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.

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