Locational Determinants of Foreign Direct Investments in Nigeria

Abstract

In this paper, we examine country specific or locational determinants of foreign direct investments (FDI) in Nigeria. Using time series data from 1975-2008 and applying Generalized Method of Moments (GMM) with autoregressive error technique, we find that the index of government expenditure, index of energy consumption, and the indicator of political stability are positive and significant predictors of FDI in Nigeria at 5 percent significance level. Other locational variables suggested in the literature such as inflation rate, exchange rate, market size, infrastructure and human capital are however not significant determinants of FDI in the country. We thus recommend that the varying influences of these variables should be noted for appropriate policy actions in order to fully attract FDI into the country.