International Journal of Commerce and Management Research

International Journal of Commerce and Management Research


International Journal of Commerce and Management Research
International Journal of Commerce and Management Research
Vol. 4, Issue 4 (2018)

Effect of country risks on foreign direct investment in Nigeria


Oni Olusegun Opeyemi, Olurinde Kingsley Olusola, Oluganna Eunice T

Ever since the beginning of debt crises in 1980s Nigeria had paid considerable attention to FDI by introducing various policies and reforms to attract foreign capital inflows into the country. However, the state of business, economic, political and security in Nigeria which is generally considered deficient and parlous has continued to pose threats to the nation’s economy and hindrances to foreign investment. This study therefore examined the effect of country risks on Foreign Direct Investment (FDI) in Nigeria. Time series data were collected from the Central Bank of Nigeria (CBN) 2016 Financial Statistical Bulletin and Transparency International Index that covered the period 1980 to 2016. The study adopted Johansens’s Multivariate Cointegration Test and Error Correction Model (ECM) techniques. The findings of the study revealed that, country risk variables: Political instability (PINs), Insecurity (DSV), Corruption Index (CI) were found to be statistical significant on FDI. However, the study revealed that Inflation Rate Volatility (IRV) has no significant effects on FDI in Nigeria. The implication of the findings is that country risk factors are responsible for the recent capital flight and decline in FDI inflow been experienced in the country. The study recommends among others, that Nigerian government can achieve the war against corruption by strengthening and granting of autonomy to the anti-graft agencies, control of nominal effective exchange rate as well as the adoption of a holistic approach in tackling the state of insecurity in the country. In conclusion, government can increase the inflow of FDI by ensuring that they maintain the current democratic system of government and reduce the incidences of political violence in the country especially during election periods.
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