Determinants of Foreign Direct Investment in the Nigerian Telecommunication Sector

Abstract

This paper investigated the key determinants of FDI in the Nigerian telecommunication sector. The study made use of data from 1986 to 2014. Annual data on infrastructure, government expenditure, trade openness and market size, were sourced from the World Development Indicators (WDI) of the World Bank. FDI flow into telecommunication sector, foreign exchange rate, interest rate and inflation, were sourced from Central Bank of Nigeria Statistical Bulletin. Data were analyzed using graphs, t-test and Autoregressive Distributed Lag (ARDL). The results showed that the key determinants of FDI in the sector are market size and trade openness (t = 5.75 to 9.05; p < 0.05) on positive side, as well as Inflation and real interest rate (t = −0.05 to −4.03; p < 0.05) on negative side. The study therefore concludes that the key determinants of FDI flow into the Nigerian telecommunication sector are market size, trade openness, government expenditure, inflation and interest rate.