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Exchange rate volatility and sectoral analysis of foreign direct investment inflows in Nigeria (1970-2009)

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  • Lukman O. Oyelami
  • Dauda O. Yinusa

Abstract

This paper investigates the effect of exchange rate volatility on oil and non-oil FDI inflows in Nigeria using vector error correction model (VECM) for the period 1970-2009. Previous theoretical and empirical studies on this issue produced conflicting results. The empirical results from short run dynamics show that bi-directional causal relationship exists between exchange rate volatility and non-oil FDI and no causal relationship exists between exchange rate volatility and oil FDI. But the results from forecast error variance decomposition (FEVD) indicate that there is no significant differential effect of exchange rate volatility on oil and non-oil FDI in Nigeria. This might suggests that there are other variables that drive oil FDI inflows apart from macroeconomic condition in Nigeria.

Suggested Citation

  • Lukman O. Oyelami & Dauda O. Yinusa, 2014. "Exchange rate volatility and sectoral analysis of foreign direct investment inflows in Nigeria (1970-2009)," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 8(3), pages 296-308.
    • Handle: RePEc:ids:ijecbr:v:8:y:2014:i:3:p:296-308
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    Cited by:

    1. Anthony Enisan Akinlo & Olufemi Gbenga Onatunji, 2021. "Exchange Rate Volatility And Foreign Direct Investment In Selected West African Countries," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 15(1), pages 77-88.

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