Effect of Exchange Rate on Foreign Direct Investment in Nigeria

Main Article Content

Adejoke M. Adewale
Bosede C. Olopade
Eyitayo O. Ogbaro

Abstract

This study investigates the relationship between exchange rates and Foreign Direct Investment (FDI) in Nigeria from 1981 to 2021. Employing a Fully Modified Ordinary Least Squares (FMOLS) regression analysis, the study reveals a significant positive correlation between exchange rates and FDI. Conversely, the study finds a positive but statistically insignificant association between trade openness and FDI. Finding on interest rates (INTR coefficient: -0.104) indicates a negative relationship with FDI, lacking statistical significance. Similarly, inflation rates (INFR coefficient: 0.012) exhibit a positive yet statistically insignificant link with FDI. Notably, the study highlights a substantial and statistically significant negative relationship between human capital (HC coefficient: -77.787) and FDI, signifying the importance of human capital development in attracting foreign investment. In summary, the research findings indicate a substantial impact of exchange rates on FDI in Nigeria. It suggests that policymakers should proceed with caution to avert possible depreciation of the exchange rate, which could deter foreign investors. Furthermore, adopting a comprehensive strategy for macroeconomic stability could foster a more conducive atmosphere for foreign investment.

Article Details

How to Cite
Adewale, Adejoke M., Bosede C. Olopade, and Eyitayo O. Ogbaro. 2024. “Effect of Exchange Rate on Foreign Direct Investment in Nigeria”. ABUAD Journal of Social and Management Sciences 5 (2):302-18. https://doi.org/10.53982/ajsms.2024.0502.05-j.
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