Description

ABSTRACT

For a long time now, Nigeria has been experiencing many economic problems, which include high degrees of unemployment, inflation, unfavorable balance of payment etc,

Policies ( both fiscal and monetary) put in place by successive regimes love, due to a combination of various reasons, proved abortive in turning our economy, ground. Even the presence of so many multinational corporation does nor seem to be doing so much for the economy during all these year of multiple economic distress.

In view of the above, the researcher undertook a study to determine the whether or not these multinational are actually contributing to our economic recovery efforts and the extent and dimensions of these contributions (if any). The work is also meant to find out whether or not these MNCS did contribute to the Nations economic problems and if so, how?. This work became necessary because many experts believe that the MNC’S are very imports agents of economic growth and development, Lence the incessant clamour for more private foreign investment in Nigeria. Others, especially radical economists however, caution that these MNCS actually pose dangers to our economic recovery efforts. So, which side of the argument should we accept and work with?

At the end of the research work, it is expected that important discoveries that will positively influence future government’s polices on the issue of multinational companies would have been found out. Should this objective be met, then the researchers efforts will be judged as successful.\CHAPTER ONE

• INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Developing countries like Nigeria, with weak economic base cortically require foreign investment in various forms in order to augment their local resources, as the struggle for economic development gathers momentum. Foreign investments could come in a number of ways: including direct and portfolio investments, grants. For economic development from foreign government or non – governmental organizations and individuals.

For the purpose of this research work however, we shall concentrate on direct foreign investment, which take place when foreign national acquire physical a recipient country. This type of acquisition may be total, in which case, the domestic company operates as a subsidiary of the foreign company, or it could be in partnership with other domestic investors. This is generally referred to as multinational or Transnational corporation. Control and ownership of the domestic e nterprises are largely vested in the parent company. The decision by a firm abroad to invest in another country is influenced by:

1. Availability of key raw materials
2. However production costs,
3. Political stability
4. Favourable and stable economic policies and incentives to foreign investors as well as
5. Existing or potential demand for the proposed products.

 

Prior to the 1980s, American Multinationals dominated global direct

investments in recent times however, their dominance has declined with the emergence of big Japanese and western corporations on the global scene. Today, there are more than 1,000 multinational corporations, with over 80,000 affiliates, which they effectively control all over the world. Most of them recorded gross sales, which are much higher than the GNP of many developing countries and indeed, a few developed countries. (AKAMIOKHOR, G.A. 1989).

Although the multinational corporations are created by private initiatives, with no political objective, they operate on such a large scale and amass such wealth with the resultant monopolistic practices (in some cases) to the extent that they become capable and indeed, do challenge the prerogatives and responsibilities political authorities. Mally, G (1993:13).

This work, will among other things examine the activities of the multinational corporations in Nigeria especially since independence, with a view to showing how they have contributed to, or stagnated the development of our economy. It is pertinent here to recognize that our experts in Economics never agreed on whether or not the multinational corporations are messials or stumbling blocks to the Nations economic development. According to Dr. Udeaba, S.I., the major objectives of those multinational corporations are profit maximization, economic exploitation and neo-colonial imperialism (S.I Udeaba: 1999, Pg 129).

Nwankwo A. 1981 Pg 107) agreed with the above assertion, when he noted that “All sectors of our economy Have suffered or degenerated in terms of efficiency,” and predicted that with this pace of development a century of independence will still leave us with poor infrastructure and weak industrial base, due largely to the negative influences of these multinational corporations.

Many Economists however agree that these multinational corporations assist in the growth of the economy, increasing our exports thereby boosting our foreign exchange earnings, providing experts in Technical and managerial skills, stimulating the employment of both men and materials in the economy and developing local technology with reduced production costs due to large scale production as well as increase revenue to government through taxation on the companies.

In the chapters, which follow, the activities of these MNCs will be critically appraised with a view to finding out which aspects of the fore – going arguments are true. Finally, the researcher will profer feasible solutions on how best to direct and use the opportunities provided by these MNCs in our National developments efforts, using Texaco (oil) Nig Plc as a case study.

 

• STATEMENT OF PROBLEMS

The statements of problem of this study is to determine whether or

not the multinational corporations existing in Nigeria have contributed positively of negatively in developing the Nations economy. Due recognition is given to the factors identified below which the multinationals daim to be assisting to improve upon in the interest of the Nation’s economy.

• Inadequacy of infrastructure facilities e.g. Electricity Roads, water, Telephone lines, Hospitals, schools, etc.
• Local technology and honest managers of both private and public enterprises;
• Insufficient local sourcing of inputs;
• Strong competition from imported products and
• Institutional and administrative bottlenecks.

 

Since these problems unfortunately still exist, many scholars persistently advise government to encourage the efforts of multinational corporations in these areas. Yet, (Onwuka R.I. and Sessay, 1985, Pg 149)

Posed a critical question which is relevant in this discourse “can Nigeria truly be independent when her mining, trading, banking, insurance constructions and distribution systems are virtually controlled by these multinationals?

Throughout this research work, the problem of how best to use the efforts of these multinational corporations for development purpose without posing real or potential danger to present and future well being of our economy will occupy the mind of the researcher.

 

• OBJECTIVES OF THE STUDY

The objectives of this research are identified below:-

1. To appriaise the activities of multinational corporations in Nigeria with a view to show whether or not they have contributed positively to our economic development
2. To show wether such positive contributions if any have brought about structural and found a mental changes that are self – sustaining and beneficial to the masses
3. This study will also provide the bases (Critical economic reasons) for attracting more companies to invest in Nigeria from abroad.
4. Particular economic problems like unemployment poverty/hungers, Balance of payment, etc will be used in this study to appraise the contributions of these multinationals to our economic development.
5. The study will also venture into the sensitive question of political inter ferance in the affairs of the Nation by some of the multinational corporation
6. finally, the all important problem of developing a sustained culture of building local technology and transferring technology from abroad will also be examined in the light of the activies of these MNCS.
7. AND BASED ON THE ABOVE, Make recommendations on the most feasible ways to approach the MNCS in our match towards self – sustaining economic development.

 

• RESEARCH QUESTIONS:

To what extent are the goals of these (MNCs) similar to that of

government in terms of sustainable economic growth and development

2. To what extent has these foreign companied in improving or worsening the Nations balance of payment situations?
3. To what extent did they assist to check the ever – increasing rate of unemployment in Nigeria?
4. What have they helped in developing local technology or (in economically – suitable manner) the transfer of technology?
5. To what extent have they contributed positively to the problems of poverty all aviation, political stability and their pledge to remain responsible and responsive corporate citizens in Nigeria.
6. What do they prefer, local or foreign raw materials and spare parts. If yes, why?

 

• HYPOTHESIS

The Null and Alternate hypothesis of this study are as follows:-

1. Ho: The activities of the multinational corporations do not contribute to the Economic development of Nigeria.

Ho: The activities of the MNCs contribute to the Economic development of Nigeria.

2. Ho: Texaco Nigeria PLCs impact to total MNCs investment in Nigeria is significant.

Hi:       Texaco Nigeria PLCs impact to total MNCs investment in Nigeria is significant.

1.6  SIGNIFICANCE OF THE STUDY

Nigeria, like other countries within the sub-Saharan region, is a country endowed with both human and materials resources, and also like other, in going through some difficult economic situations. This study is significant because, realizing the above fact, various suggestions have been made on how to steer the economy out of its present pithole by using resources from the multinational corporations more effectively.

