Macroeconomics Variables And Foreign Direct Investment Inflows In Nigeria

Abstract

The paper x-rayed the impact of macroeconomic variables on the foreign direct investment inflows into Nigeria. The ex-post facto research design was adopted, and aggregate Secondary, annual time series data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin and World Bank statistical database for 1984-2021 were utilized. The data collected were analyzed using the Ordinary Least Squares estimation technique of multiple regression analysis, the Autoregressive Distributed Lag (ARDL)approach to the co-integration test and the Vector error correction model. Findings indicated that a long-run and short-run relationship exists between macroeconomic variables and FDI. Also, the exchange and interest rates negatively and significantly impacted FDI inflows into Nigeria. In contrast, GDP and inflation rate negatively impacted FDI inflows into Nigeria, but the impact was insignificant. On the other hand, external reserves positively and significantly impacted FDI inflows into Nigeria. The study, among other things, recommends that the monetary authorities maintain a single exchange rate for the economy to reduce the activities of the currency manipulators. Also, the government should reduce corruption-laden expenditures, such as subsidy regimes, to improve the level of our external reserves that will help support our currency. Policies such as tax holidays and genuine diversification of the economy should be rigorously pursued. Furthermore, a moderate contractionary monetary policy should be pursued. Finally, the government should improve the infrastructure, such as adequate power supply, to reduce operating costs and interest bank charges.