IMPACT OF INCENTIVE MEASURES ON THE FLOW OF FOREIGN PRIVATE INVESTMENTS

IMPACT OF INCENTIVE MEASURES ON THE FLOW OF FOREIGN PRIVATE INVESTMENTS

ABSTRACT

Attempts at attracting foreign direct investment in Nigeria have been based on the need to maximise the potential benefits derived from them, and to minimise the negative effects their operations could impose on the country. To this effect, the federal government of Nigeria has over the years, been employing different incentive measures, both fiscal and monetary, for the purposes of attracting investors to develop the economy. How successful have these incentives been?In this study, impact of incentive measures on the flow of foreign private investments: the study of Nigeria’s tax incentive policy measures (1995 – 2005) the researcher set out achieve four objectives to assess the Nigerian tax environment; to examine the incentive regimes of the federal government of Nigeria; to study the trend of foreign private investment in the country, with the objective of ascertaining its economic impact; and finally, to appraise the effect of the various incentives on foreign private investment in Nigeria. The research found that there are several built-in incentives to attract foreign private investments into Nigeria; that the manufacturing and agricultural sectors were more favoured in the incentive measures; that the incentive measures were able to boost the inflow of foreign direct investments; that this increased inflow however, could not translate to visible improved living standards, nor reduce inflation and the unemployment status of the nation.

CHAPTER ONE

1.0  INTRODUCTION

1.1             BACKGROUND OF STUDY

According to Medupim (2002:1), foreign private investment accounted for 70% of the total industrial investment, in Nigeria, at independence. This also constituted over 90% of investment in such basic industries as chemical production, and vehicle assembly plants and no less than 90% of other manufacturing sub-sectors. Foreign Private Direct Investment (FPDI) dominated banking, insurance and mining before the indigenization programme (Ukeje, 2003:285).

However, the indigenization programme of 1972 and 1977 drastically reduced foreign private investment in Nigeria. Ever since then, there have been concerted efforts by the FederalGovernment of Nigeria to industrialise and attract Foreign Direct Investment, over the years. This is because, according to Okafor (1983:53), direct foreign investment often means much more than capital inflow. It also constitutes a source of new product ideas, technology, professional expertise, etc. These efforts take the form of incentive schemes, which come in different forms. But common in African and the company income tadx relief, import duty relief, and all other tax incentives (ibid).

Howbeit, in order to attract enough foreign private investment, the macro economic environment must be attractive to foreign investors also. Issues like industrial infrastructure, sizeable internal market, and political stability together with a friendly tax environment, all culminate to influence foreign private investment into any country.

IMPACT OF INCENTIVE MEASURES ON THE FLOW OF FOREIGN PRIVATE INVESTMENTS