IMPACT OF FOREIGN PRIVATE INVESTMENT ON NIGERIAN ECONOMY.
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IMPACT OF FOREIGN PRIVATE INVESTMENT ON NIGERIAN ECONOMY.
Chapter one
1.1 Background of the Study
Foreign private investment, which comprises both private direct inventory and foreign private portfolio investment, is a significant component of overall investment, particularly in developing countries.
In a country like Nigeria, where domestic saving is low, an increase in foreign investment results in a macro-significant sequence of private foreign investment as domestic saving rises and foreign capital inflows accelerates.
The Nigerian economy, which had experienced significant growth as a result of its oil wealth until the late 1970s, has been plunged into an unparalleled economic slump since 1981. Private investment is a significant avenue for aggregate investment. That is, improvement in economic adjustment is projected to occur.
Ironically, the oil was to blame for this. By 1981, global oil prices had dropped to an all-time low of approximately $12.00 per barrel, compared to $40.00 per barrel in international markets the previous year.
This results in a considerable decline in foreign exchange earnings and a serious distribution of the economic development process. It is impossible for the government to complete previously agreed national projects, and the foreign exchange deficit cannot be solved solely by agricultural exports, which have suffered significant neglect during the oil boom years.
As a result, industrial productivity fell, and unemployment rose as factories produced below capacity or were closed. In addition, the rate of inflation grew due to industrial output shortages and restrictions imposed in an effort to conserve foreign cash.
Virus administrations including as Shagari, Babangida, and Buhari (SAP) attempted to address the economy in the 1980s, but by 1987, the government realised that the oil boom years were ended. As previously stated, the failure to attract local investment funds and the fall in the flow of foreign money into the country exacerbated the situation.
As a result, the Babangida administration emphasised the importance of additional foreign investment in the economy. In this context, the government aggressively supported the various benefits presumed to accrue to the host country from foreign investment, which serve to alleviate the scarcity of domestic savings and enhance the availability of foreign exchange, allowing for rapid growth in real income.
It is believed that direct foreign investment will result in higher direct taxes paid by foreign nationals.
However, G.L. REUBER et al. have expressed some reservations about this, stating that the quantity of benefits here would be contingent on the considerable subsidies that the host countries must provide.
It is anticipated that direct foreign investment will result in lower product prices, particularly when investment is cost-producing. Foreign investment is expected to be related with specific external economics.
Apart from contributing physical capital to the host country, they also provide technological expertise, market information, administrative and supervisory skills, personal organisational experience, and product creativity, all of which are in short supply in many developing countries.
In this regard, foreign investment may be critical to the portion of private technical assistance and demonstrative efforts that could be beneficial elsewhere in the economy, while new techniques complement the inflow of private capital by promoting the diffusion of technological advancement in the economy.
It is further anticipated that foreign investment Nigeria encouraged domestic investment by lowering costs in other industries, which might result in increased profits and the expansion of other businesses.
Furthermore, initial foreign investment in Nigeria has helped to create external investment incentives by increasing demand for the products of other businesses.
1.2 Statement of the Problem
Private foreign investment is stated as helping to alleviate the shortfall of domestic savings and boost the supply of foreign exchange, allowing for rapid growth in real income.
Direct foreign investment is anticipated to result in greater direct states, which must be compensated for by significant subsidies provided by host countries.
Similarly, direct foreign investment is expected to result in a huge labour force. Beyond that, foreign investment was found to be linked to external economics.
The crucial considerations are the amount of the inflow given the country’s political and social economic systems.
The country’s external relationship with the developed countries’ economic status, as well as their incentives for major inflows of investors.
The influx of private foreign investment has also been influenced by a country’s shifting political and economic conditions.
Their status may either improve or shift the potential growth of foreign private investment and its advantages to the Nigerian economy.
1.3 Aim and Objectives of the Study
Foreign investments have made significant contributions to the core challenges. In Nigeria’s economic downturn and expansion. Additionally, private international investment is encouraged.
1. To assess the contribution of private foreign investment to Nigeria’s GDP.
ii. To demonstrate the growth and development rate of private foreign investment in the economy.
iii. To demonstrate to the government that either area of the economy might benefit greatly from foreign investment in the country, rather than relying primarily on the oil industry.
iii. Determine the overall performance of private foreign investments in Nigeria from 1980 to 2002.
v. To capitalise on the many fields of private foreign investment, which include mining and quarrying, manufacturing and processing, agriculture, forestry, fishing, transportation, and communication. Other categories include construction, commerce and business, services, and miscellaneous.
vi. Examine the prospects for increased foreign private investment in Nigeria over time.
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