CC BY
17gs4 инновации ^d
Madodjemu Michael,
Department of International Economic Relations, Peoples' Friendship University of Russia (PFUR)
Ekpobodo Raymond Ovwigho,
Engineering Academy,
Department of Engineering Business and Management/Space Technology,
Peoples' Friendship University of Russia (PFUR) e-mail: raygho2000@yahoo.com
Omoroghomwan Queen,
Department of International Economic Relations, Peoples' Friendship University of Russia (PFUR)
FOREIGN INVESTORS AS A MEANS OF SOCIO-ECONOMIC DEVELOPMENT OF NIGERIA
Annotation. The primary concern of any country's national economy is the ability to bring investors to promote its country's national interest within the concord of other nations. Hence, the article is focused on foreign investors to achieve the desired economic goals, which are correlated with the objectives of the Nigerian economic system for subsequent stages. The article investigates the impact of foreign investors into the developing and transitional economies of Nigeria. It is also important to study the trends and determinants of foreign investors in Nigeria. The article further describes the role that could be played by foreign investors in socio-economic development in Nigeria, pointing out the positive and negative aspects, and how to deal with each of them in proportion to the facts of the Nigerian Economy needs. The article observed that Nigeria's socio-economic development is characterized by the lack of budgetary resources to finance. The significant fluctuations in oil prices and the Naira exchange rate, as well as political and insecurity surgency, followed by the increase in capital outflow. These highlighted problems search for way forward to solve the socio-economic problems in Nigeria. In conclusion, the article develops a prospect for attracting more foreign investors to high value-added activities in Nigeria.
Key words: foreign investors, socio-economic development, economic growth, Nigeria.
1. INTRODUCTION
Nigeria is well known as the most populous black nation in the world. However, her population has not been converted into a comparable improvement in foreign investors, neither in socio-economic development, due to decades of economic mismanagement. In 1960s, agriculture, manufacturing and even services have all shrunk as a proportion of gross domestic product (GDP). But not now that Nigeria is well known as a major oil producer. Thus, foreign direct investment (FDI) has been prominent in oil and gas development. This has remained low in other sectors and of marginal development value that led Nigeria to external debt and borrowing. Currently, FDI inflows to Nigeria have been profoundly affected by political interest of different administration, its world price and Government's policies in this area. Before, it was the development of the oil sector (United Nations)1.
1 United Nations Conference on Trade and Development. Available at: https://unctad.org/en/Docs/
Achieving the socio-economic development and implementing the Nigeria Foreign Direct Investment requires mobilizing additional investors, in particular foreign and domestic investors, to fund public goods and services. This article presents internationally comparable indicators on tax and nontax revenues that can be used to track progress on socio-economic development and to inform Nigeria Foreign Direct Investment towards policy reform.
Nigeria interests in foreign investors has grown significantly lately. This is an attempt to solve her national economy problems. Hence, the article reviewed and provides an important tool of the integrated solution to slowing economic growth and socio-economic problems. The role of foreign investor's impact in Nigeria economy has been influenced by national role conceived for it in international businesses. This role conception has become the defining paradigm for foreign investor's engagement towards business in Nigeria. Considering this paradigm, the authors believe that Nigeria
diaepcb20081_en.pdf Retrieved (07/12/2019)
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economy and her socio-economic development is tied to that of other African states because of cultural and historical experiences. To this end, the authors see investment process as one of the main aspects of the functioning of the national economic system, determining the level of technological basis and efficiency of material production, which each country should consider. According to (World Bank, 1999; Crespo and Fontura, 2007; Romer P., 1993; UNCTAD, 1991), it is widely recognized that foreign direct investment (FDI) produces economic benefits to the recipient countries by providing capital, foreign exchange, technology, competition and by enhancing access to foreign markets1.
