The Effect Of Multinational Corporation On The Nigeria Economy


The activities of multinational corporation have generated so much controversy that many books and article have been written in an attempt to explain their operation and hence their role in the third world economics. It is not only the real nature of the multinational corporation but also their public  image  that  governs the actions and altitude towards them.

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Although some corporation have existed in was not until the early seventies that6 the term multinational corporation” started to appear in serious works of economics. This  phenomenon has spread in the past twenty years. As both an expression off a driving force behind the economic system that is sporation  are seen as bringing modernity and efficiency in the system.

Multinational corporations certainly figure in the fore frosty of the current economic and political debate at both national and international levels. By there are active in countries they focused attention on a number of new issue such as national sovereignty, the acceptance of development objective regard for cultural medals and scales of values the problems concurring the transfer of technology capital and activities and relation with the government of the host counter strictly speaking most of these have to do with the question of the compatibility of the corporations economic objective between which there is a continual interplay.

In view of the political importance of the question, is not amazing that it has been taken up by the press and mass media. As a result,  the controversy surrounding the multinationals has been carried beyond the  experts to the common man in  the street. The varieties of activities of multinational are viewed and evaluated difference depending on the approach adopted the social and political background of the observer. Hence we have two schools of through.

  1. The Radical thinkers and
  2. The orthodox thinkers.

The radical thinkers survey the activities of  the multinational corporation Randolph an Bradford (1996) multinational corporation critically to the kind of development which takes into account the need of the people. They communed that the fact that multinationals are increasingly investing labour intrusive activities such as assembling or the production of spare parts does not necessary mean that developing countries are getting a good deal. This school of through maintains that the benefits accuracy to for nation taxing of profit many revert to the industrialized countries through concession offered to lure foreign investments

Further more these critical proponents also argued that since the third world nation do not possess the kind of advanced technology known in the advanced countries it is virtually impossible for the less developed countries to compete with the advanced countries and the result will be a one way trade.

As Nwaukwo (1981) said that Foreign monopolies adversely militate against all efforts by developing countries to achieve take off into sustained economic growth. They invest capital in extractive in extractive  industries(and also distributive industries) and to a significantly less extents in productive industries. As a result the lion shae of economic surpluses generated from the extractive industries goes to the countries of the monopolies and because investment is not in productive industries resources from by product industries are not in existence. Thus the determination  of these developing countries to have industries that will generate forward and backward linkages in the economy are frustrated.

On the other hand the Orthodox school of thought argued that activities of multinational corporations are beneficial to the developing countries. The exponent of this school of thought professor Lewis et al, (191) claims that multinational corporation out as an external source of development finance. They maintains that foreign investment in development countries introduce the awareness of new products and processes in  these economics. They claim that by investing in developing countries, the multinational corporation rum some risk since the firm have to assess the country concerned both in it issues politic and economical viability thus, as a market where a seasonable return on the capital invested may be earned. If a ventune is not successful the loss is borne by the investor company or corporation.

There are other risks include termination of concessions by host country imposition of heavy royalties and taxes, nationalization of all or parts  of its investment.

This school maintains that in all cases, the government has the power to inhibits the policies and operation of any foreign investor especially when it is intentions run countries  to national deeds and priorities. When foreign investment is successful the state the population benefit from new employment  opportunities, the introduction of advanced skills and methods, the impact on social welfare, the payment of taxes to the government and also the payment of wages for local services supplied.

Subsequently http: fair constancy com/ globhr/mmc. Htm porters two proponents of multinational corporation those of proponent of multinational corporation those of positive role and those of negative role”

The first angure that their presence has a  precious effect on the economic development of poor counters because foreign investment fills  resources gaps in these countries improves the quality of factors of production introduces new technologies that would  otherwise be out of reach for poor countries and help to increase the level  domestic investment. Other arguments are the creation of jobs, the provision of new and better products the implementation of programs to improve health housing and education for employer and local communities and the professional training of local people.

