MULTINATIONAL CO-OPERATIONS AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

The study examined the impact of Multinational Corporation on the economy of Nigeria. The study employed time series data spanning from 1980 to 2015.. The study was necessitated by the negative impacts of these multinational corporations on our economy which have hampered economic growth. The specific objectives were to determine the impact of company income tax on gross Domestic Product (GDP) of Nigeria, to determine the impact of foreign direct investment on gross Domestic Product (GDP) of Nigeria and to ascertain the impact of employment rate   on gross Domestic Product (GDP) of Nigeria. The econometric tools used for the analysis is regression analysis. From the results, it was revealed that company income tax has positive and significant impact on gross domestic product, foreign direct investment has positive and significant impact on gross domestic product and employment rate has positive and significant impact on gross domestic product. It was recommended that governments should strategize their existing policies and institutions, rather than merely attracting FDI, and should focus additionally on effective transfer of technology, which includes the diffusion and generation of technology locally.

Keyword: Multinational Corporation and economy of Nigeria

 

 

 

 

 

 

 

 

 

 

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

A multinational corporation or worldwide Enterprise is a corporate organization that owns or controls production of goods and services in one or more countries other than their home country. A typical multinational corporation (MNC) normally functions with a headquarters that is based in one country, while other facilities are   based in locations in other countries. In some circles, a multinational corporate is referred to as a multinational enterprises (MNE) or transnational corporation (TNC) (Tatum, 2010).

The main players in a global knowledge-based economy are corporations (MNCs). The Dutch East India Company was the first multinational corporation in the world and the first company to issue stock (Mondo, Visione, 2008). It was also arguably the world’s first mega corporation, possessing quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies, Ames and Glenn. J. (2008).

The history of Multinational corporationin developing multinational countries is marked by its origins in policies of imperialism and Colonialism. Nigeria as a developing country has played host to MNCs long before independence till date.

The number and activities of these MNCs have grown over time as Nigeria struggles to develop socio-economically as a nation Onudogo (2013). Multinational Corporation are those powerful conglomerates that came into being in Nigeria after the abolition of slave trade, Aworom (2013).

A multinational corporation (MNC) is usually a large corporation incorporated in one country which produces or sells goods or services in various countries, Doob and Christopher (2013). The two main characteristics of MNCs are their large size and the fact that their worldwide activities are centrally controlled by the parent companies. Other characteristics include Importing and exporting goods and services, making significant investments in a foreign country, buying and selling licenses in foreign markets, engaging in contract manufacturing permitting a local manufacturing in a foreign country to produce their products, opening manufacturing facilities or assembly operations in foreign countries.

Multinational corporations are companies which seek to operate strategically on a global scale. A multinational corporation is a company, firm or enterprise that operates worldwide with its headquarters in a metropolitan or developed country.

Hill (2005) defines Multinational Enterprise as any business that has productive activities in two or more countries. Certain characteristics of Multinational Corporations should be identified at the start since they serve, in part, as their defining features. Often referred to as multinational enterprises, and in some early documents of the United Nations they are called transnational organizations, Multinational Corporations are usually very large corporate entities that while having their base of operations in one nation, the home nation carry out and conduct business in at least one other, but usually many nation carry out and conduct business in at least one other, but usually many nations, in what are called the host nations. Multinational Corporations are usually very large entities having a global presence and reach (Kim, 2000). Multinational corporations (MNCs) can spur economic activities in developing countries and provide an opportunity to improve the qualities  of life, economic growth, and regional and global communities, (Litvin, 2002).

The importance MNCs in the current global business environment cannot be over emphasized. There is usually huge capital investment in major economic activities, the country can enjoy varieties of products, services and facilities, brought to their doorstep; there is creation of more jobs for the populace; the nations pool of skills are best utilized and put to use effectively and efficiently; there is advancement in technology as these companies bring in state- of- the- art technology for their businesses. Most of the products we use are supplied by multinational-corporations. Their presence and significance in our lives are undeniable facts. They have developed distinct advantages which can be put to of world development. Their ability to tap financial, physical and human resources around the world and to combine them in economically feasible and commercially profitable activities, their capacity to develop new technology and skills and their productive and managerial ability to translate resources into specific output have proven to be outstanding. At the same time, the power concentrated in their hands and their actual or potential use of it, the ability to shape demand patterns and values and to influence the lives of people and policies of government, as well as their impact on the international division of labour, have raised concern about their role in world affairs.

