THE FORMATION POLICY PROCESS

The idea that policy development can be thought of as a series of steps in a decision-making
process was first broached systematically in the work of Harold Lasswell, a pioneer in the field of
policy research (Lasswell 1956, 1971). In most recent work, a five-stage model of the policy
process has been most commonly used.

In this model, “agenda-setting” refers to the first stage in the process when a problem is initially
sensed by policy actors and a variety of solutions put forward. “Policy formulation” refers to the
development of specific policy options within government when the range of possible choices is
narrowed by excluding infeasible ones, and efforts are made by various actors to have their favored
solution ranked highly among the remaining few.

“Decision-making” refers to the third stage in which governments adopt a particular course of
action. In the fourth stage of “policy implementation,” governments put their decisions into effect
using some combination of the tools of public administration in order to alter the distribution of
goods and services in society in a way that is broadly compatible with the sentiments and values
of affected parties.

Finally “policy evaluation” refers to the fifth stage in the process in which the results of policies
are monitored by both state and societal actors, often leading to the reconceptualization of policy
problems and solutions in the light of experiences encountered with the policy in question
(Howlettet al.2009).

This idea of policy-making existing as a set of interrelated stages provides a general “framework”
for understanding the policy development process and points to several of the key temporal
activities and relationships that should be examined in further study of the issue.

Styles of policy behavior in the policy cycle

Agenda-setting

In the scholarly literature on agenda-setting, for example, a useful distinction is often drawn
between the systemic or unofficial public agenda and the institutional or formal, official, agenda
which helps to conceptualize policy-making dynamics at this stage of the process. The systemic
agenda “consists of all issues that are commonly perceived by members of the political community
as meriting public attention and as involving matters within the legitimate jurisdiction of existing
governmental authority”(Cobb and Elder 1972). This is essentially a society’s agenda for
discussion of public problems, such as crime or health care, water quality or wilderness
preservation. The formal or institutional agenda, on the other hand, consists of only a limited
number

of issues or problems to which attention is devoted by policy elites (Baumgartner and Jones 1991;

Kingdon 1984). Each society has literally hundreds of issues that some citizens find to be matters
of concern and would have the government do something about. However, only a small proportion
of the problems on the public or systemic agenda are actually taken up by policy actors actively
involved in policy development and understanding how and why this movement occurs is key to
understanding process dynamics at the ‘front-end’ of the policy process.

Policy formulation

Studies of the second stage of the policy cycle, policy formulation, have also emphasized the
importance of specific kinds of actors interacting to develop and refine policy options for
government

(Freeman 1965; Linder and Peters 1990) and the resulting small number of styles of policy
formulation. But unlike agenda-setting, where the public is often actively involved, in policy
formulation, the relevant policy actors are restricted to those who not only have an opinion on a
subject, but also have some minimal level of knowledge of the subject area, allowing them to
comment, at least hypothetically, on the feasibility of options put forward to resolve policy
problems.

The power of the ideas held by these actors and their stability in policy subsystems, in particular,
has been a subject of much attention in studies of policy formulation in recent years.
Decision-making

Similar styles have been identified at the decision-making stage of the policy process. Many early
studies of policy-making in companies, governments, and organizations conducted largely by
students of public and business administration, for example, argued that decision-makers attempt
to follow a systematic method for arriving at logical, efficient decisions. They argued that policy-
makers achieved superior results when they first established a goal; explored alternative strategies
for achieving it; attempted to predict its consequences and the likelihood of each occurring; and
then chose the option that maximized potential benefits at least cost or risk (Gawthrop 1971; Carley
1980; Cahill and Overman 1990).

This model was “rational” in the sense that it prescribed a standard set of procedures for
policymaking which were expected to lead in all circumstances to the choice of the most efficient
means of achieving policy goals (Jennings 1987; Torgerson 1986). Pure “rational” models of
decision-making thought of policy-makers as neutral “technicians” or “managers,” who identify a
problem and then find the most effective or efficient way of solving it (Elster 1991). Many of the
latest efforts to enhance the efficiency and effectiveness of public policy decision-making, such
as, for example, the “evidence-based policy movement”(Pawson 2006), focus on the application
of systemic evaluative rationality to policy problems (Sanderson 2006; Mintrom 2007) in classic
rational style.

Policy implementation styles

Generally speaking, comparative implementation studies have also shown that governments tend
to develop specific implementation styles (Knill 1998; Hawkins and Thomas 1989; Kagan 1991;
Howlett 2002b) which combine various kinds of instruments into a more or less coherent whole
which is then applied in particular sectors (Howlett 2011; Wuet al.2010). Linked to
implementation, policy tools provide the substance or content to what was planned in the
formulation stage and decided upon afterward in the decision-making stage of the policy process
(Howlett 2011).

These tools fall into two types. Substantive instruments are those directly providing goods and
services to members of the public or governments. They include a variety of tools or instruments
relying on different types of governing resources for their effectiveness (Tupper and Doern 1981;
Vedung 1997; Woodside 1986; Peters and Van Nispen 1998; Salamon 1989). A useful way to
classify these (see Table 2.1) is according to the type of governing resource upon which they rely:
modality or information; authority, treasure or financial resources, or administrative or
organizations.

Procedural instruments are different from substantive ones in that their impact on policy outcomes
is less direct. Rather than affect the delivery of goods and services, their principal intent is to
modify or alter the nature of policy processes at work in the implementation process (Howlett
2000; in’t Veld, 1998).

Policy evaluation styles

The last stage of the cycle is policy evaluation. For many early observers, policy evaluation was
expected to consist of assessing if a public policy was achieving its stated objectives and, if not,
what could be done to eliminate impediments to their attainment. Thus David Nachmias (1979)
defined policy evaluation as “the objective, systematic, empirical examination of the effects
ongoing policies and public programs have on their targets in terms of the goals they are meant to
achieve.”

However, while analysts often resorted to concepts such as “success” or “failure” to conclude
their evaluation, as Ingram and Mann cautioned:

The phenomenon of policy failure is neither so simple nor certain as many contemporary critics
of policy and politics would have us believe. Success and failure are slippery concepts, often highly
subjective and reflective of an individual’s goals, perception of need, and perhaps even
psychological disposition toward life. (Ingram and Mann 1980)

That is, public policy goals are often not stated clearly enough to find out if and to what extent
they are being achieved, nor are they shared by all key policy actors. Moreover, the possibilities
for objective analysis are also limited because of the difficulties involved in the attempt to develop
objective standards by which to evaluate a government’s level of success in dealing with subjective
claims and socially constructed problems.