The empirical of foreign investor's impact on the socio-economic development consists of not only economic perspective but examine also the social aspects. In order to ensure the implementation of key policies of the President Buhari administration as captured in the 2016-2018 Medium Team Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) which was denied approval by the 8th National Assembly, President Muhammadu Buhari has once again forwarded an Executive Communication to the Senate seeking the Chamber's approval to borrow $29.96 billion as part of the External Borrowing Plan of the Government to execute Key Infrastructure Projects in various sectors of the economy2. To this end, the authors noticed that the $29.96 billion 2016 - 2018 external borrowing plan of President Buhari administration is a financial wastage. When defining a modern investment vision for socio-economic development in a country like Nigeria, there should be fundamental propositions that policy makers should keep in mind to avoid regular borrowing. Investment policy and development is not about choosing to privilege foreign investment over domestic or vice-versa and borrowing. It should be about connecting both of them. Investments, and in particular foreign direct investment (FDI) are not homogenous phenomena. Different types of investment have different effects on socio-economic development and thus require different policies. In view of the changing development finance landscape of Nigeria, the government should adopt a
1 Dr. Khondoker Abdul Mottaleb. Determinants of Foreign Direct Investment and Its Impact on Economic Growth in Developing Countries. Available at: https://www. researchgate.net/profile/Khondoker_Mottaleb2/ publication/24116456_Determinants_of_Foreign_Direct_ Investment_and_Its_Impact_on_Economic_Growth_in_ Developing_Countries/links/5444f5b80cf2e6f0c0fbfa72/ Determinants-of-Foreign-Direct-Investment-and-Its-Impact-on-Economic-Growth-in-Developing-Countries.pdf Retrieved (03/12/2019)
2 Federal Republic of Nigeria, National Assembly (28/11/2019). President Buhari Seeks Approval to Borrow $29.96bn Loan, As Senate Moves to Address Housing
Deficit. Available at: https://www.nassnig.org/news/ item/1266 Retrieved (03/12/2019)
development finance and aid assistance to facilitate a better understanding among stakeholders of the current and future flows of development finance, in the context of national socio-economic strategy and sustainable development.
2. RESEARCH BACKGROUND
The primary responsibility of any country's economy policy is to articulate in clear terms its country's national interest and to relate them to those of other nations within international system. In order to achieve its national socio-economic strategy and sustainable development will need to draw on finance from a range of sources and consider the implications of potential changes to the availability and concessionally of financing. Thinking on how best to attract foreign investors on development of national economy, it considers how institutional arrangements within the government may potentially be adjusted to prepare for socio-economic development. The challenge of aligning foreign investors with national socio-economic development priorities and results is not unique to Nigeria. Indeed, the need for more integrated investors to achieve sustainable development and encourages the formulation of integrated national socio-economic development is dedicated to the Foreign Direct Investment (FDI) influence on economic growth.
According to Central Bank of Nigeria, Foreign Direct Investment (FDI) in Nigeria increased by 909.54 USD million in the second quarter of 2019. Foreign Direct Investment (FDI) in Nigeria averaged 1233.61 USD Million from 2007 until 2019, reaching an all time high of 3084.90 USD Million in the fourth quarter of 2012 and a record low of 314.44 USD Million in the fourth quarter of 201 83. These statistics illustrate the Foreign Direct Investment (FDI) of mobilizing and effectively utilizing the resources necessary for the Nigeria economy, particularly the challenges of aligning investors with Nigeria's foreign investor's goals.
In order to contribute to a comprehensive evidence base on existing investment flows in Nigeria, the government considered domestic and international, public and private sources of socioeconomic development. Figure 1 presents findings of the Foreign Direct Investment in terms of the volume and trends for those investment flows for which statistical data was available. There has been slow growth in investment trends provided by the Nigeria Foreign Direct Investment, starting from 2017 to 2019. Whereas, external debt and borrowing is a large source of financing Nigeria economy, while there is a great deal of variability in levels of borrowing from year to year, the stock of external debt in Nigeria
3 TRADING ECONOMICS/CENTRAL BANK OF NIGERIA. Available at: https://tradingeconomics.com/ nigeria/foreign-direct-investment Retrieved (06/12/2019)
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increased to 27162.63 USD Million in the second quarter of 2019 from 25609.63 USD Million in the first quarter of 2019 and this is illustrated in figure 2. Public revenues, and specifically tax and non-tax revenues, has grown significantly in volume particularly since around 2017. Looking at the tax portion of Nigeria revenues, the total tax revenues of Nigeria have
increased to 5.7% of GDP in 20171. Figure 3 presents findings of the unweighted average tax-to-GDP ratio for eight selected ECOWAS countries published in the Revenue Statistics in Africa 2019. The tax-to-GDP ratio of the selected countries refers to total tax revenue, including, social security contributions, as a percentage of gross domestic product (GDP).
Figure 1
Statistical data of Nigeria Foreign Direct Investment, 2016 - 2019 (in USD mil.)
Source: Tradingeconomics.com/Central Bank of Nigeria
Nigeria Public External Debt, 2016 - 2019 (in USD mil.)
