In the last few years, Nigeria, the African continent's largest economy, has been plagued with growing insecurity problems following numerous acts of violence perpetrated by the insurgent group Boko Haram. Although mostly concentrated in the North-Eastern part of the country, bordering Cameroon and Chad, these acts of violence have affected the entire nation, both politically and economically. As a result of the overall deterioration of the political and economic climate in Nigeria, foreign investors are beginning to worry about the short-term economic future of the entire region. Using the 3-sector model of economic analysis, explain what would be the economic consequences of a decrease in foreign direct investment into Nigeria, whether financial investments or real investments such as factories or real estate. Please take note of the following assumptions for your analysis:
Nigeria has low capital mobility;
The Nigerian economy is currently positioned in the middle part of the intermediate range of its aggregate supply curve;
The Nigerian central bank is determined to maintain the value of its currency, the Naira (NGN) fixed against the US Dollar at a nominal exchange rate of USD 0.05/NGN).
What happened with a monetary base? Explain and show it on the graph.