IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 3 NO. 2 2017

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Macroeconomic Policy Variables and Foreign Direct Investment in Nigeria

Ndugbu, Michael O. (Ph.D), Duruechi, Anthony H. & Ojiegbe, Josephine N. (Ph.D)

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Abstract

This study examined macroeconomic policy variables in relation to foreign direct investments (FDIs) in Nigeria. Macroeconomic theory of foreign direct investments posits that FDIs largely depend on changes in the macroeconomic environment. The environment consists of GDP, real exchange rate, openness of the economy etc., which are some of the factors that affect the FDIs flows in a country. In Nigeria, Various macroeconomic policies and reforms have been embarked upon by government aimed at attracting FDI into the country, but these efforts have appeared to be futile going by the low and unsteady behaviour of the level of foreign direct investments. This has become a source of worry to all concerned. Therefore, this work was set out to investigate the impact of macroeconomic policy variables on FDI in Nigeria. Data for the study were collected from the Central Bank of Nigeria statistical bulletin (1986 – 2016). Vector Auto Regression (VAR) analysis using e-view 9.0 version was used to analyze the data. Variables examined were exchange rate, inflation rate, interest rate, real gross domestic product and trade openness. Findings revealed that though all the variables put together impact on FDI, specifically, interest rates, inflation rates and RGDP (economic growth) have significant positive impact on FDI in Nigeria. Therefore, Government should evolve sound policies that would strengthen the attraction of FDIs in Nigeria by paying more attention to the identified macroeconomic policy variables. The variables have shown to be a vital tool that could be used to encourage the inflow of FDI into the country

keywords:

Macroeconomic, Policy variables, Foreign Direct Investments, Forward linkages, Backward linkages.

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