Figure 2
Source: Trading Economics https://tradingeconomics.com/nigeria/external-debt
1 Revenue Statistics in Africa 2019. Available at: https://www.oecd.org/tax/tax-policy/brochure-revenue-statistics-africa.pdf Retrieved (06/12/2019)
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Figure 3
Tax-to-GDP ratios (total tax revenue as % of GDP), 2017
Xigeria Equatorial Guinea Ghana Senegal Mali ■ Côte d'Ivoire ■ Burkina Faso Togo
21.00%
Source: OECD/ATAF/AUC(2019), Revenue Statistics in Africa 2019, http://oe.cd/revenue-statistics-in-africa
3. METHODOLOGY AND DATA
Strengthening institutions dealing with foreign investors and related issues of socio-economic development is a necessary condition for achieving the ambitious development objectives of national economy. According to Svetlana, et al. (2018), investment activity is one of the most important activities of nonstate pension funds, which allows increasing the amount of pension savings of fund participants, protecting the actual value of savings against depreciation due to the inflation and, at the same time, providing the national economy with long-term investment resources. Foreign investors in developed world would not only play the role of an institution aimed at providing socio-economic development but are also considered in the context of investment policy1. To this end, the article identifies several shortcomings associated with the institutional framework in charge of issues related to investment, including promotion. Among those are problems of
1 Analysis of Investment Activities of Nonstate Pension Funds. International Journal of Civil Engineering and Technology (IJCIET), Volume 9, Issue 11, November 2018, pp. 2452-2459. Available at: http://www.iaeme. com/MasterAdmin/UploadFolder/ IJCIET_09_11_246/IJCIET_09_11_246.pdf Retrieved (16/12/2019)
funding, weak managerial capacity, outdated foreign investment policies, political party interest, lack of coordination mechanisms as well as unclear division of labour between institutions dealing with investment, foreign direct investment (FDI). The emphasis of providing incentives for foreign investors is also linked to the theoretical notion advanced by K.B. Moeti (2005), who opines that government should adopt friendly attitudes towards investors and provide incentives in an effort to attract the right kind of FDI2. In Coega's (2005) opinion, large investments should be allowed a deduction against taxable income for investment in specified industrial assets.
The authors reviewed and applied the work of Dickey-Fuller (ADF) and Phil ips-Perron (PP) to test for stationarity of the variables. Including the models in prior to any econometric estimation on the time series variables, it is important to conduct stationarity tests. There is a certain approach in calculating the dynamics of the unit root test. The model is presented by the following equations:
2 Tshepo S. Masipa (2018). The relationship between foreign direct investment and economic growth in South Africa: Vector error correction analysis. Acta Com-mercii - Independent Research Journal in the Management Sciences. Available at: http://www.scielo.org.za/pdf/ acom/v18n1/09.pdf Retrieved (08/12/2019)
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Intercept and trend: Intercept:
Д/t = ff + ßT + ÄFC1 + Ayf = a + <5yf_i + = er + ^f-i +
None:
For the Philips-Perron (PP) test, the regression equation is estimated as follows:
Model specification
GDPt = 0O4- 01FD/f_1 + 02G£Xf + 03flEEflf + d^TGDPf +
Priory expectations on the long-run model 0! > 0; 02 ± 0; 03 < 0; > 0,
(1.1) (1.2)
(1.3)
(1.4) > (1.5)
Where:
GDPt FDIt
is the rate of Nigeria's real GDP growth. This is the dependent variable.
is the ratio of FDI inflows to Nigeria's GDP. The coefficient (elasticity) is expected to be positive in long run model as a rise in the level of FDI is expected to positively contribute to socio-economic development and economic growth.
rry
J f" - is the ratio of government expenditure to Nigeria's GDP. The coefficient is expected to either be positive or negative. Every time the government increase its spending, there will be spillovers to other sections of the economy, hence a stimulatory effect on socio-economic development and economic growth.
REER
f - is the real effective exchange rate, which is calculated based on the flow of trade between Nigeria and investors of its major trading partners. The coefficient is expected to be native in order for a depreciation to improve socio-economic development and economic growth. Nigeria indirectly quotes the effective exchange rates; thus, an increase is an appreciation and a decrease is a depreciation of the Naira.
TGD P
f - is the ratio of total trade (exports + imports) to real GDP. This is also known as trade openness. The coefficient is expected to be positive as more willingness to trade will provide stimuli to socioeconomic development and economic growth; that is, more exports contribute positively to the economic growth according to the Keynesian model, and more imports of capital goods will also translate into expanded production and thereby socio-economic development and economic growth.
r
"" ^ - represents the error term, accounting for other variables that may affect the relationship but were not included.
