Abstract
The study examined the impact of foreign direct investment (FDI) in Nigeria
over the period 1980 to 2010. The study employed multiple regressions in
analysis, using the ordinary least square (OLS) regression technique. The
result at this revealed that FDI impacted positively on the growth of the
Nigeria economy over the period under study. Based on this, the study
recommended the provision of adequate infrastructure and policy framework
that will be conducive for doing business in Nigeria, so as to attract the
inflow of FDI necessary to stimulate growth.
Since the attachment of independent in 1960 various policies of the Nigeria
government have been geared essentially towards promoting the growth and
development of the Nigeria economy by influencing the trends of gross fixed
domestic investment or indirectly through policies aimed at stimulating the
flow of foreign finance in any growing economy. This is so given that in the
literature there are divergent views on the nature of effects of foreign direct
investment has been argued to be the most growth stimulation source of
foreign finance in any growing economy. This is so given that in the
literature there are divergent views on the nature of effects of foreign direct
investment on host economics. Those that are of the view that foreign direct
investment produce positive effects on host economics argue that some of
the benefits are in the form of externalities and the adoption of foreign
technology, employers training and the introduction of new process by the
foreign firms according to Ayadi, (2002) foreign direct investment
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especially when it flows to a high risk area of new firms where domestic
resource is limited.
The first national development plan was launched for industrial trade off and
developments however as foreign industrial investors were. Rather apprehensive
of the nascent independent administration efforts had to be made not only to
alloy their fears of nationalization but also attract additional foreign investment
through joint venture with individuals or the state. However Nigeria economy
has been one of the important destination points of foreign direct investment in
sub-Saharan Africa. The amount of foreign direct investment inflow into Nigeria
according to ayadi (2002) has reached US $ 2.23billon in 2003 and it rose to US
$ 5.31billons in 2004 (9.13% increase) the figure rose again to US $9.92 billion
(87%increasing) in 2005. The figure however declined slightly to US $ 9.44
billion in 2006.
Nigeria is argued to be buoyantly blessed with enormous mineral and human
resource but believed to be highly risky market for investment. Also decade of
bad governance have almost crippled. The national economy with corruption and
misappropriation is of fund becoming the norm rather than expectation. What is
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the way out of this economic state? Many experts accepted that foreign direct
investment. Is a verifiable boaster to kick start the economy. According to Odozi
(1995) foreign investment appears to be the most. Crucial component of capital
inflows and Nigeria should seek to attract in light of her current economic
circumstance. Some scholars are of the view that Nigeria. Is in need of foreign
direct investment as a verifiable boaster of the Nigeria economy while others are
of the view that foreign direct investment is a form of neo- colonialism to what
extent. Has foreign direct investment helped. The economic growth in Nigeria.
1.2 STATEMENT OF PROBLEM:
One of the major economic problem in less developed countries (LCD) is
low capital formation to finance the necessary investment for economic
growth.
Capital was one regarded by most economists as the principal obstacle to
economic development and this is lot attentions were paid to capital
formation. The role of capital in economic growth is still regarded as very
crucial both the theory of ‘big push’ and the concept of ‘vicious cycle’ all a
test to the crucial role of capital in the growth process. The theory of ‘big
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push’ simply state that the stagnant and undeveloped economies need huge
and sudden injection of large capital from foreign direct investment.
However in the literature FDI is found to be related to export growth while
human capacity building is found to be related to FDI floe.
Most studies on FDI and growth are cross country studies. However FDI and
growth debates are country specific. Among Nigeria studies like those by
otepola(2002) oyeyide(2005), Akinlo(2004) examined the importance of FDI
on growth for several period and the channel through which it may be
benefiting the economy.
In the literature there exist a direct positive link between export growth and
the growth of an economy. This growth in export can further be traced down
to the level of investment which in most cases can be domestic or foreign
investment.
This is so given that foreign capital remains the sure best option of filling the
saving investment gap where it exists. Given this fact assessment will be
based on the existing link among investment, export, exchange rate and
economic growth.
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These problems therefore raise the following research question.
1. What is the impact of foreign direct investment to the growth of
Nigeria economy?
1.3 OBJECTIVE OF THE STUDY
The objectives of the study are as follow
1. To find out whether or not FDI has a significant impact on the growth of the
Nigeria economy.
2. To determine the nature and magnitude of the impact of FDI on economic
growth in Nigeria.
1.4 STATEMENT OF THE HYPOTHESIS
H01: FDI has no significant impact on the growth of the Nigeria economy
H02: The nature and magnitude of FDI on economics growth in Nigeria
cannot be determined.
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1.5 SCOPE/ THE LIMITATION OF THE STUDY
The focus of the study is to verify if there has been any contribution made
toward the economic growth and development of the Nigeria economics via
gross domestic product (GDP) through foreign direct investment for the
period.(1990-2010)
This study will however be limited to investigate the impact of foreign direct
investment on the growth of the Nigeria economy.
1.6 SIGNIFICANCE OF THE STUDY
Finding from the study will be of immense benefits in a number of ways and to
different groups of persons.
1. For policy making, the expected result outcome shall serve as a riseful
guide for future policies as it relates to stimulating growth within the
economy.
2. For further studies, it will serve as a reservoir of knowledge for such
academic exercises