What is significant in the evaluative process is thus not so much ultimate success and failure, but
that policy actors and the organizations and institutions they represent can learn from the formal
and informal evaluation of policies in which they are engaged. This can lead them to modify their
positions in the direction of greater substantive or procedural policy change, or it can lead them to
resist any alteration to the status quo (Majone 1989). And, like with other stages of the policy
process, a few common or typical styles of learning have been identified in the literature on the
subject.

A significant variable in this regard is the capacity of an organization to absorb new information
(Cohen and Levinthal 1990). Only when state administrative capacity is high, for example, would
one expect any kind of learning to occur. If a relatively closed network dominates the subsystem,
then this learning is likely to be restricted to some form of “lesson-drawing, ”in which policy-
makers draw lessons from past uses of policy instruments (Rose 1991; Bennett and

Howlett 1992). Open subsystems allow for “social learning” when administrative capacity is high
and more informal evaluation where the ability to adapt is rather low. “Social learning” occurs
when ideas and events in the larger policy community penetrate into policy evaluations. If the
policy subsystem is dominated by closed networks, one would expect to find formal types of
evaluation with little substantive impact on either policy instruments or goals and lesson-drawing
attempts (Howlettet al.2009).

Policy evaluations do not necessarily result in major policy changes. That is, while the concept of
evaluation suggests that an implicit “feedback loop” is an inherent part of the policy cycle, in many
cases this loop may not be operationalized (Pierson 1993). Path dependence, in which policies are
set on “trajectories” following some “critical juncture” can hinder policy change and learning
(Pierson 2000). Organizational-institutional properties (Eising 2004; Olsen and Peters 1996) are
also often seen as barriers to learning from policy evaluations.
Conclusion: Policy Development as Policy Style

As Lasswell noted in the 1950s, envisioning policy development as a staged, sequential, and
iterative process is a useful analytical and methodological device. Methodologically such an
approach reduces the complexity of public policy-making by breaking down that complexity into
a small number of stages and substages, each of which can be investigated alone, or in terms of its
relationship to any or all the other stages of the cycle. The policy cycle idea also helps to answer
many key questions about public policy-making regarding the effectiveness of different tools and
the identification of bottlenecks in policy processes. The stages allow for the identification of
typical actors and actions in different phases of tackling a problem which makes it easier to identify
independent and dependent variables in the study of policy processes and behaviour and moves
thinking forward by helping to identify the relatively limited range of styles of activity possible at
each stage of the cycle (Freeman 1985; Coleman 1994; Tuohy 1992; Vogel 1986).
ECONOMIC PLANNING IN NIGERIA

Nigeria’s development planning could be classified under four phases. These can be described as
the Colonial Era, the Era of Fixed Term Planning (1962-85), the Era of Rolling Plan (1990-1998),
and the New Democratic Dispensation (1999 till date). There exists between these periods’ years
were dominated by sporadic governmental actions and ad hoc planning in which the country did
not actually produce a plan document that could be categorized into the four periods mentioned.
These periods represent times of major socio-political upheaval and economic crisis that
necessitated transitory and sporadic actions from the incumbent administrations.

The Colonial Era

The colonial government was seen as a field administrative organ of the colonial office in London.
Hence it was never understood by the colonial powers as a government of its own. Adamolekun
(1986:34-35) clearly explains this fact when he wrote that:

The chief servant of the Crown as far as running the affairs of the African colonies in the empire
was concerned was the Secretary of State for the Colonies. However, to underline the direct
allegiance of each colony to the Crown, one or more of the principal officials of the local colonial
government was appointed by the Crown. Thus, the successive Governors of Nigeria between
1914 and 1951 and the Lieutenant-Governors between 1914 and 1931 were Crown appointees.

The obvious consequence of the above was that planning during the colonial period was
masterminded from outside the country and thus, was in accordance with the colonial objectives,
which is believed by some scholars (Rodney 1969; Obikeze and Obi 2004) to be exploitative. The
issue of development planning from inside during the colonial administration therefore became
necessary only when the heat of nationalism and the possibility of independence for the country
became evident. Thus, it was in 1946 that the first attempt at development planning was introduced.
It was a Ten-year plan of Development and Welfare for Nigeria. The plan was purely expenditure-
related as its aim was “primarily to guide the allocation of the development and welfare funds
made available by the imperial power, Britain” (Adamolekun 1983: 157).

Major areas of attention were transport, communication, and a few cash crops (Obikeze and Obi
2004). Little attention was paid to developing the productive base and defining a comprehensive
development objective for the country. The plan suffered a revision halfway through in 1951and
the introduction of a federal structure in 1954 reduced its efficacy. However, it continued to guide
both the central and regional governments until the launching of the First National Development
Plan in 1962. Adamolekun (1983) and Ayo (1988) have exhaustively documented the problems
that marred the plan. These include poor financial resources for plan implementation, weak
formulation and implementation machinery, lack of technical skills by the generalist
administrators who prepared the plan, and the absence of clearly defined national objectives
The Era of Fixed Medium-Term Plans

Within this period, four successful plans were launched, namely, First National Development Plan
(1962-1968), The Second National Development Plan (1970-1974), the Third National
Development Plan (1975-1980) and the Fourth National Development Plan (1981-1985).

Reasonable commitment was made in the preparation of these plans. Realizing the effect of the
non-existence of a planning commission and the need to prepare the country as an independent
country led to the establishment of a National Economic Council in 1955 with the mandate of
coordinating activities for the economic development of the country. The Council was made up of
representatives of the Central and Regional governments and was headed by the Governor-general
up to 1958 when the Prime Minister became the chairman.

The Coordinating work of the Council was boosted with the establishment of a Joint Planning
Commission (JPC) made up of senior professional administrators drawn from relevant federal and
regional ministries and the Central Bank of Nigeria. It is important to mention that even these
senior professional administrators de facto lacked the technical knowledge and experience
necessary for strategic planning as most of them were young inexperienced civil servants who, by
sheer opportunism saw themselves in the high positions they occupied. The envisaged importance
of human resource factors in any planning also led to the creation of the National Manpower Board
(NMB) in 1962.

The complementary nature of the assigned functions of the JPC and NMB instigated their merging
with the Ministry of Economic Development with the responsibility for plan preparation and
implementation. The NEC remained the overall political overseer of planning at this period. This
was the new institutional framework under which the First National Development Plan 1962-1968
was done (Adamolekun 1983).