However  this view  been challenged by research conducted by critical intellectuals and institution who present several argument linking MNCs misconduct with human rights violations with lack of respect by international standard and norms, with financial support to dictatorial regimes with conflict fuelling  with obscure practices to achieve certain advantages with the usurpation of land and resource from local communities with degradation of the environmental and of the living conditions, and eradication of indigenous communities among others.

Criticisms in more details:

MNCs do not always bring in the developing countries as much foreign capital as their proponent suggest (for instance between 1958- 1968, US manufacturing subsidiaries in Latin America obtained 80l of their financing from local national authorities) because of their strength MNCs have prejerencial aces to local resource’s and are there foreable to compete successfully with local entrepreneurs.

Foreign investment in developing countries usually leads to outflow of capital (ie repatriation of profits debt service royalties and fees etc)

The types of technology introduced as frequently inappropriate and hinder local technological development

MNCs frequently retain control of their advances technology and they do not transfer it to developing countries at reasonable prices.

The  benefit for local labour  is limited, since often MNCs are expatriate managers instead of training local citizens.

They usually create highly developed enclaves isolate from the rest of the communities that do not contribute to the expansion of the large economy

MNCs have at times intervened in political processes in their host states in developing countries eg (it in Chile in the 1970)

Their presence can endanger local cultures since imported foreign value become detrimental to the local value (which become old fusioned or poor). Consumption patterns are modified and tradition can be at state;

Environmental damage although not an exclusive of MNCs in developing countries becomes  more serious in these since protection laws are  often less demanding them in developed countries.  Furthermore, there are those regarded the New classical economists and the moderates  who argue that there is a mutually convenient marriage between the multinational corporation capital and technology and developing countries natural resource  and cheap labour.

However, in the light of these diversity of  opinions,  the aim of this study therefore becomes quite interesting as its primary strives to examine their activities in Nigeria. To investigate whether the activities are inimical or healthy to the achievement of Nigerian economic independence and stability.



If multinationals of corporation is the most dramatic economic development since the world war II it is also the least understood my the abound regarding genesis of mult6inational corporation it is commonly believed to be something raclically new and indeed unprecedented but it is also the revival of old trend. There were multinational galore in the 18th  century and the fear of these institution is not new either .

Both in the united states and in Europe major scientific and technical inventions of the nineteenth century led almost immediately to the emergence of multinational corporations: that is companies that were producing and selling good in more than one country. This was  the case with siemens in the  1890s, the English subsidiary was founded almost immediately after the  German parent company, as was a subsifdicnies in Russia, for long years these subsidiaries almost over shadowed the Germ parent company. Mc cornicks harvester and the reaper thresher of his English rival so did singer sewing machine and the Remigton typewriter within a few years after the origin patent had been issued. The trend continued in the   early nineteenth century when for instance the Swiss chemical and pharma ceutical complainers become multinationals. Fiat and ford both established their subsideicuies abroad within few years of their incorporation. In the 1920. Such prototype of the multinational business of today as unlived and Royal Dutch shell were established.

The surge of the multinationals in the fifties and sixties represented in large measure a resumption of the pre world I trend rather than a totally new development. It express a return of the economic vitality and capity to grow which world war I had paralyzed even in form the multinational corporation of the present

Closely resemble the pre world war I  development a parent company with wholly owned subsidiaries and affiliates in other countries.

Unlived and Royal Dutch shell the Anglo Dutch companies with two parent companies in two countries are far more truly multinational in their structure than the new multinational in their structure than the new multinational of the recent past.

In some areas undeed the were more multinationals in the mincteeath century an early twentieth century than there is today. Before the world war. For instance two insurance companies domiciled in truest part of Austria Hungary were writing large amount of life insurance through subsidiaries in thirty to forty countries allover the world.

