EuroEconomica, Vol 38, No 2 (2019)

Abstract

This study examined the relationship between FDI inflow and exchange rate volatility in Nigeria. After a careful literature review, the study considered some determinants of FDI from the literature. The outcome of the estimation using Granger Causality Results based on VECM was that exchange rate volatility has no relationship with net FDI inflow into Nigeria, both in the short and long run. This conclusion is robust to the findings from both variance decomposition and impulse response functions. The study suggests that since there are other drivers of FDI inflow, policy makers should be more holistic in their investment drive. Market participants should think in the way of reallocation of resources, and adopt other macroeconomic variables which will encourage the inflow of foreign direct investment to the country.