ATTENTION:
BEFORE YOU READ THE
PROJECT WORK, PLEASE READ THE INFORMATION BELOW. THANK YOU!
TO GET THE FULL
PROJECT FOR THE TOPIC BELOW PLEASE CALL:
08068231953,
08168759420
TO GET MORE PROJECT
TOPICS IN YOUR DEPARTMENT, PLEASE VISIT:
THE DETERMINANT OF FOREIGN DIRECT INVESTMENT IN
NIGERIA
ABSTRACT
The research investigates the determinants of foreign direct investment
(FDI) in Nigeria over the period for 1980-2007. Cochrane Ocutt method of
regression was utilized in the study. The findings indicate that exchange rate
(economic factor) and political instability are the crucial determinants of FDI
in Nigeria.
Domestic market size (represented by GDP), openness to trade and
inflation are insignificant determinants of FDI.
The regression model however, showed a significant fit with f-value of
36. 521 and adjusted R2 of 0.93 at 0.05 confidence level. It was also observed
in the result that the behaviour of GDP and inflation to FDI is contrary to
theoretical and empirical expectation of positive and negative relationship
respectively.
The findings suggest that policy measures, primarily directed at
efficient exchange rate management and minimal political risk, would promote
FDI flow in the country.
TABLE OF CONTENTS
Title Page
Table of Contents
Abstract
CHAPTER ONE: BACKGROUND OF STUDY
1.1
Introduction
1.2
Statement of
problems
1.3
Objective of the
study
1.4
Hypothesis of the
study
1.5
Significant of the
study
1.6
Scope to the
study
1.7
Limitation of the
study
1.8
Methodology of the
study
CHAPTER TWO: LITERATURE REVIEW
2.1 Conceptual frame
work
2.2 Foreign investment policy in
Nigerian
2.3 Trend and composition of foreign
investment
2.4 Determinants of foreign
investment
2.5 Foreign investment inflows volatility and
its impact
2.6 Foreign investment and economic development
in Nigeria
CHAPTER THREE: RESEARCH MODEL SPECIFICATION
3.1 Theoretical Framework and Model
Specification
3.2 Model
Specification
CHAPTER
FOUR: PRESENTATION AND ANALYSIS OF
REGRESSION
4.1
Introduction
4.3 Analysis of regression
result
4.4 Policy
implication
CHAPTER
FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary of
findings
5.2
Conclusion
5.3
Recommendations
Bibliography
Appendixes
CHAPTER ONE
1.0
BACKGROUND OF STUDY
1.1
INTRODUCTION
Growth in
neoclassical theory is brought about by increase in the quantity of factors of
production in the efficiency of their allocation. In a simple world of two
variables, labour and capital, it is often presumed that low income countries
have abundant labour but lees capital. This situation of domestic savings in
these countries places constraints on capital formation and hence growth. Even
where domestic input in addition to labour are readily available and no problem
of input supply, increased production may be influenced by scarcity of imported
inputs upon which the production processes in low income countries are based.
International capital
flows (ICF) readily becomes an important source or means of enhancing
developing countries to overcome their capital flow in foreign private
investment (FPI) other components are:
a.
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 Assistance (IDA) and the International Finance
Corporation (IFC) on concessional and non-concessional terms.
b.
Commercial loans including exports credit: Economic theory suggests that
capital will move from countries where it is abundant to countries where it is
scares. This pattern of movement will be informed by the returns of new
investment opportunities which are considered higher in cases where capital is
limited.
The
result capital relocation will boost investment in the recipient countries and
bring about enormous social benefits. With the advent of the third millennium
era, globalization has continued to accelerate. In the areas of international
trade and finance, many factors including accelerated privatization and
economic liberalizations have also pushed globalization in almost every nation
in the world. One important economic consequence of globalization for
developing countries has been massive and unprecedented inflows of foreign
capital during the final decade of the 20th century.
However, Private
Capital Inflows (PCI) wrested primacy place from public flows, seizing the
pre-eminent finance for developing countries. According to Weitz and Lijane
(1998), while official flows totaled $56billion in 1990, compared to $44billion
in private flow by 1996, public flows had declined to $41billion and private
flows grew to 244billion.
UNCTAD figures show
that in 1997, FDI inflow amounted to US $400billion and in 1998 rose to an
unprecedented level of US $440billion (Mallampally and Sauvant, 1999). Although
GDP have become widely dispersed among recipient countries in recent years, the
distribution is still skewed with Asia receiving the lion’s share of FDI flows
going to developing countries and Africa receiving little.
According to Mallam
Pally and Sauvant, among developing countries the distribution of the World FDI
inflows is uneven. In 1997 for example developing Asia received 22%, Latin
America and Caribbean 14% and Africa 1%. Another perspective on the skewness of
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 to almost the same dozen countries (Weizt and Lijane, 1998). Therefore,
the challenge to attract more inflows of foreign investment in developing
countries particularly those Sub-Saharan Africa has increased in recent years
due to the accelerating process of globalization.
According to Weitz
and Lijane (1998). Opening of a country requires investment for connecting the
necessary infrastructure such as roads, telecommunication, power plants and
financial system. Given the low income and low savings in many African
countries, the investment- savings gap has widened and little hope of closing
without the active involvement of private sector, both domestic and foreign.
1.2 STATEMENT
OF PROBLEM
Nigeria is believed
to be a high risk market for investment because of factors such as
bad governance, unstable macroeconomic policies among others. Since the
enthronement of democracy in 1999, the government of Nigeria has taken a number
of measures necessary to woo foreign investors into the country. These measures
include the repeal of laws that are inimical to foreign investment growth,
promulgation of investment laws, oversea trips of image laundry such as
“re-branding” campaign, among others.
Despite the plethora
of incentives, the performance of foreign investment in terms of quantum is
still very unimpressive and indeed disappointing in Nigeria. Therefore the
questions raised are:
i.
What are the major determinants of foreign investment inflow?
ii.
What is the likely impact of foreign direct investment on economic development
in Nigeria?
iii.
What is the policy framework of attracting foreign investment by the
government?
1.3
OBJECTIVE OF THE STUDY
The
study specifically seeks:
1.
To evaluate the determinants of foreign investment in Nigeria.
2.
To trace the impact of foreign investment in Nigeria.
3.
To review the trend of foreign investment inflows in the country overtime.
4.
To examine the issue of foreign investment volatility.
1.4
HYPOTHESIS OF THE STUDY
The following
hypotheses have been formulated and shall be tested for conclusive result on
the determinants of foreign direct investment (FDI). The hypothesis of this
study holds that:
1.
H0 (Null Hypothesis): That Nigeria’s foreign investment has
no significant impact on the development of the Nigeria economy.
2.
H1 (Alternative hypothesis): That foreign investment inflow has a
significant impact on the development of the Nigerian economy.
1.5
SIGNIFICANCE OF THE STUDY
Given the unprepossessing growth rate
of the Nigeria economy especially as she is interested in becoming one of the
20th largest economies in the world by the year 2020, the study will
focus on discovering the factors that will extend and enlarge the frontiers
investment flows in the economy.
This research will
serve as a good guide for monetary authorities and authorized players in the
external sector as it will portray at a glance the state of foreign investment
in Nigeria. There is no doubt that academics will also find it useful for
further research.
1.6
SCOPE OF THE STUDY
The primary
objective of this paper is to find the main determinants of foreign investment
in Nigeria. In the process, a special effort is made to analyze the nexus
between policy environment and foreign investment inflow in Nigeria, and
explain the pattern of foreign investment flows since it is not possible to
include all.
AFFILIATE LINKS:
Comments
Post a Comment