Comparison of the Economic Factors that Influence Foreign Direct Investment Growth in Nigeria and India

Abstract

The study determined the compound growth rate of FDI and the factors influencing its inflow in India and Nigeria. The study showed that the time series data were non-stationary but differenced stationary and their cointegration residual and error correction model regression showed a long-term relationship and a same time period adjustment of disequilibrium between FDI and the macroeconomic variables. The growth rate and compound growth rate of FDI into India was much higher than that of Nigeria for the same time period; the results raises the question of whether the perceived notion that India is growing at a much faster pace than Nigeria is true. The determination of the relationship between FDI and the chosen economic variables suggests that Nigeria should improve on its GDP, trade openness and human capital while sustaining its inflation at the level to which it encourages FDI inflow. India attracted more FDI than Nigeria due to its large GDP, higher real interest rate and trade openness; it is suggested that a further depreciated currency would encourage more FDI inflow into India.