CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
The concept of “globalization” is not more than twenty years old, but the social, economic, political, and cultural processes that have been associated with globalization have existed for many years. “Globalization” refers to the increasing movement and exchange of capital, commerce, communication, and culture world- wide. According to lugalla, globalization is not at all a new process. It is simply an expansion of capitalism as a mode of production at a global scale.
Human economy progresses from primitive accumulation to peasant farming through agriculture and industrial revolution to capitalism, colonialism, neo colonialism, imperialism and now to globalization which is the current economic system. Globalization is the most important phenomenon shaping the current environment for economic development. Globalization simply defined is the increasing interaction among, and integration of, the activities especially economic activities of human society around the world(Musa, 2000). Globalization is the summit of mankind‟s effort towards breaking down of the physical barriers among the various races of the world for the mutual benefit of humanity. In Ajayi(2008),description, globalization is “the latest economic fad that is turning the whole world into a global village”. Facilitating the attainment of globalization are such factors as technological advances in the transportation particularly maritime technology, which gave rise to slave trade colonization and the attendant exchange of goods and services among nations. Second is the international trade with its underlying comparative advantage, international gold reserve, euro dollar market, „offshore export platforms‟ and „supply side economics‟. The third factor is the advent of multinational companies, which forge a link among nations in the production of goods and services far beyond the headquarters of these multinationals. Fourthly, the advent and revolution in information and communication technologies makes it possible to have access to remote location in real time. Coupled with this are computer mediated communication (CMC), Computer-supported Cooperative Work (CSCW) and World Wide Web(WWW), electronic commerce, virtual communities, and virtual social structures, electronic achieves, virtual architecture, virtual imaging and information design. Similarly, the term „cable network news‟ epitomizes the revolution in the electronic media; and the name „Rupert Murdoch‟ the international imprint magnate,
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symbolizes the new industry and what globalization has come to mean to its ownership and distribution. Fifthly, the establishment of international and supernatural organization among nation and continent necessitating the union of regional, continental and world bodies.
The most challenging development in world history today is globalization. Globalization is the increased integration of world economies through trade and capital flows, facilitated by the phenomenal growth in information technology and the opening up of closed economies and societies (Ezike, 2009). The concept of globalization infers that the globe is a single unit which functions as one when it comes to decision-making. In other words, globalizations implies the free movement of goods, services and capital throughout the world. Globalisation involves the opening up of national economies to global markets (Rupali, 2008).
With the advent of globalization, the world has become a much smaller place where interaction between different countries has led to a situation where a country‟s economy and development are not only in the hands of the ruling government, but is highly influence by international organizations where international rules and legislations reigns. This naturally and simultaneously results in the simultaneous reduction in the role of the State to shape national policies. Many Socialists define globalization as a primarily economic phenomenon, which involves increasing interaction and integration of national economic systems. This leads in turn to growth in international trade, investment and capital flows. Moreover, there is a rapid increase in cross-border social, cultural and technological exchanges because of the phenomenon of globalization. Globalization affects virtually all the industries and the banking industry is no exception.
Globalization can be described as a concept or a phenomenon, which either rallies public support or evokes opposition or protest- sometimes- violent protest. It creeps up in virtually every discourse is it political, economic, social and cultural. Santarrelli&Figini, (2010), defined it as a historical process driven by technology factors such as development of computers and the internet, which reduces the distance between people in terms of space and time.
Globalization is the term used to describe the growing worldwide integration of the people and countries. Globalization has reduced barrier existing in international trade. The reduction in those barriers has opened the door for exported growth. Nigerian economy has been mono-cultural since independence and has so much depended on the western countries for its survival (Salimono, 2009). Globalization according to Akinbayo (2007), is the process
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of shifting autonomous economies into the global market or the systematic integration of autonomous economies into a global system of production and distribution. This invariably involves an efficient and dynamic financial sector that is necessary for the facilitation of intermediation and exchange of goods and services.
The world is fast becoming a global village a metaphor that is often invoked to depict global interdependence and the increasing interaction among the integration of economic activities of human societies around the world (Ajayi, 2009). In concrete terms, globalization is the intensification of cross border trade and increased financial and foreign direct investment flows among nations, promoted by rapid advances in liberalization of communication and information technology Since globalization entails trade liberalization, it is therefore imperative that there is free and unrestricted movement of trade, finance and investment across the international border. The advantage here is that globalization allows Nigeria to export and import goods, capital and investment without restriction (Oputa 2006). Hence, the place of Nigeria in the globalization agenda requires some in-depth study.
Very critical to our understanding of globalization is the dire need to use it as a synonym for liberalization and greater openness. The implication of this is that both domestic and foreign liberalization are said to imply globalization, since the formal brings domestic markets more in conformity with forces operating in markets abroad, and, the removal of administrative barriers to international movement of goods, services, labour and capital increases economic interaction among nations. It is within this purview that we can argue that globalization is mainly a phenomenon of capital mobility. Its two prongs are; (i) foreign direct investment and (ii) international portfolio flows.
