Determinant of Foreign Investment Inflow on the Economic Growth of Nigeria (1990-2020)
CHAPTER ONE
Objective of the study
The objectives of the study are;
- To ascertain the relationship between foreign investment and economic growth of Nigeria
- To determine the impact of GDP on FDI inflow in Nigeria
- To determine the effect of interest rates on FDI inflows in Nigeria
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
Foreign direct investments consist of external resources, including technology, managerial and marketing expertise and capital. All these generate a considerable impact on host nation’s production capabilities. Kumar (2007), described FDI in several ways, first and most likely it may involve parent enterprise injecting equity capital by purchasing shares in foreign affiliates. According to World Trade Organization New (WTON, 2001) foreign direct investment occurs when an investor based in one country, home country, acquire an asset in another country the host country with the intent to manage the asset. Foreign direct investment is described as investment made to acquire a lasting interest (usually at voting stock) and acquiring at least 10% of equity share in an enterprise operating in a country other than the home country of investors (Mwilima 2003). According to (Ayanwale 2007), that ownership of at least 10% of the ordinary shares or voting stock is the criterion for the existence of a direct investment relationship. The United Nations defined FDI as investment in enterprise located in one country but effectively control by residents of another country. This definition not only considers foreign direct investment from an investment point of view, but also defines the status of corporate control. Economic growth is the increase in the amount of goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP. Growth is usually calculated in real terms, that is, inflation adjusted terms, in order to net out the effect of inflation on the price of the goods and service produced. FDI comprises not only merger and acquisition and new investment, but also reinvested earnings and loans and similar capital transfer between parent companies and their affiliates. FDI flows have grown in importance relative to other firms of international capital flows, and the resulting production has increased as a share of world output, but it was still only about 8% at the end of the 20th century. The United States began its role as foreign direct investors in the late 19th century. It became the dominant supplier of direct investment to the rest of the world, accounting for about half of the world’s stock in 1966. Since then, other countries have become major direct investors. The United States share is now less than a quarter of the world total and the United States has become a major recipient of FDI from other countries. Lipsey and Chrystal (2003) noted that FDI is always undertaken by domestic firms which have accumulated some benefits in the local market such benefits includes patents and know-how that bestowed on them when they enter into foreign markets. Foreign direct investment generates investments that may not be possible with the local resources only. Working with large firms linked to the global market, FDI promotes workers and management training; provide advanced technology that is not easily transferable outside the firms and already in use by foreign firms. Finally, it generates higher paying jobs and links the recipient economy into the world economy in a way that would be difficult to achieve by new firms of a local origin (Lipsey & Chrystal, 2003).
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought Determinant of foreign direct investment inflow on the economic growth of Nigeria (1990-2020)
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information determinant of foreign direct investment inflow on the economic growth of Nigeria (1990-2020). 200 staff of national bureaus of statistics, Abuja was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain Determinant of foreign direct investment inflow on the economic growth of Nigeria (1990-2020). In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of foreign direct investment on economic growth in Nigeria
Summary
This study was on Determinant of foreign direct investment inflow on the economic growth of Nigeria (1990-2020). Three objectives were raised which included: To ascertain the relationship between foreign investment and economic growth of Nigeria, to determine the impact of GDP on FDI inflow in Nigeria and to determine the effect of interest rates on FDI inflows in Nigeria. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of national bureaus of statistics, Abuja. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made statisticians, accountants cadre, programme analysts and administrative officers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
In conclusion, the empirical results show that there is positive relationship between economic growth (GDP) and FDI. The result was positive but statistically insignificant contrary to some findings. This insignificant relationship could be as a result of insufficient FDI fund invested into the Nigerian economy which has not been able to significantly impact on the economic growth. The result of our study also portrays that domestic investment was also responsible for the growth witnessed in Nigeria’s economy over the period under review. This provides an understanding that domestic investment is a major factor that contributes to the growth of the Nigerian economy. And so, more emphasis should be geared towards encouraging domestic investment to drive the economy to the desired level of growth. Despite the insignificant relationship between GDP and FDI, it is important to note that FDI contributes positively to economic growth in Nigeria.
Recommendation
Based on the findings the following recommendations were proffered Government through its policy making agents should continuously formulate and implement policies that would increase the nation’s Gross Domestic Products. This should involve creating` an enabling environment (including incentives, increased infrastructural development) for enhanced productive base. Government should tackle frontally the issue of security (internal and external) in order have a relatively low security risk investment environment as no foreign investor would want to invest in a high security risk country. Given that exchange rate is a significant determinant of FDI inflow to Nigeria, government should embark on moderate devaluation of the national currency to attract more FDI inflow into Nigeria. With such devaluation, the dollar price of some ailing indigenous industries would be reduced, thereby encouraging possible take-over bids or merger and acquisition by foreign investors. This will in turn increase economic activities, create employment and boost economic growth. The statistical significant relationship between the degree of trade openness and FDI inflow to Nigeria provides that while government is encouraged to liberalize trade, some policy caution should be introduced that would encourage re-investment (plough-back) of profits rather than outright repatriation of such earnings and dependence on loans and overdraft facilities for business activities.
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