The Effect of Timely Delivery of Construction Projects on the Economic Development of Nigeria
CHAPTER ONE
Objectives of the Study
The general objective of this is to assess the impact of FDI on the economic growth of Nigeria. Other specific objectives are:
- To ascertain the impact of FDI on sector of Nigerian economy.
- To determine the impact of FDI on non-oil sectorin the economy.
- To suggest measures for facilitating the steady flow of FDI into the Nigerian economy.
CHAPTER TWO
LITERATURE REVIEW
Introduction
This chapter reviews materials written by scholars that are directly and indirectly related to the problem under study. It reviewed journals, thesis and articles. The reviewed followed the following order; theoretical framework, impact of FDI on Economic Growth in Nigeria, some stylized facts about FDI in Nigeria, sectoral analysis of FDI inflow in Nigeria, graphical analysis of FDI inflow to Nigeria, empirical literature and the summary of the chapter.
Concept of Foreign Direct Investment in Nigeria
An agreed framework definition of foreign direct investment (FDI) exists in theliterature. That is, FDI is an investment made to acquire a lasting managementinterest (normally 10% of voting stock) in a business enterprise operating in acountry other than that of the investor defined according to residency (World Bank, 1996). Such investments may take the form of either “greenfield” investment (also called “mortar and brick” investment) or merger and acquisition (M&A), which entails the acquisition of existing interest rather than new investment.
In corporate governance, ownership of at least 10% of the ordinary shares or voting stock is the criterion for the existence of a direct investment relationship. Ownership of
less than 10% is recorded as portfolio investment. 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. Countries could be both host to FDI projects in their own country and a participant in investment projects in other counties. A country’s inward FDI position is made up of the hosted FDI projects, while outward FDI comprises those investment projects owned abroad.
One of the most salient features of today’s globalization drive is conscious encouragement of cross-border investments, especially by transnational corporations and firms (TNCs). Many countries and continents (especially developing) now see attracting FDI as an important element in their strategy for economic development. This is most probably because FDI is seen as an amalgamation of capital, technology, marketing and management.
Sub-Saharan Africa as a region now has to depend very much on FDI for so many reasons, some of which are amplified by Asiedu (2001). The preference for FDI stems from its acknowledged advantages (Sjoholm, 1999; Obwona, 2001, 2004). The effort by several African countries to improve their business climate stems from the desire to attract FDI. In fact, one of the pillars on which the New Partnership for Africa’s Development (NEPAD) was launched was to increase available capital to US$64 billion through a combination of reforms, resource mobilization and a conducive environment for FDI (Funke and Nsouli, 2003).
Unfortunately, the efforts of most countries in Africa to attract FDI have been futile. This is in spite of the perceived and obvious need for FDI in the continent. The development is disturbing, sending very little hope of economic development and growth for these countries. Further, the pattern of the FDI that does exist is often skewed towards extractive industries, meaning that the differential rate of FDI inflow into sub-Saharan African countries has been adduced to be due to natural resources, although the size of the local market may also be a consideration (Morriset 2000; Asiedu, 2001).
Nigeria as a country, given her natural resource base and large market size, qualifies to be a major recipient of FDI in Africa and indeed is one of the top three leading African countries that consistently received FDI in the past decade. However, the level of FDI attracted by Nigeria is mediocre (Asiedu, 2003) compared with the resource base and potential need. Further, the empirical linkage between FDI and economic growth in Nigeria is yet unclear, despite numerous studies that have examined the influence of FDI on Nigeria’s economic growth with varying outcomes (Oseghale and Amonkhienan, 1987; Odozi, 1995; Oyinlola, 1995; Adelegan, 2000; Akinlo, 2004).
Most of the previous influential studies on FDI and growth in sub-Saharan Africa are multi country studies. However, recent evidence affirms that the relationship between FDI and growth may be country and period specific. Asiedu (2001) submits that the determinants of FDI in one region may not be the same for other regions. In the same vein, the determinants of FDI in countries within a region may be different from one another, and from one period to another.