The work will also investigate and clear the air on some allegations usually brought against the MNCs, and throw more light on the need for more foreign capital inflow into the country. This work will be of benefit to:

1. Government in formulating polices concerning the MNCs and in attracting more foreign investment into Nigeria.
2. Researchers and scholars who are making further research in this area, will find this work an invaluable reference material.
3. Foreign companies who wish to have a balanced view on their activities in Nigeria.
4. The general public who wish to study this topic for general knowledge.

1.7  SCOPE & LIMITATION OF THE STUDY

This research aims to appraise the activities of multinational corporations in Nigeria. But there are so many MNCs operating in this country, the researcher therefore will use TEXACO (oil) Nigeria PLC asd a case study.

This company is being used to serve as a parameter for determining the effectiveness of their activities in the economy.

The conclusions to be drqwn on this work will be based on the activities of this company during the period under review on the one hand, and other related materials to be drawn from other companies on the other Land.

1.8  DEFINITION OF TERMS

1. LDCs – Less Developed countries
2. MNCs – Multinational Corporations
3. UAC – United African company PLC
4. LBN – Lever Brother Nig. PLC
5. TNP – Texaco Nigeria PLC
6. CAPITAL – A self augmenting value. Which consist of various

production inputs like tools, buildings, machines, money,  etc. they are usually invested for further production in future.

7. INDUSTRIALIZARION:

This is a process of economic development in which a growing part of the National resources is mobilized to develop technically up to data, diversified, domestic economic structure, characterized by a dynamic manufacturing sector, having and producing means of production ans consumer goods and capable of assuring a ligh rate of growth for the economy as a whole and of achieving enduring economic and social progress.

8. TECHNOLOGY:

This refers to the embodiment of useful scientific knowledge that has been effectively evolved and adopted applied for the purpose of meeting man’s immediate and future economic and social needs as determined by him.

9. ECONOMIC GROWTH AND DEVELOPMENT

Economic growth erfers to increase in the output of an economy over a period usually a year.

This is determined by the GNP. Economic development may be understood mean economic growth plus the availability of social amenities (schools, water, hosing, health care, reduced unemployment, increase in living standard) etc to an increasing number of the population over a period usually one year.

10. FOREIGN PRIVATE INVESTMENT (FPI)

This refers to the inflow of investments from rich foreign corporations and individuals. It may come in the form of the branch of a multinational corporation operating in a host country, or a foreign firm or individual may buy shares in an indigenous concern or may go into partnership with local or foreign investors by setting up a business in the host country.

 

11. HOST COUNTR

Any country which receives direct foreign investment especially a country in which a particular subsidiary or more than one subsidiaries are operating from abroad.

12. HOME COUNTRY

Any country whose Nationals or residents make foreign direct investment in other countries, especially the country of origin of the company being described

13. PARENT COMPANY

A company which owns wholly or majority shares and so controls direct foreign investment in other countries.

14. HOME OFFICE

The headquarters of the parent company where ultimate and major policy decisions taken.

The home office may also be referred to as Head office, Headquarter, etc.

15. FOREIGN SUBSIDIARY:

A branch of the  parent company in form of direct foreign investment, sometimes referred to as subsidiary or affiliate or local company.

16. INTERNATIONAL DIVISION

The department in the home office or Headquarters with a foreign geographical responsibility most companies use various names for this.

17   INTRA COMPANY

This means “within the company” and is used to describe activities, which take place within a single multinational firm such as intra – company transfer of goods/services or loans or employee’s e.g. Texaco Ltd in Texas USA could give Loan or petrol tanks or export managers to Texaco Nig Ltd.

18. INTERNATIONAL MANAGEMENT
    1. Management of business a cross National political boundaries
    2. Use executives outside their own country of origin to mange international business.

CHAPTER TWO

LITERATURE REVIEW

This chapter review literature relating to multinational corporations and Economic development of Nigeria major ideal of this section are grouped and presented under the following sub – headings.

• The concept of Economic growth / development of multinational companies in Nigeria.
• Definition of Multinational Corporation and brief History of multinational corporations in Nigeria.
• The motives of Multinational Corporation and financing of multinational Corporation.
• Management of multinational corporations and focus on oil companies.
• Lessons from the Texaco Experiences.
• Summary of Related Reviewed literature.

2.1     THE CONCEPT OF ECONOMIC GROWTH /

DEVELOPMENT OF ULTINATIONAL IN NIGERIA

The question of Economic growth and development is a very big one Nations all over the world battle with it daily in virtually any National discourse. The poor feet it, though they may not be able to discern what it is, the rich are more sensitive to its trends because it dictates the level of their wealth.

Multinational corporation do usually fill the gaps between the domestic supply of savings foreign exchange, government revenue, skills and planned level of these resources necessary to achieve development targets.

Prior to the independence of Nigeria the colonial master’s had over –whelming dominance of our economic activities. They determined what investments came into the country, from where it come and under what conditions it came.(Akpakpan 1927). However after independence, Nigeria joined the committee of Nations of the United Nations organization (UNO) and other world bodies, this being able to determine the nature and conditions by which companies abroad invest in our country. Even after independence, Agriculture remained the main export product of our economy and given our relative inexperience and anxiety in dealing with foreign investors, our fiscal policies were porous to these foreign investors and the developed countries of the west took advantage of these conditions.

Multinational corporations that were already firmly established under the colonial administration continued to expand after independence. moreover, the discovery of oil in commercial quantity in Nigeria at that time saw an influx of multinational oil companies, note by the seven sisters into the country. Companies like, UAC, lever Brothers Nigeria Ltd and oil companies, like shell BP, Mobil, Texaco and British petroleum were already flourishing in several sectors of our economy long before independence.

The chapter will trace the history of multinational corporations in Nigeria, with especial emphasis or the united African company and the oil companies, discuss the financing of the MNC;s, their management structure, the nature of foreign investment in Nigeria and the indigenization policy. The chapter will also examine the effects of the operations of the MNCS in our economy using indices like poverty, unemployment, and balance of payment and transfer of technology. The question of interference in the political activities of our country by some MNC’s will also be examined, while the discussion  will be concluded by analyzing the social economy benefits of the multinational corporations as well as their nagative impact on the economy. Measure to attract more direct foreign capital into the country in the form of multinational corporations will also be discussed as part of the concluding phase of this chapter.

It is considered imperative at this point to explain the above concept clearly with a view to showing the crucial roles the MNCs are meant to play in realizing the growth and development objectives of the Nigerian economy.

RUFFIN & GREGORY (1983)defined economic growth as either an increase in real GNP or as an increase in GNP per capital – real GNP divided by the country’s population. Economic growth is calculated on annual percentage rate of growth.

Ray & Paul (1987) also wrote that each of the two measures of an economic growth mentioned provides different information about changes in the real out put of an economy. The rate of increase in GNP is a measure of how much the total output of goods and services has increased and is a valuable indication of the change in the economic power of an economy. The rate of increase in GNP per capital indicates the rate at which the amount of goods and services available on average to each person in the economy is increasing. The per capital GNP is a measure of average living standards.

RAY & PAUL also stipulated two types of economic growth –extensive growth and intensive growth.

1. Extensive growth is the economic growth that results from the

expansions of factors inputs.

2. Intensive growth is growth that results from increase in output per

count of factor input.

Economic Development according to G. C. Aneke (mrs) in her work-problems and politics of development is the sustained growth in national income plus sustained increases in the peoples standards of living equitable income distribution, nutrition, health care, mortality rate, life expectancy etc. Mansfield (1983) in summarizing the concept of economic development observed that “there is no single measure of Economic development” because the concept is a multidimensional phenomenon. He identified per capital income as the most frequently used measure of economic development, the higher the per capital income the higher the country’s level of development. He also added other indication for measuring economic development such as the level of industrialization and the level of modernization of a country.

