Volume 59, Issue 327, March 2023

Direct foreign investment, rates of interest and currency exchange interactions in Nigeria

Adoms Francis^♦

Nnamdi Azikiwe University, Awka, Anambra state, Nigeria

^♦Corresponding author
Nnamdi Azikiwe University, Awka, Anambra state Nigeria

ABSTRACT

This study adopted an unfussy approach in determining the relationship between FDI, the rate of exchange and interest in Nigeria for the period 1980 to 2020. Using the least squares approach, we outlined a linear model of FDI. An important finding was that the rate of exchange and interest are major factors that influences FDI since the 1980’s. We showed that exchange rate exhibits a considerable positive link with the extent of FDI, but the rate of interest was not substantial on FDI. Also, interest rate contributes negatively to FDI which is line with apriori. The Johansen and Juselius, (1988) maximum likelihood method shows that the rates of exchange and interest influences FDI eventually in the long term. It is however resolved that the rates of exchange and interest are critical in the determination of foreign investment in Nigeria. Therefore, it is recommended that Nigeria, a developing country, must communicate trade and monetary policies that will boost foreign investment inflow and will also synchronize with an optimal interest rate operation in Nigeria.

Keywords: FDI, Rate of Currency Exchange, Rate of Interest

Discovery, 2023, 59, e32d1026

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Published: March 2023