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Foreign Direct Investment Inflows and Oil Exports in Nigeria: Cointegration and Vector Error Correction Model Approach
The aim of this paper is to examine the long run relationship between FDI inflows and oil exports in Nigeria. Past empirical studies have failed to examine the long run relationship between FDI and oil sector of the economy in the recent time, which has created a gap in the literature Data was collected from CBN Statistical Bulletin and UNCTAD investment report from 1990 to 2016, and various diagnostic tests such as Unit Roots and Johansen conitegration were estimated. Consequently, Vector Error Correction model was employed to address the objective of this study. It was established from this study that a long-run relationship between FDI inflows, oil exports, exchange rate and inflation existed in Nigeria, while the error correction term submits that about 38% error made in the previous year was corrected in the current year in the country. However, the findings that emerged in this work necessitated the following recommendations for the policy makers, investors and future researcher. The policy makers in Nigeria should see oil exports among others as the backbone behind the inflows of FDI in the country and should be sustained. In addition, the proceeds from oil exports should be diversified and invested in the non-oil sub sector of the economy in order to stimulate a favourable exchange rate which can further encourage further inflows of FDI in the country. Finally, it is needful to ensure that the policy measures are initiated and implemented without a delay for the desired effects to be reflected on time in the country.