FDI
For years the economy of Nigeria,
Africa’s most populous nation, was held back by political instability, poor
government policies, a lack of infrastructure, and endemic corruption. This
started to change in the 2000s. In halting steps, Nigeria has moved toward a
more stable democratic form of government. In 2007, for the first time in the
history of the country, there was a peaceful transfer of civilian power
following general elections. Since then, the government has pursued
market-orientated reforms, including the removal of subsidies, privatization of
some state-run businesses, lowering trade barriers, and deregulation. The
government has tried to rid itself of corruption, albeit with mixed success.
There has also been some attempt to improve the country’s poor transportation
and power infrastructure.
The reforms have had a positive impact. The GDP of Nigerian
purchasing power parity almost tripled from $170 billion in 2000 to $451
billion in 2012. When estimates of the “informal” or “black economy” sector are
taken into account, GDP may have been as large as $630 billion in 2012. The
economy grew at around 7 percent per annum during the 2010-2012 period.
Powering this growth have been high oil prices. Nigeria is a significant oil
producer, and high oil prices have helped to improve government finances, but
the industrial and agricultural sectors of the economy are also growing.
One of the major engines of growth has been foreign direct
investment. For years, foreign investors stayed away from Nigeria—scared off by
the political instability and high levels of corruption—but that too is
starting to change. Encouraged by better economic management and the promise of
a large domestic market, inward foreign investment in Nigeria increased from
$1.2 billion in 2000 to a peak of almost $9 billion in both 2011 and 2012.
Among recent investors has been General Electric, which announced in 2013 that
it would put more than $1 billion into Nigeria over the next five years. The
investments include building a manufacturing plant to support the power
generation and oil extraction industries and a service center for supporting GE
equipment. GE believes that its investment will create 2,300 jobs.
While the majority of investments are still targeted at
Nigeria’s large energy sector, there are signs that this too is beginning to
shift. A case in point is Procter & Gamble, which in 2012 invested $250
million to construct a state-of-the-art plant to manufacture disposable diapers
in Nigeria. Explaining the investment, a P&G spokesperson noted that
“Nigeria has a very strong, dynamic and growing population of now over 167
million people with over 40 percent less than 15 years old. By 2050, Nigeria is
projected to have the third largest population in the world. This represents a
rapidly growing number of consumers and a wonderful opportunity to serve.” The
P&G spokesperson also indicated that P&G would increase its investment
if the Nigeria government was successful in further lowering import tariffs and
consumption taxes and resolved some of the infrastructure problems that were
currently holding the country back.
1 WHY ARE NIGERIAS ECONOMIC AND POLITICAL
REFORMS
a.
IMPORTANT TO THEIR ECONOMIC
SUCCESS IN THE FUTURE
b.
HOW DOES CONTINUED FDIS BENEFIT
NIGERIA.
2. WHAT R THE BENEFITS OF ESTABLISHING MULTINATIONAL ENTERPRISE OPERATIONS IN THE
COUNTRY
