ABSTRACT
This study examined foreign direct investment and political development in Nigeria.
The study used quantitative method.
The study revealed that; political policy of Buhari administration is positively correlated on the inflow of foreign direct investment; Buhari policies positively influenced the size of foreign direct investment in Nigeria; corruption, cultural factor, ethnicity and insecurity are the identified factors the hinders the inflow of foreign direct investment under Buhari administration; in order for foreign direct investment to be improved in Nigeria, political stability should be encouraged, there should be low interest rate, the government should provide an enabling and peaceful environment for investment and business to thrive, and the issue of corruption should be given utmost attention and priority.
The study concluded that; in order to enhance foreign direct investment in Nigeria, government should create a positive and enabling environment for businesses to thrive, corruption should be tackled aggressively, interest rate should dropped and political stability should be promoted and encouraged, in order to encourage foreign investors investment in the country.
The study recommended that; policies that will aid foreign direct investment should be encouraged and formulated; foreign policy that will foster international relations should be formulated in order to encourage foreign investors that will contribute to the inflow of foreign direct investment in Nigeria; the government should provide an enabling and peaceful environment for businesses and investment to thrive in order to encourage investors in the country; the government and relevant agency should work to address the issue of high interest rate so as to reduce it and encourage prospective and known investors and entrepreneurs; the issue of corruption should be given adequate attention so as to curb its menace in the society; a peaceful cultural and ethnicity should be promoted in order to bring about a peaceful co-existence in the country.
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Political development is an idealized politics of western worlds which emerges to convey political modernization. The advanced industrial nations are the fashion-makers and pace-setters in most phases of social and economic life, and it is understandable that many people expect the same to be true in the political sphere (Chukuemeka, Okoye Egboh and Ewuim, 2012). The specific qualities of political development thus become certain patterns of presumably rational and responsible governmental behavior: an avoidance of reckless actions which threaten the vested interests of significant segments of the society, some sense of limitations to the sovereignty of politics, an appreciation of the values of orderly administrative and legal procedures, an acknowledgment that politics is rightfully a mechanism for solving problems and not an end in itself, a stress on welfare programs, and finally an acceptance of some form of mass participation (Malik and Mansur, 2017).
A political state needs to credibly commit to potential and current investors that it will not expropriate most or all of the profits that may accrue from the production process or the means of production themselves (Chukuemeka, 2012). Credible commitment can be motivational if it is in the interest of both the state and the investor to adhere to the rules both formal and informal, that is, the state will commit to not expropriating rents over and above which may be considered to be ‘fair’ if it wants to make sure that foreign investors commit to the investment decision and engage in production (Waheed and Omoniyi, 2011). Government credible commitment is obtained through both formal and informal institutions. Formal institutions such as laws which prohibit the illegal seizure of private property, courts that provide sanctions against the firm’s customers when there is a non-payment of dues, and bankruptcy procedures which protect financiers such as bondholders when a firm enters into bankruptcy are all examples of formal institutions of credible commitment (Malik and Mansur, 2017). But informal institutions such as kinship structures, social norms, and patron–client networks can also act as institutions of credible commitment, especially in environments where formal institutions do not exist or are not well functioning (Olokoyo, 2012).
For example, in a patron–client network, where the patron is the politician and the client is the domestic entrepreneur, the politician may protect the entrepreneur and provide access to funds and certain privileges such privileges can be licenses for production, imports in return for the rents that accrue from production which may be used in part for financing the political machinery and executing political policies. Foreign direct investors will then have an incentive to find political patrons who may be keen to protect them, in exchange for economic and political support.
Foreign direct investment (FDI) is a productive investment in a country by an individual or company of another country. This can either be in form of buying a company in the target country or by expanding operations of an existing business in the country (Wafure and Nurudeen, 2010). Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds. World Bank (2018) conceptualized Foreign Direct Investment (foreign direct investment) as investment that is made to acquire a lasting management interest (usually 10% of voting stock) in an enterprise and operating in a country other than that of the investors the investors purpose being an effective voice in the management of earning either long term capital or short term capital as shown in the nations balance of payments account statement (Emmanuel, 2016).
Broadly, foreign direct investment includes mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations and intra company loans. In a narrow sense, foreign direct investment refers just to building new facilities. Olokoyo, (2012) believed that foreign direct investment encourages the inflow of technology and skills and fills the gap between domestically available supplies of savings, foreign exchange and government revenue. It also encourages the inflow of technology and skills. Adeleke et al., (2014) asserted that the contributions of foreign investment to Japan after the World War II and in South Korea after the Korean War has tremendously assisted the economic growth of these countries by providing the local economy with a source of foreign skill, technology, management expertise and human resource development through international training and collaboration (Emmanuel, 2016).
