GLOBAL FINANCIAL CRISIS AND FOREIGN DIRECT INVESTMENT IN NIGERIA (1980-2010)
CHAPTER ONE
INTRODUCTION
1.1    Background of the Study
The recent global economic crisis and financial meltdown is unpredicted in terms of scope and severity. The crisis started in 2007, from the United States of America (USA) principally due to mismatched and over exposure of banks to mortgage industry and the capital market. The crisis spread to other parts of eth world because of the internationalization of the dollar to which many countries assets are denominated as well as the globalization of the financial market which allows free flow of capital among major markets across the globe. The impact of these economic meltdown manifested in the form of frozen flow of global capital in addition to the persistent credit crunch despite massive global liquidity infections besides the decline in global aggregate demand 9 about 50 trillion dollars value lost through capital market, housing etc) plus collapse commodities prices with global coordination failure.
Every economy experiences a downturn at some points in history. The downturn or recession the end result is rising prices, retarded GDP growth rate, reduce investment flow (FDI), diminishing incomes and consumption expenditure and increasing unemployment. The hardest hit institution in a recessed economy is the stock market because it serves as a barometer of economy health of nation. A newfangled terminology for a recession now is global finance crisis.
Financial crisis broadly defined are dislocation in financial market leading to constrained flow of credit to household and business and consequently the real economy and fall in the gross domestic product (GDP).
Foreign Direct Investment (FDI) is viewed as a major stimulus to economic growth in developing countries like Nigeria. Its ability to deal with two major obstacles and technology and skills which have made it the centre of attention for policy market in most low-income countries in particular. Only a few of these countries have been successful in attracting significant FDI flows. Nigeria and the rest of Africa countries ranked 126 billion dollars between 200 – 2010 in foreign direct investment (FDI). Africa share of FDI low has risen over the last decades from 0.7percent in 2000 to 4.5percent in 2010.
Broadly defined, foreign Direct Investment (FDI) is a direct investment by a company in production located in another country or by expanding operations of an existing business in the country. Foreign direct investment provides n inflow of foreign capital, investment in addition to an increase in the transfer of skill technology and job opportunities in developing countries such as Nigeria.
As a result of global financial crisis all over the world, there has been a significant decline in the prospect for conducting international business and foreign direct investment in many countries Lekshmi (2009). Also the recent bombings of lives and prosperities both private and public business places in Nigeria by the so called Boko Haram Sect has started scaring away foreign investors into Nigeria.
In response to global financial crisis, many national government have adopted trade related protectionist measures violating the pledge taken in G20 summit on November 2000. these measures were generally aim at preserving national interest. For foreign direct investment to be sustainable wealth must be created not just for foreign investors but most importantly for Nigerians.
1.2    Statement of Research of Problem
The global economic meltdown that quickly engulfed many developing countries like Nigeria, affect a number of financial and non-financial sector indicators i.e. mainly macroeconomic indicators. Although, the shocks exerted by the crisis on the overall economic performance vary overtime and on the degree of integration into the global financial system. The major macroeconomic indicators expected to be shock responsive during the financial crisis periods are Foreign Direct Investment, Bank Leading Rate, Trade Balance, Inflation Rate, Exchange Rate, Liquidity and Export.
Without doubt, the Gross Domestic Product (GDP) of Nigeria countries has been affected by the crisis. In fact, The IMF forecasted growth rate to dip below 3 percent in 2009. Sanni (2009), opined that the pessimistic forecast was based on the fact that the global financial crisis has endangered credit crunch which will ultimately affect global demand for goods and services. Thus, global growth of output contracted expectedly and Nigeria suffered. Sanni (2009) further indicated that African economy is highly vulnerable given that both the prices and supply of their primary exports are exogenously determined. The global financial crisis has therefore adversely affected export volume as well as prices of both energy and non-energy commodity prices. The resultant effect of the slowdown has posted into short fall in export revenues resulting into trade deficits; others include reduced capacity utilization for most industries, as majority depends on imported raw materials.  
