The long-term response of FDI to insecurity and corruption: evidence from Nigeria
The long-term response of FDI to insecurity and corruption: evidence from Nigeria

Summary/Abstract: Nigeria is undoubtedly faced with unstable inflows of FDI at the present time, and that country has continued to contend with rising insecurity and a relatively high level of corruption. We employ the DOLS and ARDL estimation techniques to explore the long-term response of FDI to both insecurity and corruption using quarterly data from Nigeria over the period 1996-2020. A long-term relationship was found amongst insecurity, FDI and corruption (alongside market size, the presence of natural resources, inflation, and exchange rate) based on the bounds testing approach to cointegration. The results point to a long-term significant and positive influence of lower corruption and higher security on FDI. Also, the size of the market, the presence of natural resources and depreciation of the domestic currency have a long-run significant positive influence on inbound FDI, while inflation has a long-term significant and decreasing influence on FDI. Thus, policymakers and government are advised to employ measures to reduce both insecurity and corruption to encourage the inflow of FDI over the long term.

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