Assessing the Effect of Exchange Rate Fluctuation on Macroeconomic Variables in Nigeria

This study evaluates how exchange rate fluctuation impacts inflation rate and foreign direct investments in Nigeria, a country that depends heavily on oil exports and faces external economic shocks. The study analyses the relationship between exchange rate, inflation and foreign direct investments by applying data analysis tools to secondary data collected between 2000 and 2019 from World Bank Database.  The findings reveal weak positive relationship between exchange rate and inflation with a correlation coefficient of 0.241 at P=0.268 and a strong negative relationship with a correlation coefficient of -0.805 between exchange rate and foreign direct investment at P<0.001. The study presents perspectives on Nigeria's economic dynamics while stressing the importance of exchange rate management to control inflation and explaining how foreign direct investment (FDI) withdrawal from Nigeria is connected to the instability of exchange rate which has created an uncertain business environment for foreign investors.