Defense Budget and Response of Foreign Direct Investment (FDI) in Nigeria: Co-Integration and VECM Approach

Abstract

The research was conducted on the topic: Defense Budget and Response of Foreign Direct Investment (FDI) in Nigeria: Co-integration and Vector Error Correction Model (VECM) Approach. It investigated how Foreign Direct Investment (FDI) move in response to defence budget considering the insecurity problem faced by Nigeria during the period of the study. Time series data which spanned from 1981 to 2019 was sourced from CBN. The data collected was subjected to unit root test, co-integration test and vector error correction estimation. The results showed long run equilibrium among variables. It was found also that there existed short-run relationship among variables or ran from GDP, MNFO, INF and LFP to FDI and recommended improvement in output, inflation control, enhancement of labour force performance, economic diversification and improved security spending and sincere intention in the approach to finding lasting solutions to insecurity among others.