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Devlpmnt Fin1
Devlpmnt Fin1
Nigeria is the most populous country in Africa and is the eighth most
populous country in the world. It is a country with huge oil wealth yet
half the population still lives on less than $1 a day and one in five
children dying before the age of five. The obstacles preventing sound
economic development in the country are huge. Oil wealth has
distorted the economy and has discouraged growth in other sectors.
Oil based Industrial transformation ignoring the development of
outstanding Agricultural sector made Nigeria a net importer from a net
exporter of food items. Besides Competition for a share of oil wealth
dominates politics, feeds corruption, and diverts attention away from
improving governance, management of public finances and delivery of
basic services, all of which suffered during 30 years of military rule.
Religious and ethnic diversity contribute to regional disparities in
wealth and sometimes give rise to conflict and violence. Following
years of economic stagnation, Nigeria embarked on a comprehensive
reform program during the second term of the Obasanjo
administration. The program was based on the National Economic
Empowerment and Development Strategy (NEEDS) and focused on
four main areas: improving the macroeconomic environment, pursuing
structural reforms, strengthening public expenditure management, and
implementing institutional and governance reforms. The paper
reviewed the stages of economic development, tried to find out the
major impediments rooted in Nigeria which have been deterring the
growth of a resource blessed country like Nigeria.
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INTRODUCTION
In Sub-Saharan Africa, Nigeria is the second largest and the biggest
economic power with an annual growth rate of 6 per cent witnessed
between 2001 and 2008. It is generating two-thirds of the region’s
Gross Domestic Product (GDP). It is also Africa’s most populous
country. Until the current global economic crisis began to affect the
economy seriously towards the end of last year, the country had
achieved unprecedented macroeconomic stability. However, the high
growth rates do not seem to have translated into equitable distribution
of wealth. The government has been quite concerned with these poor
outcomes which indicate increasing commitment of the government to
a broader poverty reduction, social protection and human development
agenda. Positive results can already be seen in the trend of the Human
Development Index (HDI) rate of growth from 0.490 through 0.494 to
0.499 and 0.513 (NBS) in 2004, 2005, 2006 and 2008, respectively,
placing Nigeria in the lead of low HDIs in the global UNDP HDI ranking.
More achievements in growth should push Nigeria into the medium HDI
countries.
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100000. The varieties of customs, languages, and traditions among
Nigeria’s 250 ethnic groups give the country a rich diversity.
The dominant ethnic group in the northern two-third of the country is
the Hausa Fulani, most of whom are Muslims. Other major ethnic
groups of the north are the Nupe, Tiv, and Kanuri. The Yoruba people
are predominant in the southwest. About half of the Yorubas are
Christian and half Muslim, like the population as a whole. The Ibos,
primarily catholic are the largest ethnic group in the southeast.
Persons of different language backgrounds ordinarily communicate in
English, although knowledge of two or more Nigerian languages is
common. Hausa, Yoruba and Ibo are the most widely used.
AGRICULTURE
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Agriculture has suffered from years of mismanagement, inconsistent
and poorly conceived government policies, and the lack of basic
infrastructure. Still, the sector accounts for over 26.8% of GDP and
two-thirds of employment. Agricultural products include cassava
(tapioca), corn, cocoa, millet, palm oil, peanuts, rice, rubber, sorghum,
and yams. Although overall agricultural production rose by 28 percent
during the 1990s, per capita output rose by only 8.5 percent during the
same decade. Agriculture has failed to keep pace with Nigeria’s rapid
population growth which labeled the country as a net importer in
where it was a highest net exporter of cocoa, palm oil and peanuts.
INDUSTRY
The oil boom of the 1970s led Nigeria to neglect its strong agricultural
and light manufacturing bases in favor of an unhealthy dependence on
crude oil. In 2000, oil and gas exports accounted for more than 98% of
export earnings and about 83% of federal government revenue.
Nigeria is the 12th largest producer of petroleum in the world and the
8th largest exporter, and has the 10th largest proven reserves. The
country joined OPEC in 1971. Petroleum plays a large role in the
Nigerian economy, accounting for 40% of GDP and 80% of Government
earnings.
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zinc. Despite huge deposits of these natural resources, the mining
industry in Nigeria is still in it infancy.
SERVICES
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After the Independence, Nigeria adopted First National Development
Plan(1962-68) charted Nigeria's transition from an essentially
agricultural economy to a mixed economy based on agricultural
expansion and limited industrial growth. These plans included
economic forecasts, policies toward the private sector and a list of
proposed public expenditures but did not constitute commitments by
public departments to spend funds. They discouraged increased taxes
on the wealthy and advocated a conservative monetary and fiscal
policy emphasizing a relatively small plan, openness to foreign trade
and investment, and reliance on overseas assistance. Foreign aid was
set at one half of public sector investment. Development plans were
instituted in 1970 and 1975, but the goals set in all three plans proved
unrealistic.