Foreign direct investment (FDI) is an investment made to acquire a lasting management interest (normally 10% of voting stock) in a business enterprise operating in a country other than that of the investor defined according to residency (World Bank, 1996). Such investments may take the form of either “greenfield” investment (also called “mortar and brick” investment) or merger and acquisition (M&A), which entails the acquisition of existing interest rather than new investment.
One of the most noticeable features of today’s globalization drive is conscious encouragement of cross-border investments, especially by transnational corporations and firms (TNCs). Many countries (especially developing) now see attracting FDI as an important element in their strategy for economic development. This is most probably because FDI is seen as an amalgamation of capital, technology, marketing and management. Africa as a region now has to depend very much on FDI for so many reasons, some of which are amplified by Asiedu (2001). The preference for FDI stems from its acknowledged advantages (Sjoholm, 1999; Obwona, 2001, 2004). The effort by several African countries to improve their business climate stems from the desire to attract FDI. In fact, one of the pillars on numerous studies that have examined the influence of FDI on Nigeria’s economic growth with varying outcomes (Oseghale and Amonkhienan, 1987; Odozi, 1995; Oyinlola, 1995; Adelegan, 2000; Akinlo, 2004). Most of the previous influential studies on FDI and growth in sub-Saharan Africa are multi country studies. However, recent evidence affirms that the relationship between FDI and growth may be country and period specific. Asiedu (2001) submits that the determinants of FDI in one region may not be the same for other regions. In the same vein, the determinants of FDI in countries within a region may be different from one another and from one period to another (Kolawole and Henry, 2009).
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This chapter describes method and procedure used in conducting this research work. The description of the procedure is done under the following headings: Research design, area of the study, population of the study, sample and sampling procedure, instrumentation, procedure for data analysis.
Resign Design
A survey study method was be used for this research. This method facilitate the effective gathering of data through sampling of a small size of the population and generalizing the findings on the entire population. This method is considered appropriate for this study because it will help the researcher to discover relative incidence and distribution on the population (Afolabi, 1993)
Population of and the Study
The population consist of the entire staff of Two multi-national companies in Nigeria(Etisalat and MTN) and the sample size comprise of Kaduna branch of Etisalat and MTN mobile communication with staff 135,out of which 30 person were drawn using the simply random selection technique in form of Hat drawn. The sample is appropriate in conformity with the view of Ndagi (1996)who opined that at least more than 10% of the population should be adopted as the sample size.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
Introduction
This chapter contains detailed presentation of results findings and discussion for this study. All the data collected through the questionnaire to provide answers to the research questions.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Summary
The study examine the impact of foreign direct investment on the economic growth in Nigeria. As such the general objective of this is to assess the impact of FDI on the economic growth of Nigeria. Other specific objectives are: To ascertain the impact of FDI on sector of Nigerian economy as well as to determine the impact of FDI on non-oil sector in the economy and to suggest measures for facilitating the steady flow of FDI into the Nigerian economy.
A survey method was used for the study. The population consist of the entire staff of Two multi-national companies in Nigeria(Etisalat and MTN) and the sample size comprise of Kaduna branch of Etisalat and MTN mobile communication with staff 135,out of which 30 person was drawn using the simply random selection technique in form of Hat drawn. A questionnaires developed by the researcher based on likert 5-point scale was used for the study. Mean scores and sequences were used to analyzed the data based on the research questions. The analysis indicates the following results: First, FDI into the oil sector contributes positively to economic growth as well as enhances revenue generation in Nigeria and facilitate employment generation in Nigeria.secondly, DFI Promote entrepreneurship development in Nigeria as well as Facilitate investment in stock and increase government revenue generation as well as Enhances private sector participation.The analysis also indicates that DFI Facilitate the development of local industry.Finally, The measures that could facilitate the steady flow of FDI into the Nigerian economy is genuine efforts to engage in joint ventures that are beneficial to the economy as well as the needs to come up with more friendly economic policies and business environment, which will, attract FDI into virtually all the sectors of the economy. The analysis shows that Nigerian government needs to embark on capital project, which will enhance the infrastructural facilities with which foreign investors can build on.
