Foreign Direct Investment Influenced by Macroeconomic Variables in Nigeria

Abstract

This study examines FDI in Nigeria and macroeconomic issues. This study expands on previous research by using short- and long-term analytical methods to show how macroeconomic factors impact FDI in Nigeria. This study used macroeconomic data to examine Nigerian FDI inflows and outflows from 1986 to 2023. The ordinary least squares (OLS) model estimated that GDP, exchange rate, and interest rate influenced gross fixed capital creation in the short term, but inflation and money supply did not influenced gross fixed capital creation in the short term. In the short run, inflation, GDP, and exchange rates correlated positively with gross fixed capital creation, whereas money supply and interest rates correlated negatively. Short run macroeconomic variables impact FDI in Nigeria either negligibly or significantly. Foreign direct investment are essential to macroeconomic growth, hence the government should maintain price stability and a stable macroeconomic climate. Nigeria needs a strong currency policy to attract FDI by keeping exchange rates stable, and monetary policy should decrease interest rate fluctuations.