CHAPTER ONE

1.2 BACKGROUND OF STUDY

Multinational corporations have existed since the beginning of overseas trade. They have remained a part of the business scene throughout history, entering their modern form in the 17th and 18th centuries with the creation of large, European-based monopolistic concerns such as the British East India Company during the age of colonization. Multinational concerns were viewed at that time as agents of civilization and played a pivotal role in the commercial and industrial development of Asia, South America, and Africa. By the end of the 19th century, advances in communications had more closely linked world markets, and multinational corporations retained their favorable image as instruments of improved global relations through commercial ties. The existence of close international trading relations did not prevent the outbreak of two world wars in the first half of the twentieth century, but an even more closely bound world economy emerged in the aftermath of the period of conflict.

Multinational corporations take many different forms, ranging from companies that participate only in direct importing and exporting, to those making significant investments in foreign countries, to those buying and selling licenses in foreign markets, to others engaging in contract manufacturing (permitting a local manufacturer in a foreign country to produce their products), and still others opening manufacturing facilities or assembly operations in foreign countries.

In more recent times, multinational corporations have grown in power and visibility, but have come to be viewed more ambivalently by both governments and consumers worldwide. Indeed, multinationals today are viewed with increased suspicion given their perceived lack of concern for the economic well-being of particular geographic regions and the public impression that

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multinationals are gaining power in relation to national government agencies, international trade federations and organizations, and local, national, and international labor organizations.

Despite such concerns, multinational corporations appear poised to expand their power and influence as barriers to international trade continue to be removed. Furthermore, the actual nature and methods of multinationals are in large measure misunderstood by the public, and their long-term influence is likely to be less sinister than imagined. Multinational corporations share many common traits, including the methods they use to penetrate new markets, the manner in which their overseas subsidiaries are tied to their headquarters operations, and their interaction with national governmental agencies and national and international labor organizations

Multinational corporations are those mega companies that came into being in Nigeria after the abolition of slave trade; they became more prominent during the heydays of colonialism and have even dominated the Nigerian economy after her independence. Rodney 1972 reasoned that ‗after the abolition of slave trade, European countries needed market for surplus products and place to access cheap raw materials and labour, Africa thus became the obvious destination‘, consequently, today, multinational corporations like United Africa Company (UAC), Lever Brothers, Coca-cola company, Mobil oil, Shell BP, to mention but a few adorn the landscape of the Nigerian economy. Multinational corporations according to the Wikipedia free dictionary are organizations that are owned or control productions of goods or services in one or more countries other than the home country.

The emergence of Multinational Corporations in Nigeria dates back to the period of Mercantilist trade, when European traders and explorers came to trade in West African coast, including Nigeria‘s Coastal Towns like Calabar, Opobo and Lagos. This trading started with Human

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Merchandise and progressed to primary products like palm produce, cocoa and cotton. These companies transcend from pre- colonial to colonial and post colonial. The MNCS dominated all sector of African economy before independence.

Using a theory in the theories of international relations to explain multinational corporations i.e. the radical perspective, they offered a powerful critique of multinational corporations. Abhorring the notion that multinational corporations are positive instrument of economic development, radicals sees them as instrument of exploitation. Multinational corporations particularly those from the developed world, perpetuate the dominance of the North and explain, in large part, the dependency of the South. So the interdependence that multinational corporations represent to the liberals is interpreted by radicals as imperialism and exploitation. In that system, decisions are taken in the economic and financial centers of the world- Tokyo, Berlin, New York, and Seoul while the work of carrying out those decisions occurs in factories of the less developed countries. According to radical theorists, multinational corporations embody the inherent inequality and unfairness of the international economic system.

However, the activities of Multinational Corporations multinational corporations and their relevance to the economic development of third world countries (Nigeria inclusive) have always generated controversies in international economic relations. Being the most frequently studied of all the non-state actors in the international relations, Multinational corporations mean different things to different people. Thus, at the two extremes of international divide (developed and developing world) Multinational corporations merely represent both good and evil. While the developed countries stress the important roles of the Multinational corporations in the development process, the developing countries on the other hand express concern about the

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negative effects the operations of the Multinational corporations have on their growth and development.

Multinational Corporations operations create a variety of problems and opportunities for both the host and home countries governments.

The tremendous growth and spread of Multinational corporations has sparked controversy. Some people believe that Multinational corporations contribute to unemployment in the country where they are based by hiring foreign workers for overseas branches or affiliates. Some people also believe Multinational Corporations exploit the people and resources of other countries. However, others argue that Multinational Corporations create more jobs than they eliminate and that Multinational Corporations bring capital and technology to areas that need it. Examples of multinational corporations include; coca-cola, which is domiciled in almost every country in the world, shell oil, focuses more of its attention to oil producing states amongst others. In truth, these corporations gain a lot, as they prefer to interact with developing or under developed states where they can enjoy tax reductions, very cheap laws, break labour rules that would have been enforced upon them if they were in developed states. Gain access to very cheap mineral resources and gain large revenue as these developing and under developed states specialise in the production of primary goods and rely upon finished goods from other sources.

However, Third world countries are known to be highly dependent economically; they are devoted to producing primary products for the developed world and to provide market for their finished products. They are characterized with rural social structures, high population growth and wide spread poverty. They are sharply differentiated, for it includes countries on various levels

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of economic development. These countries are also known as the global south, developing countries and are least developed countries in most aspects. Many third world countries are located in Africa, Latin America and Asia. They are often colonized by another nation in the past. The population of third world countries are generally very poor but with high birth rate. From the given definition and characteristics of third world countries we can conclude and observe that Nigeria is a third world country.

This research is therefore aimed at examining critically the positive and negative effects of multinational companies towards the development of third world countries (Nigeria as a case study) or its underdevelopment.

1.2 STATEMENT OF PROBLEM

Multinational corporations exist everywhere in Nigeria because of the availability of resources based in the country, they dominate the economy, straddle the indigenous entrepreneur and in the process create a monopoly and accumulate unimaginable profits. The followings are the questions arising;

1.     How much is their contributions to the economic development of Nigeria given their enormous resources?

2.  Are the contributions of the multinational corporations negative or positive?

3 If the negative contributions outweigh the positive ones, what can be done to balance the effects?

These are most of the questions that will be answered in the course of the long essay.

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1.3 RESEARCH QUESTIONS

·         What is responsible for the formation of Multinational Corporations?