Impact of Power Sector Development on Foreign Direct Investment Growth in Nigeria: 1986-2023

The Nigerian government has undertaken several reforms aimed at attracting foreign direct investment to the power sector to boost the sector; these efforts may seem to have yielded modest benets. However, the country faces challenges in attracting foreign direct investment into the power sector, including political instability, regulatory uncertainties, and security concerns. Thus, the paper investigated the impact of power sector development on foreign direct investment growth in Nigeria from 1986 to 2023. The Fully Modied Ordinary Least Squares Regression was employed as method of data analysis. Results revealed that power sector capital expenditure is signicant and positively related to foreign direct investment growth in Nigeria. While, power sector recurrent expenditure is signicant but negatively correlated with foreign direct investment growth. Also, the estimated impact of power sector generation on foreign direct investment growth is negative and insignicant in the long run. Furthermore, the results indicated that power distribution capacity inuences foreign direct investment growth negatively and insignicantly in the long run. Therefore, the paper recommended that the Federal government should prioritize increased capital investment in the power sector, specically in infrastructure projects like power plants, transmission lines, renewable energy sources and Research and Development; given the positive and signicant relationship between power sector capital expenditures and foreign direct investment growth. Also, the Nigerian Electricity Regulatory Commission should focus on improving the reliability and consistency of power generation by upgrading existing plants, investing in diverse energy sources (e.g., renewables like solar and wind), and ensuring that power plants operate at full capacity. Further, the Nigerian Electricity Regulatory Commission should address inefciencies in the distribution system, such as high technical and non- technical losses (e.g., electricity theft and poor metering); due to the negative and insignicant impact of power distribution on foreign direct investment growth.