AN ASSESSMENT OF THE IMPACT OF FOREIGN DIRECT INVESTMENT ON NIGERIAN ECONOMIC GROWTH AND DEVELOPMENT


AN ASSESSMENT OF THE IMPACT OF FOREIGN DIRECT INVESTMENT ON NIGERIAN ECONOMIC GROWTH AND DEVELOPMENT

ABSTRACT

This study assess the impact of Foreign Direct Investment in Nigerian economic growth over the period of 1990-2011. Data from Central Bank of Nigeria (CBN) Statistical Bulletin was used. The Ordinary Least Square (OLS) technique was specified and used to examine the relationship between the variables which includes the Gross Domestic Product as the dependent variable, export, Exchange rate, foreign direct investment and trade openness as the independent variables.

The explanatory power of the model was given by the R2 of 85.5% and was subjected to t-test and f-test to test the significance of the independent variables.

Dedication……………………………………………………………………………

Acknowledgement………………………………………………………………

Abstract ………………………………………………………………………………

Table of content……………………………………………………………

CHAPTER ONE

INTRODUCTION

Background of the study………………………………………
Statement of problem3
Research  Questions……………………………………………4
Objective of the study…………………………………4
Research Hypothesis…………………………………………6
Significance of the study………………………8
Scope of the study………………………………………..

Limitation of the study………………………………11

CHAPTER TWO

LITERATURE REVIEW

Introduction……………………………………………………………………………12

Theoretical Framework……………………………………15

Foreign Direct Investment and Economic growth

(Empirical)………………………..17

FDI and competition in the Host market………………………………………………………..20

2.5 Impact of FDI on Productivity………22

Impact of FDI on Innovation…………………….23

Impact of FDI on Technology Adoption……………………………………………

Impact of FDI on Human Capital………………………………………………………

Factors Influencing Demand…………………………………………………………………

Factor Limiting Technology Transfers…………………………………………

Benefits of Economy FDI on Nigeria’

CHAPTER THREE

Research Methodology…………………………………………………………30

Model Specification…………………………………………31

Method of Evaluation…………………………………………………………………………32

Justification of the Model……………………35

Data RequiredandSource35

Econometric Software………………………………………26

CHAPTER FOUR

PRESENTATION AND ANALYSIS OF REGRESSION RESULT

Presentation………………………………………of result…………………………………
Analysis of the Result…………………………………………………………37……
Evaluation of Research Hypothesis38……

CHAPTER FIVE

SUMMARY, POLICY RECOMMENDATION AND CONCLUSION

Summary of Findings…………………………………………42
Policy Recommendation……………………………………45
Conclusion………………………………………………………………………………………48

BIBLIOGRAPHY

APPENDIX

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Investor decision sand actions globally are influenced significantly by the dictates of self-interest which suggests that capital, not only be channeled to high-yielding economic sectors but also to those that are ostensibly quick yielding economies. On balance therefore investors would spun profitable opportunities characterized by extreme competitions, market glut, unfavorable regulation, long gestation periods and opt instead for investments that yield high returns within the shortest time possible. Base on this view, investors generally migrate from one economy to another in search of better investment climate and higher returns.

This form of capital movement results in the creation of a typical investment called Foreign Direct Investment. In the opinion of Jomo (1988) Foreign Direct Investment can be explained to represent the flow of tangibles from a country abroad of capital, equipment and other production and processing facilities into a host economy. It is also defined as a long term investment reflecting a lasting interest and control by a foreign direct investors (or parent enterprise), of an enterprise entity residents in an economy other than that of the foreign investor (IMF, 1993).

Foreign Direct Investment is widely thought to bring with it into the host country a bundle of productive assets including long term foreign capital, entrepreneurship, technology skills, innovative capacity and managerial, organizational and export marketing know-how. The distinctive feature of Foreign Direct Investment is that it involves not only a transfer of resources but also the acquisition of control. i.e the subsidiary does not simply have a financial obligation to the parent company, if is part of the same organizational structure (Krugman and Obstfeld,2000). Foreign Direct Investment involves much more

than the simple transfer of capital or the establishment of a local factory in a developing nation. Multinational carry with them technologies of production, tastes and diverse business practices including cooperative arrangement, marketing restrictions advertising and the phenomenon of transfer pricing. They engage in a range of activities, many of which have little to do with the development aspirations of the countries in which they operate. (Todaro, 2000).

Temle (1999) demonstrates that technical changes and technological learning which are significant components of Foreign Direct Investment represent important determinants of economic growth. Furthermore, it is relevant to add that technology is generated by Research and Development (R&D), most of which is conducted in industrialized countries making technology transfer very important for economic prosperity of countries with weak Research and Development (R&D) and innovation capacities.

Political and economic policies bothering on FDI assist immensely in stimulating the economic growth of the recipient nations Chang(2001) believes that in the

16th and 17th centuries deliberate transfer policies of King Henry viii made Britain a leading manufacturing nation. Among the hotly debated issues in development,

economics is the role played presently by FDI in export performance of developing countries such as the case of East and South East Asian country.

FDI flows to Africa have expanded only marginally and are still at levels behind those of other developing countries. The region accounted for less than 1% of the global total FDI inflows in the late part of 1990s (Odenthal, 2001) while inflows to developing countries as a group increased from U.S $20billion to U.S

$75billion between 1981 and 1985. Africa’s share

(UNCTAD 1999).

Historically, low rates of FDI inflows to the region and Nigeria in particular are explained by hostile policies, unstable political environment characterized by civil wars and armed conflicts, lack of effective regional integration efforts, poor and deteriorating infrastructure, burdensome regulations or lack of institutional capacity to implement FDI to establish confidence.

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