In general, globalization summarizes a number of interrelated features of the world economy; rapid advances in the communication and transport technologies, expanding spatial scope for the business activities of uniformity in policy and institutional environment that set the rules of the game for economic actions and interaction on the part of private agent based in various countries (Court and Yanagihara, 2008).
However, despite the glowing advantages, globalization has its set-backs. It is remarkable to note that despite the giant striders that have accompanied the process of globalization, the statistics suggest that the rate of improvishment is growing on a global scale and the numbers of the poor and the excluded are rising in many parts of the world (UNCTAD, 2002). Although the evidence for these trends varies among the different regions of the world, it is
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evidently overwhelming among the sub Saharan countries, Nigeria inclusive. Indeed if anything, the number of people living in absolute poverty has been on the rise. In Nigeria, globalization has been associated with the collapse of the middle class and the swelling number of the very poor and armies of unemployed people including university graduates.
The centrality of this project is to advance balanced and reasoned agreements for and against the global order in order to bring out in bold relief the effect of global order on the sub Saharan Africa, Nigeria in particular.
1.2 Statement of the Problem
The benefits of globalization have been less than its advocate claim, the price paid has been greater, as the environment has been destroyed, as political processes have been corrupted, and the rapid pace of change has not allowed countries time for cultural adaptation. The crises that have brought in their wake massive unemployment have, in turn, been followed by longer-term problems of social dissolution…. ( Stiglitz, 2002). In spite of the openness of the economy and the numerous opportunities associated with globalization, it has been observed that external trade performance has not been encouraging. Some countries like Nigeria are yet to benefit from it
The globalization orthodoxy contends the one major effect of the regime is the ability and ease of movement of labour, especially skilled labour, across national boundaries. They maintain that once the qualification are right and the cognate experience met prospective job seekers can apply to and be employed in given company in any region of the world. Harris (2006) observed a trend towards a simple global labour market, moving towards on price for labour for each skill grade regardless of whether the country compete with each other for unemployment, offering employers the lowest price at a given level of labour productivity.
The anti-globalization countered that rather than universalization of employment opportunities favouring LDCs the reverse has been the case. Technocrats and professionals are few and far between in LDCs and these few ones are attracted to North America and Western Europe due to „dollarized income‟. The next effect is brain drain in critical sector of the economy. Similarly, the „mad rush‟ to Western Europe and North America by African youth is detrimental to the growth and development of Africa.
The role of the state in a global order has been a subject of controversy by the schools of thought. Proponents of globalization contend that rather than being eclipsed the role of state
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has enlarged in the wake of globalization. On the contrary, anti-globalization element maintained that the role and place of international rather than national forces and institutions has assumed a particularly prominent profile in the era of globalization. It further argued that „it is no longer the state to which we should be paying attention but rather to the forces of the international arena‟ (Orford, 2009). Globalization orthodoxy pointed to the synergy between globalization and democracy, noting that global interconnectedness has engendered the global upsurge and spread of democracy in several ways. Beck (2009) opined that globalization “creates trans-national solid links and spaces, revalues local culture and promotes third cultures”. Schwartzman (2008) argued that global shocks have contributed to democratization by creating legitimacy crisis in authorized regimes.
On the other hand, antagonists maintained that „globalization is rendering democracy irrelevant and this it poses the most serious threat yet in the history of democracy‟ (Ake). As a result of globalization, people are becoming generally affected economic, culture and environmental factors that are beyond their borders and shores; and people are losing their ability to participate in decision making. The protagonist of globalization maintained that whatever the shortcomings inherent in global order could be ameliorated within the workings of international institutions such as International Monetary Fund (IMF), World Bank, World Trade Organization (WTO).
In respect of international law, many scholars have questioned what is international about international law. Africa and the Third World in general were not part of the originator of international law. Consequently, their values, social norms and expectations are not fully are not fully reflected or covered by international law (Anand, 1974). Anti-globalization thinkers opined that the knitting together of world economies which is the hall-mark of international capitalism, otherwise known as globalization has not insulated any part of the globe from crisis and shock in the capital and financial markets.
1.3 Objectives of the Study
Therefore, the main objective of the study is to examine the socio-economic implication of globalization for sub-Sahara Africa. The specific objectives of the study are to:
i] To examine the benefit and burdens of globalization in general and on sub Saharan Africa using Nigeria as a case study.
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ii] To assess the effects of globalization on Nigeria‟s economy using gross domestic (GDP) in relations to that of international trade and foreign Direct Investment.
iii] To examine how globalization has led to economic breakdown and to know to what extent globalization has affected roles of states.
iv] To ascertain whether globalization has effect on democratization in sub Saharan Africa.
