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EFFECTS OF INSECURITY ON THE PROFITABILITY OF SOME SELECTED CONSTRUCTION FIRMS IN THE NIGERIAN NIGER DELTA REGION
CHAPTER ONE
INTRODUCTION
1.1 Background of the study
Organizations exist in and inter-relate with the society or environment. The organization’s environment is the sum total of all variables and happenings that surround and influence it; including both internal and external factors. The interactions between the business enterprise and the environment that it operates is very significant. Firstly, organizations are major stakeholders in the environment. Not only are they dominant stakeholders in every environment but they significantly affect the behavior and actions of other institutions and stakeholders in the locality where they exist. Secondly, what goes on in the environment where the business entity exists has a way of influencing the business. Organizations therefore must be very sensitive and reactive to the dynamics of the environment where it exists and carries out its business operations for it not only to survive, but to thrive.
The insecurity environment or insecurity environmental factor of business refers to security factors or issues that affect the smooth operations and performance of the business enterprise; in which it has little or no control over. Insecurity, is one of the elements in the business environment just like others (such as good technological innovations, favourable economic climate, etc.), enhance and optimize business operations. King (2016) argued that in Nigeria, the insecurity factors range from theft and armed robbery to other social vices such as kidnapping/hostage taking and demand for ransom, assassination, militancy, youth restiveness and constant invasion and disruption of business operations, lack of employment, limited accessibility to basic means of livelihood, bombing and repeated destruction of pipelines. All these constitute forms of insecurity and crimes which have affected the Nigerian business environment very hostile and unpleasant for the smooth operation of businesses. The fortunes of construction companies in the Niger Delta region in terms of operations and performance have not been smooth due to insecurity. There have been several recorded cases where Construction companies were either forced to abandon their contracts or delay the execution of their jobs due to insecurity. A notable case was the abandonment of the contract for the construction of the ever busy and important East West Road due to the activities of Niger Delta militants and other insecurity issues. In one year alone, Julius Berger was alleged to have paid about 430 million naira as ransom to kidnappers and militants (Oyibo 2008). Shonekan (2001) opined that youth restiveness and ethnic militancy in the Niger Delta, out of alleged feelings of abandonment by the government and seeming discontent by youths, arising largely from the poor economy and unemployment is responsible for some of the negative profitability indices being recorded by construction companies operating in the region.
Statement of the problem
Previous empirical studies have been carried out on security challenges and the implications for business activities in Nigeria by Okonkwo et al (2015), Nwogwugwu et al (2012); Arong & Egbere (2013); Olusola, (2013), Adeagbo (2014). However, none have actually dealt with the influence of insecurity costs on the profitability of construction companies in Nigeria’s Niger Delta region. Therefore, this study is unique, and aims at filling that knowledge gap by empirically examining the relationship between insecurity costs and profitability of construction companies in Nigeria, particularly the Niger Delta region.
There are several security challenges affecting Nigeria’s Niger Delta region, among others include;
Kidnapping/Hostage taking: Kidnapping and hostage has been a major tool used by Niger Delta youths and militants or agitators to drive home their demand. Though criminal in approach, their major targets have been oil and construction workers of major companies. Expatriates and other Nigerian workers are usually kidnapped for ransom. This has left very serious negative marks not only in terms of development of the region but also the profitability of the companies in question, as their operations were disrupted. Nwankwo (2012), posits, that kidnapping is now used as avenue for settling social and political scores. Again, the pecuniary gains accruing from the money-making business collected from the victims of the illegal trade, usually in multimillions of dollars and naira, many agitating youths in the region are now using kidnapping as a tool of making money by kidnapping and taking hostage staff of construction companies for ransom. The result of this is that such ransom paid for the release of their staff are not tax deductible and therefore eats deep into their contract sum. The overall implication is that their profitability is affected negatively.
Militancy and Youth Restiveness: Militancy and Youth restiveness is also another mode of insecurity existing in the region and sometimes beyond. It constitutes one of the multiple effects of the critical problem of insecurity in Nigeria’s Niger Delta region (Ejumodo,2014). Militancy and youth restiveness means the alleged matters of youth agitations over the issues of negligence, marginalization and deprivation, due to feelings of dissatisfaction. It entails a situation whereby youths get agitated, and becomes quite difficult to control. It can also be seen as youths’ agitations over for the settlement of their rights through self-seeking and criminality or criminal activities.
