Political Risk and Foreign Direct Investment in Nigeria
Abstract
The study broadly seeks to investigate the impact of political risks, specifically corruption and government effectiveness, along with Gross Domestic Product (GDP), on Foreign Direct Investment (FDI) in Nigeria. The research was based on secondary sources of data, with 25 observations from 2000 to 2024. The Ordinary Least Squares (OLS) regression was applied to achieve the objective. The regression analysis revealed that the Corruption Index has a significant negative impact on FDI, indicating that higher levels of perceived corruption deter foreign investors. Conversely, the Government Effectiveness Index demonstrated a significant positive impact on FDI, suggesting that improved governance structures attract more foreign capital. Furthermore, Gross Domestic Product (GDP) also exhibited a significant positive impact on FDI, highlighting the attractiveness of a growing economy for foreign investors. The model explained approximately 39.17% of the variation in FDI. Conclusively, the underlying variables of the study show that FDI in Nigeria is greatly affected by these factors, responding according to their established relationships. The study recommends, among other things, that the Nigerian government should intensify its anti-corruption efforts, continuously work to enhance government effectiveness, and foster sustainable economic growth to create a more conducive environment for attracting and retaining foreign direct investment.