THE IMPACT OF FDI ON ECONOMIC GROWTH THROUGH EMPLOYMENT GENERATION IN NIGERIA

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[icon type=”icon-pencil”]: THE IMPACT OF FDI ON ECONOMIC GROWTH THROUGH EMPLOYMENT GENERATION IN NIGERIA
[icon type=”icon-book”]: Chapter 1 – 5
[icon type=”icon-book-open”]: 81 Pages
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[icon type=”icon-doc-line”]: Ms Word format

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Keywords:THE IMPACT OF FDI ON ECONOMIC GROWTH THROUGH EMPLOYMENT GENERATION IN NIGERIA


RESEARCH BODY

CHAPTER ONE

INTRODUCTION

1.0     Background to the Study

With the advent of globalization, transfer of capital across country boarders has been on the increase. This is done either through green field investment or through Foreign Direct Investment (FDI). Such investments are believed to compliment domestic investment, and either directly or indirectly increases output, employment and thus boosts economic growth in the host economy. For these reasons, developing countries all over the world especially in Africa have made considerable efforts to attract FDI. The United Nation Conference on Trade and Development (UNCTAD) 2007, reports that FDI inflow to Africa has increased from $9.68 Billion in 2000 to $1.3 Trillion in 2006.

In Nigeria, FDI during the pre-independence and post-independent periods have been wide spread in the economy. However, the emergence of various policies and reform (the indigenization policy of 1972 and 1977 amongst others) by the government has narrowed the scope of FDI inflow in the country. The relaxation of these policies and effort to make the environment conducive for foreign investors seem to have resulted in large inflow of FDI into the country. As at 2005 Nigeria is the second largest recipient of FDI in Africa and the tenth developing country recipient of FDI in the world (WDI, 2005). Also UNCTAD world investment report 2006 shows that FDI inflow to West Africa is mainly dominated by inflow into Nigeria who received about 70 percent of the sub-regional total and 11percent of Africa’s total. Out of this, the oil sector alone received about 90 percent of FDI in Nigeria, making it a major contribution to the country’s GDP and major source of government revenue.

Similarly the economy is said to be growing over the years. According to AEO 2013, currently the economy is said to be growing at 6.6% as at 2012.  However, it is not just enough for an economy to record impressive growth but such growth should be inclusive, such that it translates to improvements in the quality of life and provides equal economic opportunities. ADB (2007) points out that unequal access to economic opportunities often exacerbates income inequality which has left substantial number of people still lacking reliable and affordable access to cline water and sanitation. If theses disparities remain over looked they could threaten fragile political consensus for economic reforms or even political stability. Therefore to remove disparities inclusive growth strategies need to be adopted that would create equal economic opportunities for every members of the society (ADB, 2007). The economic growth experience in Nigeria cannot be said to be inclusive with unemployment rate as high as 23.9 percent, poverty incidence of 69 percent, high inequality (0.447 Gini coefficient) and increasing economic/political instability in the country (NBS, 2010). Therefore this study looks at FDI, economic growth and unemployment in Nigeria in the light of inclusiveness.

 1.1     Statement of the Problem

Nigeria just like every other developing nation have made several efforts in attracting reasonable amount of FDI into the country to help in it development. This is evident in its efforts in providing enabling environment for investors through the repeal of laws that are inimical to foreign investment growth, promulgation of investment laws, various overseas trips for image laundry by both the president and the various state governors. It is evident that these efforts have produced some results. This is because FDI inflow into the country measured in US Dollars at current prices and current exchange rates in millions has increased by 322.7 percent between 1999 and 2005. It further increased by 79% between 2005 and 2011 before decreasing to by 21 percent between 2011 and 2012, while the real GDP growth rate increased from 0.47 percent in 1999 to as high as 21.3 percent in 2002 before dropping to 7.4 percent in 2011 and further dropped to 6.4 percent in 2012 (UNCTAD, 2013).

Existing literature has pointed out that one of the spillover effects of FDI in host country include employment generation and technological transfer. In spite of the impressive growth recorded in FDI there are no indications that employment has grown proportionately and this explains why the overall growth has also not produce measurable outcome in terms of employment. According to the National Bureau of Statistics (NBS) unemployment rate in Nigeria increased to 23.9 percent in 2011 from 21.10 percent in 2010. From 2006 to 2011, unemployment rate average 14.6 percent reaching an all time high of 23.9 percent in December 2011 and a record low of 5.3 percent in December 2006. This is an indication that the economy has been experiencing jobless growth which has translated into high poverty incidence in the country. The country’s poverty incident rose from 28.1 percent in 1980 to 46.3 percent, 42.7 percent and 65.6 percent in 1985, 1992 and 1996 respectively before dropping to 54.7 percent in 2004 (NBS, 2007).

Similarly, Osita (2012) noted that, the country’s poverty rate measured by those living on less than $1 a day has rose to 61 percent in 2010 and in a similar manner, income inequality has widen at a rate unprecedented in the economic history of the country. He further mentions that economic growth in Nigeria has not created meaningful employment as unemployment has become intractable especially among the youth. More so income of the majority has not risen, while access to education and health may have improved in the country but its quality has declined significantly. This simply indicates that growth in Nigeria has not been inclusive. A principal link through which economic growth is transmitted to the poor is through employment generation. This makes providing equal employment opportunities very important for development of any nation. Emanating from the problems stated, this study seeks to answer the following questions :-

1.2     Research Question

  1. Has the growth of FDI impacted on economic growth?
  2. Why has the growth not impacted on unemployment rate?
  3. What is the impact of FDI on unemployment in Nigeria?

1.3     Objectives of the Study

The broad objective of this study is to determine the impact between FDI and economic growth on one hand and FDI and employment in Nigeria on the other hand, in the light of inclusive growth. Other specific objectives include;

  1. To determine the impact of FDI on economic growth in Nigeria.
  2. To determine the impact of economic growth on Unemployment.
  3. To determine the impact of FDI on unemployment.

1.4     Scope of the Study

The study looks at FDI, Economic growth and unemployment in Nigeria. The study covers the period between 1970 and 2014, this is because Nigeria experienced some important events during this period such as the indigenization policy, introduction of Structural Adjustment Programm (SAP), civil war among others. Therefore the choice of this period will help in providing better understanding and predicting the fluctuations in the subject matter.

1.5     Justifications for the Study

This study contributes to the literature by looking at of FDI, economic growth and unemployment in Nigeria, hence addressing the country’s specific dimension to the FDI growth debate and also to determine if economic growth being recorded in the country has any meaningful impact on unemployment. This research work will be useful for individual to make necessary investment decisions, corporate organization can also use it to make meaningful managerial decision and government bodies to make policies that will better the living standard of people. It also serves as reference for further studies in the area of knowledge.

1.6     Organization of the Study

This study is organized into five (5) chapters; Chapter one is the introductory part which consists of the problem statement, aims and objectives of the study, justification of the study, and limitations of study, as well as organization of chapter or plan of the work. Chapter two is the literature review of the subject matter, which starts with the conceptual framework, review of relevant theories and the empirical review. Chapter three introduces all the method and methodologies that are used for the study. Chapter four deals with the data analysis and interpretation which uses the methodology already defined in chapter three. The last chapter which is the chapter five consists of the summary, conclusion and recommendations.

Keywords: THE IMPACT OF FDI ON ECONOMIC GROWTH THROUGH EMPLOYMENT GENERATION IN NIGERIA



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Keywords: THE IMPACT OF FDI ON ECONOMIC GROWTH THROUGH EMPLOYMENT GENERATION IN NIGERIA

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