An Error Correction Model Analysis of the Determinant of Foreign Direct Investment: Evidence from Nigeria
This study used Granger causality and then error correction model to investigate the determinants of foreign direct investment inflow to Nigeria during the period 1970 – 2009. The results show that causality runs from government policy, fiscal incentives, availability of natural resources and trade openness to FDI without reverse or feed back effect. The parsimonious result of the error correction model reveals that past foreign investment flows could significantly stimulate current investment inflows. Also, while inadequate natural resources reduce the inflow of FDI, fiscal incentives, favorable government policy, exchange rate and infrastructural development are found to be a positive and significant function of FDI in Nigeria. Market size (at lags 2 and 3) and trade openness are positively signed while political risk is negatively signed. These variables, however impact insignificantly on FDI. Thus, fiscal incentives, favorable government policy and infrastructural development are positive predictors of FDI inflows and should be used as policy instruments. In the light of these findings, recommendations such as government, improving on the country’s market size through its monetary and fiscal policy and revitalizing the agricultural sector for extraction of raw materials were made.
|Date of creation:||14 Feb 2012|
|Date of revision:||14 Feb 2012|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Yuko Kinoshita & Nauro F. Campos, 2003.
"Why Does Fdi Go Where it Goes? New Evidence From the Transition Economies,"
IMF Working Papers
03/228, International Monetary Fund.
- Campos, Nauro F & Kinoshita, Yuko, 2003. "Why Does FDI Go Where it Goes? New Evidence from the Transitional Economies," CEPR Discussion Papers 3984, C.E.P.R. Discussion Papers.
- Yuko Kinoshita & Nauro F. Campos, 2003. "Why Does Fdi Go Where It Goes? New Evidence From The Transition Economies," William Davidson Institute Working Papers Series 2003-573, William Davidson Institute at the University of Michigan.
- ibrahim, waheed & Omoniyi, Benjamin, 2011. "Determinants of Foreign Direct Investment in Nigeria: Political Factor Effects Revisited," MPRA Paper 59429, University Library of Munich, Germany, revised 2012.
- Ashoka Mody & Krishna Srinivasan, 1998. "Japanese and United States Firms as Foreign Investors: Do they march to the same tune?," Canadian Journal of Economics, Canadian Economics Association, vol. 31(4), pages 778-799, November.
- Dinda, Soumyananda, 2008. "Factors Determining FDI to Nigeria: An Empirical Investigation," MPRA Paper 28097, University Library of Munich, Germany, revised Nov 2010.
- Dinda, Soumyananda, 2009. "Factors determining FDI in Nigeria: an empirical investigation," MPRA Paper 40172, University Library of Munich, Germany, revised 16 Jul 2012.
- Goldberg, Linda S & Kolstad, Charles D, 1995. "Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(4), pages 855-873, November.
- Linda S. Goldberg & Charles D. Kolstad, 1994. "Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty," NBER Working Papers 4815, National Bureau of Economic Research, Inc.
- Goldberg, Linda S. & Kolstad, Charles D., 1994. "Foreign Direct Investment, Exchange Rate Variability and Demand Uncertainty," Working Papers 94-23, C.V. Starr Center for Applied Economics, New York University.
- Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36676. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.