Influence of Exchange Rate on Foreign Direct Investment in Nigeria

Abstract

This study examined the trends of exchange rate and Foreign Direct Investment (FDI) in Nigeria over the period 1981 to 2021. Trend analysis and descriptive statistics were employed in analyzing the relationship between exchange rate and Foreign Direct Investment (FDI). Exchange rate history reveals a dynamic pattern with stability and modest appreciation in the early 1980s, followed by sharp depreciation, hyperinflation, and substantial devaluation in the late '80s and early '90s. The new millennium saw fluctuations until relative stability from 2006 to 2015, only to face another sharp depreciation post-2015. This exchange rate narrative reflects Nigeria's economic journey, influenced by both internal and external factors. Simultaneously, FDI trends in Nigeria portray a story of economic development, policy changes, and external forces. Fluctuating levels in the early '80s gave way to increased FDI in the late '80s and early '90s, driven by reforms and favorable conditions. The 2000s marked significant growth in FDI, aligned with economic reforms and Nigeria's status as an oil- exporting nation. However, post-2013, a decline occurred, possibly linked to global economic factors and domestic challenges, followed by a resurgence in later years. This study recommended the need for balanced economic policies and effective currency management to create a conducive investment climate, ultimately influencing investor confidence and FDI levels. Nigeria's economic resilience and adaptability are evident in the face of internal and external challenges, making it a compelling destination for foreign capital

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