The impact of foreign direct investment on nigeria’s economic development

Thesis Abstract

INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Economic Performance and economic growth of a country is influenced by multiple factors. For economies in general and developing economies in particular, Foreign Direct Investment (FDI) has been observed and argued as a significant determinant. However there remain two contrasting views. Esther & Folorunso (2011) have investigated the impact of FDI flows on economic growth in Nigeria. Their study found that FDI had a beneficial impact on the economic growth. However, they also report that the extent to which FDI influences the economic growth positively could be limited by human capital. With the environment of domestic and foreign policies narrowing towards a common international economic order induced globalization, foreign direct investment and now represent a major form of cross border resources flow among countries. More than before, more firms, in numerous industries and in many countries are expanding abroad through foreign direct investment (either private or portfolio). The magnitude of foreign direct investment (FDI) with the past few years has compelled discussions as to the desirability of a multinational investments agreement (MIA). Developing countries in Africa, Asia, and Latin America has come increasingly to see that foreign Direct Investment is a source of economic development, modernization, income growth and employment and poverty reduction. These countries are successfully developing their economies under outward oriented policies, albeit in varying degrees. Globally, economist tends to favour the free flow of capital across national borders because; it allows capital to seek out the highest rate of returns. Nigeria is reputed to be buoyantly blessed with an enormous minerals and human resources, but believed to be at high risk market for investment. Foreign direct investment can also be a veritable booster to kick starts an economy. Nigeria in the past and present, have a large population and enlightened market; a real potential market, an investment conscious society, as well as a conducive sustainable environment for foreign private investment to thrive in the development of the economy. Over the past two decades, Nigeria have implemented broad ranging economic reforms, including the liberalization of foreign trade and investment regimes domestic market and privatization of state companies which has had an effect on the flow and nature of foreign investment. Nigeria especially since the African financial crisis has become much more liberal in its‟ economic policies to attract more foreign direct investment to increase its economic growth and development. Hence (though not mentioned explicitly in official policy statement) alleviating poverty in the country. Foreign direct investment can be described as investment made so as to acquire a lasting management interest ( for instance, 10% of voting stocks) and at least 10% of equity shares in an enterprise operating in another country other than that of investors‟ country (Mr.Williams 2003; World Bank 2007). Policy makers believe that foreign direct investment (FDI) produces positive effect on host economies. Some of these benefits are in the form of externalities and adoption of foreign technology. Externalities here can be, in form of licensing agreement, limitation, employee training and the introduction of new processes by the foreign firms. (Alfaro 2006). According to Tang, Selvanathan and Selvanathan (2008), Multinational Enterprises (MNES) diffuse technology and management know –how to domestic firms. When foreign direct investment (FDI) is undertaken in high risk areas or new industries,…

1.2 STATEMENT OF THE PROBLEM
In recent times, the government of Nigeria has embarked on economic policies to check the flow of foreign private investment in certain sectors of the economy. Admittedly, how to achieve rapid economic development through foreign investment has proved to be one of the economic problems facing Nigeria. Therefore, this work tends to analyse critically the following; the determinants of Foreign Direct Investment (FDI) in the Nigerian economy, the impact of foreign investment on the growth of the Nigeria economy.
1.3 RESEARCH QUESTIONS
The research questions of this study seek to provide solution to include
i. Is foreign investment having any relevant preparation to determine the economic growth?
ii. To what extent can foreign investment be best applicable in enhancing the economics of Nigeria as a whole?
iii. Why should foreign investment be included in financial and the government target tool for economic growth?
iv. How can the monetary value of foreign investment service be determined?
v. Can these monetary values serve as an aid to management in internal control problems of the Nigerian economy?
vi. What are the possible effects of the monetary worth of employee‟s services to the profitability of an organization and the economic?