IMPACT OF FOREIGN DIRECT INVESTMENT ON INVESTMENT IN NIGERIA: 1960-1980 (MULTINATIONAL, INTERNATIONAL, DOMESTIC CAPITAL FORMATION)

GLADSON NWANKWO NWANNA, Fordham University

Abstract

The subject area of Foreign Direct Investment (FDI) especially as it relates to the host/home country relationship and as it pertains to the cost and benefits, have continued to remain controversial. One can trace the root cause of the problems and controversies relating to FDI, not only in the relatively scanty empirical studies in the area, but also in the scope and objective functions of previous studies. For the most part the scope and objectives of these studies have been, either, inadequately defined and/or have been narrowly pursued.^ The present study has attempted to accommodate these limitations, as it evaluates the impact of FDI on investment in Nigeria. The objective of the study was incorporated in three distinct hypotheses. The hypotheses were then tested within a neo-classical investment framework comprising six separate equations and two additional sectoral equations, reflecting the Petroleum and Non-Petroleum sectors. The adopted estimation technique was the two-stage least squares.^ The results of the study resolved the hypotheses and essentially concluded: That, FDI in Nigeria between 1960 and 1980 had on the aggregate, a negative or displacing impact on domestic capital formation; that there was no one-to-one relationship between a unit inflow of FDI and the effect on domestic investment; that in the short-run FDI had a negative effect on domestic investment as opposed to a positive long-run effect; and that FDI impact on capital formation in the petroleum sector was different from the impact in the non-petroleum sector. It had a positive or complementary effect in the former and a negative or displacing effect in the latter.^ Based on these results and the implication for Nigeria's development efforts, some broad and specific recommendations were made. These recommendations included: A re-evaluation and restructuring of policies related to FDI and especially channeling FDI inflow to more priority areas such as agriculture. An overhaul of the incentive system and making it more purposeful and efficient. Finally, an increased efforts is required on the part of the government to re-vamp the agriculture and non-petroleum export sectors through an array of investment-propelled initiatives and private sector encouragement. ^

Subject Area

Finance

Recommended Citation

NWANNA, GLADSON NWANKWO, "IMPACT OF FOREIGN DIRECT INVESTMENT ON INVESTMENT IN NIGERIA: 1960-1980 (MULTINATIONAL, INTERNATIONAL, DOMESTIC CAPITAL FORMATION)" (1984). ETD Collection for Fordham University. AAI8506350.
https://fordham.bepress.com/dissertations/AAI8506350

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