study of the nature involves a lot of deep research and understanding of the
factors, which creates the effects on the subject matter. Primarily, these factors were more economical
than managerial as the case may be, on the understanding that this research
work is being casual out under a management setting or department. Just as the
subject matter is, the impact of foreign direct investment on the Nigerian
Economy with a case study of Nigerian Bottling Company Plc, it is based on the
economic, social and entrepreneurial impacts created by these multinational
companies like NBC Plc on their host societies.
Based on this, the objective of this study was to determine through
quantitative and quantitative measures whether the benefits of multinational
enterprises (MNE’S) out weigh the cost that results from their activities in
the hose countries.The first chapter of this work contains a general discussion
(i.e. critics and defense) of FSI’s activities in host countries. Further the statement of the research problem
was studied and the need for the study.
The scope and limitation to the research work was finally looked into
with the stated hypothesis which guide the researcher in his evaluations. In
chapter two, a number of part related literatures were examined as it relates
to the impact of foreign direct investment to Nigeria as the case may be with
particular reference to NBC Plc activities in Enugu Zone. Chapter three treated the design of the
study, the method of collecting data and the ways in which the questionnaires
were distributed within the chosen population. The data gathered from the
research were analysed and interpreted in chapter four of this research report.
Finally, the summary of findings, conclusions on the research work and
recommendations were given by the researcher all in chapter five.It is believed
that these recommendations made in this study will help both the multinationals
in their relationship with their host communities as well as creating an enabling
environment from the host country for their business to there.
TABLE OF CONTENTS
1.1 Background of the Study
1.3 Purpose of the Study
1.4 Scope of the Study
of the study
1.7 Definition of Terms
impact of foreign direct investment on the growth of the host society
Direct Investment; how Ready is Nigeria
of Foreign Direct Investment
Investment and Welfare
3.1 Research Design
3.2 Area of Study
of the study
and Size Determination
of Data Collection
of the Instrument
of the Instruments
of Data Collection
Distribution and Retrieval
of Data Analysis
Data Presentation and Analysis
4.1 Data Presentation and Analysis
4.2 Summary of Results
conclusion and Recommendations
of the Research Findings
for Further Studies
1.1 BACKGROUND OF THE STUDY
from the colonial experience with an economy structured in accordance with the
imperators of colonial economic relationship.
The first National Development plan of (1963) was launched with the
objectives of providing the framework for industrial take off and
development. However, as the foreign
investors were apprehensive of the nascent independent administration, efforts
were made not only to alloy their fears of nationalism but also to attract more
foreign investments through joint ventures with regional government then or the
federal government. The first
development plan as an open door regime saw an increase in the establishment of
miscellaneous foreign enterprises in Nigeria, many of which are unincorporated
branches of their overseas business.
just only about few years offer independence when the rest of the world
including the erstwhile colonial master had hardly adapted to the realities of
Nigeria’s attainment of nationhood or for the Nigerian government to articulate
and plan its own economic policy, the country experienced its first military
coup d’ et al in 1966. This was followed
by the civil was which tested for three years hence necessitated the cohesion
of resources towards the successful execution of the war. The period saw the introduction of various
control measures of great significance.
For the foreign investors, these include licensing, quotas, exchange
control measures with two tier compulsory credit system for import payments,
restriction on capital/individual transfer and the promulgation of the
companies decree of 1968 which compelled all forms operating the country to be
incorporated as Nigerian Companies subject to local regulations.
Direct Investment (FDI) refers to a movement of capital that
involves ownership and control of a firm in another country for
instance, the purchase of common chores in a Nigerian incorporated company by a
French citizen involves ownership and an element of control. This is because all shares in an organisaiton
have same voting rights.
the purpose of this classification such is recorded as FDI if the share
acquired involves more than 10% of the outstanding common shares of the
this research and generally, Foreign Direct Investment is classified in the
context of Multinational Corporations (MNC).
The MNC is sometimes referred to as Multinational Enterprises (MNE) is
Transnational Corporations (TNC) or Transnational Enterprises (TNE).
to the chairman of BOD’s of Chemical Co, a multinational form in the united
state origin “the emergence of a world economy and the multinational
corporation have been accomplished land in land”. He sees multinational enterprises moving
towards what he called “a global company”, a firm that have no nationality but
belongs to almost all countries.
phenomenon of the MNC can be explained only in a world of imperfect factor and
product market characterized by differential taxation market power and share,
positive information costs and the existence of pure specific revenue producing
assistance. In such a world, the market
mechanism is partially replaced by other organizational firms, which generates
and transmits relevant information and which co-ordinates production and
MNC arises in other words in response to a particular kind of market failure
caused by high differential costs of inter-nation transfer of market
information and technology and of course, factors of production (Tour and
Hirsil 1979). The key features of MNC
are the, it provides the recipient nation with a package of knowledge, capital
and entrepreneurship development. It may
thereby create a positive contribution to economic growth and development in
multinationals corporations exist in the Nigerian economic settings these
encompassed the manufacturing sector like Nigeria Bottling Company (NBC),
constitution like Julus Berger Nigeria, Mineral Exploration like Shell Nigeria,
banking etc, to mention but a few. It
becomes pertinent that the manufacturing sector be given due cognizance for the
purpose of the research work. In this
sector, the Nigerian Bottling Company Plc will be a case study and a pointer.
