Abstract:
Foreign Direct Investment (FDI) has been at the center stage as a phenomena of discussion
amongst international cum development economists since the breakthrough made by Hymer‘s
Thesis in 1960 which serves as a basic reference in subsequent study on the Multinational
Corporations (MNC). Therefore, there has been a continuous growing concern on research in
the area of FDI due to globalization of markets and companies emerging to be
internationalized. Also, the existing liberal regulations in various countries give rise to the
influx of companies across borders in an effort to engage in FDIs. The issue of FDI
determinants remains relative and debatable owing to different results found empirically.
Asiedu (2006) suggests that in Nigeria, FDI is determined by large local markets, natural
resources, infrastructure and low inflation but to Bakare (2011) the major determinants of
FDI are attributed to political cum macroeconomic instability; while Okafor (2012) conclude
that the key FDI determinants are real gross domestic product (GDP), interest rate, and real
exchange rate. Therefore, the problem of ascertaining the real FDI determinants in Nigeria is
yet to be unanimously established and that calls for further research. In this study, we use
time series data from 1970 to 2014 so as to enable us capture the FDI determinants in Nigeria
up to date. We employ econometric techniques and estimated the FDI model with exchange
rate, real gross domestic product, money supply, interest rate, international trade and
expenditure on education as explanatory variables. The result shows that the model has a
perfect fit at the same time GDP, money supply, international trade and interest rate increase
FDI inflow. Furthermore, almost all the variables entered behave in accordance with a priori
economic expectation. We conclude that government should intensify on such policies that
are likely to attract FDI and vice versa.
