Main Article Content
Aims: This study examined the place of exchange rate in determining foreign direct investment inflow into the Nigerian economy using time series data from 1980 to 2017.
Study Design: Historical research design method was adopted for the study, it uses secondary sources and a variety of primary documentary evidence.
Place and Duration of Study: Department of economics, faculty of social sciences, Nnamdi Azikiwe University, between September 2010 and May 2018.
Methodology: The method adopted for this study was the Autoregressive Distributed Lag (ARDL) estimation approach and error correction mechanism within the framework of dynamic OLS (DOLS) estimation. The analysis began with a verification of the unit root properties of the variables. The Augmented Dickey Fuller (ADF) and Philips-Perron (PP) unit root procedures were employed and both tests indicate that the variables were integrated of either order I(0) or order I(1). This warranted the use of Bounds testing approach in determining the cointegration among the variables in the various equations in the selected countries. Analysis using the Bounds testing approach to cointegration confirmed the existence of long run relation among the variables of the models. In determining the impact of exchange rate on foreign direct investment inflow in Nigeria, we estimated an ARDL model.
Results: The results indicate that exchange rate affects FDI in both the long and short run. The result also reveals that the impact of exchange rate on FDI in the short run continuous up to three periods after the initial disturbance.
Conclusion: This study concluded that exchange rate appreciation will lead to increases in foreign direct investment inflow. The study therefore recommended, amongst others, that government should apply exchange rate regime that is competitive at the international market so as to attract more FDI inflow to the Nigeria economy.
Sahiti A, Ahmeti S, Ismajli H. A review of empirical studies on FDI determinants. Baltic Journal of Real Estate Economics and Construction Management. 2018;6(1): 1-11.
Paez L. Liberalizing finance services and foreign direct investment. Basingstoke: Palgrave Macmillan; 2011.
Cambazoglu B, Günes S. The relationship between foreign exchange rate and foreign direct investment in Turkey. Economics, Management and Financial Markets. 2016;11(1):284.
Jin W, Zang Q. Impact of change in exchange rate on foreign direct investment: Evidence from China. Lingnan Journal of Banking, Finance and Economics. 2013;4(1):1.
Omorokunwa OG, Ikponmwosa N. Exchange rate volatility and foreign private investment in Nigeria. Asian Journal of Business Management. 2014;146-154.
Olowe RA. Modelling naira/dollar exchange rate volatility: Application of GARCH and asymmetric models. InternationalReview of Business Research Papers. 2009;5(3):377-398.
Abayomi TO, Olaronke TO. A comparative analysis of exchange rate volatility in the West African monetary zone. CBN Journal of Applied Statistics. 2015;6(2):161-184.
Kalu OM. Comparative analysis of bureaux de change and official exchange rates volatility in Nigeria. Mykolo Romerio University; 2016.
Osemene OF, Arotiba K. Exchange rate volatility and foreign portfolio investment in Nigeria. Global Journal of Management and Business Research. 2018;8(2):12- 20.
Udeh VU. Globalization, exchange rate volatility andforeign trade performance in Nigeria: An empirical analysis (Master’s project). Department of Economics, University of Nigeria, Nsukka; 2010.
Dunnings JH. Trade, location of economic activity and MNE: A search for an eclectic approach. London: Macmillian. 1977;395-418.
Muhammad SD, Azu NP, Oko NF. Influence of real exchange rate and volatility on FDI inflow in Nigeria. Inter-national Business Research. 2018;11(6): 73-82.
Eregha PB. Exchange rate, uncertainty and foreign direct investment inflow in West African monetary zone. Global Business Review. 2019;20(1):1-12.
Payaslioglu C, Polat B. The impact of exchange rate uncertainty on FDI inwards into Turkey. In WEI International Academic Conference Proceedings, Antalya, Turkey; 2013.
Gandu S, Yusha'u IA. Analysis of the impact of foreign direct investment on economic growth in Nigeria. International Journal of Operational Research in Management, Social Sciences & Education. 2017;3(2):88-100.
Okenyis SC, Madueme SI. The impact of dollar exchange rate volatility on foreign direct investment in Nigeria. International Journal of Research in Arts and Social Sciences. 2010;2(1):419-437
Ekpo AH. Foreign direct investment in Nigeria: Evidence from time series data. CBN Economic and Financial Review. 1997;35(l).