AN ASSESSMENT OF THE IMPACT OF FOREIGN DIRECT INVESTMENT ON NIGERIAN ECONOMIC GROWTH
This study assess the impact of Foreign Direct Investment in Nigerian economic growth over the period of 1990-2014. Data from Central Bank of Nigeria (CBN) Statistical Bulletin was used. The Ordinary Least Square (OLS) technique was specified and used to examine the relationship between the variables which includes the Gross Domestic Product as the dependent variable, export, Exchange rate, foreign direct investment and trade openness as the independent variables. The explanatory power of the model was given by the R2 of 85.5% and was subjected to t-test and f-test to test the significance of the independent variables.
1.1.BACKGROUND OF THE STUDY
Investors’ decisions and actions globally are influenced significantly by the dictates of self-interest which suggests that capital, not only be channeled to highyielding economic sectors but also to those that are ostensibly quick yielding economies. On balance therefore investors would spun profitable opportunities characterized by extreme competitions, market glut, unfavorable regulation, long gestation periods and opt instead for investments that yield high returns within the shortest time possible. Base on this view, investors generally migrate from one economy to another in search of better investment climate and higher returns. This form of capital movement results in the creation of a typical investment called Foreign Direct Investment. In the opinion of Jomo (1988) Foreign Direct Investment can be explained to represent the flow of tangibles from a country abroad of capital, equipment and other production and processing facilities into a host economy. It is also defined as a long term investment reflecting a lasting interest and control by a foreign direct investors (or parent enterprise), of
an enterprise entity residents in an economy other than that of the foreign investor (IMF, 1993). Foreign Direct Investment is widely thought to bring with it into the host country a bundle of productive assets including long term foreign capital, entrepreneurship, technology skills, innovative capacity and managerial, organizational and export marketing know-how. The distinctive feature of Foreign Direct Investment is that it involves not only a transfer of resources but also the acquisition of control. i.e the subsidiary does not simply have a financial obligation to the parent company, if is part of the same organizational structure (Krugman and Obstfeld,2000). Foreign Direct Investment involves much more than the simple transfer of capital or the establishment of a local factory in a developing nation. Multinational carry with them technologies of production, tastes and diverse business practices including cooperative arrangement, marketing restrictions advertising and the phenomenon of transfer pricing. Theyengage in a range of activities, many of which have little to do with the development aspirations of the countries in which they operate. (Todaro, 2000). Temle (1999) demonstrates that technical changes and technological learning which are significant components of Foreign Direct Investment represent important determinants of economic growth. Furthermore, it is relevant to add that technology is generated by Research and Development (R&D), most of which is conducted in industrialized countries making technology transfer very important for economic prosperity of countries with weak Research andDevelopment (R&D) and innovation capacities.