Exchange Rate Volatility: Effect on Foreign Direct Investment ‎Inflows in Nigeria

  • Authors

    • Charles Odinakachi Njoku Federal University of Technology, Owerri
    • Kelechi Enyinna Ugwu Federal University of Technology, Owerri
    • Chilaka Emmanuel Nwaimo Federal University of Technology, Owerri
    • Emmanuel Chijioke Nwadike Federal University of Technology, Owerri
    • Chinonso Karen Eke Federal University of Technology, Owerri
    • Christopher Chiedozie Ikeogu Federal University of Technology, Owerri
    • Edward Uche Omeire Federal University of Technology, Owerri
    • Anthony ‎Ifeanyi Otuonye Federal University of Technology, Owerri
    • Ibeawuchi Ifeanyi Echeme Federal University of Technology, Owerri
    • Babatunde Oyelade Eriwa Bowling Green State University, Bowling Green, Ohio, USA
    https://doi.org/10.14419/7v3g3q68

    Received date: July 30, 2025

    Accepted date: September 2, 2025

    Published date: September 14, 2025

  • Foreign Direct Investment; Exchange Rate; Interest rates; Volatility.

  • Abstract

    A nation's high GDP, high exports, and influx of foreign direct investment all indicate its economic ‎growth and stability; yet, exchange rate risk—that is, the possibility of a country's currency ‎depreciating or appreciating—can also cause concern for international investors and the nation of ‎origin. The uncertainty surrounding their currency exchange rate presents a formidable challenge: ‎is it better for their economy to have low or high volatility, and does it have the potential to draw ‎in or hinder FDI? The research used the Autoregressive Distributed Lag (ARDL) model to ‎investigate the effect of exchange rate volatility on foreign direct investment inflows into Nigeria ‎from 1986 to 2023. The study aims to determine whether the Nigerian government should ‎impose more stringent measures on foreign direct investment flows while formulating strategies to ‎ensure stable exchange rates. The ARDL bounds testing approach was utilized in the cointegration ‎analysis to investigate the relationship between the variables in the model. The result of the ‎analysis revealed that inflation and interest rates have a long-term negative effect on foreign direct ‎investment inflows to Nigeria as a result of high currency volatility. Also, exchange rate ‎fluctuations have a long-term, significant negative effect on foreign direct investment inflows into ‎Nigeria, highlighting the concerns of international investors regarding currency instability in the ‎country. The research recommends that Nigeria diversifies its economy in order to attract more ‎Foreign Direct Investment‎.

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  • How to Cite

    Njoku, C. O., Ugwu , K. E., Nwaimo , C. E. ., Nwadike, E. C., Eke , C. K. ., Ikeogu , C. C. ., Omeire , E. U. ., Otuonye , A. ‎Ifeanyi ., Echeme , I. I. ., & Eriwa , B. O. . (2025). Exchange Rate Volatility: Effect on Foreign Direct Investment ‎Inflows in Nigeria. International Journal of Accounting and Economics Studies, 12(5), 573-582. https://doi.org/10.14419/7v3g3q68