FOREIGN INVESTMENT IN NIGERIA UNDER
STRUCTURAL ADJUSTMENT PROGRAMME (SAP)
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
5.1
Findings
5.2
Conclusions
5.3
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.