the political economy of multinational conglomerates in nigeria

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The Political Economy ofMultinational Conglomerates inNigeriaChinedu B. Ezirim PhD a , M. I. Muoghalu DBA b &Prosper Nkwocha PhD ca Department of Finance and Banking , University ofPort Harcourt , Nigeriab Pittsburg State University , Broadway, Pittsburg,KS, USAc Carols P. College of Arts and Science , Aba, NigeriaPublished online: 24 Sep 2008.

To cite this article: Chinedu B. Ezirim PhD , M. I. Muoghalu DBA & Prosper NkwochaPhD (2005) The Political Economy of Multinational Conglomerates in Nigeria, Journalof African Business, 6:1-2, 119-137, DOI: 10.1300/J156v06n01_07

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The Political Economyof Multinational Conglomerates

in Nigeria

Chinedu B. EzirimM. I. Muoghalu

Prosper Nkwocha

ABSTRACT. The paper analyzes the operations of the multinationalconglomerates so as to determine the impact of their operations on theNigerian economy, and especially on the manufacturing sector. It alsoinvestigated the possible problems hindering their operations. In an at-tempt to accomplish these objectives, we employed both survey and in-vestigative research methods using regression modeling and estimation.The analysis of the secondary evidence indicates that, generally, the in-vestment activities of conglomerates are found to positively and signifi-cantly relate to the output performance of the manufacturing sector ofthe Nigerian economy. The primary data analysis confirms this finding.On the other hand, they are seen to exploit natural resources and theworkforce to the detriment of the country, and by repatriating all avail-able funds and profits to overseas economies, the economy is starved ofneeded funds. However, their positive contributions to the Nigerianeconomy were seen to outweigh their negative contributions. This is partic-ularly true of the manufacturing sector. Two perennial problems confront-ing the conglomerates in their investment activities relate to environmental

Chinedu B. Ezirim, PhD, is Senior Lecturer, Department of Finance and Bank-ing, University of Port Harcourt, Nigeria (E-mail: [email protected]). M. I.Muoghalu, DBA, is Professor of Finance, Pittsburg State University, Broadway,Pittsburg, KS, USA. Rev. Prosper Nkwocha, PhD, is Director, Carols P. College ofArts and Science, Aba, Nigeria.

Journal of African Business, Vol. 6(1/2) 2005Available online at http://www.haworthpress.com/web/JAB

2005 by The Haworth Press, Inc. All rights reserved.doi:10.1300/J156v06n01_07 119

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hostilities and communal disturbances/social upheavals. Other problemsrelate to political risks, instability and impasse, and unstable economicclimate. [Article copies available for a fee from The Haworth Document Deliv-ery Service: 1-800-HAWORTH. E-mail address: <[email protected]> Website: <http://www.HaworthPress.com> © 2005 by The Haworth Press,Inc. All rights reserved.]

KEYWORDS. Conglomerates, multinationals, manufacturing sector,Nigerian economy, investment, output performance

INTRODUCTION

The general accusation is that the multinational corporations (MNCs)operating in Nigeria are simply economically exploitative, and more orless instruments of assertion used by the economically advanced coun-tries to dominate the less developed ones. This accusation is directed tothe conglomerates more than any other group of the MNCs operating inthe Nigerian economy. They are seen to command huge resources, whichif strategically employed would assist the economy on the ladder ofgrowth and development. Their investments should ordinarily stimulatethe economy unto desired progress. The facts on the ground are that theeconomy is “growing” dismally; inflation is the order of the day; compa-nies are operating below capacity, while indigenous ones are winding upby the day; the manufacturing sector is not at its best; and hence aggregateproduction is usually lower than expected.

Seeing these, can we say that the conglomerates are basically eco-nomic organisms that merely exercise themselves in the pool of eco-nomic sabotage, as some commentaries prefer to put it? Is it that capitalinjection by the economic giants unto the economy in general, and in themanufacturing sector in particular, have no significant positive influ-ence to propel the economic wheels thereof? Can we regard their invest-ment activities to be just a necessary evil that only shows that the entitythat is called Nigeria belongs to the global economy? Specifically, wegeneralize a research question as follows: Is there a significant relation-ship between the output performance of the manufacturing sector of theeconomy and the capital employed by investments, turnover, and theprofits of the multinational conglomerates operating in the country?These posers demand clear-cut answers in order to know the actualmagnitude and direction of impact of the investment activities of con-

120 JOURNAL OF AFRICAN BUSINESS

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glomerates on the Nigerian economy, and especially on the manufactur-ing sector.

It is the purpose of this study, therefore, to determine if there is a rela-tionship between the performance of the manufacturing sector and theoperations of multinationals in Nigeria, with special reference to theconglomerates. This study also aims at attempting to resolve the contro-versial issue of whether multinational conglomerates have actuallybeen a blessing or a negative input in developing economies such as theNigerian economy. Analysis of the problems facing the multinationalsin their investment activities in Nigeria is also a sub-objective of thisstudy.

