FOREIGN DIRECT INVESTMENT AND NIGERIA ECONOMY: AN EMPIRICAL RE –EVALUATION
Abstract
The study examined the effect of Foreign Direct Investment (FDI) on the Nigeria economy. Secondary data were collected through extraction from the Central Bank of Nigeria’s statistical bulletins. The data collected covered 14years (2000 – 2013) which encompassed Foreign Direct Investment (FDI) and Foreign Reserves (FR) (as independent variables) and Gross Domestic Product (GDP) (as the dependent variable) signifying the Nigeria economy. The data were analysed through the use of linear regression and correlation techniques. The formulated hypotheses were tested with the use of t-test and F-ratio. Findings suggest that the independent variables (FDI and …show more content…
Private Foreign Investment – This is the investment of private foreign funds in the economy of a developing nation, usually in form of import substitution industries by Multinational Corporations which carry with them technology of production, management service, diverse business practices including cooperation arrangement, advertising and transfer pricing on the resources.
2.2.3 An Evaluation of Foreign Direct Investment on the Nigerian Economy
According to Asiedu (2002), international flows of capital reduce the risk faced by owners of capital by allowing them to diversify their lending and investment. The global integration of capital market can in turn contribute to the spread of best practices in corporate governance, accounting rules and legal tradition. This global mobility of capital also limits the ability of government to pursue bad policies. This is yet to be adhered to by the Nigerian government.
Also, foreign direct investment could play a role in supplementing domestic relationship and induce local people with resources to engage in entrepreneurship activity (Nunenkamp and Spatz, 2003).
However, many factors have affected foreign direct invest in Nigeria. The factors …show more content…
Manpower – The provision of labour and the technical skill of the labour force of the country are very critical when making foreign investment decision. The level of return on profit will be low due to the small size of effective market and the difficulty of getting expertise.
Therefore to encourage foreign investment in Nigeria, the government of the country for the past two decades, has introduced some incentives in form of allowing 100% ownership of business by foreign investors where there is no discriminating restriction, allowing full repatriation of profit by foreign inventors; and investing heavily in improving infrastructure, especially power and transportation aimed at reducing the cost of doing business in Nigeria (CBN, 2013).
In Nigeria today, Foreign Direct Investment is seen to be a major source of foreign capital flow compared with other foreign investments such as portfolio investment, which is negligible in Nigeria (Obamuyi, 2002). This trend has assisted in building up the country’s reserves over the years, though, the impact has been grossly depleted by the constant depreciation of the national currency (naira) against the hard currencies of the
Abstract
The study examined the effect of Foreign Direct Investment (FDI) on the Nigeria economy. Secondary data were collected through extraction from the Central Bank of Nigeria’s statistical bulletins. The data collected covered 14years (2000 – 2013) which encompassed Foreign Direct Investment (FDI) and Foreign Reserves (FR) (as independent variables) and Gross Domestic Product (GDP) (as the dependent variable) signifying the Nigeria economy. The data were analysed through the use of linear regression and correlation techniques. The formulated hypotheses were tested with the use of t-test and F-ratio. Findings suggest that the independent variables (FDI and …show more content…
Private Foreign Investment – This is the investment of private foreign funds in the economy of a developing nation, usually in form of import substitution industries by Multinational Corporations which carry with them technology of production, management service, diverse business practices including cooperation arrangement, advertising and transfer pricing on the resources.
2.2.3 An Evaluation of Foreign Direct Investment on the Nigerian Economy
According to Asiedu (2002), international flows of capital reduce the risk faced by owners of capital by allowing them to diversify their lending and investment. The global integration of capital market can in turn contribute to the spread of best practices in corporate governance, accounting rules and legal tradition. This global mobility of capital also limits the ability of government to pursue bad policies. This is yet to be adhered to by the Nigerian government.
Also, foreign direct investment could play a role in supplementing domestic relationship and induce local people with resources to engage in entrepreneurship activity (Nunenkamp and Spatz, 2003).
However, many factors have affected foreign direct invest in Nigeria. The factors …show more content…
Manpower – The provision of labour and the technical skill of the labour force of the country are very critical when making foreign investment decision. The level of return on profit will be low due to the small size of effective market and the difficulty of getting expertise.
Therefore to encourage foreign investment in Nigeria, the government of the country for the past two decades, has introduced some incentives in form of allowing 100% ownership of business by foreign investors where there is no discriminating restriction, allowing full repatriation of profit by foreign inventors; and investing heavily in improving infrastructure, especially power and transportation aimed at reducing the cost of doing business in Nigeria (CBN, 2013).
In Nigeria today, Foreign Direct Investment is seen to be a major source of foreign capital flow compared with other foreign investments such as portfolio investment, which is negligible in Nigeria (Obamuyi, 2002). This trend has assisted in building up the country’s reserves over the years, though, the impact has been grossly depleted by the constant depreciation of the national currency (naira) against the hard currencies of the