THE IMPACT OF DIRECT FOREIGN
INVESTMENT ON THE NIGERIA ECONOMY
(A CASE STUDY OF
JOHN-HOLT INVESTMENT COMPANY LOKOJA)
BY
YAKUBU HARUNA
2009/HND/BUS/130
A PROJECT SUBMITTED TO THE
DEPARTMENT OF BUSINESS ADMINISTRATION SCHOOL OF MANAGEMENT STUDIES, KOGI STATE
POLYTECHNIC, LOKOJA.
IN
PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF HIGHER NATIONAL DIPLOMA
(HND) IN BUSINESS ADMINISTRATION
NOVEMBER, 2011
APPROVAL PAGE
This
is to certify that this project has been for meeting the requirement for the
award of Higher National Diploma (HND) in the Department of Business
Administration, Kogi State polytechnic, lokoja.
________________ ______________
Mr.
A. A. Oguche Date
Head
of Department
________________ _____________
Mr.
Sani . I Date
Project
Supervisor
_______________ ______________
External
Examiner Date
DEDICATION
This
project work is dedicated to Almighty God, who is the author and the finisher
of my faith, the beginning and the end.
ACKNOWLEDGEMENT
“Except the lord build the house, they labour
in vain those building it”. It is neither by my power nor by my strength. The
struggle has been tough and the road rough, but a glorious journey at last by
the special grace of Almighty Allah.
In
undertaking this project work I have inevitably become indebted to my parent
Late Mr. Mustapha Yakubu and my caring mother Mrs. Afusat Mustapha and also to
my Honorable supervisor Mr. Sanni I. Who through his excellent knowledge
thoroughly supervised the manuscript of this project work. I therefore express
my sincere and unflinching thanks to him. More Greece to your elbow, Allah will
reward him mightily.
I
am also indebted my unflinching thanks to my lovely fiancé Ahjia Kofoworola
Wulemat Alasinrin for her support may God continue to bless her (Amen).
Conclusively,
my sincere appreciation also goes to these cordial friends of mine for their
moral, and professional advices as well as their financial assistance, such as Sunday Shadow, Simon shadow, prince Jimoh
Owosuyi, Denis Parishe, Sk2Go, and other may Almighty Allah continue to see you
through in all your endeavour in life (Amen).
ABSTRACT
Chapter
of this project deals with the general overview of the impact of direct foreign
investment company lokoja Kogi state. The researcher appraisals in the foreign
investment, background of the study, objectives, problems, prospect and
implementation, consequently, the researcher delved into the roles of direct
foreign investment in the economic development of the country. Conclusively,
opinion was sampled out that the foreign trade, John Holt company lokoja
particular in Kogi state is fast becoming a global village and competitions is
becoming strong and move pronounced day in day out.
TABLE OF CONTENT
Title
page - - - - - - - - - i
Approval
page - - - - - - - - - ii
Dedication
- - - - - - - - - - iii
Acknowledgement - - - - - - - - - iv
Abstract
- - - - - - - - - - v
Table
of Content - - - - - - - - - vi
CHAPTER ONE (INTRODUCTION)
1.1.
Introduction - - - - - - - - 1
1.2.
Background of the Study - - - - - - - 1
1.3.
Statement of the Problem - - - - - - - 3
1.4.
Purpose of the Study - - - - - - - 4
1.5.
Significance of the Study - - - - - - - 5
1.6.
Research Hypothesis - - - - - - - 5
1.7.
Scope of the Study - - - - - - - - 5
1.8.
Limitation and Constraints of the Study - - - - - 5
1.9.
Definition of Terms - - - - - - - - 6
CHAPTER TWO REVIEW OF RELATED LITERATURE
2.1.
Theory of Investment - - - - - - - 8
2.2.
Dependency Theory of Underdevelopment - - - - 9
2.3.
Foreign Investment - - - - - - - - 10
2.4.
Direct Foreign Investment - - - - - - - 12
2.5.
Merit of Foreign Investment - - - - - - 14
2.6.
Demerit of Direct Foreign Investment - - - - - 15
2.7.
Economic Growth in Nigeria - - - - - - 17
2.8.
Foreign Capital and Aid in Nigeria’s Economic
Growth - - 18
2.9. Macro-Economic Policies and Enabling
Environment for Direct
Foreign
Investment in Nigeria - - - - - - 20
2.10
Deregulation of Financial System - - - - - 21
2.11 Promotion of Direct Foreign Investment
in Nigeria’s for Economic
Growth. - - - - - - - - - - 23
2.12
The Impact of Direct Foreign Investment Growth From 1980 to Date - 25
CHAPTER THREE RESEARCH METHODOLOGY
3.1
Design of the Study - - - - - - - - 31
3.2
Area of the Study - - - - - - - - 31
3.3
Population of the Study - - - - - - - 31
3.4
Sample of the Study - - - - - - - - 32
3.5
Administration and Retrieval of Instrument - - - - 32
3.6
Problem of Methodology - - - - - - - 32
3.7
Method of Data Analysis - - - - - - - 33
CHAPTER FOUR (DATA PRESENTATION AND
ANALYSIS)
4.1
Data Presentation and Analysis - - - - - - - 34
4.2
Test of Hypothesis - - - - - - - - 40
43
Discussion of Findings - - - - - - - 43
CHAPTER FIVE (SUMMARY CONCLUSION
AND RECOMMENDATION)
5.1
Summary of findings - - - - - - - - 44
5.2
Conclusions - - - - - - - - - 44
5.3
Recommendation - - - - - - - - 45
Bibliography
Appendix
CHAPTER ONE
1.1. INTRODUCTION
Direct
foreign investment (DFI) is one of the veritable tools usually applied by
multinational corporations (MNCs) to explore opportunities in host countries
such opportunities as attracting new sources of demand, enter market in which
superior profits are possible, also fully benefit from economies of scale,
utilize foreign materials, use foreign technologies, react to trade
restrictions and many more.
Direct
foreign investment carries managerial control. That is to say, MNCs brings
their plants to the host countries to produce their products and they have
control over their branches. DFI became possible because trade barriers were
removed in South American countries, Europe and Africa.
DFI,
whether by joint venture with foreign firms or through acquisition of foreign
firm and formation of new foreign subsidiaries it requires a substantial
investment and can therefore place much capital at risk. Moreover, when the
investment does not perform as well as expected, the MNC may be unable to
easily sell the foreign project created.
Given
this return and risk characteristic of DFI, the researcher intend to examine
the impact of direct foreign investment on the Nigeria economy. Using John Holt
investment company lokoja branch as a case study.
1.2. BACKGROUND OF THE STUDY
Direct
foreign investment can be regarded as the key to development. Foreign trade in
Nigeria was at the hire hold of independence, economic activity before
independence was almost wholly commercial, since the role of the colonies was
that of produces of raw materials and consumers of finished foreign trade
investment naturally. Therefore the early effort of foreign trade investment
were to foster the substitution of locally produced goods for imported ones such
that the case of this research work (John Holt Company) was not undermined.
This
import substitution foreign investment strategy was a dominant feature of the
Nigeria efforts; it has since then be programmed to include the production of
some intermediate goods. The foreign trade investment policy and objective of
the Nigerian government emphasized that the direction of action in its foreign
investment sector shall be to encourage and promote directly and indirectly the
rapid development of manufacturing and allied economic prosperity of the
nation. This will also create positive input into the attainment of vital
social goods.
It
is not an over statement to say that (John Holt company) has contributed to the
achievement of the direct-foreign investment policy objectives as it has been
to achieve an accelerated pale of foreign development by making the foreign
investment sector the prime mover of the economic. The objective conceived by
the Government could only be achieved by taking into consideration many factors
which were topmost in the list. The economic factors that have affected
economic development and growth in Nigeria can be segregated into internal and
external data beat to the oil boom of the 1970s when crude petroleum export
began to gain as condense in foreign exchange earning and as the main source of
government revenue. The oil sector which accounted for 22% of the Gross
Domestic product provided about 80% government revenue and over 96% of export
earning in 1980 as the result of increase of the government revenue form oil
agriculture was neglected. The share of the agricultural sector in Gross
Domestic product fall from 40% in the early 1970s to 20% in 1980s. Nigeria
become dependent on imported food and agro-allied inputs. The need for foreign
capital earning then arose in the country for economic development and growth
foreign capital can enter a country in the form of private foreign capital many
take the form of direct and indirect investment.
