8 min read
18 Feb

The main actors in a global knowledge-based economy are corporations (MNCs). The Dutch East India Company was the first multinational corporation in the world and the first company to issue stock (Mondo, Visione, 2008). It was also arguably the world’s first mega corporation, possessing quasi-governmental powers, including the ability to wage war, negotiate treaties, coin money, and establish colonies, Ames, Glenn.J. ( 2008). The history of multinational corporations in developing multinational countries is marked by its origins in policies of imperialism and Colonialism. Nigeria as a developing country has played host to MNCs long before independence till date. The number and activities of these MNCs have grown over time as Nigeria struggles to develop socio-economically as a nation Onudogo (2013).Multinational corporations are those powerful conglomerates that came into being in Nigeria after the abolition of slave trade, Aworom(2013). As a result, the European countries needed a market for surplus products and place to access cheap raw materials and labour, Africa especially Nigeria became the obvious destination. They dominated the Nigerian economy after her independenceConsequently, today, Multinational Corporations like the United African Company (UAC), Toyota motors, Coca-Cola, Lever brothers, Mobil oil; Shell BP etc. dominate the landscape of Nigerian economy. These corporations are very rich in all ramifications because of the profit they make in Nigeria. For instance, Nigeria is one of the largest producers of oil in the world which accounts for over 80% of her income. Since this sector of the economy is effectively controlled by multinational corporations who make enormous profit from the industry, one expects that they should spearhead the developmental process of Nigeria but unfortunately the reverse is the case.Most of these corporations have been fingered on several occasions playing active roles in the under development of Nigeria. These corporations are distinguished on the basis of their orientation into "ethnocentric" (home-country oriented), "polycentric" (host-country oriented) or "geocentric" (world-oriented), Bernadine (2003). International business is the spur for multinationals and both are currently boosted by the wave of globalization. The concept of globalization has given impetus to multinational corporations/enterprises to operate more easily in other parts of world other their home countries. The term ‘globalization ‘means integration of the world economies into one in a phenomenon aptly called “global village Onudugo( 2013).No one can deny the importance of MNCs in the current global business environment-there is usually huge capital investment in major economic activities; the country can enjoy varieties of products, services and facilities, brought to their doorsteps; there is creation of more jobs for the populace; the nation's pool of skills are best utilized and put to use effectively and efficiently; there is advancement in technology as these companies bring in state-of-the-arttechnology for their businesses. Most of the products we use are supplied by multinational corporations. Their presence and significance in our lives are undeniable facts. They have developed distinct advantages which can be put to the service of world development. Their ability to tap financial, physical and human resources around the world and to combine them in economically feasible and commercially profitable activities, their capacity to develop new technology and skills and their productive and managerial ability to translate resources into specific outputs have proven to be outstanding. At the same time, the power concentrated in their hands and their actual or potential use of it, their ability to shape demand patterns and values and to influence the lives of people and policies of governments, as well as their impact on the international division of labour, have raised concern about their role in world affairs. This concern is probably heightened by the fact that there is no systematic process of monitoring their activities and discussing them in an appropriate forum. The relevance of the foreign private sector to the development of developing countries was recognized in the International Development Strategy for the Second Development Decade unanimously adopted by the United Nations General Assembly in 1970. Countries such as Singapore, Malaysia, and Thailand have encouraged foreign direct investment actively because of the tremendous positive impact which multinational corporations have created on their economies. The growth in China's coastal sector is indisputably linked to the massive Investments by multinational corporations. However, historically, Japan and Korea have pursued more cautious policies regarding investments by multinational corporations. Most economists believe that the MNCs are exploitative as natural resources found in developing countries such as Nigeria meant for its developmental goals are not productively utilized due to de-capitalization of the economy in form of profit repatriation, Osuagwu and Onyebuchi(2013).Ozoigbo and Chukuezi,(2011) in full support of the above claim argued that the idea of investing in foreign land is not to better the lot of the host nation but to exploit as much as possible in order to develop the home country. Hence, they are often accused of destructive activities such as damaging of the environment, complicity in human rights abuses, and involvement in corruption and stifling of infant industries autonomy. Although, Bulu and Ango (2012) reports that many MNCs are now attempting to manage these complex set, hence, they are often accused of destructive activities such as damaging of the environment, complicity in human rights abuses, and involvement in corruption and stifling of infant industries autonomy issues in the host countries by implementing corporate social responsibility (CSR) strategies; because such issues may risk the success of their operations. But it is not in the nature of the MNCs to solve social or economic problems of the host countries. This is owing to the fact that the interaction between multinational corporations and host country institutions is not well understood (Wiig and Kolstad, 2010). There is a risk that multinational corporations facilitate patronage problems in resource rich countries, exacerbating their resource base. The influence of the big businesses is so pervasive that even if you don’t want them, you may find that sooner than later their products would find you. This is influenced by the convergence of ideologies, tastes, technologies, free and easy movement of people and capital, and international political cooperation. It is under the auspices of the foregoing that this study sets out to critically examine the negative effects of multinational corporations on the economy of Nigeria. This paper also suggests ways of minimizing these negative effects and how these corporations can be managed In Nigeria, the activities of multinational companies have been identified as questionable or even unethical because of the harms they have caused on the society. Because of their formidable resource base, they dominate the economy, straddle the indigenous entrepreneur and in the process create a monopoly. In the oil sector which is the economic mainstay in Nigeria, these corporations perpetrate heinous activities such as pollution of the environment, inadequate technology transfer, violation of human rights, blunt refusal to discharge their social responsibilities, gas flaring which destroys wildlife, seafood’s and farmland especially in the Niger-Delta region without adequate compensation. Equally, the activities of these multinational corporations have led to increase in anti-social activities like drug abuses, prostitution, kidnapping, armed robbery and murder etc. On the effect of these kidnappings on the socio-economic development of Nigeria, Ajaero submits that Nigeria lost N2.46 trillion in 2006, N 2.69 trillion in 2007 and N2.97 trillion in 2008 through attacks on oil installations resulting in shutdowns and spillages. Nigeria has also lost billions of Naira to foreign countries through act perpetrated by multinational companies such as tax evasion, bribery, under-declaration of profit, over-invoicing, smuggling, and racketeering. 


