Investigating the impacts of infrastructure on foreign direct investment in flow to Nigeria

This study’s primary objective is to empirically investigate the impacts of infrastructure on foreign direct investment inflow to Nigeria from 1996 to 2018. Specifically, it seeks to determine if there exists a long run relationship between infrastructure and FDI inflow in Nigeria or if these two macroeconomic variables converge in the long run. The understanding of the determinants of foreign direct investment (FDI) is an important issue of economy literature because of increasing investment requirements of the economies. Infrastructure has a vital role for economic development through promoting productivity, costs and trade. In this regard, the purpose of this paper is to investigate the impact of infrastructure of a country on foreign direct investment (FDI) level in that particular country by using five infrastructure indicators, including mobile cellular subscribers, railways rail lines, air transport and seaport infrastructure, by using Ordinary Least Square models with data covering the 1996-2018 period. The Eclectic Paradigm formed the theoretical background of this research with emphasis on the Location advantage of the OLI framework which pinpoints the role of infrastructure in attracting FDI. The results indicate that only two infrastructure variables, mobile cellular subscribers and seaport infrastructure quality causes an increases in FDI inflows. A close analysis of the results generally highlight the fact that Nigeria though a big market of about 200 million people and rich in resources, such as crude oil and natural gas, is still lagging behind its peers in terms of infrastructure and this has made it difficult for foreign investors to come into the country to invest as expected. Power Infrastructure, which has recurring transmission and distribution challenges, and Rail infrastructure, which has very low spread across the country in particular, showed poor results and considering the role of these two sub-sectors in the growth of any economy it becomes imperative that they must be resuscitated urgently to ensure that Nigeria can gain more inflow of Foreign Direct Investment