INTRODUCTION
1.1 Background to the Study
With the evolution of globalization, most especially since the end of the world war 11, the world has become a much global place where interaction between different countries has led to a situation in which country’s economy and development are not only in the hands of government, but also highly influenced by international organizations and international trade where international laws and legislations pre- dominate (Gabriel, 2012).
Globalization has been a highly controversial process that has been placed under serious criticism in its current capitalist form and comes to a surprised economics and policy makers who are believed to be highly convinced of the benefit this form of globalization can bring to the developing countries like Nigeria (Adesoye, Ajike, & Maku, 2015). Globalization is the process of international integration arising from the interchange of world views, products, idea and other aspect of cultures (Akunbi, 2013).
According to Francis, (2010), globalization refers to the increasing integration among nations which has accelerated sharply over the past half a century, gotten largely by the remarkable expansion in international trade and extra ordinary advances in information and communication technologies.
Globalization is the term used to describe the growing worldwide interdependence of people and countries, a process which has grown tremendously in the past decade, mainly because of great innovation in technology (Okpokpo, Ifelunini, & Osuyali, 2014).
Williams, (2010), maintains that the main essence of globalization is to move the economy towards external liberation, focusing on market- oriented economic system export-led strategy and stabilization of the economy. Utuk, (2015) stated that there are two views on globalization, one given by anti-globalist and the other by supporters of globalization or simply globalist. The ant-globalist view globalization as controlling and influencing force used by overseas cooperation’s to dominate international trade. This criticism has given rise to theories such as Dependency theory and new colonialism.
According to the globalist, globalization is the only true way to beat poverty, they argue that foreign direct investment will help developing nations to industrialize, create job opportunity and acquire manufacturing skills. Economic growth implies a change in the way goods and services are produced, not merely an increase in production achieved using the old method of production on a wider scale. But, it also involves improvement in a variety of indicators such as literacy rate, life expectancy and in addition poverty rates, in line with increasing private income, economic growth also generate additional resources that can be used to improve social services such as health care, social amenities, and safe drinking watered (Shuaib, Ekeria, & Ogedengbe, 2015).
Over the years, globalisation has proven to be the most adopted mechanism in dealing with economic development, improving the social welfare of states and strengthening political ties between countries. Globalisation development theory adopts policies such as liberalisation, privatisation, deregulation and capitalism for effective results (Barry, 2010). However, United Nations Conference on Trade and Development (2015) report shows that globalization policies are much more favourable to North America, Europe and some part of Asia compared to African countries whose economic, political and social growth has been stunted by some of these policies, hence their failure in benefiting from globalisation.
Globalisation as the World Health Organisation (2017) puts it, is "the increased interconnectedness and interdependence of peoples and countries generally understood to include two inter-related elements: the opening of international borders to increasingly fast flows of goods, services, finance, people and ideas; and the changes in institutions and policies at national and international levels that facilitate or promote such flows."
Nigeria being the giant of Africa has long accepted globalisation as a means to achieving rapid economic development. Paradoxically, with so much natural resources at its disposal, 53.5% of Nigerians were living in absolute poverty (World bank data 2009) and Nigeria's human development index reportedly ranks 152nd position (United Nations Development programme 2016). Given these figures, coupled with her high unemployment rate, vulnerable economy, bad policies, unhealthy investment climate, high level of indebtedness and corruption, it is clear that Nigeria is one of the most disadvantaged countries engaged in globalisation.
The concept of globalisation is not a new concept in Nigeria. It has always existed and has been embraced in most frameworks of the country (Akunbi, 2013). Nigeria has since been engaging in the globalisation process, adopting policies such as disinvestment, privatisation, commercialization and devaluation. However, recent data from the Economic Report on Nigeria (2015) shows that Nigeria has been experiencing slow growth. Some of the reasons for this challenge includes the Naira devaluation which ultimately led to higher cost of purchasing goods and services, structural problems that result in lack of transparency, low oil prices and revenue caused by liquidity, restricted fiscal policies and tighter monetary policies which engenders high interest rates and reduced activity in the capital market.
1.2 Statement of the Problem
Globalization fringes economic development in economy globalization is faced to be a systematic way which technological advanced countries to develop them by way of investing in the economic. However ,the effect of globalization on developing and undeveloped countries can be vividly seen, as the developed nations (i.e. technological advanced countries) tend to use the undeveloped and developing countries as their dumping, ground, for their used products and their sub-standard products for example electronic.