Oil rich Nations may earn substantial per capital income but are yet to develop a domestic industry. Such countries may still retain the Features of a traditional per modern society. Although wealthy in terms of per capital income, they may Lack certain characteristics of modern life – decent urbanization, adequate/good jobs in offices and factories to the working class, so social mobility and qualitative university education that may be available and affordable in less wealthy nations. In such countries income is highly concentrated in the hands of a very few who were either born into wealthy or had the opportunity to unjustly or corruptly enrich them selves at the expense of other citizens.

Sometimes too, the level of economic development may be measured in terms of the health, shelter, and education etc of the population.

 

• DEFINITION OF MULTINATIONAL CORPORATION

So, far, we have carried on with the linkage of multinational

corporations and foreign direct investment in host countries as the definition of MNC. It is however considered imperative here to recognize the definitions of the subject matter by other experts in order to provide a broader view of the issue.

Ells Richards (1992) saw multinational corporations as covering a range of phenomena or transnational business activities of diverse types and organized variously like firms, licenses, and proprietorships, centralized and decentralized companies and usually widely dispersed but wholly – owned subsidiaries. He added that the “Multi” prefix alone refers to a number of nations ranging from two to a score or more. He then went ahead to define MNC as a “cross – boarder or transnational business organsation (s) that is characterized by the dispersal of its managerial centers among several nations in order to overcome the barriers of political frontiers of Nation states”. Thus (Ells Richard (1992:31) maintains that any company which performs its main operations by way of manufacturing or provision of services is at least two countries qualifies as a multinational corporation.

Odozi (1995) said that “foreign investment involuves the transfer of a package of resources including capital, technology, management and marketing expertise from the investor’s country to another with the aim of maximizing the objective function of the investor”. It can be undertaken by individuals / Firms and governments.

Broadly speaking however, some author’s such as Johnson (1970) suggested that schooling abroad and technology transfers through the purchase of patents and licensees represents investment abroad.

Vernom and Louis (1996) defined MNC as companies made up of a cluster of affiliated firms that though indifferent countries, nevertheless share similar characteristics as follows:-

1. They are linked by ties of common ownership;
2. They draw on a common pool of resources such as money and credit, information systems, trade names and patents;
3. Respond to a common management strategy.

 

• BRIEF HISTORY OF MULTINATIONAL CORPORATIONS IN NIGERIA

Foreign investors both private and corporate played a major role in the

industrialization of Nigeria right from the early years of this century; as could be dissented from the fore – going.

 

• THE PERIOD UP TO 1945

The first three most important processing and manufacturing activities

stated during this period. This pioneers at that time were the saw – milling plant at Koko (then Bendel now Delta state) set up by the millter Brothers.

The West African soap company set up at Apapa in Lagos by lever Brothers and a cigarette manufacturing plant at Oshogbo set up by the British – American Tobacco company. Although there were no incentives from the government at that period. Theses companies took giant steps by bringing technology, managerial expertise and capital into Nigeria (Ekundare, 1973)

 

2.3.2  THE PERIOD 1946 – 1960

(Kilby 1969) recalled that during this period, the government had taken significant steps towards encouraging ventures in the country. This was indeed a period of upsurage in foreign inclustrial development. The multinational companies set up at this time included united African company Ltd (UAC). John Holt, Paterson Zochonis (Pz) campagnie francaisede U’ Afrique occidentale (CFAO) and the union Trading company (UTC), etc.

 

2.3.3  THE PERIOD 1961 – 1969

According to records available at CBN, multinational companies continued to establish their presence in Nigeria during this period though at a slow pace. This situation is understandable given that this period was the most turbulent in the political history of the Nation. Most of the investments was got at this period came from Britain which contributed 51% of our total foreign investment by 1966 amounting to N374.2m.

The annual survey which the CBN usually carry out to in determining the flow of foreign investment and their sectoral distribution showed that this period witnessed a significant shift in foreign investment from commerce and agriculture to industry, with the minig industry contributing most to our industrialization efforts due to the inlux of oil companies at that time.

 

 

 

1.3.4  THE UAC

The U.A.C also played a key role during the period under review because their expansion in various sectors of our economy was very glaring.

The table below shows clearly that UAC was the real controller of the country’s economy despite the rather weak efforts of indigenous entrepreneurs and the influence from our government.     

 

S/No	CAMPANY	NATURE OF PROJECT	YEAR ESTAB
1	African Timber & Plywood Ltd.	Timber & Plywood	1948
2	Nigeria Breveries Ltd	Alcoolic & soft drinks	1948
3	Taylor Woodrow Ltd	Building contractors	1953
4	Nigeria Jonery Ltd	Wood work & Funiture	1953
5	Nig Presstresses Ltd	Presstresses & Concrete	1954
6	N.I.P.O Ltd	Plastic Products	1957
7	Bedford Nig. Ltd	Bedford Lorries	1958
8	Releigh ind. Ltd	Bicycte Asswnbly	1958
9	Mine Farms ltd	Pigs Breeding	1959
10	Northern construction coy Ltd	Building contractors	1960
11	West African thred Ltd	Sewing thred	1961
12	W.A.P.C.O Ltd.	Cement Production	1961
13	Nig. Storage comp. Ltd	Meat Processing	1961
14	Wall Nig. Ltd	Ice cream	1961
15	Vono Products Ltd.	Bad Mattresses	1961
16	Cement Paint ltd	Cement paints	1962
17	Guiness Nig Ltd	Stout & malt drinks	1962
18	Fan Milk Ltd.	Reconstituted milk	1963
19	Nig. Sugar company Ltd	Sugar & dye products	1963
20	NARPIN Ltd	Cotton yarns	1963
21	VITA FOAM Nig. Ltd	Rubber foam Products	1963
22	A.J. Seward	Perimery & cosmetics	1963
23	D.Y.E Ltd	Radio Assembly	1964
24	Brand Park Ltd	Fibre Board cartons	1964
25	Kwara tobacco comp. Ltd	Cigarettes	1964
26	Associated Battery Co. Ltd.	Vehicle Batteries	1965
27	Crocodile Match Ltd	Matches	1965
28	Textile Prints Ltd	Printed Textiles	1965

 

Source: Industrialization in an open economy,

(Kilby, 1966)

 

2.3.5  THE POST WAR ERA

the period after the civil was saw a gradual return of the economy to grwth, given the post – war reconstruction activites activities at that time and the assurances given to foreign investors about the safety of their investment political instability however affected economic development in many ways and this also affected the presence of multinational corporations in Nigeria. Inspite of all odds however, the value of foreign investment in Nigeria stood as high as N9.313b in 1986, showing that despite the inconsistencies in our economic policies. Foreign nationals still retained confidence in their ability to conduct profitable business in Nigeria.

 

2.4     THE MOTIVES OF MULTINATIONAL CORPORATIONS

Eneanya (1986) stipulated three basic motives of multinational corporations viz economic, political and ideological.

1. The dominat motive is economic; ie to seek new investment opportunities with maximum risk.
2. But the above motive could be constrained by political factors like change of government, so the multinationals are often motivated to invest in countries that are politically stable, or they could give financial or other necessary support to preferred candidates during any change in government in the country of operation.
3. The ideological motive is the monopolization ofr areas in the economy in order to check the infilteration of ideologies different from theirs in the third words.

These motives were divided into demand & supply side of factors of

production by Robert and Duane (1992).

On the factor supply side the following issues are examined by the M.N.C.S.

1. Lower production costs.
2. Lower delivery costs
3. Acquisition of raw materials
4. Off – shore assembly of foreign sourced raw materials
5. Portfolio of production source (New Greas to invest)
6. Access to skills and technology.

