The Drivers of Foreign Direct Investment in Nigeria
DOI:
https://doi.org/10.33423/jabe.v25i6.6584Keywords:
business, economics, macroeconomic factors, foreign direct investment, interest rate, inflation, causality, NigeriaAbstract
The study seeks to explore and present the macroeconomic factors that drive Foreign Direct Investments (FDI) in Nigera. It employed least square methods with model diagnostic tests and Granger causality processes on 1986–2020 Nigerian yearly data. The results show that interest rate, currency rate, and level of economic activity (represented by growth in real GDP) influence the flow of FDI into Nigeria. FDI is neither driven by inflation nor by market openness. The policy implications are that when considering policies aimed at attracting foreign direct investors to Nigeria, government and monetary authorities should give priority to such factors as interest rates, exchange rates, and the growth rate of the economy. It is suggested that reduced loan rates and slight Naira depreciation should be encouraged and promoted.
