Published: 2022-01-05

DOI: 10.56557/jet/2022/v7i17447

Page: 1-10


Department of Economics, Federal University Oye-Ekiti, Nigeria.

*Author to whom correspondence should be addressed.


This study examines the relationship among exchange rate fluctuations, foreign direct investment, and financial development in Nigeria over the period 1970 to 2020. The study utilizes the Autoregressive distribution lag estimation technique to examine the relationship among the variables of interest. The results of the study show that foreign direct investment has a positive relationship with the level of exchange rate fluctuations, however, trade openness and inflation have a negative effect on the flow of foreign direct investment into Nigeria. The study observed that the interactive effect of exchange rate fluctuations and foreign direct investment has a negative effect on the level of financial development in Nigeria. Therefore, this study recommends that there is a need for the Nigerian government to implement policies aimed at improving the interaction between the level of exchange rate and foreign direct investment which in turn would have a positive impact on the development of the financial sector.

Keywords: Financial development, foreign direct investment, autoregressive distribution lag

How to Cite



Download data is not yet available.


Lily J, Kogid M, Mulok D, Sang T, Asid R. Exchange rate movement and foreign direct investment in Asian economies. Economics research international, Hindawi; 2014.

Dewenter K. Do exchange rate changes drive foreign direct investment? The Journal of Business. 1995;68:405-433.

Udomkerdmongkol M, Gorg H, Morrissey O. foreign direct investment and exchange rates. A case study of United States foreign direct investment in emerging market countries. Working papers in economics, School of economics, Nottingham; 2006.

Khan H, Ali AS, Shafiq A, Razi,A. Determinants of exchange rate and its impact on Pakistani economy, Global Journal of Management and Business Research. 2012;12(16).

Javed Z, Farooq M. Economic growth and exchange rate in case of Pakistan. Pakistan Journal of LIFE and Social Sciences. 2009;16(3):112-118.

Khraiche M, Gaudette J. Foreign direct investment, exchange rate volatility and financial development: regional differences in emerging economies. Economics Bulletin. 2013;33(4):3143-3156.

Cyril Ubesie M. The effect of variations in foreign exchange on financial depth: Evidence from Nigeria. European journal of accounting, auditing and finance research. 2016;4(4):56-64.

Eregha PB. Exchange rate policies and foreign direct investment flow in West Africa Monetary Zone. Africa development bank group working paper No. 2017;254.

Busse M, Hefeker C, Nelgen S. Foreign direct investment and exchange rate regimes. Joint discussion paper series in economics, University of Marburg, paper No. 2010;15.

Mbanasor CO, Obioma J. The effect of fluctuations of exchange rates on Nigeria’s balance of payment. International Journal of Banking and Finance Research. 2017;3(2):53-74.

Lawal IA, Atunde IO, Ahmed V, Abiola A. Exchange rate fluctuations and the Nigeria economic growth. Euro Economica. 2016;35(2):127-142.

Murtala Zakari. The impact of exchange rate fluctuations on foreign direct investment in Nigeria, Journal of finance and accounting. 2017;5(4):165-170.

Uzoma-Nwosu DC, Orekoya O. Exchange rate volatility and foreign direct investment in Nigeria. Euro Economica. 2019;38(2).

Ogunleye EK. exchange rate volatility and foreign direct investment in Sub-Saharan Africa: Evidence from Nigeria and South Africa. Report, African center for economic transformation, Ghana; 2005.

United Nations Conference on trade and development (UNCTAD), world investment report, united nations publication; 2019. ISBN: 978-92-1-112868-0.

United Nations Conference on Trade and Development. World investment report, international production beyond the pandemic; 2020. Available:

Aghion P, Bacchetta P, Ranciere R, Rogoff K. Exchange rate volatility and productivity growth: the role of financial development, National bureau of economic research working paper no. 2006;12117.

Jehan Z, Hamid A. Exchange rate volatility and capital inflows: role of financial development, Portuguese Economic Journal. 2017;16(3):189-203.

Lamouchi A, Zouari E. Financial development and capital flows: the effect on the real exchange rate. Global Journal of Management and Business Research Finance. 2013;13 (3).

Ogoun S, Adumein GW. Towards exchange rate and financial deepening: A dependency determination, International Journal of Economics and Finance. 2020;11(1):37-49.

Agunuwa EV, Inaya LS, Proso T. Evaluating the effect of exchange rate on foreign direct investment in Nigeria. Journal of academic research in economics, Spiru Haret University, faculty of accounting and financial management constanta. 2017;9(1):34-48.

Adokwe EI, Agu AO, Maduka AC. Exchange rate volatility and foreign direct investment: The Nigerian experience. Journal of business and economic policy. 2019;6(4). DOI:10.30845/jbep.v6n4p10.

Adaramola AO, Obisesan OG. Impact of foreign direct investment on Nigerian capital market development. International Journal of Academic Research in Accounting, finance and management sciences. 2015;5(1):103-108.

Farouq I, Sulong Z. The effects of foreign direct investment uncertainty on financial development in Nigeria: An asymmetric approach. Iranian Journal of Management Studies; 2020. DOI:10.22059/IJMS.2020.302199.674060.

Aisien LN. The impact of exchange rate on foreign private investment in Nigeria. Asian finance and banking review. 2018;2(2):19-32.

Amassoma D, Nwosa IP, Fasoranti MM. Exchange rate volatility and foreign capital inflow nexus: evidence from Nigeria. Journal of Oye studies in the arts and social sciences. 2015;1(1):23-48.

Nwosa IP, Emma-Ebere OO. The impact of financial development on foreign direct investment in Nigeria, Journal of Management and Social Sciences. 2017;6(1).

Adaramola AO. Exchange rate volatility and stock market behavior: The Nigerian experience. Research Journal of Finance and Accounting. 2012;3(3):88-96.

Latief R, Lefen L. The effect of exchange rate volatility on international trade and foreign direct investment in developing countries along “one belt and one road”. International journal of financial studies, MPDI, Open Access Journal. 2018;6(4):1-22.