Also globalization has also faced the challenge of culture and language barrier, the different variation in culture and language of the different countries tend to affect the bilateral relations. One of the challenges of underdevelopment is the inability of a country to produce and create unemployment for its citizenry, in order to meet up with the economic needs and social economic needs of its members. However, the research study is geared toward using the research study to solve these challenges in Nigeria economy.
Globalization as the World Health Organisation (2017) puts it, is "the increased interconnectedness and interdependence of peoples and countries generally understood to include two inter-related elements: the opening of international borders to increasingly fast flows of goods, services, finance, people and ideas; and the changes in institutions and policies at national and international levels that facilitate or promote such flows."
Unemployment rate: Nigeria has long been engaged in the process of globalisation which implies, integrated economies, removal of trade barriers, increased cross-border relations amongst countries and interdependence between nations. The benefits of the above mentioned have been achieved by developed countries and leading democracies in the world.
Nigeria’s decision to engage in this process is merely a desire to be as developed and influential as other democracies and globalised countries. However, the impact of globalisation has had negative implications on the Nigerian economy as it has contributed to the upsurge of unemployment in Nigeria and has stagnated the process of national development.
Unemployment is a situation where a person is unemployed. According to the international labour organisation (ILO 2003), an unemployed person is someone who does not have a job, actively seeking for one or is readily available to work (Francis, 2010). The national bureau of statistics reports (2015) showed that the unemployment rate in Nigeria rose from 9.9 percent to 10.4% in 2015, the unemployment rate by gender was 12.3% for females while 8.8% for males, underemployment by gender was 22.0% for males while 15.7% for females, while urban unemployment was 12.1%, rural unemployment was 9.0%, urban underemployment was 9.0% while rural underemployment was 21.0%. At the moment Nigeria has the 7th highest unemployment rate in the world (NBS 2015).
Vulnerable Economy: Nigeria’s major export, crude oil, which is also the country’s major source of foreign exchange and revenue - contributing between 80-95% to the nation’s budget over the last 20 years - is a volatile commodity that is vulnerable to internal and external socio-economic and political conditions (Nwakanma, & Ibe, 2014). These factors are responsible for the fluctuations in the price and volume of the nation’s crude production and export, which in turn leads to volatility in the economy. Incessant violence by bandits and militants in the Niger Delta oil- producing region, pipeline vandalism, bunkering and non-passage of the controversial Petroleum Industry Bill (PIB) are the major internal factors creating uncertainty in the nation’s oil and gas sector and partly responsible for the volatility in the nation’s economy in recent times.
These internal problems, especially bunkering, is responsible for the country’s inability to reach the budget benchmark crude volume production target of 2.5m/b per day. It has led to a drop in revenue and created the cash flow problems (Nwogwugwu, Maduka, & Madichie, 2015). The foreign reserve has also been hit as it has grown only marginally. In an economy that is dominated by the public sector that greatly depends on oil receipt, the GDP has also been hit by the below-target crude export, further strengthening call for diversification of the economy.
External problems have however contributed more to the volatility in the nation’s oil and gas sector. Socio-political and economic problems in other countries of the world, supply glut and financial crises are some of the factors that have had bearing on Nigeria’s oil production, export, revenue and ultimately the economy at large (Nwogwugwu, Maduka, & Madichie, 2015). All these factors have made it imperative to develop strong buffers to serve as a hedge against uncertainties associated with the interlinked globalized world. The buffers will help stabilize the nation’s economy in the short to medium term and ensure stable and long term growth.
Unhealthy investment climate: Trade liberalization changes relative prices: eliminating tariffs and non-tariff barriers lowers the relative price of import-competing goods. Suppose this leads to an increase in the output of sector E (for Expanding) and a reduction in the output of sector C (for Contracting)—changes resulting from, say, capital and labor moving from the contracting sector to the expanding sector in response to a change in relative goods prices. This resource allocation will lower a country‘s total emissions if the expanding sector is less pollution intensive than the contracting sector.
