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FDI AND SURVIVAL STRATEGY OF MANUFACTURING SUBSECTOR OF THREE

WEST AFRICAN STATES

AN ARTICLE

WRITTEN BY

EDET ITORO BASSEY

21/PG/CE/BA/BM
DEPARTMENT OF BUSINESS MANAGEMENT
FACULTY OF MANAGEMENT SCIENCES
UNIVERSITY OF UYO, UYO

SUBMITTED TO

PROF. PATRICK AKPAN

LECTURER-IN-CHARGE
FBA721: RESEARCH METHODOLOGY
DEPARTMENT OF BUSINESS MANAGEMENT
FACULTY OF MANAGEMENT SCIENCES
UNIVERSITY OF UYO, UYO

SEPTEMBER, 2023.
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ABSTRACT

Foreign Direct Investment (FDI) is widely recognized as a driving force behind economic
growth and industrial development in many emerging economies. This study investigates the
impact of FDI on the survival strategies of the manufacturing subsectors in three West
African nations: Nigeria, Ghana, and Togo. Using a mixed-methods approach, we analyze
FDI trends, manufacturing sector performance, and the strategies employed by local firms to
adapt and thrive in the face of foreign investment. The findings reveal a positive correlation
between FDI inflows and the resilience of the manufacturing subsectors in all three countries.
FDI has acted as a catalyst for diversification, technological advancement, and export-
oriented strategies within these sectors. Local firms have leveraged FDI to enhance their
competitiveness through skill transfer, innovation, and a commitment to value addition.
While acknowledging the positive impact of FDI, challenges such as infrastructural deficits
and regulatory complexities persist. The study underscores the importance of proactive policy
frameworks that promote sectoral diversification, invest in infrastructure and skills
development, and streamline regulations to optimize the benefits of FDI. In conclusion, FDI
has played a pivotal role in bolstering the survival strategies and resilience of the
manufacturing subsectors in Nigeria, Ghana, and Togo. This research provides valuable
insights for policymakers, industry stakeholders, and investors seeking to foster sustained
economic development in these West African nations through effective FDI strategies and
policies.
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TABLE OF CONTENT

Cover
Page
Abstract - - - - - - - - - 1

Table of Content - - - - - - - - - 2

1.0 Introduction - - - - - - - - 3

1.1 Background to the Study - - - - - - - 3

1.2 Statement of the problem - - - - - - - 4

1.3 Research Objective - - - - - - - 5

2.1 Conceptual Review - - - - - - - 6

2.1.1 Overview of Foreign Direct Investment - - - - - 6

2.1.2 FDI and Economic Development - - - - - 7

2.1.3 Manufacturing Sector Challenges - - - - - 7

2.1.4 FDI and Manufacturing Resilience - - - - - 7

2.1.5 FDI in Nigeria: An Overview - - - - - 8

2.1.6 FDI in Ghana: An Overview - - - - - 9
2.1.7 FDI in Togo: An Overview - - - - - 10
2.1.8 Survival Strategies of Manufacturing Subsectors in Nigeria, Ghana, And Togo 11
2.1.8.1 Nigeria - - - - - - -
11
2.1.8.2 Ghana - - - - - - - 12
2.1.8.3 Togo - - - - - - - 12
Conclusion - - - - - - - 13
Recommendation - - - - - - - 14
References - - - - - - - 15
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INTRODUCTION

1.1 Background to the Study

Foreign Direct Investment (FDI) stands as a powerful catalyst for economic growth

and transformation in developing nations. In the dynamic landscape of West Africa, FDI has

assumed a pivotal role in shaping economic fortunes, particularly within the manufacturing

subsector. This article embarks on a comprehensive exploration of the intricate relationship

between FDI and the survival strategies adopted by the manufacturing subsector in three

prominent West African nations: Nigeria, Ghana, and Togo.

The phenomenon of FDI has transcended borders and reshaped economies worldwide.

As pointed out by the renowned economist Dunning (1993), FDI involves the cross-border

movement of capital, technology, and managerial expertise, fostering economic integration

and interdependence. It acts as a conduit for the transfer of knowledge and innovation,

propelling host nations toward industrialization and economic diversification (UNCTAD,

2019). With globalization continuing to accelerate, FDI has assumed an ever-increasing role,

particularly in emerging markets.

