Economic Investment Climate and Foreign Direct Investment Inflow in Nigeria

The study examines economic investment climate and foreign direct investment inflow in Nigeria from 1986 to 2024. The dependent variable is foreign direct investment inflow and the independent variables are exchange rate, inflation rate, financial deepening, infrastructural quality and labour force. Data are sourced from the Central Bank of Nigeria Statistical Bulletin and World Bank and analyzed using the Error Correction Model. The results indicate that exchange rate, financial deepening and labour force all have significant positive effects on foreign direct investment inflow in Nigeria, while inflation rate and infrastructural quality have negative and no significant effects on foreign direct investment inflow in Nigeria. Based on the findings, the study concludes that exchange rate, financial deepening and labour force are the core economic investment climate variables that drive FDI inflow over the few period studied. It is recommended that the monetary authority should pursue policies that will decrease the rate of inflation in Nigeria such as leveraging on Nigeria’s abundant labour force to strengthen the country’s productive capacity thereby boosting the pursuit of stable exchange rate and decreasing inflation rate. Also, government should continue to strengthen the financial sector and provide critical infrastructure in order to restore investor confidence and increase the inflow of FDI into Nigeria.

Economic Investment Climate, Exchange Rate, Foreign Direct Investment, Inflation Rate, Infrastructural Quality

1. Abille, A.B., Mpuure, D. M., Wuni, I.Y. & Dadzie, P. (2020). Modelling the synergy between fiscal incentives and foreign direct investment in Ghana, Journal of Economics and Development, 22(2), 325-334 [Google Scholar] [Crossref]

2. Abdulrahman, B. S. & Ajayi, O.E. (2022). Impact of infrastructure on foreign direct investment inflow to Nigeria, Journal of Economics and Allied Research. 7(2), 33-48 [Google Scholar] [Crossref]

3. Adegboye, F. B., & Gbebikan, A. M. (2026). Foreign direct investment, macroeconomic variables and Nigeria’s economic development. Nigerian Journal of Banking and Financial Issues, 12(1), 1–15. [Google Scholar] [Crossref]

4. Agada, F. A., & Ekadi, H. E. (2023). Bank regulations and private sector financial deepening in Nigeria. International Journal of Economic Development Research and Investment, 13(1), 28–46 [Google Scholar] [Crossref]

5. Akpan, E. I. (2024). Strategic determinants of investment locations and FDI in Nigeria’s corporate sector. Contemporary Journal of Management and Economic Research, 5(2), 66–82. [Google Scholar] [Crossref]

6. Asogwa, O. S., & Nosike, C. J. (2024). Determinants of an enabling environment for foreign direct investment in Nigeria. Nigerian Journal of African Studies, 6(1), 45–60. [Google Scholar] [Crossref]

7. Adewale, A. M., Olopade, B. C., & Ogbaro, E. O. (2023). Effect of exchange rate on foreign direct investment in Nigeria. ABUAD Journal of Social and Management Sciences, 4(1), 88–102. [Google Scholar] [Crossref]

8. Companies and Allied Matters Act, 2020. (2020). Nigerian corporate legislation. [Google Scholar] [Crossref]

9. Dollar, D., Hallward-Driemeier, M., & Mengistae, T. (2005). Investment climate and firm performance in developing economies. Economic Development and Cultural Change, 54(1), 1–31. [Google Scholar] [Crossref]

10. Ibekwe, E. C. (2023). Promoting foreign direct investment (FDI) in Nigeria: Challenges and opportunities in the legal framework (2020–2023). Babcock University Journal of History and International Studies, 91–108. [Google Scholar] [Crossref]

11. Kyari, K. A. (2020). The impact of petroleum tax incentives on foreign direct investment inflow: Evidence from Nigeria. International Journal of Energy Economics and Policy, 10(4), 516-524. [Google Scholar] [Crossref]

12. Mbiankeu, S.N, (2021). The impact of infrastructure development on foreign direct investment in Cameroon, Economics Bulletin, 41(3), 1113-1124. [Google Scholar] [Crossref]

13. Mutuku M. (2015). Kenyan Investment Climate.Retrieved from: https://www.icpak.com/wp-content/uploads/2015/09/Mr.-Martin-Mutuku.pdf. [Google Scholar] [Crossref]

14. Nzom, N., & Eyyazo, M. D. (2025). Foreign direct investment and commercial law reform in Nigeria: A critical evaluation. Nnamdi Azikiwe University Journal of Commercial and Property Law, 12(3). [Google Scholar] [Crossref]

15. Oboh, T., (2021). Direct tax and foreign direct investment, Accounting and Taxation Review, 5(1), 1-14. [Google Scholar] [Crossref]

16. Ogbanga, A. Ewubare, D., & Onyema, J. I., (2022). Effect of infrastructural development on foreign direct investment in Nigeria. Iconic Research And Engineering Journals, 5(8), 1-15 [Google Scholar] [Crossref]

17. Ogu, C., Tade, O. D., & Yuni, D. N. (2021). Investment climate and manufacturing firm’s performance in Nigeria. Journal of Advances in Social Science and Humanities 7(4), 1689−1714 [Google Scholar] [Crossref]

18. Okeke, T. A., & Onuoha, C. A. (2021). Structural adjustment programme and foreign direct investment inflow in Nigeria: Policy implications for economic growth. African Journal of Economic and Management Studies, 12(4), 543–558. [Google Scholar] [Crossref]

19. Owokalu, O., Oguntuase, T., Surulere, O. J., & Alaketu, A. A. (2025). Evaluating business strategies for attracting foreign direct investment in developing economies: A case study of Nigeria. African Journal of Stability and Development, 17(2), 210–228. [Google Scholar] [Crossref]

20. Ozekhome, H.O., (2022). Tax and foreign direct investment in Nigeria: A dynamic estimation approach. Journal of Economic Development, 47(2), [Google Scholar] [Crossref]

21. World Bank. (2002). Private sector development strategy: Directions for the World Bank Group. Washington, DC: World Bank. [Google Scholar] [Crossref]

22. World Bank. (2020). World development report 2020: Trading for development in the age of global value chains. Washington, DC: World Bank. [Google Scholar] [Crossref]

• Impact of Foreign Direct Investment in India
• Issues Involved in Digitalisation Special Reference to Indian Tourism Growth
• Relationship Marketing and Customer Loyalty in the Fast-Moving Consumer Goods (FMCG) Industry in Nairobi County
• Financial Literacy or Financial Inclusion? Which is Which, What is What—To Achieve Uganda’s 10-Fold Economic Growth By 2040
• Harnessing Natural Gas for Economic Transformation: Overcoming the Regulatory and Infrastructural Bottlenecks in Nigeria