annual report of the Central Bank of Nigeria, the Nigeria economy has
performed less well in the 1980’s than the 1970’s. Much of the growth in
both periods was based on performance of the oil sector. By 1970 oil
output stood at 558 million barrels and increased to 823 million barrels
by 1973. Between 1975 – 1985, oil output per day averaged between 1.8
and 2.3 million barrels respectively. With the dramatic rise in oil
price in 1973 and 1974 oil came to account for 31.9% of growth in real
gross domestic products and has since continued to dominate economic
performance in Niger sector. Although the aim of the policy was to
translate oil revenue into directly productive structures and promote
long-term development prospects, the imperatives and political pressure
to spend led to consolable waste and to oil boom in construction
The oil include rise in the
exchange rate also gave negative protection to agriculture and eroded
it’s significance in the economy from about 40% of the gross domestic
product I the early 1970’s to 1980’s. According, food imports which were
only 200,000 lorus the 1960’s has increase tremendously to 399,000
tones in 1974, reaching a pear level of 2,441,000 lorus in 1981.
By 1985 capacity utilization
of most industries was below 20% owing to lack of foreign exchanges raw
materials and sparse parts. Inflation had also attained an intolerable
level. When therefore, the past administration in Nigeria came to power
(the Babangida Administration) in August 1985, it looks a critical look
at the magnititude of the economic problems facing the nation and in
July 1986, it adopted a programme known as Structural Adjustment
Programme (SAP) as a means of tackling these preambles.
The entailed, among other
things the diversification of the economics so as to make it more
resilient to external forces. The import licensing system was abolished
and the inter-bank foreign exchange system was introduced in September
1986 with a view to making the naira achieve a realistic exchange rate.
The commodities abroad were abolished and which various government
subsidies were either removed or splashed by means of commercialization
and privatization; such as telecommunications and electricity.
Generally, market forces in
the allocation of resources replaced administrative controls. Public
investments were generally reduced in government owned companies and in
some cases such companies were fully privatized. Except in some
strategic industries such petroleum liquefied nature gas (LMG) and
Government has rather decided
to concentrate on the provision and improvement of basic infrastructural
facilities such as roads, water supply, telecommunications and
electricity. The overall goal of the economic adjustment is to allocate
resources efficiently and to put the economy back to the past glory. It
aims to relocate rescues from the public sector to the private sector as
that this sector will become more productive thereby becoming the
economic foundation of Nigeria’s economy (Ayaji, 1990) foreign
investments are those investment that are owned by individuals and
corporate bodies from other countries than the host.
The structural adjustment
programme is an array of measures that are instituted with hope of
revamping an ailing economy. As it affects the issues of foreign
investments, the most important aspect of the structural adjustment
programme is deregulation of the exchange rate and liberalizing the
procedure for the registration of foreign business in Nigeria. Although
the exchange control act was enacted in 1962, it was liberally applied
until the outbreak of the civil in 1967.
The 1968 Act provides that
foreign investors had to obtain a business permit and must also obtain a
permit to employ foreigners. The enterprises promotion Decrease of 1977
limited the equity participation of foreigners in local enterprises
depending on their schedule or category, which such enterprises fall.
However, with the introduction of the Structural Adjustment Programme,
most of the regulations where released. Foreigner investors could seek
and obtain licenses coordination committee (IDCC), bring I their funds
and repatriate the profits, without any form of inhibition.
1.2 OBJECTIVES OF THE STUDY
objectives of the study are based on the changes that have taken place
in the Nigeria economy during the structural Adjustment Programme in
relation to foreign investment ascertaining the impact of those changes.
On the economy and also appraise the foreign investment in Nigeria
under the structural changes in the direction anticipated by the
planning authorities. It is also envision new adjustments in SAP
policies and offer suggestions that will enhance the realization of the
goal of attracting more foreign investments in Nigeria. The study also
examines the relationship that exists between the following:
- Foreign investments and gross Domestic Product Items.
- Foreign investment and value of Nigeria (N) it is expected that the
aforementioned objectives of the study will be attained at the end of
the study through the hypothesis formulation and testing.
- Foreigner investment and balance of payment.
1.3 SIGNIFICANCES OF THE STUDY
now the impact of foreign investment on the national economy has become a
topical issue in the press, industry and academic circles. The great
importance of foreign investments on the economy under scores the need
to erratically examine the consequences of the level of foreign
investment on the economy. This study will be of a great significance to
policy makers who are seeking avenues to evaluate the effectiveness
help in the policy monitoring and control process. Research and student
will also find study and invaluable reference in advance or future.
1.4 STATEMENT OF PROBLEM
generally held that the stock capital and the existing level of
technology in an economy determine the economy’s level of productivity.
For this reason many countries, especially third countries pursue a
rigorous industrial policy in order to increase their country’s standard
of living. The two ways by which this is accomplished are by
participating directly in individual activities and by providing
infrastructure for others to invest.
Due to the dearth of capital
in third countries, including Nigeria, they prefer the latter option.
They tend to enable both foreign and local investors to participate in
the economy. The scenario of attracting foreign investment and local
investors has been one of the cardinal points of the structural
This study is deigned to
examine “the impact these foreign investments have made on Nigeria’s
economy under the structural adjustment programme.
1.5 HYPOTHESES FORMULATION
As a basic upon which this study is to be conducted, the following hypothesis have been formulated:
1: The gross domestic product of
Nigeria has a positive relationship with the increase in foreign
investment during SAP period.
2: The gross domestic product of
Nigeria has a negative relationship with the increase in foreign
investments during the SAP period.
3: The value of Naira has not depreciated as result of increase in foreign investment.
1.6 SCOPE AND LIMITATION OF THE STUDY
focuses on the levels of foreign investment in Nigeria and the way the
GDP, BOP and the exchange rate of Naira respond to those increase levels
of foreign investment for the period 1984 – 1992 (9 years).
Attention is mainly focused on
the structural adjustment programme. The limitation of this study is
that it covers only this period in which information is available in the
Central Bank Of Nigeria (CBN).
For instance, information
relating to foreign investment as regards gross domestic product and
balance of payment positions where not readily available for 1993, as
SAP ended in 1993.
1.7 DEFINITION OF TERM
Investment: This is
ploughing one’s finance or finds into projects or assets (be it tangible
of financial assets) with a view to increasing one’s wealth.
Foreign Investment: Foreign
investments are those investments that are owned by individual and
corporate bodies from other countries then the host country that is,
hose businesses which foreigners maintain controlling shares of which
foreigners fully own, can be regarded as foreign investment (Alphonsus,
Gross Domestic Product: - The
gross domestic product is the total value of all goods and services
produced in a country usually a year. If the net income from aboard is
added to the gross domestic product we get the gross national product.
Balance of payment: - The
balance of payment of any country is a record of all economic
transactions involving countries of the world in any gives period
usually in one calendar year.
Foreign Exchange Rate: - The
foreign exchange rate is defined as the price of one unit of a foreign
currency in terms of a unit of the domestic currency. The exchange rate
between the Nigeria naira and the British pound sterling is the number
of naira required to buy one-pound starling. (Ewa udu and G.A. Agu
Private Sector: - The
private sector can e defined as that sector of the economy owned by
individuals and operated by individuals, that is absence of government
Mutt National Company: - This
refers to a foreign company that has subsidiaries in other foreign
investments, National mainly manage its local subsidiaries (WESTOM,
Devaluation of Exchange Rate: - This
is the reduction if the value of a country’s currency with respect to
that of another country or countries. It involves a country’s currency
depreciating to a certain level, which is always done by country /
countries Central Bank so as to correct their balances in the economy.