How much a country emits per unit of a particular good produced or consumed depends on the techniques of production or consumption. To the extent that globalization changes these techniques, either through policy channels or technological changes, globalization impacts the environment itself. Most attention to technique effects has focused on changes in environmental policy associated with income gains from trade. Accordingly, I allocate much of my discussion to empirical estimates of income effects. However I will also discuss evidence concerning additional channels through which globalization impacts ―techniques‖, such as changes in the political environment shaping regulation, regulators‘ability to assess abatement potential, and producers‘ability to abate in the first place. One of the most disturbing accusations about globalization is the charge that foreign investment takes place largely so that developed country industries can transfer their production overseas, especially to poorer developing countries, to take advantage of lower wages and other less stringent regulatory environments.
To be sure, some companies have sought to move their production facilities overseas with such goals. But a look at the overall statistics on where foreign investment goes illustrates that this factor cannot be the primary objective of most companies. In fact, the great majority of global FDI takes place among developed countries. However, as a result of the recent financial crisis, and its greater effect on developed countries, the developing economies have had less of a decline. According to the UNCTAD 2013 World Investment Report, in 2012, for the first time, developing countries received more FDI inflows than developed countries. In addition, developing countries generate one-third of the global FDI outflows. The top three recipients of FDI in 2012 include the United States, China, and Hong Kong (UNCTAD, 2013). Although FDI flows have been increasing at a great rate over the past decade, developing countries in Southern Africa have actually been losing their share of global investment.
These countries received a peak of world FDI inflows in 2001. When viewed this way, one might conclude that Sub-Saharan Africa is being left behind by globalization. On the other hand, the FDI inflows for the rest of the developing world have been increasing over the past decade as well, especially China. In 2012, the investment climate started looking better for Africa, as the continent achieved a five percent increase in FDI inflows in 2012, compared to 2011. FDI inflows to the least developed countries also saw a rise in 2012 as well. Many of the developed countries saw huge declines, in fact declines in FDI to the European Union accounted for two-thirds of the global decline in 2012 (UNCTAD World Investment Report 2013).
High level of indebtedness: Globalization being a coin with two sides as mentioned earlier, can either benefit or cost a nation.
In line with this statement, Lola (2009) stated that globalization carries benefits and opportunities as well as risks and costs. She further noted that developed countries like United State of America (USA), Japan and United Kingdom (UK) are benefiting greatly thereby leaving the less developed countries particularly African countries with the costs and risks of globalization. These risks and costs includes income inequality, environmental degradation, brain drain, external indebtedness, dominant and dependent on industrialized countries, sharpen dualism, unrealistic trade policies, high rate of price instability, increase in exchange rate devaluation to mention but a few. All these lead to a wide spread margin between the rich and the poor which eventually results to global poverty. In Nigeria, a large proportion of the population is still living below $1 (one dollar) per day, faced with poor health conditions, high infant and maternal mortality rate with mortality rate of 191 per 1000 births.
This placed us at 148th among 173 countries in 2006 , low life expectancy which stood at 46 and 47 years for male and female in 2006 based on this, Nigeria was ranked 155th out of the world’s 177 countries, high rate of illiteracy etc.. (World Bank, 2008); (CIA, 2009). All these are the features of massive underdevelopment and poverty ( Okungbowa, 2011)
Onwuka & Eguavoen (2007) studied globalization and its implications for the growth process of the Nigeria economy for the period 1985 – 2001. Using descriptive method of analysis, the study revealed that Nigeria has not benefited from globalization due to mono-cultural export, inability to attract increased foreign investment and huge indebtedness.
Corruption: Corruption is not only a social problem because it does not only deny people the benefits of the exploitation of the abundance of natural resources that should have been invested for developmental purposes, it also undermine the economy, constitute a menace to democratic governance, distort economic, social and political programmes with implications for undermining the prospects of a durable social order in the country. That the problem has become hydra-headed and structural is no longer hyperbolic. Corruption that manifest in diverse forms such as bribery, inflation of contracts, kickbacks, over-invoicing, outright looting of the common wealth, manipulation of formal and acceptable processes and procedures, diversion of public funds, embezzlement and general misuse of authority and position has assumed frightening and unimaginable dimensions that it has not only gradually eroded the social and moral fabric of society.
At the end of the last century it is clear that through various media – the burgeoning capacity of electronic communications to compress both time and space, changes in technology which are allowing production and culture to be divorced from place, the pervasiveness of global ideologies on subjects such as the environment and human rights, and recent seismic shifts in the world’s geopolitical balance the world is now thoroughly globalized, a single place.
