The Effect Of Multinational Corporation On The Nigeria Economy

Project and Seminar Material for Accountancy / Accounting

Project and Seminar Material for Accountancy / Accounting

Chapter One


1.1 Background To The Study

Based in part on the development of modern communications and transportation technologies, the rise of multinational corporation was totally unanticipated by the classical theory of international trade as first developed by Adam Smith and David Ricardo. According to this theory which rests on the doctrine of comparative advantage each nation should specialize in the production and export of those goods that it can produce with highest relative efficiently while importing those good that other nations can produce relatively more efficiently (Gilpin, 2011).

Underlying this theory is the assumption that white good and services can move internationally factors of production such as capital labour and hand are relatively imniobile furthermore the theory deals only with trade in commodities; it ignores the role of uncertainty economies of scale and technology in international trade and is static rather than dynamic.

Contrary to the postulates of smith and Ricardo, the very existence of multinational corporation is based on international mobility of certain factors of production. Capital raised in London on the Eurodollar market may be used by on wise based pharmaceutical firm to finance the acquisition of equipment by a subsidiary in Brazil (Goerzen, A. & Makino, 2007). It is the globally world innate allocation of resources by a single centralized management that differentiate the multinational enterprise from other firms engaged in international business. Decision regarding market entry strategy, ownership of foreign operations and production marketing, and financial activities and made with an eye to what is best for the corporation as a whole (Onimode, 1982). The true multinational corporation can be characterized by its emphasis on group performance rather than of its individual components.

At the center of the debate on globalization one the multinational corporations giant actors who think and act globule. Their exetence is often associated with the phenomenon of globalization itself. These actors have gained power visibility and influence at all levels, and one determinant to the setting and implementation of the “ global agenda”. MNCS have created a massive wealth and propelled high technological development. However, their global role their increased economic and political power especially felt in developing countries of which Nigeria is among ) their strong influence in shopping international rules and their lack of transparency and democratic control has put them under severe scrutiny (Ozoigbo & Chukuezi, 2011).

Infact the mention of multinational corporation usually elicits mixed reactions. On the one hard, MNCS are associated with exploitation and ruthlessness. They are criticized for moving resources in and out of a country as they strive for profit without much regard for the country social welfare Varity Corp a Canadian multinational firm. Was criticized for its action in 1991 to relocate its headquarter from Toronto to the united states (Buffalo) in order to take advantage of U.S Canadian Free Trade agreement. “For a long time India referred MNCs as agents of neocolonialism (Robinson, 1979).

On the other hand MNCs have power and prestige additionally they create social benefit by facilitating economic balance. As explained by Miller “with resources capital, food and technology unevenly distributed around the plannet and all in short supply, an efficient instrument of quick and effective production and distribution of a complex of goods and services is first essential (Stopford, 1998).

According with the UNCTAD (United Nations conference on trade and development) more than two thirds of the world trade involve at least one multinational half of which occurs within the same multinational around the world. The worlds 44,508 MNCs manage some 280,000 affiliates all over the world.

With regards to Nigeria economy there some 3,000 of them having their foreign direct investment either in manufacturing or service industries. Their emergency with regard to Nigeria economy dated back to the history and activities of the Royal Niger company. Of which today in Nigeria they have increased much more in number (Tatum, 2010). These multinational corporations while Nigeria in a way opportunity of genning what they did not have from foreign country, but the issue is that did they create opportunity with some part of the produce of Nigeria industry employed in a way in which Nigeria have greater advantage (Wiig & Kolstad, 2010).

1.2 Statement Of The Problem

Most of the multinational corporations operate by seeking and securing the opportunity for environment that has least cost of production of goods for world markets. This goal may be achieved through acquiring the most efficient locations for production facilities or obtaining taxation concession from host governments. This has been looked upon by many has counterproductive to the host country. Though multinational corporations have contributed in terms of job creation but many of the employees of most Multinational Corporation are poor remunerated. However, the researcher is evaluating the role of multinational corporations towards economic growth of Nigeria.

1.3 Objectives Of The Study

The following are the objectives of this study:

  1. To examine the role of multinational corporations towards economic growth of Nigeria.
  2. To identify the factors determining the growth and success of multinational corporation in Nigeria.
  3. To examine the demerits of multinational corporation to their host country.

1.4 Research Questions

  1. What is the role of multinational corporations towards economic growth of Nigeria?
  2. What are the factors determining the growth and success of multinational corporation in Nigeria?
  3. What are the demerits of Multinational Corporations to their host country?

1.5 Hypothesis

  • HO: Multinational Corporations have not contributed to economic growth in Nigeria.
  • HA: Multinational Corporations have contributed to economic growth in Nigeria.

1.6 Significance Of The Study

The following are the significance of this study:

  1. The outcome of this study will be useful to government of Nigeria and the general public on the role of multinational corporation in the economic growth in Nigeria.
  2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7 Scope/Limitations Of The Study

This study on the effect of multinational corporations on the Nigeria economy will cover how the multinational corporation has affected the economy of Nigeria.

Limitation Of Study
1. Financial constraint

Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

2. Time constraint

The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8 Definition Of Terms

1. Multinational corporation:

A multinational corporation may be defined as a company or group of companies with subsidiaries in more them one country. They owns (in whole or in part) control and mange income generating asset in than one country.

2. Global corporation:

A group of people having authority to operate as a single unit with separate legal existence affecting the whole world.

3. Corporate planning:

This is the establishment of objectives and formulation evaluation and section of polices, strategies, tactics and action requirement to achieve an objectives.

4. Globalization:

As a phenomenon is the most evident in the convergence in trade, finance and information flows across national boundaries.

5. Indigenous skilled man power:

This refers to the number of people working or available for work who are skillful and belong to a place naturally.

6. Neocolonialism:

This means control by powerful countries of former colonies or less developed countries by economic pressure.

7. Acquisition:

Has been defined as a series of transition whereby a person (individual group of individuals or company) acquire control over the assets of a company either directly by becoming the owner of those assets or indirectly by obtaining control of the management of the company.

8. Subsidiary:

It simply means a company whose another company acquired more than 50% of that company shares.

The Effect Of Multinational Corporation On The Nigeria Economy

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