This study investigates the relationship between Foreign Direct Investment (FDI) and economic growth in Nigeria, with particular attention to the mediating roles of inflation and government expenditure. Using annual time series data from 1981 to 2023 sourced from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS), the research adopts an ex-post facto design and employs econometric techniques, including the Augmented Dickey-Fuller unit root test, Johansen co-integration analysis, and Vector Error Correction Model (VECM). The findings reveal a positive and statistically significant relationship between FDI and gross domestic product (GDP), indicating that FDI contributes to economic growth through technology transfer, capital formation, and job creation. Conversely, inflation exhibits a negative but statistically insignificant effect on GDP, suggesting that while price instability can undermine growth, its impact remains limited within the study period. Government expenditure shows a positive yet statistically insignificant relationship with GDP, highlighting that the effectiveness of fiscal spending depends largely on allocation efficiency and governance quality. The study concludes that FDI remains a vital driver of Nigeria’s economic performance, but its growth-enhancing effects are contingent upon macroeconomic stability and effective fiscal management. It recommends policies aimed at maintaining moderate inflation, improving the quality of public expenditure, diversifying FDI inflows beyond the oil sector, and promoting reinvestment of foreign earnings to foster sustainable economic growth.

Keywords: Foreign direct Investment, Gross domestic Product, Fiscal Management, Inflation