It is easily seen by a critical mind that though a Planning Commission was in place, its members
lacked the expertise and the Commission did not have reasonable time to do a thorough job before
coming out with the First Plan in 1962. Foreign experts were of course invited by the government
for assistance, but in a mercenary-like fashion. No attention was paid to public participation in the
preparation of the plan. The departure of the foreign experts at the end of plan formulation stage
meant that the plan implementation was entrusted to the few Nigerian technocrats (who had played
only a minor role in the plan’s formulation) and to the ordinary citizens who had not been involved
in the plan formulation exercise at all. All this meant that the chances of the plan being
implemented successfully were very limited.

Even the limited opportunity for success was further depleted by the political upheavals and
regionalized and ethnocentric politics faced by the new indigenous government that culminated in
a military takeover in 1966 and subsequent 30 months of civil war from 1967 to 1970. The war
situation called for a radical approach, which included the suspension of the Planning/
Implementation organs-the JPC and NEC. The plan remained un-reviewed until 1970. It also
remained a perfunctory source of action for the Federal government and the twelve state
governments supposedly operational at this period. The plan however cannot be written off
entirely. Some of its major projections that laid the foundation for the industrial growth of the
country were realized. These included the Niger Dam, The Port Harcourt Refinery, The Nigerian
Security and Minting plant, the Jebba Paper Mill, The Niger Bridge and The Bacita Sugar Mill.
Part of the failure in realizing its projections was increased administrative overheads that saw the
percentage of actual expenditure at 19.5% of total expenditure instead of the planned percentage
of 7.2%. Also, only 15.2% out of the planned 20.9% (National Planning Office) was used for social
overhead comprising Education, Health, cooperation, and social welfare, etc., Obikeze and Obi
(2004) have blamed the failure of the plan to the civil war which meant that distortions were as a
result of channelling resources towards keeping Nigeria together.

The subsequent plan in this era (Second National Development Plan 1970-1974) witnessed
attempts to rectify some of the shortcomings of the first development plan. The planning
machinery was strengthened, the need for public input was recognized by preceding the plan
preparation by a national conference on economic development and reconstruction, and the need
for inputs from various levels of government, ministries, and agencies especially relevant planning
agencies like the National Manpower Board and Federal Office of Statistics, and an Advisory
Body made up of representatives drawn from the universities, trade union, other ministries and the
private sector.

The Ministry of Economic Development remained at the centre of plan coordination and
preparation while the Supreme Military Council (the government in power still being military) was
at the apex of the Planning machinery as it was in charge of the approval of broad national policies.
More importantly, the need for comprehensive national objectives to guide development plans was
recognized. Five such objectives were spelled out for the second national Plan. These were: To
establish Nigeria firmly as:

i. a united, strong, and self-reliant nation;

ii. a great and dynamic economy;

iii. a just and egalitarian society;

iv. a land of bright and full opportunities and

v. a free and democratic society.

These national objectives were considered so important that they were included in the 1979
Constitution. Yet their inclusion in the constitution did not actually influence plan implementation
as they were only considered as directive and fundamental and not legally enforceable. Abasili
(2004: 94) has this to say about them:
i. The directive principles are not legally enforceable by any court of law

ii. the state cannot be compelled through the courts to implement and fulfill their fundamental
obligations

iii. the fundamental objectives are ‘pious wishes’ devoid of constitutional significance

iv. the non-justiciable nature of the directive principles makes them superfluous and irrelevant.

Thus, the guiding principles, which became increasingly recognized from the Second Plan, did not
correct plan distortions and slippages. Apart from their vagueness, it did not actually achieve its
rationale of directing the programmes and budgets of various administrations. Part of the problems
remained lack of the will to perform, lack of finance, corruption, monocultural oil economy etc.

The serious impact of a monocultural economy in which over 90% of the government’s source of
revenue upon which development plans were based became more critical from the Third and
Fourth National Development Plans. In the Third Plan, for instance, the government could only
spend N29.43 billion out of the projected expenditure of N43.31 billion as reviewed. While in the
Fourth Plan, only N17.33 billion was actually spent out of the planned total expenditure of N42.20
billion. Okojie (2002) shows an analysis of Nigerian economic (GDP) growth rate of 5.1%, 8.2%,
5.0%, and 1.2% for the First, Second, Third, and fourth fixed term planning periods respectively.
But the truth indeed is that planning in Nigeria markedly showed an increasing developmental
crisis that climaxed with the Fourth Plan.

Development planning was meant to control the future. But within this era, plans were rather
overwhelmed by the future and external events especially the fluctuations of oil pricing, which
even happened in some cases immediately after the launching of the plan. The 1981 production
decline from 2.1 million barrels per day that climaxed in less than one million barrels per day by
February 1983 started immediately after the launching of the Fourth Plan in 1981. The obvious
explanation was that an adequate forecast was not made by the planners. The fixed-term planning
system did not improve the development planning and was found to be inappropriate for unstable
national and international political, economic, and social events in the period. Okojie aptly
remarked that:

At the end of the four plan periods, the foundation for sustainable growth and development was
yet to be laid. The productive base of the economy and sources of government revenue were yet
to be diversified. The economy did not have its own driving force and was therefore highly
susceptible to external shocks (Okojie 2002: 362).

The Rolling Plan Era (1990-1998)

By 1986, the development planning in Nigeria had hit the rocks. The huge deficits of the third and
fourth plans had pushed the country’s external debts to about $22 billion. Nigeria’s creditors
necessarily had to be involved in her planning if further debt rescheduling had to be obtained. Thus
came the introduction of the Structural Adjustment Programme (SAP), which was basically a
‘reform therapy’ from the Word Bank and the International Monetary Fund (IMF). SAP was only
an economic emergency programme expected to last for two years. But its programmes were too
radical to be realized within such a short time. SAP underscored a shift from a project-based to a
policy-based planning system and emphasized a private-sector-led economy rather than the
prevailing public-sector-led philosophy that had inspired previous plans. SAP also presented the
opportunity to evaluate the planning system for the country as the fixed medium-term planning
system had failed.

A three-tier planning system was to succeed SAP. The new proposal consisted of:

i. a 15–20-year Perspective or Long-term Plan;

ii. a three-year Rolling Plan; and

iii. an Annual Budget that will draw from the Rolling Plan (Okojie 2002).

