Foreign Direct Investment in Nigeria: Reassessing the Role of Market Size

Abstract

This paper examines the influence of market size on foreign direct investment to Nigeria for the period 1970 – 2011. It answers the question: do multinational enterprises consider market size in the allocation of their foreign direct investment (FDI) to Nigeria? Unlike similar previous studies on Nigeria, this paper examines market size in terms of economy size and population size. Autoregressive Distributed Lag (ARDL) model and Granger Causality Tests were estimated. The results show that economy size and population size has positive and significant effect on foreign direct investment to Nigeria. Market size also Granger causes FDI to Nigeria. This paper, therefore, concludes that multinational enterprises consider Nigerian market size in the allocation of their foreign direct investment (FDI) to the country.