AJAG Article

Abstract

Although existing studies from a global standpoint have recognised the influence of political factors on foreign direct investments, limited evidence emanates from Nigeria. This study, therefore, examines the effect of certainpolitical factors on foreign direct investment (FDI) in Nigeria. These political factors specifically include government effectiveness, regulatory quality, corruption control, and democratic accountability. An ex-post facto research design was adopted, using secondary time series data spanning 1980 to 2023 from the Cross-National Time Series Data Archives (CNTS) and the Nigerian Bureau of Statistics (NBS). Employing an econometric approach, we analysed the sourced datausing time series techniques, including multiple regression to determine the relationships between variables. A bound test was conducted to confirm long-term relationships, while the Autoregressive Distributed Lag Error Correction Model (ARDL-ECM) was used to assess both short- and long-term effects. Findings indicate that government effectiveness has a significant negative long-term effect on FDI (β1= -26.0200, p-value = 0.00158). Regulatory quality has a positive short-term effect (β2= -25.2006, p-value = 0.0439) but a negative long-term effect (β3= -51.3960, p-value = 0.0383). Corruption control negatively affects FDI in both periods, while democratic accountability has a positive long-term effect (β4= 20.1101, p-value = 0.0234). To boost FDI, we recommend that the government improve policy implementation, streamline regulations, combat corruption, and strengthen democratic institutions to ensure transparency and stability.

In What Way Do Political Factors Affect Foreign Direct Investments in Nigeria? An Econometric Approach, 2025, Vol. 3, No. 1, pp. 13-22. PDF