Nigeria, adjudged Africa’s most populous country whose main source of income is revenue from crude oil, has recently witnessed very alarming level of insecurity. This may not be unconnected with its size, overdependence of oil, high level of poverty and unemployment among its citizens, etc. All these variables have contributed to prevailing crimes and constitute insecurity to business enterprises in Nigeria; making the Nigerian security environment to be complex. Regrettably, investors are not willing or ready to put their monies where their investments are not secured.
Over the past few years, the case of the Niger Delta Region is really pathetic and severe, as construction companies now see the high risk or rate of insecurity in the region as one of the factors posing threats to their survival and investments; as many companies and businesses in the Niger Delta region have stopped operation due to insecurity caused by activities of militants and other security challenges. Sad enough, the cost of lives and material resources loss in the region due to these security problems cannot be quantified. Poor security in the region has also caused increases in the costs of doing business, in the form hiring of private security companies, hire of police and military escorts, hire of patrol vans, building fences, or installation of security alarm systems by companies operating in the region. These costs impede business growth and profitability. For instance, Julius Berger, a notable construction giant, left the Niger Delta region in 2015 citing insecurity reasons as the major factor. Aside that, there were also other reported cases of project abandonments and avoidable delays by construction companies operating in the region due to one security problem or the other. These had negative implications not on the company’s turnover, operations, and finances but also the economy and infrastructural development of the region.
No known research has been carried out on the impact of such ‘insecurity costs’ on the profitability or corporate financial performance of Construction Companies in Nigeria. It is based on the foregoing that the researcher sought to carry out this study.
Purpose of the study
The broad objective of the study was to investigate the impact of insecurity costs on corporate profitability of construction companies in the Niger Delta States of Nigeria. Specifically, the objectives were:
1. To determine how Kidnaping/hostage taking costs affect Gross Profit Margin of construction companies in the Niger Delta region.
2. To establish the relationship between Kidnaping/hostage taking costs and Operating Profit
Margin of construction firms in Nigeria’s Niger Delta region;
3. To assess the effects of Militancy/ youth restiveness costs on Gross Profit Margin of construction firms in the Niger Delta.
4. To determine the effect of Militancy/ youth restiveness costs on the Operating Profit Margin of construction firms.
5. To establish the effect of Effective policing by security agents on the relationship between insecurity costs and profitability of construction firms in the Niger Delta of Nigeria.
Research Questions
The following research questions guided the study:
1. To what extent does kidnaping/hostage taking costs affect Gross Profit Margin of construction companies in the Nigeria’s Niger Delta region?
2. To what extent does kidnaping/hostage taking costs affect Operating Profit Margin of construction firms in Nigeria’s Niger Delta region?
3. To what extent does militancy/youth restiveness costs affect Gross Profit Margin of construction firms in the Niger Delta?
4. To what extent does militancy/ youth restiveness costs affect the Operating Profit Margin of construction firms?
5. To what extent does effective security framework/policing by security agents affect the relationship between insecurity costs and profitability of construction firms in the Niger Delta?
Development of Hypotheses
From the above, the following hypotheses were formulated;
H01: There is no significant relationship between Kidnaping/ hostage taking costs and Gross Profit
Margin of construction companies in the Niger Delta region
H02: There is no significant relationship between Militancy/ youth restiveness costs and Gross Profit Margin of construction firms in the Niger Delta.
H03: Kidnaping/hostage taking costs does not significantly affect Operating Profit Margin of construction firms in Nigeria’s Niger Delta region
H04: Militancy/ youth restiveness costs does not significantly affect Operating Profit Margin of construction firms in Nigeria’s Niger Delta region.
H05: Effective security framework/policing by security agencies does not impact the relationship between insecurity costs and profitability of construction firms in the Niger Delta.
Limitations to the Study
Empirical research of this nature requires the use of established data from the company’s financial statements or data from relevant agencies of government and not questionnaire only. However, this research is probably one of the very few initial works on insecurity accounting in Nigeria. Hence data on insecurity costs incurred by companies are limited, resulting to the use of questionnaire only. Another limitation was that the sample size considered for this research was too small to generalize and conclude for all construction companies operating in the Niger Delta region of Nigeria. There is therefore room for further research in this area.
