AN EVALUATION OF THE DETERMINANTS OF FOREIGN DIRECT INVESTMENTS IN NIGERIA
TABLE OF CONTENT:
CHAPTER ONE
1.1.Background of the Study
1.2.Objective of the Study
1.3.Methodology of the Study
1.4.Hypothesis of the study
1.5.Scope and Limitation of the Study
CHAPTER TWO
Literature Review
CHAPTERTHREE
3.1. Research Design/Methodology
3.2. Sources of Data, Primary and Secondary Location Data.
CHAPTERFOUR
Summary and findings
CHAPTER FIVE
5.1. Recommendation
5.2. Conclusion
5.3. Bibliography
ABSTRACT:
This paper attempts to investigate the analysis of the determinants of FDI in Nigeria
The first chapter gives a background of the study. Growth in neoclassical theory is brought about by increases in the quantity of factors of production and in the efficiency of their allocation.
The objective of the study is to evaluate the determinants of FDI in Nigeria. It also goes to evaluate the impacts of FDI on the economy
In the empirical analysis of the impact of foreign trade as an engine of growth in Nigeria, the method used is the Ordinary Least Square(OLS) regression techniques. The data used in this analysis are the Gross Domestic Product (GDP) and foreign investment flow.The data for different variables were compiled for a period(1986 – 2010)
CHAPTER ONE:
1.1 . Background Of The Study
Growth in neoclassical theory is brought about by increases in the quantity of factors of production and in the efficiency of their allocation. In a simple world of two factors, labour and capital, it is often presumed that low-income countries have abundant labour but less capital. This situation arises owing to shortage of domestic savings in these countries, which places constraint on capital formation and hence growth.
Even where domestic inputs in addition to labour, are readily available and hence no problem of input supply, increased production may be limited by scarcity of imported inputs upon which production processes in low-income countries are based. International capital flows (ICFs) readily become an important means of helping developing countries to overcome their capital shortage problem. One of the components of international capital flows is foreign Direct investment (FDI).
Other components are:
Official flows from bilateral sources (e.g developed and OPEC
countries) and multilateral sources(such as the World Bank and its two affiliates: the International Development Association(IDA),and the International Finance Corporation(IFC),on concessional and non-concessional terms.
Commercial bank loans including export credits.
Economic theory suggests that capital will move from countries where it is abundant to countries where it is scarce. This pattern of movement will be informed by the returns on new investment opportunities, which are considered higher where capital is limited. The resultant capital relocation will boost investment in the recipient country and as Summers 2000 suggests, brings enormous social benefits. Underlying this theory is the premise that returns to capital decrease as more machinery is installed and new structures are built, although in practice this is not always or even generally true.
With the advent of the third millennium, the peace of globalization has continued to accelerate. The areas of International trade and finance have been pushed by many factors including accelerated privatization and economic liberalization in almost every country in the world.
One important economic consequence of globalization for developing countries has been the massive and unprecedented inflows of Foreign Direct Capital during the final decades of the 20th century. Indeed during the last decade of the last century,private capital flows wrested primacy place from public flows,seizing the pre-eminent position as the source of foreign investment and development finance for developing countries. According to Weitz and Lijane(1998)
“While official flows totaled $56 billion in 1990,compared to $44 billion private flows by 1996,public flows had declined to $41 billion and private flows grew to $244 billion”(1998: p.4)
UNCTAD figures show that in 1997,FDI inflows amounted to $400billion and in 1998 reached an unprecedented level of $440 billion. Mallampally and sauvant(1999,p.3)
Although FDI have become more widely dispersed among recipient countries inrecent years, the distribution is still skewed with Asia receiving the lion’s share of FDI flows going to developing countries and Africa receiving very little. According to Mallampally and Sauvant, “Among developing countries,though the distribution of world FDI inflows is uneven. In 1997 for example, developing Asia received 22%; Latin America and the Caribbean,14% and Africa 1%”. Mallampally and Sauvant (1999p.35)
Another perspective in the skewness of the distribution is obtained when it is realized that in 1995, 81% of global FDI flows to developing countries went to 12 countries while 89% of all portfolio flows went to almost the same dozen countries. Weitz and Lijane (1998;p.13)
Clearly,therefore the challenge to attract more inflows for investment in development projects has become acute in Sub-saharan Africa where only a small proportion of new inflows have gone. Note, the needs of developing countries particularly those in Sub-Saharan Africa has sharply increased in recent years due to the accelerating process of globalization. According to Weitz and Lijane(1998p.6): “Opening up a country requires investment for connecting the necessary infrastructure-roads, telecommunication, power plants, financial system. Given the low incomes and low savings in many African countries, the investment-savings gap has widen and there is little hope of closing it without the active involvement of the private sector-both domestic and foreign. Thus, increasingly, in order to finance the investment gap,it is becoming imperative to attract foreign investment
There is an emerging consensus that a conductive macro-economic policy environment is not only a desideration but is in fact a sine qua non for attracting substantial amounts of foreign investment inflow in a liberalization and globalizing world economy. Nigeria needs a massive inflow of foreign investment in order to transform its economy,upgrade dilapidated infrastructure and plug on to the electronic age of computers and the internet. An absolute pre-requisite for success is the design and implementation of policies and measures that would make the policy environment investment friendly.
1.2. OBJECTIVES OF THE STUDY:
The study specifically seeks to;
- To evaluate the determinants of foreign direct investment
in Nigeria. - To trace the impact of foreign direct investment in Nigeria
1.3. METHODOLOGY OF THE STUDY:
The source of collection of data for this study will be secondary source such as Central Bank Of Nigeria(CBN) publications and statistical bulletin. The ordinary least square regression technique will be used to analyse the impact of the exogenous variables on the endogenous variables of the model.
HYPOTHESIS OF THE STUDY:
To carry out this study, the following hypothesis would be formulated:
H.0(Null Hypothesis): That Nigeria’s foreign direct investment inflow has no significant impact on the development of the Nigeria economy.
H.1 (Alternative Hypothesis):That foreign direct investment inflow has a significant impact on the development of the Nigeria economy.
1.5 . Scope and Limitation of the study:
The primary objective of this paper is to find the main determinants of foreign direct investments in Nigeria. In the process,a special effort is made to analyse the nexus between policy environment and foreign direct investment inflow in Nigeria,and explain the pattern of foreign investment flows
The study will basically cover a period of 24years(1986-2010). This study is limited to the determinants of foreign investment in Nigeria. A major constraint of the study is the short time needed to complete the study,and problem of consistent and accurate data.
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