Abstract
This study examines the relationship between the two major investment components (domestic investment and foreign direct investment) and macroeconomic stability in Nigeria. In order to capture the macroeconomic stability, some selected macroeconomic variables are presented, namely: real GDP growth rate (RGDPgr), trade openness (TOP), exchange rate (EXR), inflation rate (INFR), interest rate (INTR), private sector credit (PSC) which represent domestic variables and world oil price (WOP) which represent foreign variable. The study employs Johansen cointegration and Vector Autoregressive model as the estimation techniques. Findings from the study reveals that there is no long-run relationship between the selected macroeconomic variables and the two investment variables. The study also reveals that shocks and fluctuations from real GDP growth rate (RGDPgr), private sector credit (PSC), inflation rate (INFR), interest rate (INTR), exchange rate (EXR) and world oil price (WOP) strongly and significantly affect domestic investment in Nigeria; while the shocks and instabilities arising from real GDP growth rate (RGDPgr), inflation rate (INFR), interest rate (INTR), exchange rate (EXR), trade openness (TOP) and world oil price (WOP) majorly and significantly affect foreign direct investment in Nigeria during the period under review. The study therefore recommends that Nigerian government should provide stability measures in all the aforementioned macroeconomic indicators, as this will attract a higher level of FDI and this will create an enabling business environment for domestic investment to operate.