CHAPTER ONE

1.0 INTRODUCTION

The traditional economic theory teaches that capital starved, but generally labour surplus developing countries, should be the net importers of financial resources from advanced countries. This pattern o movement will be informed by the returns on new investment opportunities, which are considered higher where capital is limited (Oyeranti 2003:10). Flows of funds in the opposite direction from individuals and business organizations are considered perverse and exceptionable.
Financial resources enter into a country through any of the followings:
• Foreign direct investment, official flows from bilateral sources (eg. OPEC, Organisation for Economic Co- operation and Development-OECD) and multilateral sources (such as the World Bank, International Development Association-IDA, International Monetary Fund-IMF, International Financial Corporation-IFC) on concessional and non-concessional terms.

• Commercial Bank Loans (excluding export credits)

All of these come in form of investment, loans, grants or aids. According to World Bank (1997), Foreign Direct Investment is the investment made to acquire a lasting management interest, usually at least 10% of voting stock, in an enterprise operating in a country other than that of the investor.
International Monetary Fund‟s Balance of Payments Manual defines foreign direct investment (FDI) “investment made to acquire a lasting interest in foreign enterprises with the purpose of having an effective voice in its management”. The World Trade Organisation (1996) also observes that foreign direct investment occurs when an investor based in one country (the home country) acquires an asset in another country (the host country) with the intent to manage that asset. The resultant capital relocation will boost investment in the recipient country and according to Summers (2000:16) brings enormous social benefits. It is the process of investing, by foreigners, in the economy of another country. These funds are generated outside the investment recipient country. FDI can be in form of build,

operate and transfer (BOT), turn-key, leveraged buy out, venture capital or starting a new company from the scratch.
Foreign direct investment is viewed as a major stimulus to economic growth in developing countries. Its ability to deal with major obstacles, namely, shortages of financial resources and technology, skills acquisition and training, as well as contribution to corporate tax revenue in the host country, has made it the centre of attention for policy-makers in low-income countries in particular. However, only a few of these countries have been successful in attracting significant FDI flows.

1.1 BACKGROUND OF THE STUDY

Nigeria, like other African countries, recognizes the contribution of FDI to economic development and integration into the world economy. Nigeria since pre-independence era till date has being making considerable efforts to improve its investment climate through liberation, deregulation, privatization and enabling laws and incentives. Among these are:

1. The Aid to Pioneer Industries Ordinance and the Income Tax (Amendment) Ordinance Act of 1952
2. Industrial Development (Income Tax Releif) Act of 1958

3. Companies Act of 1968, Banking Act of 1969, Petroleum Act of 1969, etc

4. National Office of Industrial Property Act 90 of 1979

5. Nigerian Enterprises Promotion (Issues of Non-voting Shares) Act 1987

6. The Nigerian Enterprises Promotion Act No. 54 1989

7. Nigerian Investment Promotion Commission, etc

However, the much-expected surge in FDI into Nigeria has not occurred. This is particularly worrisome, as Nigeria possesses almost all the attributes of a good FDI destination. These include size of market, availability of natural resources, low labour cost and high productivity, incentives, high level of human capital development, major markets proximity, etc.
Nigeria needs FDI because it is favoured over other forms of private capital flows. Portfolio equity and debt are subject to

reversals in financial crises period, while FDI is more resilient. (Lipsey: 2001).2
FDI is critical to the country as it is the key source of large pool of capital necessary for the development of the country. However, despite several fiscal incentives by the government, foreign direct investment has remained dismal (The Punch 2002) The cost of not having foreign direct investment is high. A decline in investment reduces the expansion of output, variety and quality, leading to a reduced market share and potentially declining non-price competitiveness.

1.2 STATEMENT OF PROBLEMS

The dream of any nation is to attract investment to help it develop its economy through efficient manufacturing of goods and provision of services. Nigeria has been unable to attract enough FDI to develop its economy and reduce unemployment.
The reasons for this include:

1. Perceived political instability;

2. Low Gross Domestic Product (GDP);

3. Bad image of the country overseas due to high financial crime rate;

4. Persistent political and religious crises;

5. Micro-economic instability;

6. High rate of crime in the country;

7. Adverse operating conditions;

8. Erratic power supply and poor infrastructures;

9. High corruption especially in the government;

10. Attendant high cost of doing business in the country; and

11. Inefficient judicial system and general insecurity

1.3 OBJECTIVES OF THE STUDY

This study will among other things, try to:

