Nexus between financial development and foreign direct investment inflows: An empirical investigation from Nigeria

This study examined the nexus between financial development and foreign direct investment inflows in Nigeria from 1990 to 2023, aiming to establish long-run relationships and causality between financial development and FDI in Nigeria. Data was collected from the World Development Indicators, and the study employed Fully Modified Ordinary Least Squares and Granger Causality techniques to analyze the objectives. The conclusions indicate that financial development strongly supports the attraction of FDI in Nigeria, with both strategic policy and financial development variables being major drivers of FDI inflows. Based on these findings, the study recommends that Nigerian policymakers should align the financial development policy framework with FDI inflow objectives. To attract more FDI, the monetary authority should consider lowering the monetary policy rate to reduce lending costs, as these were found to be significant channels affecting FDI. Additionally, implementing appropriate monetary policies to facilitate FDI inflows is essential; for example, currency depreciation discourages FDI, highlighting the need for an exchange rate stability mechanism in Nigeria.