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Evaluation of Foreign Direct Investment (FDI) and Public-Private Partnerships Involving Chinese Investment in Nigeria.

1Eneka, W. A., 2Okwu-Delunzu, V.U. and 3Nnadi, E.O.E.

1Project Management Department, ESUT Business School, Nigeria

2Department of Geomet, Enugu State University of Science and Technology Agbani, Nigeria.

3Civil Engineering Department, Kampala International University, Uganda.

ABSTRACT

This research work evaluated the Foreign Direct Investment (FDI) and Public-Private Partnerships (PPP) schemes involving Chinese Investment in FCT Projects, Research objective which guided this work was to compare Chinese investments and PPP schemes as methods for infrastructure finance in FCT.  Research questions were formulated and tested. To carry out the work, comparative analysis of both investment options was done using the Google Research tool, interviews and an extensive literature review to evaluate the use of Chinese Investment and Public-Private Partnership (PPPs) in FCT Projects to find out which option met Sustainability Development Goals (SDG 11) criteria. Findings from the work show that Infrastructure projects are massive, and complex with multiple stakeholders. The research also found out that Chinese investment has increased Nigerian debt stock and that infrastructure paucity leads to multiple challenges in Nigeria. The T-test result was less than 0.05, null hypothesis was upheld and it affirmed PPP as a preferred method of financing infrastructure in Nigeria and recommended for the use of PPPs as the most cost-effective method of infrastructure financing in Nigeria in order to meet up with SDG 11.

Keywords: Foreign, Direct Investment, Public, Private Partnerships, Chinese and Investment

INTRODUCTION

Infrastructure development and financing are the foundation for the economy of nations. Its deficit is one of the major factors militating against progress in Nigeria. This study examines the financing of infrastructure projects in Nigeria using China Investments. [1] argued that infrastructure projects include roads, rails, hospitals, schools, nuclear plants and dams. In their work on intersections and societal transformations – they opined that the aggregation of money and money-worth required to execute these mega projects is called infrastructure financing.  From International Project Finance Association [2] Infrastructure Financing is a process which includes the development of investible funds into a pull, such as pension funds, insurance funds, private equity, structured debts and sovereign bonds to form an Infra Market to execute huge infrastructure projects. For instance, the Nigerian government establish InfraCo to finance infrastructure projects.  According to [3] megaprojects are infrastructure projects, which are complex and difficult to deliver. In their study of 30 European Infrastructure projects, they posited infrastructure finance is essential to delivering positive project outcomes. This research examined sustainable infrastructure finance in developing countries, using a comparative analysis of Chinese investment and the Public-Private Partnership (PPP) scheme in Nigeria. It examined their impacts on meeting the objectives of Sustainable Development Goals (SDG 11). The Central Bank of Nigeria [4] stated, that the accumulated debt stock of Nigeria stands at an estimated figure of $190B. Spending 92% of annual revenue on debt servicing has made the financing of infrastructure projects difficult. The huge national debt stock has made it a challenge to fund infrastructural projects. While the PPP option does not increase debt stock.

International Project Finance Association [2] stated that revenue shortage in the public sector due to population explosion, greater expectations from citizens and increasing pressure on the government to meet competing needs, made the seeking for an alternative infrastructure financing such as PPP imperative. [6] analyzed the link between economic development and poverty reduction. They posited that infrastructure development in the transport sector employs the skilled and unskilled. The report concluded that there is a symbiotic relationship between infrastructure finance and economic growth, enhancing the GDPs of Asian nations.

In addition, the paucity of infrastructure has restricted economic activities and increased the cost of goods and services in Nigeria. According to [6], lack of transport infrastructure has negatively impacted DIL Food businesses and is estimated to be N36B in foregone profits. Smaller firms have closed down, thereby contributing to unemployment and insecurity. He stated, that the projected government’s revenue across three major businesses (Cement, Sugar & Flour) will amount to N2.1 trillion in forgone taxes by 2022.  This tax revenue to the government may not be achieved if the problem persists. The study covers a period of ten (10) years (2011 – 2020). Generally, Infrastructure projects include transport, housing, education and technology. The accumulated debt stock of the Federal Government of Nigeria is estimated to be USD 100B according to [7]. The International Monetary Fund [8], posited that Nigeria is currently suffering from debt distress. It stated that Nigeria spends about 92% of its revenue on debt services.

The aim of this work is to Evaluate the Foreign Direct Investment (FDI) and Public-Private Partnerships Involving Chinese Investment in FCT Projects by examining whether Chinese investments and/or PPP schemes meet Sustainable Development Goals (SDG 11) in Nigeria and by assessing the impacts of Infrastructure Foreign Direct Investment (FDI) Finance on the economy. The following hypotheses were propounded: HO1There is no significant relationship between infrastructure finance via Chinese debts and/or PPP option and sustainable development goals and HO2: There is no relationship between FDI Finance and the Nigerian economy.

CONCLUSION AND RECOMMENDATION

In this section, a summary of findings from the data analyzed in sections three and four are given, and conclusions were drawn from the findings that 100% of the respondents preferred PPPs to Chinese Investments/loans for Infrastructure Financing. Over 95% agree that Chinese loans increase the Nigerian debt profile. 100% of the respondents agreed that PPPs can meet Sustainable Cities and Communities Development Objective (SDGs 11). 91.7% agreed that PPPs enhance local employment, while 8.3% suggest Chinese Investments. 100% agree PPPs enhance the Nigerian private sector better than Chinese loans.  The respondents preferred PPPs as the best alternative method of Financing Infrastructure in Nigeria. The work thus recommends the use of PPPs as the cost- effective method of infrastructure financing in Nigeria.

Contribution to Knowledge: The work provides further insight into this field of knowledge by systematically evaluating Chinese investments in Nigeria, as well as PPPs as a vehicle for financing Infrastructures. The work provides a comparative framework to assess Infrastructure Finance between Chinese investments and PPPs in Nigeria. After testing the framework in Nigeria, its application could be extended to other developing countries.

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CITE AS: Eneka, W. A., Okwu-Delunzu, V.U. and Nnadi, E.O.E. (2023). Evaluation of Foreign Direct Investment (FDI) and Public-Private Partnerships Involving Chinese Investment in Nigeria.  NEWPORT INTERNATIONAL JOURNAL OF SCIENTIFIC AND EXPERIMENTAL SCIENCES (NIJSES) 4(1)18-24. https://doi.org/10.59298/NIJSES/2023/10.3.1000

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