An Evaluation of the Relationship Between FDI, Inflation, and Consumer Spending in Nigeria
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Background of the Study
Foreign Direct Investment (FDI) is a critical engine of economic growth and development, bringing capital, technology, and managerial expertise. In Nigeria, FDI inflows have the potential to stimulate consumer spending by creating jobs and boosting income levels (Adeyemi, 2023). However, high inflation can undermine these benefits by reducing purchasing power and increasing the cost of living. The interplay between FDI, inflation, and consumer spending has become a focal point for policymakers aiming to achieve sustainable economic growth (Okoro, 2024). Recent studies indicate that while FDI can lead to increased consumer spending, persistent inflation may offset its positive effects, leading to subdued domestic consumption (Balogun, 2025). This research examines how the interaction between FDI inflows and inflation trends influences consumer spending patterns, thereby affecting overall economic activity. By analyzing historical data and recent economic trends, the study aims to provide a comprehensive understanding of these dynamics and offer policy recommendations that optimize the benefits of FDI while curbing inflationary pressures.
Statement of the Problem
Nigeria faces the dual challenge of attracting FDI and managing high inflation, which together impact consumer spending adversely. While FDI is expected to boost consumer expenditure through increased employment and income, high inflation erodes real purchasing power, leading to reduced spending (Adeyemi, 2023). The lack of an integrated approach to manage these factors results in inconsistent consumer spending trends, hampering economic growth (Okoro, 2024; Balogun, 2025).
Objectives of the Study
- To examine the relationship between FDI inflows and consumer spending.
- To analyze how inflation moderates this relationship.
- To propose policy measures that enhance consumer spending by balancing FDI benefits and inflation control.
Research Questions
- How does FDI influence consumer spending in Nigeria?
- What role does inflation play in moderating the impact of FDI on spending patterns?
- Which policy interventions can maximize consumer spending amid inflationary pressures?
Research Hypotheses
- FDI inflows positively influence consumer spending.
- High inflation negatively moderates the positive impact of FDI on spending.
- Policies that control inflation enhance the stimulative effect of FDI on consumer spending.
Significance of the Study
This study is significant as it explores the nexus between FDI, inflation, and consumer spending in Nigeria. The insights will help policymakers devise strategies to attract FDI, control inflation, and stimulate domestic consumption, thus supporting overall economic development (Adeyemi, 2023; Okoro, 2024; Balogun, 2025).
Scope and Limitations of the Study
This study is limited to evaluating the relationship between FDI, inflation, and consumer spending in Nigeria. It focuses on domestic economic factors without addressing international market influences.
Definitions of Terms
• FDI (Foreign Direct Investment): Investment made by foreign entities in the domestic economy.
• Inflation: The rate at which the general price level of goods and services increases.
• Consumer Spending: The total expenditure by households on goods and services.
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