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THE IMPACT OF MULTI-NATIONAL CORPORATIONS ON ECONOMIC DEVELOPMENT IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

A typical multinational corporation normally functions with a head quarter that is based in one country, while other facilities are based in the host country.  In   some circles, a multinational corporation is referred to as the multinational enterprise (MNE) or a transnational corporation (TNC) (Tatum, 2010).  They enter host countries in different ways and different strategies.  Some enter by exporting their products to test the market and find out whether the existing products can gain sizeable market share. For such firms, they rely more on export agents. These foreign sale branches or assembly operations are established to save transport costs. This is because there is a limit to what foreign exports can achieve for a firm owing to tariff barriers and quotas. Most of the firms are encouraged by low wage rates and other environmental factors. To meet the growing demands in the foreign countries, the firm considers other options such as licensing or foreign direct investment which are critical steps. Some will export even when they have settled for the FDI option.

Tatum (2010) proposes that multinationals operate in different structural models.  The first and the common model is for the multinational corporation positioning its executive headquarters in one nation, while production facilities are located in one or more other countries. This model often allows the company to take advantage of benefits of incorporating in a given locality, while being able to produce goods and services in areas where the cost of production is lower (Ozoigbo and Chukuezi, 2011). The second structural model is for the MNC to base the parent company in one nation and operate subsidiaries in other countries around the world.  With this model, just about all the functions of the parent are based in the country of origin. The subsidiaries more or less  function  independently,  outside  of  a few  basic  ties  to  the  parent.  A third approach to the setup  of an MNC  involves  the  establishment of an  headquarter  in  one  country  that  oversees a diverse conglomeration that stretches to many different countries.

Available literature on world history reveals that nothing bothers national leaders more than the development of their nations’ economies. Outstanding world leaders always formulate and carry out policies aimed at economic development of their nations. No prospect is more alluring to nation leaders than the thought of bringing in businesses to develop their nation’s economy.

Economic and political developments are the goals of any modern state. The yearning for these goals has in recent time dominated the literature of the economies of the developing nations of the world in which Nigeria is one. The lopsided arrangement of the world's capitalist order under which the third world economy and its periphery components constitute a major obstacle to economic growth and  development of these new nations in general. Obviously speaking the development of modern nation states depend so much on the transformation spread on the technological activities of multinational organizations. (Imaga 1980).

In Nigeria, the first three decades of the 20th century, development was shaped primarily by Nigerian Farmer and Trader's response to changing conditions in national markets. Agriculture and trading were the major economic activities apart from mining and handcraft; there was practically no industrial production in Nigeria. The government played a conservative and essentially passive role in the economy except for a few major budgets, while trying not to interfere with the market system. The 1950's witnessed the beginning of industrial development and increased government participation in nearly all sectors of the economy.

However, available information does not permit one to measure changes in the total level or the sectorial composition of economic activities in Nigeria with much precision. Although, data on external trade and budget of different levels of government and of other public corporations do reveal absolute changes on these particular activities on export of goods and services. An increase in value by 11.7 percent between 1950 and 1962 while import rose by 24.6 percent during the same period. The rise of MNCs is considered a great influence on this development. (Imaga 1980).

1.2  STATEMENT OF THE PROBLEM

Understanding the essence of Multinational Corporations and their impacts on economic growth has become a global phenomenon. In the light of this, there has been increasing attention to what indicators to look out for in the valuation of economic growth of a country in consideration of its MNCs.

Tatum (2010) noted that, attention were as a result of controversies on how these MNCs affect variables of the economy; employment, infrastructures, goods and services, local firms and GDP. Some believe MNCs are agents of imperialism while others believe they are agents of growth and development. These controversies are due to lack of proper understanding of the nature and workings of the MNCs, as a result, the judgment of the government and the people are from personal perspectives. Based on the foregoing, the research questions the study intends to provide solution to in this research work;

i. To what extent do Multi-national Corporations help in nation development?

ii. To what extent has the Multi-national Corporations transfer their technological skills to Nigerians?

iii. How has the Multi-national Corporations helped in creating job opportunities in Nigeria?

iv. What constraint hindered Multi-national Corporations in their contribution to the economic development of Nigeria?

v. To what extent has the company attract government assistances?

vi. To what extent has Multi-national Corporations re-invest their profits in the Nigerian economy rather than repatriating it abroad?

