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<p>One essential consideration of foreign investors when choosing a country of choice for investment purposes is often centred on a stable economic environment. Economic stability signifies a low level of uncertainty that ultimately favours investment opportunities. Thus, this study uses recently constructed uncertainty indices for Nigeria to investigate their impact on various components of foreign investment inflows into the country, which are foreign direct investment (FDI), foreign portfolio investment (FPI) and other investment portfolios (OIP). The study emphasizes using the ARDL approach that covers the period between January 2010 and November 2022. Our outcome establishes that a higher domestic EPU index significantly dampens the size of foreign investment inflows in both runs. However, while the degree of adjustment to any imbalance in the system in the short run is instantaneous for FDI, it is rather slow for FPI, an instance that confirms the stability and stronghold features of FDI in this family. Again, a similar stance is confirmed for the alternative EPU index, and it further indicates that there is no significant stance on the OIP component. In all two cases, the exchange rate exhibits a positive connection with foreign investment inflows, which by implication suggests that exchange rate depreciation strengthens investment inflows into the Nigerian economy. However, while this study recommends the implementation of macroeconomic policy in a clearer term to avoid any ambiguity, the outcome provides useful information for investors and policymakers on how to deal with each investment type in an unstable economic environment.</p>

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Nigerian economic policy uncertainties and foreign investment inflows: evidence from recently constructed indices

  • 期刊论文

  • 发表日期：

    2025年2月7日

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  • Yinka Hammed,
  • Moses Ogunniran,
  • Solomon Ademosu,
  • Abubakar Bagudo Muhammad

摘要

One essential consideration of foreign investors when choosing a country of choice for investment purposes is often centred on a stable economic environment. Economic stability signifies a low level of uncertainty that ultimately favours investment opportunities. Thus, this study uses recently constructed uncertainty indices for Nigeria to investigate their impact on various components of foreign investment inflows into the country, which are foreign direct investment (FDI), foreign portfolio investment (FPI) and other investment portfolios (OIP). The study emphasizes using the ARDL approach that covers the period between January 2010 and November 2022. Our outcome establishes that a higher domestic EPU index significantly dampens the size of foreign investment inflows in both runs. However, while the degree of adjustment to any imbalance in the system in the short run is instantaneous for FDI, it is rather slow for FPI, an instance that confirms the stability and stronghold features of FDI in this family. Again, a similar stance is confirmed for the alternative EPU index, and it further indicates that there is no significant stance on the OIP component. In all two cases, the exchange rate exhibits a positive connection with foreign investment inflows, which by implication suggests that exchange rate depreciation strengthens investment inflows into the Nigerian economy. However, while this study recommends the implementation of macroeconomic policy in a clearer term to avoid any ambiguity, the outcome provides useful information for investors and policymakers on how to deal with each investment type in an unstable economic environment.