This study investigated the impact of exchange rate volatility and stock market performance on the inflow of foreign direct investment to Nigeria using time series data from 1980 to 2013. It employed the ordinary least square technique and error correction mechanism in its estimations. The result revealed that exchange rate volatility has negative and significant effect on the inflow of foreign direct investment to Nigeria both in the long run and in the short run. It further revealed that market capitalization, proxy for stock market performance was positively signed and statistically significant. Apparently, a stable and well developed capital market will definitely attract direct foreign investment to Nigeria. The study recommends the pursuance of sound exchange rate management system and policies that will lead to increase in domestic production of export commodities. The study further recommends deepening of the capital market to provide the needed funds for investment and avoidance of dollarization of the economy to reduce the stress on foreign exchange earnings. Sound foreign reserve management practices are imperative for Nigeria as measures of maintaining the value of the naira and reduce the impact of international capital shocks.
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