The Impact of Exchange Rate Fluctuations on Private Domestic Investment Performance in Nigeria (original) (raw)
Related papers
Impact of Exchange Rate Fluctuations on Domestic Investment in Nigeria (1986-2017)
EPRA International Journal of Economic and Business Review, 2020
The major objective of this study is to analyze the impact of exchange rate fluctuations on domestic investment in Nigeria, using annual data covering the period 1986–2017. Time series data on domestic investment, gross domestic product, interest rate, financial deepening and exchange rate were obtained from the Central Bank of Nigeria Statistical Bulletin 2017 edition. The technique of Autoregressive distributed lagged modeling (ARDL) is adopted to examine the time series data. Findings reveal that the relationship between exchange rate fluctuations and domestic investment in Nigeria is negative. However, exchange rate fluctuation has no significant impact on domestic investment in the long run p(t) value 0.6201> 0.05) and short run p(t) value 0.6244 > 0.05). The study suggests that monetary authorities in Nigeria should strive for currency swap agreements with other nations that trade heavily with Nigeria, for example, India, Turkey, United Kingdom. This would help in mitiga...
The Impact of Exchange Rate on Foreign Private Investment in Nigeria
Asian Finance & Banking Review, 2018
The study examined the impact of exchange rate on foreign private investment using quarterly time series date from Nigeria for the period 2007 to 2017. Foreign private investment in the study was disaggregated into foreign direct investment and foreign portfolio investment in order to ascertain their separate reactions to changes in the exchange rate of the naira against the US dollars. The empirical analysis was based on the VAR estimation procedure using three lagged periods adopted on the basis of various lag order selection criteria. The empirical result revealed that devaluation/depreciation of the naira adversely affects foreign direct investment and foreign portfolio investment in Nigeria. Increased in the size of the domestic market and development of the financial sector were found to stimulate foreign private investment while high inflation rate in the domestic economy discourages foreign private investment in Nigeria. The study, therefore, recommended among others that th...
Exchange Rate Volatility and Foreign Private Investment in Nigeria
This study investigates the dynamic relationship between exchange rate volatility and foreign private investment in Nigeria from 1980 to 2011. The rational for this study is the realization that a viable exchange rate regime that is stable and predictable presents rich vista for inflow of foreign investment. We employed the Error Correction Model (ECM) after a battery of preliminary investigations which include the Augmented Dickey Fuller (ADF) test for stationarity and the Engle and Granger two-step cointegration procedure. Our finding include among other things that; exchange rate volatility has a very weak effect on the inflow of Foreign Direct Investment (FDI) to Nigeria, both in the long run and in the short run and that exchange rate volatility has a weak effect on foreign portfolio investment in the short run but a strong positive effect in the long run. Based on our findings, an array of recommendation were made, which include the need for policy makers to develop sound exchange rate management system in the country, inter alia.
Effect of Selected Macroeconomic Variables on Private Investment in Nigeria (1986-2016)
2019
The essence of this study is to examine the effect of selected macroeconomic variables on private investment in Nigeria. Ordinary Least Square method was adopted to analyse the time series properties of the variables under consideration using data set on private investment, exchange rate, and interest rate spanning from 1986-2016. The main objective of this paper is to identify and examine the effect of selected macroeconomic variables on private investment in Nigeria. The data source was from the CBN Statistical Bulletin (various issues), 2016. The finding shows that exchange rate has a significant effect on private investment in Nigeria, and that interest rate has a significant correlation with private investment in Nigeria. The outcome recorded from the study align with extant findings and evidence and they agree with the fact that investment is a function an aggregation of macroeconomic variables whose changes determine the increase or decrease that it experiences over time. Bas...
Exchange Rate Volatility, Stock Market Performance and Foreign Direct Investment in Nigeria
International Journal of Academic Research in Accounting, Finance and Management Sciences, 2015
This study investigated the impact of exchange rate volatility and stock market performance on the inflow of foreign direct investment to Nigeria using time series data from 1980 to 2013. It employed the ordinary least square technique and error correction mechanism in its estimations. The result revealed that exchange rate volatility has negative and significant effect on the inflow of foreign direct investment to Nigeria both in the long run and in the short run. It further revealed that market capitalization, proxy for stock market performance was positively signed and statistically significant. Apparently, a stable and well developed capital market will definitely attract direct foreign investment to Nigeria. The study recommends the pursuance of sound exchange rate management system and policies that will lead to increase in domestic production of export commodities. The study further recommends deepening of the capital market to provide the needed funds for investment and avoidance of dollarization of the economy to reduce the stress on foreign exchange earnings. Sound foreign reserve management practices are imperative for Nigeria as measures of maintaining the value of the naira and reduce the impact of international capital shocks.
