EFFECT OF GOVERNMENT TRADE POLICIES ON FOREIGN DIRECT INVESTMENT IN THE OIL AND GAS SECTOR IN NIGERIA

Government trade policies (tax policy, balance of payment and trade openness) affect foreign direct investment in developing countries especially Africa, irrespective of their level of development, geographical location or industrial structure. Yet, it is uncertain whether government trade policies affect foreign direct investment in Oil and Gas in Nigeria or foreign direct investment in Oil and Gas affect government trade policies in Nigeria. The study examined the effect of government trade policies on foreign direct investment on the oil and gas sector in Nigeria. The study used ex-post facto research design and the population is made up of 5 oil and gas foreign investors in Nigeria. The sample size is the 5 oil and gas foreign investors. The study relied on reports from Central Bank of Nigeria for secondary data. The study employed various procedures in analysing the data such as correlation matrix, unit root test, co-integration and vector error correction model. The study revealed that there is a long run relationship between government trade policies and foreign direct investment (FDI) in Oil and Gas in Nigeria. The study also found that causality runs from government trade policies to Foreign Direct Investment in Oil and Gas which implies that government trade policies causes increase in the inflow of FDI in Oil and Gas sector. This implies that trade openness policy, balance of payment (expenditure reducing policy and expenditure switching policy) and tax policy (tax rate) influence foreign direct investment in Oil and Gas sector in Nigeria. The study suggested import substitution strategy, export promotion, National Economic Empowerment and Development Strategy (NEEDs Era) and structural adjustment programme (SAP), expenditure reducing policy and expenditure switching policy should be continually and appropriately applied with corresponding policies such as trade openness, tax rate and balance of payment to attract multinational corporations in Oil and Gas Sector in Nigeria. Federal Government of Nigeria should consider the establishments of agency on trade consistency of agreements to monitor the activities of foreign direct investors in Oil and Gas sector in Nigeria.