Exchange rate volatility and sectoral analysis of foreign direct investment inflows in Nigeria (1970-2009)
by Lukman O. Oyelami; Dauda O. Yinusa
International Journal of Economics and Business Research (IJEBR), Vol. 8, No. 3, 2014

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.

Online publication date: Sat, 13-Sep-2014

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