Scope of the Study
Insecurity costs or problem in Nigeria is vast, looking at the country as a whole and the construction industry, in particular. This study focuses on known construction companies operating in the Niger Delta region of Nigeria. It examined the effects of insecurity costs on corporate performance of construction companies, particularly their profitability.
It is believed that the study will contribute to existing literature by examining the relationship between Insecurity costs and profitability of construction companies in the Niger Delta States of Nigeria. The study also is a peculiar deviation from previous studies in scope (covering only the costs associated with insecurity costs and its influence on the profitability of construction companies in the Niger Delta.
The greatest limitation encountered by the researcher was that of lack of literature on the subject matter. There was no much literature on accounting for insecurity costs, as the area had not been well explored by previous researchers.
Another major problem faced by the researcher was the complexity of the research itself in terms of the locations, statements and companies selected for the study. Cost of transportation and other logistics, to a great extent affected the researcher; particularly the risk of plying the nooks and cranny of the entire Niger Delta region was a huge task.
Again, the present insecurity problem in the Niger Delta region was a limitation. Aside that, distance, time, financial constraints and language barriers were some of the limitations the affected the study.
Finally, getting necessary data from the right source was also a limitation. Some respondents chose to be economical with the truth by not giving the right information that would be useful for the research.
Significance of the study
Crime and insecurity are hindrances not only to the society but businesses particularly. A business environment that is not secured drives away existing and potential investors. It increases business risks and uncertainty. Tackling insecurity is therefore a major step toward alleviating the challenge facing businesses in Nigeria.
Over the years, several researchers have carried out studies on similar subjects, but not on the influence of insecurity costs on the profitability of construction companies in Nigeria’s Niger Delta region. This study contributes to existing literature and in no small measure, will be of great importance to other researchers.
The study x-rayed the various dimensions to insecurity in the Niger Delta, stating their causes, effects, and possible solutions. This will be of immense benefits to investors, the government, and other policy makers to achieving a more secured nation; as the study recommended practical steps to be used to tackle the problem of insecurity in the country, particularly the Niger Delta.
Finally, the study will boost the scanty literature on insecurity in Nigeria as it relates to the construction sector. It is believed that the study will therefore be a reference point to upcoming researchers in the construction and security sectors of the economy.
Definition of terms
The following terms were defined during the study:
Security- Security was defined as a state of being secured or being free from threats fear or anxiety. It entails an environment devoid of threats and insecurity issues.
Insecurity- Insecurity refers to a state of not being secured. It is described as “the state of fear or anxiety, stemming from a concrete or alleged lack of protection.” It refers to a situation of no freedom. It means a state of danger.
Niger Delta- These are the areas of the southern part of Nigeria geographically characterized predominantly characterized by deltaic features.
Kidnapping- Is an unlawful and criminal method of confinement of persons against their will. It entails holding a person hostage, either for ransom or other reasons, against their will and the law.
Youth Restiveness- Youth restiveness refers to youth agitations over the issues of negligence, deprivation and marginalization.
Militancy- Is the use of violent or confrontational means to fight a cause. It entails unlawfully taking arms against the state, criminally.
Profitability- profitability entails a type of performance measurement. It means the organization’s ability to make profit There are several measures of firm’s profitability including; Gross profit margin, Operating profit margin, Earnings per share, return on assets, return on equity and Return on capital employed.
CHAPTER TWO
LITERATURE REVIEW
2.1 Conceptual Framework
The Concept of Insecurity
The concept of insecurity connotes different meanings to different people. To some it entails absence of safety; danger in the environment; and risk; and even absence of protection. Insecurity could be described as ‘a state of safety caused by fear or anxiety resulting from an alleged absence of security or safety’ (Beland 2005). It also refers to a situation of no freedom from environmental danger. Achumba et al (2013) posits that insecurity refers to a situation of being exposed to impending societal danger from the environment or avoidable threats of danger, which can lead to harm or injury. They further argued that insecurity is a state of being exposed to insecurity and societal risks, that may lead to some outright calamity or misfortune. This means that those who fall victim of insecurity are not certain about its occurrence and also exposed to certain level of dangers when such misfortunes occur eventually.
