Foreign Direct Investment and Exchange Rate on Macroeconomic Performance in Nigeria

This study examined the influence of foreign direct investment (FDI) and exchange rates on Nigeria’s macroeconomic performance from 1990 to 2024. The study employed foreign direct investment net inflows as a percentage of GDP, real effective exchange rate, trade openness, and gross fixed capital formation as explanatory variables, while real GDP growth rate served as indicators of macroeconomic performance. Time series data were sourced from the World Bank’s World Development Indicators and the Central Bank of Nigeria Statistical Bulletin. The study utilized descriptive statistics, Augmented Dickey-Fuller (ADF) unit root tests, ARDL bounds cointegration tests, ARDL estimation technique, and post estimation tests for empirical analysis. The findings reveal that trade openness has a negative but statistically insignificant long-run effect on real GDP growth. The real effective exchange rate exerts significant positive effects in the short run but a significant negative effect in the long run. Gross fixed capital formation has a significant positive long-run effect, indicating that productive investment contributes substantially to economic growth. Conversely, foreign direct investment has a significant negative effect on real GDP growth in both the short and long run. The error correction term is negative and statistically significant, confirming the existence of a long-run equilibrium relationship among the variables. The study concludes that Nigeria should strengthen productive investment, promote exchange-rate stability, improve the quality of FDI inflows, and adopt trade policies that enhance domestic production and export competitiveness.