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PROJECT TOPIC: THE EFFECTS OF MULTINATIONAL CORPORATIONS ON THE NIGERIA ECONOMY

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CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

Based in part on the development of modern communications and transportation technologies, the rise of multinational corporation was totally unanticipated by the classical theory of international trade as first developed by Adam Smith and David Ricardo. According to this theory which rests on the doctrine of comparative advantage each nation should specialize in the production and export of those goods that it can produce with highest relative efficiently while importing those good that other nations can produce relatively more efficiently.

Underlying this theory is the assumption that white good and services can move internationally factors of production such as capital labour and hand are relatively imniobile furthermore the theory deals only with trade in commodities; it ignores the role of uncertainty economies of scale  and technology in international trade and is static rather than dynamic.

Contrary to the postulates of smith and Ricardo, the very existence of multinational corporation is based on international mobility of certain factors of production. Capital raised in London on the Eurodollar market may be used by on wise based pharmaceutical firm to finance the acquisition of equipment by a subsidiary in Brazil. It is the globally world innate allocation of resources by a single centralized management that differentiate the multinational enterprise from  other firms engaged in international business. Decision regarding market entry strategy, ownership of foreign operations and production marketing, and financial activities and  made with an eye to what is best for the corporation as a whole. The true multinational corporation can be characterized by its emphasis on group performance rather than of its individual components.

At the center of the debate on globalization  one the multinational corporations giant actors who think and act globule. Their exetence is often associated with the phenomenon of globalization itself. These actors have gained power visibility and influence at all levels, and one determinant to the setting and implementation of the “ global agenda”. MNCS have created a massive wealth and propelled high technological  development. However, their global role their increased economic and political  power especially felt in developing countries of which Nigeria is among ) their strong influence in shopping international rules and their lack of transparency and democratic control has put them under severe scrutiny.

Infact the mention of multinational corporation usually elicits mixed reactions. On the one hard, MNCS are associated with exploitation and ruthlessness. They are criticized for moving resources in and out of a country as they strive for profit without much regard for the country social welfare Varity Corp a Canadian multinational firm. Was criticized for its action in 1991 to relocate its headquarter from Toronto to the united states (Buffalo) in order to take advantage of U.S Canadian Free Trade agreement. “For a long time India referred MNCs as agents of neocolonialism.

On the other hand MNCs have power and prestige additionally they create social benefit by facilitating economic balance. As explained by Miller “with resources capital, food and technology unevenly distributed around the plannet and all in short supply, an efficient instrument of quick and effective production and distribution of a complex of goods and services is first essential.

According with the UNCTAD (United Nations conference on trade and development) more than two thirds of the world trade involve at least one multinational half of which occurs within the same multinational around the world. The worlds 44,508 MNCs manage some 280,000 affiliates all over the world.


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