Natural Resources Determining FDI in Nigeria

An Empirical Investigation


  • Soumyananda Dinda



FDI, Natural Resource Export, Exchange Rate, Openness, Inflation Rate, VECM


This study investigates the determinants of FDI to Nigeria during 1970-2006. This study suggests that the endowment of natural resources, trade intensity, macroeconomic risk factors such as inflation and exchange rates are significant determinants of FDI flow to Nigeria. The findings suggest that in long run, market size is not the significant factor for attracting FDI to Nigeria, it contradicts the existing literature. The findings indicate that FDI to Nigeria is resource-seeking. Results also suggest that trading partner like the UK in North-South (N - S) and China in South-South (S - S) trade relation have strong influence on Nigeria’s natural resource outflow.


Anyanwu, John C. (1998), An Econometric Investigation of the Determinants of Foreign Direct Investment in Nigeria. Annual Conference, Nigeria Economic Society.

Asiedu, Elizabeth. (2002), On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different? World Development, 30(1), 107-119.

Asiedu, Elizabeth. (2006), Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability. United Nations University.

Banerjee, Anindya, Dolado, J. Galbraith, J.W. and Hendry, D. F. (1993), Co-integration, Error correction and the econometric analysis of non- stationary data. New York, Oxford University Press.

Chakrabarti, A. (2001), The determinants of foreign direct investment: Sensitivity analyses of cross-country regressions. Kyklos, 54, 89-112.

Chakraborty, Chandana, and Basu, Parantap. (2002), Foreign Direct Investment and Growth in India: A Co-integration Approach. Applied Economics, 34(9), 1061- 1073.

Dinda, Soumyananda. (2010), Factors Determining FDI to Nigeria: An Empirical Investigation. MPRA Paper 28097

Engle, Robert F, and Clive. W. J. Granger. (1987), Cointegration and Error Correction, Representation, Estimation and Testing. Econometrica, 251- 276.

Iyoha, Milton A. (2001), An econometric study of the main determinants of foreign investment in Nigeria. The Nigerian Economic and Financial Review, 6(2) December.

Johansen, Soren, and Katarina Juselius. (1990), Maximum Likelihood estimation and inference on cointegration – with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52 (2), 169-210.

Johansen, S. (1988), Statistical analysis of cointegrating vectors. Journal of Economic Dynamics and Control, 12, 231-254.

Juselius, K., Framroze, N. & Tarp, Finn. (2011), The Long-Run Impact of Foreign Aid in 36 African Countries: Insights from Multivariate Time Series Analysis. UNU-WIDER Working Paper 2011-051.

Obadan, Michael I. (1982), Direct Foreign Investment in Nigeria: An Empirical Analysis. African Studies Review, XXV (1), March.

Pesaran, H.M., and Shin, Y. (1995), Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. DAE working paper series 9514, Department of Applied Economics, University of Cambridge.

Pesaran, H. M., Shin, Y. and Smith, R. J. (1996), Testing the existence of a long-run relationship. DAE working paper series 9622, Department of Applied Economics, University of Cambridge.

Pesaran, H. M., and Smith, R. J. (1998), Structural Analysis of Cointegration VARS. Journal of Economic Surveys, 12 (5), 471-505.

Pesaran, H.M., Shin, Y. and Smith, R.J. (2001), Bounds Testing Approaches to the analysis of level relationships. Journal of Applied Econometrics, 16, 289-326.

Phillips, P.C.B., and Perron, P. (1988), Testing for a Unit in Time Series Regression. Biometrika, 75, 335-346.

Quintos, Carmela, E. ((1998), Stability Tests in Error Correction Models. Journal of Econometrics, 82(2), 289-315.

UNCTAD. (2006), World Investment Report. United Nations, Oxford University Press. New York.

UNCTAD (2007), Handbook of Statistics. on-line (

UNCTAD (2008), World Investment Report. United Nations, Oxford University Press. New York.

Wheeler, David, and Mody, A. (1992), International investment location decisions: The case of U.S. firms. Journal of International Economics, 33, 57-76.

World Bank (2008), World Development Report. Oxford University Press.




How to Cite

Dinda, S. (2014). Natural Resources Determining FDI in Nigeria: An Empirical Investigation. International Journal of Research in Business and Social Science (2147- 4478), 3(1), 75–88.