Impact of Foreign Direct Investment on the Nigerian Economy
Foreign direct investment is one of the avenues through which the Nigerian government has been able to turn around its economy. This is because it is a strong mechanism that promotes the spread of business opportunities across the various industries of the country. As a result of this, employment opportunities are made available to the people and income levels are raised, thus, boosting the overall economy of the West African nation.
There are various impacts of foreign direct investment in the economy of Nigeria. In 2000, Nigeria recorded an increased foreign direct investment of US$1.2 billion from less than US$1 billion in 1990. In 2004 and 2005, it even shot up a notch higher to US$1.9 billion and US$2.3 billion respectively. In fact, the figures have been on the rise since in 2006, it almost doubled to US$4.5. Nigeria has been recoding great improvements in foreign direct investments in the foreign years, and the trend is expected to continue into the future. This points out to great economical rewards to the nation.
In the recent years, Nigeria implemented economic reforms that resulted into the stability of its macroeconomic variables. With this, there has been great investor confidence in the country’s economy, thus, attracting great foreign direct investment opportunities. In 2004, Nigeria received home remittances valued at about US$2.26 billion. Just two years later, the figure had moved up to approximately US$ 7 billion. As a result of this and other foreign direct investments, the country was able to experience GDP growth averaging 7.8% between fiscal years 2004 to 2007. In fact, this economic growth surpassed that of several African countries.
Some of the industries where a number of foreign direct investments have been made in Nigeria include the telecommunications, wholesale, agriculture and retail trade. Over the years, Nigeria has been able to experience high per capita GDP than most African countries as a result of foreign direct investment. In 2007, the country’s GDP was estimated to be US$166.8 billion, a projection of 6.4% growth in real terms over the previous year. During that period, the best players in the GDP were agriculture, industry and services in that order.
In 2006, Nigeria acquired a net inflow of foreign direct investment valued at about US$5.4 billion. A greater percentage of this came from the United States that has over the years been one of the key investors in the West African nation. In the same period, foreign direct investment contributed to 74.8% of gross fixed capital formation, indicating low domestic investment levels.
Most of the foreign direct investments in Nigeria have over the years been directed to the energy industry. Nigeria looks towards attracting foreign direct investment of about US$600 billion between 2008 and 2020 to assist in financing its Vision 2020 policy that is aimed at transforming the economy of the nation. With this expectation, Nigeria is eyeing to be among the 20 largest economies in the world by the end of 2020.
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