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Statistical Analysis Of The Impact Of Foreign Direct Investment (fdi) On Nigeria’s Economic Growth (1980 – 2012)
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CHAPTER ONE
INTRODUCTION
1.0 Background Information
Foreign
direct investment (FDI) are investments from other countries i.e
(abroad), it has been described as investment made so as to acquire
lasting management interest, for example, 10% equity share in an
enterprise operating in another country other than the investors country
(Mwilliama, 2003 and World Bank, 2007 ). In other word, foreign direct
investment implies foreign private investment. Foreign investment can be
defined as the package of foreign resources comprising equity capital,
reinvested earnings, or net borrowing of subsidiaries of foreign
companies from their parents companies or affiliates.
In Nigeria, FDI
is defined as an investment undertaken by an enterprise that is either
wholly or partly foreign owned. Foreign investment inflow, particularly
foreign direct investment (FDI) is perceived to have positive impact on
economic growth on the host country through various direct and indirect
channels. Some of the positive impact of foreign direct investment in a
country like Nigeria is in the area of employment creation, transfer of
technology, increased domestic competition and other positive
externalities (Anyanwala, 2007).
FDI augments domestic investment
which is crucial to the attainment of sustained economic growth and
development. Nigeria is one of the greatest economies with great demand
for goods and services and has attracted some FDI over the past decades.
In Nigeria foreign direct investment increased from less than
US$1billiion in 1990 to US$1.2 billion in 2000, US$1.9 billion in 2004,
US$2.3 billion in 2005 and US$4.5 billion in 2006 according to United
Nations Conference on Trade and Development (UNCTAD, 2007) and (CBN,
2006). As percentage of GDP, there has been a remarkable increase in FDI
in recent times. The portfolio investment has also followed in the same
direction, growing from US$0.2 billion in 2003 to US$0.92 billion in
2006 (UNCTAD 2007). Economic reforms and the resulting of macroeconomic
stability have been adduced as reason for this, all leading to high
confidence in Nigeria economy.
According to (UNCTAD, 2012), Nigeria
received a net inflow of US$85.73 billion of foreign direct investment
(FDI), much of which were from Nigerians in the Diaspora. Most FDI was
directed towards energy and banking sectors.
The Nigeria Enterprise
Promotion (NEP) Decree in 1972 (reviewed in 1977) was intended to
reduced foreign direct investment in the Nigeria economy, this type of
policy was not relevant in an economy with a rapidly growing force.
Although one may accept the rationale for the promulgation of that
decree, however, any exchange control policy that has the potential to
discourage foreign investment will counter productivity under this
present economic situation of the country. Hence the abrogation of the
NEP decree was therefore a step in the right direction.
Foreign
direct investment (FDI) is arguably an important source of employment
opportunities for developing countries like Nigeria; hence it is
imperative that the federal government promote a healthy private sector
that can earn a reasonable rate of return.
Developing countries that
wish to attract foreign direct investment (FDI) inflow should consider
measures such as establishing a transparent legal framework that does
not discriminate between local and foreign investors, adopting liberal
foreign regime e.g. regime without large gaps between official and
market rates, creating simple investment friendly regulations and
institutions and effective administering them such that the rate of FDI
inflow into the country will improve appreciably.
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ABSRACT - [ Total Page(s): 1 ]This research examined the impact of foreign direct investment (FDI) on the growth of Nigeria economy. According to (UNCTAD 2012) Nigeria received a net inflow of US$85.73. Unlike other studies this research extended the period of investigation to 2013 given that the Nigeria economic environment under investigation most likely has changed over the years.The research employed ordinary least square (OLS) regression technique to analyze the time series data from 1980 – 2013, GDP and CPNG whe ... Continue reading---
