Discuss about the FDI and the Nigerian Economy.
Foreign Direct Investment is a significant feature for a country to have flourished in its economy (Adeniyi et al., 2012).
Nigeria is one of the most populace nations of Africa to whom its certain drawbacks in the system has kept away from foreign investments in the country in spite of the fact that the country has great demands for services and goods (Akinlo, 2012). The political unsteadiness, reduced infrastructure, underprivileged corruption and ineffective government policies have kept away foreign investors in making their investments into the country (Erhieyovwe & Jimoh, 2016). With the passage of time, the scenario is changing now and it has all started in the mid- 2000s (Imoudu, 2012).
There are certain factors, which are catching the attention of foreign investors. Moreover, an amplified foreign direct investment is shaping Nigeria into a more developed country. This report helps in assessing the impact of FDI on the economy of Nigeria with the assessment of investment by a large consumer Household based Company (Nkoro & Furo, 2012). It also reveals the impact of vicious insurgency mounted by Boko Haram on investors.
For years Nigeria, the most populace country of Africa lacked poor investment interest from the foreign investors. There were various reasons that had resulted in the same. The political instability, insufficient infrastructure, incapable government policies and widespread corruption have all helped in degrading the economy of Nigeria (Nwankwo, 2014). It all changed with the election held in the year 2007 and the newly elected national power has all helped in the changed scenario (Ojide, 2012). The newly elected government since then focussed on the recovery part and took initiatives such as subsidies exclusion, minor trade barriers, privatization of a few businesses conducted by the state etc. These steps proved extremely helpful in the turning around of Nigeria from low GDP country to a comparatively higher GDP country (Olayiwola, & Okodua, 2013).
The appointment of a new government after the election in the year 2007 has opened its door to various kinds of reforms that has attracted the FDI flow back in the country Nigeria (Olusanya, 2013). The GDP accelerated from $67 billion in 2000 to $183 billion in 2013 (Onakoya, 2012). Initiatives to get rid of corruptions, attempt to get better the transport and the infrastructure of the nation state, elimination of subsidies, privatization of some state run trade have all helped the newly appointed government in bringing back the investments to the country (Umoh, Jacob & Chuku, 2012). Oil production is a significant part of Nigeria and elevated oil prices have helped government in civilizing the financial status (Uwubanmwen & Ajao, 2012). Apart from this, the agricultural and the industrial growths are also attracting more foreign investments in the country. The promising large domestic market has also contributed in attracting an accelerated foreign investment in Nigeria. Moreover, the investment made by the P&G in the year 2012 to build up a plant to manufacture throwaway diapers in Nigeria is a good example of an enhanced foreign investment in Nigeria (Umoh, Jacob & Chuku, 2012).
An increasing FDI with every passage of years is going to enhance the economy of the country in the coming future. Moreover, the statement given by the P&G representative about the growing opportunities in Nigeria with the growing population is a significant comment in favour of an improved economy in Nigeria in coming future. By 2050, the population of Nigeria may expectedly climb to the world third largest inhabitants (Olusanya, 2013). The increasing population carry the fact of an enhanced consumer base in Nigeria providing a wonderful prospect in Nigeria to the foreign investors (Akinlo, 2012). The P&G spokesperson also indicated towards increased investments provided the achievement of the government of Nigeria in further lowering of the trade in tariffs and expenditure taxes. These factors in addition with an improved infrastructure than the one, which is existing going to attract additional foreign investments in the country and ultimately, this is going to healthier the economy of Nigeria (Imoudu, 2012).
Nigeria faces severe challenges in the appearance of irregular oil prices like other African countries. This is creating a serious concern for the government to maintain the GDP of the country. In further OPEC nations, the declining of oil prices has resulted in a reduction in the export of Nigeria and an expected drop in GDP (Ojide, 2012). The reduced GDP is going to affect the economy of Nigeria and this is a serious threat to a country, which is evolving as a potential country to foreign investors.
Boko Haram, the fundamental Islamist rebellion based in the northern-eastern part of Nigeria remains a lively risk to the economic and the political constancy of Nigeria (Akinlo, 2012). The violence of Boko Haram has not yet reached to the part of the country reach in oil production but it has already influenced the agricultural production of the country. Moreover, the affected agricultural component has guided to a bigger food pricing in the northern division in addition to brutally dipping cross-border business with Chad, Niger and Cameroon (Onakoya, 2012). Specified declining oil prices, civilizing the safety atmosphere is a critical aspect in promoting a vigorous investment environment in Nigeria (Onakoya, 2012).
For a consumer Household based company to invest in Nigeria, there is growing opportunities with the existing threats that can disinterest some foreign investors from investing in the country (Akinlo, 2012). The struggling face of transport, construction and communication sector in the country catches least interest of the foreign investors (Akinlo, 2012). However, the transport and the communication sector are continually civilizing and these are apart from the oil industry fetching some of the attractions of the foreign investors. However, the statement of the spokesperson of the P&G regarding the growing population of Nigeria is evolving like a tempting factor to the investors for the consumer Household trade (Nwankwo, 2014). The population of Nigeria expected to grow more and by 2050, expected to be the world third largest populated country. This is something, which has caught the attention of the P&G representative and compelled the person in making a statement regarding the possible market expansion for consumer Household trade (Uwubanmwen & Ajao, 2012).
