Abstract
This study examined the Effect of Exchange and Interest Rates on Foreign Direct Investment in Nigeria 2006-2018. Secondary data was used for the study and it was obtained from the financial statement of the Central Bank of Nigeria for the period 2000-2018. The unit root property of the data was analyzed using the Augmented Dickey Fuller Test and the variables were all stationary at first difference. Also, Johansen Co-integration test statistics was used to test the cointegrating nature of the data while the longrun and the shortrun relationship between the variables of the study were examined using the error correction model. The data was tested for normality using the Jarque-Bera test statistics. The result of the study indicates that a positive relationship exist between Exchange Rate and Foreign Direct Investment (FDI). The relationship is statistically significant (as tcal = 7.25891) is greater than ttab = 2.101 df 17) and in line with a priori expectation. The longrun co-integrating equation shows that a negative relationship exit between Interest Rate (INT) and Foreign Direct Investment (FDI) and the result is not statistically significant (as tcal = -12.5639 is greater than ttab = 2.101 @ df 17). Inflation (INF) was negatively related to Foreign Direct Investment (FDI) in the long-run. A unit increase in Inflation (INF) will lead to a corresponding increase in Foreign Direct Investment by GDP by 23.37%. This relationship is statistically significant (p<0.05) (as tcal = -12.5639) is less than ttab = 2.101@ df 17) and in line with our a priori expectation. It was recommended among others that board composition effect on total voluntary disclosure can be increased when appointment is made sometimes of an outside director who is an official of a financial firm as it has been found to increase firm share value. It was concluded that FDI is an important avenue for investment in agricultural, manufacturing and transfer of technology to an economy. It was recommended among others that the government should seek to stabilize exchange rates, through adoption of sound fiscal and monetary policies.
Highlights
The common goal of all businesses is wealth maximization and businesses will seek all ways to remain profitable and increase shareholders' wealth. Muema (2013) defined Foreign Direct Investment (FDI) as investments that are meant to be long lasting and those that are outside the economic or physical boundaries of the investor.The beneficiary country of FDI is equipped with capital flow as well as technology flow that will aid in its development
An effective foreign exchange rate management together with interest rate and inflation is expected to break the dominance of the oil sector, and give more opportunities to other sectors of the economy such as the manufacturing, agriculture, solid mineral mining etc and improve its balance of payment
FDI is an important avenue for investment in agricultural, manufacturing and transfer of technology to an economy
Summary
The common goal of all businesses is wealth maximization and businesses will seek all ways to remain profitable and increase shareholders' wealth. Muema (2013) defined FDIs as investments that are meant to be long lasting and those that are outside the economic or physical boundaries of the investor.The beneficiary country of FDI is equipped with capital flow as well as technology flow that will aid in its development. The common goal of all businesses is wealth maximization and businesses will seek all ways to remain profitable and increase shareholders' wealth. Muema (2013) defined FDIs as investments that are meant to be long lasting and those that are outside the economic or physical boundaries of the investor. The beneficiary country of FDI is equipped with capital flow as well as technology flow that will aid in its development. When a country seeks to invest in another, the benefit it seeks to achieve must be higher than the risks it must deal with. UNCTAD (2002) describes three different types of FDI.
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