ABSTRACT
Most economic rationales for granting special incentives for attracting
FDI are based on the belief that FDI bridges the “idea gap” between the rich
and the poor nations in addition to the generation of technological transfers
and spillovers. Empirical Literature however finds controversial, the effect of
FDI on productivity growth. This study is an investigation into the impact of
FDI on the Nigerian economy. Using secondary data obtained from CBN Statistical
Bulletin and National Bureau of Statistics, Ordinary Least Square regression
techniques were employed in the analysis. Major findings show that FDI has a
significant positive impact on the Nigerian economy. It is recommended among
others that government should enhance its economic climate and increase the
incentives to attracting more FDI flows to the economy. It is suggested that
further studies should explore the impact of each of the determinants of FDI on
the economy.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
One
of the most salient features of today’s globalization drive is conscious
encouragement of cross-border investment, especially by transnational corporations
and firms (TNCs). Many countries and continents (especially developing) now see
attracting FDI as an important element in their strategy for economic
development. This is most probably because FDI is seen as an amalgamation of
capital, technology, marketing and management.
Sub-Saharan Africa as a region now has to depend very much on FDI for so
many reasons, some of which are amplified by Asiedu (2001). The preference for
FDI stems from its acknowledged advantages (Sjoholm 1999; Obwona, 2001, 2004).
The efforts by several African countries to improve their business climate stem
from the desire to attract FDI. In fact, one of the pillars on which the New
Partnership for Africa’s Development (NEPAD) was launched was to increase
available capital to US$64 billion through a combination of reforms, resource
mobilization and condusive environment for FDI (Funke and Nsouli, 2003).
Unfortunately, the efforts of most countries in Africa to attract FDI
have been futile. This is in spite of the perceived and obvious need for FDI in
the continent. The development is disturbing, sending very little hope of
economic development and growth for these countries. Further, the pattern of
the FDI that does exist is often skewed towards extractive industries, meaning
that the differential rate of FDI in flow into sub-Saharan African countries
has been adduced to be due to natural resources, although the size of the local
market may also be a consideration (Morriset 2000; Asiedu, 2001).
Nigeria as a country, given her natural resources base and large market
size, qualifies to be a major recipient of FDI in Africa and indeed is one of
the top three leading African countries that consistently received FDI in the
past decade. However, the level of FDI attracted by Nigeria is mediocre
(Asiedu, 2003) compared with the resource base and potential need.
Following the collapse of the international market for crude petroleum,
Nigeria’s mono-export total foreign exchange earnings declined persistently
creating acute shortage in the country’s ability to finance high import bills
and servicing of external debt which has been on the increase. Continuation of
regime of controls on trade and payment proved counter-productive and made
economic environment unsuitable for investment.
In order to deal with the above situation, the
federal government introduced several measures in aid of her economic recovery.
Paramount on the list of measures is the introduction of Structural Adjustment
Programme (SAP) comprising a package of economic policy measures aimed at
creating a suitable climate for growth and investment within the economy. The
ability of the policy measure in Nigeria’s structural Adjustment Programme
(SAP) to stimulate aggregate output in the country depends strictly on the
size, composition and quality of foreign direct investment the country can
attract in the medium term (Eden, Lekan 1990). Also, among the revamping
measures is the use of the monetary policy to attract direct foreign
investment. Other policy measures include; the review of the 1970
indigenization policy which restricted foreign investors venturing into some
sectors of the economy. While some arrears barred to direct foreign investors
have been lifted, others with minority permission have now been liberalized
(Ahmed, 1998).
These and other measures have been in force. The question is why “despite
the presence of the FDI in the country, their impact on economic and national
development is yet to be felt”? Maybe, tracing the history of FDI in Nigeria
will help answer the above question, this shall be treated in the next chapter.
This study will therefore make its contributions by examining the contributions of FDI to growth and then determine the contributory
variables to FDI flow in Nigeria.
1.2 STATEMENT OF THE PROBLEM
Nigeria
is one of the economies with great demand for goods and services and has
attracted some FDI over the years. The government has spent enormous resources
meant for other pressing economic needs in attracting foreign direct investment
in the country. Large chunk of budget allocations are set aside yearly for
embarking on foreign trips in a bid to attract foreign direct investments. The
government over the years has introduced different measures to encourage
foreign investment. Though there has been an increasing presence of foreign
investment in the country, one begins to wonder and worry over the direction
and magnitude of the impact of FDIs on the development of Nigeria economy and
the question that comes to mind is, do these FDIs actually contribute to
economic growth in Nigeria? This informs the approach to this study....
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Item Type: Postgraduate Material | Attribute: 58 pages | Chapters: 1-5
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