Corruption Perception and Foreign Direct Investment in Nigerian States: An Empirical Panel Analysis

This study empirically analyses the relationship between corruption perceptions and foreign direct investment (FDI) inflows across Nigerian states, addressing a gap in the sub-national analysis of governance-investment linkages in African economies. While national-level corruption-FDI studies are well established in the literature, state-level panel analyses within single-country settings offer superior control over macroeconomic confounders and allow examination of within-country institutional variation. A balanced panel dataset covering 36 states and the FCT over the period 2015 to 2022 is constructed using FDI data from the Nigerian Investment Promotion Commission (NIPC) and state-level governance quality indices from the Nigeria Governors Forum Assessment Reports. Fixed effects and system GMM panel regression techniques are employed to address reverse causality and omitted variable bias. The Institutional Theory of Investment Location and Transaction Cost Economics provide the theoretical framework. Findings confirm a robust negative relationship between perceived corruption intensity and FDI inflows, persisting after controlling for infrastructure quality, market size, and natural resource endowments. States in the South West zone, with lower corruption scores and stronger institutional environments, attract disproportionately large shares of total state-level FDI. The study contributes original sub-national panel evidence on the corruption-investment nexus and proposes state-level governance improvement benchmarks as investment promotion tools. Keywords: corruption perception, foreign direct investment, Nigerian states, governance, panel data.