IIARD International Institute of Academic Research and Development

WORLD JOURNAL OF FINANCE AND INVESTMENT RESEARCH (WJFIR )

E-ISSN 2550-7125
P-ISSN 2682-5902
VOL. 8 NO. 3 2024
DOI: 10.56201/wjfir.v8.no3.2024.pg91.107

---

Impact of Exchange Rate Movements on Foreign Portfolio Investment in Nigeria

Agoh, Ndubuisi , Ogbulu, Onyemachi Maxwell , Ejem, Chukwu Agwu

---

Abstract

This study investigates the dynamics between exchange rate volatility and foreign portfolio investment in Nigeria. This study is germane mostly now that exchange rate fluctuation is assumed to have affected all facets of economic activities in Nigeria. To achieve this, monthly data are obtained from Central Bank of Nigeria Statistical Bulletin, 2022, and analyzed by employing EGARCH and other finametric tools. The empirical results of the analysis found a significant relationship between exchange rate movements and foreign direct investment in Nigeria within the scope of the study. It was also found that shocks from exchange rate to stock prices are durable, implying that shocks from exchange rate to foreign portfolio investment last a long period before their effects fade. Therefore, the researchers recommend among others that sound foreign exchange rate management policies are designed and implemented vigorously to curb exchange rate volatility.

keywords:

Exchange Rate, FDI, Stock prices, EGARCH

---

References:

Adom, A. D., & Elbahnasawy, N. G. (2014). Saving-Investment Gap and Economic Growth.

British Journal of Economics, Management & Trade. https://doi.org/10.9734/

BJEMT/2014/10588

Bogdan, T. (2016). Determinants of capital flows to emerging market economy: A case

of ukraine. Transformations in Business & Economics, 15[1(37)], 127-146.

Brana, S. & Lahet, D. (2010). Determinants of capital inflows into Asia: The relevance of
contagion effects as push factors. Emerging Markets Review, 11: 273–284

Byrne, J. P. & Fiess, N. (2015). International capital flows to emerging markets: national

and global determinants. Journal of International Money and Finance.

http://dx.doi.org/doi:10.1016/j.jimonfin.2015.11.005.

C¸ulha, A. A. (2006). A structural VAR analysis of the determinants of capital flows into

Turkey. Central Bank Review 2: 11-35.

Danladi, J. D., & Uba, U. P. (2015). Does the Volatility of Exchange Rate Affect the Economic

Performance of Countries in the WestAfrican Monetary Zone? A Case of Nigeria and

Ghana. British Journal of Economics, Management & Trade, 11(3), 1-10. Retrieved from

http:// journaljemt.com/index.php/JEMT/ article/view/12341

Enisan, A. A. (2017). Determinants of foreign direct investment in Nigeria. Review of

Innovation and Competitiveness, 3 (1), 21-48

Essien, E. A. & Onwioduokit, E. A. (1999). Capital flows to Nigeria: Issues and determinants.

CBN Economic & Financial Review, 37(1): 1 – 20

Forster,¨ M., Jorra, M. & Tillmann, P. (2012). The dynamics of international capital

flows: Results from a dynamic hierarchical factor model. MAGKS Joint

Discussion Paper Series in Economics, No. 21-2012, Philipps-University

Marburg

Grzegorz, T., Brzozowski, M. & Sliwinski,´ P. (2017). Determinants of capital flows to

emerging and advanced economies between 1990 and 2011. Port Economic

Journal. DOI: 10.1007/s10258-016-0126-5

Guglielmo, M. C., Faek, M. A., & Nicola, S. (2013). Exchange rate uncertainty and

international portfolio flows. Centre for Applied Macroeconomic Analysis (CAMA),

Canberra, Australia.

Gujarati,D.N, & Dawn C.P. (2009). Basic econometric international edtion,791-798.

Ibrahim, W. & Omoniyi, B. (2011). Determinants of foreign direct investment in Nigeria:

Political factor effects revisited. MPRA Paper No. 59429.

Idowu, O. O. (2015). Foreign Portfolio Investment in Nigeria, International Journal of Social
Relevance and Concern 3 (5), .pp.3-19.

Isu, H.O., Ogbulu, O. M., & Paul, N. (2009), Trade openness and its impact on foreign direct
investment inflows to Nigeria, Journal of Finance, Banking And Investment (JOBFI),
Dept of Banking and Finance, Abia State University, Uturu, 3(1), April, pp. 120-130.

Leonard, N. A. (2018). The impact of exchange rate on foreign private investment in

Nigeria. Asian Finance & Banking Review, 2(2), 19-32


Maghori, E. (2014). Determinants of foreign direct investment in Nigeria: evidence from

cointegration and error correction modeling. International Journal of Business

and Social Science 5(6), 215-224.

Nwosa, P. I. & Adeleke, O. (2017). Determinants of FDI and FPI volatility: An E-

GARCH approach. CBN Journal of Applied Statistics 8(2), 47- 67.

Nwosa, P . I., & Amassoma, D.(2014). Capital inflows and exchange rate in Nigeria.

Mediterranean Journal of Social Sciences,(5); 267-272. .


Nwokoye, E. S. & Oniore, J. O. (2017). Impact of monetary policy on capital inflows in

Nigeria. Business, Management and Economic Review, 3(10), 192-200


Obida, G. W. & Abu, N. (2010). Determinants of foreign direct investment in Nigeria:

An empirical analysis. Global Journal of Human Social Science 10(1 Ver 1.0),

26-34.

Ogbulu, O.M. & Paul, N. (2009), The impact of black-market exchange premium on the
inflows of foreign direct investment FDI) in a liberalized economy: the Nigerian
case, Journal of Finance And Economic Research (JOFER), Dept of Banking And
Finance, Abia State University, Uturu, 2(1), pp. 116-128.

Ogbulu, O.M. (2018), Oil price volatility, exchange rate movements and stock market
reaction: the Nigerian experience (1985-2017), American Finance & Banking
Review, 3(1), pp. 222-244, DOI: 10.14738/abr.63.4275.

Okereke, E. & Ebulison, N. (2016). Determinants of foreign direct investment inflows in

Nigeria: An empirical analysis.
Available at http://dx.doi.org/10.2139/ssrn.2756975

Taylor, M. P., & Sarno, L. (1997). Capital Flows to Developing Countries: Long- and Short-

Term Determinants. World Bank Economic Review, 11(3), 451-470. Retrieved from

https://www.jstor. org/stable/3990255?seq=1#page_ scan_tab_contents

Vita, G. D. and Kyaw, K. S. (2008) “Determinants of FDI and Portfolio Flows to Developing

Countries: A Panel Cointegration Analysis”. European Journal of Economics, Finance

and Administrative Sciences, Issue 13.

World Bank (2020). Migration and development brief 32: COVID-19 crisis through a mi-

gration lens. World Bank, Washington, DC.

World Bank (2019a). Migration and remittances: Recent developments and outlook. Mi-

gration and Development Brief, No. 31. World Bank, Washington, DC.

World Bank (2019b). Data release: Remittances to low- and middle-income countries on

track to reach $551 billion in 2019 and $597 billion by 2021. People on the Move

blog.

World Bank (2019c). Leveraging Economic Migration for development: A briefing for the

world bank board (English). Washington, D.C.: World Bank Group.

DOWNLOAD PDF

---

Back