Impact of Exchange Rate Volatility on Foreign Direct Investment in Nigeria (1980-2022)

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@article{1706460,
      author = {Emmanuel Abiodun Ayangbemi, Okeke Stanley Chukwujekwu},
      title = {Impact of Exchange Rate Volatility on Foreign Direct Investment in Nigeria (1980-2022)},
      journal = {Iconic Research And Engineering Journals},
      year = {2024},
      volume = {8},
      number = {5},
      pages = {30-41},
      issn = {2456-8880},
      url = {https://www.irejournals.com/formatedpaper/1706460.pdf},
      abstract = {The study looks at how foreign direct investment in Nigeria is affected by currency rate volatility. Annual time series data spanning from 1980 to 2022 are used in the investigation. Autoregressive Distributed Lag Models (ARDL) are the estimation method used in this study. Interest rate (IT), exchange rate (EXR), trade openness (TOP), and foreign direct investment (FDI) were the variables considered in the analysis. The ARDL analysis's findings demonstrate that, while exchange rates have a short-term negative and large influence on foreign direct investment, they also have a long-term positive and considerable impact. In the short and long terms, interest rates have a positive and considerable effect on the target variable. In the short and long terms, trade openness significantly and negatively affects foreign direct investment in Nigeria. Additionally, the gross domestic product (GDP) has a long-term positive and large impact on foreign direct investment as well as a short-term negative and major impact. Following the results of the empirical analysis, the following suggestions were made: Analyze the success of legislative initiatives meant to reduce volatility in exchange rates. To stabilize their currencies, improve exchange rate risk management, and provide a more stable investment climate, nations may enact measures like inflation targeting, exchange rate pegs, or currency intervention. Analyze the degree of trade liberalization in the home and host nations. Since businesses that engage in international commerce are frequently better suited to withstand currency changes, a more open trade environment may lessen the impact of exchange rate volatility on foreign direct investment. Additionally, vary your import and export. Think about the difference in interest rates between your home country and the host country. Decisions about investments may be impacted by changes in interest rates. While a large interest rate differential may enhance exchange rate volatility, a higher interest rate in the host nation may draw in more foreign direct investment. Analyze how FDI is affected by GDP growth. Increased foreign investment may result from the host nation's robust economic growth, but investors may be discouraged by the significant volatility of exchange rates. Examine the harmony between GDP expansion and stable exchange rates.},
      keywords = {Economic Growth, Foreign Direct Investment, Exchange Rate, Trade Openness JEL CLASSIFICATION: D40, F13, F31 and F50},
      month = {November},
  }