 

On the demand side, the following factors are studied:-

1. New markets including foreign markets)
2. restriction of exports (in some countries or on some goods)
3. Local presence of competitors
4. Requirements for good corporate citizenship.

 

• SOURCES OF ECONOMIC GROWTH AND DEVELOPMENT

1. a) INTERNAL SOURCES:

Ruffin and Gregory (1983) identified two things that can make economies grow viz:-

1. Expansion of the total amount of land, labour and capital inputs (in any of its forms) for mass production;
2. When available resources are effectively utilized

 

1. b) EXTERNAL SOURCES – THE IMPACT OF FOREIGN INVESTMENT

Resources from outside the country if well directed to the crucial areas of economic need has very high potential of stimulating economic growth and development in less developed economies. These multinationals regardless of their sieze and high volume of capital injected into the economy must not be seen as replacing private domestic investment or government’s direct and indirect involvement in moving the economy towards sustained growth and development.

 

• FINACING OF MULTINATIONAL CORPORATIONS
  • INTERODUCTION

Investigation have revealed that apart from the inihal huge investment by the parent copany in the host country, the multinations are mainly funded by their earnings locally. This accounts for over 60% of all the finance that subsequently accrue to them during their years of business operations. Below the various sources of finance to M.N.,C.S are briefly outlined to ease understanding.

 

• LOCAL SOURCES

1. a) RETAINED PROFITS

profits made in the cause of business usually enable the companies to finance their operations during the current and future business years.

1. b) DEPRECIATION ALLOWANCES, Trade credits, sales of securities, proceeds from debenture institutions, etc also constitute the local sources of finance available to the multinationals

 

• FOREIGN SOURCES

The multinationals may also be funded from aboard mainly from their parent companies by way of intra – company loans or trade credits. The parent companies do also usually extend various forms of assistance to their subsidiaries in terms of technical, human resources, information and material aids.

 

• CONCLUSION

The above sources are however not exhaustive because the MNCS can and do receive finance from several other sources. What is of interest in our analysis is the fact that all the sources of finance mentioned above have relevance in the type of contributions the MNCS make to our economy. The fact the majority of their funding are obtained from local sources shows their level of efficiency in managing their investments and the diverse resources they employ in our economy. The revenue which our governments gain from them by way of profit sharing (oil companies only) taxation, value added Tax, etc also add to their contribution to our revenue base and the economy generally.

• MANAGEMENT OF MULTINATIONAL GORPORATIONS

Primarily, M.NC.s are formal organization whose specific purpose is

profit making through harnessing and exploiting available (potential and actual) factors of production. The purpose of this section is to identify the organizational structure, bureaucratic process, etc which give rise to the power sharing arrangement and management strategies of the multinationals.

It should be however, emphasized that at the bottom of whatever management strategy that is adopted in the need to make maximum profit at minimum cost at the quickest possible time by ensuring that the following factors (management mix) are carefully managed.

1. The manufacture and supply of goods and services;
2. The provision of finance:
3. Ensuring of a suitable return on investment;
4. The creation and maintenance of markets
5. The efficient and effective organization of labour and
6. Ensuring cordial relationship between the company of the government,

the host communities and the general public, usually referred to as the

“Operating environment”.

The Texaco Nigeria PLC Uses the organization structure shown below in its operations in Nige
SOURCE: TEXACO NIG PLC ORGANIZATION CHART

• FOCUS ON OIL COMPANIES
  • INTRODUCTION

In hos very outstanding work petroleum Economics, N. Atamah stated that petroleum products are some of the most important sources of energy and no modern industrialized nation will survice without them, nor will a developing nation attain a meaningful level of development without these products. According to him, industrial plants and processes need oil, lubricants, hydrqulic fluids and so forth, while both manufacturing industries and domestic consumers requires gas for halting and cooking respectively. Without petroleum products service industries will be grounded: commercial transportation, by either commercial aviation or motor vehicle transportation of goods and people by rail, road and sea will be unthinkable.

In, short, modern civilization by way of automated manufacturing process, mechanized agriculture, transportation, construction, heath care, Housing, etc would be unknown with out petroleum products.

• ORIGIN AND DEVELOPMENT OF OIL INDUSTRY IN NIGERIA

Given the limited local expertise, the complex technology and large

capital required for oil production, various Nigerian governments understandably allowed foreign investors to play major roles in the exploration and marketing of oil in Nigeria.

In 1958, shell – BP stated oil production and export from oloibiri

(now in bayeisa state) at the rate of 5,100 barrels per day and as the rate doubled in subsequent years, Nigeria was ushered into the international oil market. Ealier before this in 1957 safrap (now ELF) made two commercial discoveries at the Anambra River Basin and a gas well farther East at Ehandiagu in Enugu State.

Desipte huge investments made by other oil companies in exploration of oil in Nigeria, shell enjoyed sole concession rights up till 1959, when it was revoked in order to increase the pace of exploration ans avoid the country’s dependence on one company or Nation. Shell’s success in 1958, did actually encourage other companies to show interest in Nigeria oil. Thus by 1961, mobil, Guif, Agip, safrap (now ELF) Tenneco and Amoseas (Now Texaco / Chevron) had joined the exploration for oil in the onshore and off shores areas of Nigeria.

Today, multinational oil companies operating in Nigeria conduct their business either as explorers or oil marketing companies. In which ever form, they contribute both positively and negatively to Nigeria’s economy just like other multinational companies.

 

• LESSONS FROM YTHE TEXACO EXPERIENCES

Texaco first started as a small time oil company incorporated by two

Texans in America – Joseph

1. cullinan and Arnold schlaet with only $50,00.oo on march 28, 1901. from that time onwards, the company continued to growth from strength to strength to the extent that today it has branches in over 50 countries of the world, according to a bulletin named “THE SPIRIT OF TEXACO” (1997). It’s products also expanded from crude oil to aviation fuel, grease, lubricants, petroleum jelly, liquefied gas, petrochemicals, plastic etc.

 

• TEXACO NIGERIA PLC

Texaco operates two separate business in Nigeria, under separate

management viz: Texaco overseas Ltd which explores oil fields for crude petroleum and Texaco Nigeria PLC which manufature and market petroleum products like lubricants, greese, oil, etc. this discourse is mainly interested in Texaco Nigeria PLC.

The marketing of Texaco products in Nigeria started in 1913, writes another bulletin published by Texaco Nig. PLC called “THE SART OF NIGERIAN ROADS; By that time, these products were distributed exclusively by compagine francaise de L ‘Ajrique occidentale (CFAO) of france which was a retail company. In 1964, Texaco Africa Limited started direct marketing of Texaco products selling through services stations and Kiosks acquired from CFAO on lease terms. It also entered the aviation and banking business that year.

On August 12,1969 Texaco Nig. Ltd was in corporated as a wholly owned subsidiary of Texaco Africa Limited, then inheriting the business formally carried on in Nigeria by Texaco Africa Ltd. With the promulgation of the Nigeria indigenization decree in 1978, 40% shares of Texaco Nigeria Ltd were sold to Nigeria individuals and organizations by Texaco Petroleum Company. In 1990, the companies and allied matters decree came into force and this necessitated the dropping of “Ltd” from the company’s corporate name to the prescribed “Public limited liability company” (PLC).

Currently, 45,355,125 shares are held by 16,289 Nigerian shareholders in Texaco Nigeria PLC, a company with the main business of manufacturing and marketing of petroleum products in Nigeria. With 196 company owned and 139 third party owned operating outlets, as at August, 1,1997, Texaco Nig. Plc is indeed a major player in Nigeria’s petroleum products marketing industry.

A leading producer of quality lubricating oils and greases, the company owns the following facilities in Nigeria.

