Research Proposal on "Impact of Global Economic Crisis on the Nigerian Business Environment"

Research Proposal 25 pages (8527 words) Sources: 20

[EXCERPT] . . . .

Global Economic Crisis on the Nigerian Business Environment

Nigeria is a land of stark contrasts, a country in which the extremely wealthy live together with the starving individuals. This is highly intriguing in a context in which the country's economy is one to reveal the highest growth rates. The aim of this paper is to assess the business environment in Nigeria and to answer several questions relative to the impact the contemporaneous economic crisis has had upon the Nigerian business environment.

General Description of the Nigerian Business Environment

In terms of measured gross domestic product for 2008, Nigeria is ranked as the 34th largest economy of the globe, with a GDP of $338.1 billion. Business operations in the African country are primarily focused on the usage of the land's natural resources, mainly natural gas and petroleum, tin, iron ore and arable land -- agriculture is a great part in economic development, accounting for 18% of the national income, together with services with 31% and industry with 51%. Despite this structure, the labor force by occupation reveals a reduced efficiency of the agricultural operations as the field only generates 18% of the GDP but employs 70% of the entire labor force; 10% are employed in industry and 20% in services (World factbook, 2009).

Oil operations are the main contributor to national income, with significant GDP increases being registered in 2007 and 2008 in a context of growing international oil prices. Businesses in Nigeria are currently registering increased operational costs due to the need to adequately respond to environmental challenges. The country's main difficulties include soil degradation, deforestation, water pollution, desertification or the growing loss of arable land. Additionally, the pressure to respecting environmental issues has increased in Nigeria and Shell for instance, the largest oil producer in the African country, has been subjected to fierce criticism (Manby, 1999).

Another challenge for the business environment belongs to the demographic category and refers to the reduced life expectancy of the population -- only 46 years. In the highly developed western economies, a 46 years old employee is a useful addition to an organization as he is highly trained and skilled and the investments in training him are minimal, while the benefits are highly increased. In Nigeria on the other hand, employees may well not even reach the age of 46. A second demographic challenge is posed by the very high risk of contracting an infectious disease. This is threatening for all employees, as well as potentially foreign manager / owner and increased absenteeism due to infectious disease generate increased financial loses.

In terms of a structure of the Nigerian business environment, it becomes obvious that the country is showing a deficit relative to small and medium size enterprises. The reasons why SMEs fail to succeed in this environment generally revolve around denaturized public perceptions over their activities, political instability, economic turmoil or the failure of the national authorities to support these types of organizations. Additionally, poor infrastructure, political corruption and an uneven distribution of natural and human made resources also constitute reasons why the SME community plays a reduced role within Nigerian business (Mumbula, 2002).

Historically speaking, the Nigerian business environment has been dominated by the intense presence of foreign business operators, with the actual presence and role of local entrepreneurs being limited. While the same is true for today, modifications have occurred in percentage, meaning that the presence and role of local entrepreneurs is gradually increasing. "Business in Nigeria has long been, and still is, in the hands of foreigners: British, Syrio-Lebanese, Greek, French, Indian and a few other nationalities including, in recent times, a handful of Americans. It is only recently that Nigerians have attempted to try their skills in the competitive world of business. […] Business comparable in size to those operated by foreign companies has been alien to the indigenous entrepreneur" (Smythe and Smythe, 1960).

1.2. Problem analysis

The past decades have been characterized by intensifying forces of globalization, meaning primarily a transcending of national values from one country to the other. These values include a multitude of fields, such as politics, culture and most importantly to this research, economics. The globalization of economic forces translated into increased abilities for territorial expansion and increased abilities to benefit from the comparative advantages of numerous global regions (such as cost effective labor force or an abundance of natural resources). However, the process has been forcefully disclaimed by parties pointing out the disadvantages of globalization, such as a loss of local cultural identify, the exploitation of natural resources, an uncontrollable expansion of corporations and multinational organizations or, the one most important to this paper, the globalization of business risks.

1.3. Purpose of Study

The most relevant example of how the forces of globalization materialize in a transcending of business risks from one country to the other has been offered by the contemporaneous economic crisis. Emerged from within the United States in a context of an unsustainable economic model based on consumerism and culminating with the real estate crisis, the crisis soon took over all fields of the American economy. And not only this, it also soon came to affect all of U.S.' economic partners and their partners in turn.

The effects of the economic crisis were multiple and often diverse based on each particular situation in the assessed countries. The strategies developed and implemented in resolving the financial difficulties were as such also diverse. While in the U.S., the new Obama administration implemented the TARP, or the Trouble Assets Relief Program, the U.K. officials discussed a reduction of the value added tax. These strategies were as such based on the particular consequences of the crisis within each country. Given a status quo in which an international analysis reveals varied impacts, it is necessary to conduct an individual examination of each country of interest. The purpose of this study is then to assess how the contemporaneous economic crisis has impacted the business environment within Nigeria.

1.4. Relevant Research Questions

a) What are some general impacts the internationalized financial crisis has manifested within the Nigerian business environment?

b) Oil is the main export commodity in Nigeria. What role has oil played in the crisis?

c) What other commodities does Nigeria export, aside from oil, and how has the economic crisis impacted the business sectors exporting the respective commodities?

d) How have the Nigerian authorities responded to the crisis and to what extent have they managed to achieve the desired goals?

1.5. Statement of Hypothesis

The statement at the basis of this paper revolves around the idea that despite its limited economic abilities and interactions with the outside world (in trade operations other than oil), the economic crisis has left its mark upon the Nigerian business environment in statistically identifiable ways.

1.6. Definition of Terms / Concepts

This section is focused on presenting not necessarily the unfamiliar terms and concepts, but rather those issues which are discussed in the analysis and which require a thorough understanding.

Business environment -- the totality of organizations, regulations and players that make up the environment in which business operations are being conducted. Major representative figures of any business environment include federal legislations, small and medium size entities, large or even multinational corporations, organizational employees and so on.

Hoarding goods -- a situation in which the population will store large amounts of goods for fear and insecurity of the future; the actions of hoarding are generally perceived as unnecessary and not based on real threats.

Commodity reliance -- the level to which a country relies on a single commodity or a set of commodities as the basis for its international trade operations and the main generator of income in the GDP.

Historical background -- a retrospective look at the past features of a business environment in order to better understand its current status.

International involvements -- the degree to which global organizations or other countries will become engaged in operations within a given country and the effects their involvement will have upon the respective state. The effects can be both positive, such as an alignment to international values, but also negative, such as an uncontrolled exploitation of the country's natural resources.

International trade? -- import and export of commodities to and from one country. The final results are organized into the balance sheet which is constructed on annual basis and reveals either a surplus, when exports exceed imports, either a deficit, when the country has bought more that it has sold.

1.7. Delimitation (Scope) of the Study

Given the information already presented, the scope of this study becomes a clear one -- that of assessing the Nigerian business environment in light of the contemporaneous economic crisis and answering the posed research questions.

1.8. Significance of the Research problem and the jurisdiction for investigating it

The relevance of the research problem is a concept that depends on the stand taken by each individual party. To an international investor that is looking to open a business within the African country,… READ MORE

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