The Determinants of Foreign Direct Investment Inflows in Nigeria: An Empirical Investigation


  • Timothy Ayomitunde Aderemi Olabisi Onabanjo University
  • Adeniran Busari Ganiyu Yaba College of Technology
  • Gbenro Matthew Sokunbi Michael Otedaola College of Primary Education
  • Yusuf Adebola Bako The Federal Polytechnic


Market Size; Growth Rate; FDI; Exchange Rate; Nigeria


This research work  aims at investigating  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 the Autoregressive Distributed Lag (ARDL) model was used to address the objective of this study. The study came up with following findings as summarized thus; the principal determinants of FDI inflows in Nigeria are the past FDI inflows, market size, exchange rate and growth rate. These macroeconomic variables have a positive and significant impact in driving FDI inflows in Nigeria.  However, the inflation rate discourages FDI inflows in the country. Moreover, based on these findings, it is important for this paper to make the following recommendations for both the policy makers and the investors in Nigeria. The policy makers in the country should be committed towards policy measures that will ensure the continuous expansion of the country`s market size, double digits growth rate and exchange rate stability. In the same vein, the policy measures that would address inflation rate problem on FDI inflows in the country should be put in place by the policy makers in Nigeria.

Author Biographies

Adeniran Busari Ganiyu, Yaba College of Technology

2Department of Accountancy

Gbenro Matthew Sokunbi, Michael Otedaola College of Primary Education

Department of Economics

Yusuf Adebola Bako, The Federal Polytechnic

Depertment of Business Administration and Management


Aderemi, T. A. Olayemi, H. O., Ebere C. E. and Adeniran, A. A. (2018). Security Spending and Foreign Direct Investment Inflows: Evidence from the Nigerian Economy. IOSR Journal of Humanities and Social Sciences (IOSR-JHSS), Vol. 23, No. 11, PP. 29-35
Adeyeye, P. O., Akinuli, B. O. and Ayodele, S. O (2016). The Nexus between Security Expenditure and Foreign Direct Investment in Nigeria. IOSR Journal of Business and Management (IOSR-JBM), Vol. 18, No. 11, PP. 83-89.
AFDB, OECE, UNDP and UNECA (2011). ``African Economic Outlook 2011: Africa and its emerging partners``. African Development Bank, Tunis, Tunisia

Asiedu, E. (2006). Foreign Direct Investment in Africa: Role of Government Policy, Institutions and Political Instability. World Economy, Vol. 29, No. 1, PP. 63-77.
Ayanwale, A. B. (2007): “FDI and Economic Growth: Evidence from Nigeria”. AERC Research Paper 165. African Economic Research Consortium, Nairobi
Azman-Saini, W. N., Baharumshah, A. Z., & Law, S. H. (2010). Foreign Direct Investment, Economic Freedom and Economic Growth: International Evidence. Economic Modelling, Vol. 27, No. 5, PP. 1079–1089.
CBN (2017).Statistical Bulletin Central Bank of Nigeria
Dickey, D. A. and Fuller, W. A. (1981). “Likelihood Ratio Tests for Autoregressive Time Serieswith a Unit Root”, Econometrica, Vol. 49, PP. 1057 – 1072.
Dima, SC 2010, 'From international trade to firm internationalization', European Journal of Interdisciplinary Studies, Vol. 2, No. 2, PP. 59-66
Enoma, A. and Mustafa, I. (2011). The Impact of Financial Sector Reforms on Non-Oil Export in Nigeria, Journal of Economics, Vol. 2, No.2, PP. 115-120

Gui-Diby S. L. (2014). Impact of Foreign Direct Investment on Economic Growth in Africa: Evidence from three decades of panel data analyses. Research in Economics, Vol. 68, PP. 248-256.
Islam, N. (1995). ‘Growth Empirics: A Panel Data Approach’, Quarterly Journal of Economics, Vol. 110, PP. 1127-70.

Jadhav, P. (2012). Determinants of Foreign Direct Investments in BRICS Economies: Analysis of Economic, Institutional and Political Factors. Procedia-Social and Behavioral Sciences, Vol. 37, PP. 5-14.
Jadhav, P., & Katti, V. (2012). Institutional and Political Determinants of Foreign Direct Investment: Evidence from BRICS Economies. Poverty & Public Policy, Vol. 4, No. 3, PP.49-57.
Johanson, J & Vahlne, J-E. (1977). 'The internationalization process of the firm—a model of knowledge development and increasing foreign market commitments', Journal of international business studies, Vol. 8, No. 1, PP. 23-32.
Johanson, J & Wiedersheim‐Paul, F. (1975). 'The internationalization of the firm—four Swedish cases 1', Journal of management studies, Vol. 12, No. 3, PP.305-323.
Karmel P. H. and Polasek M, (1980). Applied statistics for economists
Latorre, MC. (2008). 'Multinationals and foreign direct investment: Main theoretical strands and empirical effects', Journal of Economic Literature, no. F21, F23, L10
Mahmood, K., Azid, T., Chaudhry, I. S., & Faridi, M. Z. (2010). Impact of Economic Freedom on Economic Growth: The Case of Some Selected SAARC Member Countries. International Research Journal of Finance and Economics, Vol. 52, PP. 7-16.
Mughal, MM & Akram, M 2011, 'Does market size affect FDI? The Case of Pakistan', Interdisciplinary Journal of Contemporary Research in Business, Vol. 2, No. 9, PP. 237-47.
Nonnenberg & Mendonça. (2004). The Determinants of Direct Foreign Investment in Developing Countries, IPEA Working Paper.
Offiong A.I. and Atsu I.A. (2014): ``Determinants of Foreign Direct Investment in Nigeria (1980 -2011)``International Review of Management and Business Research, Vol. 3, No. 3.

Olumuyiwa, B.A. (2003) “Exchange Rate Uncertainty and FDI in Nigeria:, WIDR, No 2003/20
Pesaran, M. H., Shin, Y., & Smith, R. J. 2001. Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, Vol. 16, PP.289-326.
Pesaran, M. & Pesaran, B. (1997). Microfit 4.0 (windows version). New York: Oxford University Press Inc.

Phillips, P. C. & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, Vol.75, PP. 335-346
Sahoo, P. (2006). Foreign Direct Investment in South Asia: Policy, Trends, Impact and Determinants. ADB Institute Discussion Paper No. 56.
Saibu, M. & Akinbobola, T. (2014). Globalization, Foreign Direct Investment and Economic Growth in Sub Saharan Africa. Journal of Economics and International Finance, Vol. 6, No. 3, PP.62-68
Samol A. &A. Solifano (2014) “Private Investment and Macroeconomic Adjustment: A survey”, World Bank research, Vol. 7, No. 2
Vijayakumar, N., Sridharan, P., & Rao, K. C. (2010). Determinants of FDI in BRICS Countries: A Panel Analysis. International Journal of Business Science and Applied Management, Vol. 5, No. 3, PP. 1-13.




How to Cite

Aderemi, T. A., Ganiyu, A. B., Sokunbi, G. M., & Bako, . Y. A. (2020). The Determinants of Foreign Direct Investment Inflows in Nigeria: An Empirical Investigation: Array. Acta Universitatis Danubius. Œconomica, 16(3). Retrieved from



Business Administration and Business Economics

Most read articles by the same author(s)