Naira-Dollar Exchange Rate and Foreign Direct Investment in Nigeria (1981 - 2023)

The study investigated the effect of naira-dollar exchange rate on foreign direct investment in
Nigeria (1981-2023). The specific objective is to examine the relationship between naira-dollar
exchange rate and foreign direct investment in Nigeria.
Secondary data culled from the CBN Statistical Bulletin were collected on Foreign Direct
Investment, exchange rate, inflation rate and interest rate. Data collected were analyzed using
descriptive statistics, Augmented Dickey Fuller (ADF), Autoregressive Distributive Lag Model
(ARDL), as well as the Granger Causality Tests.
The findings showed that a current period lag of LNEXRT has a positive impact on foreign direct
investment and it is statistically significant with the use of the Autoregressive Distributed lag
Output. The study also revealed that there is no long run relationship between naira-dollar
exchange rate and foreign direct investment in Nigeria within the period under study. The
diagnostic test revealed that there is no heteroskedasticity in the model and that series are not
serially correlated, it also revealed that residuals are not normally distributed.
The Granger causality revealed that there exist a uni-directional causality between naira-dollar
exchange rate and foreign direct investment.
The study concluded that naira-dollar exchange rate has significant positive effect on foreign direct
investment within the period under study. It, therefore, recommends that government should
implement policies to enhance exchange rate stability, such as maintaining adequate foreign
reserves, improving monetary policy frameworks, and promoting investor confidence.