According
to Simon (1996), Direct foreign investment means that the concern of the
investing country exercise the factor or dejure control over the assets created
in the capital importing country by means of the investment. The impact of the
direct foreign Investment on the Nigeria economic via John Holt company may
take many forms such as:
(i)The
formation in the capital importing country of a company of the investing
country.
(ii)
The formation in the capital importing country of a company financial
exclusively by the present concern situated in the investing country.
(iii)
The formation of a concern in which a company of the investing country has
majority holding.
(iv)
Setting up a corporation in the investment Country
for the specific purpose of operating in the other concerns.
(v)
The creation of fixed asset in the country by the national of the investing
country, such companies or concerns are known as transactional corporation or
multinational corporations.
The
researcher actually went to examine properly the nature objective and effects
of direct foreign investment in the economic growth of Nigeria. This will
enable the researcher to make capital into our economic through direct foreign
investment. There are among other challenging factor about direct foreign
investment on economic growth of the country.
1.3. STATEMENT OF PROBLEMS
In
any company regardless of the type and size, the need for the contribution of
direct foreign investment cannot be over emphasized in order to create a
lasting impact to the effectiveness and requisite skill by those involve in the
company.
However,
it requires both Manual, conceptual and social skills which can be learnt on
order to cope with various problem in the company.
John
Holt Company Lokoja, Kogi State has the responsibility of providing higher quality
of service to the development of Kogi State for the company to function
effectively, the company should adequately and persistently involve in training
of staff in order to control effectively the development of Kogi State economy.
Despite
the availability of both human and material resource for the contribution of
company to the development in Kogi
State yet their
performance was not encouraging. Therefore, the researcher was geared to
evaluate the causes of poor performance in order to recommend for improvement.
1.4. PURPOSE OF THESTUDY
The
purpose of this project is to study the impact of direct foreign investment in
Nigeria economic growth via John Holt Company generally. The following are the
major objectives of this study
(a)
.To examine the effects of direct foreign investment in
economic growth of the area.
(b)
To examine the types of direct foreign investment in
the area.
(c)
To create awareness of the performances of Nigeria
economic growth.
(d)
To make suggestions based on the research for
improvement of foreign investment in the area.
1.5. SIGNIFICANCE OF THE STUDY
This
research work, when completed will be of great importance to the students,
business society, future researchers and Kogi State
in general.
(i)
The result, suggestion and recommendation will assist
greatly in the management of business in our society and will avert its
failure.
(ii)
The project work is determined to present the true
picture of the impact of direct foreign investment in Nigeria economic and provides
reference point for future research work.
(iii)
Readers of this work might find it useful in having to
know more of the numerous facilities available for obtaining loans from both
foreign and local financial institutions to finance their business.
(iv)
Operators of the system will see from the work their
shortcoming and of options to remedy their shortfalls.
(v)
Those not aware of the various economic service
rendered by foreign investment for the purpose of developing the sector might
start to reap benefit of this research after reading it.
1.6. RESEARCH HYPOTHESIS
The
following are the assumption people have made about the impacts of direct
foreign investment in Nigeria’s
economic growth since 1980 till date. The researcher through the data collected
will definitely test the following hypothesis in order to accept or reject
them, the hypothesis are as follows:
1.
HO: Direct foreign investment has no
significant impact in Nigeria’s economic growth.
HI: Direct foreign investment
has significant impact in Nigeria’s
economic growth
2.
HO: Direct foreign investment has no
international impact on Nigeria’s economic growth.
HI: Direct foreign investment
has only international impact on Nigeria’s economic growth.
1.7. SCOPE OF STUDY
This
project work will be limited to the impact of Direct foreign investment on the Nigeria economic in John Holt Investment company
in Lokoja Kogi State.
1.8. LIMITATION OF THE STUDY
This
study has some shortcomings which arose as a result of problems encountered by
the researcher in the course of this work. The shortcoming of the study is
referred to as limitation of the study; the limitations were due to external
forces sources as follows:
(a)
Limited funds: Financial constraint narrowed my
visit to the company (John Hoit company Lokoja) as it supposed to be.
(b)
Limited time: couple with my official schedule
(Lecture time) this made it difficult for me to get enough time to gather
enough facts.
(c)
Poor co-operation or respondents: Respondent
when contacted are not ready to provide relevant information required, this
also posed a problem in carrying out the study.
1.9. DEFINITION OF TERMS
Some
key terms used in this segment or the study are further explained for proper
understanding, these include:
(1)
Direct foreign investment (DFI). Means that the
concerns or the investing country exercise the factor that control over the
asset created in the capital importing country by means of that investment in
the flow or capital, technology and enirepreneunal skills to the host economy
where they are combined with local factors in the production of goods and or
export market.
(2)
Dependency: is a situation in which the economy
of a certain country is conditional by the development and expansion of another
economy to which the former is subjected. It also means to describe certain
characterizes of the economy as a whole and is intended to trace certain
process which are casually linked to its underdevelopment.
(3)
Optimal Capital: it’s the function of expected
profit it the aggregate profit in the economy and business profit are arising
they may lead to the expansion of their continued increase in the future.
(4)
Foreign aid: it’s the floes from the done
country in the form of grants wants, technical assistance, contribution in kind
e t c to the recipient country invoices real cost for former and provide real
benefit to the later.
(5)
Data: it’s the art of gathering data relating to
the subject of a study.
(6)
Population: Refers to all member of element of
well defined group and it could be finite or infinite.
(7)
Research: it’s a frame work or plan usually as a
guide in the convection and analysis of data for a study it is also related to
the general approach adopted in executing the study.
(8)
Licensing: its obligates a firm to provide
technology (copyrights, patents trade-marks, or trade names) in exchange for
fees or some other specified benefit. For example, A&T and operate parts of
India’s
telephone system.
(9)
Franchising: its obligators a firm of provide a
specialized sales or service strategy, support assistance and possibly an
initial investment in the franchise in exchange for periodic fees.
(10) PORTFOLIO
INVESTMENT: This does not carry a managerial control, that is foreign
nationals just invest in share/stock or debenture; there rewards are inform of
retention of profit which contrive to grow for the owners over the years.
Portfolio
investment move to areas where they can get high returns for their investment.
CHAPTER TWO
LITERATURE REVIEW
2.1 THE THEORY OF INVESTMENT
The
profits theory regards profits in particular undistributed profit as a source
of internal fund for financing investment, investment depends on profits and
profits in turn, depend on income in this theory, profits relate to the level
of current profits and of the recent past. If total income and total profits
are high. The retained earning of firms are also high, and vice versa. Retained
earnings are of great importance for small and large firm when the capital
market in imperfect because it is cheaper to use them. Thus, if profits are
high, the retained earning are also high. The cost of capital is low and the optimal
capital is large. That is why firm prefer to re-invest their extra profits
making investment instead of keeping them in bank in order to buy securities to
give dividends to share holders. Contrariwise, when profits fall, they cut
their investment projects. This is the liquidly version of the profits theory.
Another
version in that the optimal capital stock is a function of expected profits. If
the aggregate profits in the economic and business profits are arising, they
may lead to the expectation of their continued increase in the future. This
expected profits are some function of actual profits in the past.
Edward
(1980:15) has developed the profits theory of investment in which total profits
vary directly with the income level for each level of profits, there is an
optimal stock. The optimal capital stock varies directly with level of profits.
The interest rate and the level of profits, in turn, determine the optimal
capital sock. For any particular level of profits, the higher the interest
rate, the smaller will be the optimal capital stock and vice versa.
2.2 THE DEPENDENCY THEORY OF UNDER 29TH
DEVELOPMENT
The
dependency theory start that the dependence of less developed countries (LDCS)
on developed countries (DCS) is the main cause for the under development of the
former. This theory of underdevelopment originated in the writings of a few
lasting America economists whose translations began to appear in English in the
mid 1960sand early 1970s.
The
prominent among them are frank Sunkel, Furtado, Santos, Emmanuel and Amin. The explanation of
dependency given by the various writers differs in degree only. Each tries to
pinpoint and specify certain which have been responsible for the
underdevelopment of LDCS by DCS. So there is a plurality of dependency views;
different are accorded the concept of dependency, and different analyses are
offered to explain underdevelopment as a result of the interplay between
internal and external structures. As there are varieties of dependency, theory,
the researcher with briefly discuss the views of the main writers in the form
of certain characteristics.
