Revista Internacional de Economía y Ciencias de la Gestión

THE CONSEQUENCES OF FOREIGN EXCHANGE RATE REFORMS ON THE PERFORMANCES OF PRIVATE DOMESTIC INVESTMENT IN NIGERIA.

Abstract

Bakare A.S Ph.D

Empirical cross-country studies have yielded ambiguous results with respect to the impact of different exchange rate regimes on macroeconomic performance particularly on private domestic investment. This study extended this body of knowledge by carrying out an empirical analysis of the consequences of the foreign exchange rate reforms on the performances of private domestic investment in Nigeria. The ordinary least square multiple regression analytical method was used for the data analysis. Some statistical tools were employed to test the statistical significance of the variables. The analysis started with the test of stationarity and co-integration of Nigeria’s time series data. The empirical study found that the data were stationary and co integrated. The multiple regression results showed a significant but negative relationship between floating foreign exchange rate and private domestic investment in Nigeria. These results were robust to a number of econometric specifications. Our findings and conclusion support the need for the government to dump the floating exchange regime and adopt purchasing power parity which has been considered by researchers to be more appropriate in determining realistic exchange rate for naira and contribute positively to macroeconomic performances in Nigeria.