Political Risk and Foreign Direct Investment in Africa: The Case of the Nigerian Telecommunications Industry

Ellis L.C. Osabutey*, Chris Okoro

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

21 Citations (Scopus)

Abstract

Foreign direct investment (FDI) flows are expected to be influenced by political risk factors. However, studies that evaluate the relationship between political risk and FDI flows in sub-Saharan Africa (SSA) are scarce. This study examines the impact of political risk on FDI flows in an SSA context using the 12 political risk components published as the International Country Risk Guide (ICRG) by the Political Risk Services (PRS) Group with the Nigerian telecommunications sector as a case study. The study finds that political risk has a significant influence on the inflow of FDI into developing economies in SSA such as Nigeria and that the 12 components affect FDI in different ways. Irrespective of the political risk rating, a consistent improvement in composite political risk enhances FDI inflow. Among the 12 components, corruption, law and order, democratic accountability, and investment profile were found to have significant influences on FDI inflow into the Nigerian telecommunications sector. Corruption, in particular, explains nearly two-thirds of the FDI inflow.

Original languageEnglish
Pages (from-to)417-429
Number of pages13
JournalThunderbird International Business Review
Volume57
Issue number6
DOIs
Publication statusPublished - 1 Nov 2015
Externally publishedYes

Fingerprint

Dive into the research topics of 'Political Risk and Foreign Direct Investment in Africa: The Case of the Nigerian Telecommunications Industry'. Together they form a unique fingerprint.

Cite this