Does Economic Performance Attract Foreign Direct Investment? Market Size, Macroeconomic Conditions and National Stability in Nigeria, 1993–2022

Purpose: Nigeria's economy roughly tripled in real terms between 1993 and 2022, yet net foreign direct investment (FDI) inflows fell from a peak of 2.9 per cent of GDP in 2009 to slightly below zero in 2022. This study asks whether, and through which channels, host-country economic performance shapes FDI. It examines three dimensions of performance: the size of the economy, prevailing economic conditions and national (macroeconomic) stability. Design/methodology/approach: The study uses annual World Bank data for 1993–2022. It estimates three autoregressive distributed lag (ARDL) models, applying the bounds F-test and the error-correction t-test with small-sample critical values simulated for the actual sample size, and includes a 1999 regime-shift dummy suggested by Zivot–Andrews break tests. Direction of causality is examined with error-correction terms and Toda–Yamamoto augmented-VAR Granger tests. Findings: FDI is cointegrated with the size of the economy (F = 12.92, p < 0.01) and, more weakly, with economic conditions (F = 5.68, p < 0.10; error-correction t = −4.70, p < 0.05), but not with the stability indicators. Contrary to the market-seeking hypothesis, real GDP has a significant negative long-run association with FDI intensity (−1.85, p = 0.028). Trade openness raises FDI in the long run (0.062, p = 0.097). Inflation reduces FDI in the short run (−0.036, p = 0.008). Causality runs from market size and economic conditions to FDI in the long run, while in the short run FDI Granger-causes the exchange rate (p < 0.001) and trade openness (p = 0.004). Research limitations/implications: The sample of 30 annual observations limits the number of regressors per model. Aggregate FDI does not distinguish resource-seeking from market-seeking investment, and governance indicators were not available for the full period. Practical implications: A large and growing domestic market is not enough to attract FDI to Nigeria. Policy should give priority to trade integration, low and stable inflation and exchange-rate predictability, which are the channels through which performance actually reaches investors. Originality/value: Most Nigerian studies treat FDI as a driver of growth. This study reverses the lens, models FDI as an outcome of separately measured dimensions of performance, and uses small-sample bounds inference. It documents a "growth without FDI" paradox that the market-size consensus in the FDI literature does not anticipate.