1.3  OBJECTIVES OF STUDY 

This project work is designed to look into the impact of Multinational Companies on the Nigerian economy and observe how their activities have contributed to an increase in the Gross Domestic Product (GDP) and economic development.

The specific objectives are:

i.  To evaluate the nature of the relationship that exists between Multi-national Corporations and economic growth of Nigeria.

ii.  To examine the impact of multi-national corporation sector on Nigeria Economy.

iii.  To offer some recommendations based on the findings of the study.

1.4  RESEARCH HYPOTHESIS

H0:  There is no significant relationship between multi-national corporations and economic growth of Nigeria.

H1:  There is significant relationship between multi-national corporations and economic growth of Nigeria.

H0:  Multi-national Corporation’s investment has no significant effect on the Nigeria economy

H1:  Multi-national Corporation’s investment has significant effect on the Nigeria economy

1.5   JUSTIFICATION OF STUDY

A nation with Multinational Corporations compared to one without is considerably more advanced technologically, socially and economically. MNCs in Nigeria, Nestle, Glaxosmith Kline, Unilever, Friesland etc are institutions that led to economic corporation among Nigeria and other nations. There have been wide acceptances of economic corporation in the most effective method of enhancing economic development into the less developed countries. In Nigeria, MNCs provide a wide range of job opportunities for both skilled and unskilled labor. They provide a wide variety of goods and services in addition to the locally provided options. MNCs pressurize local producers to develop and improve local production; they import social skills, man power and technology which locals adopt. They are directly involved in the development scheme of the economy, sponsoring of local projects and programs, provision of social goods for the locality in which they are situated like construction and repairs of roads, provision of street light and security measures which is beneficial to them and the community.

This research work emphasizes to the government, the role Multinational Corporations (MNCs) play in the economy towards growth and development. It can serve as a go-to source for information where anyone can consult for reference in respect of formulation of policies, evaluation of MNCs in Nigeria and their impacts on socio-economic development. It shall provide an understanding on strategies for promoting these corporations which are useful to all concerned stakeholders. It could serve as a guide for future researchers who are embarking on the same subject matter. Also, it serves as an additional knowledge for students or interested study groups as it creates more awareness on the Multinational corporations, how they affect the economy and vice versa.

1.5 SCOPE AND LIMITATIONS OF STUDY

The scope of this research work is Nigeria as a whole. This broad horizon is due to the irregular distribution of these companies across the country, the selection of a small geographical area as case study might lead to a biased conclusion in this research work with regards to the method of analysis used. More so, to ensure the suitability of this work, titled “ The Impact of Multi-national Corporations on Economic Development in Nigeria” as a reference point for the government at all levels, investors, researchers and students.

This research work has been limited primarily by time frame used to carry out this study.  As an undergraduate student, there is a stipulated time to carry out this research work, this hinders the quality of the work as required materials cannot be fetched, readily available materials that are easy to reach have to be used instead. Also are the problems of inadequate data and limited funds.

1.6 ORGANISATION OF CHAPTERS

This research work is divided into five (5) main chapters. The first part deals with the introduction aspect of the work which comprises; background of the study, statement of the problem, research questions, objectives of the study, justification of study, scope and limitations of the study and organization of chapters. Chapter two is made up of review of literature, of which review of related conceptual framework can be found; economic growth and its determinants, economic growth, its challenges and history in Nigeria, objectives of multinational corporations, and nature of multinational corporations in Nigeria. The third chapter contains research methodology which includes items such as nature and source of data used, research area, the sample and sampling technique used in the research work, the model used, and the method used in analyzing the data collected. Chapter four presents the results and analysis of data collected while chapter five summarizes the findings of the research work followed by conclusions and recommendations.

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