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RESPONSIVENESS OF ECONOMIC GROWTH TO FOREIGN DIRECT INVESTMENT AND EXPORTS IN NIGERIA, 1989 - 2014

CHAPTER ONE

 INTRODUCTION 
 1.1 Background to the Study
 Nigerian economy is basically an open economy with international transactions constituting an important proportion of her aggregate economic activity. As a result of this, the economic prospect and development of the country like many developing countries rest critically on international interdependence. The Nigerian economy is significantly characterized by a large foreign sector, mostly in the form of foreign direct investments (FDI) exports and imports. Foreign Direct Investment (FDI) is perceived to have a positive impact on economic activities of the host country through various direct and indirect channels. According to the International Monetary Fund (IMF) 2001, and Organization for Economic Cooperation and development (OECD) 1996 definitions, foreign direct investment reflects the aim of obtaining a lasting interest by a resident entity of one economy (direct investor) in an enterprise that is resident in another economy (the direct investment enterprise). The “lasting interest” implies the existence of a long term relationship between the direct investment enterprise and a significant degree of influence on the management of the latter. A more simplified definition is given by World Bank (1996), as 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. 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 whereas ownership of less than 10% is recorded as portfolio investment. FDI comprises not only merger and acquisition and new investment, but also re-invested earnings and loans and similar capital transfers between parent companies and their affiliates. Strikingly, one of the most silent features of today’s globalization drive is conscious encouragement of cross border investments especially by transnational corporations and firms (TNCF). Many countries (especially developing countries) now see attracting FDI as an important element in the development process. This is most probably because FDI is seen as an amalgamation of capital, technology, marketing and management. It augments domestic investment, which is crucial to the attainment of sustained growth and development. Consequently, many developing countries have offered generous incentives to attract FDI inflows and in addition undertaken macroeconomic reforms geared towards creating an investor friendly environment. Nigeria as a country, given her natural resource base and large market size, qualifies to be a major recipient of FDI in Africa and in deed is one of the top three leading African countries that consistently received FDI in the past decade. How has this transformed the Nigerian economy in terms of growth and development? This question is at the hearth of many research studies. Asiedu (2003) maintained that the level of FDI attracted by Nigeria is mediocre when compared with the resource base and potential need. Most of the previous 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. Similarly the determinants of FDI in one country may be different from one another and from one period to another. This position supports our study on the responsiveness of economic growth to foreign direct investment and exports, using Nigeria data for a specified period. Caves (1996) observed that the rationale for an increased effort to attract more FDI stems from the belief that FDI has several positive effects. Among these are productivity gains, technology transfers, and the introduction to new processes, managerial skills and technical know-how in the domestic market, employee training and international production networks and access to markets. Borensztein, Dee Gregoria and Lee (1998) see FDI as an important vehicle for the transfer of technology, contributing to economic growth in a larger measure than domestic investment. Findlay (1978) postulates that FDI increases the rate of technical progress in the host country through a “contagion” effect from the more advanced technology and management practicesused by foreign firms. On the basis of these assertions, governments have often provided special incentive to foreign firms to set up companies in their countries. Some foreign firms have taken advantage of these incentives to satisfy their various motives of ensuring stable monopolistic control over sources of raw materials for their parent companies, access to control of local markets, utilizing low cost labour and realizing the possibility of higher returns, and this has significantly constrained the economic growth and development of the host country economy. Carkovic and Levine (2005) reported that the economic rationale for observing special incentives to attract FDI frequently derives from the belief that foreign investment produces externalities in the form of technology transfers and spillovers. Curiously the empirical evidence of these benefits both at the firm level and at the national level remains ambiguous. De Gregorio (2003) while contributing to the debate on the importance of FDI notes that FDI may allow a country to bring in technologies and knowledge that are not readily available to the domestic investor and in this way increase productivity growth throughout the economy. FDI may also bring in expertise that the Country does not possess and foreign investors may have access to global markets. There is a widespread view that the responsiveness of foreign direct investment (FDI) to economic growth is ambiguous, Gorg and Greenaway (2004). Although, most of such work is not situated in Africa. However, the focus of most research work on FDI and economic growth can be broadly classified into two; first, FDI is considered to have direct impact on trade through which the growth process is assured, Makussen and Vernables (1998). Second, FDI is assumed to augment domestic capital thereby stimulating the productivity of domestic investments, Borensztein et al (1998) and Driffield (2001).

Project detailsContents
 
Number of Pages124 pages
Chapter one Introduction
Chapter two Literature review
Chapter three  methodology
Chapter  four  Data analysis
Chapter  five Summary,discussion & recommendations
ReferenceReference
QuestionnaireQuestionnaire
AppendixAppendix
Chapter summary1 to 5 chapters
Available documentPDF and MS-word format


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