Generally, policies and strategies of Nigerian government towards Foreign Direct Investments are shaped by two principal objectives of desire for 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 Nigeria. 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 degreed to which they can help in improving economy 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.
TABLE OF CONTENTS
Table of contents
1.2 Statement of problem
1.3 Objective of study
1.4 Significance of study
1.5 Research questions
1.6 Scope and limitations of study
Review of related literature
2.1 The concept and theory of foreign investment
2.2 Portfolio investment
2.1.2 Direct Investment
2.2 The Theory of foreign direct investment
2.3 Direct Foreign Investment in Nigeria, Trend and Polices
2.4 Developments to boost foreign direct investment in Nigeria
2.5 The role of foreign direct investment in the growth of Nigerian economy
The federal government in recognition of the importance of foreign investment as a 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 capabilities which can be put to the service of growth in any host economy”.
A general belief for a country to growth rapidly is for it 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 receipt economy to ‘exploit’ the foreign investor through the judicious use of macro-economic polices deliberately designed to take advantage of the available foreign investment for the national economic benefits.
Te 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 investors which consequently will act as catalyst to the growth of our economy.
1.2 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) notes 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 the dire need of foreign capital for the on-going internal economic adjustments, yet she fears that foreign investors many wrest complete control of the national economic 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.
1.3 OBJECTIVES OF THE STUDY
The objectives of this study are as follows:
1.4 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.
1.5 RESEARCH QUESTIONS
Based on the objective of the study, the following question are necessary for formulation of hypothesis.
In orders to find answers to the question raised in the research question, the following hypothesis are necessary.
Ho: The level of foreign direct investment in Nigeria is not adequate
H1: The level of foreign direct investment in Nigeria is adequate.
Ho: 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 Nigeria economy.
H0: 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
1.6 SCOPE AND LIMITATIONS OF STUDY
Since the field of investment is too vast that one can safety 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 material 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.
Agbachi, (2007), “Nigeria and Foreign Investors” Business Time, November 14, p.9
Aremu, J.A (2000), “Negotiating Foreign Direct Investment Under Democratic Avesrare in Nigeria” Financial Standard, vol. 1 No. 29 April 24 p. 14
Alao S. (2008) “Nigeria Attracts N2 Trillion FDI in one year” Financial Standard vol. 9 No 154, May 26. P1
VBN Research Department (1994), CBN Economic and Financial Review, Vol. 34. No 3 pp. 12-15.
REVIEW OF RELATED LITERATURE
Investment generally speaking is the commitment of funds or savings to a specified project with the primary motive of achieving a primary objective which could be profit, fame or good will. A foreign investment is the ownership of property abroad, usually in a company for a financial return. A foreign direct investment (FDI) is a subset of foreign investment when control follows the investment. So, an investment is called direct when the concept of control is introduced to it. In addition, direct investment possesses some other features such as:
The ownership of a controlling interest in a foreign operation is the highest type of commitment to foreign operations. For an investment to be considered direct therefore, there has to be either a minimum of 10 or 25 percent ownership of the voting rights or shares in a foreign enterprise.
The concept of control is very important in the operation of foreign direct investment because in most cases, it is the single most important fact that motivates investors to be willing to transfer technology and other competitive assets.
This chapter discusses the concept and theory of foreign direct investment , trend and polices of FDI in Nigeria and finally, the role of FDI in the economic growth of Nigeria.
2.1 THE CONCEPT AND THEORY OF FOREIGN INVESTMENT
According to Nwadikwo (2007), foreign investment is a type of investment whether in real of financial assets across the national boundaries of the investors. With the aim of maximizing the objective function of the investors which can be undertaken by individuals, firms or the government. Basically, foreign investment falls into two broad categories.
2.1.1. PORTFOLIO INVESTMENT
This is an investment in which an investor lacks control over the investment. It typically takes the form of investments in financial assets such as bonds and stocks in which the investor dose not have controlling interest. The major motivating factor is the favorable interest rate differential i.e capital flow from where it is plentiful to where it is scarce.
Portfolio investment can equally be called foreign private investment (FDI) where you do not have to be involved in the management. You just buy shares, if anything goes wrong you first go to the stock exchange and sell your shares and go away.
2.1.2 DIRECT INVESTMENT
By direct investment, we mean an investment in a foreign country where the investors retain control over the investment. According to Arenu, (2000) foreign direct investment shows that the owner of the money is coming to direct the affairs. He has an effective voice in the management.
FDI typically takes the form of a foreigner setting up a subsidiary or taking over/control of an existing firm in the country in question. Usman (2008), asserted that foreign direct investment involves the internationalization of product in order to service markets which were formally served by expert.
Also, foreign direct investment in distinguished from other forms of foreign investment by the fact that it involves not only foreign investment ownership but also foreign control. In other words, foreign direct investment occurs only if an individual or organization in a foreign country gains sufficient interest in an operation to acquire control. Therefore , FDI as a concept differs from international or foreign investment which is a much wide concept.
From these definition, a direct investment can be recognized as an incorporated or unincorporated enterprise in which a single foreign investor either controls 10 percent or more of the ordinary shares of voting powers of an incorporated enterprise or; the equivalent of an unincorporated enterprise or controls less than 10 percent/or non or the enterprise but has an effective voice in the management of the enterprise.
An effective voice in the management means that the foreign investor has the potential to influence or participate in the management of an enterprise. It dose not mean that he must have absolute control.
2.2 THE THEORY OF FOREIGN DIRECT INVESTMENT
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