PROPOSAL
The research
study on foreign investment in Nigeria
under the structural adjustment programme focuses on the intervened levels of
foreign investment in Nigeria
during SAP period. In other words, the thrust of this study is based on the
impact. The increased level of foreign investment has made under structural
adjustment programme. It set out a number of objective which include: the
appraisal of the change that has taken place in the economy of Nigeria due to
SAP, in relation to foreign investment, ascertainment of the impact of those of
foreign investment in Nigeria under SAP to know of the change are I the
direction anticipated by the government; to envision new adjustment in SAP
policies and offer recommendation or suggestions that will entrance the
realization of the goal of attracting more foreign investment in Nigeria. For
the research to be well guided, three hypotheses were formulated as below:
1. The cross
domestic product of Nigeria
has a positive relationship with the increased levels of foreign investments in
Nigeria
during SAP.
2. The balance
of payment (BOP) of Nigeria
did not increase proportionately with the increased levels of foreign
investment in Nigeria
during SAP.
3. The value
of Naira did not appreciate as a result of the increased level of foreign
investment in Nigeria
during SAP.
4. The
methodology adopted in the write-up constitutes data, which were based from
both primary and secondary sources. These data were tested using and regression
analysis. The study then found out that the gross domestic products of Nigeria
has increase levels of foreign investments during SAP; the Bop position of
Nigeria did not increase proportionately with the increase level of foreign
investment in Nigeria under SAP, the value of Naira did not appreciate as a
result of the increase level of foreign investments in Nigeria under SAP. The
study discovered that even though SAP was against importation of goods from
abroad but yet import rose higher during SAP than before SAP which caused the
BOP position to even grow worse and the SAP policy repatriation was faulted by
the study because it allowed the foreign companies to repatriate most of their
capital / profit which would have served as foreign exchange for the country
thereby increasing the supply of foreign exchange and rising value of Naira as
a result, this was therefore recommended than on luxury goods should level of
import and achieve more stable balance of payment (BOP). Foreign investment
should be enforce seriously so as to reduced the level of import and achieve
more stable balance of payment, foreign investors should be made to use the
greater part of the profits to provide infrastructures that will attract
foreign investments in the country the exchange policy should be reviewed by
the government to fall within fixed and being left floating for the forces of
demand and supply to determine it.
5. The study
concluded that the future of foreign investments in Nigeria in bright and that foreign
investment would increase significantly during the post SAP era. There if
government takes the recommendations given seriously, foreign investment will
make a greater impact on the economy of Nigeria during the SAP era.
TABLE OF
CONTENTS
Title Page
Approval Page
Dedication
Acknowledgement
Abstract
Table of contents
CHAPTER ONE
1.1
Introduction
1.2
Objectives of
the study
1.3
Significance
of Problem
1.4
Statement of
Problem
1.5
Hypothesis
Formulation
1.6
Scope and
Limitation of the Study
1.7
Definition of
terms
CHAPTER TWO
2.0 REVIEW OF
RELATED LITERATION
2.1
The government efforts towards attracting foreign
investments
2.2
The role of Industrial development co-ordination
committee in the execution of foreign policy under (SAP)
2.3
The concept o investment
2.4
The concept of foreign investment
2.5
Portfolio investment
2.6
Foreign investment and multinational corporation (MNC)
2.7
Foreign investment and the 1991budget.
CHAPTER THREE
RESEARCH DESIGN AND METHODOLOGY
3.1
Study Area
3.2
Sources of data
3.3
Data collection technique
3.4
Sample for the study
3.5
Judgment sampling
3.6
Statistical method of Analysis
CHAPTER FOUR
PRESENTATION AND ANALYSIS OF DATA
4.1
Presentation of data
4.2
Analysis of data
4.3
The devaluation of Naira and foreign investment
4.4
The role second-tire foreign exchange market
4.5
Problem confronting Nigerian’s balance of payment.
