Impact of Macroeconomic Indicators on the Performance of Foreign Portfolio Investment in Nigeria

Abstract

This paper examines the impact of macro-economic variables on foreign portfolio investments in Nigeria between the periods of 1980-2010. Data were sourced from the World Bank statistical data base. Various empirical analyses were performed using Phillip-Peron at lag 3 to test for the properties of the time series variables. Co integrations results showed that macroeconomic variables were co integrated with foreign direct investment in Nigeria. The study revealed that among the identified macroeconomic variables, GDP and MS had inverse relationship with FPI while other macroeconomic variables were positively related to FPI. These variables are inversely related to FPI but Interest Rate, Exchange Rate and inflation rate were directly related to FPI. Granger causality results revealed that macroeconomic variables do not granger caused FPI. Macroeconomic variables were found to be statistically insignificant to FPI based on F-statistic computed value. Finally, the study found out that there was no run relationship existing between GDP, inflation rate, exchange rate, MS, interest rate and foreign portfolio investment. The study recommended that excellent macroeconomic policy performance and national’s investments strategic plan should made which will enhance efficient and optimal investments holding and management while paying significant attention to the development of infrastructures, and employment generation in the country.

Keywords: Granger, Nigeria foreign portfolio investment, Macroeconomic variables, OLS, Significance