Nigerian Journal of Banking and Financial Issues (NJBFI)

Effect Of Digital Financial Service Tools On Foreign Direct Investment In Nigeria

Abstract

Financial technology has continually gained global attention owing to its significant impact across the globe. Despite the regional differences in the financial landscape, Digital Finance Service tools have played a significant role in financial sectors offering both customers and non-customers financial services. Recently, Nigeria has witnessed a surge in the adoption of Digital Financial Services tools. The technology adoption has played a significant role in the elimination of barriers to investment, meanwhile, introducing new risks that have discouraged Foreign direct investment in certain sectors. The study examined the impact of digital finance service tools and macroeconomic variables on Foreign Direct Investment in Nigeria. The study used normal-power regression analysis to investigate the effects of four tools (Automatic teller machines, Point of Sale, Web Payments, and Mobile Money) and four macroeconomic variables (Gross Domestic Product per capita, inflation rate, official exchange rate, and unemployment rate) on Foreign direct investment. The findings revealed that while Automatic teller machines, Point of Sale, Web Payments, Mobile Money, Gross Domestic Product, Official exchange rate, and Unemployment rate have significant impacts on Foreign direct investment, inflation) does not show a significant effect. The study concluded that enhancing digital finance services, infrastructure, particularly ATMs and web payment systems, can attract more Foreign direct investment. Conversely, addressing the negative impacts of POS transactions is crucial. The study recommended that policies aimed at maintaining economic stability, managing GDP growth, and stabilizing exchange rates are essential to creating a favourable investment climate. Encouraging foreign investment in sectors that can absorb the unemployed workforce is also recommended. This study underscores the importance of integrating technological advancements in financial services with macroeconomic stability to attract and sustain foreign investments.