Nigerian Journal of Banking and Financial Issues (NJBFI)

FOREIGN DIRECT INVESTMENT, MACRO ECONOMIC VARIABLES AND NIGERIA`S ECONOMIC DEVELOPMENT

Abstract

Nigeria has been unable to fully capitalize on the advantages of foreign direct investment (FDI) because of its weak infrastructure, excessive reliance on oil, and macroeconomic instability, despite its abundant resource endowment and enormous market potential. Efforts to attain sustainable economic development are hampered by these persistent challenges. Using GDP per capita as the primary proxy, this study examines the effects of foreign direct investment (FDI) and two important macroeconomic factors—inflation and exchange rate—on Nigeria's economic development. Using secondary time series data spanning the years 1990–2023, the study adopted a quantitative approach. The relationships between FDI, inflation, exchange rates, and economic development were estimated using multiple regression analysis. The findings showed that whereas inflation and the exchange rate were both statistically significant but had negative effects, foreign direct investment (FDI) had a positive and significant impact on economic development. The findings imply that while foreign direct investment (FDI) is a key contributor to economic expansion, macroeconomic unpredictability limits its efficacy.