CHAPTER ONE
1.1 INTRODUCTION
The need to accelerate the pace of
economic growth and development by many Countries, especially the less
developed coun ies (LDC) i.e. Nigeria, have propelled them to make deliberate
efforts to attract foreign direct investment (FDI).
Ezirim, Emenyeonu, Muoghalu (2002)
suggested that these efforts are geared towards improving the general
investment c1imat through the adoption and implementation of foreign
investment. Ho ever, friendly policies and programme such as Tax incentives,
export promotion significantly, the drive for foreign investment drives the
various benefits it confers on the host Country. The benefits include addition
of new capital, technology, improved management and market access,. FDI has
also been acknowledged as a potent source of improving efficiency of the
productive sector through competition, stimulation of economic progress,
creation of jobs and fostering growth in the host economies.
According to Narula and Portelli
(2004) over the past two decades, the growth of Multinational enterprises
(MNE's) activities in developing countries has increasingly been regarded as
one of the defining characteristics of the world economy and an engine of
economic growth of host economies.
Multinational Enterprises (MNEs)
related externalities have been, although increased interest from developing
countries because of the perceived benefits in terms of the injection of
capital, technology and knowledge. However, key multinational enterprises (MNE's)
externalities include the knowledge spillovers and link es from the ... MNEs to
domestic firms in host countries.
The nature of these MNE-
externalities may either arise from pure market transactions (e.g. Through MNE vertical linkages) or else through
knowledge spillovers which take non-mar monetary firm, non-monetary firm.
The nature of these MNE -
externalities may either arise from pure· market transactions (e.g. through MNE
vertical linkages) or else through knowledge spillovers which take on-market or
on-monetary firm.
This general, warning of attitudes
towards Foreign Direct Investment (FDI) has taken place in the content of the
promotion of outward looking economic strategies as envisaged by the
International Monetary Fund (IMF) and the World Bank. Hence, developing
countries have been undertaken policy shifts from inward-looking. import
substitution industrialization models towards ore outward, export-oriented
economics policies, Narula, (2001); Ozawa (2002).
This topic has assumed greater importance
in the context of the anti-globalization movement, which opposes further liberalization
of international trade and investment. FDI and its developmental effects is therefore a topic which
attracts considerable attention and interest from academia and policy makers
(Narula and Portelli, 2004).
The abundance of natural resources in
Nigeria is not in doubt as the country can boast of large reservoir of many
mineral resources such as crude oil, cold, zinc, limestone, coal etc as well as
skilled manpower. But due to bad management of the economic resources; lack of
adequate capital resources, declining higher inflationary rates, and high rate
in poverty level (which affects savings and capital formation) makes direct
foreign investment or capital inevitable for the economy. This study proposal,
therefore represent an attempt to examine the impact of Foreign Direct Investment
on the Nigeria Economy.
1.2 STATEMENT OF RESEARCH PROBLEM
The statement of the research
problems which necessitate carrying out this research work are:
What impact does FDI has on the
economic growth in Nigeria?
Direct foreign investment has not
contributed to the increase in Gross Domestic Product (GDP)
The fiscal policy of the government
does not affect the inflow of FDI to Nigeria.
1.3 AIM AND OBJECTIVES OF THE STUDY
The overall objectives and aims of
the study are to understand the effect of FDI on Nigeria Economy.
The Objectives of this study are:
1) To measure the contribution of
Foreign Direct Investment to the a Nigeria Economy
2) To examine the effect of FDl
on the economic growth of Developing Countries
3) To identify the various variables
that enhance the inflow of Foreign Direct Investment to Nigeria's Economic
growth and development.
1.4 STATEMENT OF RESEARCH HYPOTHESIS
The hypotheses for this research are
formulated in both Null (Ho) and Alternative (HA) forms.
HYPOTHESIS 1
Ho: FDI inflow has no significant impact
on the Nigerian Economic growth and performance
HA: FDI inflow has significant impact on
the Nigerian Economic growth and performance
HYPOTHESIS 2
Ho: Direct Foreign Investment does not
contribute to in ease in Gross Domestic Product
HA: Direct Foreign Investment contributes
to increase in Gross Domestic Product.
