IMPACT OF MICROECONOMICS VARIABLES ON FOREIGN DIRECT INVESTMENT IN NIGERIA

Abstract

This study investigated the impact of microeconomics the, variables on foreign investment in Nigeria. Specifically, variables on foreign the study analyzed the relative impact selected microeconomics on variables foreign direct investment inflow. Microeconomics variables considered in the study included lending rate, inflation rate, terms of trade, total investment, gross domestic product growth rate, real gross capital formation and trade .The study covered a period of 45 years (1970-2014). Secondary data collected in the study were analyzed using time series techniques of analyzed including unit root test, co-integration test, error correction, model analysis. Result showed that microeconomics instability in Nigeria has the tendency of impeding the level of Foreign Direct Investment inflow into the country on the short run while the negative influence fizzles out along the passage of time. Allocation of government national resources to capital oriented expenditure in an attempt to ensure rapid development of infrastructural facilities in the country will undoubtedly spur the rate of Foreign Direct Investment inflow into the country especially on the long run when such expenditure had succeeded in stabilizing other microeconomic variables, It was also succinctly concluded in the study that economics policy geared towards increasing the terms of trade of Nigeria either by increasing the bulk of exportable goods and services  from all quarters of production (Primary, secondary, Tertiary) or reducing the level of importation into the country, has the capacity of spurring the inflow of foreign direct investment into the country. Hence, government should extensively  analyze the economy vis–a–vis developed economics in other to deduce the best  economics management style that can guarantee the inflow of foreign direct investment into the country add more values to the country than it take from it. There is need for government to ensure tranquility in the political interplay of the country in order to regulate the rate of social unrest, and politically driven insurgencies in the country. Finally, government should earmark greater percentage of the budget to capital expenditure in order to foster high level of capital formation through sustained infrastructural development.