EMUOBO JOSEPHINE ANENE

This study sought to examine the effect of exchange rate on foreign private capital inflows in Nigeria. The specific objectives were to analyse the effect of exchange rate on foreign private capital inflows in Nigeria; examine influence of exchange rate volatility on foreign private capital inflows in Nigeria; and investigate the effect of domestic interest rate on foreign private capital inflows in Nigeria. The study used secondary time series data covering the period 1981 to 2019. The study adopted the Augmented Dickey-fuller unit root test, Bounds Cointegration test, Granger causality test and Autoregressive Distributed Lag Modeling technique. The findings of this study showed that there exists a unidirectional relationship between exchange rate and foreign private capital inflow. It was discovered that a bi-causal relationship exists between foreign private capital inflow and exchange rate volatility. It was revealed that causality runs from foreign private capital inflow to financial deepening and not vice versa. It was discovered that the effect of exchange rate on foreign capital inflow is mixed. It was revealed that exchange M rate volatility has a positive significant influence on foreign private capital inflows. Thus, the study recommended that the Nigerian monetary authority should come u with policy strategy to curb the volatility of the exchange rate so as to encourage foreign private capital flows into the country. Also, appropriate macroeconomic policies should be put in place to boost the size of the domestic market. An increase the real gross domestic product will stimulate foreign capital inflow into the economy. Finally, a sound financial sector is a basic pre-requisite for assessing the absorptive capacity of the domestic economy to inflow of foreign capital. Therefore, the Nigerian government through the various financial sector regulatory agencies should step up their supervisory role in the sector in order to boost the soundness of the financial sector of the economy