{"id":3343,"date":"2024-06-10T14:55:27","date_gmt":"2024-06-10T14:55:27","guid":{"rendered":"https:\/\/journals.amssr.org\/grjesd\/?p=3343"},"modified":"2024-06-10T14:56:09","modified_gmt":"2024-06-10T14:56:09","slug":"exchange-rate-volatility-and-foreign-direct-investment-in%ef%ac%82ows-in-nigeria-a-variance-decomposition-approach","status":"publish","type":"post","link":"https:\/\/journals.amssr.org\/grjesd\/2024\/06\/10\/exchange-rate-volatility-and-foreign-direct-investment-in%ef%ac%82ows-in-nigeria-a-variance-decomposition-approach\/","title":{"rendered":"Exchange Rate Volatility and Foreign Direct Investment In\ufb02ows in Nigeria: A Variance Decomposition Approach"},"content":{"rendered":"\n

Abstract<\/strong><\/h2>\n\n\n\n

Research Purpose:<\/strong> Amidst economic fluctuations, this study explores the relationship between exchange rate volatility and Foreign Direct Investment (FDI) inflows in Nigeria, aiming to provide insights for enhancing economic stability and investment attractiveness.<\/p>\n\n\n\n

Methodology:<\/strong> The study employs a variance decomposition approach, using data from 1970 to 2023 sourced from UNCTAD and reputable journals. Analytical methods include Vector AutoRegression System (VARS), Vector Error Correction Modelling (VECM), Granger Causality tests, and diagnostic tests such as Unit Root, Co-integration, variance decomposition, and impulse response functions (IRFs), all conducted with E-View 9.0.<\/p>\n\n\n\n

Findings:<\/strong> The analysis reveals a significant connection between exchange rate volatility and FDI inflows. The findings indicate that exchange rate stability positively influences FDI inflows, as evidenced by variance decomposition and IRFs.<\/p>\n\n\n\n

Conclusion:<\/strong> The study concludes that stabilising Nigeria’s exchange rate is crucial for attracting FDI. Exchange rate volatility poses a challenge, but strategic management can enhance investment inflows.<\/p>\n\n\n\n

Recommendations:<\/strong> The Central Bank of Nigeria should prioritise increasing the naira’s value and stabilising the exchange rate to boost FDI. Additionally, harmonising the multiple exchange rate system to reduce volatility is essential for creating a favourable investment climate.<\/p>\n\n\n\n

Key words: <\/em><\/strong>Foreign Direct Investment; Exchange rate, Volatility, Exchange Rate Volatility.\u00a0 Investment inflows.<\/em><\/p>\n\n\n\n

References<\/strong><\/h2>\n\n\n\n

Adaramola A, (2016). The Effect of Real Exchange Rate Volatility on Export Volume in Nigeria. FUTA Journal of Management and Technology Effect of Exchange Volatility on Export Volume<\/em>, 1(2):45-61. <\/p>\n\n\n\n

Arize, A. C. et al. (2010). Exchange-Rate Volatility and Foreign Trade: Evidence from Thirteen LDC’s. Journal of Business & Economic Statistics<\/em>, 18(1): 10-17. <\/p>\n\n\n\n

Asmah, E. E. & Andoh, F. K. (2013). Exchange Rate Volatility and Foreign Direct Investment in Sub-Saharan Africa. Journal for the Advancement of Developing Economies<\/em>. 21. https:\/\/digitalcommons.unl.edu\/jade\/21. <\/p>\n\n\n\n

Bahmani-Oskooee, M. & Gelan, A. (2017). Exchange-rate Volatility and International Trade Performance: Evidence from 12 African Countries. Munich Personal RePEc Archive<\/em>. <\/p>\n\n\n\n

Bakhromov N. (2011). The Exchange Rate Volatility and the Trade Balance: Case of Uzbekistan. Journal of Applied Economics and Business Research JAEBR<\/em>, 1(3): 149- 161. <\/p>\n\n\n\n

Dada J. T. (2017). Exchange Rate Volatility and Trade Balance in Sub-Saharan African Countries: A Causal Relationship. American Journal of Business, Economics and <\/em><\/em>Management<\/em>, 5(5): 68-73. <\/p>\n\n\n\n

Danladi, J. D. et al (2015). Exchange Rate Volatility and International Trade in Nigeria. Research Journal of Finance and Accounting<\/em>, 6(18): 122-131. <\/p>\n\n\n\n

Dinoshi, I & Fortuzi, S. Real Exchange Rate Volatility and International Trade: The Case of Albania. 13th International Conference of ASECU Social and Economic Challenges in Europe 2016-2020. <\/p>\n\n\n\n

Ellah, N. (2011). Exchange Rate Volatility and Foreign Direct Investment (FDI) Behaviour in Pakistan: A Time Series Analysis with Auto-Regressive Distributed Lag (ARDL) application African Journal of Business Management<\/em>, 5(29):11656-11661.<\/p>\n\n\n\n

Fapetu, O. & Oloyede, J. A. (2014). Foreign Exchange Management and the Nigerian Economic Growth (1960 \u2013 2012). European Journal of Business and Innovation Research<\/em>, 2(2):19-31. <\/p>\n\n\n\n