1. 74,000 barrels base oil storage at Apapa – Lagos.
2. A lube blending plant at Apapa capable of producing 250,000 bls/year
3. A 5.00 million Kg/Yr Grease plant at Apapa.
4. An 8,000 metric ton per year petroleum jelly plant at Apapa.
5. A plastic manufacturing plant capable of producing 5.16m units per year at Aba
6. A modern Arject facility at ikeja Lagos
7. A 5,100 metric ton, per month LPG plant in warr;
8. A 1,200 metric ton per month PLG plant in P/Harcourt.
9. A 10,000 barrels bulk storage facility in maiduguri.
10. A warehous complex at mapere Lagos
11. A back – up depot (Fuels Terminal) at Apapa Lagos.

Texaco petroleum company owns 60% of Texaco Nig. Plc shares and

has a total of 19 branch offices and 6 Zonal offices throughout Nigeria with a total staff strength of 146 throughout the country as at 31at Dec. 1997, The profit of the company has continued to grow and in line with our discussion in section 2.5.2 tagged “Retained profits below, these profits form the major source of funds available to the company for their operations and expansion in Nigeria’s economy. The table below shows the progressive increase in the company’s profit from 1988 – 1997, which is used to illustrate the point above.

TURNOVER PROFIT TACATION AND DIVIDEND FROM 1988 – 97 (10 YEAR)

Particu-lars as	1988	1989	1990	1991	1992	1993	1994	1995	1996	1997
At 31st Dec	N’000	N’000	N’000	N’000	N’000	N’000	N’000	N’000	N’000	N’000
Turn-Over	391,219	575,122	653,541	881,468	1,027950	1,432556	3579070	7,169,460	8,063,087	8,444,771
Profit b/4 Tax	29,246	47120	37084	22668	56204	162290	294286	675430	520853	181064
Taxation	(13752)	(21027)	(12687)	(5088)	(17145)	(56779)	(109,999)	(236,867)	(168,895)	(245)
Profit Taxation	15494	26093	24397	27756	39059	105,511	184,287	438,563	35,1958	95,539
Add other income	7823	–	9153	15943	37835	52883	33667	42203	474766	626075
Dividend	(21090)	(17235)	(19276)	(20410)	(23811)	(124727)	(17575)	–	(175751)	(151184)
Retained Profit	227	8858	14346	37635	52882	33667	42203	474766	626075	37135
SOURCE: ANNUAL RPORT AND ACCOUNTS – TEXACO NIG PLC 1988 – 97.

 

SUMMARY:

From the above table the company retained a total net profit of N1,664,012 during the 10years under review, despite it’s marginal declared loss of N95,539 = in 1997.

It is also imperative to note that several multinational companies declare false accounts or buy their undeclared profits in complex, often false accounting statements. Such items like depreciation, allowance, cost of sales, capital projects, cost of maintenance, etc are some times inflated in order to reduce final profits and by so doing avoid higher taxes.

Texaco Nigeria PLC has however continued to enjoy the reputation of being one of the most honest among the oil companies operating in Nigeria.

Finally, given the strategic position of oil in the development of a weak economy like ours, the researcher believes that indigenous entrepreneurs should be given adequate incentives to invest in various aspects of the petroleum industry in stead of leaving same in the hands of foreign Firms. We must pick our lesson from the acute shortage of petroleum products for more than 12 months between Nov.1997 to Dec. 1998, which was attributed, largely to the inability of our technicians to repair any of our four refineries. It is the sincere belief of the researcher that if our citizens invest massively in the oil sector, we would raise experienced engineers who could be pooled out to assist the NNPC & PPMC when the need arises. The havoc done to our economy during the oil crises should not be allowed to reoccur. The Texaco experience shows how the MNC from developed countries spread their tentacles all over the world.

 

• MULTINATIONAL & INDIGENIZATION POLICY

A research carried out by Teriba, Edozien and Kayode (1972) revealed that out of 1,320 business representing about 80% of all companies registered in Nigeria by 1970, Nigerians accounted for less than 40% of shareholdings in these companies, the balance of over 6% was in foreign hands, thus showing that foreigners has a firm grip of our economy. To redress this problem, the Federal government promulgated the indigenisation decree of 1978 whose primary objective was to allow Nigerians greater equity ownership in companies operating in Nigeria.

This was however, based on the wrong assumption that mere ownership of shares confers management right to the shareholders, but this was not so. The expatriates according to Nwankwo A. 1981, P.98. still dominated the technical departments, top level management and imputation of vital spare parts and raw materials from abroad. The Nigerian Enerprises promotion Board which come into being in 1977 was magnt to solve some of the problems observed in the indigenization policy and to further determine certain business in which only Nigeria can venture into e.g. Department stores/supermarkets, watch repairs, clocks & Jewellery, estate agency, manufacture of suitcase, and wholesale distribution of locally produced goods.

Schedules, I and II provides for Nigerians to have at least 40% & 60% shares respectively in the businesses under the schedule.

CHAPTER THREE

RESEARCH NETHODOLOGY

The following issues are described in this chapter:-

• Design of study
• Area of study
• Population of study
• Sample / Sampling technique
• Instrument for data collection
• Validity / Reliability of instrument
• Method of data collection
• Method of data Analysis
• DESIGN OF STUDY

Given the nature of this study, descriptive analysis was employed.

Here, the researcher employed the use of hypothesis testing as well as simple percentages and other descriptive measures for data analysis.

The study centies on the empirical study of the contributions of multinational corporations in the economic development of Nigeria. The strategy involves the acquision of relevant data and analyzing same using appropriate techniques.

• AREA OF STUDY

The study was carried out at Texaco Nig. Plc Zonal office at Abakiliki

Rd Emene – Enugu.

 

• POPULATION OS STUDY

The target population of this study consist of mainly staff of a

multinational corporations – Texaco Nig. Plc. Staff which has a total of 32 staff. Texaco Nig. Plc is use is Located at Abakiliki Express Road Emene – Enugu and central bank of Nigeria and some indigenous firms.

 

• SAMPLE / SAMPLING TECHNIQUE

Since the population is large, the researcher decided to make use of

stratified sampling. This is a method where the population is sub – divided. Out of the 35 companies (randomly selected for study) operating in Nigeria, culting across the seven major sub – sectors of the Nigerian private sector, 32 were used for this study.

 

• INTERUMENT FOR DATA COLLECTION

The instrument for data collection is questionnaires and interviews. The questionnaire is issued to the employees of the multinational companies, indigenous firms and central bank of Nig. Staff.

• VALIDITY / RELIABILITY OF INSTRUMENT

The instrument, questionnaire and interview was used to make sure of

reliability because it is a face to face contack. Visity regulaling will force or convince them to answere your question and collectedly.

• METHOD OF DATA COLLECTION

Primary and secondary source were use.

• PRIMARY DATA

The primary sources of data for this research were questionnaires and

interviews. Questionnaires were issued to employees of multinational corporations, indigenous firms, CBN staff e.t.c. People in similar or ganisations were also interviewed.

• SECONDAY DATA

Data from secondary sources include those from journals, text books,

CBN Economic and financial reports and annual reports of Texaco Nig. Plc.

• METHOD OF DATA ANALYSIS

The data collected from the various sources were analysed using the following techniques:-

1. Table and percentages (%)
2. Tests concerning proportions
3. 2 – Tests.

1. THE 2 I TEST

Formula =

• = X – nP

np – (1 –p)

where x = (contribution of MNCs to the Nations Economy)

n = Sample Size

p = Proportion of the sample size 2 ^x/_n

CHAPTER FOUR

DATA PRESENTATION INTERPRETATION & ANALYSIS

In this chapter, the primary data collected through the survey shall be treated and analysed. The research questions and hypothesis postulated earlier shall also be tested. Most questions are designed to solve the research problems others were meant to supply relevant data considered to be of interest to the work. The question that would be analysed are those that have direct bearing on the research.

