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PROJECT TOPIC: THE IMPACT OF FOREIGN DIRECT INVESTMENT ON NIGERIAN ECONOMIC DEVELOPMENT (A CASE STUDY OF NIGERIA BOTTLING COMPANY)

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CHAPTER ONE  INTRODUCTION  1.1 BACKGROUND OF THE STUDY  The foreign direct investor may acquire 10% or more of the voting power of an enterprise in an economy through; incorporating a wholly owned subsidiary or company, acquiring shares in an associated enterprise, through merger or an unrelated enterprise and, participating in an equity joint venture with another investor. Foreign direct investment incentives may be in form of low corporate and income tax rates, tax holidays, other types of tax concessions, preferential tariffs, special economic zones, investment financial subsidies, soft loan or loan  guarantees, free land or land subsidies, relocation and expatriation subsidies, job training and employment subsidies, infrastructure subsidies, research and development support and derogation from regulations, usually for very large projects (Obadan, 2004).  Attempts at attracting FDI into Nigerian economy have been based on the need to maximize the potential benefits derived from them; and to minimize the negative effects their operations could impose on the country. As a result of the persistent global panic, unemployment has been on the rise, jobs are being lost, there is shortage of liquidity and acute scarcity of credit has remained visible in the financial institutions. For Nigeria to generate more foreign direct investment, efforts should be made at solving problems of government involvement in business; relative closed economy; corruption; weak public institutions; and poor external image.  Nigeria is one of the economies with great demand for goods and services and has attracted some FDI over the years. According to CBN (2006), the amount of FDI inflow into Nigeria reached US$2.3 billion in 2003 and it rose to US$5.31 billion in 2004 (138% increase) this figure rose again to US$9.92 billion (87% increase)  in 2005. The banking reform engendered the interest of foreign banks in the Nigerian market making foreign direct investment (FDI) into Nigeria grew by 134% to N1.123 trillion (US$9.6 billion) in 2007. Out of a total US$36 billion of FDI that went into Africa, Nigeria received 26.66% of the inflow. The Vanguard Newspaper of May 19, 2008, reported that a total of US$12.5 billion of foreign investment inflow was recorded in the economy at the end of 2007, and that this was an indication that “Nigeria is a beautiful bride for foreign investors”. This has not also been so, however.  In Nigeria, FDI is defined as an investment undertaken by an enterprise that is either wholly or partly foreign-owned. The Investment Code that created the Nigerian Investment Promotion Commission (NIPC) (Decree No. 16 of 1995) and the Foreign Exchange (Monitoring and Miscellaneous Provision) Decree, also enacted in 1995, gives full backing for FDI in Nigeria. Nigeria has a high potential to attract significant foreign private investment inflow. Most countries strive to attract FDI because of its acknowledged advantages as a tool of economic development. Africa and Nigeria in particular, joined the rest of the world in seeking FDI as evidenced by the formation of the New Partnership for Africa’s Development (NEPAD), which has the attraction of foreign investment to Africa as a major component. Openness to trade and available human capital, however, are not FDI inducing. FDI in Nigeria contributes positively to economic growth. Although the overall effect of FDI on economic growth may not be significant, the components of FDI do have a positive impact. The FDI in the ICT sector has the highest potential to grow the economy and is in multiples of that of the oil sector.  Foreign Direct Investment (FDI) refers to a movement of capital that involves ownership and control of a firm inanother country for instance, the purchase of common chores in a Nigerian incorporated company by a French citizen involves ownership and an element of control.  This is because all shares in an organization have same voting rights.  1.2        STATEMENT OF PROBLEM  The undeveloped countries like Nigeria suffer not only from low income and unstable growth, but also from regional disequilibrium, economic instability unemployment, depending on foreign countries, specialization in the production of raw materials and economic, social, political and cultural marginality.  Underdevelopment is an element in the process of development of the international system underdevelopment and developments are two facts of a single process of which both internal and international structures are causes. International treacle brings about polarization because the low income countries are assigned the production of primary production (raw materials) which are processed in the home countries because of worsening and unstable terms of trade, because the economics of the low income countries lack the force work force, the entrepreneurship and physical/institutional infrastructure to seize export opportunities and because of generally monopolistic arrangement by which profits flow out from the underdeveloped countries to the developed.  In Nigeria for unsnarl, there is that popular and commonly held view that manufacturing multinationals have done greater lower than good to the host communities as a result of their operations in these communities wheel has led to loss of economic and social quality and environmental degradation.  It is not out of place for one to say that these MNC’s have threatenical the health of the indigenes by the use of dangerous chemical, pollutants etc.  These and more are the problems that will be looked into which necessitated this research work.  It will try to examine the nature and pattern of foreign direct investment that is International Corporation in Nigeria manufacturing rector with a particular reference to Nigerian Bottling Company Plc as a case study.


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