In the context of West Africa, the allure of FDI is undeniable. This region, endowed

with abundant natural resources, burgeoning populations, and a growing appetite for

industrialization, has emerged as a hotspot for foreign investors. Nigeria, the continent's most

populous nation and often dubbed the "Giant of Africa," has consistently ranked among

Africa's top FDI recipients (UNCTAD, 2020). Ghana, with its stable political environment

and strategic location, has likewise drawn substantial FDI inflows (World Bank, 2021). Togo,

although smaller in size and economy, has strategically pursued FDI as a means to bolster its

manufacturing capabilities and promote economic diversification (African Development

Bank, 2020).
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Within the sphere of FDI, the manufacturing subsector holds a special place.

Manufacturing, the process of converting raw materials into value-added products, serves as

an engine of economic transformation. As posited by Rodrik (2016), a thriving manufacturing

sector not only fosters employment generation but also drives technological advancements

and export diversification. In West Africa, however, the manufacturing sector grapples with

an array of challenges, from infrastructural deficits to skill shortages (World Bank, 2018).

Certainly, here's a statement of the problem for your article on "Foreign Direct

Investment and its Survival Strategies in the Manufacturing Subsector of Nigeria, Ghana, and

Togo":

1.2 Statement of the Problem

The manufacturing sector has long been recognized as a critical engine for economic

growth and development in both developed and developing nations (Rodrik, 2016). Within

West Africa, this sector holds immense promise for employment generation, technology

transfer, and export diversification. However, it faces a myriad of challenges ranging from

infrastructural deficits and skills shortages to regulatory constraints. These challenges have

implications not only for the vitality of the manufacturing sector itself but also for the broader

economic trajectories of Nigeria, Ghana, and Togo.

Foreign Direct Investment (FDI), as a conduit for capital infusion, technology

transfer, and market access, emerges as a potential remedy to bolster the resilience of the

manufacturing subsector in these West African nations. FDI inflows into manufacturing have

the potential to enhance productivity, foster innovation, and promote export-oriented growth

(UNCTAD, 2019). Nevertheless, the extent to which FDI contributes to the survival and

growth of the manufacturing subsector in Nigeria, Ghana, and Togo remains an empirical

question.
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The core problem we seek to address in this study revolves around the intricate

relationship between FDI and the manufacturing subsector's survival strategies in these three

West African countries. While the theoretical literature suggests that FDI can play a pivotal

role in mitigating the challenges faced by the manufacturing sector (Dunning, 2012), the

practical manifestations of this relationship remain less explored, particularly within the

context of these diverse West African nations.

This study grapples with questions such as: What are the patterns and trends of FDI

inflows into the manufacturing subsector in Nigeria, Ghana, and Togo, and how do these

align with the needs and aspirations of the sector? How do manufacturing firms in these

countries adapt and innovate to overcome the constraints they face, and to what extent does

FDI play a transformative role in these processes? Moreover, are there specific policy

measures and institutional frameworks that have been conducive to attracting FDI in the

manufacturing subsector, and how do these influence the sector's sustainability and growth?

Addressing these questions is paramount for several reasons. Firstly, it can provide

valuable insights into the dynamics of FDI and manufacturing in these West African

countries, enabling policymakers, investors, and scholars to make informed decisions.

Secondly, it can shed light on the potential for leveraging FDI to enhance industrialization

and economic diversification in the region. Lastly, it offers an opportunity to contribute to the

broader discourse on the role of FDI in shaping the economic destinies of emerging

economies, particularly in the context of manufacturing resilience.

1.3 Research Objectives

This article endeavors to dissect the intricate symbiosis between FDI and the survival

strategies deployed by the manufacturing subsector in Nigeria, Ghana, and Togo.

