Exploring the Impact of Inflation on FDI Attraction and GDP Growth in Nigeria
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Background of the Study
Inflation is a key determinant of a country’s economic attractiveness and growth potential. In Nigeria, high inflation can deter foreign investors by increasing uncertainty and reducing real returns, thereby limiting FDI attraction (Adeyemi, 2023). Simultaneously, inflation erodes the gains from GDP growth by diminishing consumers’ purchasing power. Policymakers have long sought to balance inflation control with stimulating economic growth, as stable prices are crucial for attracting FDI and ensuring sustainable GDP expansion (Okoro, 2024). Recent fiscal and monetary interventions have aimed to create a low-inflation environment that fosters both domestic growth and foreign investment (Balogun, 2025). This study explores how inflation influences FDI attraction and GDP growth in Nigeria by analyzing historical trends, policy interventions, and their interplay. The research will help clarify whether inflation acts as a barrier to FDI and, consequently, to economic growth, providing insights for more effective economic management.
Statement of the Problem
Nigeria’s persistent high inflation poses a challenge for attracting FDI and achieving sustained GDP growth (Adeyemi, 2023). Elevated inflation increases business costs and creates uncertainty, discouraging foreign investors and undermining the benefits of GDP growth. This complex interaction remains insufficiently understood, thereby impeding the formulation of effective policies to control inflation and stimulate both FDI inflows and economic expansion (Okoro, 2024; Balogun, 2025).
Objectives of the Study
- To assess the impact of inflation on FDI attraction.
- To evaluate the effect of inflation on GDP growth.
- To recommend policy measures that lower inflation and boost FDI and GDP growth.
Research Questions
- How does inflation affect FDI attraction in Nigeria?
- What is the impact of inflation on GDP growth?
- Which policy interventions can mitigate inflation’s negative effects on FDI and growth?
Research Hypotheses
- High inflation negatively affects FDI attraction.
- Elevated inflation reduces GDP growth.
- Effective inflation control policies enhance FDI inflows and GDP expansion.
Significance of the Study
This study is significant as it explores the impact of inflation on FDI attraction and GDP growth in Nigeria. The results will assist policymakers in developing strategies to control inflation, thereby fostering a more attractive investment climate and promoting sustainable economic growth (Adeyemi, 2023; Okoro, 2024; Balogun, 2025).
Scope and Limitations of the Study
This study is limited to investigating the impact of inflation on FDI attraction and GDP growth in Nigeria. It focuses exclusively on these macroeconomic variables without considering other external influences.
Definitions of Terms
• Inflation: The sustained rise in the general price level.
• FDI Attraction: The ability of an economy to draw foreign investments.
• GDP Growth: The rate of increase in economic output.
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