  1. • Environmental degradation: This is more conspicuous among the oil producing companies/firms in Nigeria. These companies have blatantly degrades our environment ,farmlands, wildlife, rivers through gas flaring, oil spillages Ibeanu(2009).At the same time, millions of naira have been lost on these issues because they seriously impede economic growth and development of the country. For instance, Nigerians lost 2.456 trillion in 2006, 2.69 in 2007 and 2.97 in 2008 as a result of the activities of these multinationals.
  2.  • Technological backwardness: It is in this area that the MNCs are regarded as the worst culprits because it is in this section that the MNCs play their greatest trick imaginable. The MNCs by way of purporting to help industrialize Nigeria create a branch-plant economy of small inefficient firms incapable of propelling overall development. The local subsidiaries exist only as enclaves in the host economy rather than as engines of self-reliant growth. These corporations intentionally and deceitfully introduce inappropriate types of technologies that hinder indigenous technological developments. These MNCs employ capital intensive productive techniques that cause unemployment. All these prevent the emergence of domestic technologies. Before the advent of the MNCs, in Nigeria, there were so many assorted types of technologies all over the country, though they were of low scale type. The MNCs rather than help them grow knocks them off systematically through the introduction of more advanced technologies. The MNC both retain the control of the most advanced technology and do not transfer it to Nigeria or the rest of the developing economies at reasonable prices. The negative impact of MNCs on Nigerian economy is most conspicuous in this area of technology transfer. Ozoigbo and Chukuezi (2011) noted that there are four main reasons for this assertion; a) Most of the imported technologies came under the industrial property system of restrictive patterns and license. This is a very sensitive barrier for Nigeria. The implication of this is that Nigerians cannot copy and internalize these technologies even if they have the capacity. Because of this, Nigeria has to make do with dependent development, which has several deleterious economic consequences. b) The MNCs jealously guard the technological know-how of their technologies by way of refusing to make use of competent staff. The MNCs instead use mere technicians who are at the last rung of productive process and simply assemble together what they knew not how it was produced. By implication Nigerians cannot learn from the technicians the intricacies involved in the production of the material or product. c) Another point of skillful deceit by the MNCs is the fact that where qualified and competent indigenous staff are to be exposed to the technological know-how of a type of production. Sometimes the type of technology they are exposed to is so sophisticated that they are mesmerized by it. In some cases, the high capital that may be needed simply embarrasses the nation in that they cannot afford it instead she prefers to forget about it. d) The MNCs increase the mal-distribution of income in Nigeria and other less developed countries. The case of oil workers earning in a month what some federal civil servants earn in a year does not augur well with the development of the nation. This step creates a class-conscious society, which does not help development as such. Therefore, the type of technology that the MNCs imported into the country is the one that serves the few urban elite because only they have the resources to get at it while the generality of the populace continue to face stark underdevelopment . 
  3. iii) - Structural Distortion: The principle of industrialization in an open economy of the Nigerian government in relation to the MNCs has given the MNCs the freedom to choose their line of operations, the locations of their industry and other productive processes. The MNCs natural base is usually in urban centers of the Nigerian society like Lagos, Kaduna, Enugu and Port- Harcourt. The industries in these cities are mainly those of oil and consumer goods. This urban concentration of MNCs distorted the structure of the society by enhancing an uneven “development”.