concept of Multinational Corporation and economic development has remained on
the relationship between the MNC’s and the host societies and how development
is appraised in these host societies.
issue of contribution to development through social responsibility by the
business enterprise has become a topical issue in management decision and is
negatively favoured in these host societies.
have rounding argued that there has been gross neglect and lack of development
focus in their place or communities. It
is good to discuss the fact that some laudable developments have been directly
felt by these host societies in terms of revenue, employment technology
transfer and other benefits to the government.
It is a fact that Nigeria is a developing country and have the same
peculiar characteristics with other developing nations of the world such as low
standard of living with low savings and investment and lacks managerial know
how. This has placed Nigeria in a guest
for resources from other developed nations viz-a-viz international business
is also right to say that MNC’s like other business ventures has the objective
of profit maximization as their aim.
From the foregoing, this research work places premium on the critical
evaluation and examination of the impact
of foreign direct investment (MNC) activities in the Nigerian economy using
Enugu Zone which comprises Enugu North, Enugu South, Enugu East and 9th
Mile Corner on a bench mark. The
prospective here is primarily managerial and economic i.e. the dissension
focuses on the important part in the overall evaluation so, they are discussed
along with the above mentioned factors.
Historical Background of Nigeria
The Nigeria Bottling Company Plc (NBC)
was incorporated in November 1951, as a subsidiary of the A.G Levant’s Group
with the franchise to bottle and sell coca-cola products in Nigeria. From a
humble beginning as a family business, the company has grown to become
predominant bottler of non-alcoholic beverages in Nigeria, responsible for the
manufacture and sale of over 33 different coca-cola brands. Other popular
brands of beverage produce by the company are Eva water, Five Alive fruit juice
and the newly introduced Burn energy drink. The company presently has 13
bottling facilities and over 80 distribution warehouses located across the
country. Since production started, NBC Plc has remained the largest bottle of
nonalcoholic beverages in the country in terms of sales volume, with about 1.8
bottles sold per year, marking it the second largest market in Africa. Today,
the company is part of the coca-cola Hellenic Bottling Company (CCHBC). One of
coca-cola company’s largest anchor bottlers worldwide CCHBE operates in 28
countries, serving 540 million consumers and selling over 1.3billion unit cases
of beverage annually. The company recently embarked on restructuring exercise
to expand further it market share and growth profit. It invested in a new state
of the art can filling packing line at the Apapa plant.
is in addition to a new bottling plant in Abuja, investment in the upgrade of
other manufacturing infrastructure, distribution and delivery facilities.
Bottling company Plc (NBC) Company and a sole franchise of the coca-cola Inc.
spanning over six decaes of operation, NBC is a market leader in the production
A softer than expected macroeconomic
posed challenges to the manufacturing sector of which NBC, as an integral part
has to come to grips with to stay ahead of the pack. Major challenges facing
the industry include weak infrastructural support facilities (especially
power), Unfair Competition from cheaper imported products and rising cost of
fund among others, an analysis of the financial strength of NBC reveals an
above-per performance in 2007. Hretrospect, we observe abysmal results in 2006.
This was however reversed in 2007 with 13.91 percent ROE and 201.69 percent
growth in PAT. Due to the FYE 2006 performance, NBC exhibited a very risky
financial profile, (based on Altman’s Z score). However, it scaled through the
4years average. Q1 2008 result show, respectively, turnover and PAT growth of
10.2 percent and 11.7 percent. Our forecasts for FYE 2008 percent and 5.0
percent for turnover and PAT respectively in valuing NBC, we employed both the
Discounted cash flow (DCF) and relative valuation Methodologies we obtained
#13.57, #12.12 and #23.19 respectively from the discounted.
Divided method, present value of Growth
Opportunities and Residual income valuation. Our relative of Price-to-Earnings
(P/E), price-to-sales (P/S) yields #55.75, #97.82 and #176.12 respectively.
Attaching appropriate weights to each of the methodologies, we arrived at a
fair price of #65.77 with a discount to valuation of 14.39 percent and an
upside potential of
We therefore place a BUY recommendation
medium and long term investment horizons.
