How Foreign Direct Investment can Help Non Dollar Polarized Countri...

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Hello friends, hope we all are fine. This article centered on how economies that aren't making use of the dollar as their domestic currency could be empowered through Investment in dollar concentrated regions like the US, UK etc. I trust you'll be paid in full after taking a perusal.

Introduction.

First, what is foreign direct investment? This could simply be grokked as a type of investment established in a country, order than one's own. For instance, if Nigeria should have an establishment or any sort of Investment in the US, this is actually the Intel behind the concept.

The advent of mercantilism gave room to respective countries trading both favorably and unfavorably with each other. Different nations usually come onboard to trade based on their domestic output. Currently, countries, especially developing ones or less developed countries (LDC's) have more to gain in investing in dollar polarized countries than just exchanging their respective domestic products which isn't enough to equate with the high quality products they could trade with them in the international level given to the nonaligned exchange rate.

There are certain issues that could lead to low rate of returns after trades especially in LDCs, this includes but not limited to substandard products and low productivity in those nations and when these variables are met with standardized the high quality tech materials exchangeable at the international level, the LDC's has no option than to return home with nothing after trades, which is actually what has raised this issue of FDI.

Using Nigeria as one of the LDCs for instance, if we have 1m barrels of oil and wish to get about 500 airplanes from the US, the 10m barrels will be sold and we'll still borrow to finance the purchase of those airplanes. In reality, the least price of commercial airplane with about 700 seaters cost $89.1m according to pilotpassion and 500 numbers of it will cost $44,550m while the cost of barrel of crude oil according to Central Bank of Nigeria is $87, and multiplying this with 10m will give us $870m. Going by these figures, the Nigerian government has about $43,680 to balance the US and hence, we have nothing left on us again but to scuttle this imbalance, Nigeria needs to invest in the US to help them generate more income in dollar currency.

These and more are the need for a foreign investment especially in dollar polarized regions. The other time, I went through an article where The Russian President (Putin) was advising developing nations for a depolarized system but I don't actually see credible reason for such a deduction because I'm assured it will pose a malignant effect on such economies if they should heed to such advice.

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Problems Bedeviling Nations Without Investment in Dollar Polarized Countries.

Let's look into some of the issues compounded in non dollar polarized regions using Nigeria as a case study since it's among the non dollar polarized region.

Trade Imbalance.

This is one of the major problems posed in those regions. Even as I expantiated above using real estimates from CBN and pilotpassion.
Majority of the non dollar nations have issues in the underscored caption above given to the gap between their country's currency and the dollar to be precise.

A country's input in terms of product standardization and level of output will definitely determine the rate and manner of acceptability in his intended to sell products. Most of the LDCs do not have the necessary technology needed for mass productivity and this has posed a great concern to what they would have in return after the sale of their few commodities.

For instance, according to OEC From May 2022 to May 2023, the US had a trade deficit of $213m with Nigeria after exporting $213m worth of goods and also importing about $426m worth of goods from Nigeria. This does not mean that the US is developing but it was on account of Nigeria's increase in FDI especially in 2022 stipulated at $752.51m according to
Trading economics that gave it a boost to trade favorably against the US between 2022 and 2023.

Conclusively, assuming Nigeria doesn't have a reasonable volume of FDI in $ within this period, her balance of trade with the US would have been unfavorable unequivocally.

Inflationary Concern.

Majority of the developing nations are faced with this issue of inflation given to the low productivity within their regions.

Although inflation is a natural phenomenon and can easily escalate if not properly controlled, in essence, the majority of the developing nations are easily threatened by the menace of inflation because they don't have what it takes, especially in terms of technology to scuttle it.

We know that inflation is a product of low productivity and low productivity is quite given to a more use of crude and unimproved techniques in production. Many non dollar polarized regions or LDCs who don't have what it takes to afford these improved technologies used in mass and standardized production are easily prone to inflation.

Nonetheless, given this issue of inflation, I strongly believe that before the end of 2023, Nigeria's balance of trade with the US will turn negative given the current rate of inflation facing the country. This is also to add to my deduction in the first assertion above.

Diversification Issues.

We know that many non dollar polarized regions are faced with the issue of diversification given to their over dependency on human labor in doing virtually everything. It is factual that what an hundred able bodied men will do in an hrs, machines can possibly do more than that within 5-10 min.

I have observed that it's not really that most LDCs don't have what it takes to acquire good technical tools in diversifying productivity in their economies but given to their level of reasoning, they'll prefer to used human labor which is more affordable than machines because they know they can't maintain those machines in the long-run thereby causing impediment in mass productivity and economic diversification.

Finally, we know that most technologies are manufactured in the dollar polarized regions, and most of the non dollar polarized countries may be finding it difficult to spend on such tools which would have been used in further diversifying their respective economies and hence, they'll get stock to their mono economic production as poverty, unemployment, inflation persist within them.

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Benefits of FDI to The None Dollar Polarized Countries

Increased Net Income.

The engagement of non dollar polarized countries in FDI will apparently help in increasing their net incomes. Hence, when these countries' net incomes are increased, it will lead to increased productivity and further diversification of their respective economies.

Nonetheless, when GNP is increased, there is the tendency that income per capita will definitely increase. The increase in income finally will lead to economic growth if properly managed although it has some downsides which I wouldn't be mentioning here since we're proffering solutions at this point.

Economic Diversification.

If these countries should engage In FDI, the returns from these sources will help them in procuring technologies needed for investment in other areas of their economy.

Hence, there will be increased productivity which will help to mitigate against inflation, there will also be the need to train some persons in the use of such tech equipment as to optimize its use and further increase productivity and standardization of products in those regions.

Mitigate Against Trade Imbalance.

Trade Imbalance happens as a result of low level of productivity, and low productivity could be given to the employed means of production. Nonetheless, if countries should invest in dollar polarized regions, and have their returns in the said currency, it will assist them in improving their domestic productivity which will finally lead to favorable balance of trade with the outside world.

Mitigate Against Inflation.

As I earlier said, inflation is a natural phenomenon but it is also an economic strategy. For instance, it could be used to reduce the rate of imports. When a country's currency loses value given the inflationary trend, it will be difficult for importers to import the same quantity of product they used to import before.

All being said, if these countries should maintain a reasonable Investment in dollar polarized regions, it will help them to hedge against irrelevant trends of inflation. For this to happen, these non dollar polarized countries will use the proceeds from FDI to increase productivity in their respective countries to mitigate against impeding or apparent inflation.

Conclusion.

I strongly believe that my assertions above are fact based and its application will incontestably help non dollar polarized regions to improve their respective domestic economies.

Although there are countries whose domestic values are higher than the dollar but as a standard of global measurement, it is advisable to invest in the dollar polarized regions since certain economic phenomena may impound on those currencies and bear them below the global scale.

Undoubtedly, FDI especially in dollar polarized regions like the US is a better cross-border investment strategy for developing nations and if seriously considered, the ambiguous returns may be overwhelming.

Thanks for your patience till this very spot, I believe you gained a credible insight into my assertions. Please permit me to draw the curtain at this point. Your questions will be humbly entertained, I would also love to see you in my next article bye.

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