CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Since Nigeria got her independence in 1960, it has created policies which are geared towards promoting the Nigerian economic growth and development by influencing domestic investment or indirectly policies which are aimed at stimulating the flow of finance in any growing economy. This is so given that in the literature there are divergent views on the nature of effects of foreign direct investment. It has been argued to be the most growth stimulation sources of foreign finance in any growing economy. There are divergent views on the nature of foreign direct investment on host economies. There are views that foreign direct investment produce positive effects on host economies and they argue that some of the benefit are in the form of externalities and adoption of foreign technology. Employers training and introduction of new process by the foreign firms.
Developing countries in Africa, Asia and Latin America have come increasingly to see that foreign direct investment is a source of economic development, modernization, income growth and employment and poverty reduction. These countries are successfully developing their economies under outward oriented policies albeit in varying degrees.
Globally economists tend to favor the free flow of capital across national borders because it allows capital to seek out the highest rate of returns. Nigeria is reputed to be buoyantly blessed with an enormous minerals and human resources but believe to be at a high risk market for investment. Foreign direct investment can also be veritable booster to an economy (Omagbemir 2010).
Nigeria in the past and present has a large population and enlightened market. A real potential market, an investment conscious society and a conclusive sustainable environment for foreign private investment to thrive in the development of the economy.
Foreign direct investment can be described as investment made so as to acquire a lasting management interest (for instance 10% of voting stocks) and at least 10% of equity shares main enterprise operating in another country other than that of investor country(Willima 2003, World Bank 2007). Policy makers believe that foreign direct investment (FDI) produce positive effects on host economies. Some of these benefits are in the form of externalities and adoption of foreign technology. Externalities can be a form of licensing agreement, limitation, employee training and introduction of new processes by the foreign firms (Alfaro 2006).
According to Utomi (2007) foreign direct investment (FDI) via transnational corporations do posses the needed capabilities which can be put to the services of growth in any host economy.