1.4 Basic Assumptions
The research is predicted on the following assumptions;
1] That globalization has theoretical advantage and disadvantage on the economies of sub Saharan Africa.
2] That the impact of globalization on Nigeria economy can be determined in the areas of import, exports and Foreign Direct Investment (FDI).
1.5 Research Hypotheses
These research hypotheses were tested:
Hypothesis I
Ho: There is no significant relationship between globalization and socio-economic development of sub-sahara Africa
H1: There is significant relationship between globalization and socio-economic development of sub-sahara Africa
Hypothesis II
Ho: Globalization does not influence economic growth in Nigeria
H1: Globalization influences economic growth in Nigeria
1.6 Significance of the Study
Effects of globalization are controversial among scholars and policy maker of the world. On one hand, some scholars are of the conviction is of devs ex machine an order that is meeting the needs of mankind in a variety of ways at affordable cost, quality material and service in real time even to remote locations. On the other hand, some argue that whatever the
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advantages the global order brings are enjoyed by a few developed economies at the expense of the developing areas, particularly sub Saharan Africa. Since globalization entails trade liberalization, it is therefore imperative that there is free and unrestricted movement of trade, finance and investment across the international border. The advantage here is that globalization allows Nigeria to export and import goods, capital and investment without restriction. Hence, the place of Nigeria in the globalization agenda requires some in-depth study.
This study would test the validity of these assumptions with the area of international trade and capital flow in Nigeria with a view to showing the true position. And by these, it would contribute to knowledge and enhance policy making.
1.7 Scope of the Study
Despite the tremendous growth rate of globalization over the years, sub Saharan Africa has struggled to reap the benefits of globalization. In analyzing this, statistical data would be used looking at the effects of globalization in sub Saharan Africa since 2003 to 2013.
1.8 Limitation of study
Globalization is a wide issue area as it affects the whole complex activities of man and therefore difficult to examine all the aspects. Also, studies on globalization are more amenable to quantitative rather than qualitative analysis thus eliminating biases.
1.9 Organization of Study
This project is divided into five chapters. The first chapter entails of the introduction and under the introduction, statement of problem, objective of study, assumption of study, research questions, significance of studies, scope, organization of study, definition of terms. The second chapter is the literature review and the theoretical framework. The third chapter contains the research methodology. The fourth chapter covers the data analysis and data collected from research finding. Finally, the fifth chapter contains the summary and conclusion of research work, as well as recommendation on how the problem can be tackled.
1.10 Definition of Terms
Globalization
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Most of the definitions of globalization are tainted with ideological biases between the proponent of globalization and its opponents. For proponent of globalization referred to or disinterested movement of history bestowing benefits without discrimination upon the earth‟s people (Camedessus, 2008). Musa (2009) describes globalization as increasing interaction among, and integration of the activities, especially economic activities, of human societies around the world‟. International Monetary Fund (IMF,2007), viewed globalization as an economic interdependence of the counties worldwide through the increasing volume and variety of cross border transaction in goods and services and of international capital flows, and also through more widespread diffusion of technology. And for stiglitz (2002), globalization refers to” the removal of barriers to free trade and the closer integration of national economies.
Capital flow
Capital flows are aggregated by the U.S. government and other organizations for the purpose of analysis, regulation and legislative efforts. Different sets of capital flows that are often studied include the following: • Asset-class movements – measured as capital flows between cash, stocks, bonds, etc.
• Venture capital – investments in startup businesses
• Mutual fund flows – net cash additions or withdrawals from broad classes of funds
• Capital-spending budgets – examined at corporations as a sign of growth plans
Sub-Saharan Africa
This is, geographically, the area of the continent of Africa that lies south of the Sahara Desert. Sub-Saharan Africa is, geographically, the area of the continent of Africa that lies south of the Sahara Desert. Politically, it consists of all African countries that are fully or partially located south of the Sahara (excluding Sudan, even though Sudan sits in the Eastern portion of the Sahara desert). List of Sub-Saharan African Countries
Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo (Brazzaville), Congo (Democratic Republic), Côte d’Ivoire, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Guinea-Bissau, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius,
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Mozambique, Namibia, Niger, Nigeria, Réunion, Rwanda, Sao Tome, Senegal, Seychelles, Sierra, Leone.
Foreign trade
Foreign trade is nothing but trade between the different countries of the world. It is also called as International trade, External trade or Inter-Regional trade. It consists of imports, exports and entrepot. The inflow of goods in a country is called import trade whereas outflow of goods from a country is called export trade. Many times goods are imported for the purpose of re-export after some processing operations. This is called entrepot trade. Foreign trade basically takes place for mutual satisfaction of wants and utilities of resources. International trade is the exchange of capital goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries. It is the presupposition of international trade that a sufficient level of geopolitical peace and stability are prevailing in order to allow for the peaceful exchange of trade and commerce to take place between nationsSchwartzman (2008).
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