Another myth about the multinational corporations is that it is entirely or primarily am American development. This statement is buttressed by  the fail that when the development got going in the 1950 it did so under the leadership of American companies the  reason for this was partly because of the buoyant economic and financial strength of America during this period. Thus despite the European common market the government of European countries for long time were unwilling to let their individual business become European business, mergers or even communities of Europe. Hence business of the nature were discourage and frowned upon by most Europeans government the British government being an exception). The Americans therefore were left to avail themselves of the  opportunities which the common market created. It is not too much an exaggeration to say that it is largely the American initiative b which transformed the common market from good business intentions into  economic reality. According to Drunker (11994) noted that the phase in which the leadership of the development of the multinational corporations was controlled by the Americans came to an end in the mid sixties. Since them non American business have taken the lead. By the early 1970 a little more than half of the business done by the multinational corporations was still done by companies headquarters in  many  other place and managed by Dutch Swiss, German, Swedish, French, English, Japanese and in a few cases Latin American companies.

By the mid- 1970s the movement towards global multinationals has become general. The growth of the non American multinationals has been faster than that of the American based ones and it promise to be faster still. The pan  European company in  particular is likely to emerge as a major in the world economy.



Before the coming of western civilization the vast majority of the population inhabiting this country lived either in a feudalistic society or communalism society as subsistence farmers of one kind of the other. Like  else where world wide, they lived to satisfy mans based need food and intimately linked to land use and tenure. Within this counter, the traditional African society had its philosophy regarding the politics and  economy. Traditionally it viewed the society not as organic whole in which a public sector was poised in mutual competition with a private  sector in which division and initiatives were  guided and impelled by price mechanism. As rukwu (1994) noted “society as a free  associuation of all for the benefit of all, an organic whole in which each individual generally contribute to the proceed for the good of every member it was a society of independent producers, which did not depend on wage employment. In traditional society of pre colonial Nigeria, individuals acquire. Land for homestead or farming throughout Nigeria land was regarded as the foremost property. According to Ezeaku (1989) trade was another important occupation in Nigeria. Exchange was by barter, people took to economic activities of our people especially the riverline areas where fishing net making canoe building with  wood, Kola was grown and produced  in larger quantity and bartered in western part of the country. Grass crops  grains, cattle rearing , commerce, carring and leathern crafts featured among the economic activities  of the northern part of the country.

Farming or primitive agriculture was the main occupation of the people from south Eastern part which include the Ibos, Efik, Iiv, Idoma Okigbo (1993) The pre colonial Nigerian Farmer  cultivation  his land using the system of shifting cultivation and bush following without the assistance of agricultural machine thus applying his own level of technology that is rudimentary tools. Agriculture predictor right from then was geared towards subsistence production and not for export. Therefore, the traditional economic system of Nigeria was relatively based on agriculture small scale manufacturing craft and trading.

As time went on however Nigeria became gradually responsive to the market opportunities which arose through contact with the outside world. As Jerome, Cathy William and perreault Jr. (1990) noted “these contact developed from two fronts. First the Trans Sahara trade   route through the historic trade route stretching from Timbukata to mortion African  Secondly by trade with Europeans especially the Portuguese at the coastal  parts of Nigeria.

Of the two fronts, the first to develop was the Trans Sahara trade  with North Africa. It was through this ruts that most Nigerian goods found their way into Europe. This means that for centuries, the inhabitansd of the Northern pant of this country has been engaged in extensive trade across the Sahara deseat, using the Trans Sahara trade route.



According to Davis (1998) reports fuat the British government masters on imperial duties in order to protect their economic interest introduced their own kind of currency the British silver shilling coins. The British government however did not find the introduction of her own currency easy because the coatal traders had developed conservatism. This made the British colonial government to mount extensive propaganda the nineties especially in the coastal area of  Nigeria, to poplanise her newly introduced currency. The idea behind this division was to clear the currency confusion which was happening the British   trade. The British colonial government came to the south to establish a standard currency to facilitate trade with Nigeria. With the abolistion of slave trade in the year 1808 by British government, the patte4rn of trade between  Nigeria and British had a dramatic turn. The notorious traffic in human being was re placed by trade in palm produce. Soon the newly introduced currency gained ground in Lagos and other south Western part of the country where the natives had been accustomed to European way, of life. Once British authority was firmly established in Nigeria she was pre- occupied with maintenance of law and order while also extracting raw materials from the home market and at the same time creating Nigeria demand for British manufactured goods. Under colonial rule, traditional pattern of economic activity become drastically  changed. Export crops as against food crop become introduced groundnuts. Cotton cocoa peanuts, plam produce coffee and tobacco. The need also arose to exploit our timber resources such as iroko mahogany, as well as coal and tin.