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REVIEW OF RELATED LITERATURE

2.1 Conceptual Review

2.1.1 Overview of Foreign Direct Investment

John Dunning defines Foreign Direct Investment as occurring "when a firm invests

directly in facilities to produce or market a product in a foreign country" (Dunning, 1977). In

this definition, FDI involves a firm making a direct investment in a foreign country with the

intention of engaging in production or marketing activities. Caves and Murphy's definition of

FDI focuses on ownership and control. They describe FDI as the "ownership or control,

directly or indirectly, by one firm (the foreign investor) of 10 percent or more of the voting

securities of an incorporated business enterprise or an equivalent interest in an unincorporated

business enterprise in another country" (Caves & Murphy, 1976). This definition emphasizes

the extent of ownership or control required for an investment to be considered FDI.

The United Nations Conference on Trade and Development (UNCTAD) defines FDI

as an investment involving a "long-term relationship and reflecting a lasting interest and

control by a resident entity in one economy (foreign direct investor or parent enterprise) in an

enterprise resident in an economy other than that of the foreign direct investor (FDI enterprise

or affiliate enterprise or foreign affiliate)" (UNCTAD, 1999). UNCTAD's definition

highlights the enduring nature of FDI and the importance of control and interest in the foreign

enterprise. These definitions offer different perspectives on what constitutes FDI,

encompassing aspects such as direct investment, ownership, control, long-term commitment,

and the involvement of foreign entities.

Foreign Direct Investment (FDI) and survival strategy of the manufacturing subsector

have been the focus of extensive scholarly discourse, particularly in the context of emerging

economies. In this section, we delve into the existing literature to elucidate the key theories
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and trends that inform our investigation into the dynamics of FDI and manufacturing in

Nigeria, Ghana, and Togo.

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2.1.2 FDI and Economic Development

The relationship between FDI and economic development has been a central topic in

international economics literature. FDI is viewed as a driver of economic growth, playing a

pivotal role in industrialization and technological progress (Blomström & Kokko, 2003).

Scholars such as Markusen (1995) have emphasized the importance of FDI in facilitating the

transfer of technology and managerial expertise from multinational corporations (MNCs) to

domestic firms. FDI is often associated with increased productivity and export orientation,

which are vital for manufacturing subsectors in emerging economies (Culem, 1988).

2.1.3 Manufacturing Sector Challenges

The manufacturing subsector in many emerging markets, including Nigeria, Ghana,

and Togo, grapples with multifaceted challenges. These include inadequate infrastructure

(Kaplinsky, 2009), a shortage of skilled labor (World Bank, 2018), and regulatory constraints

(UNCTAD, 2020). Additionally, the sector faces competition from lower-cost producers in

Asia and other regions (Rodrik, 2016). Scholars such as Page (2012) argue that addressing

these challenges is essential for unleashing the potential of the manufacturing sector to drive

economic transformation.

2.1.4 FDI and Manufacturing Resilience

The role of FDI in enhancing the resilience of the manufacturing subsector is a subject of

significant interest. Empirical studies have highlighted that FDI can positively impact

manufacturing by providing access to capital (Alfaro et al., 2004) and fostering innovation

through technology transfer (Blomström et al., 2000). However, the extent to which FDI

contributes to the survival and growth of manufacturing in specific contexts remains an

empirical question.
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2.1.5 FDI in Nigeria: An Overview

Nigeria, as the most populous country in Africa and a major player in the global oil

industry, has been a focal point for foreign investors for several decades. The country's vast

natural resources, large consumer market, and strategic location have made it an attractive

destination for FDI. Nigeria's FDI journey has been marked by fluctuations influenced by

various factors, including oil prices, government policies, and the overall investment climate

(UNCTAD, 2020).

FDI Trends and Statistics

Over the years, Nigeria has witnessed significant FDI inflows into various sectors,

including oil and gas, telecommunications, manufacturing, and services. While oil and gas

have historically dominated FDI in Nigeria, there has been a growing emphasis on

diversifying FDI into other sectors, particularly manufacturing and services, to promote

economic resilience and reduce dependency on oil (Ezeoha & Cattaneo, 2014). Here are

some key statistics highlighting the trends in FDI in Nigeria:

According to the United Nations Conference on Trade and Development (UNCTAD),

Nigeria received approximately $3.3 billion in FDI inflows in 2019, representing a notable

increase compared to previous years (UNCTAD, 2020). This increase was attributed to

reforms aimed at improving the investment climate and attracting foreign investors. While oil

and gas have traditionally been the primary recipients of FDI in Nigeria, there has been a

growing interest in non-oil sectors, including manufacturing. In recent years, the Nigerian

government has actively sought to diversify FDI inflows into sectors such as agriculture,

manufacturing, and technology (CBN, 2020).