During the late 1960s, oil had replaced cocoa, peanuts, and palm
products as the country's biggest foreign exchange earner. In 1971
Nigeria--by then the world's seventh-largest petroleum producer--
became a member of the Organization of the Petroleum Exporting
Countries (OPEC). Between 1970 and 1974 Nigeria’s real growth in
GDP was 12.3 percent per year in where target had been only 6.2
percent. Rapid oil industry growth and Sharpe increase in oil prices was
the main factors for Nigerian growth. In 1974 the dramatic rise in oil
price brought huge amount of wealth described as "dynamic chaos."
Substantial portion of revenue was intended for investment to diversify
the economy. But this large amount of wealth spurred inflation and
eventually widespread unemployment, underscored inequities in
distribution. In 1975 production fell sharply as a result of the sudden
decrease in world demand, and prices moved downward until late in
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the year when OPEC intervened to raise prices. Nigeria fully supported
OPEC policies.
Amid the euphoria of the 1974 oil price boom, the Ministry of Economic
Development of Nigeria approved and added numerous projects for
other ministries not supported by a proper appraisal of technical
feasibility, costs and benefits, or the technical and administrative
arrangements required to establish and operate the projects and
necessary coordination and implementation were ignored. These
projects were accepted for political reasons, not because of their social
or economical importance by the Central Planning Office of the
Supreme Military Council.
In late 1989, the concept of a fixed five-year plan was abandoned and
instead, a three-year "rolling plan" was introduced for 1990-92 in the
context of more comprehensive fifteen- to twenty-year plans. A rolling
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plan, considered more suitable for an economy facing uncertainty and
rapid change, is revised at the end of each year, at which point
estimates, targets, and projects are added for an additional year. In
Nigeria, the objectives of the rolling plan were to reduce inflation and
exchange rate instability, maintain infrastructure, achieve agricultural
self-sufficiency, and reduce the burden of structural adjustment on the
most vulnerable social groups.
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Source: IMF (2005; 2003; &2001)
DEBT RELIEF
In September 2005, Nigeria received the biggest ever debt relief
package from the so called “Paris Club”—an informal group of the
world’s richest countries, including the UK. The debt relief deal was
worth $18 billion and represented a reduction of about 60% of
Nigeria’s overall debt to the Paris Club of about $30 billion of which
annual return was $100 billion. The UK’s share of the debt relief was
£2.85 billion. Nigeria’s external debt now stands at less than 4% of
GDP.
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• Improving the macroeconomic environment,
• Pursuing structural reforms,
• Strengthening public expenditure management,
• Implementing institutional and governance reforms.
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Growth rates have averaged about 7.1 percent annually for the period
2003 to 2006. This is a notable improvement on the performance over
the decade before reform when annual growth rates averaged about
2.3 percent. More importantly, the recent strong growth rates have
been driven by strong growth in the non-oil sectors, which is needed
for employment creation. This reform complemented by improvements
in debt management and the budget preparation process.
STRUCTURAL REFORMS
A broad range of structural reforms has been taken to improve the
domestic business climate and enhance competitiveness, to
deregulate and reduce government activity in various economic
sectors and to address various structural constraints to growth. Four
major areas of recent structural reform was
PRIVATIZATION:
• Between 1999 and 2006, about 116 enterprises were privatized,
including various loss-making government enterprises operating
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in industries such as aluminum, telecommunications,
petrochemical, insurance, and hotel.
• Unbundling of the Power Holding Company of Nigeria (PHCN)
into18 companies responsible for power generation,
transmission, and distribution.
• An increase in the number of telephone lines in the country from
about 500,000 landlines in 2001 to over 32 million GSM lines at
present. The sector has attracted over US$1 billion a year in
investments in the past four years and Nigeria has been rated as
one of the countries with the fastest growing tele-density in the
world.
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• The Central Bank of Nigeria requested all deposit banks to raise
their minimum capital base from about US$15 million to US$192
million by the end of 2005.
• Implementation of the consolidation exercise triggered mergers
in the banking sector and reduced the number of deposit banks
in Nigeria from 89 to 25.
• Reform of the banking and insurance sector is complemented by
improved regulatory oversight of the central bank.
TRADE POLICY
• Nigeria liberalized its import tariff regime by adopting the
Common External Tariff (CET) of the Economic Community of
West African States (ECOWAS).
