Institutional Quality, Corruption Perception, and FDI Location Choice Within Nigerian States

This study analyses the role of institutional quality and corruption perception in shaping foreign direct investment location choices across Nigerian states, examining why FDI remains geographically concentrated in Lagos and a small number of southern states despite national investment promotion efforts. Cross-state variation in regulatory quality, security conditions, infrastructure provision, and perceived corruption levels creates a differentiated sub-national investment climate that influences location decisions for internationally mobile capital. The research employs a panel data design using state-level FDI data from the Nigerian Investment Promotion Commission, sub-national governance quality indicators from the Fragile States Index and the State Peer Review Mechanism, and infrastructure and security data from the National Bureau of Statistics, covering the period 2017 to 2023. Panel regression with state and year fixed effects is used, supplementing quantitative findings with qualitative interview data from 20 foreign investment location decision-makers. The theoretical framework draws on the institutional theory of FDI, the OLI eclectic paradigm, and sub-national investment climate literature. The study tests the hypothesis that institutional quality and anti-corruption effectiveness at the state level are stronger predictors of FDI attraction than fiscal incentives alone. Findings are expected to reveal that states with superior governance ratings attract disproportionately larger FDI volumes even after controlling for market size and infrastructure, validating the primacy of institutional quality in investment location decisions. Recommendations focus on state-level governance reform, anti-corruption capacity building, and performance-based federal support for investment climate improvement. Keywords: institutional quality, corruption, FDI location, Nigerian states, investment climate