INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Foreign direct investment refers to an investment made by an entity or a company based in a country, into another entity or company that is based in different country. FDI is an investment made to acquire a lasting management interest (normally 10 percent of voting stock) in a business enterprise operating in a country other than that of the investor defined according to residency World Bank (1996). The importance of FDI to developing countries cannot be over stated, it acts as a complement to their locally assembled savings it is accompanied with managerial skills and technology which are key in the development of any economy. A number of studies inspired by Chenery and Syrquin (1975), Ranis (1976), …show more content…
To the extent that FDI involves transfer of scarce resources, output and employment in the host developing countries will be "stimulated directly from the production by foreign corporations and indirectly with the multiplier effects from the spending of the income generated in the economy" (Hess and Ross, 1997). FDI also boosts investment in other industries "by putting unused resources to work, by encouraging local suppliers to act as suppliers and distributors for foreign corporations, and by helping disseminate efficient foreign product techniques and management styles to local businesses" (Rothgeb,1989). In recent years many developing countries have increasingly turned to FDI as a source of the capital, technology, managerial skills and market access needed for sustained economic growth and development. It is against this backdrop that most nations seek to attract foreign direct investment. However, several doubts have been raised as to the perceived …show more content…
Available records from NBS (1996) show that about 71 percent of Nigerian households are considered poor. However, the poverty level amplified 74.2 percent in the year 2000. The high level of poverty has a lot of adverse effects on the citizens as well as the country. Poverty has the tendency to aggravate crime, prostitution and high level of disturbance. Evbromen (1997) observed that poverty could cause fear, depression, despondency and suicide as well as revolution, envy and so on. The impact of poverty can therefore be said to be multidimensional in nature. In order to reduce the level of poverty, the Nigerian government made use of a lot of measures such as fiscal, financial and non-financial. In the 1997 budget, government showed its intent to enter into investment production agreements (that is bilateral, regional and multinational treaties) with external governments or private organizations requesting to invest in Nigeria as well as discuss additional incentives with them (Aremu, 1997). The influx of foreign resources such as foreign direct investment has the tendency of stimulating employment, income, consumption and economic growth, hence the opportunity of reducing poverty. Borenstein and Lee (1998) have shown that foreign private investment has a significant outcome on the host country for example a one percent rise in the proportion of foreign direct investment and gross domestic