Interrogating the Level of Unemployment, Insecurity and Its Implication on Foreign Direct Investment in Nigeria: ARDL and Granger Causality Approach

Sule, Abubakar*, I.d Mohammed and Yahaya Wada
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Sule, Abubakar*: Department of Economics, Kogi State University, Anyigba - Nigeria
I.d Mohammed: Monetary Policy Department, Central Bank of Nigeria, Abuja - Nigeria
Yahaya Wada: Department of Economics, Kogi State University, Anyigba - Nigeria

Noble International Journal of Economics and Financial Research, 2022, vol. 7, issue 1, 10-23

Abstract: This study interrogates the level of unemployment, insecurity and its implication on foreign direct investment in Nigeria (1999 to 2019) using quarterly time-series data sourced from the Central Bank of Nigeria Statistical Bulletin and World Bank’s Development Indicator. The specific objectives are to investigate the effect of insecurity on foreign direct investment and to determine the causation between unemployment and insecurity. The first preliminary test employed are the Augmented Dickey-Fuller and Dickey-Fuller Generalised Least Square (GLS) unit root tests while Autoregressive Distributed Lag model, Johansen Co integration and Granger Causality test is used for the analysis. For objective one, the bounds test shows that there is a long-run connection between the dependent and independent variables. For the variables used to capture insecurity, the ARDL coefficients for both long-run and short-run revealed that the NTI and DFE exhibit a negative relationship while ISE exerts a positive relationship with FDI and are statistically significant at 1% and 5% respectively. Furthermore, it takes 21% for the model to adjust to equilibrium in the long-term. For the second objective, Johansen Co integration test further shows that there is long-run association between the regressand and regressors. The granger causality result indicates that NTI granger causes UER and DFE. From the findings above, this study recommends total overhauling and restructuring of security architecture for both military and paramilitary through the strengthening of existing laws, budgeting of substantial amount for the purchase of modern security equipment and enhancing the welfare of security personnel. If these are in place, it stands to guarantee security of life and property thereby inducing foreign investment that can create more job opportunities for teeming youths.

Date: 2022
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