THE MNCs AND THE NIGERIAN ECONOMY:A REVIEW

The multinational companies “arrived” Nigeria at the inception ofthe 20th century to run their commercial businesses long before thegovernment of Nigeria began to show any real interest in them. Withtechnological innovations from their countries of origin, they attemptto produce “identicals” of imported goods. The following, hithertodistributive firms, initiated their investments operations even beforethe early 1930s: United African Company (U. A. C.), London andRhodesia (LONRHO) Unilevers, John Holt, Paterson Zochonis (P. Z.),Companies Francaise de L’Africa Occidental (C. F. A. O.), SocieteCommercialle de l’ Quest African (S. C. O. A.) and United TradingCompany (UTC).

The type of policies pursued by the Nigerian Governments has facili-tated the attraction of multinationals into Nigeria. The colonial adminis-tration prior to independence in 1960, for instance, adopted a laissezfaire policy towards the operations of multinational enterprises in thecountry. Although these enterprises were to operate “within the framework of government regulations”, in actual practice, government regu-lations of business activities were virtually absent (Mummery, 1968).Thus, there was growth of large expatriate firms, which hampered thedevelopment of indigenous business. Economic power was concen-trated in large expatriate enterprises, the biggest of which was theUnited African Company limited (U.A.C.). By the late 1930s the UACcontrolled over 40% of imports into Nigeria and purchased on behalf ofNigeria Marketing Boards 43% of all Nigerian non-mineral exports.During this time, expatriate dominance was also evident in the fields of

Ezirim, Muoghalu, and Nkwocha 121

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banking, shipping and mining (Adewusi, 1986; Onyeiwu, 1987). Thegovernment also pursued many other policies that re-enforced the posi-tion of the British investors in the Nigerian economy. Among these isthe monopoly of West African Produce control Board under whichmany expatriate firms flourished since they were designated the board’sbuying agents.

In the early years of self-rule (in the early 60s), Nigeria continued theopen door policies inherited from the colonial administration. The coun-try’s first Development plan (1962-1968) created a climate that gave for-eign investors access to all the incentive policies and facilities that wereavailable to the Nigerian investors. These include income tax relief (from1958) for a specific period of years; generous accelerated depreciation al-lowances on machinery, equipment, structure etc., import duty relief(from 1957) on raw materials and components restrictions (quantitativeand tariff) on import of finished products; exchange and investment guar-antees; and the provision and continued expansion of economic and so-cial overhead capital (e.g., industrial estate, power production, etc.).While such generalized industrial incentives and sheltered market haveundoubtedly had a crucial impact on the structure, character and level offoreign investment in Nigeria, the enrichment of the internal market andthe country’s vast and varied resource endowments in men and materialshave equally been identified as important factors for the purpose of influ-encing the amount of foreign investment flow into Nigeria (Fabayo andAlade, 1984). Avenues to encourage foreign investors to invest in Nigeriawere further strengthened when, in 1965, Nigeria became one of the firstsignatories to the World Bank’s Convention on the settlement of invest-ment disputes between states and nationals of other countries, guarantee-ing third party arbitration in any investment disputes originating inNigeria.

The attraction of foreign investments continued into the Military ruleof 1966-1979, except for the war years when little efforts were made toattract new investments. For example, in 1973 the Federal governmentcut import duties, relaxed foreign exchange regulation and expatriates’quota regulation, while company tax was reduced from 60% to 40%.The liberalized investment policies pursued by the government duringthis period did not, however, continue till the end of the decade withoutsome reconsideration.

During the period of 1976-1979, the Nigerian Government, though itcontinued to protect foreign investments, appeared to be more con-cerned with the regulation of foreign investors. For instance, in 1976,government prohibited the distribution of dividends in excess of 30% of


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profit before tax. The same government, however, later announced re-ductions in tax break to foreign construction firms, increased personalincome tax affecting expatriate managers, and announced new exchangecontrol policy measures that reduced the percentage of fees for consult-ing and technical services that could be remitted. Though an increasingamount of regulation of multinationals has accompanied the Nigeriangovernment’s investment incentives, foreign investments enjoy an at-tractive business climate. In recent times, the realization that the recov-ery of the Nigerian economy from the present economic recessiondepends more crucially on the size, composition, and quality of foreigninvestments the country can attract, particularly in the medium term,has led to more relaxed regulations and increased incentive measures.Besides, the development of some basic industries and infrastructuresconsidered necessary for expanding and consolidating the industrialbase of the economy is being proposed and embarked upon by the gov-ernment to create a conducive atmosphere for foreign investors. The at-traction of such needed foreign investment would provide neededtechnology and other investment pre-requisites for the production of in-dustrial inputs (Ezirim and Ojukwu, 1998; Ezirim, Emenyonu andMuoghalu, 2002).

