Do Domestic Macroeconomic Variables Matter for Foreign Direct Investment Inflow in Nigeria?

Abstract

Economic theory predicts that foreign capital flows could stimulate economic growth of nations. However, there are various exogenous and endogenous factors that influence the flow of capital from one region to the other. This study focused on the impact of pull factors on capital movement in Nigeria. The empirical analysis addresses the role of key domestic macroeconomic variables on Foreign Direct Investment (FDI) in Nigeria using the Ordinary Least Square (OLS) estimation technique. The result shows that real gross domestic product, interest rate, and real exchange rate are key determinants of foreign direct investment in Nigeria. The result suggests that these domestic macroeconomic variables are critical to FDI inflow. Thus, policy makers should strive to improve the macroeconomic environment to encourage the flow and benefits of foreign direct investment in Nigeria.

Key words: Economic Theory, Exogenous, Endogenous, Pull Factors and Capital Movement.