The perspective plan was to identify long-term policies upon which the rolling plans and the annual
budgets will derive their medium- and short-term programmes respectively. It is necessary to point
out that the spelling out of some national objectives, as the foundation for plans that started with
the Second Fixed term plan was very much like doing the work of a perspective plan. However,
the idea of a perspective plan was a significant innovation as it ought to be more elaborate and
specific than the national objectives that were criticized for being vague (Okojie, 2002) and having
no constitutional significance (Abasili, 2004) nor administrative utility for the implementation of
plans.

The preparation of a perspective plan that was to take effect from 1990 together with the rolling
plan did not take place until 1996 when Abacha set up the Vision 2010 Committee. The main
report of Vision 2010 submitted to the Abacha government in September 1997, among other
things, recommended that ‘the Vision should provide the focus for all plans, including long
(perspective), medium (rolling) and annual plans (budgets)’ (Adubi 2002: 65). It became in effect
the first perspective plan for the country, even though it seemed to have died with Abacha in 1998.

The three-year rolling plan became effective in 1990 with the initiation of The First National
Rolling Plan, 1990-1992. The essence of the rolling plan was to afford the country the opportunity
for revision in the midst of increasing socio-political and economic uncertainties. However, the
preparation of medium-term plans turned out to be a yearly event and became almost
indistinguishable from the annual budgets. Okojie concludes that Rolling Plans have been prepared
yearly at all levels of government including the local government level.

At the end of about ten Rolling Plans, from 1990 to 1999, Nigerians are no better off than they
were during the years of fixed medium-term planning (Okojie 2002: 366). With the coming to
power of a new democratic power in May 1999, there were high expectations that things were
bound to change regarding development planning in Nigeria since the military rule was partly
blamed for plan failures especially as it concerned constant change of governmental
administrations that led to inconsistency in plan formulation and implementation, and absence of
democratic means of control that will likely guarantee more responsibility in governance.

The New Democratic Dispensation (1999-2007)

Democratic governance returned to Nigeria in May 1999 with the swearing-in of President
Olusegun Obasanjo on the platform of the Peoples Democratic Party. This was after long military
rule that ran from 1966 to 1999 with a brief interlude from 1979 to 1982, and a few months of
Interim National Government headed by a civilian in 1983.

The new administration started development planning in 1999 on a clean slate with the initiation
of a four-year medium-term plan document, the National Economic Direction (1999-2003). The
plan had the primary object of pursuing a strong, virile, and broad-based economy with adequate
capacity to absorb externally generated shocks.

While being a new plan document, the objectives and policy direction were not significantly
different from that which the country has followed since the introduction of SAP. According to
Donli (2004:69), The new plan was aimed at the development of an economy that is highly
competitive, responsive to incentives, private sector-led, diversified, market-oriented, and open,
but based on internal momentum for its growth.

The plan did not achieve much of the articulated programmes of deregulating the economy,
reducing bureaucratic red-tapism in governance, creating jobs, alleviating poverty, and providing
welfare programmes and infrastructure such as water, improved health care, electricity, and roads.
Despite the huge resources garnered from improved oil pricing, the sale of privatized government
enterprises, and recovered loot from the Abacha family and its cronies, Nigeria went further down
the rungs of impoverished nations.

Today Nigeria ranks among the fifteenth poorest countries in the world despite her position as the
6th among the oil-producing countries of the world. Oil- the black gold- is reckoned as one of the
highly-priced natural endowments in the world today, Nigeria by all standards supposed to be rated
highly in the committee of wealthy nations.

When the PDP government got a second opportunity by virtue of being re-elected in 2003, it saw
the need to rethink the issue of development planning. It realized the need for a comprehensive
socio-political and economic reform of the country since no plan could succeed in Nigeria if it
continued to be business as usual. This intent to bring radical changes in the way things are done
gave birth to the National Economic Empowerment and Development Strategy (NEEDS).
NIGERIA DEVELOPMENT PLAN

There is unanimity in documentation among writers and scholars that the first attempt at
development planning in Nigeria started in 1946 with a ten-year plan of Development and Welfare
(Okoli, 2004; Obikeze and Obi, 2004; Ugwu, 2009). It is also on record that this plan which was
expected to run till 1956 came to an abrupt end in 1951 due to the constitutional changes that
introduced federalism, thus the plan ran alongside “other plans for each of the then four regions of
the federation viz: the West, East, North and the Southern Cameroons” Okoli, (2004).

The plan was stymied due to limited financial resources; serious weaknesses in the public policy-
making process and non -consultation with Nigerians as beneficiaries of the plan. The 1951-56
plan that followed was meant to last for five years, however, the 1954 Lyttleton Constitution made
Nigeria “a real federal system” and the bitter struggles for dominance among nationalist leaders
resulted in the 1953 Kano riots leading to the scrapping of the plan that year. Obikeze and Obi
(2004) reported that this plan was not particularly different from the original one.

In view of the above developments, the 1956-62 plan was introduced. However, political events
unfolded dramatically, rapid reversals of earlier political stands led to the Northern members of
parliament demanding self-government “as soon as practicable”. This was an aftermath of the
Action Group (AG) sponsored motion seeking self-government for Nigeria in 1956; hence
independence came (earlier than expected) in 1960. There was a compelling need to draw a
Development Plan reflecting the independent status of Nigeria. And as Okoli (2004) recorded, the
new status made the 1956-62 Development Plan outdated.

First National Development Plan:

The First National Development Plan (1962-68) aimed at, and required cooperation between public
and private sectors, and as expected between federal and regional governments. It aimed at high
level of development which was expected to supersede the colonial plans hence, it required a
realistic study of the financial stands of both public and private sectors. It aimed at avoiding any
Balance of Payments (BOP) crises; thus past plans were studied in order to project for the future.
This plan equally emphasized agricultural; industrial; transport and manpower development.
Other objectives of the first National Development Plan included the achievement and
maintenance of the highest possible rate of increase in the standard of living of the populace. It
also aimed at a target saving of about 15 percent of the GDP by 1975; an annual investment of
15% of the GDP during the plan period; a GDP minimum growth rate of 4% for the economy. And
as reported by Obiekeze and Obi (2004), the plan which was expected to last for six years
had a proposed total investment expenditure of about N2, 132 million. The public sector
investment expenditure was put at N1, 352.3 million and the remaining investment
expenditure of N780 million was to be made by the private sector. However, the subsequent
crises culminating in the thirty-month Nigerian Civil War (1967-70) punctuated the
implementation of this plan.
Apart from this, Osifo-Whiskey (1987) however, concluded that there was no attempt, at the
Centre, to plan the development centrally so that each region could optimize in a truly national
economy”. The plan was not national, it rested disproportionately on public sector contributions,
though, conceived the role of the private sector as marginal hence, failed to harness the private
sector’s contribution to national development.