4. RESULTS AND DISCUSSION
From the analysis, the article found that the major determinants of FDI inflows to Nigeria are, amongst others, the slow growth in investment trends which seems to be high as compared to other developing economies, insurgency and Fulani herdsmen killings. Therefore, trade and investment unions need to implements policies that ensure investors and their businesses correspond to the level of the output. High levels of insurgency and Fulani herdsmen killings in the country also discourage
the inflow of foreign investors, as many complain about the state of security in Nigeria. The government, on the country, should also strengthen its strategies of fighting unavailable electricity, as it can discourage foreign investors to come and invest in Nigeria. However, a number of factors which make Nigeria a good investment destination were discussed; these factors include, among amongst others, the ease of doing business, well-developed financial systems and banking regulations, human capital and population, Real GDP increased from 1.89% in Q1 of 2018 to 2.10% in the first quarter of 2019, the
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strongest first quarter growth since 2015 and 1.94% and the well embraced democratic Constitution of the country.
The practical significance of foreign investors are holistic process of forming and directing the development of FDI technology, monitoring the state of the strategic revenue growth initiatives and trade and investments. According to E.O. Raymond (2014), productivity of human capital in knowledge growth influence regional economic growth. Therefore, the effective output of socio-economic development and economic growth would be even more pronounced than the pronounced entrepreneurs apply and disseminate the knowledge in a region1. At present, it is difficult to overestimate the role of foreign investors in ensuring competitiveness of socio-economic development of Nigeria. Building a sustainable revenue generation investment by ensuring resilient and optimal performing revenue streams whilst applying the right incentives, safeguards, and accountability and performance management systems will not only boost national economic growth, but it will as well eliminates economy leakages.
5. CONCLUSION
In conclusion, a number of recommendations can therefore be made: firstly, in furtherance of socioeconomic development, it is important to concede that attracting inward FDIs alone is not enough for sustainable economic growth, development and poverty reduction. The government needs to implement and have innovative holistic policies for foreign investors, which should also encompass equitable distribution of income, create sustainable jobs and reduce the extreme level of poverty and unemployment in Nigeria. To this end, the attraction of foreign investors should not only be seen as an end in itself, as well to be seen as a means of addressing socio-economic problems facing Nigeria. Secondly, there is a need to improve trade and
1 ROLE OF ENGINEERING EDUCATION IN NIGERIAN ECONOMIC DEVELOPMENT. European Journal of Contemporary Economics and Management May 2014 Edition Vol.1 No.1 Available at: https://www. researchgate.net/profile/Raymond_Ekpobodo/ publication/323693668_ROLE_OF_ENGINEERING_ EDUCATION_IN_NIGERIAN_ECONOMIC_ DEVELOPMENT/links/5ca94948a6fdcca26d0456cc/ ROLE-OF-ENGINEERING-EDUCATION-IN-NIGERIAN-ECONOMIC-DEVELOPMENT.pdf Retrieved (16/12/2019)
investment rules to bring in foreign investors. Thirdly, achieving fiscal sustainability and macro-fiscal objectives of government will require bold, decisive and urgent action, as well as modern technologically advanced environment. Trade investment union should focus more on prioritize entrepreneurship development in order to create awareness regarding self-employment opportunities for the youth to bring more foreign investors to Nigeria.
References:
[1] Crespo, Nuno and Fontoura, Maria Paula (2007). "Determinant Factors of FDI Spillovers- What do We Really Know?" World Development, Vol. 35, No. 3, pp. 410 - 425.
[2] Coega, (2005). Support for investors, viewed 10 April 2016, from http://www.coega.co.za/files/ FIL81
[3] Ekpobodo Ovwigho Raymond (2014). Role of Engineering Education in Nigerian Economic Development. European Journal of Contemporary Economics and Management, Vol.1 No.1. http://elpjournal.eu/wp-content/ uploads/2018/03/1-1-9.pdf
[4] Svetlana Anatolievna Khmelevskaya, Irina Urievna Orlova, Dmitrii Nikolayevich Ermakov (2018). Analysis of Investment Activities of Nonstate Pension Funds. International Journal of Civil Engineering and Technology (IJCIET), Volume 9, Issue 11, November 2018, pp. 2452-2459. Availabl: http://www.iaeme. com/ijciet/issues.asp?JType=IJCIET&VType=9&IT ype=11
[5] Moeti, K.B., (2005). 'Rationalization of government structures concerned with foreign direct investment policy in South Africa', unpublished doctoral thesis, Faculty of Economic and Management Sciences, University of Pretoria, Pretoria.
[6] Romer, P (1993). "Idea Gaps and Object Gaps in Economic Development." Journal of Monetary Economics." Vol. 32, No. 3.
[7] UNCTC (1991). World Investment Report 1991: The Triad in Foreign Direct Investment. New York: United Nations Centre on Transnational Corporations.
[8] United Nations (2009). Investment Policy Review Nigeria.
[9] World Bank (1999). Foreign Direct Investment in Bangladesh: Issues of Long-run Sustainability.
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