The impact of foreign direct investment on nigeria economic growth (1980 – 2010)

Thesis Overview

<p> 1.3 BACKGROUND OF STUDY:<br>Since the attachment of independent in 1960 various policies of the Nigeria<br>government have been geared essentially towards promoting the growth and<br>development of the Nigeria economy by influencing the trends of gross fixed<br>domestic investment or indirectly through policies aimed at stimulating the<br>flow of foreign finance in any growing economy. This is so given that in the<br>literature there are divergent views on the nature of effects of foreign direct<br>investment has been argued to be the most growth stimulation source of<br>foreign finance in any growing economy. This is so given that in the<br>literature there are divergent views on the nature of effects of foreign direct<br>investment on host economics. Those that are of the view that foreign direct<br>investment produce positive effects on host economics argue that some of<br>the benefits are in the form of externalities and the adoption of foreign<br>technology, employers training and the introduction of new process by the<br>foreign firms according to Ayadi, (2002) foreign direct investment<br>2<br>especially when it flows to a high risk area of new firms where domestic<br>resource is limited.<br>The first national development plan was launched for industrial trade off and<br>developments however as foreign industrial investors were. Rather apprehensive<br>of the nascent independent administration efforts had to be made not only to<br>alloy their fears of nationalization but also attract additional foreign investment<br>through joint venture with individuals or the state. However Nigeria economy<br>has been one of the important destination points of foreign direct investment in<br>sub-Saharan Africa. The amount of foreign direct investment inflow into Nigeria<br>according to ayadi (2002) has reached US $ 2.23billon in 2003 and it rose to US<br>$ 5.31billons in 2004 (9.13% increase) the figure rose again to US $9.92 billion<br>(87%increasing) in 2005. The figure however declined slightly to US $ 9.44<br>billion in 2006.<br>Nigeria is argued to be buoyantly blessed with enormous mineral and human<br>resource but believed to be highly risky market for investment. Also decade of<br>bad governance have almost crippled. The national economy with corruption and<br>misappropriation is of fund becoming the norm rather than expectation. What is<br>3<br>the way out of this economic state? Many experts accepted that foreign direct<br>investment. Is a verifiable boaster to kick start the economy. According to Odozi<br>(1995) foreign investment appears to be the most. Crucial component of capital<br>inflows and Nigeria should seek to attract in light of her current economic<br>circumstance. Some scholars are of the view that Nigeria. Is in need of foreign<br>direct investment as a verifiable boaster of the Nigeria economy while others are<br>of the view that foreign direct investment is a form of neo- colonialism to what<br>extent. Has foreign direct investment helped. The economic growth in Nigeria.<br>1.2 STATEMENT OF PROBLEM:<br>One of the major economic problem in less developed countries (LCD) is<br>low capital formation to finance the necessary investment for economic<br>growth.<br>Capital was one regarded by most economists as the principal obstacle to<br>economic development and this is lot attentions were paid to capital<br>formation. The role of capital in economic growth is still regarded as very<br>crucial both the theory of ‘big push’ and the concept of ‘vicious cycle’ all a<br>test to the crucial role of capital in the growth process. The theory of ‘big<br>4<br>push’ simply state that the stagnant and undeveloped economies need huge<br>and sudden injection of large capital from foreign direct investment.<br>However in the literature FDI is found to be related to export growth while<br>human capacity building is found to be related to FDI floe.<br>Most studies on FDI and growth are cross country studies. However FDI and<br>growth debates are country specific. Among Nigeria studies like those by<br>otepola(2002) oyeyide(2005), Akinlo(2004) examined the importance of FDI<br>on growth for several period and the channel through which it may be<br>benefiting the economy.<br>In the literature there exist a direct positive link between export growth and<br>the growth of an economy. This growth in export can further be traced down<br>to the level of investment which in most cases can be domestic or foreign<br>investment.<br>This is so given that foreign capital remains the sure best option of filling the<br>saving investment gap where it exists. Given this fact assessment will be<br>based on the existing link among investment, export, exchange rate and<br>economic growth. <br></p>