Constraints to Foreign Direct Investment in Nigeria
2017
Foreign Direct Investment (FDI) is considered as an invaluable tool for achieving economic growth in
developing countries. In order to achieve the objective of a higher rate of economic growth and the
efficiency in the utilization of resources, developing countries the world over have embarked upon various
policy measures at attracting FDI. The study is an empirical investigation (using a time series data
between 1980 and 2015) into the factors that constrain the inflow of FDI into the Nigeria economy. The
Phillip Perron (PP) unit root test was used to test stationarity of the variables, Johansen Co-integration
approach was conducted to test for long run relationship between the variables used, Vector Error
Correction Model was used to establish the short run dynamics and the long run relationship as well as
ascertain the speed of systemic adjustment in the model. The study found that government external and
domestic debts, inflation rate and exchange rate appreciation (in favour of the domestic currency) have
significant long run relationship with foreign direct investment in Nigeria. It therefore recommends among
others a more prudent management of both domestic and external debt of Nigeria and that our monetary
authorities should devise effective ways of fine-tuning and managing such macroeconomic tools and
variables as the rate of inflation and exchange rate
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