1. Appraise and find solutions to how to increase the GDP.

2. Look into ways of curbing the menace of high financial crime rate in Nigeria.

3. Examine ways of attracting foreign direct investment in Nigeria.

4. Investigate and analyse the causes of adverse operating conditions in the country.

5. Proffer solutions to the high cost of doing business in Nigeria.

6. Find ways of boosting export of local goods.

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   KNOWLEDGE AND ACCEPTANCE OF ORAL REHYDRATION THERAPY OF MOTHERS IN THE MANAGEMENT OF DIARRHEA IN CHILDREN 0-5 YEARS

   APPLICATION OF MATRICES TO REAL LIFE PROBLEMS

   ASSESSMENT OF THE PERCEIVED EFFECT OF ALCOHOL AND DRUG ABUSE ON THE ACADEMIC PERFORMANCE OF STUDENTS OF OSUN STATE UNIVERSITY, OSOGBO.

7. Analyse the effect of political and religious crises in Nigeria.

1.4 HYPOTHESIS

This study is carried out with certain underlying assumptions upon which observations, findings, comments and suggestions are based.
These assumptions are:

a. (i) General Hypothesis:

FDI in Nigeria has no direct link to the state of infrastructures in Nigeria.
(ii) Null Hypothesis:

FDI has direct link to the state of infrastructures in Nigeria.

b. (i) General Hypothesis:

Size of the market has no impact on the attraction of FDI.

(ii) Null Hypothesis:

Size of the market has an impact on the attraction of FDI.

c. (i) General Hypothesis:

Open economies do not encourage FDI.

(ii) Null Hypothesis:
Open economies encourage FDI.
d. (i) General Hypothesis:
There is no relationship between incentives/operating
conditions and FDI.
(ii) Null Hypothesis:
There is relationship between incentives/operating
conditions and FDI.
e (i) General Hypothesis:
Political risk does not affect flow of FDI.
(ii) Null Hypothesis:
Political risk affects the flow of FDI

1.5 SIGNIFICANCE OF THE STUDY

This study is very important as it will contribute immensely towards establishing a viable and vibrant economy that will attract the much needed FDI. The inflow of investments from abroad offers a lot of advantages, which include reduction of risk, faced by investors, enthronement of best practices in corporate governance, accounting rules, legal traditions among

others (Fieldstein: 2000). It leads to economic growth and development.
As such, it is important because:

1. It will bring into focus ways of attracting FDI

2. It will reveal the impact of financial crime on FDI and our economy.

3. This study will identify ways of improving the operating environment in the country.

4. It will offer solutions on how to reduce political risks.

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   AWARENESS, USE AND USERS’ SATISFACTION WITH LIBRARY E-RESOURCES BY UNDERGRADUATES OF NATIONAL OPEN UNIVERSITY OF NIGERIA, LAGOS STUDY CENTRE

   HEALTH INFORMATION RIGHTS AWARENESS, PERCEIVED STIGMATIZATION, PERSONAL FACTORS AND WILLINGNESS TO USE MENTAL HEALTHCARE SERVICES AMONG LIBRARIANS IN PRIVATE UNIVERSITIES IN SOUTHWEST, NIGERIA

   IMPACT OF FINANCIAL INSTITUTION ON THE ECONOMIC DEVELOPMENT OF NIGERIA

5. It will highlight the importance of infrastructures in attracting FDI.

6. It will find ways of producing export-oriented goods.

1.6 SCOPE AND LIMITATIONS

This study was conducted out within Lagos metropolis. Some of the respondents interviewed gave their sincere opinion; however, others were uncooperative, probably due to ignorance.
The major problem experienced during the study was lack of up-to-date data and reliability of the ones got eventually. There was also the problem of getting the interviewees on seat for personal interviews despite previous appointments by them.
1.7 RESEARCH QUESTIONS

a. What is responsible for poor infrastructures despite the huge amount purportedly invested in it?
b. Why is foreign Direct Investment in the real sector still very low irrespective of the present regimes concerted effort to wow investors to Nigeria?
c. How does privatisation affect FDI?

d. What are the possible impact(s) of openness to FDI and the flow of goods and services?
e. What are the reasons why FDI has remained low despite the incentives given by the government to attract FDI?