Determinants of Foreign Direct Investment Inflow: A Focus on Nigeria.

Abstract

This paper examines determinants of foreign direct investment (FDI) inflows using Nigeria as a case study, with specific attention on exchange rate, gross domestic product (GDP), inflation, stock market capitalization and interest rate. The study is motivated by the need to promote policies that attracts foreign capital for sustainable economic growth.  Unit root test, Co-integration test, Variance decomposition and Error Correction Model (ECM) constituted the analytical methods. Results obtained shows that all the selected determinants individually and jointly exerted significant long run effects on FDI inflows. The recommendation therefore is that concerted efforts must be made to strengthen the capacity of economic planning and management institutions in order to ensure stability in macroeconomic performance, which boosts the confidence of foreign investors in the Nigeria.

Key words: Foreign direct investment, Inflation, Exchange rate, Economic growth, Sustainability.