Foreign direct investments in Nigeria: determinants and impact
Keywords:
Direct investment, foreign investment, technology transfer, foreign exchange, economic growth, incentives, foreign direct investments, low economy, NigeriaSynopsis
This study investigates the determinants and impact of foreign direct investments (FOI), in Nigeria. lt has become necessary to carry out a study of this nature because there are two major obstacles to higher economic growth faced by Nigeria in the 21 st Century. These two obstacles are low investments and shortages of foreign exchange. The need for this study was predicated on the fact that macro-economic reforms initiated by the government together with attractive investments incentives have not yielded appreciable levels of foreign direct investment inflows. The study addressed the following research questions: Why has the inflow of foreign direct investments not increased despite improvement in our macro economic structure? What factors do foreign investors consider important in making their investment decision in a country such as Nigeria? ls the economy "open" and investor friendly? Ooes socio-political instability negatively affect FOI? Has foreign_ direct investments contributed in technology tranfer? What are the linkages or relationships between foreign direct investments and the low economy? ln addition to the above objectives the study predicted three hypotheses boardering on socio-political instability, investment incentives and economic growth. lvvo broad analytical techniques were adopted in the investigation of the determinants and impact of foreign direct investments. The first technique involved the survey of 302 foreign affiliate managers. The second approach involved the application of regression analysis on selected explanatory variables. The findings can be summarised as follows: As confirmed by the foreign affilia te managers and the regression results, socio-political instability is a major deterrent of foreign investment inflows. ln analysing the second hypothesis and research question, it was found that although incentives were statistically sig nificant as a major promoter of FOI inflows, foreign investors do not rate investments singularly high. The study further confirmed that FOI in Nigeria has contributed to technology tranfer through the training of the local work force by expertriates. lt was confirmed by the study that FOI has some linkages to the Nigerian economy especially in the form of local raw material purchase by foreign firms. Overall, FOI has contributed marginally to economic growth in Nigeria.
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