ABSTRACT
This research analyses communication FDI and its effect on the development of
Nigerian telecommunication industry. The 1999 deregulation introduced the presence of
‘umbrella people’ in almost every corner of the streets, express-roads, pathways in many suburbs and towns across Nigeria. Today, Nigerian economy is one of the targeted countries by multinational telecommunication industries due to its ready market, population size, and growing economy. This research is an ‘ex-pesto’ because it is an evaluation research on FDI and communication sector, but the focus is on the telecommunication subsector.
The hypotheses were to analyse the significant benefit from Nigerian labour market to the international GSM operators. Also, the relationship between Nigerian increased paid-up capital and the multinational GSM operations, and the effect of the mobile penetration and the growth of the teledensity in the host communities.
The study is confined to the MTN Nigeria and Zain Nigeria, the two major GSM mobile operators in Enugu state. Most of the population in Enugu urban is subscribers to these.
The instrumentation used is structured questionnaire constructed into fixed alternative questions with inter-rater scale and personal interview. The secondary data is the recorded data in the CBN annual statistical bulletin 2005, FOS report 2005, and retrieved data from selected websites, journals, and textbooks. A probability sampling with random technique is used. This employed a stratified random sampling. The sample size is 108 units. The validated instrument, which is the fact-finding package, was distributed and collected from the selected respondents on the two different periods based on cross-sectional method. The test retest is used to measure the variables stated in both the statement of research problem, research questions and the hypotheses. The statistical tools used are chi-square(X2), Pearson’s contingency coefficient, and Yates’ correction formula.
From the field surveying, HO was rejected in the three hypotheses tested. The significance shown that X2–value calculated are greater than X2-value critical except in seven items of the questionnaires. For instance in the analysis, 37% of the respondents believed that whether
Nigerians are gaining or not, these international GSM investors are benefiting more in terms of capital flight, tax waivers, labour concession, etc
In concluding, the recommendation is that the foreign contact should be encouraged in the development of telecommunication in less developed countries like Nigeria but, there will be the need to check on the capital flight, and the standard of their services should be of international quality.
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF STUDY
“Statelessness does provide certain environmental advantages. Among the benefits are the ability to avoid trade and political problems, to sidestep regulation hurdles, to achieve labour concessions, to balance costs, and to win technology break through,” (Czinkota et al 2000: 392).
This statement enunciates the reasons why multinational corporations are usually better companies than their local rivals in most of the developing countries. The assumption emphasizes that these world corporations are building insider capabilities no matter their area of operation and either their factories or laboratories are moved around the world.
In the Nigerian economic sector, the highest recent growth in foreign direct investment (FDI) has been in services. The influx of
international investment in telecommunications has received high and favorable attention because of the monopoly and inefficiency of NITEL for decades. Stimulation has been given to this cross–border activity due to its connections to innovation diffusion and the mobility of foreign equity capital pumped into the Nigerian economy. FDI leads to sustainability in any developing economy. It is an amalgamation of capital, technology, marketing and management. As Ugbaka (2007:63) writes, “It is elementary economics that the wheels of every economy are oiled not only by FDI but, also, by the creation of jobs, which has direct impact on national development, wealth creation, and national security.” It is assumed that stronger FDI and official development assistance (ODA) inflows and a reduction in the stock of public debts are among the factors that drive growth in any review period in Nigeria (Abdul Mutallab 2006: 18; Yakubu 2007, Todaro and Smith 2003: 635, Adesida 2001: 2).
Conversely, the pre-liberalization era of telecommunication in Nigeria encountered a terrible heart attack. The industry had symptoms of high level of corruption, epileptic service provision, and high cost of acquisition, paralytic infrastructural maintenance, poor availability of telephone lines etc.
The complete deregulation in 1999 of the Nigerian mobile phone market opened up for other cellular operators a lifeline, thereby increasing competition and driving down prices. Already, by April 2007, it estimated that 38m mobile phones have served Nigerians.
The Advanced telecommunication in the telephone and internet services recognize to have led to economic success especially by strengthening real sector and personal advancement, since sustainable human development cannot occur in a vacuum (Anotonelli 1999: 25; Nwosu, Nwodu and Fab–ukozor 2007; NEEDS document 2005: 72).
