POLITICAL INSTABILITY AND FOREIGN DIRECT INVESTMENT IN NIGERIA

Abstract

Nigeria struggles to attract Foreign Direct Investment (FDI) because of its
recognized advantage as a tool of economic development. This study
investigates the determinants of FDI inflow into Nigeria by examining the
influence of political instability which has constitute a problem in the
country and other variables like openness, inflation and interest rate using
a quarterly time series data for the period of 1980 to 2014 obtained from
world bank development indicator. Series of econometric techniques were
employed; unit root test, ARDL bound test, long and short run test all using
the ARDL mode of estimation. The results of the long run relationship
suggest that political instability which was significant shows that it
decreases the rate of inflow of foreign investors into the country. Increase
in inflation rate shows decrease in FDI but increase in the rate of interest
rate increases FDI inflow. Openness was not significant in the long run but
was significant in the short run.