Analysis of Foreign Direct Investment and Exchange Rate on the Nigerian Economic Growth

Abraham Vincent Atayi, Sherif Olorunrin Adekunle, Edache Godwin Omoche and Paul Andrew Kumsat
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Abraham Vincent Atayi: Department of Economics, Plateau State University Bokkos, Nigeria
Sherif Olorunrin Adekunle: Department of Economics, Ahman Pategi University, Kwara State, Nigeria
Edache Godwin Omoche: Faculty of Education, University of Pretoria South Africa
Paul Andrew Kumsat: Department of Political Science, Plateau State University Bokkos, Nigeria

International Journal of Research and Innovation in Social Science, 2025, vol. 9, issue 15, 950-964

Abstract: The study investigated the effect of foreign direct investment and exchange rate on the Nigerian economic growth. The Secondary data used include the aggregate annual time series at current prices for gross domestic product, GDP, INTR, INFLR, EXR, and total net inflows for Foreign Direct Investment, FDI covering the period 1980-2022. The study made used Autoregressive Distributed Lag Model (ARDL) to determine both the short-run and the long-run relationship between the variables. The coefficient of determination (R2) showed the percentage of variations in the dependent variable that can be explained by the independent variables. The R2 of 0.997101 or 99% showed that Economic development can be explained by changes in the explanatory variables as shown in the model and the remaining 1% is explained by the dummy variable. The F-statistic which measures the overall significance of the model indicated that it is significant at 5%. This is indicated by the F-statistics and its probability (44.85634 and 0.004642) respectively. We therefore conclude that there is a significant relationship between foreign direct investment and exchange rate on economic growth in Nigeria. The study recommends among other things that Government should give tax holiday to the newly established industries, as that will encourage indigenous industry thereby leading to economic growth, government also needs to subsidies industrial farm inputs as such will help producers to produce goods at affordable prices thereby reducing inflation in the economy.

Date: 2025
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