Second National Development Plan:

The Second National Plan (1970-74) can be referred to as the “Oil-boom development plan”
because it coincided with the period that Nigeria made high earnings from the sale of crude oil and
allied products. Having emerged from a devastating civil war and with lessons to learn, the plan
had the following objectives as captured in Ugwu (2009):

• The reconstruction of facilities damaged by the war or fallen in despair.

• The rehabilitation and resettlement of persons displaced by the war.
• The rehabilitation and resettlement of demobilized armed forces personnel
• The establishment of an efficient administrative service, and an appropriate economic
infrastructure, especially in the new states.
• The achievement of a rate of growth of per capita output sufficiently high to bring about a
doubling of real income per head before 1985.
• Creation of job opportunities
• The production of high level of intermediate manpower
• The promotion of balanced development between the urban and rural areas
• The rapid improvement in the level and quality of social services provided for the welfare
of the people.

The plan also had some lofty heights to attain such as building a united, strong and self-reliant
nation; a great and dynamic economy; a just and egalitarian society; a land of bright and full
opportunities for all citizens; and a free and democratic society.

Egonmwan and Ibodje (2001) reported that this plan “involved a capital expenditure of N3.2
billion and an anticipated overall growth rate of 7% per annum”. Resulting from the profligacy
that characterized the oil-boom period, the initial plan budget of N3.2 billion was revised upwards
to N5.3 billion which as Osifo-Whiskey (1987) posited was little compared to third plan. It can
therefore be persuasively argued that the Nigerian governing elite started the march towards
economic regression from this period as a result of fiscal and financial indiscipline. Again, during
this (1970-74) plan period, Nigerians were expected to fully participate in private sector which
witnessed the enactment in 1972 of the Nigerian Enterprises Promotion Decree (which was
targeted towards Nigerians to own certain companies and increase Nigerian participation from
40% to 60% ownership). Full foreign investments were discouraged as the central government
bought shares in major commercial houses like banks and insurance companies. However,
Ezekiel (1987) adds that a comprehensive review of the 1972 Indigenization Decree took place,
its provisions, and others were consolidated into Decree No. 3 of 1977 which came up with three
schedules, instead of the two under the 1972 decree. Ezekiel (1987) averred further that it was
discovered that the decree, rather than transferring ownership and control to Nigerians, succeeded
in subjugating them.

On thorough analysis and scrutiny, Nigeria’s economic governance requires complete diagnosis
and surgery. Financial indiscipline, sundry mismanagement of resources, and planning
inadequacies made a country that embarked on indigenizing enterprises in 1972 through 1977 to
commence privatization and commercialization of those enterprises in less than twenty years as a
result of conditionality from the Bretton Wood institutions. The country seems to have remained
a pawn in the chess game of these capitalist nations and their institutions. Notwithstanding that
the Second National Development Plan had to be extended by one year to end in 1975 due to its
implementation which proved cumbersome for the bureaucrats, Okoli(2004) affirmed that this plan
very nearly succeeded where others failed in running its full course under one regime.

Third National Development Plan:

The Third (1975-80) National development plan also fell within the ‘oil boom’ years, and in that
era was seen as the largest and the most ambitious ever launched (compared to the ones that
preceded it). The national purposes stated in the Second National Development Plan were
reaffirmed as they can be said to be long term in nature. The objectives include: Increase in per
capita income; even distribution of income; reduction in the level of unemployment; increasing
the supply of high level manpower, diversification of the economy; balanced development and
indigenization of economic activities. The initial total expenditure for this plan was put at N30
billion over five years. Further adjustments put the total at N60 billion in 1980Osifo-Whiskey,
(1987). The above stated objectives therefore enlisted the following:

• Research in agriculture on both food and cash crops for domestic feeding and export,
and raw materials for local industries;

• Research and development on livestock and veterinary;

• Special agricultural development schemes;

• Reviewing the credit requirement of Nigerian Agricultural and Cooperative Bank (NACB);

• Installation and building of terminal plants and stations;

• Rural electrification

• Development of some inland waterways on river Niger and Benue;

• Universal free primary education;

• Construction of 60,000 dwelling units in various locations in the country.

Inherent in the objectives of this plan was its incremental posture or seeming similarity
with the preceding plan. The intention of this plan was to curb inflationary trends and it suggested
the country’s attainment of a high development level. The search for a wider market which might
be incidental to this plan witnessed the formation of ECOWAS as a sure strategy. Nigeria
spearheaded the building of the $27 million secretariat at Abuja, in addition to other contributions
and activities in ECOWAS. As part of the convergence criteria to accelerating a durable monetary
union and ultimately regional integration, Nigeria is expected to harmonize its fiscal, economic
and legal policies (among others) with those of other member states.

In a review of the Third National Development Plan, Onah (2006) established that agriculture and
social development schemes (education, housing, health, welfare etc) that have direct bearing on
the living conditions of the rural population (constituting about 70% of Nigerian population)
received only 5 percent and 11.5 percent respectively of the financial allocations contained in the
plan. These lean financial allocation to priority areas of the plan reflected lack of focus of the
planners.

The Third National Development Plan however achieved the following: GDP grew at an average
rate of 5% per annum; the manufacturing sector recorded the fastest growth with an average of
18.1% per annum; building and construction grew at 13.9%; Government services leaped at 17.7%
and other services grew at 15.7%. However, the agricultural sector recorded a negative growth of
2.1% per annum Egonmwan and Ibodje, (2001). These authors noted that most of the key projects
that were anticipated as foundation for self-sustaining and dynamic growth were either not
completed or could not take off. Examples of the projects included Ajaokuta Iron and Steel
Complex; Aladja Direct Steel Reduction Plant; The Eleme Petrochemical Complex; Oku-
Iboku Newsprint Paper Mill; and the Liquefied Natural Gas (LNG) plant at Bonny.

