Financial Market Development and Foreign Direct Investment in Nigeria, 1986-2023

Purpose: Foreign direct investment (FDI) has been deteriorated and persistently being volatile in Nigeria recently, these may due to weakness in the financial system. Due to the forgoing, this study investigated the impact of financial market development on foreign direct investment in Nigeria for the period, 1986-2023. Specifically, it seeks to evaluates whether improvements in key financial market indicators such as financial market access, depth and efficiency have significantly contributed in attracting and sustaining foreign direct investment inflows in Nigeria over the studied period. Methodology: The Study adopted autoregressive distributed lag (ARDL) model Results and Conclusion: The study found that financial market access positively influences FDI in Nigeria, being significant in the short run but turned to be insignificant in the long run. Financial market efficiency revealed a positive and significant influence on the FDI both in short and long runs, whereas financial market depth exerted positive and negative insignificant influences on FDI respectively. The study therefore concludes that while financial market depth has no significant impact on the FDI, financial market and efficiency significantly influenced foreign direct investment in Nigeria. Implication of findings: The findings of the study suggest the financial market access and efficiency are central in attracting FDI in Nigeria, while financial market depth has no significant impact. Hence, policymakers should prioritize improving market accessibility, efficiency, and transparency to enhance sustained FDI inflow in Nigeria.