BACKGROUND OF THE STUDY An Assessment Of Nigeria's Foreign Policy On Foreign Direct Investment 2007 - 2016

 

1.1 INTRODUCTION

BACKGROUND OF THE STUDY

The role of Foreign Direct Investment (FDI) in the development of Nigerian economy cannot be overemphasized. Foreign Direct Investment provides capital for investment, it enhances job creation and managerial skills and possible technology transfer. All of these contribute to economic growth and development. Nigerian government has been trying to attract foreign direct investors via foreign policy.

Foreign Direct Investment (FDI) increases financial, economic and political ties among and between states. It is investment behavior when an individual or industrial firm has expanded asset resources from one country to the other in compliance with the legislation of the host country. Foreign Direct Investments extended to foreign economic and business activities in agriculture, manufacturing, mining, ship construction and development, electronics and tele-communication industries, technology and machines.

Foreign Direct Investment is increasing importance in the global economy due to the additional resources pooled for development in the host country. Foreign Direct Investment attracted great controversy concerning their positive or negative contributions to economic development of the host country (i.e. Nigeria in particular). A larger share of the FD is made by enterprises called Multi-National Corporations (MNCs). Multi-National Corporations are essentially those that own or control production facilities in more than two countries.

Foreign Direct Investment has attracted the attention of most governments through the desire to extend the market system because many developing countries (Nigeria in particular) are heavily indebted externally. This is to say that the problem of external debt burden is not solved by borrowing more but by attracting more private flows in the form of FDI. Nigeria as a country, given her natural resources base and larger market size, qualities to be a major recipient of FDI in African and indeed is one of the top leading African countries that consistently received foreign direct investor. The political and economic policie bothering on Foreign Direct investment assists immensely in stimulating the economic growth in Nigeria.

Generally, foreign policy and strategy of the Nigerian government towards foreign direct investment are shaped by two principal objectives of desire for economic independent and the demand for economic growth and development. Multi-National are expected to bring into Nigeria’s foreign capital in form of technical skills, entrepreneurship, technology and investment fund to boost the economic activities thereby raising the standard of living of Nigerians. The distinctive feature of FDI is that, it involves not only a transfer of resources but also the acquisition of control. They also engage in a range of activities many of which have little to do with the development aspirations of the countries in which they operate.

1.2 STATEMENT OF THE RESEARCH PROBLEM

Foreign Direct Investment (FDI) is very crucial in respect of economic growth and development of Nigeria. FDI occupies a priority status in Nigerian economy and foreign policy. Unfortunately, Foreign Direct Investment is constrained by lack of effective and dynamic foreign policy. The most challenging issue facing FDI is inconsistency in the Nigeria’s foreign policy. Inspite of the abundance studies on FDI and economic growth in Nigeria, the causal relationship between Nigeria’s foreign policy and the foreign direct investment on economic growth and development as well as the associated benefits in contradiction.

Despite the seeming positive association between FDI, economic growth and development, such relationship has not reached a consensus on the direction of this impact however suggesting that foreign direct investment can be either beneficial or harmful to the economic growth and development of Nigeria. The performances of the major determinants of FDI in Nigeria have not been impressive in terms of business environments, price levels and others. This is contrary to the belief that rational investor will only invest in assets with higher rates of returns and less risk. Foreign direct investments have remained low.

In view of the above, the study intends to examine the impact of Foreign Direct Investment on the economic growth of Nigeria economy specifically 2007 – 2016 with the aim of assessing the challenges and prospects of the Foreign Direct Investment in the country.

1.3 OBJECTIVES OF THE RESEARCH

The main aim of this research is to determine and assess the impact of Nigeria’s foreign policy on foreign direct investment and economic performance.

Other objectives of the study include:

1. To assess the roles of Nigeria’s foreign policy on foreign direct investment between 2007 – 2016.

2. To examine measures that could be used to enhance foreign direct investment in Nigeria.

3. To determine the nature and scope of Nigeria’s foreign policy on its foreign direct investment between 2007 – 2016.

1.4 RESEARCH QUESTIONS

The following research questions have been put in place as a guide to elicit reliable information for this study. The research questions are as follows:

1. What are the roles of the Nigeria’s foreign policy on foreign direct investment between 2007 – 2016?

2. What are the possible measures that could be adopted to enhance and encourage foreign direct investment in Nigeria?

3. How to determine the nature and scope of the Nigeria’s foreign policy on its foreign direct investment between 2007 – 2016?

