The Effect of Foreign Exchange Fluctuations on Foreign Direct Investment Inflows In Nigeria
Keywords:
Foreign exchange rate fluctuation, foreign direct investment inflowAbstract
This study investigates how changes in foreign exchange rates affect foreign direct investment (FDI) in Nigeria from 2005 to 2022. Using data from the Central Bank of Nigeria, the study examines variables like Foreign Direct Investment Inflows (FDII), Real Exchange Rate (RER), Nominal Exchange Rate (NER), and Official Exchange Rate (OER). Employing a Vector Autoregression (VAR) model, the study finds that fluctuations in exchange rates, including OER, RER, and NER, do not significantly impact FDI inflows. The study underscores the need for Policymakers to diversify investment promotion strategies, fortify economic fundamentals, engage in targeted marketing, and consider implementing hedging mechanisms to alleviate currency risk k for potential investors.