Foreign direct investment inflows and regulation in Nigeria: an empirical perspective

Abstract

The aim of this study is to examine the long run equilibrium relationship between regulation and FDI inflows in Nigeria over the period of 1990 to 2016 which past studies have failed to explore. Consequently, the study utilized data from UNCTAD, World Bank database, CBN Statistical Bulletin and Cointegration, DOLS and Granger Causality approach was used to address the objective of this study. However, the major findings in this study are summarized as follows. Government effectiveness, rule of law and inflation rate have a significant positive relationship with FDI inflows in Nigeria in the long run, apart from regulation quality that is not significant. This implies that regulation is favorable to the inflows of cross border investment in the country. In addition, there is a unidirectional feedback relationship which runs from FDI inflows to regulation quality and one way feedback relationship runs from the rule of law to government effective-ness in the country. Finally, due to the findings that emerged from this study, the following recommendations are made for the policy makers, investors and future researchers in Nigeria that when attraction of FDI inflows are the target of the policy makers in the country, improving variables like rule of law, government effectiveness and regulation quality will induce the inflows of cross border investment accordingly in the long run. Also, the Nigerian government should be committed to the provision of a sound business environment in the form of good government regulations to ensure rapid inflows of FDI in the country