FOREIGN DIRECT INVESTMENT AND DEVELOPMENT OF HOST COMMUNITY A CASE STUDY OF SHELL PETROLEUM DEVELOPMENT COMMISSION IN GBARANTORU COMMUNITY IN BAYELSA STATE

Abstract

The Nigerian Oil and Gas Industry, which was birthed and dominated, since inception, by foreign direct investments (FDI) is the bulwark on which the Nigerian economy has rested for about six decades now. Despite the huge financial resources earned by the country, the communities where oil and gas hydrocarbons are found and exploited have not fared well. The objective of this study therefore, is the evaluation of the impacts of FDI in the oil industry on the livelihoods of households in the oil-bearing communities of Bayelsa State. A hypothesis was formulated to guide the study, namely: FDI in the oil and gas industry in Nigeria have not significantly impacted on the sustainable livelihoods of households.

TABLE OF CONTENT

Title page

Approval page

Dedication

Acknowledgment

Abstract

Table of content

CHAPETR ONE

1.0   INTRODUCTION 

1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study

CHAPETR TWO

2.0   LITERATURE REVIEW

CHAPETR THREE

3.0        Research methodology

3.1    sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis

CHAPTER FOUR

DATA PRESENTATION AND ANALYSIS AND INTERPRETATION

4.1 Introductions

4.2 Data analysis

CHAPTER FIVE

5.1 Introduction

5.2 Summary

5.3 Conclusion

5.4 Recommendation

Appendix

CHAPTER ONE

INTRODUCTION

• Background of the study

Foreign Direct Investments (FDI) is one of the most important purveyors of industrial and development capital, particularly, for developing countries in dire need of catalysts for economic growth and development. It is a veritable instrument for the socio-economic development of countries especially, in situations where domestic capital formation is persistently inadequate to stimulate growth and development due to such socio-economic malaises as low savings, low productivity, low consumption and high propensity for ostentatious consumption. FDI refers to investments made for the acquisition of long-term interests in a business entity which has its origin and carries on its business in a country or countries other than that of the investor (International Monetary Fund, IMF, 1993). The interests acquired are usually intended to enable the investor to control the management of the entity or to significantly influence its decisions and operations. FDI plays crucial roles in the socio-economic development of both the investing and the recipient countries. The experience of a small number of fast-growing East Asian newly industrialized economies has strengthened the belief that attracting FDI could bridge the resource gap of lowincome countries and avoid further build-up of debt while directly tackling the causes of poverty (UNCTAD 2004). Since FDI can create employment and act as a vehicle for technology transfer, provide superior skills and management techniques, facilitate local firms’ access to international markets and increase product diversity, FDI can therefore be an engine of economic growth and development in Africa where the need for it cannot be overemphasised (Ngowi 2001; Mckinsey 2005). The evidence on growth and poverty reduction is best approached by looking at two countries that have huge reduction in poverty; China and India. A vast majority of the world’s poor live in these countries but both countries achieved significant reductions in poverty during 1980-2000 when they grew rapidly by opening up to foreign investment (Bhagwati and Srinivasan 2002). FDI has been a prominent feature of the Nigerian oil and gas industry particularly, since the post-World War II period when Shell D’Arcy Exploration Company was granted the license to prospect for crude oil in the country (Kato, 2011). The advent of Shell was soon followed by the presence of other companies namely, Mobil, Chevron, Safrap, Esso, Total, BP, and so on, who brought enormous investments into the industry. Thus, the prominence of FDI in the Nigerian oil and gas industry is because the exploration and production of oil and gas in Nigeria are financed majorly by oil transnational corporations (TNCs). FDI have been largely instrumental for the procurement of crude oil and natural gas exploration and exploitation equipments and installations such as flowstations, pipelines (running into thousands of kilometers in length), oil wells, oil fields, gas fields and compressor stations as well as export terminals. As at January 2013, this huge FDI flow into the oil and gas industry in Nigeria has been responsible, in the main, for the provision of the 27 crude oil terminals, 130 flow stations, 218 oil fields (in production), 97 oil fields (not producing), 3 petrochemical plants, 2,800 producing oil wells and a network of pipelines covering more than 16,000 kilometers (oil and products) in length (DPR, 2015). However, the local communities, including Owaza, Umuorie, Umuokwor and Uzuaku in Ukwa West Local Government Area of Abia State, where crude oil and gas hydrocarbons are embedded have not fared any better. Their environments have been negatively affected by oil and gas production operations; and, their livelihoods disrupted (Osuji and Nwoye, 2007). For instance, the mangrove and rainforests which are prominent in this environment are gradually but steadily being decimated. Oil production operations have equally brought about the contamination of both surface and underground water sources. These have resulted to the intensification of the poverty which characterizes the living experiences of the people of the study area. This is because of the loss of soil fertility occasioned by oil spill incidents (Ibekwe, 2016) and gas flares, and have resulted ultimately, to the reduction in household incomes (Inoni, Omotor and Adun, 2006). The present study has, therefore, become necessary, at this time, when the Nigerian government is searching for solutions to the myriads of livelihood challenges which confront the mass of the Nigerian people presently. Several poverty alleviation programmes including the National Poverty Alleviation Programme (NAPEP) and the Subsidy Reinvestment Programme (Sure-P) have been embarked upon by the government of the Federal Republic of Nigeria without much success. The plight of households in the oil- and gasbearing communities is pathetic given the fact that the huge revenues the Nigerian state and the oil companies derive from hydrocarbon deposits found in these communities are not reflected and seen in the socio-economic development of these communities.

