IMPACT OF FDI ON EXCHANGE RATE IN NIGERIA: A COMBINED COINTEGRATION APPROACH

Authors

  • ALIYU AKOREDE RUFAI PhD candidate, Department of Economics, Babcock University, Ilishan Remo, Ogun state.
  • OLALEKAN BASHIR AWORINDE Department of Economics, Pan Atlantic University, Lagos.
  • OLUSEGUN AJIBOLA Department of Economics, Babcock University, Ilishan Remo, Ogun state

Keywords:

Bayer-Hancks, Cointegration, Exchange rate, FDI, Gregory-Hansen, Nigeria

Abstract

This study examined the long-run nexus between foreign direct investment (FDI) inflows and exchange rate (EXC) in Nigeria using the Gregory-Hansen, and Bayer-Hanck cointegration approaches from 1980M01 to 2019M12. The result showed that there is presence of long-run association between FDI and exchange rate in Nigeria. The Dynamic Ordinary Least Square (DOLS) technique was employed to establish the impact of FDI on the exchange rate. A negative nexus was found between the two variables. This implies that an increase in FDI brings about an appreciation of the Naira and vice versa. The study recommended that the Nigerian Government should strive to engage in activities that will minimise the outward leakages of Naira by attracting foreign investors into businesses, primarily in the oil sector. This action could lead to massive dollar injection, like setting oil refineries against crude oil extraction and exportation, which gives lesser USD inflows into the economy.

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Published

2022-03-24

How to Cite

RUFAI, A. A., AWORINDE, O. B., & AJIBOLA, O. (2022). IMPACT OF FDI ON EXCHANGE RATE IN NIGERIA: A COMBINED COINTEGRATION APPROACH. JOURNAL OF ECONOMICS AND ALLIED RESEARCH, 7(1), 141–158. Retrieved from http://jearecons.com/index.php/jearecons/article/view/112

Issue

Vol. 7 No. 1 (2022): March

Section

Articles