Tax and Foreign Direct Investment in Nigeria: A Dynamic Estimation Approach

Hassan O. Ozekhome ()
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Hassan O. Ozekhome: Samuel Adegboyega University, Edo State, Nigeria

Journal of Economic Development, 2022, vol. 47, issue 2, 115-124

Abstract: This paper empirically investigates the nexus between tax and foreign direct investment (FDI) in Nigeria, over the period 1986-2020. Employing the dynamic system GMM estimation technique, the findings show that a high tax regime has a destabilizing effect on FDI inflows. Lagged FDI (a measure of agglomeration effects, relating current FDI to past FDI inflows) is positively and significantly related to FDI. Growth rate of real GDP (a measure of economic size) is positively and significantly related to FDI. It is also evident that infrastructure has a positive but weak impact on FDI. The paper recommends institutional reforms in tax to entrench an investment- friendly environment, as well as increased infrastructure investment spending, particularly, ICT, and a stable political and macroeconomic environment to stimulate FDI inflows to Nigeria. =

Keywords: Tax; Foreign Direct Investment; Cost of Capital; GMM (search for similar items in EconPapers)
JEL-codes: C13 F21 H25 (search for similar items in EconPapers)
Date: 2022
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