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Full Project – EFFECT OF FOREIGN DIRECT INVESTMENTS IN THE ECONOMIC GROWTH OF NIGERIA

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ABSTRACT

Generally, policies and strategies of Nigerian government towards Foreign Direct Investments are shaped by two principal objectives of desire for economic independence and the demand for economic development. Multinational corporations are expected to bring into Nigeria, foreign capital in the form of technical skills, entrepreneurship, technology and investment fund to best economic activities thereby, rising the standard of living Nigerians.The main issue in this project relates to understanding the effects and impacts of Foreign Direct Investment(FDI) on the Nigerian economy as well as our ability to attract adequate amounts sufficient enough to accelerate the pace of our economic growth. From related research and studies, it was revealed that multinational companies are highly adaptive social agents and therefore, the degree to which they can help in improving economic activities through Foreign Direct Investment will be heavily influenced by the policy choice of the host country.

From the analysis through the use of secondary data, it was observed that the level of FDI in Nigeria is not adequate. The model used was Internal Gap(Foreign Capital Need).From the analysis of the questionnaire distributed, it was discovered that FDI has a significant role in the economic growth of Nigeria.

The research thus suggested that in order for her to improve the economic climate for foreign direct investment in Nigeria, the government must appreciate the fact that the basic element in any successful development strategy should be the encouragement of domestic investors first before going after foreign investors.

CHAPTER ONE

INTRODUCTION

The federal government in recognition of the importance of foreign investment as an important vehicle for economic growth, in her 2007 budget expressed his readiness to enter into investment protection agreement with foreign government or private organization wishing to invest in Nigeria as well as discuss additional incentives. According to Utomi (2007), “foreign direct investments (FDI) viz transnational corporations do possess the needed district capabilities which can be put to the service of growth in any host economy”

A general belief for a country to grow rapidly is for its to industrialize. However, to industrialize, a country requires substantial capital investment which is possible through earning of foreign exchange from export, borrowing in the international financial markets, or allowing businessmen to invest in her economy.

However, Agbadu (2007), advises that no country should ever rest on her oars and expect fortune seeking foreign investors to grow her economy for her. It is up to the recipient economy to „exploit‟ the foreign investors through the judicious use of macro-economic polices deliberately designed to take advantage of the available foreign investment for the national economic benefits.

The sustainable economic growth of a developing country like Nigeria cannot be achieved in isolation. It deserves the existence of substantial capital to carry out diversification of the economic base.

In Nigeria, the per capital income is low; hence the realization of substantial savings to effect capital accumulation for investment is unfeasible. This has rendered the dream of domestic sourcing of finance for investment unrealistic. This scenario has led to increased desire for foreign investment in the provision of desired capital that will help in economic growth.

With the existing democratic governance, another chance is given to Nigeria to make her economy patronisable by foreign invertors which consequently will act as a catalyst to the growth of our economy.

STATEMENT OF PROBLEM

Nigeria is like a country in a web on the role of foreign capital in her economic growth. On the other hand, we are aware that inflow of foreign capital through foreign direct investment is not a charity. Iwuala (2006) noted that foreign investors are not santa claus. They invest in an economy to primarily maximize their returns. In the course of this, the foreign investors are said to have emasculated and preyed on the domestic economy, thus retarding real growth. Despite there charges, the foreign investors are not entirely predacious in their operation in the domestic economy.

Nigeria is therefore in dilemma: she is in dire need of foreign capital for the on-going internal economic adjustments, yet she fears that foreign investors may wrest complete control of the national economy and render it an appendage of the western economic hegemony. This fear notwithstanding, the need for foreign capital has become indispensables if the economy must come out of the woods.

OBJECTIVES OF THE STUDY

The objectives of this study are as follows:

To ascertain the level of foreign direct investment in Nigeria.
To examine the role of FDI in the growth of Nigerian economy.
To ascertain the adequacy of the level of fiscal incentives given to foreign investors by the Nigeria government

SIGNIFICANCE OF STUDY

It is hoped that this study will act as a starting point for policy debate in the area of FDI in our economy.

On the whole, it is envisaged that the research findings will be of the following specific significance.

It will serve as a guide to economic policy makers and planners in future decisions concerning FDI

It is equally hoped that the findings and recommendation of this study will be of immense benefit not only to the government, but also to others researchers and students for future research undertakings

RESEARCH QUESTIONS

Based on the objectives of the study, the following question are necessary for formulation of hypothesis:

Is the level of FDI in Nigeria adequate?
What is the exact impact of FDI in the economic growth of Nigeria?
Are there enough incentives by the governed to encourage the flow of FDI

RESEARCH HYPOTHESIS

In orders to find answers to the question raised in the research question, the following hypothesis are necessary.

HYPOTHESIS 1

H_o: The level of foreign direct investment in Nigeria is not adequate

H₁: The level of foreign direct investment in Nigeria is adequate.

HYPOTHESIS 2:

H_o: foreign direct investment do not have significant role (impact on the growth of Nigerian economy.

H₁: Foreign direct investments have significant role on the growth of Nigerian economy.

HYPOTHESIS 3:

H_o: The level of fiscal incentive to foreign investors in Nigeria is not adequate.

H₁: The level of fiscal incentive to foreign investors in Nigeria is adequate.

SCOPE AND LIMITATIONS OF STUDY

Since the field of investment is too vast that one can safely say that it runs through all aspect of human endeavors. This study will focus on FDI in the manufacturing, processing and telecommunication sectors.

A study of this nature cannot be carried out without difficulties in the process. Some of the limitations are that. Some of the data are based on secondary source. The quality of conclusion reached in this study therefore, cannot be better than the quality of services and materials upon which the study was based. Also, the analysis covers time period in which information is already available from both the federal office of statistics and the central bank of Nigeria and order not portray the position as they are today. However, the author recognizes the fact that the past can yield an insight into both the present and the future and this from a good basis for analysis and decision making.

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