The Determinants of FDI in Nigeria and its Effects on the Growth of SMEs - Research Proposal Example

The Determinants of FDI in Nigeria and its Effects on the Growth of SMEs CHAPTER ONE: INTRODUCTION 1.1 Background Information   The topic of Foreign Direct Investment (FDI) has been one of the major topics that have attracted much attention in most of the African countries economies, which is currently emerging (Bugg-Levine and Emerson, 2011, p.26). African leaders have understood the significance if FDI and the economic growth that it can bring forth in their respective countries with Nigeria being among the countries where FDI has made remarkable impacts in all most all sectors (Basu, 2002, p.35). Effects of FDI on the recipient countries have been a touchy area of research in commerce, economics and politics (Organisation for Economic Co-operation and Development Staff, 2009, p.56). In this particular area, there are two approaches that are commonly applied namely the macro approach and the micro approach. Macro approach encompasses empirical examination of effects of FDI on the general economic growth in areas related to creation of employment, business and industry as well as international relationships (Ip, 2010, p.90). On the other hand, micro economic approach focuses on the impacts of FDI on the grass root economy in various sectors like skills development, employment generation specifically the establishment of small businesses being highly emphasized on. Foreign direct investment refers to the direct investments made to a businesses or production process in a given country by companies or individuals from other countries. This exercise is achieved by either buying the targeted business entity or by expanding corporates operations. In Rivers State Nigeria, FDI involves movement of both financial and human resources (capital) from abroad. Some of these resources are owned by individuals, governments while others are owned by leading multinational corporates (Great Britain, 2009, p.102). There exists number of factors that make Rivers State a favorable destination for many investors. Therefore, it is essential to have a brief understanding about the state that has become a target of many foreign investors. Rivers State is among the 36 states that Nigeria made up of (Mitee, 2010, p.85). The state contributes a lot in the Nigerian economy because of the presence of oil rich fields, presence of refineries and seaports among other various industries that spread out across the state. As a result, the state has become one of the most targeted areas by foreign investors who in this case comprises of both leading multinational corporations as well as individuals who travel to the state to seek employment. This has ended up affecting the states various sectors both in the micro and macro economies (Brownbridge and Gockel, 1998). However, this research will focus on the effects of FDI on the micro economy specifically small businesses. The research will also focus on establishing the main determinants of FDI in the state while still drawing empirical comparison with other countries. 1.2 Research Objectives Based on the argument explained in the background of this research proposal, this research proposal will aim to achieve the following objectives. 1. To establish the concept of FDI and its key determinants in Rivers State, Nigeria 2. To evaluate the effects of FDI on small scale businesses in Rivers State  3. To ascertain the empirical relationship of FDI’s effects on the Nigerian micro economy with that of other countries 4. To analyze various data and reports from organizations at national and international level on the presence of FDI in the small and micro economy of Rivers State 1.3 Research questions 1. What is the concept of FDI and what are its key determinants in Rivers State, Nigeria?  2. What are the effects of FDI in the small and micro economy of Nigeria specifically Rivers State? 3. What is the empirical relationship between the effects of FDI on the SME sector with other countries? 4. What is the analysis of various data and reports from organizations at national and international level on the presence of FDI the small and micro economy of Nigeria, Rivers State? CHAPTER TWO: LITERATURE REVIEW 2.0 Literature Review Over the past few years, FDI have been very rampant in Nigeria, an African country that is located to the west of the continent (Ratha, 2011, p.65). This has risen as a result of the growing economy of this western African country that is also a major oil producer in the continent. Various studies have been carried out on the key determinants FDI, and the accrued positive and negative effects particularly on small-scale businesses in Rivers State province, Nigeria (Aigbokhan, 2005, p.165). The main objectives of these research studies have been to establish the reasons why most companies or businesses want to become multinational and the reasons behind them targeting Rivers State, Nigeria. Foreign direct investments are influenced by a number of factors such as economic factors, legal environment and political factors among other macro-economic factors (Organisation for Economic Co-operation and Development Staff, 2009, p.98). Most of these factors are the ones covered in economies and are represented by an acronym ‘PESTEL’ (Political, Economic, Social, Technological, Legal, and Environmental) (Mohapatra and Ratha, 2011, p.38). These factors play a major a role in determining how business organizations or even human capital is channeled. Legal, economic and political factors however seem to be like the key determinants of how multinational organizations can invest in Nigeria particularly Rivers State region, a delta that is rich in oil fields and other numerous industries (International Business Publications, USA, 2012, p.45). The state has also a very high population, however, there exist a number of gaps that the past researches have no covered like the aspect of effects of FDI on small businesses among others hence a pressing need to carry out this research that will cover this element among others. The research will relate its findings with those of other countries especially the developing nations. This means that the data of conclusion made will be used as a general conclusion even for other countries or states (Iarossi and Radwan, 2009, p.71). CHAPTER THREE: METHODOLOGY 3.1 Introduction This chapter explains the research methodology that will be applied by the researcher while giving adequate support for his or her choice for the stated methodology (Denicolo and Becker, 2012, p.56). 