Exploring the Impact of GDP, FDI, and Inflation on Economic Growth and Stability in Nigeria
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Background of the Study
Nigeria’s economy is influenced by a range of macroeconomic variables that together determine the overall growth trajectory and stability of the nation. Gross Domestic Product (GDP) growth reflects domestic production and economic vitality, while Foreign Direct Investment (FDI) brings in external capital, technology, and management expertise that can catalyze new industries. Simultaneously, inflation directly affects purchasing power and the cost structure of businesses. In recent years, Nigeria has witnessed periods of robust GDP growth alongside intermittent FDI inflows and persistent inflationary pressures (Adeyemi, 2023). These dynamics have led to a complex interplay where positive growth may be dampened by inflation, and FDI may serve as a counterbalance to domestic inefficiencies. Policymakers have introduced several reforms aimed at enhancing fiscal discipline, attracting FDI, and controlling inflation to foster a stable economic environment (Okoro, 2024). Empirical studies indicate that the synergy among these variables is crucial for sustainable economic development and stability, as high inflation can erode the benefits of GDP growth and deter investor confidence (Balogun, 2025). This study explores how GDP, FDI, and inflation collectively influence economic growth and stability, identifying the causal mechanisms and evaluating policy effectiveness in mitigating risks while promoting long-term prosperity.
Statement of the Problem
Despite various economic reforms, Nigeria’s growth and stability remain inconsistent due to volatile GDP performance, erratic FDI inflows, and high inflation. The combined impact of these factors creates an unpredictable economic environment, making it challenging for policymakers to achieve sustainable development (Adeyemi, 2023). The current body of research does not fully clarify how these variables interact to affect overall economic stability, thus hindering the formulation of effective, integrated policies (Okoro, 2024; Balogun, 2025).
Objectives of the Study
- To analyze the individual and combined effects of GDP, FDI, and inflation on economic growth.
- To assess the impact of these variables on overall economic stability in Nigeria.
- To recommend policy measures that optimize the benefits of growth while mitigating inflationary risks.
Research Questions
- How do GDP, FDI, and inflation individually and collectively impact economic growth in Nigeria?
- What are the key channels through which these variables affect economic stability?
- Which policy interventions can effectively balance these dynamics to foster sustainable development?
Research Hypotheses
- Higher GDP growth and robust FDI inflows positively impact economic growth.
- Elevated inflation negatively moderates the positive effects of GDP and FDI on stability.
- Integrated fiscal policies enhance the overall economic stability by harmonizing these variables.
Significance of the Study
This study is significant because it provides a comprehensive analysis of how GDP, FDI, and inflation jointly affect Nigeria’s economic growth and stability. The findings will inform policymakers on designing balanced strategies to foster growth, attract investment, and control inflation, thereby contributing to sustainable economic development (Adeyemi, 2023; Okoro, 2024; Balogun, 2025).
Scope and Limitations of the Study
This study is limited to analyzing macroeconomic data and policy measures related to GDP, FDI, and inflation in Nigeria. It does not account for external global shocks or microeconomic factors that may also influence economic stability.
Definitions of Terms
• GDP: The total market value of all goods and services produced within a country.
• FDI: Investment made by foreign entities into domestic businesses or assets.
• Inflation: A sustained increase in the general price level of goods and services.
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