4.6
Foreign trade under SAP
4.7
Hypothesis testing
CHAPTER FIVE
SUMMARY OF FINDINGS CONCLUSION AND RECOMMENDATION
Findings
Conclusions
Recommendations
Bibliography
Appendix
Questionnaire
CHAPTER ONE
1.1 INTRDUCTION
According
to annual report of the Central Bank of Nigeria,
the Nigeria
economy has performed less well in the 1980’s than the 1970’s. Much of the growth
in both periods was based on performance of the oil sector. By 1970 oil output
stood at 558 million barrels and increased to 823 million barrels by 1973.
Between 1975 – 1985, oil output per day averaged between 1.8 and 2.3 million
barrels respectively. With the dramatic rise in oil price in 1973 and 1974 oil
came to account for 31.9% of growth in real gross domestic products and has
since continued to dominate economic performance in Niger sector. Although the aim of
the policy was to translate oil revenue into directly productive structures and
promote long-term development prospects, the imperatives and political pressure
to spend led to consolable waste and to oil boom in construction activities.
The oil
include rise in the exchange rate also gave negative protection to agriculture
and eroded it’s significance in the economy from about 40% of the gross
domestic product I the early 1970’s to 1980’s. According, food imports which
were only 200,000 lorus the 1960’s has increase tremendously to 399,000 tones
in 1974, reaching a pear level of 2,441,000 lorus in 1981.
By 1985
capacity utilization of most industries was below 20% owing to lack of foreign
exchanges raw materials and sparse parts. Inflation had also attained an
intolerable level. When therefore, the past administration in Nigeria came to
power (the Babangida Administration) in August 1985, it looks a critical look
at the magnititude of the economic problems facing the nation and in July 1986,
it adopted a programme known as Structural Adjustment Programme (SAP) as a
means of tackling these preambles.
The entailed,
among other things the diversification of the economics so as to make it more
resilient to external forces. The import licensing system was abolished and the
inter-bank foreign exchange system was introduced in September 1986 with a view
to making the naira achieve a realistic exchange rate. The commodities abroad
were abolished and which various government subsidies were either removed or
splashed by means of commercialization and privatization; such as
telecommunications and electricity.
Generally,
market forces in the allocation of resources replaced administrative controls.
Public investments were generally reduced in government owned companies and in
some cases such companies were fully privatized. Except in some strategic
industries such petroleum liquefied nature gas (LMG) and petrol chemicals.
Government has
rather decided to concentrate on the provision and improvement of basic
infrastructural facilities such as roads, water supply, telecommunications and
electricity. The overall goal of the economic adjustment is to allocate
resources efficiently and to put the economy back to the past glory. It aims to
relocate rescues from the public sector to the private sector as that this
sector will become more productive thereby becoming the economic foundation of
Nigeria’s economy (Ayaji, 1990) foreign investments are those investment that
are owned by individuals and corporate bodies from other countries than the
host.
The structural
adjustment programme is an array of measures that are instituted with hope of
revamping an ailing economy. As it affects the issues of foreign investments,
the most important aspect of the structural adjustment programme is
deregulation of the exchange rate and liberalizing the procedure for the
registration of foreign business in Nigeria. Although the exchange
control act was enacted in 1962, it was liberally applied until the outbreak of
the civil in 1967.
The 1968 Act
provides that foreign investors had to obtain a business permit and must also
obtain a permit to employ foreigners. The enterprises promotion Decrease of
1977 limited the equity participation of foreigners in local enterprises
depending on their schedule or category, which such enterprises fall. However,
with the introduction of the Structural Adjustment Programme, most of the
regulations where released. Foreigner investors could seek and obtain licenses
coordination committee (IDCC), bring I their funds and repatriate the profits,
without any form of inhibition.
1.2
OBJECTIVES OF THE STUDY
The
objectives of the study are based on the changes that have taken place in the Nigeria
economy during the structural Adjustment Programme in relation to foreign
investment ascertaining the impact of those changes. On the economy and also
appraise the foreign investment in Nigeria under the structural
changes in the direction anticipated by the planning authorities. It is also
envision new adjustments in SAP policies and offer suggestions that will enhance
the realization of the goal of attracting more foreign investments in Nigeria.