The relevance of the foreign private sector to the development of developing countries was recognized in the international development strategies for the second development decade unanimously adopted by the United Nations general assembly in 1970. Countries such as Singapore, Malaysia and Thailand have encouraged foreign direct investment actively because of the tremendous positive impact which multinational corporations have created on n their economies. The growth in china coastal section is disputably linked to the massive investment by multinational corporations however, historically, Japan and Korea have pursuit more cautious policies regarding investment by multinational corporations.

Contemporary critics of multinational corporations have charged that some present day multinational corporations follow the pattern of exploitation and differential wealth distribution establish by the now defunct colonial charter corporations, particularly with regards to corporations based in the developed  world that operate resource extraction enterprise in the developing world, such Royal Dutch Shell. Some of these critics argue that the operations of Multinational Corporation in the developing world take place within the broader context of neo-colonialism.

Amidst these different t views by different researchers, there has been little or no convergence. Not many clear cases have proved and established long run relationship between economic growth and MNCs. This very reason is what actually inspired the carrying out of this research.

The main focus of this work will be to examine the impact of multinational cooperation in the economic growth of Nigeria.

 

1.2 Statement of problem

MultinationalCorporations are seen as superstructures in economic history of a nation. They have high influence in economy of any country they operate. Nigeria is a country that is not left out in the presence of multinational corporations. Over the years, these companies have been seen to be positive growth contributors to any company where they operate in. In Nigeria, multinational corporations transfer technologies, capital and the culture of entrepreneurship. They increase investment levels and income, they promote improvement in their immediate environment; create access to high quality managerial skills; improve the balances of payments by increasing exports and decreasing imports; help to equalize the cost of factors of production. They stimulate domestic production and enhance efficiency and effectiveness in the production process; they stimulate positive response from local operators. Most of the well known Nigerians entrepreneurs started by working for the multinational corporations, where they acquired relevant skills and knowledge that gave them the impetus to launch out. Multinational corporations also acquired raw materials with ease from any overseas source at competitive prices and can easily export component and finished goods for assembly or distribution in foreign markets. A contrast, it is argued that MNCs are agent of imperialism and in any economy where they operate. In addition, MNCs are exploitative as natural resources found in developing countries like Nigeria meant for its development are not productively utilized due to de-capitalization of the economy in form of profit repatriation.

Since there are numerous multinational corporations in the country and each having their role in the economic growth of the country. It is of great importance to analyze the impact of these corporations on the economic growth of the country. This project work will clearly examine the impact of Multinational Corporation on the economy of Nigeria.

 

1.3 Objective of the study

The general objective of this study was to determine the impact of Multinational Corporation on the economy of Nigeria. Others specific objective includes:

1. To determine the impact of company income tax on gross Domestic Product (GDP) of Nigeria
2. To determine the impact of foreign direct  investment  on  gross Domestic Product (GDP) of Nigeria
3. To ascertain the impact of  employment rate   on  gross Domestic Product (GDP) of Nigeria

 

1.4 Research Hypotheses

The following research hypotheses were formulated based on the research objectives above:

H₀: there is no relationship between Multinational Corporations and Gross Domestic Product (GDP) of Nigeria.

H₀:Multinational Corporations does not provide employment in a country.

H₀:Multinational Corporations does not provide revenue for the government through direct taxes.

 

1.5 Research Questions

1. Is there any relationship between multinational corporations and Gross Domestic Product (GDP) of Nigeria?
2. Does a multinational corporations provide employment (employment rate) in Nigeria?
3. Does multinational corporations provide revenue for the government through direct taxes (company income tax)?

 

1.6 Significant of the study

This work serves as a guide for executing and implementing government policies in Nigeria regarding the regulation of multinational corporations. It was also helpful to other researchers who wish to advance more in similar areas.

 

 

1.7 Scope of the study

The scope of this study is from the period of 1980 to 2016. It uses time series data to empirically estimate the impact of multinational corporations on the economy of Nigeria.