Conclusion
Given the above situation and the fact that Nigeria’s economic recovery efforts and growth requires major private sector investment in modern equipments that can industrialize the agricultural sector and the economy as a whole, then the Nigeria’s foreign investment policy should move towards attracting and encouraging more inflows of foreign capital by moving ahead with economic programmes that includes measures easier set-up and expansion of businesses.
In the years ahead, Nigeria (and many other African and third world countries) in trying to pave way for more foreign direct investment faces greater problems, especially with poor external image problem and particularly the concept of European Economic Unity that includes Eastern Europe. This translate to the fact that investment flows that would ordinarily have come from countries of surplus capital like Western Europe to capital deficient countries like Nigeria would now be going to poor European Economic Communities which includes Eastern Europe. Except African countries are able to adopt new strategies, this development will further compound the crises of under-development confronting countries like Nigeria. A very important challenge of management in the coming years would therefore be the development of indigenous technology and entrepreneurial capabilities as the involvement of multinational companies in our economy may dwindle as a result of new bigger and attractive opportunities that are likely to emerge from Europe.
With the up and down movement of foreign direct investment, Nigeria needs to juxtapose foreign investment with domestic investment in order to maintain high levels of income and employment. The problem therefore does not lie so much with the magnitude of investment flows to Nigeria as with the form in which it Is given. We could emphasize that foreign investment cannot contribute much to the economic development of Nigeria if it is directed primarily to capital supply than to investment projects. Foreign investment can be very effective if it is directed at improving and expanding managerial and labour skills. In other words, the task of helping a “poor beggar” can be made less generous and yet more fruitful if it is directed at teaching him a trade rather than giving him food to eat.
The analysis presented in this work does not offer a simple version of multinational corporation investment in Nigeria because the picture in complex. Foreign direct investment can make a valuable contribution to third world countries’ development in general and Nigeria in particular, but not all foreign direct investment doe so. Greater flows of investment fund’s climate in the Nigeria economy are important but a good investment climate is not synonymous with what multinational corporation prizes most.
In conclusion, in order to further improve the climate for foreign investment in Nigeria, the government must appreciate the fact that the basic element in any successful development strategy should be to encourage domestic investors first before going after foreign investors, considering the fact that they constitute the bulk of investment activities in the economy. Thus, the most effective strategy for attracting foreign investment is to make the Nigerian economy very attractive to Nigerian investors first.
RECOMMENDATIONS
The following policies are hereby recommended to policy makers and government, if it is desired that foreign investment contribute to the growth and development of Nigeria.
- The Nigerian government should encourage the inflows of foreign direct investment and contact policy institutions that can ensure the transparency of the operations of foreign companies within the economy.
- In evaluating foreign direct investment, the screening process should be simplified and improved upon. For example, export investment projects that consistently generate positive contribution to national income can be screened separately and swiftly, while projects in import competing industries should be screened separately.
- Efforts should be made to engage in joint ventures that are beneficial to the economy. Joint ventures provide for a set of complementary or reciprocating matching undertakings, which may include a variety of packages ranging from providing the capital to technical cooperation. The government should intensify the policy to acquire, adopt, generate and use the acquired technology to develop its industrial sectors.
- Efforts should continue, this time with more vigor at ensuring consistency in policy objectives and instruments through a good implementation strategy as well as good sense of discipline, understanding and cooperation among the policy makers.
- The Nigerian government needs to come up with more friendly economic policies and business environment, which will, attracts FDI into virtually all the sectors of the economy.
- The Nigerian government needs to embark on capital project, which will enhance the infrastructural facilities with which foreign investors can build on.
- The current indigenization policy should be pursued to the letter as a way of preventing absolute foreign ownership in the key sector of the economy.
- The Nigeria government should also carry out the liberalization of all the sector of the economy so as to attract foreign investors, so that the current efficiency and growth noticed in the telecommunication sector can also be enjoyed there.
- For Nigeria to generate more foreign direct investments, efforts should be made at solving the problems of government involvement in business; relative closed economy; corruption; weak public institutions; and poor external image. It is therefore advised that the government continues with its privatization programme, external image laundry, seriousness and openness in the fight against corruption, and signing of more trade agreements.
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