According
to the Dependency economists (1985) the whole world is divided between two
stets of countries; DCS (developed countries) and LDCS (less developed
countries). The former are in the centre (Westan Europe, and the United State)
and the latter are in the periphery back word counties of Asia, Africa and
Latin America) frank calls the DCS as metropolis and LDCS as satellite
countries others call the former as nominal and the latter as dependent
countries. There are unequal centre periphery relationships where by LDCS are
dependent on DCS in trade investment, technology etc. this dependence result in
underdevelopment of the periphery because the centre is dominated by the
powerful capital countries that exploit the their benefit.
There
is only one specific definition of dependency to be found in the literature of
dependence. This is by DOS Santos (1970:17) According to him, dependency is “a
situation in which the economy of the contain countries is conditioned by the
development and expansion of another economy to which the former is subjected.
A dependent relationships between two or more economies one “when some
countries (the dominant ones) can expend and be self sustaining, while other
countries (the dependent ones) can do this only as reflection of that
expansion, which can have either a positive or negative on their immediate
development”
But
there is no unanimity among economists above the meaning of dependence because
of differences among them about the relative role of various futures of
dependence which have caused underdevelopment of LDCS. Sanjay lack (1975:18)
point out in this context: “ one sometime, gets a circular manner” LDCS are
poor because they are dependent, and any characteristics that they display
signify dependence”
Thus,
according to lack (1975:20) in the usage of the dependency school, dependence
is meant to describe certain characterizations (economic as well as social and
political) of the economy as a whole and is intended to trace certain processes
which are casually to linked to its underdevelopment and which are expected to
adversely affect its development in the future”.
2.3 FOREIGN INVESTMENT
MYRDAL
(1970:20) wrote that “foreign capital can enter a country in the form of
private foreign capital may take the form of direct and investment”,
The
researcher agreed with the assertion that foreign capital enters any country
through investments. The researcher was impressed in the manner the writer
discussed different methods by which foreign investment are brought into a
country.
The
writer further discussed the meaning of direct foreign investment and indirect
foreign investment means that:
“The
concerns of the investing country exercise the fact or dejure control over the
assets crated in the capital importing country by means of that investment.
Direct foreign investment may take many forms.
a.
The formation in the capital importing country of a
subsidiary of a company of the investing country.
b.
The formation of a concern in which a company of the
investing country has a majority holding.
c.
The formation in the capital importing country of a
company excusive by the present concern situated in the investing country.
d.
Setting up a corporation in the investing country for
the specific purpose of operating in the other concerns.
e.
The creation of fixed assets in the other country by
the nationals of the investing country. Such companies or concerns are known as
transnational corporations (TNCE) or multinational corporations (MNCS)” Incase
of direct foreign investment better known as portfolio or guaranteed or renter
investment consist
“Mainly
or guaranteed by the government of the capital importing country, shares or
debentures by the nationals of some other country such holding do not amount to
a right to control the company. The shareholders are entitled to the dividend
only. In recent years, multilateral indirect investment have been evolved. The
nationals of a country purchase the bonds of the world bank floated for
financing a particular project in some less development counties”
Public
foreign capital may consist of:
a.
Bilateral hard loans
b.
Bilateral soft loans
c.
Multilateral loans
d.
Inter governmental grant”
The
researcher is of the view that foreign and refers to public foreign capital on
hard and soft terms in cash or kind and inter government grants the researcher
in this study is much concerned with direct foreign investment and their impact
in Nigerian economic growth. Under this last category are also included loans
made available by the various agencies of the United Nations. Foreign aid
refers to public foreign capital on hard and soft terms in cash or kind and
intergovernmental grants.
BAVER.A.
(1974:11) Writing on the role of foreign aid said.
Development
than private foreign capital. The financial needs of less developed country are
so great that private foreign investment can only partially solve the problem
of financing”
The
researcher accept that private foreign investment can only particularly solve
the problem of financing in less developed counties because most of these
financiers are profit motivate their
owners. For one thing, it has nothing to do with social expenditure in such
spheres as education, public health, medical programmed, technical training and
research that contribute to welfare of the citizen generally in the country.
Such schemes through indirectly contributing to economic efficiency and
productivity of the economy in the long-run yield no direct retunes and could
therefore be financed with the help of grant received from advance counties.
Further, private foreign investment pre-supposes the existence of basic public
services in less developed countries. But investment in them requires large
sums and risks which private capital is unable to undertake. So investment and
slow-yielding project can be possible only on the basis of foreign and moreover,
unlike private foreign investment, aid can be used by the recipient country in
accordance with its development programmers. Therefore, much cannot be expected
of private foreign investment.
2.4. DIRECT FOREIGN INVESTMENT
According
to Simon. U. (1996:22) Direct foreign investment is the extension of enterprise
involves flow of capital, technology and entrepreneurial skill to the host economy
where they are combined with local factors in the production of goods and or
export markets”
Amadi
(2002:22) defines direct foreign investment as the distinctive features of
multinational enterprise (MWE). It is not simply on international transport of
capital but rather the extension of enterprise from its home country.
According
to Hendrink (2001:23) defines directs foreign investment by private forms in
foreign countries, whereby the investors maintain some degree of direct control
of the investment project. The rule of thumb used most often is the foreign
firm at least 10% of the foreign project or enterprise.
Todaro
(1999:24) defines direct foreign investment as overseas investment by private
Multinational Corporation.
Also,
Anyanwu (1997:24) says foreign investment could be direct or portfolio
investment consist of investment by non citizen in the domestic economy. Direct
foreign investment is direct if it entails investment in physical asset in host
country by foreigners. Direct foreign investment is non-resident investment in
the form of a take over capital investment in physical asset in the host
country by the foreign investors.
According
to Lipsey (1997:25) Director foreign investment in non-resident investment in
the form of a take over capital investment in a domestic branch, plant, or
subsidiary corporation in which the investor has voting control.
Also
Direct foreign investment represents a variable of foreign exchange and
technological. Transfer, especially to developing courtiers. Direct foreign
investment is therefore a major component of the capital and financial account
of the nation balance of payment (CBN annual report and statement of account
2001)
At
the turn of the present century, direct foreign capital mostly flowed in the
form of indirect investments from Europe to the underdeveloped counties. Such
capital, as flowed to low income counties in the 1920s in the form of direct
investments went mainly into production for export. Very little of ill went to
manufacturing for the home market. But since the Second World War, over half
the foreign investment has been direct. Direct foreign investment has been
concentrated mainly in extraction of raw materials like iron, crude oil,
manganese, bauxitic, copper, electric energy etc. only a small percentage has
gone to manufacturing and distribution. Not antic the economy takes off that
direct investment is made in manufacturing, that is why direct investment in
manufacturing flow to those counties which are some what include strictly advanced
and have large domestic market.
2.5. MERITS OF FOREIGN INVESTMENT
Direct
foreign investment (DFI) possess advantages which are discussed as:
a)
DFI not only private finance but also managerial,
administration and technical personnel, new technology, researcher and
innovations in product and techniques of production which are in short supply
in less developed countries.
b)
This may in turn, encourage local enterprise to must
more itself in ancillary industries or in collaboration with foreign enterprise
infect, foreign enterprises encourages Local enterprise in two ways.
i,
Directly by fostering local enterprise will men money, material, importing
training and experience to its personnel.
ii,
Indirectly by creating demand for ancillary or subsidiary services (like transport
and training agents) which are uneconomical for direct foreign enterprise to
provide.
c)
By bringing capital and foreign exchange direct foreign
investment helps in falling the sayings gap and the foreign exchange gap in
order to achieve the goal of national economic development in less developed
countries.
d)
It part of the profits from direct foreign investment
is generally ploughed back into the expansion, modernization or development of
elated industries.
e)
Direct foreign investment add more value added to
output in the recipient country than the return on capital from foreign
investment. In this sense, the social returns are greater than the direct
returns on foreign investment.
f)
Direct foreign investment also being revenue to the
government of an less developed countries when it takes profits of foreign
firms or sets royalties from concession agreements.
g)
Direct foreign investment help in raising producing and
have the real wages of local labour, When foreign investment induced
industrialization take place, the real wages of the newly employed workers are
higher than the real wager of workers in the rural sector of the economy. If
direct foreign investment is in export oriented industries. It leads to much
higher social benefit than it is in import-substitution industries because the
former have large back ward and forward linkage effects. And if export
industries are labour intensive, they also provide large employment
opportunities.
h)
Direct foreign investment also place less burden on the
balance of payments of an under developed country in the early stage of
development. For the time lag between the starting of new business concerns and
the reaping of profits of profits in large.
