Governance and Gross Domestic Investment in Developing Economies : Issues in Exchange Rate Instability in Nigeria

This paper examines governance, pubic policy and exchange rates instability in relation to gross domestic investment in developing economies with Nigeria as a focus. The technique adopted was the Ordinary Least Square (OLS) methodology by the use of time series data on exchange rate instability, gross domestic product, gross domestic investment, interest rate, exchange rate and inflation. The instability of exchange rate is measured by three years moving average of standard deviation of real exchange rate. The paper maintains that good governance should encourage stable exchange rate in an economy as well as desire private sector investment especially in the current global economic environment. It is further advocated that the best regime of governance and public policy is the one that stabilizes macroeconomic performance in terms of reducing instability in output, consumption, domestic price and other key macroeconomic variables. Government that does not recognize and/or maintain stability in the exchange rate, it is argued, renders governance a mirage capable of strangulating investment and economic fortunes of the state