Between 1929 and 1936 the years of greatest  world wide economic depression great stwides were taken in the colonial Nigerian export economy Export value and volumes by heaps bounds.

Helleiner (1986) noted that by 1929 export values increased more than seven folds, showing an  annual growth rate of 5 percent to 7 percent. Export production in 1929 probably amounted to 5 to7 percent of the country gross domestic product.

The introduction of cash brought greater number of Nigeria farmers population not only commercialization of agricultural product but also into contact with the world market  with outside ideas and with western business method  and practices. Commercial activity was not restricted to

production for export. Tin which was crudely worked in 70c, was now being developed by the British mining technologist. the tin one along with cash crops were also being exported to the world market. The idea of a home based tine refinery was not conjectured. Coal also was discovered in Enugu.

To ensure that export crops introduced in the Nigeria economy could easily find their way into the world market the colonial government though in terms of liberal economic policies calculated to propagate and generate economic development. As at 1929 total government  expenditure on goods and service stood at about  6.3 million this was the time the expansion of economic activity by the colonial government and the volume of export kept pace Orji (1987).

The mode of western production had become a phenomenon of the Nigerian economy. An  important feature of economy was the  evolution of mechant companies and trading which since 1886 monopolize the trade along the Niger. The most prominent of these companies was the united African companies (UAC) which monopolized 40 percent or more of the Nigeria import export trade. The UAC was part of Niger companies which continue it is commercial activities after the  British imperial government had revolted its charter to these companies in 1900. Other include. The lever brothers company the campague francaise del Africa occidental (CAO) etc. their monopoly or quash monopoly position enable them ton ignore African needs and thus their investment programme did little to steer our country on the path of  development and modernization the6y rather to greater interest in making profit which the colonial government  did not tax them and in repatriating these profit ton their oversea headquarters. In 1956 many other companies including oil companies started pouring into Nigeria. Thus the existence of these foreign  firms and enterprises controlling and virtually dominating the country investment development the country investment development to become a fashionable talking point as regard than their role in Nigeria economy.



Multinational corporations can be grouped into six broad and different activities or sections namely.

  1. Banking finance and insurance
  2. Commerce
  3. Mining and dridling
  4. Transportation
  5. Construction
  6. Assembling and processing



The following banks operating in Nigeria are owned by foreigners

  1. Arab Bank
  2. Bank of America
  • Bank of west Africa
  1. Bank of India
  2. Chase Manhattan
  3. First bank formerly (standard bank)
  • International bank of west Africa
  • Society Generals bank
  1. Union bank (formerly Barclays bank
  2. united bank for Africa
  3. Wema bank limited

foreign insurance companies operating in Nigeria includes.

  1. British American insurance company
  2. Lioyd insurance company
  • America international insurance



The underlets multinational corporation are the major companies involved in trading in Nigeria.

  1. Niglee
  2. Niger lux
  • United Africa company (UAC)
  1. United trading company (UTC)
  2. campague francaise del occidentals (CFAO)
  3. Societe francaise Del Oaest African
  • Tate and lyle


In the area prospecting for, and drilling of oil prominent among the multinational corporation are

  1. Shell B.P
  2. Chevron oil company
  • Safrap (now elf)
  1. Mobil
  2. Teraco
  3. Esso
  • Agip
  • Tata



  1. the pan African Airways
  2. British Airways
  • Air France
  1. Trans world Airline
  2. Union de transport African
  3. United kingdom west Africa (UTA)
  • Panalpina


2.5e.          CONSTRUCTION

among the multinational corporations engaged in constriction in Nigeria are:

  1. Taylor wood plc
  2. Monier construction company
  • Julius Berger Plc
  1. Dumes Nigeria Plc
  2. Costain (WA)Plc etc.