The multinational companies have exerted much influence on the Ni-gerian economy. It is estimated that Nigeria accounts for about 22% ofall the foreign investment in Africa as at 1972, valued at about US$2.1billion, almost doubling its stock of foreign direct investment as at1967. By this, Nigeria, with a population of about 150 million people,became the fifth most important foreign direct investment-hosting na-tion in the third world, coming after Brazil, Venezuela, Mexico, and Ar-gentina (Hveem 1975:66).

In every country, government policies influence the entry and activi-ties of foreigners. Nigeria had policies that are favorable to multination-als, which attracted a lot of them. Although these enterprises were tooperate “within the frame work of government regulations”, in actualpractice, government regulation of business activities were virtually ab-sent in the years before 1968 (Mummery, 1968). Large expatriate enter-prises with heavy trading licenses emerged, promoting economic power,although these became a hindrance for indigenous businesses. Leadingthese multinationals, United African Company Limited (UAC) was al-ready, by the late 1930s controlling over 40% of Nigeria’s imports intoNigeria. It also purchased, on behalf of Nigerian Marketing Boards,43% of all Nigerian non-mineral exports. Adewusi (1986) and Onyeiwu(1987) gave testimony to the expatriate dominance of economic activi-


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ties, which was also evident in the fields of banking, shipping, and min-ing. Besides, the Nigerian Government also pursued many other policiesthat reinforced the position of the British investors in the Nigerian Econ-omy. Among these is the monopoly of West African Produce ControlBoard, under which many expatriate firms flourished as they were des-ignated the board’s buying agents.

In Nigeria’s first ever Development Plan of 1962-1968, continuingwith the open door policies (which the colonial masters initiated) thegovernment created a climate that gave foreign investors access to allthe incentive policies and facilities available to the Nigerian investors.Some of these policies included income tax relief (since 1958) for a spe-cific period of years; generous accelerated depreciation allowances onmachineries, equipment, structures, etc.; import duty relief (since 1957)on raw materials and components; restrictions (quantitative and tariff)on import of finished products; exchange and investment guarantees;and the provision and continued expansion of economic and social over-head capital (e.g., industrial estates, power production, etc.). Fabayo andAlade (1984) noted that these generalized industrial incentives andsheltered market have undoubtedly had a crucial impact on the struc-ture, character and level of foreign investment in Nigeria. The enrich-ment of the internal market and the country’s vast and varied resourceendowment in men and materials have equally been identified as impor-tant factors for the purpose of influencing the amount of foreign invest-ment flow into Nigeria.

In 1965, Nigeria had a great honor of becoming one of the first signa-tories of the World Bank’s convention on the settlement of investmentdisputes between states and nationals of other states, guaranteeing thirdparty arbitration in any investment disputes originating in Nigeria. Thefallout of this was a wide vista of opportunities to encourage foreign in-vestors in Nigeria. Liberalized investment policies by the governmentcontinued to be in force till the later half of the 1970s, to the favor of for-eign investments. However, as the decade began to close, the govern-ment started changing policy directions towards regulation of foreigninvestors. Prior to 1975, the Federal Government had cut import duties,relaxed foreign exchange regulations and expatriate quota law while re-ducing company tax from 60% to 40%. But between 1976 and 1979there were changes such as the government prohibiting the distributionof dividends in excess of 30% of profit before tax. Even when a taxbreak was given to construction firms additional restrictions such as in-creased income tax rates and lowered repatriation amounts were im-posed.


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By the 1980s up till date, a new realization seems to be in place. For-eign investments enjoyed an attractive business climate in Nigeria inspite of increasing regulations of multinationals. Contrary to the viewsof critics, overwhelming evidence seemed to support the fact that the re-covery of the Nigerian economy depended more crucially on the size,composition, and quality of foreign investments. This has led to moreand more relaxed regulations and increased incentive measures. In re-cent years, the government has consciously embarked upon creating aconducive atmosphere for foreign investors by developing some basicindustries and infrastructures that are considered necessary for expand-ing and consolidating the industrial base of the economy.