Insecurity has unquantifiable cost implications. These costs affect both human and material resources. Businesses incur direct financial costs because of damage to company property and other litigation costs (Sohnen, 2012). Otto and Ukpere (2012) opined that there is a significant positive relationship between security and national development. They also posit that insecurity limits economic development of a nation, particularly among the developing countries of the world. Ewetan and Urhie (2014) asserts that lack of security hinders business activities and deters foreign investments. Adegbami (2013) posits noted that insecurity inhibits the well-being of the citizens, destroys businesses, and leads to the relocation of others.
Measures of Profitability
Generally, businessmen who operate in the private sector are mostly driven by profitability. Profit making is therefore the driving force behind most private sector investments. Profitability is one of the measures of performance. Its indicators are most frequently used as measures of a company’s financial performance and the return on investment to investors. Profitability ratios (usually in the form margins and returns) measures a firm’s ability to earn profit for its owners.
For this study, two profitability measures were used. They include: the Gross profit margin (GPROM) and the Operating profit margin (OPROM). Gross profit margin indicates a lot about the overall financial health of the enterprises. It specifically reveals how much money is left over for operations, expansion, debt repayment, distributions to owners and shareholders and other miscellaneous expenses.
Operating profit margin, also known as a profit margin, on the other hand measures the amount of income of an enterprise that is left over after deducting their operating costs. This helps to also determine an appropriate pricing policy and strategy for the company’s products. Review of Prior Studies
Overview of the Nigerian Construction Industry All over the world, the construction industry is continually growing. The construction industry, in both industrialized and developing nations, may be described as the sector of the overall economy which, engages in the planning, designing, construction, maintenance and repairs, various resources into constructed facilities (Isa et al, 2013). The industry is mostly concerned with planning, design and construction of civil engineering works and other related infrastructural provisions (such as road constructions, construction of bridges, construction of railways, etc.). The construction industry in Nigeria consists of companies, consultants, professionals, vendors and the clients; both public and private. The industry in Nigeria, like other places in the world, is quite large and is also attractive to foreign firms. Such foreign companies embark on large projects which the local firms find difficult to carry out due to either financial constraints or other resources and expertise.
Some notable foreign construction firms involved in the Nigerian construction industry include Julius Berger Nigeria Plc, Stemco Nigeria Ltd, Bouygues Nigeria Ltd, Reynolds Construction Nigeria Limited, Prodeco Nigeria Limited, Arab contractors etc. Local/Indigenous construction companies also exist side-by side and undertake large construction projects, but these are very few.
Brief History of Nigeria’s Niger Delta Region
The Niger Delta area is one of the largest delta regions in the world. It is said to be probably the second largest deltas in the world. The region is seen as one of the most difficult regions of the world comparable to the others such as the Amazon and the Ganges. It is in the central part of southern Nigeria. As a geopolitical zone, it is mostly occupied by minority peoples of the Southern part of Nigeria. Geographers say it lies within latitudes 4 degrees north to 6 degrees north, and longitude 5 degrees east to 8 degrees east. (Azaiki, 2007). It has an area of over 70000 square kilometers, noted for sandy ridges and barriers, mangroves and fresh waters, swampy forests, etc. The Niger Delta, also called the delta of the Niger River in Nigeria, is densely populated. It was sometimes called the Oil Rivers because it was once a major producer of palm oil in Nigeria.
The area has a population of about forty-five million people, (National Bureau of Statistics, 2006) and more than forty ethnic groups and over 1600 communities with links to different ethnic groups such as Ijaw, Ogoni, Edo, Igbo, Efik, Ibibio and Oron. It is endowed with both renewable and nonrenewable natural energy sources such as oil, gas, bitumen, etc. The region accounts for over 90% of the total revenue of Nigeria, which comes from oil and gas exploration (Brisibie, 2001; Tell, 2008). According to the NDDC ACT (2000), the Niger Delta comprise nine states, namely; Abia, Akwa – Ibom State, Bayelsa State, Cross Rivers State, Delta State, Edo State, Imo State, Ondo State and Rivers State. However, this paper shall focus on the “core Niger delta states” that is Bayelsa, Delta and Rivers states. These are the “states geographically characterized predominantly to an extent with deltaic features” (Kimiebi, 2010).
Causes of Insecurity in Nigeria’s Niger Delta region Many researchers have identified number of causes of crime and lack of security in the country (Ali, 2013; Okorie, 2011; Jega, 2002; Salawu, Achumba & Akpor 2013). These causes have been classified into external and internal causes and are discussed below;
Prevalence of Weak Security System in Nigeria – The is the major cause of insecurity not only in the Niger Delta but the country in general. It emanates from the perennial problem of shortage of modern equipment for the security personnel, in terms of weapons and training (Achumba et al. 2013). This, together with the poor attitude and behaviour of some of our security personnel, leads to further insecurity in the environment.
