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ABSTRACT
The study investigates the impact of political stability on foreign direct investment inflows in Nigeria for the period 1999-2017. The study adopts the autoregressive distributed lag bounds technique to cointegration to examine the possible long run relationship among the investigated variables and finds long run relationship. The empirical results show that political stability has positive and significant impact on foreign direct investment inflows in both the long and the short run. It therefore provides evidence in support of the validity of the location hypothesis in the Nigerian context. In the long run, political stability, trade openness and natural resources have positive and significant impacts on foreign direct investment inflows. In the short run, trade openness and natural resources have positive and significant impacts on foreign direct investment inflows. The Granger result shows that the hypothesis that political stability does not Granger cause FDI and FDI does not Granger cause political stability cannot be rejected. On the other hand, there is unidirectional relationship between trade openness and FDI with causality running from trade openness to FDI which confirms the result from the ARDL estimation. There is bidirectional causuality between FDI and natural resources. This means that any policy on the natural resources of a country will affect FDI and vice versa. Hence, the study recommends to policy makers to deepen Nigeria’s current democratic dispensation so to make her a preferred destination for foreign direct investment inflows.
