Econometric Modelling and Forecasting Foreign Direct Investment Inflows in Nigeria: ARIMA Model Approach

Ayodele Idowu, Mr (2021): Econometric Modelling and Forecasting Foreign Direct Investment Inflows in Nigeria: ARIMA Model Approach.

Abstract

This study examined econometric modelling and forecasting foreign direct investment inflows in Nigeria over the next decade using Box-Jenkins ARIMA model approach. The scope of the study is from 1970 to 2020. The correlogram show that the net foreign direct investment inflow in Nigeria is integrated of the first order. Based on the number of significant coefficients, highest adjusted R-squared, lowest volatility and the lowest SBIC and the AIC, the study estimated and presents the ARIMA (1, 1, 3) model. The diagnostic test also shows that the estimated model is not only consistent but good for forecasting the net foreign direct investment inflows in Nigeria and it also explains the dynamics around it. The result of the study shows that net foreign direct investment inflows in Nigeria are likely for exhibit very slow upward trend between 2.80 billion USD and 3.26 billion USD in the next decade which is not significantly different from values of FDI inflows in Nigeria in the recent years. The study also provide policy recommendations so as to assist policy makers and the Nigerian government on better ways to accelerate and maintain higher level of net foreign direct investment inflows in Nigeria.

• Item Type: MPRA Paper
• Language: English
• Keywords: ARIMA, Foreign Direct Investment Inflows, Forecasting, Box-Jenkins, Nigeria.
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; F - International Economics > F1 - Trade; F - International Economics > F1 - Trade > F17 - Trade Forecasting and Simulation; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F47 - Forecasting and Simulation: Models and Applications

References

Asiedu, E. (2002). On the determinants of foreign direct investment to developing countries: is Africa different? World development, 94(2), 263-276.

Adamu, J. (2018). Forecasting FDI Inflows from the United States (USA) to Nigeria over Ten years Period, 3(3), 2544-5966.

Asteiou and Hall (2007) Applied Econometrics, Revised Edition.

Gujaraji and Porter (2009) basic Econometrics, 5th Edition.

Adamu, J. (2018). Predicting Net Foreign Direct Investment in Nigeria using Box-Jenkins ARIMA Approach. Journal of Economics and Finance, 4(2) 2520-7490.

Dinda, S. (2009). Factors attracting FDI to Nigeria: An empirical investigation, Madras School of Economics, Chennai.

Ghebrihiwet, N., and Motchenkova, E. (2017). Relationship between FDI, foreign ownership restrictions, and technology transfer in the resources sector: a derivation approach, Resources Policy, 52: 320 – 326.

Goh, C., and Law, R. (2002). Modeling and forecasting tourism demand for arrivals with stochastic non stationary seasonality and intervention, Tourism Management, 23: 499 – 510.

Nyoni, T., and Bonga, W. (2018). What Determines Economic Growth In Nigeria? DRJ - Journal of Business and Management, 1 (1): 37 – 47.

Nyoni, T. (2018). Modeling and Forecasting Inflation in Kenya: Recent Insights from ARIMA and GARCH analysis, Dimorian Review, 5 (6): 16 – 40.

Olayiwola, K., and Okodua, H. (2013). Foreign Direct Investment, non-oil exports, and economic growth in Nigeria: a causality analysis, Asian Economic and Financial Review, 3 (11): 1479 – 1496.

UNCTAD, (2020). World Trade Report.

Wooldbridge J. (2009). Introductory Econometrics: A Modern Approach 4th Edition.