  4.  iv) - Political Instability: Because these corporations require a stable host government, which of course is sympathetic to capitalism, they try as much as possible to directly protect the existing government whenever a reactionary leader or group seems to take over the government. The MNCs try to maintain the status quo that is, dependent development which encourages the emergence of authoritarian regimes in the host country and go ahead to create alliances between international capitalist and domestic capitalist elite. This exploitative alliance is sustained by the intervention of the corporations’ home governments in the internal affairs of the less developed countries. In this fashion, foreign investment tends to make the host country politically dependent upon the metropolitan country, Gilpin (1987). It is on record that the MNCs kept President Mobutu of Zaire in power for so long because he was tutelage to them and with MNCs they sucked dry the economy of Zaire. The MNCs equally were responsible for the early exit and assassination of Patrice Lumumba because he would not allow their exploitative activities. The same story is true of Captain Thomas Sankara of Burkina Fasso and so many others. So the multinationals in the third world in particular and Africa at large have gained much from the political instability that exists here and there. Africa now has the greatest number of countries experiencing one kind of political crisis. 
  5. v) Profit Repatriation: These corporations have siphoned our economy by sending bulk of their profits to their home countries which they could have invested to develop our country, thereby, subjecting us to the whips and caprices of underdevelopment. Consequently, the royalties or pittance paid to the government by these MNCs are so inconsequential that they cannot be invested into heavy industrial projects. Today we are suffering from economic underdevelopment because of capital flight . vi) Bribery and corruption: These corporations are one of the agents of corruption in Nigeria. They have influenced our leaders negatively through bribes to earn their ends meet. This is a wrong signal to the international community and a big minus for Nigerians’ image and reputation.
  6.  vii) Salary Discrimination: Multinational corporations adopt discriminatory salary policies. Expatriates are highly paid while Nigerians are given peanuts when compared to what expatriates are earning monthly or annually. For instance, I personally witnessed this scenario at 7-up Bottling Company and Ama Breweries plc.located in Enugu. These companies not only pay fat salaries to these expatriates but also take responsibility for their up-keep to the extent of feeding their dogs.
  7.  viii) Inadequate Provision of Social Responsibilities: Multinational corporations have not done much in terms of social responsibilities. For instance, the largest oil producer in the country, Royal Dutch/Shell has been repeatedly criticized. In the early 1990s, several ethnic groups in Nigeria, which was ruled by a military dictatorship, protested against foreign oil companies for causing widespread pollution and failing to invest in the communities from which they extracted oil.
  8. ix) Cultural Degradation: The adverse effects of the presence and operations of MNCs in Nigeria are also felt in the area of our cherished cultural heritage. Indeed, there are negative effects of foreign direct investment on the cultural and social well-being of Nigeria and other fewer developing countries. The domineering presence of the MNCs in Nigeria is characterized as constituting a form of “cultural imperialism or colonization of the society” (Gilpin, 1987), through which Nigeria and indeed, the rest of the developing countries lose control over their culture and social development. These multinationals undermine the traditional values of the Nigerian society and introduce through its advertising and business practices, new values and tastes inappropriate to the Nigeria nation. An instance of this is the introduction of foreign violent and crime-laden films and videos as well as pornographic materials into Nigeria. It has been rightly observed that these foreign values are not only bad in themselves but are detrimental to the development of the country because they create demands for luxury and other goods that do not meet the true needs of the common masses. In considering the issue of the transfer of inappropriate technology, it has to be noted that Nigeria and other third world economies want not only the most advanced technologies but also labour-intensive technology, which will serve as appropriate technology, in order to maximize employment. Furthermore, the transfer of capital-intensive technology by the MNCs is not beneficial to the less developing economies like Nigeria. This is true because what would have taken a lot of time doing, machines do better in a lesser time and thereby save costs. The charge of cultural imperialism, despite its veracity, has to be stated at the same time that the very process of economic growth or development itself is destructive of traditional values, since it necessarily involves the creation of new tastes and unaccustomed desires. MNCs are inherently exploitative. Stopford(1998) states that advocacy groups often portray multinationals as globetrotting sweatshop operators, indifferent polluters, and systematic tax evaders. Exploitation remains a problem. But how much of this is a function of business in general, rather than MNCs in particular? He claims that smaller, local firms often can be much more exploitative than foreigners. Multinationals typically pay at or above the going wage and provide superior training. But even if most MNCs are well intentioned, they suffer from a credibility gap. Perhaps unwittingly, MNCs can fuel public concern by being culturally insensitive, not honoring promises made by their predecessors, and being inconsistent in other aspects of their "social contract" with local society. With regard to the environment, international big business is both the creator of pollution and the only resource available for its cleanup. The MNCs' record on pollution pales in comparison with those of many local businesses and state-owned enterprises. The issue of tax evasion continues to generate acrimonious debate, despite guidelines produced by the Organization for Economic Cooperation and Development. Multinational corporations protest that they pay their taxes responsibly. When many MNCs conclude that the host government had abandoned its favorable investment climate. They cut back on capital spending, closed some plants, and moved money offshore. *Employment policies: These corporations are in the habit of employing expatriates to fill in the key positions. That is why they adopt ethnocentric model of staff selection where expatriates are given preference in terms of recruitment and selection. This is inimical to the economic growth and development.
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