Neglect and deprivation of the people of the region by the government- It is no news that Nigeria, especially the Niger Delta, is rich in oil reserves. But what does the producers/owners of the oil get in return for their contribution to the national coffersneglect, deprivation, and marginalization. According to Ikelegbe (2004:490-516) instead attracting development, the discovery of fossils has ironically devastated and further underdeveloped the Niger Delta region. Oil and gas exploration and exploitation has led to inter communal wars, inter-ethnic conflicts, etc. These have contributed to the restiveness, frustration, anger, and aggression against the government and the oil companies (whom they perceive as their enemies) through various means by militants’ groups.
Social Irresponsibility of Companies Operating in the region– Some companies operating in the Niger Delta are obviously ‘socially irresponsible’ to their immediate host communities and environment. This has triggered the youths of the region to be restive because of neglect and deprivation. The increase in insecurity in some parts of Nigeria, the Niger Delta inclusive, is as a result to the total neglect of the people and the social irresponsibility of the companies in the communities where they operate. Corporate social irresponsibility entails a set of actions which increases costs and promotes avoidable conflicts. Thus, companies should engage in corporate social responsibility to minimize the rate of conflicts. This was the case of the Niger Delta crisis.
Lack of institutional capacity resulting in government failure results to the collapse of basic infrastructures. The legal and social institutions in Nigeria are very fragile and have led to the demise of state governance, institutions, and democratic norms, thus, affecting the existing set of problems including the formal and legitimate rules governing the society. A situation where the country earns a great deal of her earnings through oil sales but fails to channel these earnings to meet the needs of its people and to develop infrastructure as well as the economy is highly regrettable and very pathetic. When these situations are on the increase unchecked, crime and insecurity are bound to rise astronomically, and the security of lives and properties cannot be guaranteed.
2.2 Theoretical Framework
Frustration aggression theory and the Stakeholder’s theory. The Frustration aggression theory illustrates what causes the feeling of frustration or feeling of aggression among people when their objectives and aspirations are not met in life. Propounded by John Dollard in 1939, the great researcher made the first attempt to define the concept of human frustration and aggression in his paper. He argued that people were motivated to achieve their set objectives and goals, ambitions, and destiny in life but when these dreams are hindered; frustration sets in. He also opined that human aggression was a manifestation or an indication of frustration caused by inability to accomplish one’s set goal in life and whose ambitions are hindered by circumstances of life. Amaraegbu (2011), on his part, argued that frustration is not a function of aggression but may have some other consequences apart from aggression itself. He further argued that “aggression may develop because of having been exposed to an extremely frustrating condition sufficient to provoke the experience of hopelessness”.
Another theoretical background of accounting for insecurity costs and profitability of firms in the Niger Delta is the Stakeholders’ Theory. Stakeholders are those who have stake or are connected to and are directly or indirectly connected to the entity. Bassey et al (2013) opined that “Stakeholders are groups or persons, which are influenced by the corporate activities or which affect the entity either directly or indirectly”. Bringing that to bear on the issue of insecurity in the Niger Delta, we can argue here that the activities of militants, kidnappers and restive youths in Nigeria’s Niger Delta are mostly caused by frustration as a result of neglect of the people, that is, to the life goals of certain individuals or groups in the region. Accordingly, the success of any organization in the long run is dependent on the support and approval received from its stakeholders. Accordingly, the more influential the stakeholders are, on the organization, the more the entity must adapt to their demands and needs for it to continually enjoy their support and patronage.
In analysing the importance of FDI to economic development of any country especially the less-developed and developing nation like Nigeria and the much needed level playing ground and conducive environment for foreign investors to operate, this study focused on the liberal transnationalism theory of the political economy perspective. Although there are other relevant theories analysing acts of terrorism and FDI separately but they are limited because such could not address the nexus between the two variables. The liberal transnationalism theory of political economy perspective provided a suitable platform for analysis in this study it emphasises the importance of FDI as portrayed by the multinational corporations, the necessity of free movement of goods and services across borders and the role of the state to provide a conducive environment for individual to reach his/her goal unhindered. This is based on classical economic liberalism that is rooted in reactions to important trends in Europe in the 17th and 18th centuries. The idea of economic liberalism condemns government interference in the market because such interference could bring harm to the society. According to Viotti and Kauppi (2012), the term “Liberalism” means liberty under the law. It focuses on the human nature that is competitive in a constructive way and is guided by reasons and not emotions.