1.5 RESEARCH HYPOTHESIS

The following hypothesis has been formulated to determine the validity and reliability of the study.

Ho: There is no relationship between the Nigeria’s foreign policy and foreign direct investment on economic growth of the Nigerian economy.

H1: There is a significant relationship between the Nigeria’s foreign policy and foreign direct investment on the economic growth of the Nigerian economy.

1.6 SIGNIFICANCE OF THE RESEARCH

The performance of Nigeria’s foreign policy and foreign direct investment are very important to economic growth and development. It is believed that at the completion of this research, the findings of the research will be very significant as outlined below:

1. This study will be beneficial to Federal Government Particularly Foreign Affairs Ministry as its findings will enhance the formulation of the foreign policy of Nigeria.

2. It will provide policy guide to Foreign Policy makers and administrators on the relationship between Nigeria’s Foreign Policy, Foreign direct investment and economic performance in Nigeria.

3. To the body of academic, this study will serve as a guide for further researches in the area of Foreign Direct investment, Foreign policy, foreign investors and Nigeria investment promotion commission.

1.7 SCOPE AND LIMITATIONS OF THE STUDY

This study will cover a period of nine years (2007 – 2016). It was chosen because it would be better to use a period of steady democratic dispensation in Nigeria, which in essence means that investors must have taken a critical look at the investment environment on the country before taking the decision of doing business in Nigeria. The scope will be limited to the assessment of the Nigeria’s foreign policy and foreign direct investment on economic performance between the period of 2007 – 2016.

As a study, there are limitations which will affect the conduct of this study among which is the availability of needed materials such as books, magazine, journal and other publications. The research is constrained with finding as research of this nature need adequate finding to be conducted. Similarly, the research is equally limited and constrained with time frame. For, the time allotted to this study is too short. This is due to the fact that, an empirical research of this nature requires an ample time so as to utilize the time in data collection, presentation and analysis thereby coming up with value-free judgment at the end of the findings of the research.

 

1.8 RESEARCH METHODOLOGY

The research title “An assessment of Nigeria’s Foreign policy on foreign direct investment. 2007 – 2016” employed secondary source of data collection, presentation, analysis and generalization on foreign direct investment as it relates, to Nigeria’s Foreign Policy and economic growth specifically, between 2007 – 2016. Thus, the qualitative method is adopted in the process of collection of data.

Being the source of data collection, presentation analysis is more of content analysis based on the documentary source encompasses the use of relevant text books, peer reviewed journals, newspaper, magazines, paper presentation especially those presented at the academic conference make part of secondary source of data collection in this research.

In addition to the above, reliable, verified and genuine information or data retrieved from worldwide website known as internet sources will equally be an integral part of secondary source of data collection in this research.

However, in the entire processes and procedures of data collection and presentation only relevant and reliable information will be employed or used in analysis and generalization of findings explored in the process of conducting this study.

1.9 DEFINITION OF KEY CONCEPT

Foreign Policy:

Foreign policy as used in this study is defined as coordinate strategy with which institutionally designated decision makers seeks to manipulate the international environment in order to achieve national interest. It is an essential instrument of the state seeking to influence the external world and achieve the desire set of objectives.

 

 Foreign Direct Investment (FDI):

Foreign direct investment is an investment made to acquire a lasting management interest in a business enterprises operating within a country other than that of the investor. It is a controlling ownership in a business enterprise in one country by an entity based in another country. It is investment behavior when an industrial firm has expanded asset resources from one country to the other in compliance with the legislation of the host country. It is facilitated primarily by Multi-National Corporations (MNCs) that command the monopoly of world capital technology and market ideology

Economic growth:

Economic growth as used in the research can simply be defined as the increase in the economy’s output overtime. It is also a gradual and steady change in the long-run which comes about by a gradual increase in the economy. It is the increase in the amount of the goods and services produced by country overtime. It is normally measured as the percent rate of increase in real gross domestic product (GDP).

Economic Development:

Economic development is a significant increase in the real per capita income of a nation. It can also be perceived as a multidimensional process involving the re-organization and re-orientation of the economic system of a given state.

Multi-National Corporations (MNCs):

A Multi-National Corporation is a company firm or enterprises that operate worldwide with its headquarters in a metropolitan or developed country. It is an organization that owns or controls productions of goods or services more than two countries other than the home country. Then are companies which seek to operate strategically on a global scale.

 

Economic Performance:

Economic performance as used in this study can simply be seen as an improvement or otherwise of the economic activities as well as the success in areas related to the overall market strength.

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