HYPOTHESIS 3
Ho: The Industrial Production and Direct
Foreign Investment affect Gross Domestic Product in Nigeria.
HA: The
Industrial Production and Direct Foreign Investment does not affect Gross
Domestic Product in Nigeria.
1.5 RESEARCH METHODOLOGY
According to Koustyanis (2000),
research methodology is how data are collected and analyzed in research
studies. However, the methods for this study include source of data, analytical
tool (that is statistical tools etc).
1.5.1 Source of Data
The sources of data for this study
are mainly from the secondary source. This secondary data for this study are
related t the flow of foreign investment and Gross Domestic Product (GDP) in
Nigerian economy. The secondary data are source from Cent al Bank of Nigerian
(CBN) publication such as CBN Economic d Financial Review, CBN Bullion, CBN
Briefs and Newsletter, Federal Office of Statistics (FOS) Bulletin and other
economic management journals etc.
This study also rely on relevant
information from textbooks, and electronic web materials via the internet from
institution as the CBN, IMF, World Bank group et cetera
1.5.2 Statistical Tools
This also represents the analytical tools.
However, for this type of research, the multiple regression statistical
techniques (econometrics) regression was adopted due to its appropriateness n analyzing secondary
data, since this research employed econometric modeling of the variables
formulated.
The Ordinary Least Method (OLB) of
multiple regression would be adopted. The OLS would be use: to estimate the
models from the independent and dependent variables.
1.6 SIGNIFICANCE OF THE STUDY
The importance of these research work
lies in the fact that its final result would be useful to policy makers in
Nigeria to evaluate and create the positive or otherwise contribute to direct
foreign investment to Nigeria economic growth and development and also those
factors that affects its inflow, it will also be useful to investors in the
area of information (when making investment decision).
Finally, it would be useful to
researchers interested in carrying out further studies in the future. The
research study is also important for the requirement of B. Sc. Degree programme
in Economics.
1.7 SCOPE AND LIMITATION OF THE
STUDY
The scope of this research work would
cover only the direct foreign investment as no attempt will be made to study
foreign investment in totality. It would also consider a period of 1999-2008
(Ten years). Dearth of data,
inaccessibility of data, term and financial constraints etc, are some of the
limitations that will be fatal in the process of carrying out the research
work.
1.8 DEFINITION OF TERMS/ CONCEPTS
·
Foreign Direct Investment (FDI): This is regarded as the flow of investment from MNCs
(developed economies) to less developed.
·
Multinational Corporations (MNCs): These are large corporations from develop countries that
have their parents com any abroad and host firms in less developed economies.
·
Economic Growth: Is defined as a long-term rise in capacity to supply increasingly diverse
economic goods to its population.
·
Foreign Direct
·
Economic Efficiency: Is the process whereby there absence of wastage of resources in the economy
·
Human Capital: This is the process of skill acquisition with a view of developing human
capacity and understanding which are crucial for the economic and the political
development of a country
·
Technological development: This is the process whereby technology adverse from one
stage to another there enhancing productivity.
1.9 ORGANIZATION OF THE STUDY
This research work is divided into
five chapters.
Chapter One: Introduction, this chapter will
introduce the study and the background to the study, examine the statement of
problems, aim and objectives of the study, statement of hypothesis, the
significance of study, the scope/limitation of the study and the plan of the study.
Chapter Two: Literature. review, this chapter will
examine the literature review which comprises of the conceptual over view of Foreign
Direct Investment (FDI), economic growth and performance, importance of MNCs
and the theoretical review of the effectiveness of FDI on Nigeria economy.
Chapter Three: Structural composition of the study,
this will provide a review and an assessment of the FDI performance in Nigerian
economy and the strategies and policies implementation agencies, macro-economic
policies on FDI from 1999-2008 in FDI and
selected issues and challenges on macro-economic stability management in
Nigeria,
Chapter Four: This consists of data analysis and
interpretation of results, en empirical investigation of FDI and economic
growth in Nigeria. It entails the methods of analysis, which includes
econometric techniques, hypothesis test and the source of gathering the data
which is based on secondary data.
Chapter Five: Summary, Conclusion and Recommendation.
This chapter will summarize, conclude and make suggestion, finding and.
recommendation on the study.