Between foreign direct investment (FDI) and outsourcing: which policy strategy will enhance the competitiveness of the Nigerian rice sector?
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Date
2015
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Abstract
The dawn of the global economy which ushered in trade liberalization has been greeted
with mixed feelings among developing countries. This is because liberalization rarely brings
about a zero-sum welfare gain among asymmetric participating countries. However, one
critical aspect of globalization that can benefit developing countries is the encouragement of
foreign sourcing. Outsourcing and foreign direct investment (FDI) will bring about strategic
linkages with local buyers, suppliers and other institutions. Against this background, this
study makes a case for foreign sourcing in the rice sector vis-à-vis the absorptive capacity of
the sector over a projected 10-year (2013-2023) period in Nigeria. It subsequently modelled
the welfare implication of FDI and outsourcing on the host nation.This study emphasized the
need for increased investment that will enhance technological spillovers to the local
producers. The model suggests that at a low level of human capital and high absorptive
capacity, it benefits the country to first encourage FDI and subsequently encourage more of
outsourcing as it is a better welfare enhancing strategy.The study concludes by
recommending the setting up of attractive investment environments and the formulation of
sound domestic and macroeconomic policy that would make the country more attractive for
investors
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foreign direct investment (FDI)