EVALUATION OF THE EFFECT OF FDI ON MONEY AND PRICES IN NIGERIA: 1981 – 2016
SOLOMON OLUBUNMI, PhD
Volume 7 Issue 1
Abstract
This study investigates the effects of FDI on money and prices in Nigeria between 1981 and 2016. Structural macro econometric model consisting of monetary and prices block was developed for the purpose of the study. The model has 4 simultaneous equations and 15 variables to capture the required proxies. Three-stage least squares (3SLS) technique was adopted to estimate the macro econometric system of 4 simultaneous equations in order to capture the effect of FDI on that sector of the economy. FDI has positive effect on that sector as almost all the variables estimated were positive: in the estimated results for the equations MD2, (money supply), PHGS (public holding of government security), CINF (core inflation) and EXCR (exchange rate) of the monetary and price block, when FDI was included as independent variable it was highly significant for all the estimated equations and was positively signed. The major recommendations of the study is that government should provide enabling environment in such a way that the problem of exchange rate volatility, insecurity and corruption would be tackled; this would facilitate easy inflow of FDI into the country and affect the monetary sector positively; the multiplier effect can reduce inflation in the long run and influence the aggregate production which would then help relax the unemployment and foreign exchange bottle neck bedeviling the country and thereby facilitating the rapid growth of the economy
Download Paper