Is Foreign Direct Investment Inflow Market Seeking in Nigeria? An Error Correction Model Approach

The aim of this study is to examine the critical macroeconomic variables that determine the inflows of FDI in Nigeria over the period of 1990 to 2017 which past studies have not fully explored. Consequently, the study utilized data from UNCTAD World Bank database and CBN Statistical Bulletin and error correction model was used to address the objective of this study. However, the following are the crucial findings that originated from this study. The following are the crucial findings that the study discovered. The error correction term indicates that about 22% of total disequilibrium due to external shock in the previous year is corrected in the current year. The principal driver of FDI inflows in Nigeria is growth rate of the economy. While, market size only caused an insignificant FDI inflow in the short run. Therefore, FDI inflow in Nigeria is not market seeking. Furthermore, based on these findings, this study makes the following recommendations for the policy makers in Nigeria. The policy makers should embark on holistic approach that has the capacity to expand the country`s market size and ensure a double-digit growth rate of the economy. In the same vein, the policy measures that would guarantee sustainability of the FDI inflows through market size and growth rate of economy in the long run should be put in place by the policy makers in Nigeria.