Project Abstract

<p> This study assess the impact of Foreign Direct Investment in Nigerian economic<br>growth over the period of 1990-2011. Data from Central Bank of Nigeria (CBN)<br>Statistical Bulletin was used. The Ordinary Least Square (OLS) technique was<br>specified and used to examine the relationship between the variables which<br>includes the Gross Domestic Product as the dependent variable, export, Exchange<br>rate, foreign direct investment and trade openness as the independent variables.<br>The explanatory power of the model was given by the R2<br>of 85.5% and was<br>subjected to t-test and f-test to test the significance of the independent variables. <br></p>

Project Overview

<p> </p><p></p> <p>1.0 INTRODUCTION<br>1.1 BACKGROUND OF THE STUDY<br>Investors’ decisions and actions globally are influenced significantly by the<br>dictates of self-interest which suggests that capital, not only be channeled to<br>high-yielding economic sectors but also to those that are ostensibly quick yielding<br>economies. On balance therefore investors would spun profitable opportunities<br>characterized by extreme competitions, market glut, unfavorable regulation, long<br>gestation periods and opt instead for investments that yield high returns within<br>the shortest time possible. Base on this view, investors generally migrate from<br>one economy to another in search of better investment climate and higher<br>returns.<br>This form of capital movement results in the creation of a typical investment<br>called Foreign Direct Investment. In the opinion of Jomo (1988) Foreign Direct<br>Investment can be explained to represent the flow of tangibles from a country<br>abroad of capital, equipment and other production and processing facilities into a<br>host economy. It is also defined as a long term investment reflecting a lasting<br>interest and control by a foreign direct investors (or parent enterprise), of an<br>enterprise entity residents in an economy other than that of the foreign investor<br>(IMF, 1993).<br>Foreign Direct Investment is widely thought to bring with it into the host<br>country a bundle of productive assets including long term foreign capital,<br>entrepreneurship, technology skills, innovative capacity and managerial,<br>organizational and export marketing know-how. The distinctive feature of<br>Foreign Direct Investment is that it involves not only a transfer of resources but<br>also the acquisition of control. i.e the subsidiary does not simply have a financial<br>obligation to the parent company, if is part of the same organizational structure<br>(Krugman and Obstfeld,2000). Foreign Direct Investment involves much more<br>than the simple transfer of capital or the establishment of a local factory in a<br>developing nation. Multinational carry with them technologies of production,<br>tastes and diverse business practices including cooperative arrangement,<br>marketing restrictions advertising and the phenomenon of transfer pricing. They<br>engage in a range of activities, many of which have little to do with the<br>development aspirations of the countries in which they operate. (Todaro, 2000).<br>Temle (1999) demonstrates that technical changes and technological<br>learning which are significant components of Foreign Direct Investment represent<br>important determinants of economic growth. Furthermore, it is relevant to add<br>that technology is generated by Research and Development (R&amp;D), most of which<br>is conducted in industrialized countries making technology transfer very<br>important for economic prosperity of countries with weak Research and<br>Development (R&amp;D) and innovation capacities.<br>Political and economic policies bothering on FDI assist immensely in stimulating<br>the economic growth of the recipient nations Chang(2001) believes that in the<br>16th and 17th centuries deliberate transfer policies of King Henry viii made Britain<br>a leading manufacturing nation. Among the hotly debated issues in development,<br>economics is the role played presently by FDI in export performance of<br>developing countries such as the case of East and South East Asian country.<br>FDI flows to Africa have expanded only marginally and are still at levels<br>behind those of other developing countries. The region accounted for less than<br>1% of the global total FDI inflows in the late part of 1990s (Odenthal, 2001) while<br>inflows to developing countries as a group increased from U.S $20billion to U.S<br>$75billion between 1981 and 1985. Africa’s share of that inflow dropped<br>(UNCTAD 1999).<br>Historically, low rates of FDI inflows to the region and Nigeria in particular<br>are explained by hostile policies, unstable political environment characterized by<br>civil wars and armed conflicts, lack of effective regional integration efforts, poor<br>and deteriorating infrastructure, burdensome regulations or lack of institutional<br>capacity to implement FDI to establish confidence.