Liberalism is a tradition of political thought composed of a set of practical goals and ideals. According to classical liberal theorists, the individual is the most important unit of analysis and the claimant of rights. The state is therefore expected only to play a minimal role in a classical liberal society, acting as arbiter in disputes between individuals and ensuring the maintenance of conditions under which individuals can enjoy their rights to the fullest. The theory’s preference for the state’s role is limited to maintaining a stable political, social and economic environment within which individuals can interact and pursue their chosen ends. That means it is the duty of the state to ensure all-round conducive environment for all to operate and pursue their individual goals and objectives without any interference. The liberal concerns for individuals were reinforced by Adam Smith’s and David Ricardo’s works in economics. They emphasise the important role of the individual entrepreneur who should be relatively unconstrained by the state. Liberalism emphasises individual’s role in all aspects of life and thought—scientific, political, economic, social and religious (Dunning, 1992; Waltz, 1979).
Liberal transnationalism is about free market enterprise across national boundaries with particular attention on the increasing role of multinational corporations abroad and the challenge they posed to the sovereign prerogatives of states as they transited across national boundaries in the daily conduct of their business transactions. Transnational was used to describe either an actor (Multinational Corporation) or a pattern of behaviour (MNCs act transnationally). Viotti and Kauppi (2012) posit that the focus was on studying these actors, their interactions and the coalitions they form across state boundaries that involved diverse non-governmental actors such as MNCs, banks, churches and eventually human rights, environmental and terror or criminal networks. Transnationalism also focuses on the links between trans-governmental agencies at the level of bureaucracies as a challenge to the state as a unitary actor. Links or coalitions between non-governmental organisations and trans-governmental actors also became very important. This, however, does not suggest a leakage in state sovereignty or rendered it irrelevant. Rather, the role of the state is recognised as germane to the survival and success of the links or coalitions of trans-governmental actors and to achieve their set goals and objectives. This role the state performs by ensuring a politically, socially, and economically conducive environment for the TNCs/MNCs to operate to the maximum capacity.
This brought to the fore the interdependency between the state and the transnational actors. As Nye and Keohane (1998) put it, interdependence is all about mutual dependence resulting from the types of international transactions catalogued by transnationalists, that is, flows of money, goods, services, people, communications and so on. This is characterised by reciprocal effects among countries or among actors and different countries. Marfleet (2006) says liberal transnationalism has become strengthened by globalisation as the world integration acts as a driver of increased prosperity and harmony. The liberating powers of the market are bringing benefits for all as there is a general advancement of economy and society and reduction of political tension and conflict. The intensification of global relations in the respective realms of commerce, communications, technology, economic production and finance has certainly enabled some non-state actors to maximise their profit-making potentials and reach previously inaccessible markets.
It is important to state here that the activities of MNCs as transnational actors have become strengthened by economic liberalism which compels the state to provide a stable/free market enterprise and politically, socially and economically conducive environment for them to operate. In the same vein, it has enhanced other transnational actors (such as terrorists, criminals or insurgency groups) to form coalitions and links across borders, whose activities now threaten the operations and survivals of MNCs as agents of FDI in their host countries especially in the less-developed and developing countries bedevilled by various security challenges like ethno-religious violence, militancy, terrorism and insurgency as the case is in Nigeria.
2.3 Empirical Framework
Foreign Direct Investment (FDI) plays a major role in the economic development of emerging markets. This is important, because FDI provides capital to finance domestic projects as well as expertise to undertake such projects. The competition for getting FDI inflow has become stiffer as both advanced countries and developing countries are all showing growing interest in attracting FDI. The importance of FDI to a developing or less-developed country has been emphasized by different people. This has to do with its role of improved technology, efficiency and productivity that can promote economic growth (Lim, 2001). Be that as it may, the potential contributions of FDI depend strictly on the circumstances in the recipient country. Certain conditions of the host country are necessary to facilitate the spill-over effects. The extent to which FDI contributes to growth depends on the economic and social conditions of a country. This refers to the quality of environment of the recipient country (Buckley, Clegg, Wang, & Cross, 2002).
