Nigeria is one of the few countries in the world that is blessed with a huge reservoir of natural and mineral resources and these make her a “beautiful bride” at the age of 100 years to foreign investors. Although the country is rich in agricultural and mineral resources, they have not been sufficiently harnessed for industrial enterprises. The manufacturing industry in Nigeria still depend largely to a disquieting extent on importation of raw materials. Manufacturers have to spend huge funds importing raw materials from overseas and this poses costly burden on manufacturing firms. Thus, production capacity of manufacturing firms in Nigeria is below par because of inaccessibility to raw materials and weak industrial base. It is in Nigeria that manufacturing firms will have their machines in order, workers available, sufficient demand for products but production suspended for lack of raw materials.When raw material is available, it may serve no purpose because value has not been added to the raw material. Additionally, inadequate electricity supply,weak institutional linkages, poor infrastructure, and multiple tax regimes are responsible for increase in the cost of production.As a result most locally made products are not competitive in the global market and the country’s participation in world economy suffers a setback.
Foreign investors have been on the increasein most African nations and indeed Nigeria. This is as a result of globalization of world economy which has made foreign investments very attractive to governments of developing nations. Most African nations have to embrace foreign investments in an attempt to overcome inadequate capital, unemployment, inaccessibility to foreign markets, and failing entrepreneurial sector amongst other reasons. They had to embrace foreign investments in order to improve their economic performance. Nigeria has continuously taken steps to adapt her economy to the changing external environment by creating an atmosphere that will attract foreign investments.
Foreign Direct Investment (FDI) is defined as “a direct investment into production or business in a country by an individual or firm of another country, either by buying a company in the target country or by expanding operations of an existing business in that country”. It remains an important technology transfer instrument and a significant avenue for cross border cooperation at the firm level. In developing countries, FDI is often carried out through multinational companies in the host countries, which are subsidiaries of the foreign companies in the host countries. The manner in which technology is sought to be transferred will invariably determine whether there is mere exchange of technology or effective acquisition of the same.
Nigeria with a population of more than 170 million people (actual figure not known), “is one of the top three destinations for Foreign Direct Investments (FDIs) in Africa despite challenges”. In fact, a recent report has it that “Nigeria has the largest FDI in Africa and the first among emerging markets” and that it has outperformed countries like South Africa and Ghana considering stable exchange rates, single digit inflation, fiscal restraint, low debt levels and lower poverty levels”. The UNCTAD report released recently shows that foreign investment inflows to Africa rose by four percent to US$ 57 billion with Nigeria’s inflow standing at US$ 5.6 billion in 2013. This profile calls for celebration as Nigeria’s inflow has improved over time but we need to however, manage the “success” achieved. This is because FDI in Nigeria is mainly driven by natural and mineral resources. Thus, the Government must play a significant role in ensuring that FDI enables technology transfer at firm level. And that foreign investors are restricted to high-tech (manufacturing) sector of the economy, while efforts are also directed at improving managerial and labor skills of Nigerians in that sector. It is in the high-tech sector of the economy that more of our young graduates can be employed and not in trading. The effort to create job in the country is acknowledged but the level of unemployment is still below expected threshold.
It is heartwarming to know that “the National Industrial Revolution Plan (NIRP) is designed to attract substantial foreign investment inflows in the short and medium term, and targets five trillion Naira manufacturing revenue annually”. The huge revenue that may accrue from foreign investment inflows as predicted in the NIRP should not be the main objective of foreign investment inflows, instead relevant agencies should ensure that indigenous technological capability is developed through this plan.
Research reports show that FDI though important,bears tenuously on the Nigerian economy. This is because domestic investors are also working hard to improve the nation’s economy in spite of internal challenges occasioned by incessant power supply, high lending rates, multiple tax regimes, political instability and insecurity.Consequently, Nigeria needs to ensure that all investors are motivated through sustained policy framework and given the opportunity to operate together in order to maintain high levels of income and employment. It is worthy to state that FDI will give rise to economic development when appropriate structures are put in place to enable the nation benefit from the endeavor.
Regulatory bodies must ensure that laws guiding the conduct of local and foreign investors’ are well regulated. This is in areas covering standards and business ethics, including transfer of appropriate technology. Regulation of investment is only effective when the country has the capacity and demonstrates the political will to enforce it. It is the responsibility of the Government to improve on existing business climate through provision of adequate power supply and security as these will contribute to reducing cost of production of goods and services. An improvement in the investment climate will encourage the “beautiful bride” to keep her wealth and reduce capital flights.