Nexus between Exchange Rate Fluctuation and Foreign Direct Investment in Nigeria
African Journal of Economics and Sustainable Development , 2022
This study examined the nexus between exchange rate fluctuation and foreign direct investment in Nigeria from 1986 to 2020. The research was conducted using relevant econometric tools which include unit root test, co-integration test and Autoregressive Distributed Lag (ARDL) model. The results of ADF unit root test revealed that only interest rate is stationary at level while exchange rate, foreign direct investment, gross capital formation and inflation rate became stationary at first deference. The bounds test showed that there is a long run relationship between the foreign direct investment inflows, interest rate, exchange rate, gross capital formation and trade openness in Nigeria. The findings revealed a negative relationship between exchange rate and foreign direct investment in Nigeria and all the lagged value of exchange rate are statistical significant at 5% level of significant, which an indication of exchange rate importance on foreign direct investment inflows into Nigeria to a two standard error shock of exchange rate showed that exchange rate effect on foreign direct investment is persistence and significantly positive over the a period of up to 8 years after the shock. The exchange rate, though relatively stable, has a profound effect on foreign direct investment in Nigeria. The study recommended that given the perceived over-valued naira, a deliberate effort toward revaluation of the naira to reflect the true value of dollar to naira exchange rate will obviously increase the exchange rate and as such makes it cheaper to invest in Nigeria by foreign businesses.
2017
This study seek to amplify the chemistry between foreign direct investment, exchange rate, interest rate and economic development in Nigeria between the periods 1986 to 2015 using Auto Regressive Distributive Lag model. From the statistical report, we discovered that foreign direct investment and interest rate exhibit a direct relationship to economic development in Nigeria. Study further suggest that the low rate of interest promote investment paradox and thus stimulate economic development in Nigeria while the report from the exchange rate shows that if exchange rate is appreciating, economic development is been stimulated. This therefore suggest that an appreciating exchange rate is capable of attracting foreign investors and thus promote economic development as the case may be. The interrelationship between exchange rate, foreign investment and economic development is expected to be direct accordingly such that rise in exchange rate attract foreign investment and thus promote ec...
Exchange Rate Volatility, Foreign Private Investment and Performance in Nigeria's Capital Market
Indo-Asian Journal of Finance and Accounting, 2021
Studies abound on exchange rate volatility and foreign investments in Nigeria. However, this study investigated the asymmetric effects of exchange rate volatility and foreign private investment on the Nigeria's capital market performance. Data obtained on capital market performance, foreign private investment, exchange rate volatility, and gross capital formation between 1986 and 2017 were analysed using the non-linear autoregressive distributed lag technique. The results showed that in the long run volatility of exchange rate, foreign private investment, and capital market performance are co-integrated. Besides, the study revealed that exchange rate volatility has asymmetric effects on capital market performance while foreign private investment exerts linear effects on capital market performance in both time horizons.
Nigerian Journal of Financial Research, 11(1), 85-93., 2016
The study aims to empirically investigate the interplay between Foreign Direct Investment, interest rate and exchange rate in the Nigerian system between 1970 and 2014. Annual time-series data on interest rates, exchange rates and foreign direct investment were sourced from the statistical database of the Central Bank of Nigeria and United Nations Conference on Trade and Development; and the e-views8 statistical software was employed to process the data using the VAR estimation technique. From the results, there is a statistically insignificant relationship between interest rate and foreign direct investment; while there is a statistically significant relationship between exchange rate and foreign direct investment as well as a uni-directional causal relationship. Based on the findings, it is recommended that first, though this study shows variations in exchange rate as strongly influencing the flow of foreign direct investment into the nation, there appears to be a negative effect of depreciation in the value of the Naira in the international financial market. As such, managers of the Nigerian economy should in an attempt to attract a flow of foreign direct investment, take measures to ensure an appreciation in the value of Naira; reduce the level of risk in the investment environment in Nigeria and; introduce export oriented policies through export promotion investments to boost exports. Further, they should formulate and implement appropriate interest rate policies that will enable Nigeria use a single digit interest rate policy option which is hoped to attract foreign investors and encourage domestic borrowings for further expansion in the Nigerian economy.
FOREIGN DIRECT INVESTMENT AND FOREIGN EXCHANGE RATE FLUCTUATIONS IN NIGERIA: 1981-2018
White Wing Publication , 2020
This study examined the relationship between Foreign exchange rate fluctuations and foreign direct investment (FDI) in Nigeria from 1981 to 2018. This study was motivated by conflicting results regarding how foreign exchange rate changes influenced foreign direct investment in varied economies especially in Nigeria, and to answer the question of whether Foreign Exchange rate fluctuations adversely retarded the flow of Foreign Direct Investment in Nigeria or otherwise. The study adopted an ex-post facto research design using annual time series data from the Central Bank of Nigeria (CBN) statistical bulletin. The model was estimated using the Vector Error Correction (VEC) model. The result of the analysis revealed that foreign direct investment has positive but no significant relationship with Foreign exchange rate fluctuations; and there was no granger causality existing between foreign exchange rate and foreign direct investment in Nigeria. The paper submits that foreign direct investment inflow could be attracted if stable foreign exchange regime is sustained and ease of doing business in Nigeria is satisfactory. The paper recommended among others that the Central Bank of Nigeria should sustain the foreign exchange rate policies especially by financing commercial farming and agro-allied businesses and encouraging the standardization of products for exports; available foreign currency should be allocated mainly to export-oriented businesses; fully standardized Free trade zones and industrial layout should be marked out across the nations and private sectors should be encouraged to power the zones and layouts; and all levels of governments say the local, state and federal should work towards entrenching true federalism.