Determinant of Foreign Direct Investment and Its Effect on Economics Growth: Evidence from Nigeria

Abstract

The Paper focus on the determinant of FDI in Nigeria, it covered the period of 1980-2013, using OLS to determine the effect of independent variable on the dependent variable, the variables are integrated of order one I(1). Per capita, economic growth, education and trade openness has positive impact in attracting FDI, significant and has expected signs, wage rate is significant but not consistent with priori expectation, infrastructure has negative effect on FDI and significant and depreciation of Naira also has negative effect on FDI, has expected sign and significant. The independent variables has 86 percent (R²) 86 percent explanatory power on dependent variable, the residual is stable and white noise, the model is stable, no functional form misspecification, no serial correlation (autocorrelation) in the regression, the residual is homogenous and normally distributed. We proffered the following recommendation; (1) Government should try to improved or speed up the economic growth rate as it has positive in attracting FDI into the economic (2) Policy to encourage flow of FDI in other sectors of the economy other than resource sector should put in place (3) Infrastructure facilities should be put in place to promote business and reduce the cause of doing business in the country (4) Exchange rate policy that aims at stabilizing the value of the Naira will improve the FDI inflow into the economy (5) Government should continue to increase  on the education of the populace and improve the quality of the education in the economy.

Keywords: FDI Determinant, Effect on Economic Growth, evidence Nigeria.

JEL CLASSIFICATION CODE: F210