The depreciation of global currencies (exchange rate) precipitated by external shock resulted in high cost of importation of industrial inputs translating to the high cost of production and subsequent decline in output. The decline in output is due basically to the fall in aggregate demand and an increase in cost of production.
Since the ongoing global financial meltdown, the rate of defaulters in terms of margin loans in a number of countries has increased, especially in Nigeria. Additionally, it has proved difficult for genuine investors and governments to access funds at the global financial markets either via government bonds or attracting FDIs, and financial aids, or through sovereign wealth funds allocations, and this situation has elicited nonavailability of liquidity at the country levels which, in turn, has compounded the problem of liquidity at global and national levels. The result is that it has not been very easy recovering from this ravaging global recession for both corporate companies and national economies even ass at today.
1.3      Research Questions
1.    Does Foreign Direct Investment affect openness of the Nigeria economy?
2.     Does Foreign Direct Investment affect Real Gross Domestic Product in Nigeria?
3.    Does Foreign Direct Investment affect domestic investment in Nigeria?
4.    Does Foreign Direct Investment affect inflation rate in the Nigerian economy?
5.    Does Foreign Direct Investment affect financial risk in Nigeria?
6.    Does Foreign Direct Investment affect financial crisis in Nigeria?
1.4    The Objective of the Study
The main objectives of the study are;
1.    To determine the impact of global financial crisis on FDI in Nigeria.
2.    To examine the relationship between openness, Real GDP, domestic investment, financial risk, inflation rate and global financial crisis in Nigeria.
1.5    Hypothesis
H0:    Foreign Direct Investment does not affect openness of the Nigeria economy.
H1:    Foreign Direct Investment does affect openness of the Nigeria economy.
H0:    Foreign Direct Investment does not affect Real Gross Domestic Product in Nigeria.
H1:    Foreign Direct Investment affects Real Gross Domestic Product in Nigeria
H0:    Foreign Direct Investment does not affect domestic investment in Nigeria.
H1:    Foreign Direct Investment affects domestic investment in Nigeria.
H0:    Foreign Direct Investment does not affect inflation rate in Nigeria.
H1:    Foreign Direct Investment affects inflation rate in Nigeria.
H0:    Foreign Direct Investment does not affect financial risk in Nigeria.
H1:    Foreign Direct Investment affects financial risk in Nigeria.
H0:    Foreign Direct Investment does not affect financial crisis in Nigeria.
H1:    Foreign Direct Investment affects financial crisis in Nigeria.
1.6    Significance of The Study 
The study is relevant in the following respects:
1.    It will serves as guide for investors (both foreign and local) in making their investment decisions.
2.    It will serves as a reference points in determining if Nigeria would ever develop/progress without foreign investment.
3.    It will assist prospective researchers that would want to make research on foreign direct investment
4.    It will also verify or modify any existing theory within the scope of this study.
5.    The findings and recommendation of this study will also serves as a sources of input information to potential investors.
6.    The empirical study will be relevant, to policy maker or government for policy formation that will encourage inflow of foreign direct investment into the Nigeria economy, also analysis and simulation in Nigeria.
7.    The study will also enable students in management sciences and academia in the University of Benin and other tertiary institution to gain insight into the subject issue and to increase their knowledge of global financial crisis and FDI.
1.7    Scope of the study
This study is limited to the Nigeria economy after the global financial crisis. The study will capture the period between 1980 – 2010.
1.8    Limitation of the study
The limitation of the study is the poor records of investment inflows into Nigeria. Records are not properly kept and difficult to comedy.
1.9    Organization of the study
This study is divided into five chapter; chapter one deals with the introduction of the study.
Chapter two contains the review of relate literature.
Chapter three is research methodology with emphasis on model specification, sample and sampling techniques, analytical tools and data collections.
Chapter four contains data analysis and the regression results.
Chapter five contains the summary of the result, conclusions, recommendation and suggestions for further studies.