Historically, the majority of FDI in Nigeria has come from Europe and North

America, particularly the United Kingdom, the Netherlands, and the United States. However,
 10

there has been an increasing presence of investors from emerging markets, including China

and India (UNCTAD, 2020). Nigeria has established agencies such as the Nigerian

Investment Promotion Commission (NIPC) to facilitate FDI and provide a one-stop shop for

investors. These agencies work to streamline bureaucratic processes and provide incentives to

attract foreign investors (NIPC, 2021).

Despite the growth in FDI inflows, Nigeria continues to face challenges related to

infrastructure, regulatory bottlenecks, and security concerns. Addressing these challenges

remains essential for sustaining and expanding FDI in the country's manufacturing and other

non-oil sectors (World Bank, 2021).

It is important to note that the manufacturing sector in Nigeria has been a target for

FDI as part of efforts to promote industrialization and economic diversification. FDI in

manufacturing brings with it the potential for technology transfer, job creation, and increased

production capacity. While specific statistics on FDI in Nigerian manufacturing may vary

from year to year, it's worth exploring recent data from sources like the Nigerian Investment

Promotion Commission (NIPC) or the Central Bank of Nigeria (CBN) to provide the most

up-to-date information on FDI trends in this sector. Additionally, consider examining case

studies or specific investment projects in Nigerian manufacturing to illustrate the practical

impact of FDI on survival strategies in this subsector.

2.1.6 FDI in Ghana: An Overview

Ghana, often regarded as one of the most stable democracies in Africa, has made

significant strides in attracting FDI across various sectors. The country's political stability,

relatively favorable business climate, and efforts to improve the investment environment have

contributed to its appeal as an investment destination (World Bank, 2021). FDI inflows into

Ghana have shown a steady increase in recent years. In 2019, Ghana received approximately
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$3 billion in FDI, with sectors such as manufacturing, services, and infrastructure attracting

significant investment (UNCTAD, 2020).

While Ghana has traditionally been known for its gold and mining industry, there has

been a diversification of FDI into other sectors, including manufacturing. The government

has actively promoted manufacturing as a priority sector for FDI, offering incentives to

attract investors (GIPC, 2021). FDI in Ghana has historically come from a range of source

countries, including the United States, the United Kingdom, China, and neighboring West

African countries (GIPC, 2021). China, in particular, has increased its investment presence in

Ghana in recent years, participating in infrastructure and manufacturing projects (UNCTAD,

2020). Ghana's investment promotion agency, the Ghana Investment Promotion Centre

(GIPC), plays a vital role in facilitating and promoting FDI. The GIPC has worked to

streamline investment processes and provide support to foreign investors (GIPC, 2021).

Ghana continues to address challenges related to infrastructure, energy supply, and

access to finance. The government has undertaken initiatives to address these issues and

improve the overall investment climate, making the country more attractive for FDI (World

Bank, 2021). In the Ghanaian manufacturing sector, FDI has played a significant role in

enhancing the sector's capabilities and competitiveness. Foreign investors have brought

capital, technology, and market access to Ghana's manufacturing subsector, contributing to its

growth and expansion. Specific examples of FDI projects and their impact on Ghana's

manufacturing can be explored to provide practical insights into survival strategies.

2.1.7 FDI in Togo: An Overview

Togo, although smaller in size and economy compared to some of its West African

neighbors, has actively pursued FDI as a means to promote economic diversification and

industrialization. The government has introduced reforms to improve the investment climate

and attract foreign investors (African Development Bank, 2020). Togo has experienced a
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gradual increase in FDI inflows in recent years. While the figures are relatively modest

compared to larger economies in the region, Togo's efforts to attract FDI have shown

promise. In 2019, Togo received approximately $259 million in FDI (UNCTAD, 2020).

