The Mediating Role of Governance in Foreign Direct Investment Inflows and Economic Performance Nexus: New Evidence from Nigeria

Abstract

The recent FDI-growth literature suggests that the varying effects of foreign direct investment on economic growth in host countries might be due to certain domestic factors that determine the benefits of FDI. Among these factors is the quality of governance; thus, this study examined how the interaction between foreign direct investment (FDI) and governance affects the performance of the Nigerian economy by relying on annual time series data spanning 1986 to 2021. The results from the autoregressive distributed lag (ARDL) model revealed that the interaction between governance and foreign direct investment exerts a positive and highly significant impact on economic performance. Apparently, the interaction between governance and foreign direct investment appears to be elastic. The foregoing suggests that governance is a significant moderating factor between foreign direct investment and economic performance in Nigeria.