These companies undertake major large. Scale construction activities such as roads bridges dams, reservoirs land reclamation public and private building and public parks.



Foreign companies engaged in assembling in Nigeria includes:

  1. Anambra motors company (ANAMMCO)
  2. Volkswagen motors Lagos
  • Peugot Automobile Nigeria Limited Kaduna
  1. Leyland motor company Ibandan
  2. Zabadna Electornics Lagos
  3. Nulec Electronics port Harcourt etc.

In the processing sector of the economy the following foreign companies are involved

  1. Lever brothers
  2. Patterson and zechomis (P2)
  • Niger Biscuits company
  1. Board park packaging company
  2. Cadbury
  3. Nestle
  • Nigeria Tobacco company (NTC) etc.



In the early 1970 a full decades after Nigeria political independence the agitation for economic independence began to gather momentum. This is an initiation of a process of indigenisation key foreign owned business.

Nwosu (1985) set out clearly the objectives and peroration of post war Nigeria. The plan among other thing aimed at creating a viable national economy march to self reliance. It was realized that to achieve the stated objectives it would be unrealistic to  leave the vital to leave  the vital sector of the economy to whims and caprices of the private sector under the direct and remote control of foreign large industrial companies. It was an attempt to avert this damger that the indigenisation decree was made. The Nigerian enterpridser promotion Decree better known as the indigenisation decree) which was promulgated on 23rd February 1982, came in effect on 1st April 1984. The promulgation of this decree was one  of the measure adopted to ward off the danger and it was the first real scientific approach to this subject. The decree was initiated with the following aims

  1. To create more opportunities for Nigeria indigenes businessman.
  2. To maximize local retention of profits
  3. To raise the level of intermediate and capital goods production

The indigenisation decree was group into two broad schedules. Schedule one consists of 22 different economic activities to be completely taken over by the indigenes of Nigeria. Half of these as the table would show services. Schedule two consists of 23 different enterprise in which non Nigeria’s have the right to participate provided that they satisfy the following conditions:

  1. The paid up capital of the enterprised
  2. The turnover of the enterprise exceeded #1 million during the base year 1978/79-80 which even of these two tests was considered by the Nigerian enterprise promotion board to be more appropriate and
  3. Indigenous Nigeria participation was not less than 40 percent supplement to official gazette (1982)



  1. Advertising agencies and public relation business
  2. All aspects of pool belting business and lotteries
  3. Assembling of radio radiograms, record chargers electronics domestic appliances not combined with manufacturing of their component.
  4. Blending and bottling of alcoholic drinks
  5. Blocks bricks and ordinary titles manufactured for building and construction work
  6. Bread and cake making
  7. Candle manufautures
  8. Casinos and gaining centres
  9. Cinemas and other place of entertainment
  10. Clearing and forwarding agencies
  11. Hair dressing
  12. Hulage of goods by road
  13. Manufucture of jewelry and related articles
  14. Landry and dry cleaving
  15. Newspaper publishing printing
  16. Ordinary garment manufacture not combined with production of textile materials
  17. Municipal and taxis services
  18. Radio and television broad casting
  19. Retail trade except by on with the department stores.
  20. Rice making
  21. Single manufacture
  22. Tyre retreading