Although FDI in telecommunication industry ought to be accepted, the lapses in the quality of services provided by these GSM operators in Nigeria should not be neglected. There have been complaints from consumers on the gradual decay of their services. The cause of these lapses is traceable to the government incapability to breed positive influence into the system.
This prompted into carrying out this project. The research project when concluded, will provide a framework on the levels of association between the FDI and the growth of the telecommunication industry in Nigeria
1.2 STATEMENT OF RESEARCH PROBLEM
Before proceeding further, there is need to state what constitutes the research problem on this study.
Several researchers have done work on the macroeconomics related to this topic. Such researchers are Linda Y. C Lim and Pang Eng Fong, 1991; Antonelli C 1991; Agba A. V, 2002; Aremu J.A 2005; Ndukwe E, 2006; Bhattacharya, Montiel and Sharma 2005, Calderon and Serven 2004, Kirsten M (ed) 2003: 91 – 168.
These authors work will be reviewed as the empirical related literature. However, this research is pinpointing on how international investment in Nigeria can help at the microeconomic level to achieve economies of scale that has not been achieved in domestic market.
Just as Adam Smith stressed on self–interest, once there is growth in each subsector of the economy, it will have effect on the growth in the aggregate economy.
One of the major variables to be studied is on the assumption that multinational corporation employ cultural management techniques to suit the locality.
The nature of this prediction is that there will be need for these multinational corporations in Nigeria to employ more of indigenes than bring in foreign expertise into the host economy.
Therefore, the research intends to find out how FDI has affected Employment of labour in Nigeria.
In addition, to define how the FDI tends to make a change through market expansion and increase in the federal capital reserve with the complaint of infrastructural deficiencies in Nigeria.
Another aspect is that there has been non-acceptability of their quality of services delivery especially in their inter–connectivity networking which has raised public hearing forum proposed by NCC and NASB on telecommunication activities.
Finally, the issue of who gains more than the other on the investment is yet to be clarified. Is the capital inflow into Nigeria more beneficial to Nigerians than the capital flight to the parental corporation or vice versa?
1.3 RESEARCH OBJECTIVES
The objectives are as follows:
1. To investigate the impact of multinational corporation on employment function in the telecommunication industry in Nigeria.
2. To examine the effect of capital inflow through Nigerian telecom industry into the GDP from the foreign direct investment
3. To assess the quality of available GSM services and other lifelines in march with the population density.
4. To explore the outcome of Communication FDI in developing communities through telecom services
1.4 RESEARCH QUESTIONS
The study proposes to provide empirical responses to the following research questions:
1. Who has gained more than the other in the foreign direct investment? Is it the host market or the parent enterprise outside the country?
2. What percentage index of the profit maximization gained by these multinational telecom corporations from Nigeria has been reinvested back into the economy?
3. What effect has the capital flight from the affiliated branch office of these international GSM operators to the parental enterprise on the Nigerian GDP?
4. To what extent has the improved telecommunication industry contributed on aggregate employment function in Nigerian labour market?
5. To what extent has the employment of Nigerians by these transnational telecom corporations affected the growth of their business trend?
6. What effect has the FDI expanded market into Nigerian telecommunication companies had on their global linkage?
7. To what extent does the consumption investment schedule of the telephony in Nigeria has to depend on foreign direct contacts?
8. To what rate has the revolution in the Nigerian telecommunication industry affected other sectors of the national economy in Nigeria?
9. How many of these multinational corporations with their manufacturing functions related to GSM operation has been attracted to invest into Nigerian manufacturing subsector?
10. To what extent has there been technology transfer from the transnational telecom corporation to the Nigeria domestic market?
11. How far has these international GSM operators gone with signing memorandum of understanding with communities to build good relation with the people?
12. How successful has the communication FDI assisted their subscribers by providing scholarships, skills development programmes etc to encourage their patronage?
1.5 RESEARCH HYPOTHESES
To come out with realistic results from the research questions asked, the following null hypotheses are formulated from the objectives stated above for statistical testing:
HO: Communication FDI has no significant benefit from the cheap labour provided by Nigerian labour market.