The study also examines the relationship that exists between the following:
1. Foreign
investments and gross Domestic Product Items.
2. Foreign
investment and value of Nigeria (N) it is expected that the aforementioned
objectives of the study will be attained at the end of the study through the
hypothesis formulation and testing.
3. Foreigner
investment and balance of payment.
1.3
SIGNIFICANCES OF THE STUDY
For
sometime now the impact of foreign investment on the national economy has
become a topical issue in the press, industry and academic circles. The great
importance of foreign investments on the economy under scores the need to
erratically examine the consequences of the level of foreign investment on the
economy. This study will be of a great significance to policy makers who are
seeking avenues to evaluate the effectiveness help in the policy monitoring and
control process. Research and student will also find study and invaluable
reference in advance or future.
1.4
STATEMENT OF PROBLEM
It is
generally held that the stock capital and the existing level of technology in
an economy determine the economy’s level of productivity. For this reason many
countries, especially third countries pursue a rigorous industrial policy in
order to increase their country’s standard of living. The two ways by which
this is accomplished are by participating directly in individual activities and
by providing infrastructure for others to invest.
Due to the
dearth of capital in third countries, including Nigeria, they prefer the latter
option. They tend to enable both foreign and local investors to participate in
the economy. The scenario of attracting foreign investment and local investors
has been one of the cardinal points of the structural adjustment programme.
This study is
deigned to examine “the impact these foreign investments have made on Nigeria’s
economy under the structural adjustment programme.
1.5
HYPOTHESES FORMULATION
As a basic
upon which this study is to be conducted, the following hypothesis have been
formulated:
1: The gross
domestic product of Nigeria
has a positive relationship with the increase in
foreign investment during SAP period.
2: The gross
domestic product of Nigeria
has a negative relationship with the increase
in foreign investments during the SAP period.
3: The value of
Naira has not depreciated as result of increase in foreign investment.
1.6
SCOPE AND LIMITATION OF THE STUDY
This study
focuses on the levels of foreign investment in Nigeria and the way the GDP, BOP
and the exchange rate of Naira respond to those increase levels of foreign
investment for the period 1984 – 1992 (9 years).
Attention is
mainly focused on the structural adjustment programme. The limitation of this
study is that it covers only this period in which information is available in
the Central Bank Of Nigeria (CBN).
For instance,
information relating to foreign investment as regards gross domestic product
and balance of payment positions where not readily available for 1993, as SAP
ended in 1993.
1.7
DEFINITION OF TERM
Investment: This is ploughing one’s finance or
finds into projects or assets (be it tangible of financial assets) with a view
to increasing one’s wealth.
Foreign Investment: Foreign investments are those
investments that are owned by individual and corporate bodies from other
countries then the host country that is, hose businesses which foreigners
maintain controlling shares of which foreigners fully own, can be regarded as
foreign investment (Alphonsus, 1991).
Gross Domestic Product: - The gross domestic product
is the total value of all goods and services produced in a country usually a
year. If the net income from aboard is added to the gross domestic product we
get the gross national product.
Balance of
payment: - The balance of payment of
any country is a record of all economic transactions involving countries of the
world in any gives period usually in one calendar year.
Foreign Exchange Rate: - The foreign exchange rate is
defined as the price of one unit of a foreign currency in terms of a unit of
the domestic currency. The exchange rate between the Nigeria naira and the British pound
sterling is the number of naira required to buy one-pound starling. (Ewa udu
and G.A. Agu 1992).
Private Sector: - The private sector can e defined as
that sector of the economy owned by individuals and operated by individuals,
that is absence of government ownership.
Mutt National Company: - This refers to a foreign
company that has subsidiaries in other foreign investments, National mainly
manage its local subsidiaries (WESTOM, 1984).
Devaluation of Exchange Rate: - This is the
reduction if the value of a country’s currency with respect to that of another
country or countries. It involves a country’s currency depreciating to a
certain level, which is always done by country / countries Central Bank so as
to correct their balances in the economy.
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