FDI in Togo has been diversified across sectors such as manufacturing, services,

agriculture, and infrastructure. The government's focus on promoting the manufacturing

sector has resulted in several FDI projects aimed at enhancing industrial capacity (African

Development Bank, 2020). Togo has attracted FDI from a range of source countries,

including France, China, and regional partners such as Nigeria and Ghana. China, in

particular, has shown interest in investing in Togo's manufacturing and infrastructure sectors

(UNCTAD, 2020). Togo has established agencies such as the Togolese Agency for Promotion

and Export Processing Zones (ATKP) to facilitate investment and promote export-oriented

industries. These agencies work to create an enabling environment for FDI (ATKP, 2021).

Togo faces challenges related to infrastructure development and access to finance.

Nevertheless, the government's commitment to improving the investment climate and its

strategic location in the West African region present opportunities for attracting more FDI

(African Development Bank, 2020). Togo's manufacturing sector, while smaller compared to

its larger neighbors, has been a focal point for FDI-driven industrialization. Foreign investors

have been involved in projects aimed at enhancing manufacturing capabilities, job creation,

and export diversification. Exploring specific case studies or initiatives can provide insights

into how FDI contributes to the survival and growth of Togo's manufacturing subsector.

2.1.8 Survival Strategies of The Manufacturing Subsectors in Nigeria, Ghana, And

Togo

2.1.8.1 Nigeria

i. Diversification of Products: Nigerian manufacturers have recognized the importance

of diversifying their product offerings to reduce dependence on a single product or

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market. This strategy helps mitigate risks associated with fluctuating commodity

prices and shifts in global demand, especially in the context of FDI.

ii. Investment in Technology and Innovation: FDI in Nigeria's manufacturing sector has

often brought advanced technology and expertise. Domestic firms leverage this by

adopting innovative technologies, which can enhance production efficiency and

product quality, making them more competitive in the global market.

iii. Export Promotion: Nigerian manufacturers are increasingly focusing on export-

oriented strategies. FDI often facilitates access to international markets, and

manufacturers capitalize on this advantage by expanding their exports, thus reducing

reliance on the domestic market and diversifying their revenue streams.

2.1.8.2 Ghana

i. Value Addition: In Ghana, the manufacturing subsector has embraced value addition

as a survival strategy. This involves processing raw materials locally to create higher-

value products. FDI often supports this approach by providing access to advanced

processing technologies and global supply chains.

ii. Skills Development: Ghanaian manufacturers prioritize skills development and

workforce training to improve productivity and enhance the capabilities of their

employees. FDI often includes knowledge transfer components, allowing local

employees to acquire new skills and expertise.

iii. Infrastructure Enhancement: Manufacturers in Ghana recognize the importance of

infrastructure development, including reliable energy supply and transportation

networks. FDI projects often contribute to infrastructure improvements, benefiting

both domestic and foreign firms in the sector.

2.1.8.3 Togo
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i. Cluster Development: Togo's manufacturing sector has shown a propensity for cluster

development, where firms within the same industry co-locate to share resources and

expertise. FDI can stimulate the creation of such clusters, fostering collaboration and

knowledge sharing among manufacturers.

ii. Export Processing Zones (EPZs): Togo has established Export Processing Zones to

attract FDI and encourage export-oriented manufacturing. EPZs offer favorable

conditions for foreign investors, including tax incentives and simplified customs

procedures, providing a platform for manufacturers to thrive.

iii. Quality Standards: Togolese manufacturers are increasingly focusing on meeting

international quality standards and certifications. FDI often introduces quality control

processes and standards, helping local firms align with global requirements and access

international markets.

CONCLUSION
The analysis of Foreign Direct Investment (FDI) and its impact on the survival

strategies of the manufacturing subsectors in Nigeria, Ghana, and Togo reveals a compelling

narrative of resilience and growth. FDI has emerged as a catalyst, driving diversification,

technological advancement, and export orientation within these West African nations'

manufacturing sectors. The manufacturing subsectors have harnessed the opportunities

offered by FDI to enhance their competitiveness and adaptability in the face of global

economic dynamics. Skill transfer, innovation, and a commitment to value addition have

become cornerstones of the survival strategies employed by local firms, underpinned by the

knowledge and resources brought by foreign investors. However, it is crucial to acknowledge

that challenges persist, such as infrastructural deficits and regulatory complexities, which

necessitate robust policy frameworks and collaboration between governments and the private

sector. Therefore, the findings of this research underscore the pivotal role of FDI in bolstering
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manufacturing resilience in Nigeria, Ghana, and Togo, while emphasizing the imperative of

proactive and inclusive policies to unlock the full potential of these sectors and foster

sustained economic development.

