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Spatial Econometric Analysis of Inbound Foreign Direct Investments in Nigeria: A Geographically Weighted Regression Approach

Spatial Econometric Analysis of Inbound Foreign Direct Investments in Nigeria: A Geographically Weighted Regression Approach

 

Abstract: This paper empirically analysed the spatial distribution and identified key determinants of foreign direct investments (FDIs) in Nigeria using data on the 36 states and the Federal Capital Territory. Unlike extant studies on FDI, the approach pursued here is not only disaggregated but also spatial to better reflect observed state-level disparities often masked by conventional aggregate-level analyses. Data from the Nigerian Capital Importation Report (2014) and other official sources were used. The spatial econometric analysis of the data was conducted using ordinary least squares (OLS) and the geographically weighted regression (GWR). Several interesting results ensued, chief among which are: marked variations in the geographical distribution of FDI in Nigeria with the largest volume in Lagos; access to transport infrastructure (in terms of access to airports and seaports) and their corresponding distances also significantly influenced FDI flows to states; and Lagos State appeared to be the only FDI cluster albeit surrounded surprisingly by relatively FDI poor states. In policy terms, therefore, concerted efforts have to be made by government to provide the necessary infrastructure in a more spatially balanced manner. This will make other states, apart from Lagos, more attractive for foreign investment and ultimately result in ameliorating the tensions that typically arise from marked regional discrepancies in access to economic opportunities.

 

 

 

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