The Influence of Exchange Rate Fluctuation on Foreign Direct In-vestment in Nigeria (1986-2022)

Abstract

Using yearly data series spanning 36 years, from 1986 to 2021, the research empirically evaluates the influence of exchange rate fluctuation on foreign direct investment in Nigeria. The study’s objectives were focus on examining the extent of exchange rate volatility in Nigeria and ways by which exchange rate volatility impact on foreign direct investment in Nigeria. Secondary source of data was employed from world development indicator (WDI) and central bank of Nigeria (CBN). Autoregressive Distributed Lag (ARDL) were employed and the GARCH (1, 1) model was used in investigating the model built and were analyzed using multicollinearity with the use of Augmented Dickey-Fuller (ADF) test to verify that the variables are stationary in order to make sure the estimated results are not erroneous. Findings from the study shows that real exchange rate volatility (REERVOL) has a long-term and short-term detrimental impact on FDI and negative long- and short-term interest rate coefficients demonstrate that an unfavorable interest rate exacerbates the already diminishing foreign direct investment (FDI) flows to Nigeria as a result of REERVOL. The policy was recommended for improving FDI through effective exchange rate management.