Corruption and Foreign Direct Investment in Nigeria (1986-2025)

This study examines the relationship between corruption and foreign direct investment (FDI) inflows in Nigeria over the period 1986-2025, a stretch of nearly four decades that encompasses military rule, democratic transitions, oil price cycles, and recent post-pandemic economic shocks. Nigeria remains one of Africa's largest economies, yet it consistently ranks among the most corruption-afflicted nations in global governance indices, a paradox that sits at the heart of this investigation. While the country's vast natural resource endowment, demographic scale, and strategic geopolitical position should theoretically make it an FDI magnet, actual investment inflows remain volatile, sector-concentrated, and far below the nation's potential. The study employs Ordinary Least Squares (OLS), Fully Modified OLS (FMOLS), and Dynamic OLS (DOLS) regression techniques to isolate the independent effect of corruption on FDI, while controlling for market size, inflation, exchange rate, trade openness, governance quality, regulatory framework, rule of law, infrastructure, oil reserves, and global economic trends. Using annual time-series data primarily sourced from the World Bank, the Central Bank of Nigeria (CBN), the International Monetary Fund (IMF), and Transparency International, the results consistently demonstrate that corruption exerts a statistically significant negative effect on FDI inflows. A one-unit improvement in the Corruption Perceptions Index (CPI) is associated with a 0.0401 percentage point increase in FDI as a share of GDP. Governance quality, regulatory efficiency, and rule of law emerge as equally powerful determinants, suggesting that corruption does not operate in isolation but as part of a broader institutional deficit. The study finds robust cointegration among the variables, stable model parameters, and confirms that corruption Granger-causes FDI in a unidirectional fashion. The findings have direct implications for Nigeria's industrialisation agenda, the Tinubu administration's economic reform programme, and the broader African Continental Free Trade Area (AfCFTA) investment strategy.