Moreover,
profits are likely to be small in the earlier stage of production. Thus, the
remittance of profit from direct investment bring less pressure on the balance
of payment if direct foreign investment mainly flows into agriculture and
executive industries which produce primary goods for export, it further helps
in easing the balance of payments position of less developed countries. In the
case of a developing country like Nigeria, direct foreign investment
has a greater sanctuary effect on the balance of payments. Since to help in
producing manufactured articles, not only for the domestic market but also for
foreign markets.
(i)
Lastly direct foreign investment flowing into
developing country also encourages its entrepreneurs to must in other less
developed counties. Firms in Nigeria
have started in ECOWAS countries and other less developed countries while they
are still borrowing from abroad.
2.6. DEMERIT DIRECT FOREIGN INVESTMENT
Direct
foreign investment has certain disadvantage in the form of costs to the
recipient country which fund to off set its benefits,
(a)
The recipient country may be required to provide basic
facilities like land, power and other public utilities, rebate in distributed
profits, additional depreciation allowance, subsidized inputs etc. such
facilities and concessions involve cost in absorbing an less developed
countries resources that could be utilized elsewhere by the government.
(b)
To attract direct foreign investment less developed
countries have to provide sufficient facilities for transferring profits,
dividends, interest and principal. If these payments lead to a net capital out
flow, they create serious balance of payment difficulties. Thus, the indirect
costs of debt serving balance of payment adjustments create serious foreign
exchange crises, thereby, adversely affecting the national economy.
(c)
No doubt, direct foreign investment increase investment
employment income and saving less developed countries but it adversely affects
income distribution when it competes with home investment. Capital and other
resources may flow to foreign enterprises in preference to domestic enterprise.
This may reduce profits in the letter, thereby discouraging local enterprise.
(d)
Many foreign concerns in less developed countries,
reserve and savior executive posts for their national and pay them very high
salaries with may panics which are a huge train on the resources of the
recipient country. At best, they train local nationals for lower and middle
level posts having little in dependent decision making. Moreover, the loutish
spending habits of foreign national have an undesirable demonstration effect on
the nationals of less developed countries and create social tension.
(e)
Direct foreign investment bring in highly capital
intensive technologies which do not fit in the factor proportion of less
developed countries. Offer obsolete and discolored machines and technique are imported which involve high social cost
in terms of replacement after a few years.
(f)
Direct foreign investment also involve cost in the form
of a less of domestic autonomy when foreign firms interfere in policy market
decisions of the government of an less developed countries which favors the
foreign enterprises. Such interference is usually resorted to, by the
multinational corporations.
2.7. ECONOMIC GROWTH IN NIGERIA
One
of the most important objectives of macro economic policy in recent years has
been the rapid economic growth of an economy. According to etal (1999:26)
Defined Economic Growth: as “The process whereby the real percapital income of
a country increase over a long period of time”
The
researcher is of the opinion that economic growth is measured by the increase
in the amount of goods and services produced in a country. A growing economy
produces more goods and services in each successive time period. Thus growth
occurs when an economy is productive acidity increases which in turn is used to
product more goods and services. In its wider aspect. Economic growth implies
raising the standard of living of the people and reducing inequalities of come
deviation. All agreed that economic growth is a desirable goal for a country.
But, there is no agreement over the magic number of the annual growth rate
which an economy should attain.
Generally,
the economist believe in the possibility of continual growth. This belief is
based on the presumption that innovations tend to increase production
technologies of both capital and labour overtime. But there is every Luke hood
that an economy might not grow despite technological innovations production
highs not crease further due to the lack of demand which may return the growth
of the productive capacity of the economy. The economy may not grow further if
there is no improvement in the quality of labour in keeping with the new
technologies. Jhingan (1999) discussing economic growth in less developed
countries wrote that
“Growth is not limited because resources are
scarce in every economic. All factor have opportunity cost. To produce more of
one particular product will mean reduction in that of the other new
technologies lead to the replacement of old machines which become useless”.
The
research completely with the writer and adds that labour affects growth.
Workers are also displaced because they cannot befitted in the new
technological set up immediately. Moreover, rapid growth lead to urbanization
and industrialization with their adverse effects on the platen of living and
environment. People have to live in squalor and slums. The environment become
polluted, social tensions develop.
The
writer further stated that:
“growth
has other move basic effects on sure that unrestricted growth is worth all its
cost, since the price in terms of change in deterioration of or even
destruction of the environment is not get fully known. What does seem clear,
however, is that growth is not going to be halted because of environment problem
and that mankind must learn to cope with the problem or face the consequence”
The
researcher relating all the above to Nigeria monetary and fiscal
policies contribute towards growth by helping to maintain stability of privies.
By moderating economic fluctuation and avoiding recession these policies help
in achieving the growth objective. Since rapid and variable rate of inflation
discourage investment and adversely affect growth these policies help in
controlling inflation. And growth can be promote by a judicious mix of monetary
fiscal policies. So monetary and fiscal policies should be such as to encourage
investment and control economic fluctuation in order to promote growth.
2.8 FOREIGN CAPITAL AND AID IN NIGERIA’S ECONOMIC GROWTH.
Foreign
aid which floes form the donor country in the form of grants, loans, technical
assistance, contribution in kind etc to the recipient country involves real
costs for the former and provides real benefits to the letter.
Pincus
(1965:30) has measured the real costs of aid to the donor and real benefits to
the recipient of aid. He measures the real cost of capital flows for capital
exporter as the income he forgoes as a result of the out flow of capital, given
alternative possible use of the same funds. The real benefits for a capital
importer is measured by the net increment in income as a result of investing
the capital inflow received, as compared with making the same investing the
capital from alternative sources for measuring capital flows developed
countries to a less developed countries princess introduces the concept of a
grant equivalent. A grant is “a sort of gift from developed countries to a less
developed countries on which the latter is not required to pay any interest or
make repayment. A loan given by a developed country on terms such as lower
interest rate longer grace period and linger repayment period has some
confessional element as compared to a loan at commercial market terms”.
The
researcher is of the opinion that the above write failed to differentiate
properly between investment capital and aid from developed countries to less
developed counties. Also, the writer method of presentation of foreign aid and
grants was not quiet acceptable. Grant being freely given or a gift from
developed country to less developed countries does not sound economical without
implications. The fact is that the cost benefits analysis of foreign aid leads
to certain policy implications. Non-tied aid increases the real cost to the
donor. At the same times, tied and increase the burden of repayment for the
recipient and reduces the real benefit of the aid. It is therefore, advisable
that the recipient should insist on non-tied laid emphasis on the developed
countries to ease the terms and conditions of aid to the less developed
countries. They should adjust the aid that the grant equivalent per unit valve
of aid given should increase rather than deceive this argument gain greater
force from the fact that a number of less developed countries have very high
debt service obligations and they fund it difficult to replay their accumulate
debts.
Debts
service in such countries with essential imports for foreign exchange earnings,
thereby adversely affecting domestic savings, investment and hence development.
Therefore, the developed countries should raise the grant equivalent per donor
of foreign aid to the less developed countries it is better to change a rate of
interest lower than the rate of return on loan in the recipient country.
Further,
there is always the fear that the recipient may default on loan repayments.
Therefore, the donor should provide grant rather than loans. But due to
psychological and political reasons, it is in the interest of the recipient
country to produced itself loans rather than grants. As for as this study is
concerned, the researcher is highly concerned with the impact of direct foreign
investment.
2.9. MACRO-ECONOMIC POLICE AND ENHLINLG ENVIRONMENT
FOR DIRECT FOREIGN INVESTMENT IN NIGERIA.
A
conducive economic setting is indispensable for high investment and economic
growth. If good macro-foreign investment should be one characterized by
stabiles predictability. In addition the macro-economic environment be one
which.
i.
Promote locative efficiency
ii.
Encourage and reward individual initiative
iii.
Greater a more level playing field for the private
sector by dismantling monopolies and establishing more transparent regulatory
iv.
Promotes a stronger and sounder barmaids system that
prefect the saving of small depositors and elicits increased savings.
v.
Encourage greater transparency and accountability in
government and corporate affairs.
vi.
Reduce uncertainty so as to asseverate the investment
rewires to incentive packages.
SOUND MACRO ECONOMIC POLICES
According
to investment for government of formulate and implement sound macro economic
policies that promote growth through, who inflation, sound money, prudent
fiscal policies and a sustainable current account/balance of payments positive
should be designed to reduce instability endangered by externally generate socks.
