Effects of Exchange Rate Fluctuations on Foreign Direct Investment in Nigeria between 2001 And 2015
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This study examined the effect of foreign exchange rate fluctuations on foreign direct investment in Nigeria from 2001 to 2015. The study adopted a quasi-experimental research design considering the fact that a time series data were analyzed. The secondary data for analysis were extracted from CBN publications. A regression model was formulated to provide empirical illustration of the causal relationship and effect of exchange rate fluctuations and inflation rate on foreign direct investment. The Augmented Dickey Fuller Stationary Test, the Johenson Co-Integration Test, The Vector Auto regression Wald Test and the Granger Causality test were all conducted using Eviews 7.0. The study reveals a unidirectional causality run from exchange rate fluctuation to foreign direct investment inflow into Nigeria, and no causality run between Inflation Rate (INFR)and Foreign Direct Investment (FDI). Based on the findings of the study, it was recommended that Government policies be geared towards currency appreciation, and, Business Cycles be monitored and trade balances pursued in order to reduce currency risk and create a stable currency quote in the naira.
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