DETERMINANTS OF FOREIGN PORTFOLIO INVESTMENT IN NIGERIA

ABSTRACT

This study explored the determinants of foreign portfolio investment (FPI) in Nigeria. The study considers Exchange Rate, Trade degree of openness, Inflation, Real GDP, and Interest rare as determinants. The methodology employed in this study included descriptive statistics, Pearson correlation, Granger causality analysis, and a collection of diagnostic tests. The study revealed that GDP which is a proxy for economic growth responded negatively to foreign portfolio investment at 5% level of significance, exchange rate (EXCH), responded negatively to foreign portfolio investment but not statistically significant at 5% level, Interest rate responded negatively to foreign portfolio investment at 5% level of significance. Lastly, inflation rate and trade openness responded negatively to foreign portfolio investment at 5% level of significance. Some of the individual variables are not significant at 5% level. However, the f-statistic shows that the overall model is significant at 1% level while the R-square value of 0.766 shows that all the independent variables can jointly explain 76.6% variation in foreign portfolio investment in Nigeria. The findings have implications for the Nigerian government. There is need for policymakers to concentrate on policies that will fortify/balance out the macroeconomic structure of Nigeria.