Investors hold the view that political stability in the host country is important in considering their choice of investment locations and deciding the amount and volume of investment in that country. Enders and Sandler (1993) point out that political instability and social unrest have negative effect on FDI inflows, as insecurity in any form reduces the chances of a country being selected as an investment location. These social unrest and political instability can also dictate the patterns of investments within the host country. The patterns can reflect a spread across the host country or cluster of investment in a particular area. This also depends on the nature of the geographical environment and how conducive the various investment locations are within the country.
Insecurity constitutes all forms of violent activities in a country. These could be political, economic or social violence as long as such action disrupts the peace and stability of the society thereby altering the normal order of living of the people. In addition, it is the total breakdown of law and order in a country which alters the normal course of life of the people and even that of the government resulting in social disorder, wanton destruction of lives and property. Insecurity in Nigeria has to do with the various situations of social unrests or violent uprisings in the country at one time or the other. It also concerns how these have impacted on the social, economic and political development of the nation. Nigeria since independence, has witnessed series of social and violent unrest at different times and in different forms. Some are economic based, political and offshoot of ethnic and religious crises. There was the Maitatsine religious disturbances in Kano and Maiduguri in the early 1980s, Jimeta Yola religious disturbances in 1984, Zango Kataf, Bulumkutu Christian-Muslim riots, just to mention few. These are offshoots of primary causes of insecurity in the country, such as poverty, inequality, unemployment, illiteracy, deprivation, corruption, religious manipulations and others.
The spate of ethno-religious conflicts, socio-economic and political violence in Nigeria has increased with return to civil rule in 1999. The frequency of such occurrences is as a result of the freedom provided under the democratic rule. Of major concern is the increase in sophistication of weapons and attacks on the people leading to destruction of lives and property, all of which have heightened the insecurity situation of the country. There has been militancy in the Niger Delta region, ethnic violence, and Boko Haram insurgency in the North-East region. In addition, the Boko Haram group has transformed in size, nature and modes of operation from one time to the other. It has developed from Islamic organisations to Jihadist terror groups and lately become insurgents. They take over towns for themselves and set their flags as symbol of authority over the areas captured to questions the authority of the legitimate government of the country.
Nigeria recorded 1094 violent attacks between 2000 and 2012, claiming over 20,000 lives, as a result of all these violent disturbances in the country (Global Terrorism Database, 2014). In 2014 alone, over 3500 persons were reported dead, with refugee camps of Internally Displaced Persons (IDPs) in almost everywhere as the Boko Haram terrorist groups advanced in their bid to seize villages and towns in the North-East. Thousands of people were reportedly kidnapped, including women and children.
The increase in the spate of insecurity in Nigeria is a major concern for both government and the governed while it succeeded in drawing international attention to the country. Counting the cost of various security challenges featuring in the country, the statistics could be discouraging for any would-be investor as they portend danger. These would translate to high cost of risk management, increased spending on security in terms of diversion of scarce capital for the procurement of hi-tech equipment for the purpose of combating insecurity. The primary objective of every investor is to maximise profit and this may not be achievable if so much capital is invested to ensure security of lives and property. Therefore, this study examined the trend of insecurity and patterns of foreign investment in Nigeria from 1999 to 2014.
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Methodology and procedure
In this research the researcher among other methods used the descriptive research method. The descriptive research is concerned with the collection, presentation, analysis and interpretation of data for the purpose of describing vividly existing conditions, prevailing practices and beliefs, attitudes, on-going procures etc. the descriptive research goes beyond the description of the conditions or phenomena to include discovery of meaning. It also focuses a discovery of trends that are developing. The main objectives of descriptive research is to get detailed and factual information about issues, events, problems and describe the events as they are.
The descriptive research method enabled the researcher to describe in a systematic manner effects of insecurity on the profitability of some selected construction firms in the nigerian niger delta region
. The essentials of the descriptive research cannot be over-looked, it is a research that gives the true picture of the whole situation or problem. It gives the basis for eliciting possible policies for alleviating problems. It also saves time. The data for the descriptive analysis was generated through various types of data collection; they are interviews, which are structured interview and unstructured interview, also through an empirical investigation. They all will be discussed below.