• ANALYSIS OF PRIMARY DATA

Question two on the attached questionnaire was asked to establish the

type of company or business.

Table 4.2.1 is a summary of the response obtained.

TABLE 4.2.1

TYPES OF BUSINESS

S/NO	TYPE OD COMPANY	FREQUENCY	PERCENTAGE
1	Limited Liability Company	23	77
2	Partnership	4	13
3	Private proprietorship	0	0
4	Joint Venture	3	3
	Total	30	100

The response correctly shows that out of the 30 questionnaires were correctly filled and returned, no multinational company operates as a sole propriatorship.

Similarly, the response to question 7 shows that most of the companies may have been operating the country for more than (10) years.

Table 4.1.2 is a summary of the response obtained from the question “where does the bulk of the finance come from?

 

SOURCE	FREQUENCY	REPONSE (%)
Within Nigeria	14	70
Outside Nigeria	6	30
Total	20	100

 

In response to the question above, 70% of the firms asserted that they get majority of their finance within Nigeria, while 30% get theirs from abroad. This shows that apart from their initial capital investment in the country, the multinational manage their investment profitably and as well source finance locally through various means which give them their needed finance.

 

TABLE 4.1.3 shows the nature of the source of Finance.

• i Retained profits
• ii Supplier’s credit
• iii Loans
• iv Owners of the company abroad

S/NO	SOURCES	FREQUENCY	% RESPONSE
1	i only	0	0
2	ii only	0	0
3	iii only	0	0
4	iv only	2	10
5	i and iv	2	10
6	i and v	2	10
7	i, ii, iii and iv	13	65
	TOTAL	20	100

 

Table 4.1.3 shows that 65% of the MNCs rely on retained profits, loans, suppliers credit and fund, from the owners abroad for finance.

Where such loans and suppliers credit come from a broach they normally come at a high cost which inevitably increase the firms cost of production and then passed on the consumers.

TABLEM 4.2

CAPITAL EMPLOYED

 

CATEGORY	RESPONSE	PERCENTAGE
Below 1 million	–	–
Below 10 million	6	20
10 million to 50 million	10	33
Above 50 million	14	47
TOTAL	30	100

The summary above depends on the type of business the companies engage in .A. follow – up to this question sought to establish the nature of these businesses and they include production, Mining and quarrying, distribution (trading and services, processing intermediate products and management consultancy. The response to this question shows that some of the companies engage in more than one type of business.

TABLE 4.3

NATURE OF BUSINESS

S/NO	NATURE OF BUSINESS	FREQUENCY	PERCENTAGE
1	Production	20	26
2	Distribution	22	28.5
3	Processing intermediate product	15	19.5
4	Management consultancy	12	15.5
5	Other	8	10.5
	TOTAL	77	100.00

 

From the above table, we observe that 20 companies were engaged in production activities, which include mineral exploration and agriculture, 22 companies engage in distribution (large wholesale and retail outlets) scattered all over the country. Most of them distribute the final products of parent companies or other sub – sidiaries abroad. It was also observed that the businesses they engage on are not mutually exclusive, i.e. most organizations engage in more than one area.

 

 

TABLE 4.4

WHAT TYPE OF TECHNOLOGY DO YOU UES?

TYPE	FREQUENCY	% RESPONSE
FOREIGN	25	83
INDIGENOUS	5	17
TOTAL	30	100

 

83% of the firms accepted that they rely on foreign technology while 17 use indigenous technology. The signifies large transfer of foreign technology. Apart from the negative balance of payment implications, this also aid in reducing our level of technological development, because research into local technology is not given adequate attentions.

In the case of raw materials, 70% of the firms where the questionnaire were served, rely of foreign sources of raw materials, while 30% get theirs within the country. This situation leaves a lot more to be desired. The inflow of multinational companies into our country ought to induce the increasing exploration of abundant natural resources within the country and reduce dependence on imported raw material, but the reverse is the case in our own situation. The expected positive effect on the Nation’s balance of payment in the long run is almost farfetched.

TABLE 4.5

STAFF STRENGHT OF THE FIRMS

S/NO	STAFF STRENGHT	FREQUENCY	% RESPONSE
1	Below 2000	8	25
2	Between2000 & 4000	10	35
3	Above 4000	12	40
	TOTAL	30	100

 

These firms from the above response create employment opportunities for the citizens and an increase in their activities is expected to have a positive effect on the Nations unemployment situation.

 

 

TABLE 4.6

WHAT PERCENTAGE OF YOUR STAFF ARE NIGERIANS

S/NO	STAFF STRENGTH	FREQUENCY	% RESPONSE
1	Below 10%	0	0
2	Between 10 and 50%	3	10
3	Between 50 and 60%	7	23
4	Between 60% and 80%	10	33
5	90% and above	10	33
	TOTAL	30	100

 

 

TABLE 4.7

DO YOU SEND YOUR NIGERIAN STAFF FOR TRAINING ABROAD

S/NO	OPTION	FREQUENCY	% RESPONSE
1	YES	27	90
2	NO	3	10
	TOTAL	30	100

 

90% of the firms operating in Niger send their Nigerian employees abroad for training and in some other case, they arrange training programmes locally with foreign resources persons in order to reduce the high cost of overseas training

 

4.10   TESTING THE HYPOTHESIS USING THE 2 – TEST (NULL

HYPOTHESIS TESTING)

Ho:    There is a positive and significant contribution from the multinational companies to the economic development of Nigeria.

Ho:    The MNCs do not contribute to the economic development of Nigeria.

 

Level of significane is 0.05

Decision Rule: Accept Ho if 2 calculated is negative and less than 0.05.

The formular is given as:-

2 = X – np

np(1-p)

 

where X = (Contribution of the MNCs to the Nations Economy)

 

n        =       Sample size

p       =       Proportion of the sample size = x/n

(X      =       20, n = 30, p=20/30 = 0.667)

30 (0.667) (1 – 0.667)

z        =       20 – 30 (0.677

 

 

(20.01) (0.33)

=   20 – 20 . 01

 

 

= – 0 .01              – 0.01

• = 2.58

 

• = – 0 .038

 

 

 

 

 

Region

 

 

+1.96

-0.038 Ho

– 1.96

 

 

Therefore we accept the hypothesis that there is a positive and significant contribution from the multinational companies to the economic development of Nigeria.

Similarly the attached tables sought to establish the impact of the contributions of Texaco Nig. Plc. To the total multinational companies presence in Nigeria between 1985 to 1994. it shows that with a multiple regression of 0.6243391, R2 of 0.392418793 and adjusted R² of 0.316471142, Texaco Nig Plc. Is indeed a major player in the nations economy.

 

• SUMMARY

In this chapter, the analysis of data collected was done in two parts.

Part one involved data analysis using tables of frequency and percentages. The second part was the use of hypothesis testing to establish the relationship between the varables under consideration.

 

Both methods confirmed that though there are some side effects, multinational companies do make significant and positive contributions to the development of Nigeria’s economy and should therefore be encouraged under the watchful eyes of our regulatory agencies.

 

 

CHAPTER FIVE

SUMMARYOF FINDINGS, RECOMMEDATIONS AND CONCLUSION

• FINDINGS
  • MNCS CONTRIBUTION TO THE ECONOMY

Through the operations of the companies studied like the Texaco Nig.

PLC, UAC? PLC, liver Brothers Nigeria Plc, etc, it was established that the MNCS contributions to the Nation’s economy is significant and positive, in terms of Government revenue through taxation, employment generation, community development services, transfer of technology, import of capital, training of staff, etc.

