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ABSTRACT
This study empirically investigate the impact of exchange rate volatility on foreign direct investment (FDI) inflows in Nigeria for the period 1990 to 2021 (31 years). The Augmented Decay Fuller unit root test was used to ascertain the stationarity properties of the data set. Exchange rate volatility was generated using the EGARCH model; while the fully modified least square (FMOLS) was employed for the main analysis of the study. The results from the empirical analysis revealed that exchange rate in Nigeria was very volatile; it was also found that exchange rate fluctuations have significant positive impact on foreign direct investment (FDI) inflows within the period of investigation. On the other hands, while inflation rate (INFR) has significant positive impact on foreign direct investment (FDI) inflows, real gross domestic products (RGDP) has significant negative impact on FDI inflows in Nigeria. Those of trade openness has a weak positive impact on foreign direct investment (FDI) inflows in Nigeria. The study recommends among others that, since exchange rate volatility has significant effect on FDI inflows in Nigeria, the monetary authority (the CBN) should review current exchange rate policy and develop a sound exchange rate management such that deposit money banks in Nigeria should be mandated to use the allocations and disbursement of foreign currencies as well as the naira to regulate the vacillations in exchange rate. By so doing, it will continue to minimize excessive fluctuations of the naira against other major currencies in the world and in turn stabilize the naira, thereby attract more FDI into the country.
