Globalization and the Problems of Socio-economic Development in Nigeria
- What relationship exist between globalization and socio-economic development in Nigeria.
- Does increase in FDI lead to socio-economic development.
Over the past decade, globalization has been a pervasive trend in almost all economies. The world economy, according to Seunghee et al (1998), is becoming increasingly interdependent, deepening and intensifying international linkages, most notably in trade. Lawrence (1996) stressed that about 90 per cent of world nations are involved in regional economic arrangement, such as the European Union (EU), the North American Free Trade Agreement (NAFTA) and the Asia–Pacific Economic Corporation (APEC). The integration of individual economies into the world economy, according to Machlup (1976) and Seunghee (1998), has progressed, forming new links between developed and developing economies. Globalization in developing countries has occurred largely as a consequence of moves towards external liberalization, part of broader shift to more market oriented and export–led development strategies often in line with the stabilization and structural adjustment programmes of the IMF and World Bank (Motley, 2001). The ratio of world trade to GDP in nominal terms has been on a steady rise since 1987 in advance economies but this is not so in Nigeria. While there is improvement in the world trade during the globalization era, i.e. from the 1990s to the present day, the effect is yet to be felt in Nigeria.
Fu-chen Lo et al (2000) stressed that growing networks of flows in goods and services, capital, finance, people and information are increasingly linking nations through the activities performed in their major urban centres. They went further by saying that the logic of globalization driven has privileged some regions and cities over others. The developed world and some developing and newly industrialized economies (NIEs), according to them, have benefited the advanced economy while many developing countries have been marginalized. Yeung and Lo (1996) emphasized the important elements in the evolution of the global system as the expansion of trade, capital flow, (particularly direct investments) and a wave of new technologies. Akinbobola (2001) stressed that globalization of the Nigerian economy may foster a re-orientation of the domestic economy and re- direct the course of industrialization and technology development. According to Obaseki (1999), globalization has both positive and negative effects, the positive effects or benefits are numerous but the most important ones include: increase specialization and efficiency, better quality products at reduced prices, economies of scale in production, competitiveness and improvement and Increase managerial capabilities. He states further that although globalization has both positive and negative aspects, there is no doubt that it has improved global welfare. Globalization, according to him, penalizes countries that adopt the wrong macroeconomic and sectorial policies while enhancing the growth potentials of those that apply sound policies. As a result, countries must strive to adopt policies that are in consonance with the current reality of the rapid integration of the world economies. Differences in macroeconomic, sectorial and structural policies have accounted for the varying degrees of benefits accruing to countries in the context of the rapid integration of goods, services and financial markets, and information systems across the globe.
Dicken (1992) in his own argument about the importance of globalization pointed out that, while the growth of trade and financial flows is linking the nations of the world, one of the dominating forces of the global integration is the rapid increase in inflows of foreign direct investment (FDI). According to him, the major channel of FDI is the transnational Corporation (TNC). He also noted that “technology is without doubt, one of the most important contributory factors underlying the internationalization and globalization of economic activity. Lo (1994), stressed that the world economy is facilitated by new information technologies, in which ideas, capital and people move rapidly and in large numbers. According to him, the new waves of technologies have created new growth markets in both developed and developing countries as out-dated products and production processes decline in demand. Information technologies play a key role in increasing global integration and speeding economic transactions. Innovations and advances in information and transportation are but a few of the new wave of technologies that are enabling truly large-scale revolutionary change. Together, according to Lo (1994), they have helped to bring about a new “techno-economic paradigm” based on knowledge of intensive production. The benefits of globalization, no doubt, tend towards richer nations than poorer nations. The development in the Internet and related telecommunication technologies will make markets more transparent and continues to drive globalization process as they drive prices for long distance transactions down.
