<p>This study evaluates the nexus between climate policy uncertainty (CPU) and US-Nigeria foreign direct investment (FDI) inflows, using both aggregate and sector-specific inflows data between 1987 and 2024. We employ the Generalized Method of Moments (GMM) estimation framework, which addresses potential endogeneity problem and measurement bias that is typical of any time series analysis. While we explicitly account for a policy-induced structural break associated with the 2015 Paris Agreement, we also incorporate bilateral exchange rate volatility and global oil price as control variables to capture the robustness of the observed relationships. According to the findings, aggregate US FDI inflows to Nigeria are sensitive to shifts in US climate policy uncertainty, with variations across sectors. While FDI to the manufacturing sector is vulnerable to policy uncertainty, FDI to the mining sector is relatively resilient. This importantly reflects differences in capital intensity and exposure to regulatory risks. The inclusion of exchange rate volatility and global oil price as control variables provide nuance explanation on the sectoral sensitivity patterns. Specifically, it highlights the interplay between external shocks and domestic investment conditions. This outcome offers valuable insights for policymakers seeking to attract and sustain foreign investment.</p>

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Climate policy uncertainty and US-Nigeria FDI inflows: aggregate and sector-specific analysis

  • Yinka Hammed,
  • Adesuwa Erediauwa,
  • Solomon Ademosu

摘要

This study evaluates the nexus between climate policy uncertainty (CPU) and US-Nigeria foreign direct investment (FDI) inflows, using both aggregate and sector-specific inflows data between 1987 and 2024. We employ the Generalized Method of Moments (GMM) estimation framework, which addresses potential endogeneity problem and measurement bias that is typical of any time series analysis. While we explicitly account for a policy-induced structural break associated with the 2015 Paris Agreement, we also incorporate bilateral exchange rate volatility and global oil price as control variables to capture the robustness of the observed relationships. According to the findings, aggregate US FDI inflows to Nigeria are sensitive to shifts in US climate policy uncertainty, with variations across sectors. While FDI to the manufacturing sector is vulnerable to policy uncertainty, FDI to the mining sector is relatively resilient. This importantly reflects differences in capital intensity and exposure to regulatory risks. The inclusion of exchange rate volatility and global oil price as control variables provide nuance explanation on the sectoral sensitivity patterns. Specifically, it highlights the interplay between external shocks and domestic investment conditions. This outcome offers valuable insights for policymakers seeking to attract and sustain foreign investment.