Foreign direct investment as a market penetration strategy in Nigeria: an empirical analysis

Abstract

This study investigates foreign direct investment (FDI) as a market penetration strategy in Nigeria within the period 1986-2007. The study used time series data and employed regression model to determine the macroeconomic variables that influence FDI inflow in Nigeria.. It was found that the growth in the Nigerian economy proxied by GDP has been the main reason for the inflow of FDI within the period under review. Results also revealed that foreign exchange, public expenditure on education and savings exerted positive but not significant impact, on FDI inflow during the study period. However, government tax revenue (GTR) and political stability proxied by Dummy (D1) had inverse relationship with FDI inflow. The study concluded that FDI is an appropriate tool for market penetration. Consequently,it was recommended that the creation of a viable business environment, improvement in the investment climate, ensuring and maintaining macro-economic stability and increased investment in human capital and public infrastructure be pursued.

Keywords: Foreign; investment; market; penetration; strategy.