Fourth National Development Plan:

The Fourth (1981-85) National Development Plan like the ones before it reaffirmed the long term
national objectives of the preceding plan. Ijaiya and Usman (2000) corroborated that this was also
launched simply to consolidate the Third National Development Plan with much more
commitment to petroleum resources. The industrial policy objectives of this plan were: promotion
of export oriented industries; enhancement of local value-added through the development
of small and medium scale industries; local sourcing of inputs; improving the efficiency of
government owned enterprises and acquisition of technological skills. Other broad objectives
included: increasing real income for all Nigerians; reduction in unemployment; power
generation and supply; refinancing and rescheduling the trade debts to pave way for
international transactions for only selected import; increasing food production and raw
material to meet the needs of the growing population; increasing the production of livestock
and fish to meet domestic need and to make surplus for export; development of technology
for greater self-reliance; and to increase or strengthen the country’s foreign exchange earnings.
The total investment envisaged under this plan was N82 billion. Out of this amount, the public
sector was to account for N70.5 billion, while the share of the private sector stood at N11.5 billion.
The planned investment was expected to generate an annual GDP growth of 7.2%. The
manufacturing sector had a projected average growth rate of 15% for the plan period.

The rate of growth was supposed to make a significant increase in the standard of living of the
average citizen at the end of the plan period. Egonmwan and Ibodje (2001) emphasized that
out of all the plans that had been launched since independence, the Fourth plan which was
the most ambitious in terms of size of the anticipated investment programme turned out to be the
least successful in terms of achievement.

The Fourth National Development Plan was characterized by huge debt servicing which resulted
from various foreign loans obtained in the previous years; increased import bills amidst a drastic
fall in crude oil export revenue. These factors no doubt limited the scope of the objectives. This
plan being the first to be drawn under presidential democracy appeared unique in the sense that it
elicited the participation of local governments.

The performance of this plan as economic indicators/indices revealed negative growth in

major sectors of the economy in 1985 and other dismal results, however its achievements
included the commissioning of the Oku Iboku Newsprint paper project; Egbin Power station;
Akure Airport; 87 telephone exchanges all over Nigeria, and an increase in subscriber base from
188,000 in 1981 to 297,000 in 1985; increase in educational enrolment at all levels; improvement
in health care delivery; construction of thousands of kilometers of federal highways and
rehabilitation/reconstruction of state roads; implementation of Agricultural Development
Programme (ADPs) in seventeen out of the nineteen states in the federation; Conclusively
on this note, the full expectations of the citizenry were far from being met.

Integrated Development Initiatives: Structural Adjustment Programme:

Obikeze and Obi (2004) attempted to articulate their discourse on Structural Adjustment
Programme (SAP) under the caption of Fifth National Development Plan; Onah (2006)
submitted with finality that “the idea of a Fifth National Development Plan, mooted in the
late 1980, never materialized. The launch of the purported plan was postponed twice in a row in
1987 and 1988. Instead of the plan, series of Integrated Development Initiatives which
Okoli and Onah (2002) referred to as rural development strategies such as Agricultural
Development Scheme; National Accelerated Food Production Programme (NAFPP); and
Directorate for Food, Road and Rural Infrastructure (DFRRI) were structured.

The Structural Adjustment Programme (SAP) was introduced on 26 September 1986 with
the following objectives: To restructure and diversify the productive base of the economy in
order to reduce dependence on the oil sector and on imports; to achieve fiscal and balance of
payments viability over the period; to lay the basis for a sustainable non-inflationary growth; and
to reduce the dominance of unproductive investments in the public sector by improving
public sector efficiency and enhancing the growth potential of the private sector.

Studies affirmed that SAP rested on a number of pillars namely: deregulation of the value
of the naira which was said to be over-valued; deregulation of interest rate which at SAP’s
inception was below 10 percent; removal of subsidies on government-provided goods and
services. A corollary of the last is the privatization and commercialization which was considered
necessary on account that the government was already over-bloated and unwieldy, and that by
extension, its public enterprises and agencies were wasteful and inefficient.

Rolling plans (1990-1999) and vision 2010:

After SAP, Nigeria resorted to the use of (ad-hoc) short-term instruments for economic
management, as Daggash (2008) asserted, the era of Rolling Plans (1990-1999) which he
derisively tagged an era of “the Rolling Stones that gathered no moss”. He added that in a bid
to have a long term National Vision on which development could be anchored, a bold attempt was
made in 1996 to articulate a National vision document, the Nigeria Vision 2010. This development
effort had the vision of transforming the Nigerian Nation by 2010 into a united, industrious, caring
and God-fearing democratic society, committed to making the basic needs of life affordable for
everyone, and creating Africa’s leading economy Ugwu, (2009). The vision was to be achieved
using a multi-tier medium term plans that are anchored on a fifteen year perspective plan.
The Rolling plan and Vision 2010 became unfortunately stillborn arising from what Egonmwan
and Ibodje (2001) captured as the linkage between Vision 2010, the national Rolling plan and the
annual budget seems not clear.

Under normal planning circumstances, the annual budget as the annual operational plan is expected
to be linked with the rolling plan because the annual plan is the controlling plan which matches
resources with possible achievements. A rolling plan on a continuous basis takes into account
new information, improved data and analysis, and incorporates periodic revision into the
planning machinery. Each revision takes a look at the future which is determined by the nature of
factual circumstances. Expectedly, a rolling plan contains a plan for the current year which
includes the annual budget and foreign exchange budget; a medium term plan (for 3 to 5 years)
which can be changed yearly in line with the requirements of the economy; and a perspective plan
(for between 10-20 years) which presents yearly (broad) goals and an outline of forecasts for future
development. In essence, the annual plan is fitted into the same year’s medium term plan, and both
are framed in light of the perspective plan. Rolling plans help overcome the rigidities of the fixed
five year plans.

The vision 2010 called for an urgent developmental paradigm shift and placed a duty on Nigerians
attitudinally in order to realize the targets/goals. It is doubtful if conscious efforts were made to
disseminate these requirements to a wide spectrum of the populace, and this has continued to
be a noticeable snag in policy formulation with its attendant effects on implementation and
development initiatives.

National Economic Empowerment and Development Strategy (NEEDS):

The National Economic Empowerment and Development Strategy (NEEDS) offered Nigeria an
opportunity to experiment with medium-term economic development plan from 2004 to 2007.
Onah (2006) posited that NEEDS focused on wealth creation, employment generation, poverty
reduction and re-orientating values. These goals, he corroborated can be realized by creating an
environment in which business can thrive, government is redirected to providing basic services,
and people are empowered to take advantage of the opportunities which the plan will usher. The
strategies that will drive the above goals are: reforming government and its institutions; growing
the private sector; implementing a social character and value; reorientation.

