Abstract:

Nigeria is the largest economy in Sub-Sahara Africa, with its ability to grow depending on its attractiveness to foreign investors. Currently the economy is largely dependent on oil sector for her existence with its numerous negative effects on the economy. As a result, the current administration in the country is seriously considering a policy shift to diversify its economy from oil to other sectors such as agriculture and agro allied industry. However, the dwindling price of crude oil and the persistent devaluation of the Nigerian Naira are proving to make the policy shift difficult. This study examines the effects of exchange rate volatility and capital inflows on the economic growth (GDP) in Nigeria between 1970 and 2015 using FDI and remittance which proved to be most vital components of Foreign Capital inflow to Nigeria currently. The result of our Generalised Method of Moments (GMM) estimator shows that Foreign Direct Investment (FDI) and Financial Development (FD) had insignificant positive effects on Gross Domestic Product (GDP) while Remittance, Exchange Rate Volatility and capital has significant negative effect on GDP. On the other hand, Financial Liberalisation has insignificant negative effect on GDP while labour has significant positive effect on GDP. This study therefore enjoined the present administration in Nigeria to provide enabling financial and infrastructural environment that will attract the inflow of FDI to agric sector, solid minerals and agro allied industry.