THE CONGLOMERATES AND THE NIGERIAN ECONOMY

The conglomerates happen to be the most important of the multina-tional companies in the Nigerian experience. They are multinationalcompanies without the same characteristics but with billions of dollarsworth of manufacturing investments combined with trading and distri-bution. In the same country they may have several industries or facto-ries or super shops (or all of them) put together. These conglomeratesgive life to the stock exchange and constitute the greatest life-wire of theNigerian economy. Nigerians receive the greatest stock dividends, tech-nological benefits, manpower development, international exposure andother fringe benefits from these conglomerates. The government re-ceives taxes and other fiscal amounts, besides other political, social,economical, and international aid from them. In 1993 when it becamenecessary to have an interim government, the government appointed theChief Executive of the United African Company Nigeria (UACN), thetopmost conglomerate in Nigeria, Chief Ernest Shonikan, to the post ofInterim President of the country. This was because of the recognition ofthe amount and quality of management expertise and exposure that theChief Executive of a conglomerate can possess. Today, the conglomer-ates parade some of the most experienced administrators (usually in-cluded in every think-tank, trouble shooting team, special discussionpanel, etc.) appointed to tackle very sensitive and crucial issues in thenation. In Nigeria, as earlier indicated, the list of the quoted conglomer-ates includes: A. G. Leventis (NIG) PLC, C. F. A. O. (NIG) PLC, JohnHolt PLC, Lever Brothers Nig. PLC (now Uniliver), P. Z. IndustriesPLC, S. C. O. A. PLC, U. A. C. N. PLC, and U. T. C. (NIG) PLC. Theiroperational details can be seen in the Nigeria Stock Exchange fact books


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for various years. This list is by no means comprehensive of all multina-tional conglomerates operating in the economy. Very many of them areseen in the oil and gas sector, but most of them fail to avail themselvesthe facilities offered by the Stock Exchange to get quoted. Had this beenotherwise, the list would have expanded much more. Hereunder arebrief profiles of these companies.

METHODOLOGY

This study uses both simply econometric models and survey tech-nique modes of inquiry in order to analyze the impact of multinationalconglomerate operations on the manufacturing sector of the Nigerianeconomy. We employed the two approaches due to the apparent limita-tions inherent in each mode of inquiry as observed by Mintzberg (1979)and Betling (1980), and cited in Baridam (2001), especially in connec-tion with the exclusive use of interview or questionnaires. The question-naire used to elicit data for this study was standardised in line with theconcerned organizations, with mostly closed-ended structured ques-tions relating to the research questions. Our secondary sources con-sisted mainly of statistical publications of the Central Bank of Nigeriaand the Nigerian Stock Exchange. Our population for the study consistsof all the conglomerates that are quoted on the Nigeria Stock Exchange.In Nigeria, there are eight (8) of them in number, as indicated earlier inthe paper. The study covers a period of 25 years, from 1975 to 1999.

The Models

Two multivariate models are specified for our purposes in the presentstudy:

1. Relationships are hypothesized to exist between the output perfor-mance of the manufacturing sector Qm over time, t, and the levelsof capital employed (C) by the conglomerates, the turnover (T)and the after-tax profit (P) of the conglomerates. Explicitly andlinearly, we have

Q E E C E T E P U; Omt 0 1 t 2 t 3 t= + + + + >β β β1 2 3 (1)

Where U is the Stochastic term, and bis are parameters.


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2. Relationships are hypothesized to exist between the growth level ofthe economy (measured by the rate of growth of the economy), RG,and the investment performance indices of the conglomerates de-fined in terms of the deflated capital employed, PAT, and turnover.We can cast the variables into rates by dividing these measures,namely C, T, and P by the GDP of the manufacturing sector. Thereason for this is to analyze the relative impact of the conglomerates(as they relate to the manufacturing sector) on the growth level ofthe economy. It is expected that this will help us gain knowledge ofthe relative efficiency of their operations on the overall economy’sgrowth. The model can be specified as follows:

ß C ∑ ß T ∑ ß P ∑RGt = D0 + D1

®®

� D2®®

� D3®®

�E; D1, D2, D3 > 0 (2)Qm

�Qm

�Qm

�© �t © �t © �t

Where E is the stochastic term and other variables remain as previouslydefined.

Operational Measures of the Variables

The main independent variables investigated in this study are the op-erational performance of the conglomerates operating in the country,measured by: the volume of capital employed by the conglomerates; thelevel of turn-over; the level of after-tax profits; and the ratio of these tothe output level of the manufacturing sector. The major dependent vari-ables studied are the performance of the manufacturing sector of theeconomy (measured by the manufacturing sector GDP), and the growthlevels of the economy over the years.

PRESENTATION AND ANALYSIS OF PRIMARY DATA

Preliminary Information

A total of eight (8) conglomerates, representing 100% of the popula-tion quoted on the Nigerian Stock Exchange, were studied. Thus onlyeight sets of questionnaires were distributed and all were retrieved. Thequestions were completed well and showed a high degree of consis-tency. The only limitation we anticipated was the subjectivity of re-sponses, which may not alter the eventual conclusions, having beentreated with caution. Senior members of management (with at least 15


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cognate working experiences with the companies) completed the ques-tionnaire sets. They were all graduates, with the lowest qualification be-ing H.N.D. These factors helped the researcher to attach a reasonabledegree of reliability on the information provided.