 

• BALANCE OF PAYMENT PROBLEMS

It was found out that the MNCS contribute negatively towards our

balance of payment problems through their insistence and excessive import of spare parts and raw materials in order to assist their home countries economies.

 

• SOCLO – CULTURAL INFLUENCES

It was also discovered that the MNCs through their products and

advertisement Have developed a significant shift in our socio – cultural ways of doing things in favour of the western style. Their influences on our mode of dressing speech, though pattern, education, jobs, eating leisure, recreation, etc are indeed quite enormous. Many of our people now see their kits and kin who still hang on to our traditional ways of life as primitive and uncivilized.

5.1.4  POLITICAL INTERFERENCE

This study revealed that some MNCs do interfer in the internal of their involvement is largely unknown due to the usual secret nature of such involvement. All such activities largely end up as rumour or hear – say except in few cases where public officials or other interested bodies muster the courage to go to court with such cases.

• THE FUTURE OF MULTINATIONAL COMPANIES IN NIGERIA

PROBLEMS.

It was also discovered with dismay that the Nigerian investment climate is seriously unattractive. The following reasons are responsible for this:-

1. With seven military coups after independence and our current fragile romance with democracy, the political history of the nation appear rather insecure for over – seas capital.
2. Secondly, the unnecessary, stringent regulations and approval procedures affecting foreign investors appear frustrating as the usual complains from most of them centre on the discrepancy between formal rules and informal ones, between the actual content of the law and the multiplicity of administrative regulations to be observed.
3. The inadequate and irregular supply of necessary infrastructures like water, light, fuel and communication net works impose untold hardships on the effective operation of foreign enterprises.
4. PROSPECTS: DEMOCRATIC GOVERNMENT
   1. With the successful conclusion of all elections in the current democratization process, one major obstade to private foreign investment inflow is now removed. This has raised the prospect for more foreign investment inflow into the country, provided that our new democratic government becomes more stable, with attractive incentives to foreign investors in a condusive economic environment.
   2. Nigerian investment promotion commission decree 16 and the foreign

Exchange Decree 17, all of 1995.

Due to the ineffectiveness of the industrial development coordinating

committee (IDCC), the Federal Government promulgated the above decrees

in 1995 in order to make our country more attractive to foreign investors.

 

1. THE NIGERIAN INVESTMENT PROMOTING Commission is empower by the enabling decree to:-

1. Initiate and foster measures to enhance the nations investment climate to all investors.
2. The promotion of investment within and outside Nigeria.
3. The collection and dissemination of information concerning investment opportunities and sources of investment capital, as well as advising on availability, choice or suitability of partners in joint – ventures.
4. The registration and keeping of all records to which this Decree applies;
5. The identification of specific projects and inviting of interested investors for participation.
6. The initiation, organization and participation in promotional activities such as exhibition conferences and seminars for the stimulation of investments.
7. The maintenance of liaison activities between investors and ministries, government departments and agencies, institutional leaders and other authorities concerned with investments.
8. The provision and dissemination of up – to – date information on incentives available to investors.
9. The assistance of incoming and existing investors by provision of support services;
10. The evaluation of impact of the commission on investment in Nigeria and recommendation on appropriate of strategies;
11. The provision of advise to the Federal Government on policy matters, including Fiscal measures designed to promote the industrialization of Nigeria or the general development of the economy.

 

1. b) Similarly, the foreign Exchange (monitoring and miscellaneous provision) Decree 17 of 1995 authorises any person (including non – Nigeria) to deal in, invest in, acquire or dispose of, create or transfer any interest in securities and other money market instruments whether denominated in foreign currencies in Nigeria or not. This imply that any person may invest in securities traded on the Nigerian capital market or by private placement in Nigeria. With the coming into effect of the FEMMP Decree, the Exchange control (Anti – sabotage) Decree No.7of 19 84 is Null and void.

The combined implication of both MIPC and FEMMP Decree is to remove whatever bottlenecks disturbing the massive inflow of multinational companies into Nigeria by making investment climate very condusive like in the south EAST Asian countries it is however regrettable that four years after the decree, the commission is yet to commence work.

It is also hoped that developments in the economy would not have over – taken the visions of the funding fathers of that decree.

• RECOMMENDATION
  • EXPORT – ORIENTED INDUSTRIES

In order to mitigate the harmful effect of the MNCs activities on our

Balance of payment problems, the coordinating agencies should encourage export-oriented multi – national companies. Their export products will fetch foreign exchange and taxes thereby increasing government revenue, as well as create more positive impact on our Balance of payment situation.

• IDLE RESOURCES

Another important area where the MNCs can assist in developing our

economy is in the area of exploiting idle resources for investment and profit. The regulating Agencies in conjunction with the Raw materials Research and development council and the NNPC should make available area where foreign investors may be approached in order to carryout further study on them with a view to developing such idle resources further.

• MANAGEMENT OF FOREIGN CAPITAL INFLOW

While establishing the fact that the MNCs did contribute positively to the Nations economy, it was noted that these contributions did not come without some side effects. Some of these side effects could be reduced through improved regulation and monitoring. Eg where as Asbestors – cement products stand banned in countries like USA and France, their is no reason why they should still operate here in Nigeria.

The conditions for investment in Nigeria by foreigners should be simple, clear and steady.

The regulatory authorities should be alive to their responsibilities should be alive to their responsibilities at all time as much as fairness and prudence dicates. It is widely believed that if the capital and efforts of foreign investors are properly managed, they will make more positive impact on our economy.

 

• IMPROVED IN CENTIVES TO FOREIGN INVESTORS

1. FISCAL INCENTIVES:

The overall objectives of fiscal incentives is to reduce the incident of host country’s raxation policy on the MNCs. Fiscal incentives affect after tax profitability, the flow of funds, the cost of capital relative to labour, land and energy inputs in the foreign investment activities, Tax incentives affect both the average and the marginal tax rate applicable to foreign investments. Usually the impact are felt more differently on new NNCs compared to investments financed by unremitted profit of already existing fir ms. The under – listed fiscal incentives are recommended.

 

1. VALUE ADDED – BASED

The recommendation here is the corporate income – tax reductions or credits based on the value of sales less depreciation of capital equipment and the value of imported raw materials and supplies, and granting income tax credit based on the value of sales less the cost of raw materials and components, supplies and utilities and depreciation of capital equipment.

 

• FIANACCAL INCENTIVES

1. GOVERNMENT GRANT: A variety of measures which may come in the form of subsidies to cover part of capital cost or marketing cost in relation to an investment project or to defray some inevitable costs.
2. GOVERNMENT CREDIT AT SUBSIDIZED RATES: Government may approve subsidized loans, loan guarantees; as well as guaranteed export credits.
3. GOVERNMENT EQUITY PARTICIPATION: This may be done through publicly funded venture capital, participating in investments involving high commercial risks, etc.
4. GOVERNMENT INSURANCE AT PREFERENTAL RATES: This should cover certain types of risk such as exchange rate volatility, currency devaluation or non – commercial risks such as expropriator and political turmoil.
5. SUBSIDIZED DEDICATED INFRASTRUCTURE: This include the (at less than commercial prices) of land, buildings, industrial plants, or specific infrastructure such as tele – communication, transportation, electricity and water supply.

• CONCLUSION

While encouraging direct private foreign investment efforts would also be made to promote portfolio investment in the country. Nigeria should take advantage of the proposed common wealth fund as soon as she is readmitted into the body to encourage portfolio investment into the country. The benefits are numerous.