PUBLIC PROCUREMENT
Introduction of Due Process mechanism in public contracts has
promoted an open tenders process with competitive bidding for
government contracts and notable improvement in the efficiency of
capital spending..
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THE OIL AND GAS SECTOR AND THE N-EITI INITIATIVE
In 2003, Nigeria was among the first countries to adopt the Extractive
Industries Transparency Initiative (EITI) to help improve governance of
the sector. President Obasanjo personally enrolled the country in the
initiative. One of the key acts of the EITI aimed at improving
transparency was to commission an independent audit of the oil and
gas sector from 1999 to 2004.
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grievances of local people about lack of basic services all interact,
fuelling violence and insecurity.
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education). Nigeria has the most primary age children “out of school”
of any country in the world, currently estimated at 8 million. The
primary education net enrolment rate is around 63% and has improved
only a little in the last decade.
INEFFICIENT GOVERNANCE
One of the major challenges to Nigeria realizing its full potential is
weak governance. Nigeria was under military rule for more than 30
years between 1967 and 1999. Civilian rule was re-established in 1999
when President Obasanjo was elected. The legacy of military rule is
institutional weakness and lack of capacity at all levels. There is a very
low base of public finance management skills and no cadre of
experienced civil servants. When civilian rule began again in 1999,
some states had no budgeting system in place because military
governors had felt no need for them. Governance structures have been
corroded and systems for basic service delivery and infrastructure are
lacking. Nigeria has a federal structure has contributed to the survival
of Nigeria as a cohesive nation. The State governments spend 50% of
public funds and have a high degree of autonomy. States are not
required under the constitution to account to the Federal Government
for the use of the funds allocated to them. The quality of State and
local governments varies but is assessed as being characterized by
particularly weak institutional capacities. The Country Partnership
Strategy identifies the main deficiencies in government as:
• Limited transparency and accountability in public resource
management at all levels of government, exacerbated by weak
sanctions
• Low capacity of the civil service to implement programmes
• An ineffective judicial system
• Limited effectiveness of State assemblies
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• An absence of social accountability mechanisms to give voice to
citizens’ views on government services.
CORRUPTION
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Corruption is as being “endemic” at every level of government in
Nigeria and across society more broadly. An estimated 60% of public
procurement expenditure was lost to corruption.
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customs modernisation, to improve access to energy and sustainable
land and water resources, and to align trade regimes to regional
agreements are all important for the region’s development.
Nigeria is Africa’s largest oil producer and the tenth largest oil
producer in the world. However, corruption and poor governance
hamper the right channelization of the resources and being translated
into benefits for the poor. Moreover, a recent report from the UN Office
on Drugs and Crime found that the present instability in the oil-
producing Niger Delta was the “greatest rule of law challenge”
confronting the West Africa region. It directly de-stabilizes the most
powerful economy in the region, with implications far beyond the Niger
Delta.
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Income growth is viewed as the necessary engine (or means to an end)
and human development is seen as the ultimate, objective; while the
two-way linkages suggest that income growth enables improvements
in key components of human development and these, in turn, promote
further growth in income. More specifically, improvements in human
development (through, for example, better health and more education)
increase labour productivity which in turn, raises both output and
income on the hand ; while economic growth increases both private
and public resource that can be applied to raise the level of human
development on the other. Policies to achieve growth and equity
1. create an environment for high levels of investment and growth
2. promote human capital development
3. step up investment in rural areas
• develop rural infrastructure
• promote opportunity by raising the returns to labour
• create employment in the rural economy
INEQUALITY
Many studies have shown that despite its vast resources, Nigeria ranks
among the most unequal countries in the world. The poverty problem
in the country is partly a feature of high inequality which manifest in
highly unequal income distribution and differential access to basic
infrastructure, education, training and job opportunities. Inequality
between genders stands out as a key challenge. The female gender is
generally disadvantaged in access to education and employment, as
well as in agricultural wage and access to land among other things.
Evidence abounds that gender inequality affects the growth and
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perpetuates poverty among the disadvantaged groups. Clearly
inequality hurts the economy and women and girls in particular.
POVERTY
The number of poor people in Nigeria remains high. The total poverty
head count rose from 27.2% in 1980 to 65.6% in 1996, an annual
average increase of 8.83% in the 16 year period. However, between
1996 and 2004, total poverty head count declined by an annual
average of 2.1% to 54.4%. over the same period, the percentage of
population in the core poor category rose from 6.2 to 29.3% before
declining to 22.0% in 2004. the fact that over 50% of the total
population is officially poor should be major concern to policy makers.
Key correlates of poverty in Nigeria include education, occupation, age,
gender and household size. The following table shows the key
determinants of poverty.
