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The role of transnational corporations (TNCs) in relation to industrial development

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A Trans National Corporation (TNC) is a company that has operations (factories, offices, research and development, shops) in more than one country. Many TNCs are large and have well‐known brands. Often TNCs have their headquarters and areas of research, development and product innovation in the country they start in, and manufacturing and factories in other countries (often poorer ones to take advantage of cheaper labour and environmental costs).

Nigeria is attractive to many TNCs because of the large market on offer and lower labour costs. Below is a list of the 20 biggest companies in Nigeria, it shows the impact of foreign TNCs but also that Nigeria has its own home grown massive businesses.


Shell in Nigeria


Shell is a massive TNC that operates in many countries around the world. Extracting the oil is a primary industry but Shell also refine the oil which is a secondary manufacturing industry and they also sell the finished products which is a tertiary service. Shell's work in Nigeria produces more than 21% of the country's total petroleum production from more than eighty fields. Shell bring positives and negatives to the country.

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Advantages and disadvantages of TNC(s) to the host country

There are many positives and negatives of Trans National Corporations for a country like Nigeria. TNCs like Shell provide jobs in factories making supplies and in services where the products are available for sale, and they do try to clean up after they accidently damage the environment. TNCs often have charities to help people in the country they work in. Shell has the Shell foundation to help sustainability and biodiversity and help local communities. The main advantage is that TNCs can help countries develop by investing money ENCOURAGING DEVELOPMENT. Shell has spent $12 billion in LICs for example. This also means that TNCs pay tax which can be used by the governments of countries to help their people. Shell paid £20billion in corporation tax in 2013 for example. Finally, oil refineries like those in Nigeria use lots of local companies to help them run. This creates a multiplier effect and TNCs allow the import of new technologies into a country, improving it.

However, sometimes TNCs come in for criticism. Their activities have polluted the environment in the past. Shell has had many incidents involving oil spills for example. TNCs have been accused of human rights abuses in the past. Shell have been accused of crimes against the Ogoni people in the Niger Delta (see case study box). In addition, employees in LIC’s are working for long hours (e.g. 12+ hours) in poor conditions (in factories known as “Sweat Shops”). Also, employees in LIC’s might be paid much less than employees in HIC’s for doing higher intensity jobs. Some TNCs have even been known to use child labour in their factories. In addition, the jobs in the LIC’s are not secure. They could lose their jobs without warning if company decide to set up somewhere cheaper (as Michelin did in Nigeria). The profits from the production go straight to the headquarters in the HIC. They aren’t reinvested in the LIC. Even in HICs, big TNCs like Amazon and Starbucks have been accused of doing everything they can to limit the amount of tax they pay by playing the system.

CASE STUDY: HUMAN RIGHTS VS. OIL


The Niger Delta contains Ogoniland, home to a community that fought back against Shell. Shell has extracted $30billion worth of crude oil from the land of the Ogoni people since the 1950s. Oil revenue makes up 75% of the Nigerian economy and ½ of that comes from Shell. This has had consequences for the Ogoni people, many of whom live without electricity or running water, who see none of the oil profits and have to live with the poisoning of land and water from pipelines, oil spills and gas fires.


Ken Saro-Wiwa (pictured), organised the locals into the Movement for the Survival of the Ogoni People (MOSOP) who used non-violent protest methods against the power of Shell. The protest movement were attacked, killed and mutilated and some people blamed the government for this. The military Government made their intentions clear and Ken Saro-Wiwa said on May 10 1994 – “This is it. They (the Nigerian army) are going to arrest us all and execute us. All for Shell”. On May 22nd 1994 Ken Saro-Wiwa was arrested on a murder charge, he told the tribunal “I and my colleagues are not the only ones on trial. Shell is here on trial….The company (Shell) has indeed ducked this particular trial but its day will surely come”. Despite massive pressure from Germany, France and Australia, Saro-Wiwa was hanged with 8 other protestors in 1995. John Major (the then UK prime minister) declared it as indefensible.


NEXT TOPIC - Nigerian International aid and trade

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