STATEMENT OF PROBLEM
countries like Nigeria suffer not only from low income and unstable growth, but
also from regional disequilibrium, economic instability unemployment, depending
on foreign countries, specialization in the production of raw materials and economic,
social, political and cultural marginality.
is an element in the process of development of the international system
underdevelopment and developments are two facts of a single process of which
both internal and international structures are causes. International treacle brings about
polarization because the low income countries are assigned the production of
primary production (raw materials) which are processed in the home countries
because of worsening and unstable terms of trade, because the economics of the
low income countries lack the force work force, the entrepreneurship and
physical/institutional infrastructure to seize export opportunities and because
of generally monopolistic arrangement by which profits flow out from the
underdeveloped countries to the developed.
the NNC’s tend to come from the developed countries and because their
operations tend to add to host countries production, MNC’S presumably improves
the distribution of income, goods and services between the richer and poorer
the host societies however, it is guide different to judge whether a direct
investment project improves or aggravates these income, goods and service
literature critical of MNC’s demonstrates that Foreign Direct Investment (FDI)
after do not help the economic life of cost societies, do not improve their
well being hence not benefiting lower income people Very well.
Nigeria for unsnarl, there is that popular and commonly held view that manufacturing
multinationals have done greater lower than good to the host communities as a
result of their operations in these communities wheel has led to loss of
economic and social quality and environmental degradation. It is not out of place for one to say that
these MNC’s have threatenical the health of the indigenes by the use of
dangerous chemical, pollutants etc.
These and more are the problems that will be looked into which
necessitated this research work. It will
try to examine the nature and pattern of foreign direct investment that is
International Corporation in Nigeria manufacturing rector with a particular
reference to Nigerian Bottling Company Plc as a case study.
1.3 PURPOSE OF THE STUDY
1. To determine the Nigerians drive benefit from multinational
corporation in term of transaction and entrepreneurial.
2. To determine if multinational corporation contribute to the
growth of gross domestic product (GDP) in the Nigeria economy.
3. To determine of Multinational Corporation help in solving balance
of payment problem in the Nigerian Economy.
4. To determine if multinational corporation maintains cordial
relationship with in the host society.
SCOPE OF THE STUDY
Direct Investment (FDI) analysis is clouded by a lot of controversy, variety of
interpretation and numerous emotive value judgement. This recreant opinion about the activities of
MNC’s in the developing countries are as typical as the topic itself. Owing to the divergent opinions that exist,
it would be practically impossible to give a total survey of the current debate
on the topic.
this work will make positive efforts to extract in favour of or against MNC’s
in developing nations. Furthermore, it
is outside the scope of this work to discuss the consequences of Foreign Direct
Investment (FDI) for the investor nations.
1. Do Nigerians drive benefit from multinational corporation in
term of transaction and entrepreneurial?
2. Does multinational corporations contribute to the growth of gross
domestic product (GDP) in the Nigeria economy.
3. Can Multinational Corporation help in solving balance of payment
problem in the Nigerian Economy.
4. What impact does entrepreneurial make in the economy?
5. How did Multinational Corporation maintains cordial relationship
with in the host society.
LIMITATION OF THE STUDY
It is not out of place to encounter
problems and obstacle in a study of this nature because the scope is quite
encompassing both in size and complexity.
researcher’s inability to gather enough primary and secondary data from the
company posed a major problem, as the company regards its books and records as
so confidential that they deemed releasing it will be detrimental to them
because of fear of their competitors.
is another factor that militated against this work as the researcher had not
enough time to source for information, as a result of the light school
to embark on the Nigerian trips to 9th mile corner when the company
had their plant within the zone was not readily available, as such data
collection was highly impeded and limited to Enugu and 9th mile area
with a drastically reduced success.
major hunting factor was the attitude of the employees of NBC Plc in responding
to the questionnaires distributed. In
most cases, the researchers were told that the key officer are busy and cannot
see him or is on business trip. Even
those who responded to the questionnaire were skeptical as they were afraid of
being victimized for responding to the questionnaire have it a difficult to
break in the course of this study.
DEFINITION OF TERMS
Direct Investment: This
is the existence of controlling ownership by a firm from one country over a
firm in another country through new investments or acquisition.
Corporations: A corporation with
multi-country affiliates, each of which formulates its own business strategy
based on perceived market differences
Countries: Developing countries
are those for which some reasons have backwardness in developing their economic
resources with the attendant result that their people have a lower standard of
living than that enjoyed in the more advanced countries of Europe and America
(Handson 1979:128). They are also called
third world countries.
following characteristics are common among developing countries low per capital
income, population explosion, high rate of illiteracy, technological
backwardness, prevalence of hunger and disease, under utilization of factors of
production and the existence of traditional institutions (management in
Nigeria; 20th April 1984:31).
features of under development include: poverty, sky rocketing inflation,
environmental ravages, low industries base, political instability and the
domination of military, infrastructural inadequacies, trade and balance of
payment problems and debt crisis (Onuoha, 1993:53-84).
4. Balance of
to a systematic record of all transaction between the residents of the
reporting country (Nigeria in this case) and residents of foreign countries
during a given period of time usually one year.
5. Employment: By employment, we mean the state of being
gainfully engaged by a multinational corporation.
Responsibility: This is the ethical
measures taken by a corporation to see that its activities is not harmful to
the lives and properties of host communities.
It can also be economic, legal or discretionary measures desired from the
corporation by their communities.