Fiscal Policy and Foreign Direct Investment in Nigeria

Abstract

The study analyzed the effect of fiscal policy on foreign direct investment as well as the impact of Foreign Direct Investment on economic growth in Nigeria over the period of 1981-2017. The main type of data used in this study is secondary; sourced from various publications of Central Bank of Nigeria, such as; Statistical Bulletin and Annual Reports.

The regression analysis of the co-integration is the estimation technique that is being employed in this study to determine the relationship between and impact of the fiscal policy on Foreign Direct Investment as well as the impact of Foreign Direct Investment on economic growth.

The findings revealed that corporate income tax as fiscal indicators has a positive effect on foreign direct investment and government expenditure as a fiscal indicator has a negative effect on foreign direct investment. It also revealed that foreign direct investment have a significant impact on economic growth, it is further revealed that corporate income tax and interest rate and exchange rate have a negative and significant relationship on economic growth. Government expenditure and inflation have a positive and significant relationship impact on economic growth. This implies that foreign direct investment is an engine of economic growth.

The paper recommended that the government should ensure a strict fiscal policy discipline and also government need to demonstrate high level of commitment to selectively choosing investors so as to favor the economy and not investor's selfish interest as this will promote economic growth. The project work is further recommended for further study.