EMPIRICAL ANALYSIS OF MACROECONOMIC INSTABILITY AND FOREIGN DIRECT INVESTMENT INFLOW IN NIGERIA

EMPIRICAL ANALYSIS OF MACROECONOMIC INSTABILITY AND FOREIGN DIRECT INVESTMENT INFLOW IN NIGERIA

ABSTRACT

Most economic rationale for granting special incentives for attracting Foreign Direct Investment (FDI) is based on the belief that FDI bridges the ‘idea gaps’ between rich and the poor nations in addition to the generation of technological transfers and spillovers. This study seeks to carry out an empirical investigation of the impact of macroeconomic instability on FDI inflow in Nigeria covering the period 1970 to 2013. The linear regression analysis was applied and it was revealed that macroeconomic instability has negative and significant impact on FDI inflow in Nigeria for the period under analysis. The result also shows that there exists a long-run relationship between FDI and macroeconomic instability variables in Nigeria. it is therefore the recommendation of this paper that the Central Bank of Nigeria (CBN) should cooperate with the fiscal branch of the economy to ensure that macroeconomic stability is ensured through the application of fiscal and monetary tools.