Investigating the Impact of FDI on GDP, Consumer Prices, and Economic Growth in Nigeria
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Background of the Study:
Foreign Direct Investment (FDI) is widely regarded as a key driver of economic growth, innovation, and development in emerging economies such as Nigeria. By introducing new technologies, management practices, and capital, FDI can boost GDP and influence consumer price levels. However, the effect of FDI on economic growth is not uniform; while it may stimulate production and job creation, it can also contribute to inflation if increased demand outpaces supply (Akinyele, 2023). In Nigeria, where economic diversification is a policy priority, understanding the multifaceted impact of FDI on GDP, consumer prices, and overall economic growth is crucial. Recent empirical research has indicated that FDI inflows have the potential to enhance productivity and foster competitive markets, yet the resultant inflationary pressures may erode these benefits (Babatunde, 2024). This study investigates how FDI affects key economic indicators, examining the channels through which FDI influences GDP growth, alters consumer prices, and drives economic expansion (Chinaza, 2025). By integrating both macroeconomic analysis and sector-specific insights, the research aims to provide a comprehensive appraisal of FDI’s role in Nigeria’s economic development.
Statement of the Problem:
Although FDI is recognized as a vital element of Nigeria’s economic strategy, its impact on GDP, consumer prices, and overall growth remains ambiguous. Persistent inflation and inconsistent growth patterns suggest that FDI may not be uniformly beneficial. The challenge lies in disentangling the positive contributions of FDI to GDP growth from its potential to drive up consumer prices, thereby affecting the overall pace of economic development (Ibrahim, 2023). This study seeks to clarify these relationships and offer insights into how policy adjustments can maximize the benefits of FDI while minimizing adverse inflationary effects (Okeke, 2024).
Objectives of the Study:
- To assess the impact of FDI on GDP growth in Nigeria.
- To analyze the relationship between FDI and consumer price levels.
- To evaluate the overall contribution of FDI to economic growth.
Research Questions:
- How does FDI influence GDP growth in Nigeria?
- What is the relationship between FDI and consumer prices?
- How does FDI contribute to overall economic growth?
Research Hypotheses:
- H1: FDI positively impacts GDP growth in Nigeria.
- H2: FDI inflows are significantly associated with changes in consumer prices.
- H3: FDI contributes positively to overall economic growth.
Significance of the Study:
This study is significant as it investigates the multifaceted impact of FDI on Nigeria’s economy by examining its effects on GDP, consumer prices, and economic growth. The findings will provide a clearer understanding of FDI’s role and help policymakers design strategies that maximize its benefits while mitigating inflationary pressures, thereby promoting sustainable economic development (Eze, 2024).
Scope and Limitations of the Study:
This study is limited to investigating the impact of FDI on GDP, consumer prices, and economic growth in Nigeria, excluding other external factors.
Definitions of Terms:
• FDI: Foreign Direct Investment, representing investments from abroad into Nigeria’s economy.
• Consumer Prices: The average price level of goods and services paid by consumers.
• Economic Growth: The increase in the value of goods and services produced by the economy.
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