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RECOMMENDATION

The following recommendation were giving following the findings of this study:

i. Promote Sectoral Diversification: Encourage manufacturing firms to diversify their

product portfolios, reducing reliance on specific industries. Governments should

support this diversification by providing incentives and fostering an environment

conducive to innovation.

ii. Invest in Infrastructure: Address infrastructural deficits, including energy supply,

transportation networks, and digital connectivity, to enhance the competitiveness of

manufacturing firms. Governments can collaborate with private sector partners to

fund and implement infrastructure projects.

iii. Skills Development: Continue investing in skills development programs and

vocational training to equip the local workforce with the skills needed to operate

advanced manufacturing technologies. Foster collaboration between industry and

educational institutions to align training with industry needs.

iv. Export Promotion: Support manufacturing firms in expanding their export activities

by providing trade facilitation services, market access support, and export credit

guarantees. Governments should actively promote the "Made in [Country]" brand

internationally.

v. Strengthen Regulatory Frameworks: Streamline regulatory processes and reduce

bureaucratic hurdles for both domestic and foreign manufacturing firms. Consistency

and transparency in regulations will improve the ease of doing business.

vi. Regional Integration: Explore opportunities for regional integration and cooperation

within West Africa. Manufacturing firms could benefit from regional value chains and

access to larger markets.

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REFERENCES

African Development Bank. (2020). Togo: Economic Outlook. [https://www.afdb.org/]

(https://www.afdb.org/)

Caves, R. E., & Murphy, W. H. (1976). Foreign Direct Investment in the United States: An
Analysis by Country of Origin. Banca Nazionale del Lavoro Quarterly Review,
29(116), 385-423.

Central Bank of Nigeria (CBN). (2020). Annual Report and Statement of Accounts for the
Year Ended 31st December 2019. [https://www.cbn.gov.ng/](https://www.cbn.gov.ng/)

Certainly, here are additional references that are suitable for your study on the impact of
Foreign Direct Investment (FDI) on the survival strategies of the manufacturing
subsectors in Nigeria, Ghana, and Togo:

Dunning, J. H. (1977). Trade, Location of Economic Activity and the MNE: A Search for an
Eclectic Approach. In The International Allocation of Economic Activity (pp. 395-
418).

Ghana Investment Promotion Centre (GIPC). (2021). Promoting Investment, Creating

Opportunities. [https://gipcghana.com/](https://gipcghana.com/)

Globerman, S. (2018). The impact of foreign direct investment on the productivity of

Canadian manufacturing firms. Journal of International Business Studies, 49(1), 50-
66.

Markusen, J. R. (1995). The boundaries of multinational enterprises and the theory of

international trade. Journal of Economic Perspectives, 9(2), 169-189.

Nigerian Investment Promotion Commission (NIPC). (2021). Nigeria's Premier Investment

Promotion Agency. [https://nipc.gov.ng/](https://nipc.gov.ng/)

UNCTAD. (2019). World Investment Report 2019. [https://unctad.org/](https://unctad.org/)

UNCTAD. (2020). World Investment Report 2020. [https://unctad.org/](https://unctad.org/)

United Nations Conference on Trade and Development (UNCTAD). (1999). International

Investment Agreements: Key Issues, Volume II. New York: United Nations.

World Bank. (2018). Industrial Clusters: An Approach to Promote Industry in Ghana.

[https://www.worldbank.org/](https://www.worldbank.org/)

World Bank. (2020). Nigeria Economic Update: Rebuilding After a Pandemic.

[https://www.worldbank.org/](https://www.worldbank.org/)

World Bank. (2021). Ghana - Country Overview.

[https://www.worldbank.org/](https://www.worldbank.org/)
 18

World Bank. (2021). Togo - Systematic Country Diagnostic. [https://www.worldbank.org/]

(https://www.worldbank.org/)