Effect of Infrastructural Development on Foreign Direct Investment in Nigeria.

• Author(s): OGBANGA, Allwell ; Dennis Ewubare ; Prof. Joseph I. Onyema
• Paper ID: 1703182
• Page: 74-104
• Published Date: 16-02-2022
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 5 Issue 8 February-2022

Abstract

The purpose of this study is to examine the effect of infrastructure on FDI inflow in Nigeria for the period of 1988-2018. The study used annual time series data sourced from Central Bank of Nigeria, World Bank, IMF and International Financial Statistics; using time’s series data analytical techniques that solve the problems of non-stationarity. Infrastructure and other determinant of FDI inflow such as trade openness and economic growth are used to analyze their effect on FDI inflows; the Phillips-Perrron (PP) unit root test was used to see whether the variables are stationary. The result revealed that only one variable was stationary at level while the rest variables are integrated of order one I(1) series. Since the variables are of different order of integration; it necessitate the use of the ARDL Bound test method to test for co-integration relationship among the variables. The result shows that the null hypothesis is rejected since the f-statistic is greater than the upper bound limit at 5%, indicating a long run relationship among the series in the model. Also ARDL technique was chosen for analysis because it is more appropriate for analysis when the variables used in a model are of different order of integration, the result of the ARDL analysis reveals that there will be no improved and sustainable FDI inflow into Nigeria if there is no effective tackling of the challenges of basic infrastructural needs of the country by ensuring efficient, stable and reliable power supply, safe potable water, effective, efficient and functional public transportation system, effective communication system, good trade openness relationship and efficient and stable economic growth in Nigeria, as these variables are the prerequisite for FDI inflow. The following recommendations were made: Trade openness coupled with ease of doing business was found to be a key prerequisite to attracting FDI inflow in Nigeria; so the government should work towards improving the investment climate. Strengthen institutional infrastructures and governance, as they play a critical role in attracting FDI. Economic growth and a strong currency are key determinants of FDI inflows; hence, macroeconomic stability should be a priority for the government. The Central Bank of Nigeria should strive to retain inflation and interest rates as low as possible, and to maintain a strong currency. The government should increase broadband Internet connectivity, expand technical training institutes and harness innovative ideas for increased export of ICT goods and services and increase mobile cellular subscriptions, this will improve communication structure thereby attracting FDI inflows. Government should endeavour to increase and modernize air transport (passengers and Freight), more kilometers of tarmacked roads as a percentage of total road networks, more kilometers of rail line constructed and improve port infrastructure to increase container port traffic in order to attract FDI inflows. The government should construct and rehabilitate portable water systems in order to attract FDI inflows.

Keywords

FDI inflow, Infrastructural development, Economic growth

Citations

IRE Journals:
OGBANGA, Allwell , Dennis Ewubare , Prof. Joseph I. Onyema "Effect of Infrastructural Development on Foreign Direct Investment in Nigeria." Iconic Research And Engineering Journals Volume 5 Issue 8 2022 Page 74-104

IEEE:
OGBANGA, Allwell , Dennis Ewubare , Prof. Joseph I. Onyema "Effect of Infrastructural Development on Foreign Direct Investment in Nigeria." Iconic Research And Engineering Journals, 5(8)