Determinants of Foreign Direct Investment in Nigeria: The Debt Overhang Hypothesis Revisited.

Abstract

The exit of Nigeria from the global debtors club saw a total collapse of the external debt from an outrageous US$35.94billion, as at 2004 to a modest US$3.54billion in 2006. The figure has gradually risen since then to US$9.518billion in 2014. This gradual rise in the external debt has raised much concern as to whether it will engender a debt overhang situation? The objective of this article is to prove that the current level of external debt in Nigeria will not lead to a debt overhang situation. The research further examined the determinants of foreign direct investment (FDI) flow to Nigeria.Using an inferential approach and adopting a double-logautoregressive model the research applied the ordinary least squares (OLS) technique in a stepwise multiple regression involving six major debt burden indicators using secondary data from 1970-2003. The result showed that the size of the external debt is not statistically significant enough to engender a debt overhang situation into the country.To sustain economic growth and development the study recommends that macroeconomic stability, infrastructural development and structuredliberalization is integral. This article is divided into five sections. Section one introduces the article, section two reviews relevant literature, section three outlines the methodology, section four discusses the result findings and section five outlines the
recommendation and conclusions.