INTERVIEWS:
Interviews involve eliciting information from the respondent through some verbal interaction between the interview and the respondent. It is a face to face interaction situation in which one person the interviewer questions, which are responded to orally. The questions which are properly framed, allows the respondent easy understanding of the information that are being sort for.
3.2 The empirical investigation
The researcher conducted a detailed empirical investigation in nigerian niger delta region. The method here was based on sustained participant observation approach (Scott, 1965). Data were collected through interviews, study of secondary material and observation. The observation is an investigation method used to obtain direct information method used to obtain direct information on the behavior of individuals, objects or situations. It involves watching people, situations phenomena and getting first-hand information relating to particular aspects of such people, events, situations or phenomena.
Information relating to certain aspects of human behavior can only be obtained in the particular settings where such behaviors are exhibited. Use of interviews are discussed above. Secondary materials are those source of information which other people did not participate or witness the events. The author of a secondary source material tries to collect and synthesize a pool of materials, which include encyclopedia, dictionaries, textbooks, journals and periodicals, newspapers and magazines as well as publications. Extensive use was made of personnel interviews. In this research the researcher concentrated on focused interviews. This involved the use of guided questionnaire sheet which are designed to assist the researcher to obtain desired information from the respondents. This technique was aimed at giving the respondents the freedom to answer questions asked, while the interviewer occasionally directed the discussion towards the course that will enable him obtain the required information.
3.3 Reliability of data collected
interviews used where the structured interviews and unstructured interview. The structured interview is a rigidly standardized and formal kind of interview. The questions were presented to the different respondents, in the same order and choice of alternative responses, and it is restricted to predetermined list. The structured approach allowed for reliable data analysis. In the unstructured interview, which is a flexible type of interview which contains very few restrictions on the respondent’s answers, the respondents were encouraged to express their thoughts freely.
The secondary materials that were studies were those relating to internal topic. These include textbooks, publications of government, newspapers, journals and periodicals. The textbooks were gotten from the library to provide detailed information and knowledge. Generally, the textbooks provided interpretation in the topic. The government publications like books, pamphlets, e.t.c. from different government agencies and parastatals contain very rich information concerning the topic, they included statistical reports, research reports, official reports, laws and other materials that are not readily available elsewhere.
The newspapers on the other hand provided current information concerning peoples’ views and opinions in the area of study. The formed valuable sources of information from where good ideas have been obtained to be helpful in designing and executing a very good work
3.4 RESEARCH DESIGN
In this study, the research method had great emphasis toward the descriptive sample survey. This approach was adopted here because the researcher worked with a much number of potential variable of interest with little previous knowledge of theory that would inform us on where to begin. It is considered that a more flexible and exploratory approach will be needed.
A possible compromise between the exploratory research of the single participant observer and a much more systematic and standardized approach is the descriptive sample survey. In this sample survey, a premium is placed on certain kinds of standardization, here the research was concerned with the methodology areas.
This final to collect data in such a way that all respondents are confronted with rarely identical questions.This seems is concerned with sampling are the question of generalization in making results. The third is with specifying standard criterion for data analysis procedure so that different analysis may reach similar conclusion based on the available data.
3.5 Population of the study
The available population of the affected states is two hundred and fourteen (200), the information was obtained from the records of various sources.
3.6 Instrument for data collection
Two instruments where used in the study and it yields a lot of contribution and contents.
i. Oral Interview: The research used face-to-face interview with the interviews with the respondents to obtain the necessary information needed from the organization.
ii. Questionnaire: The research used questionnaires to gather information from the respondents. The questionnaire contains difference questions. Some option from which the respondents were, required to choose
3.7 Validation of the instrument
The instrument was subjected to both content and face validity by supervision, after all the corrections, the validated instrument was taken back for conformation to ensure that suggestions and observation were incorporated.
3.8 Reliability of the instrument
The instrument was subjected to test, retest reliability test. The result showed a good internal consistency.
3.9 Methods of data collection
The data for this study where obtained from primary data where obtained from respondents, through direct interview and questionnaire method.
The secondary data were obtained through the stocks of material from the researchers’ friends and associates and National library. More so, an experience from observation was very helpful in this research work.
3.10 Methods of data analysis
The analysis of data was organized along the following lines. Descriptive statistical analysis was used to indicate percentage scores of all the respondents. The calculation of respondents were equally drawn up on the table.
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