The Impact of Domestic Savings and Foreign Private Investment O Poverty Reduction in Nigeria 1981-2009.

CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY The rising profile of poverty in Nigeria is assuming a worrisome dimension as empirical studies have shown that Africa and Nigeria in particular has witnessed monumental increase in the level of poverty. Available records from the Federal Office of Statistics (1996), shows that about 71% of Nigerian households are considered poor, which reveals that poverty has been massive, pervasive and engulfs a large proportion of the Nigerian society. The high level of poverty has a lot of destabilizing effects on the citizens as well as the country. Poverty has the tendency to exacerbate crime, malnutrition, disease, unemployment, low life expectancy as well as general level of human hopelessness. The effects of poverty can therefore be said to be multidimensional in nature. In order to reduce the level of poverty, the Nigerian government introduced lots of incentives such as fiscal, financial and non-financial. In 1997 budget, government showed its intention to enter into investment production agreements (i.e. Bilateral, Regional and Multilateral treaties) with foreign governments or private organizations wishing to invest in Nigeria as well as discuss additional incentives with them. (Aremu 1997:2) The inflow of foreign resources such as foreign private investment has the tendency of stimulating employment, income, consumption and economic growth, hence the possibility of reducing poverty. Borenstein and Lee their book; “How does Foreign Investment affect Economic Growth” (1998); have shown that foreign private investment has significant effect on the host country. Though foreign private investment is made up of foreign direct investment and foreign portfolio investment, foreign direct investment is often preferred as a means of boosting the economy. This is because FDI spreads widely advanced technological and managerial practices through the host country and there by exhibits greater