Positive Contribution of Conglomerates to the ManufacturingSector and the Economy

Conglomerates operating in the country are said to contribute posi-tively to the growth of the manufacturing sector as well as the economy ingeneral. A list of such contributions following Ezirim and Ojukwu (1998)would include transfer of capital, employment generation, payment ofhigher wages compared with the indigenous firms, transfer of technol-ogy, performance of social responsibility, payment of taxes and paymentof dividends. Others include provisions of good quality products, boostingmanufacturing and other sectors of the economy, and generally raising liv-ing standards among citizens. The assessment and ranking of the respond-ing conglomerates, as to the extent to which they performing these roles,was a subject of question in the research instrument (the questionnaire).The results are summarized on Table A. As can be observed, the conglom-erates perceive their role in boosting the manufacturing sector (90.6% ofthe maximum expected points) as their greatest contribution, followed bythe provision of good quality products (90.6%), employment generation(87.5%), raising living standards (87.5%), transfer (injection) of capitalinto the economy (84.4%), and payment of dividends, in that order.Though Ezirim and Ojukwu (1998) found that multinationals pay higherwages than indigenous firms, which is perceived as a strong and positivecontribution, this point is not strongly emphasized among the conglomer-ates studied in this present work.

Negative Contribution of Conglomerates in Nigeria

Table B describes or summarizes the results of the conglomerates’impressions as to their negative contribution to the manufacturing sec-tor in particular, and the economy in general. Respondents’ assessmentsshow that the exploitation of natural resources (to the detriment of theeconomy) is seen to be the greatest negative contribution of the multina-tionals, with a mean score of 3.4 in a 4-point maximum, and percentagedistribution of 84.4% out of the maximum score of 100%. The secondmost detrimental factors are the exploitation of workforce (71.9%) andrepatriation of funds and profits (71.9%). The respective means scores


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are 2.9 each in a 4.0-point maximum score. The Conglomerates studieddo not see tax avoidance and evasion and the stifling of infant industriesas matters of much economic consequence. The mean and percentagedistributions are 1.3 (31.3%) for tax evasion and avoidance, and 2.4(59.4%) for stifling of infant industries respectively.


TABLE A. Perception of Respondents on the Positive Contribution of Con-glomerates to the Manufacturing Sector and the Economy

Details Ratings

4 3 2 1 AVE %

A Transfer (Inflow) of capital 4 3 1 - 3.4 84.4

B Employment generation 4 4 - - 3.5 87.5

C Payment of higher wages thanindigenous firms

2 3 2 1 2.8 68.8

D Transfer of technology 5 2 1 - 3.5 87.5

E Social responsibility 2 2 2 2 2.5 62.5

F Payment of taxes 4 2 1 1 3.1 78.1

G Payment of dividends 4 3 1 - 3.4 84.4

H Provision of quality products 5 3 - - 3.6 90.6

I Boosting the manufacturing sector 6 2 - - 3.8 93.8

J Boosting other sectors 3 2 2 1 2.9 71.9

K Raising living standards 4 4 - - 3.5 87.5

Mean Average Rating = 36.0/11 = 3.2 36.0

TABLE B. Respondents’ Perception of the Negative Contribution of Conglom-erates in Nigeria

Details Ratings

4 3 2 1 AVE %

A Exploitation of workforce 2 2 3 - 2.9 71.9

B Exploitation of natural resources 4 3 1 - 3.4 84.4

C Repatriation of funds & profits 2 3 3 - 2.9 71.9

D Tax evasion and avoidance - 1 3 4 1.3 31.3

E Stifling of infant industries 1 2 4 1 2.4 59.4

Mean average rating = 14.5/5 = 2.9. 14.5

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A critical look at Tables A and B reveal that the positive contributionshave an approximate mean score of 3.2, which represents about 80.7% ofthe entire distribution. On the other hand, the negative contributionclaims an approximate means score of 2.9 (72.5%) of the entire distribu-tion. By comparison, the positive effects or contributions outweigh thenegative contributions of conglomerates to the manufacturing sector aswell as to the economy in general. This is in line with the findings inEzirim and Ojukwu (1998) in their study of the multinationals.

Problems of Conglomerates Operating in Nigeria

The next issue of importance to the researcher relates to the problemsconfronting the conglomerates in their investment activities. Six of theseproblems were identified as: (a) socio-cultural bottlenecks, such as cus-toms, language and values; (b) a hostile environment, such as commu-nal disturbances and social upheavals; (c) political risks, instability ofgovernments, and impasse, etc.; (d) excessive government regulationon dividends, repatriation, indigenization, and incorporation, etc., (e) un-stable and unpredictable economic climate; (f) inflationary trends re-sulting in income loss (see Table C).

Apart from inflationary trends and excessive government regulation(which scored average scores of 1.8 (43.8%) each), the conglomeratessee the other factors as possessing a serious influence in their opera-tions. The factors with the greatest effects are hostile environments withcommunal disturbances and social upheavals, which accounted for87.5%, or 3.5, of the total distribution. The next in influence is thesocio-cultural factor (accounting for 81.3%), and unstable and unpre-dictable economic climate that accounts for 78.1% of the distribution.The overall mean score is 2.3, 58.3% of the maximum score. This distri-bution shows that the problems encountered by these conglomerates arenot beyond their powers. On the other hand, they seem to be tied over inthe midst of them.