There is no doubt that the current economic policies if carefully and honestly implemented are attractive to roaming foreign investors and it is hoped that they would not hestitate to make advantage of them to settle down in our country to do profitable business.

It is considered pertinent here to enumerate the role which the three parties to the foreign investment arrangement are expected to play to ensure a sustained flow of multinational companies into developing countries including Nigeria.

1. HOST COUNTRIES

1. Provision of an investment climate that are able to guarantee rewards to investors who committed their resources.
2. Expansion of their multilateral, regional and bilateral agreements to give adequate cover from undue vulnerability of overseas capital in their economic
3. And the establishments of promotion/regulatory agencies that will be potent enough to attract appropriate investment as well as supervising them thoroughly.
4. MULTILATERAL INSITUTIONS

International corporations such as the World Bank Group, the international monetary fund (IMT) and other United Nations organization (UNO) organs

1. Assist the LDCs at designing effective policies to attract and manage multinational companies move than what they are doing presently.
2. Assist in enhancing the credibility of the LDCs to foreign investors who are now frightened due to the 1970’s confrontation (Nationalization saga) as well as the debt crisis of the 1980s
3. Rreappraise the operations of international donour Agencies and investment corporation in line with the realities facing the LDCs and the investing community globally as we are in another millennium.

 

• MULTINATIONAL CORPORATIONS (MNCS)

Should ensure that.:

1. Their corporate strategy should accommodate countries without special local advantages; in order to assist such countries enjoy the benefits of economic globalization.
2. Show more interest in the economic development of their host countries through local sourcing of raw materials, intermediate inputs and spare parts, etc as well as community development efforts
3. Work in close liaison with multilateral agencies with a view to balancing the flow of investment capital to LDC around the continents of the world.
4. And continue to subject themselves to international, law the domestic laws of their host countries and the terms of agreement signed or amended which regulates the conduct of their businesses abroad.

 

Finally, multinational companies many come into Nigeria to establish the same type of plant which they operate in the source country, especially when the Nigeria market is judged to be viable for the product of such plant. The reason to invest in Nigeria should be vertical, backward or forward integration, i.e. to establish raw material production units in the case of backward integration or distribution and sales out lets in  the case of forward integration.

The more beneficial to our economy is the backward integration types and should be encouraged, together will exportorientyed products or investment areas with high risk or uncertainty or that require huge capital for which local investors are afraid to venture into. Thus the point need to be re-emphasised that the greatest advantage of foreign investment is the mobilization of local and foreign capital which may not be used productively through joint ventures.

Despite identified problems with the MNCs, like putting the economy virtually in foreign hands, out – competing local infant industries, socio – political influence, etc, the MNCS assist in employment generation, increased government revenue through taxes, transfer of technology, training of local entrepreneurs likes contractors, artisans, traders, etc who depend on the patronage of these giant companies to survive and grow.

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Sodersten B.O. (1977)

International Economics, University of Gothenburg, Macmillian Press Ltd).

 

Texaco Nig. Plc.

Information Bulletin (various issues)

 

Udobah S.I (1999)

“Economic Development and Planning; Policies and Problems” of Nigeria.

 

UNCTAD (1994)

World investment, Trade & Development Report (UNO – Geneva)

 

World Bank (1983).

The Nigeria – Industrial incentive

 

System: A Review and Analysis

Report No.4272 Lagos Nigeria.

QUESTIONNIARE

Dear respondents,

The attached questionnaire has been designed to elicit responses to some questions concerning the contributions of multinational corporations on the Nations economy.

This is in partial fluffiest of the requirements for the award of higher National Diploma (HND) in the department of Business Administration & management, institute of management and technology (IMT) Enugu.

Kindly respond to the questions asked sincerely and objectively. Your responses will be treated in strict confidence and used purely for academic purpose.

Thanks for your anticipated co –operation.

Yours Faithfully

Ugwueche Rosemary Ify.

PART A.

Instruction: Kindly furnish the necessary information required.

1. Name & Address of your company………………………………….. …………………………………………………………………………
2. types of Business (Please tick where applicable) Limited Liability company [ ] Partnership [ ] Private Proprietorship [ ]Joint Venture [ ]
3. Nature of Business Activities of Your company……………………… ………………………………………………………………………….
4. Position Held: …………………………………………………………
5. Sex: ……………………………………………………………………
6. Age group (please tick as appropriate) 20 – 24 [ ] 25 – 29 [ ] 30 – 34 [ ] 35 – 39 [ ] 40 and above [ ]
7. Company’s year of incorporation:…………………………..………… …………………………………………………………………………

PART B.

Instruction: (Please tick the appropiate answer for each question)

8. Where does the bulk of your finances come from ? within Nigeria [ ] out side Nigeria [ ]
9. Irrespective of No.8 what is nthe nature of the source (s) of Finance
10. Loans (ii) Supplies credit (iii) Owners of the company.
11. & ii, & iii [ ]
12. Level of capital employed

below N 1,000,00 [ ] Below N10,000,00  [ ] Between N10 – N50 million [ ] Above N50m

11. Category of Business.

Production [ ]  Processing intermediate products [ ] Distribution [ ] Management consultancy [ ] others [ ]

12. What type of technology use? Foreign [ ] Indigenous [ ] Both foreign & Indigenous [ ]
13. If foreign, are there technical partners or just imports. Technical partners [ ] imports [ ]
14. How and from where are your source for raw materials.          Primary raw mcaterials out side Nigeria [ ] intermediate raw materials out side Nigeria [ ]
15. What is your staff strength ?                                        Below 2,000 [ ] Between 2,000 & 4,000 [ ] Above 4,000[ ]
16. What is the type of labour used most in your company professionals % [ ] skilled labour % [   ] Labourers % [    ]
17. What percentage of your staff are Nigerians Below 10% ( ) Between 10% and 50% ( ) Between 50% and ^0% ( ) Between 60 and 80% ( ) 90%.
18. Do you send your Nigerian staff for training abroad ? Yes [ ] No [ ]
19. If yes, what is the type of training? Administrative [ ]  Technical [  ]  Both Administrative and Technical [  ]
20. Do you produce for export? Yes [   ] No  [     ]

SECTIONS C

21. Do your company pay income tax, Vat and import duties?

Yes [   ] No  [     ]

22. How often do your company make returns on their activities?

Monthly [ ] Quarterly [ ] Semi annually [ ]

Annually [ ] Any other period  (Please specify ) [ ]

23. Do your company carry out any or all of the under listed social responsibilities?
    1. Provision of infrastructure and social amenities
    2. Environmental protection and scholarship awards. only [ ] ii. Only [   ]  i. & ii [  ] non [  ]
    3. Do the existing regulations ensure that a larger portion of the profit earned in the country is ploughed back for development purpose? Yes [   ] No  [     ]
24. If your answer to question N0.25 above is yes please explain …… ………………………………………………………………………
25. Which of the following polices encourage foreign capital inflow more ? a) Tax concession [ ] b) Custom Duty draw back  [  ]  c) Provision of non – voting shares [ ]
26. In your opinion, how beneficial or otherwise is the operation of multinational companies to our country. :…………………………. ……………………………………………………………………
27. Do you think the fututre of multinational companies in Nigeria in bright or bleak? :……………………………………………………. ………………………………………………………………………
28. Give reasons for your answer to N0 28 above: :…………………… ………………………………………………………………………
29. Are you aware that some MNCS involve themselves in political issues in Nigeria? Very Aware [  ]  Aware  [   ] Not aware   [   ]  Not interested.
30. Do the MNCS influence our culture in any significant way? Yes [  ]   No  [  ]
31. Do the presence of the MNCs cause as more harm than good socially? More harm [    ]  more good  [  ]   Not aware   [   ]