Effects of factor endowments on local economies of cities within the Ecowas Region, Nigeria

This research has focussed on investigating the effects of factor endowments on local economies of cities in the ECOWAS region. As a measure of those effects, it uses the attraction of inward Foreign Direct Investments (FDI) as core determinant. Analysing the pattern and trend of inward FDI into the region affords insights to the volume, count and growth of investments into the cities and countries of the region as well as source cities and countries worldwide in a time series of ten years. This enabled knowledge of which cities and countries were receiving FDI, from which sources, in which sectors and in what pattern and content. With the aid of appropriate software (excel, ucinet and netdraw), growth models, positional networks and distribution maps were drawn to produce the results in graphic presentation. In identifying the important city competitors in the region, the Manhattan Distance calculation was used to determine the competitive distance between cities based on sector investments. The closer the distance values, the more intense the competition among the related cities. This forms the basis for ranking of the competitor cities and the sectors in which they are competing. The explanatory aspect of the research draws knowledge of factor endowments from cities profiles whilst the locational factors explaining the trend of FDI are drawn from the Global Competitiveness Index Report of the World Economic Forum. This was chosen because of its comprehensive assessment of indicators using common scale values across countries. The data was found appropriate for this research; however, it was only applied after conducting Variance Inflation Factor tests to check multi-collinearity. Relationship between the two sets of variables is then determined through multiple regression analysis to assess the significance level of all locational factors in explaining FDI. A similar exercise was performed on the Asia data to pair results and draw further lessons. It is common knowledge that Asia countries such as China, India, Singapore and Malaysia actively promote measures that attract FDI. This is therefore done in acknowledgement of growth in the economies, and improved competitiveness of Asian countries and cities over the years as a result of FDI flows. Besides most of these countries have political, economic and social circumstances similar to those of ECOWAS countries. As discovered, the growth of FDI into ECOWAS within the period of review 2003-2012 is 11.5 per cent. Although among the lowest in terms of volume compared to similar Regional Economic Communities (REC), the growth was relatively steady. The sectors with the most prospects are resource based like agriculture, minerals, and metals, closely followed by the services sectors. Cities and countries share of this inflow varies in count of investments depending on various factor endowments and the sector requirement. As discovered from the regression analysis, 71% of all FDI to the region is attributable to market size and business sophistication. While countries like Nigeria, Cote d’Ivoire and Ghana have attracted FDI especially due to their domestic market size, others like Senegal, Gambia and Liberia have been due to marketing and innovation. However, the extent to which the region can capitalize on these locational factors is limited by the inadequacies of the others, such as strong and viable institutions.