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Source: Computation based on National Living Standard Survey 2004 and
2008/9 Human Development
Report Team (NBS)
CAMPARISION: BANGLADESH VS. NIGERIA
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location of economic activities. Much of the territory is partly sub
merged or subject to flooding during the rainy season, and the
cultivation of rice and jute employs a very large portion of the
workforce. Bangladesh is the most densely populated agricultural
nation in the world, with 130 million people in 2000. It is also one of
the poorest and least developed in Asia, with a 2000 per capita GNP of
only $380, a life expectancy of 61 years, and a literacy rate of below
30% for women. Its labor force is expanding rapidly as a result of high
population growth rates, and unemployment and underemployment
currently exceed 20%. Although its income is more evenly distributed
than in many other LDCs, because of its very low per capita income,
Bangladesh has a high poverty rate (40% in rural areas in 1995).
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agricultural resource like pulp products, cocoa and peanut. On the
other hand Bangladesh is located on the Tropic of Cancer in South Asia
and has the world highest annual rainfall. The problems of the poor in
Bangladesh are exacerbating by their weather conditions: feminine,
floods from excessive monsoon and the average of 16 cyclones each
decades. Bangladesh is one of the countries most threatened by rising
world sea levels resulted from global warming.
DIVERSITY IN ETHNICITY
The varieties of customs, languages and traditions among Nigeria’s
250 ethnic groups give the country a rich diversity but often create
conflict. In case of ethnic diversity Bangladesh enjoys special
advantages of a population homogeneous in ethnicity; religion and
language generate relative lack of civil strife.
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Nigeria. A combination of declining oil prices, overly ambitious
industrialization program, neglect of the agricultural sector, excessive
foreign borrowing and widespread economic corruption and
mismanagement caused the Nigerian economy to experience a
prolonged period of economic stagnation and decline. Modern sector
enlargement growth has been in the Bangladesh textile and Garment
industries also traditional sector enrichment growth has been aided by
the policies and cooperation of public sector and private sector has
enabled over 2 million poor Bangladeshis to start their business.
EXPORT AND IMPORT
Both Nigeria and Bangladesh is experiencing high trade deficit. In
Bangladesh, the major export earnings come from Ready Made
Garments (RMG), Frozen Food, Tea, Jute etc and import electronic
goods. On the other hand Nigeria exports petroleum, cocoa and
tobacco. Nigeria was primarily the largest net exporter of cocoa, palm
oil and peanut but now Nigeria is a net importer country of food items
due their ignorance to agricultural sector for the development of only
oil based industrial sector.
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Both Bangladesh and Nigeria is suffering severe unemployment and
lack of skilled labor. But Bangladesh has been adopting many
innovative as well as reality based project to improve the quality of
labor force and to generate more employment which is rarely found in
Nigeria. The innovative projects adopted by Bangladesh have been
pushing up the women participation in the labor force at a significant
degree. But the problems of poor women in Nigeria are overwhelming
which reduces their extent and quality of participation in the labor
force.
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In this point Bangladesh is not far from Nigeria but able to
differentiate herself in terms of various innovative projects taking
which allow her to improve its infrastructural support to agro based
area. The food for program (FFWP) which organizes and pays with food
for the construction and maintenance of agriculture-supporting
infrastructure, mainly irrigation, drainage and embankment works has
been a significance help to the poor. On the other hand Nigeria’s
poorly developed infrastructure for the agricultural areas, poor
clarification property rights and inefficient agricultural practice lag
them behind though here are no shortage of farmland.
CONCLUSION
Nigeria is country having a country with tremendous oil resource,
agricultural resources and still many concealed service and industrial
sector. If Nigeria is to turn the tide of its economic misfortune and
mismanagement, it will have to take steps to raise domestic food
production, labor productivity and rational as well as transparent use
oil revenue to diversify economic activity. Considerable focus need to
be deployed for the reduction of the burden of its foreign debt,
lowering population growth through a combination of effective family
planning program, improvement of rural health and education and a
reduction of its absolute poverty. The country also seek increased
foreign aids and investment including significant debt relief and must
make better use of market price incentive to allocate resources while
endeavoring to improve public and private decision making and
maintain political stability between rural ethnic and religious group.
Only then will Nigeria began to achieve its potential as the major
economic force on the African continent and a leader of the developing
country.
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BIBLIOGRAPHY
Todaro, M.P., and Smith, S.C., (2008-2009), “Economic Development”
India: Pearson
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http://www.publications.parliament.uk/pa/cm200809/cmselect/.../840i.
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www.nobleworld.biz/images/Ogen.pdf
http://www.thestatesmanonline.com/pages/news_detail.php?
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