Considering the previous empirical studies on the topic it is very obvious that divers approaches have been used in the past to demonstarate the impact of globalisation on a country’s economic growth. For instance, Rodrik 1999, Huymen and Hilderink(2005) were of the opinin that foreign direct investment and trade openness are the most siginifcant variables to capture globalisation. However, (Šliburytė and Masteikienė, 2010) were of the opinion that, policy variables and nature of government institution should also be included as variables of globalisation. On this note our model uses these two forms of variables to proxy globalisation. In addition, the model also included some control variables such as per capita income, capital formation and oil revenue as part of the independent variables. The model is thus specified as follows:
gdpgr = ʄ ʄdi, top, Ø, ß………………………………………………….3.1
That is gdpgr = ɑ0 + ɑ1 + ʄdi + ɑ2top +ɑ3 Ø+ ɑ4 ß + Ḗ1
gdpgr= GDP growth rate (proxy for socio-economic development) fdi= foreign direct investment
top= trade openness
∅ = represents the policy variables that comprise of both fiscal monetary policy variables Β= represents the control variables used, they are selected macroeconomic variables.
Source of Data
The research study makes use of secondary data. The data used are obtained from CBN Annual Report and Statement of Account, the Central Bank of Nigeria statistical bulletin and the data spreading from 1980 – 2011. Again some of the data will also be gathered from the world bank data tables.
RESULT PRESENTATION AND DISCUSSION
This section of the study involves the presentation and interpretation of the empirical result. It starts with the verification of the time series properties of the variables used in the model. That is the unit root test. This is also known as the test of stationarity. Unit Root Test.
CONCLUSIONS AND RECOMMENDATIONS
Conclusion And Recommendations
The study has shown that advantages accruing from globalisation to countries in the world largely depend on the level of socio-economic development of the countries. For instance this research work has shown that trade openness and FDI which are components of globalisation do not exhibit any significant impact on the socio-economic development of Nigeria during the period under review. However , when the result is compared with findings of some authors in the past it was discovered that those studies that used developed economies as their case study found a positive and significant relationship between these globalisation variables that is trade openness and FDI and the socio-economic development of the developed countries under review.
Another conclusion that can be drawn from the findings of this study is that it appears that it is the level of development of Nigeria that will indicate the volume of foreign direct investment that will flow into the country. The same goes for trade openness. The study indicates that the level of development of Nigeria as a country will dictate the level of outward orientation of Nigeria as a country.
A general conclusion that can be made from the study is that Nigeria as a country has not benefited adequately from the gains of globalisation. Further research shows that the reason behind this might not be unconnected with domestic political and economic instabilities that characterised Nigeria economy as a developing country. It also appears that trading partner of Nigeria are gaining more at the expense of the country going by the fact that trade openness is not having any significant impact on the development of the Nigeria..
Considering the findings form the research work the following recommendations are made:
Improvement in the foreign direct investment: The study has shown that net inflow of FDI into the country is grossly inadequate to bring about any meaningful or significant impact of the development of Nigeria. Consequently, effort should be made by Nigerian government to increase the inflow of FDI into the country.
Fractioning out appropriate level of trade openness: There is the need for improvement in trsde relationship between Nigeria and ither countries. Adequate measures should be taken to moderate trade relationship in Nigeria so that Nigeria can be benefiting more from any trade relationship with other countries. This may require trade restrictions in some aspects of production so as to encoursge the domestic industries and promote the real sector of the economy generally.
Using appropriate policy mix that will increase gains from globalisation: Both monetary and fiscal policies variables used in the study fails to have any significant impact on the Nigerian socio-economic development. Therefore, there is the need for appropriate policy measures that will have good synergy with globalisation. This might lead to improvement in gains derived from globalisation by Nigeria.
Development of the real sector of the economy: Improvement of the domestic output is sine-quanon to economic growth. On this note, effort should be made to increase local production. This can be done by putting in place various physical, monetary and fiscal measures that will boost domestic output especially in the real sector of Nigeria economy. This will no doubt promote gains from globalisation in Nigeria.
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