The federal government had in turn encouraged States and Local Governments to adopt and adapt
the NEEDS document to suit its peculiar purposes, accordingly the equivalent of NEEDS in the
states are called SEEDS, while in the local governments, they go by the acronym LEEDS. In giving
practical expression to the NEEDS programme, the federal government was reported to have
allocated large percentage of capital expenditure to healthcare, education, agriculture, roads,
water resources, power and security in the 2004 and 2005 annual budgets. With the usual allegation
of unspent funds being returned at the end of the year by Ministries, Departments and Agencies of
government coupled with the monster of pervasive corruption, allocating large percentage in
budgets does not translate to faithful execution of programmes capable of delivering services to
the citizenry.

To depict the policy thrust of NEEDS focusing on empowerment, wealth creation, employment
generation and poverty reduction, as well as value reorientation and its substantial progress, the
diagram below present such structure;
 Fig. 1: The Policy thrust of NEEDS

Vision 2020 as Development Planning Initiative:

As a development planning initiative, Vision 2020 aims at growing the size of Nigeria’s economy
from its current position of the 41stto the 20thbest economy in the world by the year 2020, and to
be the African financial Centre of choice by that same year, Ugwu, (2009). This programme is
a carry over by the Yar’adua’s administration from the Obasanjo civilian administration. It
is said to be based on a proactive reaction to a 2001 Jim ‘O’ Neil thesis predicting that if Nigeria
and some other developing countries, can mobilize their resources very well, it is expected that
by the year 2025, Nigeria and countries like Egypt would have joined the biggest twenty economies
in the world”. Ugwu, (2009).

It is expected that with positive economic management in countries like Nigeria, GDP growth for
Nigeria will be larger than that of Italy by 2015 and by this same Jim Neil’s (2007) calculation,
Nigeria’s economy would have been equal to the present first 20 economies of the world
namely: Canada, Austria, Belgium, France, Greece, Italy, Netherlands, Spain, Denmark,
Norway, Poland, Russia, Sweden, Switzerland, Turkey, Australia, India, Indonesia, Malaysia and
Brazil Ugwu, (2009).

Other Programmes:

The Yar’adua administration presented a Seven-Point Agenda to include tackling the problems of:
Power and Energy; Food Security and Agriculture; Wealth Creation and Employment;
Transport Sector; Land Reforms; Security; Education. These are supposed to be running
alongside with the Nigerian version of the United Nations Millennium Development Goals
(MDGs) of eradicating extreme poverty and hunger by 2015; achieving universal primary
Education by 2015; reducing child mortality by two-third by 2015; improving maternal health
by 2015; combating HIV/AIDs, malaria and other preventable diseases by 2015; ensuring
environmental sustainability between 2015 and 2020; and developing a global partnership
for development by 2015.

The Yar’adua Seven-Point agenda however, failed in the area of coordination and on virtually all
points of the agenda couldn’t deliver qualitative services to Nigeria within that era of
administration. The MDGs are more like goals from outside, even though some of them are
achievable, the programme does not deserve any rigorous discourse under Nigeria’s development
planning initiative yet so many of the goals are still unattainable in Nigeria.

THE PLANNING PROCESS

The development planning is being implemented by structuring five-year plans. The design and
implementation of planning passes through Process of planning which takes place in six stages.
These are briefly discussed as below

First Stage:

The first stage, begins about three years in advance of the commencement of the Plan. The planning
commission attempts a thorough appraisal of the existing state of economy of the country and also
makes detailed suggestions to remove the social, economic and institutional weakness which may
be retarding the country’s progress. This report of the ‘Planning Commission’ is then submitted to
the central Cabinet and the ‘National Development council’ (NDC) for the examination and
consideration. The National Development Council, on its part, after having considered the report,
makes certain preliminary suggestions to the Planning Commission regarding the rate of growth
to be assumed and the objectives and consideration which should receive special emphasis in the
five year plan.

Second Stage:

The second stage consists in arranging various types of studies which form the basis of a Draft
Memorandum on the physical contents of the Five year Plan. The Planning Commission
constitutes a series of working groups, composed of its specialists and those of the Ministries
concerned at the centre. Each Working Group is concerned with a particular sector at field of the
economy. The Working Group on Financial Research was concerned with the estimation of
financial resources, both external, internal and resources for the public sector as well as the privet
sector.

Each working group is expected to review the performance of the economy in its particular field
and to point out the deficient that may have been observed. As the working groups at the Centre
begin their word, state government are also advised to constitute similar working groups of their
own. On the basis of reports of the working groups and suggestions of the various panels, the
Planning Commission drafts a Memorandum known as Draft Memorandum. This includes the
Principle magnitudes of the next plan. The Draft Memorandum is submitted to the central cabinet
which discusses the document detail. The document is then placed before the National
Development Council, forms the basis for the next stage in the formulation of plan, namely, the
preparation of a Draft outline.

Third Stage:

In the third stage the Draft Outline is a much more detailed document than the Draft Memorandum.
It gives fuller details of the various plans envisaged for the different sectors and brings out clearly
the main policy issues and objectives and the approach which is proposed to be adopted. The
Draft Outline is prepared by the Planning Commission and is circulated among the various
Ministries and state Governments for comments. It is considered by the Central Cabinet or
executives arms of government before being submitted to the National Development Council. With
the approval of the National Development Council the Draft Outline is published as a document
for the widest public discussion and comments are invited from all sections of public opinion. At
the national level, both Houses of Parliament discuss the Draft outline, first in a general way for a
few days at a time and then in greater detail through a series of Parlimentary Committees.

Fourth Stage:

In the fourth stage, while the Draft Outline is under discussion throughout the country, the Planning
Commission in association with the Ministers at the centre holds detailed discussion regarding the
plans of individual states. These discussions involve a study of their financial resources, proposals
for rising additional resources and their detailed plans of development.

With each state, the discussions are held both at the expert level and at the political level. But the
final conclusion is reached in consultation with Chief Ministers of individual states. These
conclusions are regarded as understandings between the Planning Commission and the states for
the size and composition of each states plans, the main targets and programs to be fulfilled and the
obligations undertaken by the centre to provide a given quantum of financial assistance and by
each state to find its share of resources and to observe the agreed priorities.