What happens in one place routinely affects perceptions, attitudes and behaviour elsewhere. Indeed, because of technological innovations, this routine impact is almost instantaneous. Because social relations are being stretched across time and s[pace the borders and walls which insulated and isolated individuals and collective actors in the past are being eroded. Adewuyi, (2010) says that territoriality is being eclipsed by telemetrically’. Indeed, the real charge in the concept of globalization most poignantly observed in its current phases is that conventional borders are becoming increasingly irrelevant to the actual patterns of much economic, cultural and even political activity.
Trans-local and transnational networks – of producers, professional, exchange students, community brokers and human rights activist – populate a truly global cultural economy, and territoriality as organizational principle of the world polity is everywhere in retreat. The modern geopolitical imagination (Tuathail, 2014), used to depicting the world in terms of spatial blocs, territory and the fixed identities usually attached to these, is now in some turmoil. Globalization presages a new geopolitics, and thus requires novel ways of imagining a global space increasingly made up of rows, networks and webs (Clare, 2014). Globalization has brought about a shift in power: the Nation – State has been weakened and there is a reduction in social accountability.
This makes sovereign states row rather than steer in the process of development, i.e. if countries do not intensely participate in this paradigm set by the North, they are ‘out’. As a consequence the poor countries’ very right to development is threatened by this unrelenting liberalization globalization process (Tandon, 2014). Globalization has put the fate of those many in the hands of large corporations. Although the ‘corporacracy’ knows very well the negative effect of globalization, few of them are committed to change.
They tend to ignore the root causes of the social problems they see as patently as everyone else, but seldom address the negative social impact of their activities. Since they lack the openness and transparency required, they pay only lip service the change and seldom change their practices (or change them in very marginal ways (Tuathail, 2014). It is therefore not by accident that globalization has been called ‘the imperialism of the 1990’s (what is different between imperialism and globalization is just that latter’s speed of expansion).
1.3 Aims and Objectives of the Study
The main objective of this study is to examine the impact of globalization on the Nigeria’s Economic Development. The specific objectives are as follows:
i. To examine the significant correlation between globalization and the Nigeria’s Economic Development
ii. To comparatively analyze the challenges of globalization on Nigeria’s economy development
iii. To evaluate the effect of globalization on the Nigerian Trade and Investment
iv. To examine the correlation between corruption in Nigeria and globalization
v. To proffer recommendations at the end of the study that will be used by policy makers and other stakeholders
1.4 Research Questions
In the quest to examine the impact of globalization on the economic development of Nigeria the following research questions were formulated to guide the study:
i. Is there a significant correlation between globalization and the Nigeria’s economic development?
ii. What are the challenges of globalization on the Nigeria’s economic development?
iii. What is the effect of globalization on the Nigerian Trade and Investment?
iv. Is there a correlation between corruption in Nigeria and globalization?
1.5 Statement of Hypotheses
The following hypotheses would be tested in the course of this study
First Hypothesis
H0: There is no significant correlation between globalization and the Nigeria’s economic development
H1: There is a significant correlation between globalization and the Nigeria’s economic development
Second Hypothesis
H0: Globalization has no challenges on the Nigeria economy
H1: Globalization has challenges on the Nigeria economy
Third Hypothesis
H0: There are no effects of Globalization on Trade Investment in Nigeria
H1: There are effects of Globalization on Trade Investment in Nigeria
Fourth Hypothesis
H0: There is no significant correlation between globalization and corruption in Nigeria
H1: There is a significant correlation between globalization and corruption in Nigeria
1.6 Significance of the Study
The findings are most significant in promoting integration among nations by expanding international trade and extra ordinary advances in information and communication technology. This study will be of immense benefits to investors and government as the findings will reveal some facts that would encourage trade and investment.
This study seeks not only to highlight the challenges Nigeria’s national development has due to globalization, it also tries to identify the internal challenges in Nigeria militating against her growth and development. In addition, this study would give feasible solutions that could be adopted to solve these problems.
Furthermore, the study will serve as a reference material for other researchers, authors, scholars that would want to embark on a similar study of this nature.
This study will be of immense benefit empirically and theoretically given that financial globalization could in principle, help to raise the growth rate in developing countries like Nigeria through a number of channels. Some of these directly affect the determinants of economic growth (augmentation of domestic savings, reduction in the cost of capital, transfer of technology from advanced to developing countries, and development of domestic financial sectors). Indirect channels, which in some cases could be even more important than the direct ones, include increased production specialization owing to better risk management, and improvements in both macroeconomic policies and institutions induced by the competitive pressures or the "discipline effect" of globalization.
