Interactive Effects of Exchange Rate Volatilityand Foreign Capital Inflows on EconomicGrowth in Nigeria

Various literature have attested to the vital roles of foreign capital inflow in bridging the savingsinvestment gaps in the developing countries in other to bring about the so much desired development. The impediment of exchange rate volatility (EXRV) on sourcing for this much desired foreign capital is also notable. However it was observed in literature that the negative effect of EXRV could be mitigated by the level of financial development prevalent in the country. This study investigates the interaction of financial development with exchange rate volatility on one hand and of financial development with capital inflows on the other hand. The result of our GMM estimation indicates significant positive effect of FDI, FD, interaction of FDI with FD and interaction of EXRV with FD on GDP. However, remittance, lag of EXRV and interaction of remittance with FD has significant negative impact on GDP. This study posits that government in its efforts to diversify the economy for future growth should promote infrastructure and adequate financial development that will attract FDI to agric and agro allied industries and diversify remittances from consumption into investment