FOREIGN DIRECT INVESTMENT DURING A RECESSION- THE NIGERIA EXPERIENCE

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FOREIGN DIRECT INVESTMENT DURING A RECESSION- THE NIGERIA EXPERIENCE(A CASE STUDY OF THE CENTRAL BANK OF NIGERIA (CBN) AND THE NIGERIA STOCK EXCHANGE. 2015-MAY 2017)

ABSTRACT

This study on “Foreign Direct Investment During recession – Nigerian experience using Central Bank of Nigeria (CBN) and Nigeria Stock Exchange (NSE) for the period 2015 – May 2017, is intended to empirically assess if Foreign Direct Investment inflow in Nigeria was significant during the period of recession and also assess if fluctuation in exchange rate significantly influenced the flow of FDI during this period as well. In order to successfully carry out this project, the researcher adopted Longitudinal Survey Design which facilitates the answering of research question as well as testing the hypothesis. Yaro Yamane Technique was used to select a sample size of 27. Ex-post facto research design was used for the study. Quota control sampling technique was used to select the variable used in this study. The data used in carrying out the research were gathered from both the primary and the secondary sources. For effective data analysis, Pearson’s Product Moment Correlation Co-efficient at 5% level of significance and Chi-Square goodness-of-fit were used to analyze the numerical values of the dependent and independent variables. Findings reveal that Foreign Direct Investment (FDI) inflow in Nigeria was significant during recession 2015 – May 2017 with Telecommunication sector taking the lead seconded by Oil and Gas sector, it also revealed that fluctuations in exchange rate did not significantly influenced the inflow of FDI during the recession. It was recommended that Government should improve on the macroeconomic indices such as general price levels, interest rate and exchange rate etc. since the contribute to they flow of FDI in Nigeria.

TABLE OF CONTENTS

pages

Title page – – – – – – – – i

Certification – – – – – – – ii

Dedication – – — – – – – – iii

Acknowledgements – – – — – – iv

Abstract – – – – – – – – vii

Table of contents – – – – – – viii

List of tables – – – – – – – xii

CHAPTER ONE

INTRODUCTION

Background of the study – – – – – 1

1.2 Statement of the problem – – – – – 6

1.3 Objectives of the study – – – – – 8

1.4 Statement of Hypothesis – – – – – 9

1.5 Research Questions – – – – – – 9

1.6 Significance of the study – – – – – 10

1.7 Scope/Limitation of the Study – – – – 11

1.8 Organization of the Study – – – – – 11

1.9 Operational Definition of terms – – – – 12

CHAPTER TWO

2.1 Introduction – – – – – – – – 15

2.2 Foreign Direct Investment (FDI): Meaning and Rationale – 15

2.3 Types and methods of Foreign Direct Investment (FDI)- 18

2.4 Theories of Foreign Direct Investment – – – 21

2.5 Determinants of Foreign Direct Investment inflow – 27

2.6 Factors that influence Foreign Direct Investment

Decision making – – – – – – – 35

2.7 Benefits of Foreign Direct Investment – – – 37

2.8 Differences between Foreign Direct Investment

and Portfolio Investment – – – – – – 39

2.9 Guidelines for Foreign Direct Investment (FDI) in Nigeria- 41

2.10 Foreign Direct Investment and FOREX Rate – – – 41

2.11 Effects of Recession – – – – – – 43

2.11-1 Business – – – – – – – 43

2.11-1.1 Falling Stocks and Dwindling Dividends – 44

2.11-1.2 Credit default and Bankruptcy – – – 44

2.11-1.3 Product Quality compromise – – – 45

2.11-2 Financial markets – – – – – – 45

2.11-3 Unemployment – – – – – – 46

2.11-4 Social – – – – – – – 46

2.11-5 Politics – – – – – – – 47

2.12 Causes of Nigeria Economic Recession – – 47

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction – – – – – – – – 50

3.1-1 Statement of hypothesis – – – – – – 50

3.1-2 Re-stated of research Question – – – – – 51

3.2 Design of the study – – – – – – 51

3.3 Area of the study – – – – – – – 51

3.4 Population of the study – – – – – – 51

3.5 Sample and sampling technique – – – – – 52

3.6 Instrument and methods for data collection – – – 53

3.7 Data analysis techniques – – — – – – 53

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Introduction – – – – – – – – 55

4.2: Data presentation – – – – – – – 55

4.3 Data presentation and analysis – – – – – 60

CHAPTER FIVE

INDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction – – – – – – – – 67

5.2 Findings – – – – – – – – 67

5.3 Conclusion – – – – – – – – 67

5.4 Recommendations – – – – – – – 68

References

Appendix

LIST OF TABLES

Table title Pages

2.12.1: Consumers Price Spike – – – – – 49

4.2.1: FDI inflow and FOREX rate in Nigeria

2015- May 2017 – – – – – – 55

4.2.2: Computation of Chi-Square (x²)

goodness of fit test – – – – – – 56

4.2.3 Computation of Dependent and Independent

Variable – – – – – – – 57

4.3.1: Job Experience Distribution of Respondents – – 60

4.3.2: Academic Qualification Distribution of

Respondents – – – – – – 60

4.3.3 Position Distribution of Respondents – – – 61

4.4: Responses to Questionnaire Distribution – – 61

4.5.1: Responses of Research Question One – – 61

4.5.1b: Responses of Research Question one b – – 62

4.5.2: Responses to research Question Two – – – 63

4.5.3: Responses to research Question Three – – 64

4.5.4: Responses to research Question Four – – – 65

4.5.5 Responses to research Question Five – – – 65

BACKGROUND OF THE STUDY

Foreign direct investment is viewed as a major stimulus to economic growth in developing countries. Its ability to deal with two major obstacles, namely, shortages of financial resources and technology and skills, has made it the centre of attention for policy-makers in low-income countries in particular. Only a few of these countries have been successful in attracting significant FDI flows however. From the early 1970‟s net resource flows to developing countries have followed an uneven path, but have risen rapidly since 1986 to an unprecedented U.S $285 billion in 1996(World Bank, 1996).The fluctuating nature of private capital flows has played a key role in this. Whereas official flows have continued broadly unchanged after a peak in 1989-91, private capital flows have experienced two waves of explosive growth, the first from 1975 to 1981, dominated by bank lending involving a high proportion of recycled petro-dollars, the second since 1990, dominated by foreign direct investment.

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