Fredrick and Charles, (2014) asserted that Nigeria’s foreign investment can be traced back to the colonial era, when the colonial masters had the intention of exploiting our resources for the development of their economy. There was little investment by these colonial masters. With the research and discovery of oil foreign investment in Nigeria, but since then, Nigeria’s foreign investment has not been stable. The Nigerian governments have recognized the importance of foreign direct investment in enhancing economic growth and development and various strategies involving incentive policies and regulatory measure have been put in place to promote the inflow of foreign direct investment to the country. According to Adeleke et al., (2014), privatization was also adopted, among other measures, to encourage foreign investments in Nigeria. This involved transfer of state-owned enterprises like manufacturing, agricultural production, public utility services such as telecommunication, transportation, electricity and water supply, companies that are owned by private individuals. Olokoyo (2012) noted that since the enthronement of democracy in 1999, the government of Nigeria has taken a number of measures necessary to woo foreign investors into Nigeria. These measures, he noted, include the repeal of laws that are inimical to foreign investment growth, promulgation of investment laws, various oversea trips for image laundry by the President among others. Thus, this study assesses the impact of foreign direct investment on economic growth in Nigeria within the period 1999-2013 (Emmanuel, 2016).
1.2 Statement of the Problem
Recently, the rate at which capital flight occurs is alarming especially during the recession time proclaimed by the National Bureau of Statistics. Majority of the foreign investors are leaving the country to where environment is business-friendly. This is not unconnected to the poor political and economic policies formulated and executed by polical actors in the country. As a result of this, the prospects for rapid foreign direct investment have become exceedingly dim in the country.
Economy manifestly changes far more slowly than political arrangements, and substantial investment growth is impeded by political development. The political development is perceived to have a positive impact on the inflow of foreign direct investment through various direct and indirect channels.
The key to the long-run relationship between political development and foreign direct investment is the rate of growth in potential output as an unobservable measure of the capacity of the economy to produce more goods and services, when available resources and potential power are fully utilized. Consequently, many developing countries, Nigeria included, have offered generous incentives to attract foreign direct investment inflows. However, the political development is characterized by structural rigidities and bottleneck. In view of the above, this present study is influenced to look into the impact of political development on foreign direct investment during the tenure of President Muhammad Buhari in Nigeria to actually bridge the gap not noticed by previous researchers.
1.3 Objectives of the Study
The major objective of this study is to examine the impact of political development on foreign direct investment during the tenure of President Muhammad Buhari while the specific objectives are to:
i. identify the political policies that contribute to the inflow of foreign direct investment during Muhammad Buhari administration
ii. examine the extent at which the policies influence the size of foreign direct investment in Muhammad Buhari administration.
iii. investigate the political factors that hinders the inflow of foreign direct investment during the tenure of president Muhammad Buhari
iv. suggest possible ways to improve on the growth of foreign direct investment in Nigeria.
1.4 Research Questions
The following research questions will be used to guide the study:
i. What is the political policy that contribute to inflow of foreign direct investment during Muhammad Buhari administration?
ii. To what extent has the policies influenced the size of foreign direct investment in Muhammad Buhari administration?
iii. What are the political factors that hinders the inflow of foreign direct investment during the tenure of president Muhammad Buhari?
iv. How can the growth of foreign direct investment be improved in Nigeria.
1.5 Research Hypothesis
H01: Political policies has not contributed to the inflow of foreign direct investment during Muhammad Buhari administration.
H1: Political policies contributes positively to the inflow of foreign direct investment during Muhammad Buhari administration.
H02: The Muhammad Buhari administration policies has not influenced the size of foreign direct investment in Nigeria.
H1: The Muhammad Buhari administration policies has positively influenced the size of foreign direct investment in Nigeria.
H03: There are no political factors that hinder the inflow of foreign direct investment during the tenure of president Muhammad Buhari
H1: There are political factors that hinder the inflow of foreign direct investment during the tenure of president Muhammad Buhari.
H04: The growth of foreign direct investment can not be improved under the Muhammad Buhari administration in Nigeria.
H1: The growth of foreign direct investment can be improved under the Muhammad Buhari administration in Nigeria
1.6 Significance of the Study
The most important task of this study is to quantify the inflow of foreign direct investment during the Buhari administration and political development impact on foreign investment.
The study will demonstrate the benefits of Nigerian political environment to the foreign direct investments and this will serve as an incentive to the foreigners who have the intention of investing in Nigeria.
This study will be of benefit to the entire society by identifying foreign direct investment that are productive which will yield more goods and service for the benefit of economic growth in Nigeria and improve in standard of living. The society will therefore realize the importance of being accommodative to the foreigner
The study will add to the existing knowledge on the impact of political development on the foreign direct investment. The study will also be useful to the upcoming researchers who develop interest to study related conceptual issues.
1.7 Scope of the Study
The study focuses on the impact of political development on foreign direct investment during the tenure of President Muhammad Buhari in Nigeria. The study will be to the view of lecturers and students of the department of International Law and Diplomacy, Babcock University, Ilishan, Ogun State, Nigeria.
Nigeria is a country in West Africa, The constitution defines Nigeria as a democratic secular state. In the Nigerian general election, 2015, the victorious All Progressives Congress has 225 House seats and 60 in the Senate while the defeated People's Democratic Party of Nigeria became the opposition with 125 seats in the House and 49 in the Senate
Therefore, sample will be drawn from lecturers and students of the department of International Law and Diplomacy, Babcock University, Ilishan, Ogun State
1.8 Operational definition of terms
Economic: The state of a country or region in terms of the production and consumption of goods and services and the supply of money.
Foreign Direct Investment: A foreign direct investment is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.
Development: Development is a process that creates growth or change
Sector: One of the areas into which the economic activity of a country is divided.
Growth: The process of growing, development.