REDUCTION IN EXTERNAL DEBT
Nigeria
high external debt stock and debt, service burden are also views as inhibiting
direct foreign investment. A reduction of external debt flow will be critical.
Consequently,
the authorities need to articulate creative strategies foe bring about debt
reductive so that the high debt stock and accompanying debt service burden do
not continue to reduce investment and haunters economic growth.
2.10. DEREGULATION OF FINANCIAL SYSTEM
DILL
and PRADHAN (1997:23) have established that if there is a financial
liberalization, market determined interest rates would result in modesty
positives interest rates. These in turn will increase the resource available to
the finical system, since bank deposit offer a completive return will attract
savings that were previous herd outside that formal financial sector.
More
so, positive real interest rates will provide an incentive for borrower to
invest in more productive thereby improving the productivity of the economy as
a whole. Consequently, financials liberalization should lead to increase in
both quantity and quality of financial intermediation by the burning system.
Financial
deregulation can be there, stimulate economic growth and development through
variety of channels. Since the financial system performs the vital function of
raising funds, for and channeling funds to productive investments, successful
financial liberalization is usually an important component of a country’s
strategy for economic growth.
Domestic
labour or other productive resources to carry out additional investment
projects. The importance of such capital goods would only redirect domestic
resources from other activities and probably lead to inflation. As a result,
excess foreign exchange, including foreign aid might be on the importation of
luxury consumption goods. Such a country is said to have a shortage of
productive resources, which from a different viewpoint can be regarded as a
shortage in savings. An outstanding example of saving gap analysis over look the
possibility that excess foreign exchange can be used to
purchase productive resources for example Saudi Arabia and Kuwiat used their
surplus providers to pay for hired labour from non-oil exporting countries in
the region and overseas. Saving-gap countries therefore do not need foreign
and. most developing countries, however, are assumed to fall into second
category, where the foreign-exchange gap binding. These counties have excess
productive resources (mostly labour) and cell available foreign exchange is
being used for imports. The existence of complementary domestic resources would
permit them to undertake new investment project. If they had the external
finance to import new capital goods and associated technical assistance. Foreign
aid can therefore ply a critical role in overcoming the foreign exchange
restraint and raising the real rate of economic growth.
Algebraically, the simple two-gap model can
be formulated as follow:
i.
The saving constraint or gap: starting with the
identify that capital inflow (the difference between import and exports) and to
investment resources (domestic saving) the saving investment restriction can be
written as KF + SY (1) where F is the amount of capital inflows. If capital
inflows (F) plus domestic saving (SY) exceeds domestic investment (I) and the
economy is at full capacity, a saving gap is said to exist.
ii.
The foreign-exchange constraint or gap: - If LDC
investment has a marginal imports share in typically raging from 30% to 60% in
most LDCS and the marginal propensity of import out of a unit of GNP (usually
around 10% to 15%) is given the parameter, M3, the foreign exchange
constraint of gap can be written as (M1
– M2) 1 + M2 Y-E < F _ _ _ (ii) where E
is the exogenous level exports. the term F enters both inequality constraints
and becomes the critical factor in the analysis. if F,E and Y are initially
assigned an exogenous current value, only one of the inequalities current
value, only one of the inequality will prove binding, that is, investment (and
therefore the output growth rate) will be constrained to a lower latter by one
of the inequalities, countries can therefore be classified according to whether
the saving of foreign- exchange constraint is binging mon-important from the
view point of foreign aid analysis is the observation that impact of increased
capital inflows will be greater where the foreign exchange gap (equation (ii))
rather than not imply that savings-gap model simply provide a grade methodology
for determine the relative need and ability of different LDC to use foreign aid
affectively as a means of economic growth.
The problem is that such gap forecast are
very mechanistic and themselves constraints by the necessity of fixing amount
and net capital inflow. In the case of exports, this is particularly
constricting because of a liabilities of trade relation between the develop and
developing word would contribute more toward relieving foreign –exchange gaps
then foreign aid.
Although E and F are substituted in the
equation
(ii)
They have quite different indirect effect especially in the case where F
represents interest-bearing loans that need to be rapid. Thus the
alteration-loans that and exports parameter through both LDC and MDC government
policy and in reality determines whether the savings or foreign exchange
constraints is restricting the further growth of national, infant output) or
infant whether neither is binding).
2.11. PROMOTION
OF DIRECT FOREIGN INVESTMENT IN NIGERIA’S FOR ECONOMIC GROWTH.
vakil
(2006:70) wrote that, Each country has to work out its own salvation
particularly to find out which production method are feasible for it. The
following techniques for use in underdeveloped country (a) those which can be
easily learnt in a short time (b) those requiring investment specialist on
skilled labour(d) this saving scarce resources rather than labour and finally
those which raise the level of production and increase supply of minerals or
electricity”.
The researchers accept that those points
are the guidelines towards the use of appropriate technology in developing
countries in keeping with their local condition by direct foreign investor. The
researcher is of the opinion that each host country must provide foreign
investment through proper choice of appropriate and relevant technology.
AUBREY (1951:50) emphasizes: it may be
sound procedure to improve technology step by step in many place at one, rather
then to a specific area”.
The researcher is of the opinion that
countries intending to accept direct foreign investment must consider the
invites idea as advantages in many ways it spread the benefits occurring more
equally over the entire populations in skill formation at al level of worries
and the size of market. It promotes more employment, better distribution of
wealth and paves the ways towards self sufficient. Also the host country as the
recipient of direct foreign investment must identify areas of needs and
encourage investment in such areas only. The strategy of gradual change over
from capital light and labour intensive method is best suited to underdeveloped
countries in the early stages of industrialization. Government must have a
policy that will not only economics the use of available natural resources but
will also create large employment opportunities. By increasing the supply of
agricultural and manufactured consumer goods, it will obviate the necessity of
importing food and raw material by the direct foreign investors into the
country. It will not be essential to import much capital goods. If they are
available within the country. Thus, this strategy in the choice of direct
foreign investment technology will to end to check inflationary tendencies and
balance of payments difficulties inherent in the development process.
Some of the advantages or benefit of direct
foreign investment in Nigeria
are:
i.
It helps promote growth I.e increasing labour force
skill, promoting competition and facilitation the transfer f technology.
ii.
It in turn encourages local enterprise to invest more
itself in auxiliary industries or in collaboration with foreign enterprise.
infact, foreign enterprises encourage local enterprise in two ways directly by
creating demand for auxiliary or subsidiary services (like transport and
training agents) which are economical for private foreign enterprise to
provide.
iii. The
inflow of DFi in Nigeria
has help in raising productivity and hence the real wages or local labour. When
direct foreign investment includes industrialization task place, the real wages
of the newly, employed workers are higher than the real wages of workers in the
rural sector of the economy. If DFI is in export oriented substitution
industries, it leas to much higher social benefits than if it is in
import-substitution industries are labour intensive they also provide larger
employment opportunities.
iv. The
inflow of DFI into Nigeria
added to output of Nigeria
than the return on capital from foreign investment. In this sense, the social
returns are greater then private return on direct investment.
v.
DFI also bring revenue to government, when it takes
profit of foreign firms or gets regalities from concession agreements.
vi. Also,
apart from profit from direct foreign investment generally ploughed back into
the expansion, modernization or development or related industries.
2.12 THE IMPACT OF DIRECT FOREIGN INVESTMENT GROWTH FROM 1980 TO DATE
Kozlor.M.
(1977:33) wrote the impact of direct foreign investment growth
“The
underdevelopment theory and dependency schools have been criticized for wishing
away class analysis and exploitation and for taking nation to nation
exploitation as the most important issue in analysis. They have also been
accused of denying life and internal dynamics to capital form action,
accumulation and internalization of Local Social Classes in the colonies-hence
their compradorization of the state and economy, however, underdevelopment
theory and the dependency school have helped underline the fact the
incorporation of the third world into the capitalist system and the creation of
metropolis and satellite or centre and periphery relationship. They also
“emphasize the role of transaction corporation (TWLCS) or multinational
accumulation exploitation and politics the world”.
The
researcher is the opinion that the entire modernization written showed much
impacts of direct foreign investment is not only Nigeria economic growth but its
total impacts on economy of less developed countries. Although the writer
fancied to tell us how direct foreign investment penetrated into
socio-political and other areas of the countries it is clear that direct
foreign investment has more than economic impact on Nigeria.
