Ineffective National Security Administration: The Implication on Foreign Direct Investment (FDI) in Nigeria

Abstract

This paper furnishes robust empirical evidences on security administration and ineffectiveness of security system in Nigeria as encumbrances to Foreign Direct Investment Inflow in the real sector of the economy. Successive governments have endeavoured to attract Foreign Direct Investment (FDI) in the real sector of the economy but the bane of this policy remains national insecurity. The objective of the study is to verify whether proxy of security series exert positive or negative shock on Foreign Direct Investment (FDI). The study employs time series data spanning from the period 1980-2011 from the Crime Statistics and Central Bank of Nigeria Statistical Bulletin. The methodology adopted is Error Correction Model (ECM). The model reveals that the proxies of insecurities represented by armed robbery and murder have inverse relationship and significant shock on the inflow of foreign direct investment. Kidnapping has a positive sign contrary to our a priori expectation. It exerts insignificant statistical influence on the inflow of foreign direct investment. We recommend that government should invest massively on acquisition of modern military hardware for the police and armed forces, quintuple employment into the forces and other security agencies and also;  commit more resources on intelligence gathering, and develop strong community policing to achieve better results in Foreign Direct Investment on the real sector of the economy.

Keywords: Foreign Direct Investment, Real Sector, Time Series, Shock, Crime Statistics.