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Factors Determining FDI in Nigeria: Role of Emerging Economies

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  • Dinda, Soumyananda

Abstract

This paper investigates the determinants of FDI in Nigeria, which is poor in terms of income but rich in natural resources. This study is an extension of our earlier work (Dinda 2012). Incorporating emerging trade partners of Nigeria in VECM this paper re-examine the factors determining FDI inflow to Nigeria in this globalized era. The economic activity of the emerging trade partners may be good proxy for exogenous factors to Nigerian economic activity. Considering per capita income of trading partners as proxy for their economic activities are incorporated as exogenous variables in this study. Findings clearly ensure that FDI inflow to Nigeria is resource-seeking FDI and market size has no role that contradicts our earlier result and also the existing literature. Short run dynamics as well as causal linkage are also completely different from our earlier paper. China is emerging as a strong trade partner of Nigeria and significantly influences its natural resource outflow while South Africa raises its competitiveness.

Suggested Citation

  • Dinda, Soumyananda, 2012. "Factors Determining FDI in Nigeria: Role of Emerging Economies," MPRA Paper 40192, University Library of Munich, Germany, revised 20 Jul 2012.
  • Handle: RePEc:pra:mprapa:40192
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    File URL: https://mpra.ub.uni-muenchen.de/46914/1/MPRA_paper_40192.pdf
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    References listed on IDEAS

    as
    1. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
    2. Dinda, Soumyananda, 2008. "Factors Determining FDI to Nigeria: An Empirical Investigation," MPRA Paper 28097, University Library of Munich, Germany, revised Nov 2010.
    3. M. Hashem Pesaran & Ron P. Smith, 1998. "Structural Analysis of Cointegrating VARs," Journal of Economic Surveys, Wiley Blackwell, vol. 12(5), pages 471-505, December.
    4. Hines, James R, Jr, 1996. "Altered States: Taxes and the Location of Foreign Direct Investment in America," American Economic Review, American Economic Association, vol. 86(5), pages 1076-1094, December.
    5. Chakrabarti, Avik, 2001. "The Determinants of Foreign Direct Investment: Sensitivity Analyses of Cross-Country Regressions," Kyklos, Wiley Blackwell, vol. 54(1), pages 89-113.
    6. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    7. Quintos, Carmela E., 1998. "Stability tests in error correction models," Journal of Econometrics, Elsevier, vol. 82(2), pages 289-315, February.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    9. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    FDI; Natural resource export; exchange rate; openness; inflation rate; VECM; Emerging economy; Nigeria; China; South Africa;

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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