GUNDER
(1979:40) on his own perspective wrote that:
“the
under development and the consequent dependence of most third world countries
is as a result of their internal contradictions. To them thus problem can be
explain by their lack of lose integration, diffusion of capital, technology and
institutions, etc. to this world view, therefore, a way out the problem is for
their world countries to seek foreign assistance, aid loan, INVESTMENT and
unhindered operations of the multinational corporations (MINCS)”.
The
researcher is of the opinion that the entire modernization school of thought is
all about this the study by W.W. Rostow (1960:40) is the most arrangement
celebration of modernization theory from the economic development stand point
it is argued:-Development can come through the multinational corporations
mechanism for transferring technology, capital and skill in management design
and marketing. However, the current forms and penetration of foreign monopoly
capital in developing countries in the major cause of their under development
and dependency. The pain of procuring loan from the world bark and the IMF with
stringent conditionality by the third word countries. Also foreign aid and
technical assistance have found to further deepen the under development of
third world countries”24
A
critical look at the foregoing conditionality will reveal their pernicious
impact on the third world countries who are caught in a debt traps and who have
to take these bitter pick. Adoption of any policy measures and imitative
couched in economic liberalism has further pauperized third world countries of
which Nigeria is among and made their crises assume a tragic tragic proportion,
especially under the renewed globalization policy. The call for new
international economic order (NIEO) by the third world countries and the
various come convention have all been met with rhetoric. The net effect of the
activates of the world Bank and the IMF has been that the control of the
commanding height of most third world economics are in the hands of those
multination (MNCS), As a mother of fact, policies in most third word countries
are no longer autonomous, they are externally initiated, packaged and closely
monitored by the west.
In
a nutshell, the activities of the world Bank and the IMF have in recent times,
further contributed to the under development of the third world countries and
have made than to be more dependence on and subservient to the west. The
activities of multinational corporation have much wider impacts as means of
direct foreign investment is socio-economic and political under development of
the third world countries.
Dependency
ecologists like Frank, Amin and Fernando hold the present economic and
socio-political conditions prevailing in Nigeria and other less developing
countries are the result of a historical international process.
According
to Dos Santos (919970:50)” development emerged as a global historical
phenomenon as a consequence of the formation expansion and consolidate of the
capitalist system known as dependent capitalism.
The
researcher is of the opinion that both the developed countries are integral
parts of the capitalist system. But the global system in such that the
development of the less developed countries.
According
to Frank (1976:50 “the word capitalism system which produced the under
development in the present”.
This
has led to what frank call “the development of under development”. Frank traces
the process of development of under development of the less developed countries
have been incorporated into the world economy since the early days colonialism.
At the second level, such less developed countries have become capitalist economics
through incorporation into the world economy. At the third level, the
incorporation of less developed countries in the world economy has led to
metropolis-satellite in which the surplus generated at each level in the less
developed countries is successively drawn off the developed countries is
impoverished and the developed countries is enriched.
According
to Amin (1977:530 capitalist relations are introduce in the less developed
countries by the developed countries. It leads to dependent development which
is an inappropriate pattern of development imposed upon the less developed
countries by the developed countries. In such a system, the less developed
countries by the developed countries, economies are without any internal
dynamism of their own and are dominated by absentee capitalist of the less
developed of the developed economy. The development of the developed countries
and their dependence on the developed countries”
Todaro
(1994:57) call “the neo-classical appendence model which contributes the
existence and continuance of third world under development primarily to the
historical evolution of highly unequal international capitalist system of rich
country poor country relationship”.
The
researcher draws conduction from all the above that less developed countries
are hearing dependent on the developed courtiers for foreign capital foreign
capital leads to external orientation of less developed countries by exploring
primary commodities, imparting manufactures and making then dependence for industrialization
of their economies.
According
to sunkel (1969:30) it is the stagnation of agriculture high concentration of
primary commodities for exports, high foreign exchange contents of
industriazation and growing fiscal deficit in the less developed countries
which necessitate foreign financing for their. In this worlds.
“It
is this aspect which finally sums up the situation of dependence, this is the
crucial; point in the mechanism of dependence”.
The
researcher is of the opinion that foreign investors exploit less developed
countries including Nigeria by insisting on the choice of project, making
decisions on pricing, supply of equipments, know how and personnel and so on.
Infect, they impose a development Patten that is not compatible with local
needs. Further, the dependence on foreign capital leads to much higher outflow
in the form of declared profits rojalities, transfer pricing, payment of
principal and interest to foreign investors of the developed countries. Debt
service and repayment drain third world wreath.
According
to Amin (1977:60) Foreign aid students agriculture encourage trade and
investment dependences and reinforces the dominance of exploitative entices of
less developed countries. Thus foreign investment and aid signify dependence
and as a means of exploitation of the less developed countries by the developed
countries”.
Haberler
(1959:61) Wrote that: Foreign trade as an engine of growth foreign trade
possesses great importance for less developed countries, it provides the urge
to develop the knowledge and experience that make development possible and the
means to accomplished it”.
The
writer further said. Overall conclusion is that international trade has made a
tremendous contribution to the development of less developed countries in the
19th and 20th centuries and can be expected to make an
equally big contribution in the substantial free policy from they point of view
of economic development”
From
which ever perspectives are can see direct foreign investment through activities
of international organization and which multinational corporations in Nigeria
can conclude that direct foreign investment have negative and positive impacts
on the Nigeria economic growth from 1980 to date and forever.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1. DESIGN OF THE STUDY
The
design of the study related to the approach adopted in executing the study.
Baridan (1990) described design of the study as: A frame work or plan used as a
guide in the collection and analysis of data for a study.
There
are different types of research design depending on the nature of the
researchers and the one to adopt depend on the nature of the study.
Since
this study is decretive questions are developed to secure specific kinds of
data that are capable of examining the phenomena under study to a significant
level of accuracy. To this and questions were administrated to all the project
managers of all the ongoing project of the company under investigation. The
researcher employed both the closed and opened questions. The researcher did
not disguise any of the questions, also the questionnaire are structured. In
addition to the questionnaires that were administered on the project managers,
Oral interviews were also conducted on them to enable the researcher generate more
relevant primary information in determine the sample size since the population
size is finite, while the simple random sampling was used as the sampling
techniques.
3.2. AREA OF THE STUDY
The
area of this project, discussed mainly on the import of direct foreign investment
as the area of the study.
3.3. POPULATION OF THE STUDY
Population
can be defined as the entire object to be studies.
It
can be defined as a set of data that consist of all conceivable, possible or
hypothetically possible observation of certain phenomenon
(Williams
2004)
Population
refers to people or subject of the geographical area where the study covers.
the
population of this research work would be the entire staff of Johnhot investment
company plc lokoja which include ten (10) senior staff, twenty four (24) middle
staff and thirty six (36) junior staff all amounting to seventy (70)
3.4. SAMPLE OF THE STUDY
Sample
according to Toluhi (2001:56) is a subgroup extracted from the research
population for study. For the purpose of making generalization about the
population from which the sample was drawn.
in
most cases, we need information concerning a group usually of person, firms or
household e.t.c we usually limit out study to some of selected people from the
group with a view to extend our finding to the entire group of people.
Due
to the nature of the sample size of the research work would be sixty (60) staff
out of seventy (70) staff in the company under study.
3.5. ADMINISTRATION AND RETRIEVAL OF
INSTRUMENT
The
questionnaire used for this project work contains question relating to john Holt
company investment
3.6. PROBLEM OF METHODOLOGY
Date
collection is very important in any project work. IN the process of data
collection, the researcher come across some problems, which hinder the
collection of data needed. These problems are:
A.
LACK OF ENOUGH
FINANCE: The researcher encounter financial problem due to the money at
hand is not sufficient for the research to look all requirements for the
project that encompass money.
B.
SECRECY: This
is another methods of methodology, most workers even the high rank or lower
level workers did not give the correct answer, some part of the answer are
hidden and may be for the fact that, they do not want the public to know more
especially the technical areas of the organization.
The
time for collecting information from the respondent (management) was delay
because the expended by the research is not true due to the respondent were not
able to give detail information need for that particular time, this is refers
to time lapse inconvenience from the respondent.
3.7. METHOD OF DATA ANALYSIS
The
information collected from the data together would be analyzed base on the
response of respondents, and hypothesis will be tested using Chi-square is
popularly donated by the sign X2 has been deemed appropriate sampling
distribution when disusing about two hypothesis test because of the frequency
with which the normal or ordering data are collected in practical situation.