H0: There is no relationship between the increased paid-up capital with the Federal Reserve System in Nigeria and the Communication FDI
H0: There is less growth rate of teledensity in the Communities even with the mobile penetration
into Nigerian economy
1.6 SCOPE OF STUDY
The nature of the study demands for an analysis on the performance of foreign-owned telecommunication companies and their relationship to the economic growth and development.
This study is confined to the MTN Nigeria and ZAIN Nigeria that are the major GSM mobile operators in Enugu state; although the findings could be generalized to their other branches since, their management system is centralized no matter their branch area.
It is limited to confirm how they have influenced the economies in Enugu State.
Its scope limits those cellular or wireless phone networks that are not operating in Enugu or those within but have not started operating.
1.7 SIGNIFICANCE OF STUDY
There is need to justify the relevance of this study. Telecommunication industry has witnessed tremendous response to
change recently in Nigeria. The outcome of its productivity and rise in GNP depends on the services prodded by both the foreign direct investors and domestic private investors.
From the study, out of the four major network operators in Nigeria, two are related to foreign-owned companies.
Therefore, a significant surveying needed to be done, to find out how favourable the part played by Communication FDI in Nigerian market. It will also assist to review how many other enterprises related to this particular subsector has been invested in Enugu urban due to presence of these transnational companies.
This research work is also necessary for researchers interested in communication development and management or international economics.
1.8 AREA OF STUDY
The geographical area for coverage is the Enugu urban in Enugu State. This locale is appropriate for the study because Enugu is one of the oldest cities in Nigeria and the two major telecom companies related to the foreign direct investment are located at the mentioned area.
The MTN Region in Asaba launched her Y’hello bahn in Enugu city on January 2002. Presently, she has a center at Zik Avenue in Uwani. Within this area, there are many related business transactions. Besides, Uwani constitutes a suitable population for the sample because of its high density.
As well, Zain Nigeria once known as Celtel until 1st August 2008 has an office at 6 Ebeano Housing Estate, Independence layout. The area
also constitutes an appropriate population from which the sample is drawn. In addition, the Zain office is situated between BankPHB Plc and Rainbownet, a local rival. The vicinity is known for its business outlook. In close proximity to the Ebeano layout is the mobile repairers’ village where so many microentrepreneurs have trade for handsets, recharge cards, simcards, and other accessories of the mobile business.
Most of the population in Enugu urban are subscribers of mobile operation and possess all the characteristics measured as required by the objectives of the study.
1.9 LIMITATIONS OF STUDY
This research has numerous limitations. The work is limited due to time factor. The time limit, within the work completed, was hampered finally.
Another limitation is lack of sufficient fund to carry out this work thoroughly.
Also, insufficient material has been encountered especially on a statistical database. The central bank of Nigeria, Okpara Avenue branch has statistical bulletin limited to 2005 (therefore, their official data will beat the span years of 2000 to 2004).
The federal office of statistics could not provide current figures for researchers. It has no data on any of these foreign- owned Cellular Companies. The worse is that the workers has low standard of literacy and are less helpful. Besides, the aggregate data provided by government agencies are unreliable and inconsistent.
The office of the National Communication Commission branch in Enugu State, which is one of the regulatory bodies, is poorly structured. The woman at the administration who redirected the researcher to the website was of no assistance. This is because the
USPF page/chapter she referred her to is unknown zone and cannot open. She also supplied her with NCC ACTS, which is unnecessary and irrelevant to the objective of the project.
Some of the staff of MTN and Zain was unhelpful. They were not cooperative and the companies jealously guarded data, which would have helped to upgrade this study.
There is also the problem of collecting all the questionnaires shared. Sometimes, the researcher meets the absence of the respondents.
1.10 CONCEPTUAL AND OPERATIONAL DEFINITIONS OF KEY TERMS
Conceptual: FDI is an investment made to acquire a lasting management interest (normally 10% of voting stock) in a business enterprise operating in a country other than that of the investor defined according to residency
(World Bank, 1996)
Operational: From 1970-2001 in Nigeria, the manufacturing subsector had a rate of 32.2%, mining and quarrying 30.3% and transportation and communication 1.1% because of its unattractiveness. Most multinational companies now pumped in capital, technology, or management techniques in the economics of communication subsector.
