An Assessment of the Impact of GDP and FDI on National Exchange Rate and Price Stability in Nigeria
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Background of the Study
National exchange rate and price stability are crucial for ensuring economic competitiveness and protecting consumer purchasing power. In Nigeria, GDP growth and FDI are pivotal in influencing these macroeconomic variables. A robust GDP indicates economic strength, which can attract FDI and bolster the domestic currency, whereas sustained FDI inflows can promote stability by enhancing investor confidence (Adeyemi, 2023). However, challenges such as volatile GDP performance and inconsistent FDI inflows can lead to exchange rate fluctuations and price instability (Okoro, 2024). Recent reforms have sought to harness the benefits of GDP growth and FDI to create a more stable economic environment (Balogun, 2025). This study examines the dual impact of GDP and FDI on exchange rate movements and price levels, investigating how these factors interact to promote or undermine economic stability. By analyzing historical trends and policy interventions, the research aims to provide insights into effective strategies for achieving sustained exchange rate and price stability in Nigeria.
Statement of the Problem
Nigeria’s exchange rate and price stability have been compromised by inconsistent GDP growth and volatile FDI inflows. These issues create uncertainty in the financial markets, affecting both domestic and foreign investor confidence (Adeyemi, 2023). The lack of a clear understanding of how GDP and FDI jointly influence exchange rate and price stability hinders the formulation of effective policy responses, leading to persistent economic instability (Okoro, 2024; Balogun, 2025).
Objectives of the Study
- To analyze the impact of GDP growth on exchange rate and price stability.
- To assess the role of FDI in stabilizing the exchange rate and prices.
- To recommend policy interventions that enhance macroeconomic stability.
Research Questions
- How does GDP growth affect national exchange rate and price stability?
- What is the impact of FDI inflows on these stability measures?
- Which policy measures can effectively stabilize the exchange rate and prices?
Research Hypotheses
- Higher GDP growth positively contributes to exchange rate and price stability.
- FDI inflows reduce exchange rate volatility and enhance price stability.
- Coordinated policy interventions improve overall macroeconomic stability.
Significance of the Study
This study is significant as it examines the interplay between GDP, FDI, exchange rate, and price stability in Nigeria. The insights provided will assist policymakers in designing economic strategies that foster a stable investment environment and enhance overall economic resilience (Adeyemi, 2023; Okoro, 2024; Balogun, 2025).
Scope and Limitations of the Study
This study is limited to assessing the impact of GDP and FDI on exchange rate and price stability in Nigeria. It focuses solely on domestic macroeconomic indicators without incorporating global economic trends.
Definitions of Terms
• GDP: The total value of goods and services produced within a country.
• FDI: Investments made by foreign entities in the domestic economy.
• Exchange Rate and Price Stability: The degree of consistency in currency value and general price levels.
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