ESTIMATION RESULTS AND ANALYSIS

We estimated the models earlier specified using the SPSS computerprogramme. The raw data were the time-series annual data of the vari-ous variables identified earlier, namely operational performances of themultinationals represented by the capital employed, the turnover, andthe profit after tax. These were related to the output performance of the


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manufacturing sector. The detailed results of the computer programmeare contained in the print-out and can be made available upon request.An extract of some relevant statistics is summarized in Table D.

The results in Table D show that a very high degree of association isidentified between the output performance of the manufacturing sectorof the Nigerian economy and the investment performance of the con-glomerates operating in the country. The magnitude of this relationshipis about 95%. It is also shown that the coefficient of determination (R2),which reveals the proportion of variation in the dependent variable thatis explained by the model, is about 0.91. This means that about 91% ofthe variations in the output performance of the manufacturing sector ofthe economy are a result of the joint effects of the independent variables(indicators of investment performance of conglomerates). When the ef-fects of sample size and the number of independent variables were ad-justed for, we obtained an adjusted coefficient of determination (AR2)of 0.88. This means that after the adjustments, the actual proportion ofexplained variation is 88%. These values are confirmed to be significantat a 1% level of significance or less seeing the F-equation of 46.47,which is greater than the critical value of F of 2.77. All other things re-maining the same, it can be said that the operational performance of theconglomerates significantly affects the output performance of the man-ufacturing sector. But we have to determine the individual partial ef-fects of the independent variables.


TABLE C. Respondents Perception of the Problems of Conglomerates Operat-ing in Nigeria

Details Ratings

4 3 2 1 AVE %

A Socio-cultural: language, customs,values, etc.

3 4 1 - 3.3 81.3

B Hostile environment : commercialdisturbances & social upheavals

4 4 - - 3.5 87.5

C Political risks, instability & impasse 4 4 - - 3.5 87.5

D Excessive government regulations - 1 4 3 1.8 43.8

E Unstable and unpredictable economicclimate

2 5 1 - 3.1 78.1

F Inflationary trends - 1 3 5 1.8 43.8

Mean for average Rating = 17.0/6 = 2.8 17.0

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The relationship (i.e., the degree of correlation) between the outputperformance of the manufacturing sector (Qmt) over time and the capitalemployed by the conglomerates (Ct) is 0.89 (i.e., rQ,c = 0.89), as shownin Table D. Subjecting this result to a t-test, the observed t o 7.81 is sig-nificant at 1% level or less. Based on this, we conclude that there is apositive and significant relationship between the output performance ofthe manufacturing sector and the investments of conglomerates operat-ing in the Nigerian economy. This means that the investments of theconglomerates, defined in terms of capital injections, affect the manu-facturing sector. The relationship between the output performance ofthe manufacturing sector and the turnover of conglomerates operatingin the economy show similar results.

From Table D above, the observed degree of relationship between theperformance of the manufacturing sector and the turnover of conglom-erates (rQ,T) is 0.90. Subjecting this degree of correlation to a t-test, wehave a t-value of 8.26, compared with a critical t of 2.58. Based on this,we infer a positive and significant relationship between the output per-formance of the manufacturing sector and the turnover of conglomer-ates operating in the Nigerian economy.

Furthermore, we can make inferences regarding the relationship be-tween the output performance of the manufacturing sector and theprofitability of conglomerates operating in the economy, which also in-dicated a similar result. From Table D above, the calculated degree of a


TABLE D. Regression Results of Estimated Model of the Performance of Man-ufacturing Sector and Selected Indicators of Performance of Conglomerates inNigeria

Statistics Variables Results

Coefficient of Multiple Regression (R) 0.95

Coefficient of Multiple Determination (R2) 0.91

Adjusted R2 0.88

F-Equation (F) 46.47

Critical Value of F 2.77

Partial Regression Coefficient between Qmt and Ct (rQ,c) 0.89

Partial Regression Coefficient between Qmt and Tt (rQ, T) 0.90

Partial Regression Coefficient between Qmt and Pt (rQ,p) 0.66

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relationship between the performance of the manufacturing sector andthe profitability of the conglomerates operating in the economy (rQ,p) is0.66. If we subject this value to a t-test, we have an observed t of 3.5,compared with a critical t of 2.58. Thus, there is a positive and signifi-cant relationship between the performance of the manufacturing sectorand the profitability of conglomerates operating in the Nigerian econ-omy.