Official Developing Assistance: (ODA)
Conceptual: Net disbursements of loans or grants made on concessional terms by official agencies of member countries of OECD (MP. Todaro and S.C Smith 2003: 804)
Operational: The interdependency by the less developed countries for financial loans or grant on the developed economy has not helped the countries economically. There is need for stronger foreign contact that will encourage challenges and improvement of human resources.
Sustainable Development:
Conceptual: It is an approach to development, which allows nations to meet their present needs without compromising the ability of future generations to meet their own needs (Nwosu
2007:7citing UNCED).
Operational: Nigerians need a capacity for self-sustaining growth and this can be actualized through the provision of a multidimensional institution and/or structures that meets the core values of development at the subsectors level.
Telecommunication:
Conceptual: It is the technology that is used to bring about communication of voice and data signals over some geographical distance (Woherem 2001:3)
Operational: Telecom has gone super high tech and Nigerians need to send and receive messages with the outsiders through electronics that can be linked globally.
Innovation Diffusion:
Conceptual: The consequence of investment behaviour and adoption ability influenced both by macroeconomic factor like demand growth and the traditional epidemic learning process of judging what advantages others are gleaning from the new technology.
(Antonelli 1991: 24)
Operational: This period of information age has helped in the spreading of new ideas, knowledge, or evidence rapidly since the world is now a global village
Conceptual: The transfer of systematic knowledge for the manufacture of a product, the application of a process, or the rendering of a service (Czinkota 2000: 831)
Operational: Communication FDI attracts companies with modern production techniques that require sophisticated machines, spare parts and technical services
Conceptual: The total market value of all final goods and services produced in the economy in a year. It is equal to the
GDP plus total earning made by national abroad (X) minus the earnings of the foreigners within the country during any given period (M) (Udabah 1999: 163)
Operational: The capital flow from the Communication FDI is a principle way by which resource comes into Nigerian economy. It stimulates aggregate supply, damp inflation and helps to restore general macroeconomic stability through tax payment, expanding of Nigerian market domestically and globally, and boosts up the labour incomes.
Conceptual: The total final output of good and services produced by the country’s economy, within the Country’s territory, by residents and non-residents, regardless of its allocation between domestic and foreign claims
(M.P.Todaro and S.C. Smith 2003: 797)
Operational: Countries derives benefits such as organizational adjustment, technology transfer, and promotion of balance of payment, price stability, and employment generation, domestic market expansion etc from foreign investment.
Conceptual: The flow of private funds abroad because investors believe that the return on investment or the safety of capital is not sufficiently ensured in their own countries
(Czinkota 2000: 818)
Operational: The government should adopt sound policies that will regulate the entry and exit of foreign dealings. The NIPC and NCC should work hand in hand to stabilize the system and encourage reinvestment into other sector.
Conceptual: The move to eliminate legal restraints on competition in various industries (Boone L.et al 1985:576)
Operational: The monopolization of telecom by NITEL affected the growth and development of Nigerian economy mostly because of their incompetency and lack of technology-know-how. The introduction of free market system attracted FDI into the communication subsector.
Conceptual: The modern inventions and instruments used for information gathering, distribution, dissemination, transfer, collaboration and Co-ordination (Ogbuoshi 2007: 160)
Operational: Due to globalization, the advanced telecommunication has been changing hand frequently. The new ICTs are always introduced into the market. It anchors global linkages.
Conceptual: They are those people who acquire the shares of the corporation; they are its owners
(Boone et al 1985:63) Operational: Some of the multinational companies operate under license while some operate under contract, merger, amalgamation, charter, etc. MTN International offered license to MTNNigeria to operate as franchise.
This material content is developed to serve as a GUIDE for students to conduct academic research
AN ANALYSIS OF FOREIGN INVESTMENT AND GROWTH DIRECT OF THE COMMUNICATION SUBSECTON A STUDY OF NIGERIAN TELECOMMUNICATION INDUSTRY
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