Impact of Fiscal Prudence and Financial Development on Foreign Direct Investment Inflow: Nigerian Evidence

Abstract

Foreign direct investment in a globalized and information technology driven environment, as we have today in the 21st century, acted as a driver of growth. This paper provides further evidences on macroeconomic management of FDI in emergent economies especially in Africa. The paper empirically measures the effects of fiscal prudence and financial development on foreign direct investment inflow in Nigeria. It tested the importance of household consumption, domestic credit to the private sector, fixed capital formation, domestic savings, external debt, foreign reserve and financial development for the purpose of ensuring FDI inflow in Nigeria. It findings show that domestic credit to private sector, fixed capital formation, foreign reserve and financial development are statistically significant in the case of Nigeria. The econometric methodologies followed for the study are log-linear regressions and ARDL bound testing. Data was sourced from National Bureau of statistics and World Bank’s World Development Index for the period ranging from 1985 to 2018.