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FOREIGN DIRECT INVESTMENT AND MANUFACTURING INDUSTRY IN NIGERIA, PERFORMANCE, PROBLEMS AND PROSPECTS

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Foreign Direct Investment (FDI) plays a vital role in shaping the economic landscape of nations around the world. In the case of Nigeria, FDI has been instrumental in driving growth and development, particularly in the manufacturing industry. The manufacturing sector holds great potential for Nigeria's economic diversification and job creation, making it a key focus for both domestic and foreign investors. However, the performance of FDI in the Nigerian manufacturing industry, along with the problems it faces, and the prospects it holds, warrant a closer examination.

Nigeria, as the largest economy in Africa, has long recognized the significance of attracting FDI to stimulate industrial growth and reduce dependence on oil revenue. The manufacturing industry, encompassing various sectors such as textiles, automobile, pharmaceuticals, and consumer goods, holds immense potential to contribute to GDP growth, employment generation, and technological advancement. FDI in this sector has the potential to enhance production capacity, improve product quality, and foster export competitiveness.

The performance of FDI in Nigeria's manufacturing industry has been a mix of successes and challenges. On the positive side, FDI has played a crucial role in job creation, knowledge transfer, and skill development within the sector. Foreign investors have introduced modern technologies and management practices, thereby raising the productivity and efficiency of Nigerian manufacturing firms. Additionally, FDI has facilitated market access to international markets, promoting export-oriented growth and increasing foreign exchange earnings.

However, the manufacturing industry in Nigeria faces numerous problems that hinder the full realization of its potential. Infrastructure deficiencies, such as inadequate power supply, transportation, and logistics, have resulted in high production costs and reduced competitiveness. The regulatory environment is often perceived as unpredictable and inconsistent, creating uncertainties for investors. Issues of corruption, bureaucratic red tape, and weak institutional frameworks have further dampened investor confidence and hindered the growth of FDI in the manufacturing sector. Additionally, security challenges, such as insurgency and criminal activities, pose significant risks to manufacturing operations and investments.

Nevertheless, Nigeria's manufacturing industry holds promising prospects for FDI. The government has recognized the need to address the

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