3.2 Research Methods/ Research Design This research will be conducted using both qualitative and quantitative research approaches meaning that the researcher will combine qualitative and quantitative research concepts. Quantitative techniques will be used especially in collecting data concerning the effects of FDI on small and micro enterprises in Nigeria using questionnaires. More than 500 copies of questionnaires will be distributed in River Sate in Nigeria. Qualitative methods on the other hand will help in collecting data using data collection instruments such ass interviews (Ogden and Goldberg, 2002, p.26). Using a hybrid of those two research methods will make the methods of data collection use and analysis relatively cheap while on still providing detailed, reliable, and quantifiable data that can be used as a general conclusion. The researcher will also get a chance to interact with the respondents thus able to verify the obtained data easily. The main disadvantage of these methodologies is the fact that collecting and analyzing data is likely to be tiresome and time consuming (McKibben, 2007, p.96). 3.3 Scope of the research The researcher will collect data from Rivers State in Nigeria with the targeted respondents being governmental and non-governmental organizations whose activities are related with community empowerment, small and micro entrepreneurs, and financial institutions like banks, Rivers State officials of foreign investors in the SME sector, community leaders, and the general residents of the state. 3.4 Sampling method Samples of the above-targeted parties will be chosen at random in either through a stratified way or systematic way in order for the data that will be collected to be representative in a way that it can be used to make a general conclusion about the effects of FDI on SME in Rivers State in Nigeria. 3.5 Methods of data collection a) Questionnaire The researcher will distribute more than 500 questionnaire forms containing sets of questions relating to what the respondent believes are the determinants of FDI in Nigeria as well as the effects of FDI on the SME sector in Rivers State. The questions used will be open and they will be disbursed to relevant parties as listed under the subheading ‘scope of the research’. b) Personal Interview This will preferably involve live interviews, phone call interviews video calls interviews using Skype. The researcher will interview the relevant key players as mentioned there above (under questionnaire). c) Secondary methods of data collection Secondary methods of data collection like researching in the internet about the effects of FDI in Rivers State, reading written books by experts in this field, newspapers, reading journals and going through previous studies about this topic if any exist (Denscombe, 2012, p.45). The researcher will ensure that the collected data is from reliable and credible sources so that the conclusion of the research can be used for future reference or can be cited on matters relating to this topic (Vithal and Jansen, 1997, p.36). 3.6 Data analysis After data collection, it will be edited so as to ensure that its accurate, check its consistency and completeness and then tabulate the obtained statistical data (Punch, 2006, p.105). Non-statistical data will be presented in the general format of writing. The collected data will be analyzed using percentages. 4.0 Conclusion This is a research proposal on the determinants of FDM in Rivers state in Nigeria. The researcher will also establish the major effects of FDM in the town particularly on the small businesses. The main objectives of the research study is to establish the key determinants of FDM in Rivers state, ascertain effects of FDM on small businesses as well as establish the empirical relationship between the findings in Nigeria with other countries. The researcher is going to apply both qualitative and quantitative methodology while carrying out the research. The researcher will use questionnaire and interviews as the primary methods of data collection. Bibliography Aigbokhan, B. E. 2005. Rekindling investment for economic development in Nigeria. Ibadan. Basu, S. 2002. Financial liberalization and intervention: A new analysis of credit rationing. E. Elgar. Northampton, MA. Brownbridge, M. & Gockel, A. F. 1998. Banking in Africa: The impact of financial sector reform since independence. Africa World Press. Trenton, NJ [u.a. Bugg-Levine, A., & Emerson, J. 2011. Impact investing: Transforming how we make money while making a difference. Kenwyn. Sage. Denicolo, P., & Becker, L. M. 2012. Developing research proposals. Los Angeles. Sage. Denscombe, M. 2012. Research proposals: A practical guide. Maidenhead. Open University Press. Great Britain. 2009. Investing for development: The Department for International Development's oversight of CDC Group plc : report, together with formal minutes, oral and written evidence. TSO. London. Iarossi, G. & Radwan, I. 2009. An assessment of the investment climate in Nigeria. World Bank. Washington, DC. International Business Publications, USA. 2012. Nigeria Business Law Handbook: Strategic Information and Laws. Intl Business Pubns USA. Ip, G. 2010. The little book of economics: How the economy works in the real world. John Wiley & Sons. Hoboken. McKibben, B. 2007. Deep economy: The wealth of communities and the durable future. Times Books, Henry Holt. Luton. Mitee, L. E. 2010. Laws of Rivers State of Nigeria: An encyclopaedic guide. Worldwide Business Resources. Luton. Mohapatra, S., & Ratha, D. 2011. Remittance markets in Africa. Washington, D.C: World Bank. Ogden, T. E., & Goldberg, I. A. 2002. Research proposals: A guide to success. Academic Press. San Diego, Calif. Organisation for Economic Co-operation and Development Staff. 2009. Oecd Investment Policy Perspectives 2008. Washington: Organization for Economic Cooperation & Development. Organisation for Economic Co-operation and Development Staff. 2009. Oecd Investment Policy Perspectives 2008. Organization for Economic Cooperation & Development. Luton.. Ratha, D. 2011. Leveraging migration for Africa: Remittances, skills, and investments. World Bank. Washington, DC. Vithal, R., & Jansen, J. 1997. Designing your first research proposal: A manual for researchers in education and the social sciences. Juta. Kenwyn. Read More