THE IMPACT OF FOREIGN DIRECT INVESTMENT ON THE NIGERIAN ECONOMY (A CASE STUDY OF NBC PLC ENUGU)

THE IMPACT OF FOREIGN DIRECT INVESTMENT ON THE NIGERIAN ECONOMY (A CASE STUDY OF NBC PLC ENUGU)

CHAPTER ONE

1.1     OVERVIEW OF THE STUDY

Nigeriaemerged from the colonial experience with an economy structured in accordance with the imperators of colonial economic relationship.  The first National Development plan of (1963) was launched with the objectives of providing the framework for industrial take off and development.  However, as the foreign investors were apprehensive of the nascent independent administration, efforts were made not only to alloy their fears of nationalism but also to attract more foreign investments through joint ventures with regional government then or the federal government.  The first development plan as an open door regime saw an increase in the establishment of miscellaneous foreign enterprises inNigeria, many of which are unincorporated branches of their overseas business.

However, just only about few years offer independence when the rest of the world including the erstwhile colonial master had hardly adapted to the realities of Nigeria’s attainment of nationhood or for the Nigerian government to articulate and plan its own economic policy, the country experienced its first military coup d’ et al in 1966.  this was followed by the civil was which tested for three years hence necessitated the cohesion of resources towards the successful execution of the war.  The period saw the introduction of various control measures of great significance.  For the foreign investors, these include licensing, quotas, exchange control measures with two tier compulsory credit system for import payments, restriction on capital/individual transfer and the promulgation of the companies decree of 1968 which compelled all forms operating the country to be incorporated as Nigerian Companies subject to local regulations.

Foreign Direct Investment (FDI) refers to a movement of capital that involves ownership and control of a firm in another country for instance, the purchase of common chores in a Nigerian incorporated company by a French citizen involves ownership and an element of control.  This is because all shares in an organisaiton have same voting rights.

For the purpose of this classification such is recorded as FDI if the shares acquired involves more than 10% of the outstanding common shares of the Nigerian company.

In this research and generally, Foreign Direct Investment is classified in the context of Multinational Corporations (MNC).  The MNC is sometimes refered to as Multinational Enterprises (MNE) is Transnational Corporations (TNC) or Transnational Enterprises (TNE).

According to the chairman of BOD’s of Chemical Co, a multinational form in the united state origin “the emergence of a world economy and the multinational corporation have been accomplished land in land”.  He sees multinational enterprises moving towards what he called “a global company”, a firm that have no nationality but belongs to almost all countries.

The phenomenon of the MNC can be explained only in a world of imperfect factor and product market characterized by differential taxation market power and share, positive information costs and the existence of pure specific revenue producing assistance.  In such a world, the market mechanism is partially replaced by other organizational firms, which generates and transmits relevant information and which co-ordinates production and marketing decisions.

The MNC arises in other words in response to a particular kind of market failure caused by high differential costs of inter-nation transfer of market information and technology and of course, factors of production (Tour and Hirsil 1979).  The key features of MNC are the, it provides the recipient nation with a package of knowledge, capital and entrepreneurship development.  It may thereby create a positive contribution to economic growth and development in host countries.

THE IMPACT OF FOREIGN DIRECT INVESTMENT ON THE NIGERIAN ECONOMY (A CASE STUDY OF NBC PLC ENUGU)