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Foreign Direct Investment And The Development Of Small And Medium Enterprises
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“The Federal Government’s economic diversification programme may have
recorded a head-start as investment groups gather for the ground
breaking ceremony of the Enpower Free Trade Zone (ENPOWER FTZ) scheduled
by the end of this month with a target to attract N240 billion Foreign
Direct Investment (FDI) and 20,000 jobs Governor Ifeanyi Ugwuanyi who
consolidates on foundation efforts of former Governor Sullivan Chime on
the project, was quoted as saying in a statement at the weekend that the
ground breaking ceremony for the facility would bear the first set of
investment fruits which will give highly needed momentum to his
government’s economic diversification programme. According to him,
“Enpower FTZ has put in substantial efforts into attracting specific,
targeted high-profile investors right from the outset. These anchor
investors play an important signaling role to other potential investors,
and we expect them to attract a network of suppliers and partners.â€The
ceremony which holds at the Akanu Ibiam Airport site of the Free Zone is
expected to attract up to $500 million (N240 billion) worth of foreign
direct investments (FDI) from leading global manufacturing companies.
Activities of the industrial clusters hosted in the free zone are also
expected to create over 20,000 jobs across three major regions in the
country. Licensed by the federal government to operate as a free trade
zone in December, 2015, ENPOWER FTZ is a Public-Private initiative with
the Enugu State government offering international and domestic investors
the benefits of connecting to business opportunities from the
South-Eastern cluster, which according to Canback & Company and the
McKinsey Global Institute, is the second largest economic cluster in
Nigeria, outside of the Lagos Clusterâ€.
In the world today,
it becomes difficult for business to survive without a form of exchange
or another which involves money, ideas, product and technology. As a
result, every economy is affected either positively or negatively. Trade
can be drawn from the need to exchange, which developed from the barter
arrangement to the currency method. Trade in Nigeria, nevertheless,
became general with the introduction of the imposing regulation, which
brought in their merchandises and made Nigerians their middle men. The
implication of this is that Nigerians came to comprehend the necessity
for trade both domestically and internationally. International business
has remained an area of concern to policy makers. Its significance lies
on the capacity to acquire goods which cannot be manufactured in a
country or which can only be manufactured at a higher cost. Similarly,
it allows a nation to trade its locally produced goods to other
countries of the world. The performance of a given economy in terms of
growth rates of output and per capita income has not only been based on
the domestic production and consumption activities but also on
international transaction of goods and services (Jhingan 2006). Small
and Medium-scale Enterprises (SMEs) play very important roles in the
process of industrialization and sustainable economic growth (Aremu
& Adeyemi, 2011; Terungwa, 2012). Since the 1960s to date, SMEs are
being given due recognitions especially in the developed nations for
playing very important roles towards fostering accelerated economic
growth, development and stability within several economies (Gunu, 2004;
Onugu, 2005; Aremu, 2010). They make up the largest proportion of
business all over the world and play tremendous roles in employment
generation, provisions of goods and services, creating a better standard
of living as well as immensely contributing to the Gross Domestic
Products (GDP) of many countries (Paul, 2010; Ojeka&Mukoro, 2011).
In Nigeria, SMEs account for fifty percent to employment on average and
also fifty percent of its industrial output. SMEs represent about ninety
percent of the industrial sector in terms of number of enterprises or
firms, and, however, they contribute a meager one percent of GDP (Ariyo,
2004). Industrial and economic developments are flourished by SMEs in
the country through efficient utilization of local resources; production
of intermediate goods and services; transformation of rural technology.
SMEs are the backbone, and they play a significant role in the business
landscape of any country, but there are also faced with a lot of
obstacles that make the sector not to contribute optimally to the
economy. In this regard, Aregbeyen (1999) argues that the industrial
development of Nigeria depends, to a large extent, on the growth and
development of SME potentials.
1.2 STATEMENT OF THE PROBLEM
The underdeveloped/developing nature of the Nigerian economy that
essentially hindered the pace of her economic development has
necessitated the demand for Foreign Direct Investment into the country.
Aremu (2007), noted that Nigeria as one of the developing countries of
the world, has adopted a number of measures aimed at accelerating growth
and development in the domestic economy, one of which is attracting
foreign direct investment (FDI) into the country. According to World
Bank (2006), FDI is an investment made to acquire a lasting management
interest (normally 10% of voting stock) in a firm or an enterprise
operating in a country other than that of the investor defined according
to residency. However, Foreign Direct Investment (FDI) is often seen as
an important catalyst for economic growth in the developing countries
because it affects the economic growth by stimulating domestic
investment, increase in capital formation and also, facilitating the
technology transfer in the host countries. (Falki, 2009) It is in view
of the above that the researcher intends to investigate influence of
foreign direct investment and the development of small and medium scale
enterprise in Enugu state, Nigeria.
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