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AN ASSESSMENT OF THE IMPACT OF FOREIGN DIRECT INVESTMENT ON NIGERIAN ECONOMIC GROWTH (1990-2011)

CHAPTER ONE

1.0 INTRODUCTION

1.1 STUDY BACKGROUND

The decisions and actions of investors worldwide are influenced significantly by the dictates of the interests which suggests that capital not only be channeled to economic sectors with high yield but also to those who are ostensibly yield savings Quick. The balance therefore, investors would have spun profitable opportunities characterized by extreme competition, glut, unfavorable regulations, long gestation periods and opt for investments that generate high returns in the shortest possible time. Based on this view, investors usually migrate one economy to another in search of a better investment climate and higher yields.

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 said to represent the flow of tangible personal property of a foreign country's capital, equipment and other facilities for production and transformation into an economy of Home. It is also defined as a long term investment reflecting a lasting interest and control by a direct investor (or parent company) Foreign, a resident of the entity of the company in an economy other than that of foreign investor (IMF, 1993).

Foreign direct investment is widely thought to bring with him in the host country a package of productive assets, including long-term foreign capital, entrepreneurship, technology skills, innovation and capacity marketing managerial, organizational and export of know-how. The special feature of FDI is that it involves not only a transfer of resources but also the acquisition of control. The subsidiary does not just have a financial obligation to the parent company if part of the same organizational structure (Krugman and Obstfeld, 2000). Foreign direct investment involves much more that the mere transfer of capital or the establishment of a local factory in a developing country. Carry with them multinational production technology, tastes and various commercial practices, including cooperation agreement, marketing restrictions on advertising and the phenomenon of transfer pricing. They engage in a series of activities, many of which have little to do with the aspirations of developing countries in which they operate. (Todaro, 2000).

Temle (1999) demonstrates that technical change and technological learning which are important components of foreign direct investment are important determinants of economic growth. In addition, it is pertinent to add that the technology generated through research and development (R & D), most of which is performed in important industrialized countries making transfer to the economic prosperity of the country with low search and development (R & D) and innovation capabilities of the technology.

Political and economic upset on FDI greatly help to stimulate economic growth in recipient countries Chang's (2001) estimates that in the 16th and 17th centuries deliberate transfer policies of King Henry VIII made Britain a leading manufacturing nation. Among the issues discussed in the development, the economy is the current role of FDI in export performance of developing countries such as the case of East and Southeast Asian countries.

FDI flows to Africa increased only marginally and are still at lower levels than those of other developing countries. The region accounted for less than 1% of total world FDI flows in the late 1990s some of (Odenthal, 2001) while the inputs to developing countries as a group increased from US $ 20 billion and 75billion between 1981 and 1985. The share of Africa (UNCTAD 1999).

Historically, FDI flows to the region rate and Nigeria especially weak are explained by hostile policies, unstable political environment characterized by civil wars and armed conflicts, lack of effective regional integration efforts, the poor and deteriorating infrastructure, heavy regulation or lack of institutional capacity to implement the IDE to build trust.

1.2 PROBLEM STATEMENT

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