Sustainability Index and Foreign Direct Investment (FDI) Inflows in Nigeria

This paper explored how sustainability index impacts foreign direct investment (FDI) inflows in Nigeria between 1981 and 2024. In particular, the paper examined the impact of environmental sustainability index (ESI), social sustainability index (SSI), and governance sustainability index (GSI) on FDI inflows in Nigeria. The research design was ex-post facto and used annual secondary time series data on Nigeria based on the Central Bank of Nigeria Statistical Bulletin, National Bureau of Statistics, World Bank data indicators, and sustainability indicators based on Nigeria-specific environmental, social, and governance series in these sources. Descriptive statistics, Levin-Lin-Chu (LLC) unit root test, Engle-Granger cointegration test, correlation matrix, ordinary least squares regression, normality test, and heteroscedasticity test were used to analyze data with the help of E-Views 10.0. The findings revealed that environmental sustainability index has a positive and statistically significant effect on FDI inflows in Nigeria (Coeff. = 3.439382; p = 0.0085), social sustainability index has a negative but statistically insignificant effect on FDI inflows in Nigeria (Coeff. = -3.086913; p = 0.1488), while governance sustainability index has a positive and highly significant effect on FDI inflows in Nigeria (Coeff. = 2.401381; p = 0.0000). The regression model was jointly significant (F-prob. = 0.0000) and showed strong explanatory power, with an adjusted R-squared of 0.979571, indicating that the explanatory variables accounted for about 98.1% of the variations in FDI inflows in Nigeria. The research found that environmental and governance sustainability are significant factors that contribute to foreign direct investment inflows in Nigeria, while social sustainability does not have strong explanatory power during the study period. It was recommended that Nigeria should strengthen governance reforms, improve environmental sustainability policy, and develop better social sustainability measurement and policy coordination in order to make the country more attractive to foreign investors.

Sustainability Index, Environmental Sustainability Index, Social Sustainability Index, Governance Sustainability Index, Foreign Direct Investment (FDI) Inflows.

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