Goldberg, L. S. & Kosistad (1995). Foreign direct investment, exchange rate variability and Demand uncertainty. International Economic Review<\/em>, 36(1): 855-73. <\/p>\n\n\n\n

Kenneth, M. K. et al (2017). Short and Long-Run Effects of Exchange Rate Volatility on Foreign Direct Investment in Kenya. International Journal of Economics, Commerce and <\/em><\/em>Management<\/em>, 5(11): 386-399. <\/p>\n\n\n\n

Martins. J. F. S. (2015). Impact of Real Exchange Rate Volatility on Foreign Direct Investment Inflows in Brazil. MSc. Dissertation ISCTE Business School<\/em>. <\/p>\n\n\n\n

Mbanasor, C. O. & Obioma, J. (2017). Exchange rate fluctuations and foreign private investments in Nigeria. IIARD International Journal of Economics and Business <\/em><\/em>Management<\/em> ISSN 2489-0065, 3(8), www.iiardpub.org. <\/p>\n\n\n\n

Obi, K. O. et al. (2016). The Impact of Exchange Rate Regimes on Economic Growth in Nigeria. Journal of Economics and Sustainable Development<\/em>, 7 (12):115-127. <\/p>\n\n\n\n

Obi, C. (2017). The Impact of Foreign Exchange Volatility on Foreign Direct Investment in Nigeria, Global Journal of Management and Business Research<\/em>: C Finance, 17(6):24-30.  <\/p>\n\n\n\n

Odili, EO (2015). Real Exchange Rate Volatility, Economic Growth and International Trade in an Emerging Market Economy: Evidence from Nigeria International. Journal of Academic Research in Business and Social Sciences<\/em>, 59(7):179-201. <\/p>\n\n\n\n

Ogunleye, E.K. (2009). Exchange Rate Volatility and Foreign Direct Investment in Sub Saharan Africa: Evidence from Nigeria and South Africa<\/em>. Ph.D. Dissertation Extract: African Centre for Economic Transformation. <\/p>\n\n\n\n

Okulegu B. E. et al. (2013). Real Exchange Rate Instability and Foreign Private Investment in Nigeria: A Causality Analysis (1986 \u2013 2008). International Journal of Social Sciences and Humanities Reviews<\/em>, 4(2):58\u201371. <\/p>\n\n\n\n

Onuoha, I.P (2014). Impact of Exchange Rate Variation and Inflation on the Economic Growth of Nigeria: An Empirical Approach. Research Journal of Finance and Accounting, 5(22):166-176. <\/p>\n\n\n\n

Osinubi, T. S. & Amaghionyeodiwe, L. A. (2009). Foreign Direct Investment and Exchange Rate Volatility in Nigeria. International Journal of Applied Econometrics and Quantitative Studies 6(2):83-116. <\/p>\n\n\n\n

Serenis, D. & Tsounis, N. (2013) Exchange Rate Volatility and Foreign Trade: The case for Cyprus and Croatia. International Conference on Applied Economics (ICOAE). Procedia Economics and Finance,<\/em> 5(1) 677\u2013685. <\/p>\n\n\n\n

Simakova, J. (2016). The Gravity Modelling of the Relationship between Exchange Rate Volatility and Foreign Trade in Visegrad Countries ACTA V\u0160FS<\/em>, 1(10):1-24. <\/p>\n\n\n\n

Udoh, E. & Egwaikhide, F. O. (2008). Exchange Rate Volatility, Inflation, Uncertainty and Foreign Direct Investment in Nigeria. Botswana Journal of Economics<\/em>, 5(7):14-34. <\/p>\n\n\n\n

Zakari, M. (2017). The Impact of Exchange Rate Fluctuations on Foreign Direct Investment in Nigeria. Journal of Finance and Accounting<\/em>, 5 (4):165-170. <\/p>\n","protected":false},"excerpt":{"rendered":"

Abstract Research Purpose: Amidst economic fluctuations, this study explores the relationship between exchange rate volatility and Foreign Direct Investment (FDI) inflows in Nigeria, aiming to provide insights for enhancing economic stability and investment attractiveness. Methodology: The study employs a variance decomposition approach, using data from 1970 to 2023 sourced from UNCTAD and reputable journals. Analytical methods include Vector AutoRegression System (VARS), Vector Error Correction Modelling (VECM), Granger Causality tests, and diagnostic tests such as Unit Root, Co-integration, variance decomposition, and […]<\/p>\n","protected":false},"author":1,"featured_media":3281,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20,22,21],"tags":[34],"class_list":["post-3343","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-grjesd","category-issue-1","category-volume-1","tag-ijeoma-perpetua-onuoha-ph-d"],"_links":{"self":[{"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/posts\/3343","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/comments?post=3343"}],"version-history":[{"count":1,"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/posts\/3343\/revisions"}],"predecessor-version":[{"id":3345,"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/posts\/3343\/revisions\/3345"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/media\/3281"}],"wp:attachment":[{"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/media?parent=3343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/categories?post=3343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/journals.amssr.org\/grjesd\/wp-json\/wp\/v2\/tags?post=3343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}