In
carrying X2 test, the
characteristic of the object or the attribute are display in a table collect
contingency table.
Percentage
method would be used to analyze the data why hypothesis would be tested using
Chi-square test.
The
contingency table whether not two categories variable are related to each
other,.
The
Chi-square statistic is given below:
X2 = S (0 - S)2
S
Where
O = Observed Frequency
S = Expected Frequency
The
expected frequency (S)
will be computed or the assumption that there is independence or relationship
is true.
Therefore
the trust state X2 tend if (Ho) null hypothesis is not true for R
and C continence table
The
test statistics X2 calculated is appropriate distributed with (r –
1) ( c – 1_ degree of freedom.
CHAPTER FOUR
4.1. DATA PRESENTATION AND ANALYSIS
PRESENTATION OF DATA
Here
the researcher used frequency table to present analysis and interpret all the
data collected from primary source of data collection (questionnaire).
Ten
(10) questions were drafted out in the questionnaire. Seventy (70) copies of
the questionnaire were distributed out of the 70 copies distributed 60 were returned
and fond usable.
ANALYSIS OF DATA
In
this section the data gathered will be analyzed on this ground the analysis
shall be done based on the available data which is considered to be representative
enough to arrive at a conclusion.
Table A.1.
SEX
DISTRIBUTION OF THE RESPONDENTS
|
Sex
|
Frequency
Of Response
|
Percentage
|
|
Male
|
45
|
75.00
|
|
Female
|
15
|
25.00
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011.
Table
4.1. Showed 75 percentages are male, while 25 percentages are female.
Table A.2.
AGE DISTRIBUTION OF THE RESPONDENTS
|
AGE RANGE
|
FREQUENCY
OF RESPONSES
|
PERCENTAGE
|
|
25
– 30
|
15
|
25.00
|
|
31
– 36
|
12
|
20.00
|
|
37
– 42
|
3
|
5.00
|
|
43
– 48
|
3
|
5.00
|
|
49
– 54
|
15
|
25.00
|
|
55
above
|
12
|
20.00
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011.
Table
4.1.2. Clearly shown that 15 is out of total respondent are within the age
range of (25 -30) representing 25% of the respondent. 12 are within age range
of (31 – 36) constituting 20% of total respondents. This is followed by range
(37 – 42) consisting of 3 respondents representing 5% respondents also fall
within range (49 – 54) is made up of 15 respondents representing 25% while
range 55 is made up of 12 respondent representing 20%.
Table
4.1.3.
EDUCATION QUALIFICATION
|
QUALIFICATION
|
frequency response
|
percentage
%
|
|
SSCE/GCE
|
3
|
5.00
|
|
OND/NCE
|
6
|
10.00
|
|
HND
|
21
|
35.00
|
|
B.S.C
|
30
|
50.00
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011.
Table
4.1.3. Showed that 6 respondents possess OND/NCE, 21 posses HND while 30 posses
B.S.C. This means that 50% of the total respondents has B.sc. 35% has HND, 10%
has OND/NCE while 5%has SSCE/GCE.
Table 4.1.
Is
there any dire foreign investment in Nigeria?
|
Response
|
frequency
of response
|
percentage
%
|
|
True
|
45
|
75.00
|
|
False
|
15
|
25.00
|
|
Undecided
|
___
|
__
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011
Table
1 show 45 respondents representing 75%
of the total respondent believes there is direct foreign investment in Nigeria 15
respondents representing 25% were false.
Table 4.2.
Do
you agree that direct foreign investment contributed positively to the economic
growth of Nigeria?
|
Response
|
Frequency
Of Response
|
Percentage
%
|
|
True
|
48
|
80.00
|
|
False
|
12
|
20.00
|
|
undecided
|
__
|
___
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011
Table
4.2. Showed 48 respondents admitted that direct foreign investment contributed
positively to the economic growth of Nigeria, 12 admitted it doesn’t,
they represent 80% and 20% respectively.
Table
4.3.
Do
you accept that foreign investment has significant impact on the economic
growth of Nigeria?
|
Response
|
frequency
of response
|
percentage
%
|
|
True
|
42
|
70.00
|
|
False
|
18
|
30.00
|
|
undecided
|
__
|
___
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011
Table
4.3. Shows 42 respondents constituting 70% accepted that direct foreign
investment has significant impact on the economic growth of Nigeria while constituting
30% were false.
Table 4.4.
Is
direct foreign investment welcome development?
|
Response
|
frequency
of response
|
percentage
%
|
|
True
|
48
|
80.00
|
|
False
|
12
|
20.00
|
|
undecided
|
__
|
__
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011.
Table
4.4. shows 48respndents constituting 80% admitted that direct foreign
investment is a welcome development , 12 of them constituting 20% were false.
Table 4.5.
Do
you agree that foreign investment has more than economic implication in
Nigeria?
|
Response
|
frequency
of response
|
percentage
%
|
|
True
|
48
|
80.00
|
|
False
|
12
|
20.00
|
|
undecided
|
__
|
__
|
|
Total
|
60
|
100.00
|
Source:
Field survey 2011.
Table
4.5. shows clearly that 48 respondents constituting 80% admitted that direct
foreign investment has more than economic implication in Nigeria while 12
respondent constituting 20% were false.
Table 4.6.
Is
direct foreign investment essential for Nigeria economic growth?
|
Response
|
frequency
of response
|
percentage
%
|
|
True
|
54
|
90.00
|
|
False
|
6
|
10.00
|
|
undecided
|
__
|
__
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011
Table
4.6. Shows 54 respondent constituting 90% of the total respondent said direct
foreign investment is essential for Nigeria economic growth. While 6
constituting 10% were false.
Table 4.7.
Do
direct foreign investment financial status positively?
|
Response
|
frequency
of response
|
percentage
%
|
|
True
|
49
|
81.00
|
|
False
|
11
|
19.00
|
|
undecided
|
__
|
__
|
|
Total
|
60
|
100.00
|
Source: field survey 2011
Table
4.7. Shows 49 respondents constituting 81 admitted that direct foreign
investment has positive effect on Nigeria financial status, 11 constituting
19% of the total respondent were false.
Table 48.
Does
direct foreign investment have negative implication?
|
Response
|
frequency
of response
|
percentage
%
|
|
True
|
42
|
70.00
|
|
False
|
18
|
30.00
|
|
undecided
|
__
|
__
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011.
Tables
4.8. shows 42 respondents constituting 70% admitted that direct implication on Nigeria
economic growth with 18 constituting 30% of the total respondents were false.
Table 4.9.
Direct
foreign investment has significant impact in Nigeria economy growth
|
Response
|
frequency
of response
|
percentage
%
|
|
True
|
60
|
100.00
|
|
False
|
__
|
__
|
|
undecided
|
__
|
__
|
|
Total
|
60
|
100.00
|
Source:
field survey 2011
Table
4.9 shows clearly that 60 respondents constituting 100% admitted that direct
foreign investment create job opportunity in Nigeria.
Table 4.10
Direct
foreign investment has only international impact on Nigeria economic growth.
|
Response
|
frequency
of response
|
percentage
%
|
|
True
|
60
|
100.00
|
|
False
|
__
|
__
|
|
undecided
|
__
|
__
|
|
Total
|
60
|
100.00
|
Source: field survey 2011
Table
4.10 show that 60 respondents constituting 100% of the actual or total
respondents said direct foreign investment create good relationship between two
countries.
From
the analysis of data and result it shows that direct foreign investment has a
great impact on the Nigeria
economy.
4.2. TEST OF HYPOTHESIS
In
testing the research hypothesis the Chi-Square was used and for proper
understanding the following variable contained in the table, in calculating X2
which is the value of Chi-square
X2 = S (0 – E)2
E
Where S =
summation
O = stand for observed
frequency
E = Expected frequency
The
degree of freedom is determined by the function.
D.F = (c -1)
Where
C = number of restriction total
One (1) is constant
It
should be noted that the degree of freedom is to be at level of significance at
5% (0.o5)
DECISION RULE
The
decision rule states that:
If
the observed or calculated value (X2) is greater than the X2
table = rejection of Hi.
If
the observed or calculated value is less than or equal top the table value X2
accepted (Ho).
CHI – SQUARE hypothesis I
Ho:
Direct foreign investment has no significant impact in Nigeria
economic growth.
