NIGERIA’S DEBT FINANCING, DEBT SERVICING AND FOREIGN DIRECT INVESTMENT SCENARIO IN EMPIRICAL RETROSPECT

Abstract

The study was motivated by the need to examine the influence of debt financing and subsequent debt servicing obligations on foreign direct investment in Nigeria. Specifically, it sought to ascertain the effect of domestic debt, external debt and debt servicing costs on the rate of FDI inflows from 2006 to 2024. The research employed the ex post facto design enabling it to source data from the World Bank Development Indicators and the Central Bank Statistical Bulletin as the evidence upon which conclusions were made. In analyzing the data, the study applied the Autoregressive Distributed Lag (ARDL) approach. Findings from the results suggest that in the short and long run, domestic debts negatively affects foreign direct investment while external borrowings showed a positive impact on foreign direct investment inflows. In furtherance to this finding, the study also discovered that consistent debt servicing had a strong positive influence on FDI inflows in the long and short run dynamics. It therefore recommended amongst others that government should reduce its dependence on internal borrowings while external financing should be strictly targeted on productive activities and sectors that can drive economic growth and increase FDI inflows.