The Effects of Market and Macroeconomic Uncertainties on Corporate Investment Decisions in Nigeria


  • Jonathan Oniovosa OSOSUAKPOR PhD, AMJU Unique Microfinance Bank Limited, Effurun-Warri, Delta State, Nigeria



In this paper, the effect of market and macroeconomic uncertainties on corporate investment decisions was examined using the real option investment theory. Two types of uncertainties were investigated: macroeconomic uncertainties (exchange, interest and inflation rates) and market uncertainty (stock market volatility) while corporate investments were measured as the sum of the changes in capital stock and depreciation. Data were obtained for the period 2005-2019 and the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) estimation technique was employed. The results showed a significant difference between the effects of macroeconomic and market uncertainties on corporate investment decisions. We found that macroeconomic uncertainty of inflation rate has positive relationship with corporate investments, with a coefficient of 0.35071, and interest rate uncertainty (0.15567) and exchange rate uncertainty (-0.07852) were also statistically significant, whereas the linear market uncertainty has a negative value of -0.00173 and the quadratic market uncertainty (0.00520) was statistically insignificant. Therefore, interest rate volatility and inflation expectations are not factors constraining investment growth; however, exchange rate uncertainty exerts a substantial negative influence on corporate investment in Nigeria. Given the findings, the study recommends, among others, an appropriate and stable exchange rate policy that makes for easy business planning and forecasting by rational investors. To achieve a stable exchange rate that would bring about increased investment, the government should implement efficient macroeconomic policies, such as those that minimize the structural rigidities in the economy.


Market uncertainty, Macroeconomic uncertainty, Corporate investments, Economic growth, Real option theory

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How to Cite

OSOSUAKPOR, J. O. . (2021). The Effects of Market and Macroeconomic Uncertainties on Corporate Investment Decisions in Nigeria. International Journal of Management and Sustainability, 10(4), 104–113.




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