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FOREIGN DIRECT INVESTMENT AND POVERTY REDUCTION IN NIGERIA

ABSTRACT

The study examined the Foreign Direct investment and poverty reduction in Nigeria and to examine if foreign direct investment has significant run impact on poverty reduction in Nigeria and to evaluate if there is any significant casualty between foreign direct investment and poverty reduction in Nigeria. Foreign direct investment (FDI) granger cause per capital income but PCI does not granger cause FDI. Thus, there was uni-directional causality lt the result depicted the spread of adjustment to the long-run equilibrium. The coefficient of ECM (-1) is statistically significance (-O-085) and it is negative. My policy recommendation on the part of (FDI) policy makers should pay increased attention to the overall role of FDl on poverty reduc1ion in light Of this, there should be provision of enabling environment that would provide a better incentive to attract FDI in flows. Foreign direct investment influence poverty reduction to really feel the impact of FDI, the government should ensure there is FDl in flow to real sector.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The importance of foreign capital to developing countries is well known. It supplements their domestic savings and it is often accompanied with technology and managerial skills which are indispensable in economic development. Foreign direct investment can contribute in significant ways to breaking of the growth – poverty vicious circle, and there lies Nigerians hope. The Nigerian government hopes that Foreign Direct Investment (FDI) can make up for domestic capital shortfalls, provide technology, managerial skills, facilitate access to foreign market and generate both technological and efficient spillovers to local firms. By providing access to external markets, transferring technology and building capacity in the local firms generally, Foreign Direct Investment (FDI) is expected to improve the integration of the continent global economy, spur economic growth and alleviate poverty.

Direct foreign investment has been characterized as the best form of foreign finance. The packages of Foreign Direct Investment (FDI) comes with finance, technology and highly skilled personnel (Lall and Streeton 1977). Indeed in the case of Nigeria as in 3rd world countries Foreign Direct Investment (FDI) was the main channel through which their import-substitution industrialization strategies were prosecuted.

It is widely believed that given the appropriate host-country policies and a basic level of development, benefits that might accrue from Foreign Direct Investment (FDI) include employment creation, the acquisition of new technology and knowledge, increased tax revenue from cooperate profits generated by Foreign Direct Investment (FDI). All of these form of benefits are expected to contributed to higher economic and employment growth, which is the most important and effective tool for achieving improvements in human well-being for alleviating poverty in Nigeria. Although, the impact of Foreign Direct Investment (FDI) on poverty alleviation depend principally on many factors such as host country policies and institutions. The most efficient way Foreign Direct Investment (FDI) help in alleviating poverty is the widening access to employment opportunities.

The ability of Nigeria to alleviate poverty depends on adequate inflow of foreign investment resources. The country has been experiencing difficulties in her effort to alleviate poverty for decades now. At present, majority of Nigerians are living below the poverty level. Consequently given the low level of per capital income characterizing the less developed economies, the traditional model of economics assumes that average and marginal consumption propensities are high, savings are low and that the formation of new productive capital is restricted.

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