Based on the sectors highlighted in this report, there is a recommendation for the Nigeria to have the pleasure of enhanced foreign investment in the consumer Household trade of the country.
The one recommendation to catch the consumer Household related interest of the foreign investors is the improvement in the field of transport, communication and construction. The communication industry is relatively evolving to a high point but the transport and the construction sectors need serious look out by the government of Nigeria. The unattractive transport system is holding back the foreign investors from investing in the country. Foreign direct investment encourages for potential output in the industrial sector and this result in an increased GDP of the country. GDP is an important asset, which directly influence the economy of the country. An amplified GDP needs contribution from all sectors of a country and to a country like Nigeria, which has evolved ever since 2007 election, there is a requirement of intense look out on this issue.
Conclusion:
Nigeria suffered due to instable political dilemma in the country, poor infrastructure; ordinary transport system, inefficient communication system and corruption in the past but the 2007 election have more or less changed the scenario of the country. Initially foreign investors were not keen on investing in Nigeria but their perceptions are changing ever since the election in the year 2007. The newly appointed government realised the diverse potential unseen in irrespective of the industries in the country. Nigeria is rich in oil and this is something, which had initiated the interest of foreign investors towards Nigeria. After since 2007, there is continuous growth in the communication and the oil industries. The oil industry has attracted significant foreign investments in the country and these investments have helped the country in an accelerating GDP with every passage of year. GDP holds a pronounced significance in stimulating the economy of the country. The GDP enlargement from $67 billion during 2000 to $183 billion in 2013 simply reveals the astonishing feat achieved by the country in recent years. The lacklustre performance of the transport and the construction industries have resulted in a conservative approach of investors in Nigeria. It requires a serious repairing in terms of its construction and transport industries to create necessary features that could attract added foreign investors in future. However, the P&G representative has revealed some bravery facts regarding the consumer Household goods based trades in Nigeria. The spokesperson revealed that Nigeria is going to be world third largest populated country by 2050. Nonetheless, an increased population in a country prepares platform to an enlarged consumer base-giving climb to an improved consumer Household oriented trades.
References:
Adeniyi, O., Omisakin, O., Egwaikhide, F. O., & Oyinlola, A. (2012). Foreign direct investment, economic growth and financial sector development in small open developing economies. Economic Analysis and Policy, 42(1), 105-127.
Akinlo, A. E. (2012). How important is oil in Nigeria’s economic growth?. Journal of Sustainable Development, 5(4), 165.
Erhieyovwe, E. K., & Jimoh, E. S. (2016). Foreign Direct Investment Granger and Nigerian Growth. Journal of Innovative Research in Management and Humanities, 3(2).
Imoudu, E. C. (2012). The impact of foreign direct investment on Nigeria’s economic growth; 1980-2009: Evidence from the Johansen’s cointegration approach. International Journal of Business and Social Science, 3(6).
Nkoro, E., & Furo, A. O. (2012). Foreign capital inflows and economic growth in Nigeria: An empirical approach. Academic Journal of Interdisciplinary Studies, 1(2), 55-71.
Nwankwo, O. F. (2014). Impact of corruption on economic growth in Nigeria. Mediterranean Journal of Social Sciences, 5(6), 41.
Ojide, M. G. (2012). Foreign direct investment into oil sector and economic growth in Nigeria. Salami Dada Kareem, Fatimah Kari, Gazi Mahabubul Alam, GO Makuachukwu, and M. Oke David (2012) Foreign Direct Investment into Oil Sector and Economic Growth in Nigeria. The International Journal of Applied Economics and Finance, 6(4), 127-135.
Olayiwola, K., & Okodua, H. (2013). Foreign direct investment, non-oil exports, and economic growth in Nigeria: a causality analysis. Asian Economic and Financial Review, 3(11), 1479.
Olusanya, S. O. (2013). Impact of Foreign Direct Investment Inflow on Economic Growth in a Pre and Post Deregulated Nigeria Economy. A Granger Causality Test (1970-2010). European Scientific Journal, 9(25).
Onakoya, A. B. (2012). Foreign direct investments and economic growth in Nigeria: A disaggregated sector analysis. Journal of Economics and Sustainable Development, 3(10).
Umoh, O. J., Jacob, A. O., & Chuku, C. A. (2012). Foreign direct investment and economic growth in Nigeria: An analysis of the endogenous effects. Current Research Journal of Economic Theory, 4(3), 53-66.
Uwubanmwen, A. E., & Ajao, M. G. (2012). The determinants and impacts of foreign direct investment in Nigeria. International Journal of Business and Management, 7(24), 67.
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