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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Subsequently to the increase wave of globalization and liberalization since 1980’s. The penetration, breaking and dismantling of barriers to trade, investment, capital flows and technology movement across national frontiers have been through to fore. This is against the backdrop of dramatic increase in foreign private investment flows spectacular spread of transactional corporation (TNC).

The rapid advancement in technology, the development of rapid means of transportation and telecommunication and proliferation of the mass media.

Since the mid 1980’s, the growing integration of markets and financial institutions and increased economic liberalization have been made a magnet for foreign private investment. According to Aremu 2000 “liberalization policies has expanded effect economic space where producers and investors could interact, Thus promotion globalization in which this economic actors behave as if the entire world is a single market” Aremu observed also, that it is equally true that globalization has hastened the pace and equally extended the scope. Economic liberalization emanated from liberalization, globalization again has in-built strategy to further accelerate liberalization. Therefore, it is difficult to isolate foreign private investment from globalization because the important economic consequences of globalization especially for developing countries like Nigeria has been the massive and unpredicted inflows of foreign private investment, during the first decades of the 20th century.

However it is pertinent for the sake of clarity to state foreign private investment (FDI) and portfolio investment (PI) the focus of this study is on foreign direct investment as portfolio investment has been negligible in Nigeria and volatile in nature.

Foreign direct investment (FDI) is viewed as a major stimulus to economic growth in developing countries it’s ability to deal with two major obstacles, namely shortage of financial resources and technology and skills has made it the centre of attention for policy makers in low income countries in particular.

Foreign direct investment(FDI), the largest component of long term capital flows to developing countries has become a crucial factor in modern economic development process from available statistics, the challenge to attract more inflows for investment in developing project has become acute in Sub Sahara African where only a small proportion of new inflows has gone. This situation has been worsened due to accelerating process of globalization. Thus Nigeria’s dire need for foreign direct investment (FDI) could be classified into three broad aspects. First, foreign direct investment (FDI) is required to fill the savings and foreign exchange gaps and thereby enable the country to achieve its economic potential. The supply side of the economy requires a massive injection of foreign resources in order to elicit the necessary inverse output, minimize the growth of unemployment and reduce the inflation rate significantly. Secondly, foreign direct investment (FDI) inflows is require to stimulate of domestic output and diversity and expand the non soil export sector. Thirdly, the effective management of external liabilities both currently and in the medium to long term requires the injection of non debt creating external resources in spite of these optimism and expectation the aggregate capital flows into African countries and indeed Nigeria is quite low.

Since foreign direct investment (FDI) is subject to many of the same “pull factors (large market size and high per capital income, economic political and social viability, favourable regime and active privitalization policy). A possession of these “factors” and the consequent design and implementation of appropriate policies and measures that would make the policy environment, invest friendly remain a fundamental prerequisite.

1.2 STATEMENT OF THE PROBLEM

As earlier mentioned, the amount of investment book foreign and domestic in a country is a major determinant of the country’s level of economic development, Nigeria, like many developing countries lack adequate investment both in agriculture and industry. This has led to an unimpressive growth with attendant infrastructure base widespread poverty amongst others.

Agriculture, the leading sector of the economy depend mainly on domestic capital, however, this source of capital is insufficient to sustain any meaningful development. Similarly, investment in the industrial sector which was and is skill dominated by foreign capital could hardly be said to be adequate, the dvert of independence in many African countries in the mid 20th century, led to the fears of foreign investment?

Again, governments efforts aimed at attracting foreign capital has not been successful, hence, the general level of foreign investment in Nigeria is still low. The problem is that there is no clear understanding of the major determinants of foreign investment flows. In other words, what are the main factors that influence foreign direct investment in the country.

There is the issue of volatility of foreign direct investment (FDI) inflows. However do government strengthen the appropriate financial and other growing economic and other institutions to avoid the cruses experienced in other growing economic like Asian countries? Put adverse consequences fluctuations in foreign direct investment (FDI) inflows on the economy?

1.3 SIGNIFICANCE OF THE STUDY

This study is of vital significance in many important respects, given the unprepossessing growth rate of Nigeria’s economy coupled with the myriad of problems in the country, the study is particularly important in ascertaining if the determinant of foreign direct investment (FDI) inflows have nay bearings on the state on the economy.

This study will also chart a new course for the initiation and implementation of the appropriate and necessary policies that will act as incentive to foreign investors. In addition, the study will provide policy makers the foresight to better cushion the unpleasant effects of fluctuating in foreign direct investment (FDI).

1.4 OBJECTIVE OF THE STUDY

The study seeks to:

To evaluate the determinants of foreign investment in Nigeria

To trace the impact of foreign investment in Nigeria

To review the trend of foreign investment inflows in the country overtime

To examine the issue of foreign investment volatility.

1.5 HYPOTHESIS OF THE STUDY

Hypothesis are logical speculations based on available information relating to the problem under investigation for this study, hypothesis to be tested in alternative and null forms

These are:

Null Hypothesis = HO

Globalization and liberalization does not have relationship with the determinant of foreign direct investment (FDI)

Alternative hypothesis = H1

Globalization and liberalization have positive relationship with the determinant of foreign direct investment (FDI) in Nigeria.

1.6 SCOPE AND METHODOLOGY OF THE STUDY

The intent of this study, will be carried out in Nigeria, with a view of analyzing the determinant of globalization and liberalization does not have positive relationship with the determinants of foreign direct investment (FDI) in Nigeria inflows into the country taking into consideration the socio-economic conditions and policy framework that prevailed till date.

However, the period 1980 to 2008 was chosen for the study because basically, the study relied heavily on secondary data. So much of the date and materials relating to the study were obtained from the Central Bank of Nigeria Billions and Statistical bulletins, Federal office of statistics journal, world bank journals and reports, workshop paper, research institution such as the national centre for management and administration, (NCEMA) and the Nigeria conference on trade and development (UNCTAD) articles and publications of the Nigeria economic society (NES) and the Nigerian economic and financial review (NEER). Newspaper, past project works and the internet, were of immense helps relevance and academic value to the goal of the research.

Finally, econometric techniques were employed in the analysis of the model related to the study.

1.7 LIMITATIONS OF THE STUDY

One limitation of the study is its inability to empirically ascertain the relative important of some factors such as political and economic instability and deteriorating social and economic infrastructure appeared to have negative determinant of foreign direct investment (FDI) in Nigeria and also have negative impact on the willingness of foreign investors to invest in Nigeria Time constraints which is the basic problem is a challenging and painstaking task which requires adequate time for meaningful result, it posed a limitation also as problem is a challenging task for researchers work to be completed with a given period of time.

Also, we have technical constrants which involves the non availability of detailed literature on the determinant of foreign direct investment (FDI) in Nigeria.

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Full Project – CORPORATE SOCIAL RESPONSIBILITY AND FIRM PERFORMANCE

Click here to Get The Complete Research Project Chapter 1-5

Full Project – CORPORATE SOCIAL RESPONSIBILITY AND FIRM PERFORMANCE

Full Project – CORPORATE SOCIAL RESPONSIBILITY AND FIRM PERFORMANCE

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