An Investigation of the Impact of Combined FDI and Inflation Trends on National Economic Stability in Nigeria
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Background of the Study:
National economic stability in Nigeria is increasingly influenced by the dual forces of FDI inflows and inflation trends. Over the past few years, while FDI has been hailed as a catalyst for economic modernization by injecting capital and fostering innovation, rising inflation has posed challenges to maintaining stable economic conditions. The interplay between these two factors creates a complex environment where benefits from external investments may be offset by the erosion of purchasing power due to persistent inflation (Akinola, 2023). Policymakers have attempted to balance these dynamics through various fiscal and monetary interventions, yet achieving a stable macroeconomic environment remains a challenge (Babatunde, 2024). Studies have underscored the importance of understanding how combined FDI and inflation trends affect economic stability, particularly in emerging markets such as Nigeria (Chinaza, 2025). This investigation aims to disentangle the interactions between FDI and inflation, examining their net impact on national stability. By reviewing historical data and current policy measures, the study intends to offer insights into the efficacy of existing economic policies and propose recommendations for enhancing stability amid fluctuating investment and price levels.
Statement of the Problem:
Nigeria’s economic stability is being challenged by the simultaneous occurrence of increased FDI inflows and high inflation. While FDI is expected to spur growth and stabilize the economy, persistent inflation undermines these benefits by reducing real incomes and increasing uncertainty (Ibrahim, 2023). The lack of effective policy coordination has led to an environment where the positive impacts of FDI are diluted by inflationary pressures. Consequently, this mismatch poses a threat to long-term economic stability, necessitating an investigation into the underlying factors and potential policy remedies (Okeke, 2024).
Objectives of the Study:
- To evaluate the combined effects of FDI and inflation on economic stability.
- To identify the challenges associated with balancing investment inflows and price levels.
- To recommend policy interventions that enhance economic stability.
Research Questions:
- How do combined FDI and inflation trends affect national economic stability in Nigeria?
- What are the main challenges in reconciling FDI benefits with inflation control?
- What policy measures can mitigate the destabilizing effects of high inflation?
Research Hypotheses:
- H1: FDI inflows positively impact economic stability when inflation is controlled.
- H2: High inflation significantly undermines the stabilizing effect of FDI.
- H3: Coordinated monetary and fiscal policies can mitigate the adverse effects of inflation on economic stability.
Significance of the Study:
This study is significant as it investigates the dual impact of FDI and inflation on Nigeria’s economic stability. The insights from this research will help policymakers develop coordinated strategies to harness the benefits of FDI while curbing inflation, thereby fostering a more stable economic environment that supports sustainable development (Eze, 2024).
Scope and Limitations of the Study:
This study is limited to analyzing the impact of combined FDI and inflation trends on national economic stability in Nigeria and does not consider other exogenous shocks.
Definitions of Terms:
• FDI: Investments made by foreign entities into Nigeria’s economy.
• Inflation: The continuous increase in the price level of goods and services.
• Economic Stability: The condition of minimal fluctuations in key economic indicators.
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