Hi:
Direct foreign Investment has significant impact in Nigeria economic growth.
|
Response
|
Frequency
Of Response
|
Percentage
|
|
True
|
60
|
100
|
|
False
|
__
|
__
|
|
Undecided
|
__
|
__
|
|
Total
|
60
|
100
|
Source
field survey. (2011)
Chi
– square test.
|
D
|
E
|
D
–E
|
(0
–E)2
|
(0 –E)2
E
|
|
60
|
20
|
40
|
1600
|
80
|
|
_
|
20
|
-20
|
400
|
20
|
|
_
|
20
|
-20
|
400
|
20
|
|
|
60
|
O
|
|
120
|
Level
of significant = 5% (0.05)
D.f.
= (r -1) (c – 1)
2 – 1 = 1
X2
= 0.05 (1)
X2
= 3.84
Decision
X2
calculated in greater than X2 tabulated therefore null hypothesis
will be rejected which means direct foreign investment has no impact in Nigeria
economic growth.
Hypothesis
II
Ho:
Direct foreign investment has only international impact on Nigeria
economic growth
Hi:
Direct foreign investment has no international impact on Nigeria economic
growth.
Table 4.10
|
Response
|
Frequency
Of Response
|
Percentage
|
|
True
|
60
|
100
|
|
False
|
__
|
__
|
|
Undecided
|
__
|
__
|
|
Total
|
60
|
100
|
Source:
field survey (2011)
|
D
|
E
|
D
–E
|
(0
–E)2
|
(0 –E)2
E
|
|
60
|
20
|
40
|
1600
|
80
|
|
_
|
20
|
-20
|
400
|
20
|
|
_
|
20
|
-20
|
400
|
20
|
|
60
|
60
|
O
|
|
120
|
X2
= 0.05 under one = 3.84
Decision
Calculated
is greater than X2 tabulated therefore null hypothesis will be
rejected which means “Direct foreign investment has no impact in Nigeria
economic growth”.
4.3. DISCUSSION OF FINDING
From
the above analysis, we can understand that most workers in John holt investment
would resign their appointment if they get a better paid employment elsewhere.
And from the analysis above, we can see that the management has to improve on
their techniques of motivating workers.
It
can also be seen from the analysis that workers performance is a function of
their expected reward. The way they put in more effort to work is determined or
is a matter of expectation. And also, it could be seen that what the workers
want in an organization or industry is the satisfaction of their needs through
rewards.
We
can also see from the data analysis that when workers are sufficiently rewarded
they would perform better.
It
can be understood from the study that most of the workers agreed with
assumption.
Most
of the workers are also in agreement that the payment of fringe benefit and
increase in salary is the only way that can make direct foreign investment
performance to be worthwhile.
CHAPTER FIVE
5.0. SUMMARY CONCLUSION AND RECOMMENDATION
5.1. SUMMARY OF THE FINDING
In
the course of this study, the researcher finding are summarized as follows:
1.
Developing countries depend on direct foreign
investment to attract capital equipment and infrastructure from developed countries.
The fact is that every developed country that wants to embark on development
programmes needs the spoor of direct foreign investors to complement the
existing local production factors for development.
2.
Direct foreign investment has significant impacts in
Nigerians economic growth. The Issued and challenges of John Holt Company and
technological acquisition from developed countries can only be possible if
foreign investors are encouraged to participate in local environment and
industries operating within the country. From the finding, the researcher
exposed here that no les developed countries like Nigeria can experience high
economic growth rate without according to direct foreign investment within.
3.
Finally, the researcher found that direct foreign
investment has more than economic implication in a country. It has social,
political legal, technological and identification implication of a country in
the country or nations.
5.2.
CONCLUSION
The
researcher through investigated the impacts of direct foreign investment on the
economic growth of Nigeria.
Direct foreign investment is the extension of enterprise which involves flow of
capital, technology and entrepreneurial skill to the host economy where they
are combined with local factors in the production of goods for export markets
in the production of goods for export markets. The researcher stopped here by
suggesting that more work has to be done on the subject matter of this study.
This will enable everybody to understand and know the actual impacts of direct
foreign investment on the economic growth. At the end, the government will know
and choose the best areas of economic development that would attract direct
foreign investors to participate that can have positive impact on the economic
growth of the country.
5.3. RECOMMENDATION
The
following recommendations were made as a contribution toward alleviation of the
problem of foreign markets as well as some of the problems faced by the John
Holt investment company.
i.
Incentive for banks: The federal government banks
incentives for the volume of financial assistance given to foreign trade market.
Banks record a particular stated percentage (%) of their aggregate advance for
foreign trade should be given a standard monitory discount at the end of the
year. These incentives will spur the banks to engage more in foreign trade
market.
ii.
To mobilized
foreign trading: particularly in the agricultural sector, provision of storage
facilities to immunized crop losses. Much are reported to be very high
especially for pers is table agriculture processing factories to turn raw-product
into “ready to save” products for foreign trading should be high priority”.
iii.
The federal government should ensure the proper funding
of the company implement all the incentive approved by the government qualified
and experiment staff should be employed and encourage for effective performance
iv.
Complete and well established companies should be selected
to take part in both home and foreign
trade- fairs so that in returns they can satisfy demand of their foreign
customers.
BIBLIOGRAPHY
Anyanwu (1997:24) International
Market Strategy: Wobum: Butter Worthy-Heineman.
Bower.A. (1974:11) The Role Of
Foreign Aid And Important On The Economy Of The Country 10th
Edition: Mc Graw-Hill Companies, Inc
Edward Shapiro (1980:15) Development
the Profit Theory Of Investment: Seminar Paper Presentation.
Et-Al (1999:29) Economic Growth of
The Country: 2nd Edition Onibonje Press Ile-Ife.
Haberler (1975:61) The Foreign Trade
As An Engine Of Growth: The Africa Guidance
August Vol.2
Kozlor.M. (1977:33) The Impact Of
Direct Foreign Investment Growth: Published By Wobum Butter.
Lak (1975:20) International Market:
6th Edition Oluo South Western, A Division Of Thompson.
Myrdal (1970:20) Foreign Capital
Investment: 4th Edition Mc Graw-Hill Companies.
Santos (1970:17) The Economic Condition Of A
Country And Its Development.
Simon .U. (1960:22) The Direct
Foreign Investment: 10th Edition: Home Wood, Irwon Inc.
APPENDIX
Department
Of Business Administration and Management
Studies,
Kogi State
Polytechnic,
Lokoja,
Kogi State.
Dear
Sir/Ma,
I
am a final year student of the above mentioned institution and currently
undertaking a research work on the topic: “The impact of direct foreign
investment on the Nigeria economy” (a case study of John Holt investment company
lokoja).
This
research work is purely endemic exercise required in partial fulfillment for
the award of Higher National Diploma (HND) in business administration and
management.
I
salute your co-operation in fully this questionnaire and returning some to me
as possible.
You
are assured that the information provided will be treated with utmost
confidentiality. Find attached is the copy of the questionnaire.
Thanks
for your co-operation.
Yours
Faithfully
Yakubu
Haruna
QUESTIONNAIRE ON DIRECT FOREIGN INVESTMENT
ON THE NIGERIA
ECONOMY.
INSTRUCTION
Please
tick the appropriate option in the box provided e.g. (ü)
1.
Designation:
Top
level management ( )
Middle
level management ( )
Lower
level management ( )
2.
Sex:
Male
(
)
Female
(
)
3.
Marital Status:
Marriage
(
)
Single
(
)
4.
Highest qualification obtained:
s.s.c
( )
NCE/ND ( )
B.sc/HND
it equivalent ( )
Post
graduate ( )
SECTION TWO: OTHER INFORMATION
1.
Is there any direct foreign investment in Nigeria?
True
( ) False
(
)
2.
Do you agree
that direct foreign investment contribute positively to the economic growth of Nigeria?
True
( ) False ( )
3.
Do you accept that foreign investment has significant impact
on the economic growth of Nigeria?
True
( ) False
(
)
4.
Is direct foreign investment welcome development?
True
( ) False
( )
5.
Do you agree that foreign investment has more economic
implication in Nigeria?
True
( ) False
( )
6.
Is direct foreign investment essential for Nigeria
economic growth?
True ( ) False (
)
7.
Does direct foreign Investment affect Nigeria
financial status positively?
True
(
) False ( )
8.
Does direct foreign investment have negative
implication?
True
( ) False
( )
9.
Does direct foreign investment create job opportunity
in Nigeria?
True
( ) False ( )
10.
Does direct foreign investment create good relationship
between two countries?
True
( ) False
( )