Analysis of Foreign Investment and Identified Macroeconomic Measures in Nigeria

Abstract

Foreign investment is made up of two components: foreign direct investment and foreign portfolio investment are classified as functions of macroeconomic indicators. This paper examines the relationship between some identified macro-economic variables on foreign investments in. Data were sourced from the World Bank statistical base. Various empirical analyses were performed using Phillip-perron 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, Exchange Rate and Money Supply have direct impact on  FI while other macroeconomic variables (Interest and Inflation rates) were negatively related to FI. Interest Rate and inflation rates are granger causes FI which indicated the exact influential factor on foreign investment in Nigeria. However, exogenous variables were found empirically not to be statistically significant to FI. Finally, short run relationship existed between exchange rate, interest rate and foreign investment. The study recommends excellent macroeconomic policy performance of national’s investments strategic plan that will enhance efficient and optimal investments holding and management while paying attention to the development of infrastructures, generation of employment and general reduction of the prevailing poverty levels in the country.

Keywords: Granger, Foreign Investment, Macroeconomic variables, OLS, Unit Root.