MANAGERIAL IMPLICATIONS, CONCLUSION,AND RECOMMENDATIONS

The above findings have some interesting implications. First, all threetested hypotheses confirmed that there is a positive and significant rela-tionship between the performance of the manufacturing sector of theNigerian economy and the investment operations of the Multinationalconglomeration quoted on the Nigerian Stock Exchange (NSE). This isseen in that the capital employed (which represents the actual inflow orcapital injection), the turnover, (which represents the results of opera-tions), and the profitability are all found to significantly and positivelyrelate with the output performance of the manufacturing sector.

Secondly, the results of the primary data analysis confirm that thepositive contributions of the conglomerates as they operate in theeconomy outweighs their negative “contributions.” This is true de-spite some serious bottlenecks hindering their operations, as are sum-marized above. Given these, it can be said that both the secondary andprimary data analysis agree on the fact that the investment activities ofthe multinational conglomerates significantly and positively affect theperformance of the manufacturing sector in particular, and the entireeconomy in general. The saying seems to be true that “in every home inthe country, their presence is clearly and compulsorily felt, without anyexception.”

In sum, the results of this study do not confirm the fears, worries, andaccusations of critics that multinational conglomerates are instrumentsof exploitation that are created and sent to milk developing economiesdry. Their presence in Nigeria is a very positive influence to the growthof the manufacturing sector and the entire economy.

Based on these, the following policy thrusts are suggested:

1. The government should endeavour to put a stop to the various hos-tilities suffered by the corporate bodies in the country. These


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range from communal clashes, social disturbances and upheavals.The government can, where necessary, use dialogue, mass reori-entation and mobilization, and social developmental crusades.

2. Since the activities of the conglomerates are in harmony withgrowth and development, every encouragement should be givento them in the form of incentive packages ranging from tax tonon-tax incentives. Where their activities are in virgin areas of theeconomy, to such extent, pioneer status should be extended tothem and appropriate tax holidays granted accordingly.

3. While encouraging the conglomerates in their mutually beneficialactivities, any identified amoral, socially irresponsible act shouldbe matched with appropriate legal action without necessarily kill-ing the spirit of liberalization of commercial activities. The Senateand House of Representatives should set up a joint-committee tolook into matters of harmful exploitation of natural and human re-sources.

REFERENCES

Adewusi, I. A. (1986) “Multinational Corporations and the Nigerian Economy”,1961-1962. CBN Economic and Financial Review, Vol. 24, No. 4; pp. 41-52.

Alade, J. A. (1988) “The Role of Multinational Corporations in Economic Develop-ment: The Nigeria Experience” The Quarterly Journal of Administration. Vol. 3 &4 (April/July 1991)

Baridam, D. M. (2001) Research Methods in Administrative Sciences. Sherbrooke As-sociates, Port Harcourt.

Ebong, C. U. (2001) “Working Capital by Multinational Corporation in Nigeria”. Jour-nal of Industrial, Business, and Economic Research; Vol. 5, No. 2, pp. 985-1001.

Ezirim, B. Chinedu and Ojukwu, D. I. M. (1998) “Foreign Direct Investments and theOutput Performance of Nigeria’s Economy: An Impact Study” The Journal of In-dustrial Business and Economic Research. Vol. 2, No. 2 (July-Dec.). PP.463-483.

Ezirim, B. Chinedu; Emenyonu, E. N., & Muoghalu, M. I. (2002) “Foreign Direct In-vestments and Economic Performance of Less Developed Countries: Empirical Ev-idence from Nigeria”. AEF Papers and Proceedings, Vol. 26, pp. 339-351.

Fabayo, O. & Alade, J. (1984) “Foreign Private Investment in Nigeria, Cotton TextileIndustry: an Impact Analysis” The Quarterly Journal of Administration. Vol. 22,Nos. 1 & 2 P. 47.

Hveem H. (1985) “The Extent and Types of Direct Foreign Investment in Africa”. InMultinational Firms in Africa, C. Widstrand (ed.) New York: African PublishingCompany.

Mummery, D. R. (1968) The Protection of International Private Investment. NewYork: Preager Publishers.

Nwachukwu, C. C. (1988) Management Theory and Practice. Onitsha: Africana FEP.


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Onimode, Bade (1983) Imperialism and Under Development in Nigeria. Lagos: MacmillanPress.

Onyeiwu, S. Z. (1987) “The Role of Foreign Private Investment in Nigeria, 1962-1982”;CBN Economic & Financial Review, Vol. 25, No. 1, P. 41-46.

Oresotu, F. O. (1988) “Foreign Investments and Nigeria’s Economic Recovery: Issuesand Prospects”; CBN Economic & Financial Review, Vol. 26, No. 1, P. 33-40.