The literature on this subject, voluminous as it is, will present conclusive evidence that would be adopted by policy makers in both the private and public sectors of the Nigeria economy and other countries in Africa at large. The literature will definitely find a positive effect of financial integration on growth as a result of globalization. Thus, an objective reading of the findings of the vast research effort undertaken will suggest strong, robust, and uniform support for the theoretical argument that financial globalization per se delivers a higher rate of economic growth.
Perhaps this is not surprising. As noted by several authors, most of the cross-country differences in per capita incomes stem not from differences in the capital labour ratio but from differences in total factor productivity, which could be explained by "soft" factors such as governance and the rule of law. In this case, although embracing financial globalization may result in higher capital inflows, it is unlikely, by itself, to cause faster growth.
In addition, as is discussed more extensively later in this study, some of the countries with capital account liberalization have experienced output collapses related to costly banking or currency crises. An alternative possibility, is that financial globalization fosters better institutions and domestic policies but that these indirect channels cannot be captured in standard regression frameworks.
In short, although financial globalization can, in theory, help to promote economic growth through various channels, there is as yet no robust empirical evidence that this causal relationship is quantitatively very important. These points to an interesting contrast between financial openness and trade openness, since an overwhelming majority of research papers have found that the latter has had a positive effect on economic growth.
In theory, financial globalization can help developing countries to better manage output and consumption volatility. Indeed, a variety of theories imply that the volatility of consumption relative to that of output should decrease as the degree of financial integration increases; the essence of global financial diversification is that a country is able to shift some of its income risk to world markets. Since most developing countries are rather specialized in their output and factor endowment structures, they can, in theory, obtain even bigger gains than developed countries through international consumption risk sharing that is, by effectively selling off a stake in their domestic output in return for a stake in global output.
Empirically, good institutions and quality of governance are important not only in their own right but also in helping developing countries like Nigeria derive the benefits of globalization. Similarly, macroeconomic stability appears to be an important prerequisite for ensuring that financial integration is beneficial for developing countries. These points may already be generally accepted; the significance of this study is to show that there is some systematic empirical evidence to support them. In addition, the analysis suggests that financial globalization should be approached cautiously and with good institutions and macroeconomic frameworks viewed as preconditions.
1.6 Scope and Limitations of the Study
The study is limited in scope to the impact of globalization on Nigeria economic development. The researcher would sample the opinion of Senior/Management Staff, Middle Level Staff, and Junior Staff of the Federal Ministry of Finance so as to get a proper view and answers of the subject be investigated. The study covers the period of 2010 to 2015.
In carrying out this study, the researcher was confronted with some challenges that tend to limit the study. These challenges include the following;
i. Financial challenge: Every research study like this current one requires funds that would enable the researcher go round to sample people opinion as related to the study, buy academic materials, stay connected online for online sources of materials etc.
ii. Limited Timeframe: The time allotted for the study wasn’t enough owing to other academic workload, time to meet with respondents, time to put the work in computer system in an acceptable format by the university and time for corrections pointed out by the project supervisors.
iii. Confidentiality: There are documents that the researcher would have loved to use from organizations like the Federal Ministry of Finance, Central Bank of Nigeria, DMO, however, such documents are regarded as confidential and not for public. This in reality, has limiting ability on the study.
Fortunately, despite the above challenges, the researcher was able to overcome all of these and conducted a successful study on the topic been investigated.
1.7 Definition of Terms
Economy: The state of a country or region in terms of the production and consumption of goods and services and the supply of money.
Globalization: Is the process of interaction and integration among people, companies, and government Worldwide.
Development: Refers to the capacity of National economy whose initial economic conditions have been more or less static to generate and sustain an annual increase in the Gross National Product (GNP) on rates of 5-7 percent or more.
Economic Development: Refers to the improvement in the general standard of living of the people in the society.
1.8 Organization of the Study
The research work is divided into five chapters. Chapter one provides a general introduction of the study, it states the background of the study , statement of the problem, aims and objectives of the study, research questions, statement of hypothesis, significance of the study, scope and limitations of the study, definition of terms and the organizational layout.
Chapter two presents the Literature Review and conceptual framework.
Chapter three examines the research methodology.
Chapter four presents the data analysis while Chapter five is the concluding chapter of this study, and it sets out the summary of findings, conclusion and recommendations.
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