FOREIGN DIRECT INVESTMENT AND POVERTY REDUCTION IN NIGERIA
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FOREIGN DIRECT INVESTMENT AND POVERTY REDUCTION IN NIGERIA
Chapter one
INTRODUCTION
1.1 Background of the Study
The value of foreign money to developing countries is well understood. It boosts their domestic savings and is frequently accompanied by technology and administrative skills that are essential for economic progress.
Foreign direct investment has the potential to significantly help to breaking the growth-poverty vicious circle, providing optimism for Nigerians. The Nigerian government anticipates that global Direct Investment (FDI) will compensate for domestic capital shortages, supply technology and management skills, facilitate access to global markets, and provide technological and efficiency spillovers for local enterprises.
Foreign Direct Investment (FDI) is projected to strengthen the continent’s integration into the global economy by providing access to external markets, transferring technology, and boosting capacity in local enterprises in general.
Direct foreign investment has been regarded as the best type of international financing. Foreign Direct Investment (FDI) packages often include finance, technology, and highly qualified staff.
Indeed, like in other third-world countries, Nigeria’s import-substitution industrialization initiatives were carried out primarily through Foreign Direct Investment (FDI).
It is widely assumed that, given appropriate host-country policies and a basic level of development, benefits from Foreign Direct Investment (FDI) include job creation, the acquisition of new technology and knowledge, and increased tax revenue from cooperative profits generated by FDI.
All of these types of benefits are predicted to contribute to greater economic and employment growth, which is the most essential and effective weapon for improving human well-being and eliminating poverty in Nigeria.
However, the influence of foreign direct investment (FDI) on poverty alleviation is mostly determined by a variety of factors, including host nation policies and institutions.
The most effective way Foreign Direct Investment (FDI) helps to alleviate poverty is by increasing access to job opportunities. The ability of Nigeria to relieve poverty is dependent on an adequate influx of foreign investment resources.
For decades, the government has struggled with poverty alleviation efforts. Currently, the vast majority of Nigerians live below the poverty line. Given the low per capita income in less developed nations, the standard economic model implies that average and marginal consumption propensities are high, savings are low, and the generation of new productive capital is limited.
1.2 Statement of the Problem
Despite massive Foreign Direct Investment (FDI) flows into Nigeria with the goal of boosting the economy and, as a result, reducing poverty (Ogunniyi and Igberi, 2014; Oni, 2014), poverty remains prevalent.
FDI inflows have been positive and growing at a modest rate. Currently, the country is Africa’s most popular destination for foreign capital, accounting for more than 15% of total FDI flows (UNCTAD, 2012).
However, due to a gap in the literature that this study aims to fill, no answer has been provided to the poverty-FDI inflows nexus in Nigeria, specifically the impact of some selected macroeconomic variables or indicators such as foreign direct investment
external earnings, trade openness, market size, exchange rate, external debt, foreign aids, and technology on poverty reduction in Nigeria.
This literature vacuum necessitates an empirical investigation to determine the impact of these selected macroeconomic indicators on poverty reduction in Nigeria.
1.3 Objectives of the Study
The study’s aims are:
1. Determine the relationship between foreign direct investment and poverty reduction in Nigeria.
2. Determine whether FDI has an impact on poverty reduction in Nigeria.
3. Determine whether FDI granger causes poverty in Nigeria and vice versa.
1.4 RESEARCH QUESTIONS.
a) Has FDI contributed to poverty reduction in Nigeria?
b) Is there a strong relationship between FDI and poverty in Nigeria?
b) Does FDI granger generate poverty in Nigeria, and vice versa?
1.5 Research Hypotheses
To ensure the study’s success, the researcher developed the following research hypotheses:
H0: There is no link between foreign direct investment and poverty alleviation in Nigeria.
H1: There is a link between foreign direct investment and poverty alleviation in Nigeria.
H02: Foreign direct investment has little impact on poverty reduction in Nigeria.
Ha2: Foreign Direct Investment does not have a substantial influence on poverty reduction in Nigeria.
1.5 Significance of the Study
The study will be valuable to the Nigerian government, students, and the general public. Nigeria’s ability to relieve poverty is dependent on an appropriate influx of foreign investment resources and a secure investment environment. The work will also serve as a reference for other scholars embarking on this area.
1.6 Scope and Limitations of the Study
The study focuses on foreign direct investment and poverty alleviation in Nigeria. The researcher faces various constraints that limit the scope of the investigation;
a) Research Material Availability: The researcher has insufficient research material, which limits the investigation.
b) Time: The study’s time frame does not allow for broader coverage because the researcher must balance other academic activities and examinations with the study.
c) Organisational privacy: Limited access to the chosen auditing firm makes it impossible to obtain all necessary and required information about the activities.
1.7 Definition of Terms
Foreign Direct Investment: A foreign direct investment is one in which an entity based in another country acquires controlling ownership of a business in one country. It is separated from a foreign portfolio investment by the concept of direct control.
Poverty is the shortage or lack of a specific amount of material possessions or money. Poverty is a multidimensional concept that can encompass social, economic, and political aspects.
Poverty reduction, often known as poverty alleviation, refers to a collection of economic and humanitarian initiatives aimed at permanently lifting people out of poverty.
1.8 Organisation of the Study
This research study is organised into five chapters for simple understanding, as follows: The first chapter is concerned with the introduction, which includes the (overview of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms, and the study’s historical context.
The second chapter focuses on the theoretical framework that underpins the study, as well as a review of relevant literature. Chapter three discusses the research design and technique used in the study.
Chapter four focuses on data gathering, analysis, and presenting of findings. Chapter 5 provides a summary, conclusion, and suggestions from the study.
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