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Effect of Institutional Factors on Foreign Direct Investment in Nigeria

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  • Ewubare Dennis Brown
  • Ekwe Ernest Ibekwe

Abstract

The study investigates the effect of economic, political and social institutions on FDI in Nigeria between 1980 and 2015. The Stock-Watson Dynamic Least Squares (DOLS) is relied upon for analyzing the data extracted from the World Bank WDI. The KPSS stationarity results indicate that all the variables were mixed integrated with FDI and political integration being levels stationary while economic and social factors were first difference stationary. The Johansen cointegration test finds evidence of two cointegrating equations in the model, indicating that long run relationship exists among the variables. The estimated cointegrating regression model showed that economic and social integrations were highly significant in explaining changes in FDI. Political institution factors, on the other hand, have an insignificant positive relationship with FDI. The Wald test showed evidence to support that the coefficients of the regressors were significantly different from zero. The result of the Granger causality test reveals that political and social institution has high predictive power for FDI flows to the Nigerian economy. Based on the findings, this study recommends that Nigeria should adopt a gradual reduction in all economic, political and social constraint to FDI inflows to optimize the benefits of foreign direct investment in Nigeria.

Suggested Citation

  • Ewubare Dennis Brown & Ekwe Ernest Ibekwe, 2018. "Effect of Institutional Factors on Foreign Direct Investment in Nigeria," The Economics and Finance Letters, Conscientia Beam, vol. 5(1), pages 12-27.
    • Handle: RePEc:pkp:teafle:v:5:y:2018:i:1:p:12-27:id:1608
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    Cited by:

    1. Hassan O. OZEKHOME, 2022. "Do Regulatory Quality, Government Effectiveness and Rule of Law Matter to Foreign Direct Investment in Nigeria?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 160-175, April.
    2. Sheikh Muhamad Hizam Sheikh Khairuddin & Zuhaib Hassan Qureshi & Rosni Ab. Wahid & Shehnaz Tehseen & Zulfiqar Hussain Pathan & Mohammad Rafat Khan, 2019. "A Conceptual Study on Contingent Impact of External Integration on Innovation Sme Business Success Relationship," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 370-380, August.
    3. Musa Abdullahi Sakanko & JAMES OBILIKWU & JOSEPH DAVID, 2020. "The Effect Of Aggregate Institutional Quality On Foreign Direct Investment In Nigeria: Evidence From Nardl," Economics & Law, Faculty of Economics, SOUTH-WEST UNIVERSITY "NEOFIT RILSKI", BLAGOEVGRAD, vol. 2(2), pages 1-13.

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