Determinants of Foreign Direct Investment in Nigeria: Political Factor Effect Revisited

Waheed, Ibrahim; Omoniyi, Benjamin

doi:10.2139/ssrn.1136083

Cited by 2 publications

(4 citation statements)

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“…Leonard (2018) who disaggregated foreign investment into FDI and FPI during the period 2007 -2017 also suggests that exchange rate appreciation impacts negatively on foreign direct investment and foreign portfolio investment in Nigeria. This result is supported by Ibrahim and Omoniyi (2011) who studied the determinants of Foreign Direct Investment (FDI) in Nigeria during 1970 -2006. In addition to corroborating findings from Obida and Abu (2010), a study by Essien and Onwioduokit (1999) for the period 1970-1997, suggests that the rate of returns on asset are critical to FDI inflows.…”

Section: Empirical Literaturementioning

confidence: 73%

“…The literature provides evidence on important global and country-specific factors determining capital flows in developing economies (see Taylor & Sarno, 1997;Ç ulha, 2006;Glauco & Kyaw, 2008a;Glauco & Kyaw, 2008b;Brana & Lahet, 2010;Förster et al, 2012;Byrne & Fiess, 2015;Bogdan 2016;Grzegorz et al, 2017) including those relating to the interest rate parity theory (see Dooley, 1988;Wang & He, 2007;Su & Zhang, 2010;Fang, Pei Zhang, 2012;Cheung, Sven, & Frank, 2016;Ning & Zhang, 2018). Also, there are studies for Nigeria in the literature suggesting different determinants of foreign capital flow (Essien & Onwioduokit, 1999;Obida & Abu, 2010;Ibrahim & Omoniyi, 2011;Maghori, 2014;Okereke & Ebulison, 2016;Nwokoye & Oniore, 2017;Nwosa & Adeleke, 2017;Enisan, 2017;Leonard, 2018).…”

Section: Empirical Literaturementioning

confidence: 99%

“…Various scholars have studied the determinants of international capital flows in different countries, including Nigeria (see Taylor & Sarno, 1997;Ç ulha, 2006;Glauco & Kyaw, 2008a;Glauco & Kyaw, 2008b;Brana & Lahet, 2010;Förster, Jorra, & Tillmann, 2012;Byrne & Fiess, 2015;Bogdan 2016;Grzegorz, Brzozowski &Śliwiński, 2017;Maghori, 2014;Obida & Abu, 2010;Ibrahim & Omoniyi, 2011;Essien & Onwioduokit, 1999;Okereke & Ebulison, 2016;Nwosa & Adeleke, 2017;Enisan, 2017;Nwokoye & Oniore 2017;Leonard, 2018). However, the causes of capital reversals in emerging economies, especially the role of interest rate differentials and exchange rate movements, are hardly examined, making it difficult to distinguish between policy actions that reverse or perpetuate outflows and policy actions that sustain or perpetuate inflows.…”

Section: Introductionmentioning

confidence: 99%

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Impact of Interest Rate Differential and Exchange Rate Movement on the Dynamics of Nigeria’s International Private Capital Flows

Karimo¹

2021

CBN-JAS

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The study examines the impact of interest rate differential and exchange rate movement on the dynamics of Nigeria’s international private capital flows from 2010Q1 to 2019Q4. It uses the interest rate parity theory and the Markov Switching Time Varying Transition Probability Modelling approach. Findings show that interest rate differential does not explain the dynamics of aggregate capital and Foreign Direct Investment (FDI) flows, but significantly explains Foreign Portfolio Investment (FPI) flows. Also, Movement in real exchange rate is significant in explaining outflows and inflows in FPI, and inflows in FDI, but neutral to aggregate capital flows. The study concludes that deviations from interest rate parity provides opportunities for interest rate and currency arbitrage in Nigeria but using aggregate capital flows mask this evidence. The study therefore recommends that the CBN should focus on exchange rate stabilization policies, so as not only to discourage FPI reversal but to also enhance FDI inflow. This can be done by putting in place foreign reserve accretion measures to boost the ability of the CBN to defend the Naira. The new policy initiative on remittances is a right step in the right direction as it could boost external reserve.

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Section: Empirical Literaturementioning

confidence: 73%

Section: Empirical Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Impact of Interest Rate Differential and Exchange Rate Movement on the Dynamics of Nigeria’s International Private Capital Flows

Karimo¹

2021

CBN-JAS

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“…The market size was found to play an important role in FDI inflows (Anyanwu, 2012) though the results of Kyereboah-Coleman and Agyire-Tettey (2008) indicated that most foreign investors do not consider this factor in making a decision to invest in Ghana. Oladipo (2008) and Ibrahim and Saidat (2008) examined the determinants of Nigeria's FDI inflow for the period 1970-2005 and found the nation's potential market size to be the most determinant factor in attracting FDI flows in Nigeria. This was justified by the increased in FDI inflows during that period.…”

Section: Measurement Of Variablesmentioning

confidence: 99%

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2019

International Journal of Asian Social Science

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Several scholarships have endeavored to guesstimate the sway of natural resources on foreign direct investment inflows around the globe, but very few have engrossed on relative studies on Ghana, Nigeria, and Togo. The current paper departed from prior lessons and employed a thoughtful charter that clearly investigate the question of whether natural resource endowments is a more relevant factor to explain FDI's attraction to the countries under study. Two models fixed and random effects were established using pooled ordinary least squares (POLS) model, to estimate the coefficients. We applied a panel and time series data from 1982-2017. Preliminary results were obtained using both the random effect and fixed effect model. After conducting several tests such as Hausman Test and Breusch and Pagan Lagrangian Multiplier Test, the fixed effects model was considered the most appropriate model for the study. The results of the study yielded by both techniques registered natural resources to be significant as a propelled feature for FDI inflows. Additional issues such as GDP per capita, trade openness, political stability, and economic liberalization were also found to be significant in FDI determination. Contribution/ Originality: The study contributed to the existing literature by revealing the inevitable impact of natural resources and liberalization on FDI inflows through the application of Fixed Effect model. 1. INTRODUCTION Foreign direct investment (FDI) has become one of the key sources of capital infusion into the third world countries. Economic concept guessed that international capital inflows, among others, endorse the effective distribution of resources, which in turn boosted economic growth (Insah, 2013). According to Insah (2013) FDI may be viewed as a reagent for technological transfer from the developed to developing countries. Mello (1997) added that inward FDI enthuse local investment by swelling domestic investment through associations' with the production chain when foreign firms bought locally, made inputs or when foreign firms supplied intermediate inputs to local firms. In this sphere, the foreign capital inflow enlarge the supply of funds for investment. Apart from being a source of development finance and a channel for technology transfer, FDI has a number of proven attributes. It advances managerial knowledge and skills, and efficacy in productivity. It also

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Determinants of Foreign Direct Investment in Nigeria: Political Factor Effect Revisited

Cited by 2 publications

References 8 publications

Impact of Interest Rate Differential and Exchange Rate Movement on the Dynamics of Nigeria’s International Private Capital Flows

Impact of Interest Rate Differential and Exchange Rate Movement on the Dynamics of Nigeria’s International Private Capital Flows

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