CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
TO THE STUDY
The construction sector occupies a
focal position in the economy of any nation because it is an important
contributor to the process of development (Aje, 2008). In the conduct of
economic activities, the construction sector is always used by government as
the stimulus for the buoyancy of the economy (Akindoyemi, 2011). The
construction industry is therefore a critical factor or variable of progress in
the drive for economic advancement of nations, especially developing countries
such as Nigeria. Nigeria no doubt requires substantial amounts of foreign
investment in the construction sector to speed up her economic growth most especially
in the area of building and construction infrastructure/facilities investment
and to promote development, which will in turn boost GDP. The significance of
foreign capital for the provision of infrastructure development for both
macroeconomic and microeconomic activities of the society, cannot therefore, be
overemphasized.
Todero (2001) described
infrastructure as the pillar of growth in Africa and it is generally inadequate
and of poor quality when compared to developed nations of the world. Foreign
capital has long been accepted as an inevitable input in the development
process, given the fact that no country is an “island” with self sufficiency on
her in terms of needed resources, to stimulate economic growth and development
(Orji, 2004). This is a continuation from experience of some countries in South
East Asia notably, Singapore, South Korea, Taiwan and Hong Kong (Ayo, 2008).
The Organization for Economic
Co-operation and Development (OECD), (2002) succinctly described Foreign direct
investment (FDI) as follows: an integral part of the international economic
system and a major catalyst for development or the flow of capital and human
resource from one country to another. Foreign direct investment (FDI) is thus
part of the economic system that stimulates economic growth including
infrastructural development. In view of the role of foreign capital inflows as
investment mechanism for economic growth in most countries, it is a strong
indicator of the economic strength of Nations.
National policies and the
international industrial architecture obviously play a significant role in
attracting FDI to most countries and stimulating growth. For instance,
Nigeria’s vision 20: 2020 sets strategies and targets in every sector of the
economy that are expected to ensure that the country joins the group of twenty
most developed economies in the next ten years. Kolapo (2010) asserted that it
is unfortunate that the palpable bottleneck in the way of sustainable growth in
Nigeria are only a clear manifestation of five decades of dishonest and
egocentric governance. Some notorious past leaders had unwittingly given
themselves away as incompetent by saying that Nigeria’s problems defiled all
logic. Discerning Nigerians only need to study the development strategies of hitherto
neglected African countries to unveil real economic pests. In his view too,
there is also lack of effective interplay between leaders of African countries
to provide the support institutions and the dynamic domestic entrepreneurial
class which is a key success factor for attracting foreign direct investment.
Another major hindrance to FDI
inflow in the continent is the fact that a number of investors are not aware of
the strides taken by African countries towards development, as many of them
limit their focus to political stability, corruption and weak infrastructure
(Eboh, 2011). It has been observed that the infrastructural base of the
Nigerian economy has remained weak in the past decades. This is because of the
low gross domestic savings of developing Countries such as Nigeria, which is a
major limitation in financing infrastructural development (Orji, 2004), hence
the need for foreign direct investment (FDI) to maximize advantages such as
managerial skills, marketing connection, technical knowledge, technological
transfer, training of local work force and movement of hard currency into the
country.
According to Mogbo (2004) and Egolum
(2011) past governments have made attempt in solving the problem by expressing
determination to improve basic infrastructures as a means of promoting economic
development through soft loans and grants from Multilateral Financial
Institutions (MFIs) such as International Monetary Fund (IMF), World Bank and
other lending nations. These loans and grants are normally characterized with
conditionality’s such as budgets cuts in the social sectors; subsidy removal,
leading to exchange rate crisis, massive devaluation of local currency and
terms of trade determination, foreign content and expatriate usage,
unemployment and underemployment (Egolum, 2011).
1.2 STATEMENT
OF THE PROBLEM
A number of studies have been
carried out on FDI and growth in Nigeria with varying results and submissions.
However, these studies did not establish that most of the FDI was concentrated
in the extractive industry. In other words, it could be said that these works
assessed the impact of investment on the extractive industry (oil and natural
resources) on Nigeria’s economic growth and not the construction industry.
Based on afore mentioned facts and issues,
it becomes expedient to study and investigate the impact or adequacy of FDI on
the Nigerian construction industry. It is thus expected that this study, while
bringing to the fore, the extent of FDI impact or effect on the construction
sector, it will also show the significant response of the Nigerian construction
sector to FDI inflow in Nigeria. The study will also spur government
agencies/departments involved in foreign investment to identify and tackle the
hindrances of FDI flows with a view to enhancing the inflow of FDI in the
construction sector; since, as established, the sector is a potent motivator of
the national economy, providing the driving force necessary for either
sustaining a buoyant economy or reviving a depressed one.
1.3 OBJECTIVES
OF THE STUDY
The following are
the objectives of this study:
1.
To assess the impact of foreign
direct investment on the construction sector in Nigeria.
2.
To examine the rate of inflow of
foreign direct investment into the Nigerian construction sector.
3.
To identify the factors limiting the
inflow of foreign direct investment into the Nigerian construction sector
1.4 RESEARCH
QUESTIONS
1.
What is the impact of foreign direct
investment on the construction sector in Nigeria?
2.
What is the rate of inflow of
foreign direct investment into the Nigerian construction sector?
3.
What are the factors limiting the
inflow of foreign direct investment into the Nigerian construction sector?
1.5 HYPOTHESIS
HO:
There is no significant relationship between foreign direct investment and
construction sector development in Nigeria.
HA:
There is significant relationship between foreign direct investment and
construction sector development in Nigeria.
1.6 SIGNIFICANCE
OF THE STUDY
The following are the significance
of this study:
1.
The outcome of this study will
enhance the competitiveness and survival of Nigerian construction industry in
the global market and ultimately improve the contribution of the construction
sector to the national economy.
2.
This
research will be a contribution to the body of literature in the area of the
effect of personality trait on student’s academic performance, thereby
constituting the empirical literature for future research in the subject area.
1.7 SCOPE/LIMITATIONS
OF THE STUDY
This study will
cover the effect of foreign direct investment on the construction sector of the
Nigerian economy.
LIMITATION OF STUDY
Financial constraint- Insufficient
fund tends to impede the efficiency of the researcher in sourcing for the
relevant materials, literature or information and in the process of data
collection (internet, questionnaire and interview).
Time
constraint- The researcher will simultaneously engage in this study with
other academic work. This consequently will cut down on the time devoted for
the research work
