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IMPACT OF EXCHANGE RATE INSTABILITY ON FOREIGN DIRECT INVESTMENT IN NIGERIA (1981-2014).

IMPACT OF EXCHANGE RATE INSTABILITY ON FOREIGN DIRECT INVESTMENT IN NIGERIA (1981-2014).

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IMPACT OF EXCHANGE RATE INSTABILITY ON FOREIGN DIRECT INVESTMENT IN NIGERIA (1981-2014).

ABSTRACT

The study aims to empirically examine the influence of exchange rate volatility on foreign direct investment in Nigeria between 1981 and 2014. The data for the research study were obtained from the CBN statistical bulletin volume 25, 2014 edition.

The methodology used was ordinary least squares, with foreign direct investment being regressed on the exchange rate, real GDP, and economic openness. Some econometric tests were performed, including the unit root, Contegration, and Vector Autoregressive Model.

The unit root result demonstrates that none of the variables were stationary at level, but at initial differencing, they all became stationary. The contegration result indicates that there is no long-term link between the variables.

The vector autoregressive model demonstrates that the exchange rate has an impact on economic growth. On this note, the researcher recommends, among other things, that policymakers continue to use floating exchange rate policy to allow our domestic currency to reach its proper level among the committee of world currencies, with the goal of establishing stability in the naira’s exchange rate, ensuring effective economic planning and long-term growth.

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