RECEIVED: 06/09/03REVIEWED: 03/15/04ACCEPTED: 08/09/04

APPENDIX 1

PROFILE OF MULTINATIONAL CONGLOMERATES IN NIGERIA

A. G. LEVENTIS

A.G. Leventis (Nigeria) Plc was incorporated on the 24th of March 1958 andgot listed on the Nigerian Stock Exchange on 29th November 1978. It is classi-fied by the NSE as a conglomerate. It has its headquarters at Lagos. Its majorkinds of business are diversified, including the provision of properties, man-agement, financial and other specialised services to associated and affiliatedcompanies. It also engages in sales, leasing and servicing of motor vehicles,agricultural and construction machinery, electronic and data processing aswell as air conditioners and power generating equipment. The major subsid-iaries and associates of Leventis are Leventis Stores Limited, Guinea Con-struction Co. Ltd., Leventis Motors Ltd., Leventis Technical Ltd, HondaManufacturing Nigeria Ltd., Platean Foods Ltd., Auto Components Ltd, andAbuja (Capital) Motors Ltd. Leventis has 1,236 employees as at December,1999. Its paid up capital is N145,497,000 as at 31st Dec. 1999 distributed intoNigerian Citizens (46%) and foreigners (54%) respectively.

CFAO (Nigeria) PLC

CFAO was incorporated on 13th September 1969 and listed on the Exchangeon 7th November 1971. Its head office is at Lagos and major businesses in-clude manufacturing and trading. The NSE classifies it as conglomerate withsuch subsidiaries and associates as Nigerian Motors Industries Plc, DEPILimited, Northern Textiles Manufacturing Ltd., CICA Nigeria Limited, Nige-rian Ball-Point Pen Ind. Ltd., Dumex Industrial Limited, and Sofitam Nige-rian Limited. Its employees number 2,474 while its paid up capital isN130,000,000.


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APPENDIX 1 (continued)

JOHN HOLT PLC

With its head office situated at Broad Street, Lagos, it was incorporated andlisted on the Exchange on the 28th August 1961 and 17th May 1974, respec-tively. Its nature of businesses includes manufacturing, assembly, leasing,pharmaceuticals, general distribution and merchandising, freight manage-ment, property and investments. It is classified by the NSE as a conglomeratewith subsidiaries and associates including Probyn Road Properties (Nig.)Limited, HPL Limited, African Propl Nigeria Ltd., Holt Engineering Ltd.,Jallco Ltd, and W.A. Drugs Co. Ltd. Others include John Holt AgriculturalEngineers Ltd, Bauchi Bottling Company Ltd, Western Holdings Ltd. (partlyowned) and Yamaha Manu. Nig. Ltd. It has 1,605 employees with paid-up cap-ital amounting to N195,000,000 at the end of 1999.

LEVER BROTHERS NIGERIA PLC (LBN and now UNILIVER)

This conglomerate as classified by the NSE was incorporated on 11th April1924 and listed in September 1973 with its head office in Lagos. It engages inthe manufacturing and marketing of Soaps and Detergents, Edible Oils andFats, Toilet Preparations and Fruit Squashes, Tea and Coffee. It has 1,797employees on its pay roll and paid up capital of N605,327, 4000.00 as of 31stDecember 1999.

PZ. INDUSTRIES PLC

P.Z. was incorporated and listed on the 4th of December 1948 and 18th ofFebruary 1974, respectively. The nature of its business includes the manufac-turing and sale of consumer products such as soaps, detergents, cosmetics,pharmaceuticals and confectionery, refrigerators, freezers, air conditioners,plastic containers and components. Being classified as conglomerate, it hassuch subsidiaries and associates as Paterson Zochonis Nigeria Plc, EkopakNigeria Plc, and Robert Pharmaceuticals Ltd. It has 4,983 employees. Its paidup capital amounted to N558,484.00, structured Nigerians (51.59%) and for-eigners (48.41%).

S.C.O.A. NIGERIA PLC

The dates of incorporation and listing of S.C.O.A. are June 1969 and 1997,respectively. Classified as a conglomerate, its businesses include automobileassembly, maintenance, distribution and leasing, manufacturing, technicalsales and services and general merchandising. It has 903 employees with sub-sidiaries including Allied Biscuit Company Ltd., and SCOA petroleum ser-vices Ltd. Its paid up capital amounted to N197,200,000 structured intoNigerians (35%) and foreigners (65%).


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U.A.C. OF NIGERIA PLC

With headquarters at Lagos, was incorporated on 22nd April 1931 and listedin 1974. It is classified by the NSE as a conglomerate. It engages in manufactur-ing, merchandising, warehousing, services, technical, processing and Agro in-dustries. The associates/subsidiaries include General Motors (Nig.) Limited,Tractor & Equipment Nig. Ltd., Spring Waters Nigeria Limited, Grand Cere-als & Oil Mills Nig. Ltd., UNIC Insurance PLC, and Chemical & Allied Prod-ucts PLC. The number of employees is 4,020, while its paid up capital isN227,159,000.00 of 31st December 1999.


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the political economy of multinational conglomerates in nigeria

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