Assessing the Role of FDI in Enhancing Nigeria’s Economic Competitiveness
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Background of the Study
Economic competitiveness is a critical determinant of long-term growth, influencing a country’s ability to attract investment, create jobs, and improve living standards. In Nigeria, FDI is considered a major contributor to enhancing competitiveness by infusing capital, modern technologies, and managerial expertise into domestic industries. Foreign investments have the potential to upgrade industrial processes, foster innovation, and improve productivity across sectors (Olu, 2023). The competitive advantage derived from FDI is particularly relevant in a globalized economy where efficiency, quality, and technological prowess determine market success.
The theoretical framework for this study is rooted in competitive advantage theory and the resource-based view, which argue that the unique assets introduced by FDI can significantly elevate a nation’s competitiveness. Empirical research from emerging markets supports the notion that FDI not only boosts domestic production but also leads to better integration into global value chains. In Nigeria, recent economic reforms and policy initiatives aimed at improving the investment climate have further encouraged FDI inflows, positioning the country to harness these benefits. However, the extent to which FDI translates into enhanced economic competitiveness is contingent upon various factors, including the efficiency of domestic institutions, infrastructural adequacy, and the absorptive capacity of local firms (Akinola, 2024).
This study aims to assess the role of FDI in enhancing Nigeria’s economic competitiveness by analyzing its impact on productivity, innovation, and integration into global markets. The research will evaluate how FDI contributes to sustainable competitive advantages and identify the key factors that facilitate its positive effects on the national economy (Ibrahim, 2025).
Statement of the Problem
Despite growing FDI inflows, Nigeria’s overall economic competitiveness remains challenged by persistent structural inefficiencies and institutional weaknesses. Although foreign investments have led to improvements in certain sectors, many domestic industries still struggle to compete on an international level due to limited technology transfer, poor infrastructure, and regulatory bottlenecks (Chinwe, 2023). Moreover, the competitive gains from FDI have not been uniformly distributed across the economy, with some sectors and regions lagging behind. This uneven impact raises concerns regarding the ability of Nigeria to leverage FDI for broad-based competitiveness.
The disconnect between FDI inflows and enhanced competitiveness suggests that additional factors, such as effective policy implementation and improved absorptive capacity, are necessary to realize the full benefits of foreign investment. Policymakers face the challenge of designing strategies that not only attract FDI but also ensure that its positive externalities are integrated into the domestic economic fabric. This study, therefore, seeks to investigate the obstacles preventing FDI from fully enhancing Nigeria’s economic competitiveness and to propose actionable recommendations for overcoming these challenges.
Objectives of the Study
• To evaluate the impact of FDI on Nigeria’s economic competitiveness.
• To identify key factors that facilitate or hinder FDI’s competitive benefits.
• To propose policy recommendations to improve the competitive impact of FDI.
Research Questions
• How does FDI contribute to enhancing economic competitiveness in Nigeria?
• What factors moderate the effectiveness of FDI in improving competitiveness?
• Which policy measures can optimize the role of FDI in strengthening Nigeria’s global market position?
Research Hypotheses
• H1: FDI inflows positively affect Nigeria’s economic competitiveness.
• H2: Institutional efficiency and infrastructural quality moderate the relationship between FDI and competitiveness.
• H3: Policy reforms aimed at improving business environments significantly enhance the competitive benefits of FDI.
Scope and Limitations of the Study
The study focuses on macroeconomic and sector-specific data from Nigeria over the past decade, using international competitiveness indices and FDI records. Limitations include data heterogeneity and the challenge of isolating FDI effects from other competitiveness determinants.
Definitions of Terms
• Economic Competitiveness: The ability of an economy to compete effectively in global markets.
• FDI: Foreign Direct Investment—capital inflows from foreign investors.
• Global Value Chains: International networks through which goods and services are produced and distributed.
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