• STATEMENT OF THE PROBLEM

For increased and sustainable economic growth and development to be achieved in developing countries of the world, there is need for increased levels of investment and capital formation. To this end, Foreign Direct Investment (FDI) is considered a critical and essential source of foreign material and human capital for developing countries in general and Nigeria in particular. In Nigeria, there is a general low level of domestic savings, low level of technical know-how and low level of foreign exchange earnings with the resultant effect of low level of Economic Investment. The adverse multiplier effect of this low level of domestic investment is a fall in the levels of employment, income, consumption and output, and these have impacted negatively on economic activities in the country over the years. Infact Akpan (2000) confirms that the basics of high performance is to recognize risk levels that is consistent within the system. This is so because foreign direct investment comes with its attendant risks (Political, Interest rate, Capital and Inflation). It is in view of the above that the researcher intend to investigate the contribution of foreign direct investment to the development of host community.

• OBJECTIVE OF THE STUDY

The main objective of this study is to investigate the contribution of foreign direct investment to the development of host community, but to aid the completion of the study, the researcher intends to achieve the following specific objectives;

1. To examine the role of foreign direct investment to the development of host community
2. To ascertain the relationship between foreign direct investment and corporate social responsibility in the host community

• To ascertain the effect of FDI on community development in Bayelsa state

1. To examine the contribution of foreign direct investment to the economic growth of host community
   • RESEARCH QUESTIONS

To aid the completion of the study, the following research questions were formulated by the researcher;

1. Does foreign direct investment by shell petroleum development commission play any role in the development of host community?
2. Is there any significant relationship between foreign direct investment and corporate social responsibility in the host community?

• Does FDI ensure effective development of host community in Bayelsa state

1. foreign direct investment by SPDC contribute to the economic growth of Gbarantoru community in Bayelsa state
   • SIGNIFICANCE OF THE STUDY

It is believed that at the completion of the study, the findings will be of great importance to the management of shell petroleum development company as the study seek to remind her of her corporate social responsibility to her host community and environed, the study will also be of importance to the benefactor of SPDC CSR programs as the study seek to explore the contribution of SPDC to the development of Gbarantoru community, the study will also be of benefit to researchers who intend to embark on a study in a similar topic as the study will serve as a reference point to further study, finally the study will also be of great importance to students, teachers, researchers, academia, lecturers and the general public as the study will add to the pool of existing literature and contribute to knowledge.

• SCOPE AND LIMITATION OF THE STUDY

The scope of the study covers foreign direct investment and development of host community with emphasis on shell petroleum development companies in Bayelsa state, but in the cause of the study there were some factors that limited the scope of the study;

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
3. c) Finance: Limited Access to the required finance makes it difficult to broaden the scope of the study;

1.7 OPERATIONAL DEFINITION OF TERMS

FDI

A foreign direct investment is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct control.

SPDC

Shell Nigeria is the common name for Royal Dutch Shell‘s Nigerian operations carried out through four subsidiaries primarily Shell Petroleum Development Company of Nigeria Limited (SPDC).

Community

A community is a small or large social unit that has something in common, such as norms, religion, values, or identity

1.8 ORGANIZATION OF THE STUDY

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature. Chapter three deals on the research design and methodology adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study

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