  1. Beer brewing
  2. Boat buidding
  3. Bicycle and motorcycle tyre manufacture
  4. Bottling of soft drinks
  5. Coastal and inland perfumery manufacture
  6. Construction and industries
  7. Cosmetics and perfumery manufacture
  8. Departmental stores and supermarkets
  9. Distribution agencies for machines and technical equipment
  10. Distribution and servicing of motor vehicles tractor and spare parts there of or other similar objects.
  11. Estate agency
  12. Fish and shrimp trawling and processing
  13. Furniture making
  14. Insecticides pesticides and fungicides
  15. Internal air transport (Schedule and charter services)
  16. Manufacture of bicycles cement matches metal containers, paints varnishes and their achied products.
  17. Manufacture of soap, detergents, suitcases brief cases, handbags purses wallets, portfolios and shopping bags.
  18. Manufacture of wire nails, washers, bolts rivets and other similar articles.
  19. Paper conversion industries passenger bus services (interstate).
  20. Poultry farming printing of books, shipping travelling agencies wholesale distribution.
  21. Production or sawn timer, plywood, retirees and other wood conversion industries
  22. Screen printing and cloth dying
  23. Slaughtering storage distribution and processing of meat.

In 1977 the decree was revived following the recommendation of the industrial enterprise parcel the decree, which is  known as the Nigerian Enterprises momotion decree 1977 had its effectiveness back dated to 29th June 1977, the decree introduces promotion board, more powers to seal up defaulting enterprises takeover sell or otherwise dispose off such enterprise form this revision a new schedule II came  into being. This revision a new schedule  contains enterprises in which Nigeria are expected to own forty percent (40%) equity share.

The indigenisation decree therefore an attempt to prepare the ground work for the indigenous investor to complete with to foreign investors. Thought objective of promulgating the indigenous decree have not been met, nonetheless the decree provides a safe base for indigenous firm to take off with efficient protection of indigenous firms by introducing certain measure to protect the  infant industries and by adapting scientific method to weaken the multinational corporation,  firm will gradually find themselves in position to compete with their rivals.


Although a full evaluation of indigenisation decree can not be given largely because indigenisation decree is still in the process of complexion. However, the indigenisation decree has stimulated investment consciousness among Nigeria and with it, the volume and value of transaction in the Nigeria stock exchange has increased. For instance the first phase 1972- 74 affected a total of 594 business of which 326 fall under schedules I and 654 under schedule II and involved an investment of some # 103 million by Nigeria citizens and association. The banking system finance almost fifty percent (50%) of the purchased of the share  at the total market value of #80m. in addition the bankes provided # 6.2m against #4m contributed by private savings.

Indiqenisation decree has led to the rapid enlargement of the public sector it has extended and intensified government involvement on a wide economic control imposed on strategic point in the economic system. There is hardly any subsector of the national economy in which the government federal  or  state does not now maintain a frightening presence but this extensive involvement has been matched with any adequate number of trained competent and devoted personnel. The result is that the ordinary citizen is exposed to the shares of corporate mangers who rig distribution channels of scare commodities to their own personal advantage.

Indigenisation policy has understood the need for the transfer of technology in the form of technical managerial and enterpremeurial capacity thus while government owned ventures resort to recruitment of foreign experts in planning engineering and management private indigenous enterprises have had difficulties in securing government approval to do the same.

On the other hand some Nigeria played the front on to some of the multinational corporation which not only detested the  decree but were seen either decaying immediate compliance to the provision of the decree on circumventing some of the provisions.

A highlight of the decree is the failure of government to purchase and distribute a good proportion of the shares for and on behalf of the masses. Despite  the  fact that the public fund were used in purchasing the share only the few rich ones were able to buy up the shares. In consequence the decree turned out to be a grand design to increase the gap between the rich and the poor of the Nigeria society. Now basic issue is to what extent has indigenisation as a flexible method of economic control responded to the goals of national autonomy what on finds is that inspite of indigenisation foreign economic domination still persists., the present economy can not rise above the existing constraints inherent in the present economy pervasively dominated by foreign economic interests.

One Comment on “The Effect Of Multinational Corporation On The Nigeria Economy”

  1. Samuel Paul Kehinde says:

    This publication is very educative and will enhance knowledge about the subject matter. It could also help other research work in relations to Multinational Corporations in Nigeria and their underlying impacts. However, Government should support indigenous companies and order all government functionaries to patronize made in Nigeria goods. The spirit and the letter of Nigerian Content Act should be effectively and efficiently implemented.

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