<br>1.2 STATEMENT OF PROBLEM<br>In recent time, the government of Nigeria has embarked on economic<br>policies to check the flow of Foreign Direct Investment (FDI) in certain sectors of<br>the economy. Admittedly, how to achieve rapid economic growth and<br>development through FDI which has proved to be one of the economic problems<br>facing Nigeria.<br>Therefore, this work tend to analyze critically the following:<br>i. The determinants of FDI in emerging economy such as Nigeria.<br>ii. The impact of Foreign Direct Investment on the growth of Nigerian<br>economy.<br>iii. To analyze the increase in local wage cost through payment of wages by<br>Multinational Corporations (MNC) affiliates.<br>iv. To examine the importation of capital intensive and cost dates<br>technology.<br>1.3 RESEARCH QUESTIONS<br>The following research questions have been designed as a guild to elicit<br>reliable information for this study. They are:<br> To which extent will the Nigerian economy depend on the foreign capital<br>inflow?<br> How friendly is Nigeria’s trade policy and environment to FDI?<br> How have the Nigerian industries been stimulated by foreign technology?<br> Does intellectual poverty production increase the attractiveness of FDI?<br> To which extent has the FDIs in Nigerian led to the diversification of<br>Nigerian economy?<br> Has the rate and volume of FDI into Nigeria increased the consumption<br>expenditure of its citizenry?<br>1.4 OBJECTIVE OF THE STUDY<br>The objective of the study includes:<br>i. To determine the magnitude of the impact of FDI on economic growth in<br>Nigeria.<br>ii. To find out whether or not FDI has a significant impact on the growth of<br>Nigeria economy.<br>iii. To examine the appropriateness and suitability of the nature and quality of<br>foreign technology transfer on Nigeria economy.<br>1.5 RESEARCH HYPOTHESIS<br>The following hypothesis have been formulated to determine the validity and<br>reliability of the study.<br>1. Null Hypothesis (Ho): There is no relationship between the volumes of FDI<br>inflows and the growth of the Nigerian economy.<br>Alternative Hypothesis (H1): There is a relationship between the volume<br>of Foreign Direct Investment inflows and the growth of the Nigerian<br>economy.<br>1.6 SIGNIFICANCE OF THE STUDY<br>Technological adoption by any country is a function of local technological<br>capabilities which in turn are largely determined by the quality and volume of<br>Research and Development being sponsored by foreign or parent companies.<br>Thus, FDI appears to substitute local innovation as the technology recipient firms<br>in the n host country becomes mere in the global chain of affiliates subject to<br>central decision making. Therefore, this study is designed to assist the policy<br>maker in determining the technology transfer through FDI into Nigeria. Also, the<br>global economic circumstances permit that national economics should be<br>integrated into global economic network and this is only possible through<br>effective capital transfers appraised and monitored through research of this<br>nature.<br>There is also need to meet challenges post by foreign product domination of<br>internal market and this is supported by research work such as this study. The<br>study can also be relevant in universities and research centers in Nigeria libraries,<br>National Bureau of Statistic and investors will find this study highly useful.<br>1.7 SCOPE OF THE STUDY<br>The study is restricted within the confines of the impact of Foreign Direct<br>Investment in the growth of Nigeria economy. The time frame covered by the<br>study is between 1990-2011. The topic is chosen because of the importance of<br>FDI in the growth of the Nigerian economy since independence.<br>1.8 LIMITATION OF THE STUDY<br>In the course of this study, many problems were encountered and most of<br>them centered on time, finance, dearth of data and poor attitude of respondents.<br>The impact of time constraints were enormous because of the nature of<br>programme. Financing of a project of this nature is always costly and this has<br>been a major constraints because cost of sourcing materials, assemblage of data<br>obtained, collected and printing constitute large chuck of fund. Also, dearth of<br>data and poor attitude of respondents affected the early completion of the study<br>many business organization in Nigeria do not make public their data bank for<br>reach studies and this affects the quality of the information generated from either<br>National Bureau of Statistics (NBS) and those released by their personal.</p><div><div></div></div><br> <br><p></p>