The impact of foreign direct investment on the development of manufacturing industries in the Nigerian economy

Abstract

The present study investigates the impact of foreign direct investment (FDI) on the development of manufacturing industries in Nigeria. The Study first reviews previous work on the developed countries (LDCs). Second, the study describes and analyses the changes in Nigeria's economic structure as a result of the establishment and growth of manufacturing industries between 1960 and 1974. Third, the study examines the comparative behaviour of foreign and local firms. in Nigerian manufacturing industries, with respect of employment policy, technology choice, industrial concentration, output growth, technical efficiency and their balance of payments impact. This examination is undertaken through the testing of specific hypotheses to highlight the impact of ownership characteristics in the above areas. In brief, the conclusions are: Empirical results, based on discriminant analysis and non-parametric tests indicate that nationally of ownership is significantly related to the choice of technology, employment policy, industrial concentration and output growth. Further, the production function analysis shows that separate production functions do exist for both foreign and local firms. However, foreign firms are not seen to possess greater levels of technical efficiency than local firms. Second, this study has shown that the potential for technological flexibility does appear to be present and therefore policies that affect incentives and that can potentially affect foreign and local investors' behaviour are certainly important. These include policies affecting relative prices as well as the general competitive environment.