Fifth Stage :

In this stage, the Planning Commission on the basis of detailed discussions with state governments
comments from organised bodies and more detailed recommendations of the various Working
Groups and panels prepares a fresh Memorandum in which it brings together the principle
features of the plan, the policy directions to be stressed and the issues which may require further
consideration before report on the Plan is finally drawn up. This Memorandum is then submitted
to the Central Cabinet or executive arms of government and the National Development Council
for consideration.
Sixth Stage :

In the sixth stage, the Planning Commission on the basis of the conclusions reached on the
Memorandum by the National development Council prepares the final report on the Five Year
Plan. This is detailed report containing the objectives, programmes and projects, in the plan. This
report in again commented upon in draft by the Ministers at the centre and by the state
Governments and finally submitted to the Cabinet and the National Development Council for final
approval. With the approval of Council, the report is published and presented to Parliament, by the
Prime Minister. After discussion lasting for several days, each house of Parliament accords its
general approval to the plan and gives a call to the nation for its implementation and for
achievement of the objectives and targets embodied in it.

The Rationale for Development Planning

The early widespread acceptance of planning as a development tool rested on number of

fundamental economic and institutional arguments. Of these we can single out four as most often
put forward.

Market failure:

Markets in developing economies are permeated by imperfections of structure and operation.

Commodity and factor markets are often badly organized, and the existence of distorted prices
often means that producers and consumers are responding to economic signals and incentives that
are a poor reflection of the real cost to society of these goods, services, and reduces. It is therefore,
argued that governments have an important role to play in integrating markets and modifying
prices. Moreover, the failure of the market to price factors of production correctly is further
assumed to lead gross disparities between social and private valuations of alternative investment
projects. In the absence of governmental interference, therefore, the market is said to lead to a
misallocation of present and future resources or, at least, to an allocation that may not be in the
best long-run social interests. This market failure argument is perhaps the most often quoted reason
for the expanded role of government in less developed countries.

Unfortunately, we cannot jump to the conclusion that if economic theory says policy can fix market
failures, it will do so in practice. Government failure may also occur in the many cases in which
politicians, bureaucratic, and the individuals or groups who influence them give priority to their
own private interest rather than the public interest. Analysis of incentives for government failure
helps guide reforms such as constitution design and civil service rules. Developing countries tend
to have both high market failure and government failure.

Resource Mobilization and Allocation:

This argument stresses that developing economies cannot afford to waste their very limited
financial and skilled human resources on unproductive ventures. Investment projects must be
chosen not solely on the basis of partial productivity analysis dictated by individual industrial
capital-output ratios but also in the context of an overall development program that takes account
of external economies, indirect repercussions, and long term objectives. Skilled workers must be
employed where their contribution will be most widely felt. Economic planning is assumed to help
by recognizing the existence of particular constraints and by choosing and coordinating investment
projects so as to channel these scarce factors into their most productive outlets. In contrast, it is
argued, competitive markets will tend to generate less investment and to direct that investment into
areas of low social priority (e.g., consumption goods for the rich).

Attitudinal or Psychological Impact:

It is often assumed that a detailed statement of national economic and social objectives in the form
of a specific development plan can have an important attitudinal or psychological impact on a
diverse and often fragmented population. It may succeed in rallying the people behind the
government in a national campaign to eliminate poverty, ignorance, and disease or to boost
national prowess. By mobilizing popular support and cutting across class, caste, racial, religious,
or tribal factions with the plea to all citizens to work together toward building the nation, it is
argued that an enlightened central government, through its economic plan, can best provide the
needed incentives to overcome the inhibiting and often divisive forces of sectionalism and
traditionalism in a common quest for widespread material and social progress.

Foreign Aid:

The formulation of detailed development plans has often been a necessary condition for the receipt
of bilateral and multilateral foreign aid. With a shopping list of projects, governments are better
equipped to solicit foreign assistance and persuade donors that their money will be used as an
essential ingredient in a well-conceived and internally consistent plan of action.

Development of Agriculture and Industrial Sector:

Planning alone can transform an agricultural and primary producing economy into a more balanced
economy with heavy, medium and light industries. Agriculture and industry stimulate production
in each other by creating demand for their products. The development of agriculture is also
essential to supply the raw material to the industrial sector. Economic planning is held in designing
the plans of agricultural and industrial sectors of developing economies.

Economic Planning Models

It is important to understand that planning is essential in whatever we do both at the micro and
macro levels of human existence. Quantifying what we want to achieve as set targets and how to
realize them given the limited resources at our disposal is of paramount importance to even the
planning authorities that is the government for them to meet up with the set targets of developing
the economy using available resources. Planning Model therefore is a series of mathematical
equations which help in the drawing up of a plan for economic development. Planning models
have been increasingly used in less developed countries of which Nigeria is one, for the
drawing up of plans for economic development.

Furthermore, It is imperative to know that model may have endogenous and exogenous
variables. Given that Endogenous variables are those whose values are determined from within
the system, examples of such are national income, consumption, savings, investment among
others, Also, exogenous variable are determined from outside the system, Examples of such are
prices, exports, imports, technological changes etc. Therefore, a planning model specifies the
relationships between endogenous and exogenous variables and aims at ensuring the consistency
of the proposed plan for economic development. It is also meant to yield an optimally balanced
collection of measures known as Model Targets which can help the planning authority in the
drawing of an actual plan.

Types of Planning Models

It is important for us to identify the various types of development or economic planning models
that traditionally have been based initially on some more or less formalized macroeconomic model.
Such an economy-wide planning model can be divided into three basic categories.

Aggregate growth, Macroeconomic or Simple Models

Multi-Sector Models and Sectoral Projections

Project Appraisal and Social Cost-Benefit Analysis

Aggregate Growth, Macroeconomic or Simple Models:

The first category is the aggregate growth, macroeconomic or simple models which involves
macroeconomics estimate of planned or required changes in principal economic variables. It deals
with the entire economy in terms of a limited set of macroeconomic variables deemed most critical
to be determined by levels and growth rates of national output; that is savings, investment, capital
stock, exports, imports, foreign aid among others. The model provides a convenient method for
forecasting output (or employment) growth over a three to five year period. Harrod Domar and
two gap models are of this type.

Multi-Sector Models and Sectoral Projections:

A much more sophisticated approach to development planning in which the activities of the major
industrial sectors of the economy are interrelated by means of a set of simultaneous algebraic
equations expressing the specific production processes or technology of each industry. Given the
planned output targets for each sector of the economy, the inter industry model can be used to
determine intermediate material, import, labour and capital requirements with the result that a
comprehensive economic plan with mutually consistent production levels and resource
requirements can in theory be constructed.

The model establish that all industries are viewed both as producers of outputs and users of inputs
from other industries. This means that, the agricultural sector for instance is both a producer of
output e.g. (wheat) and a user of input from the manufacturing sector e.g.(machinery, fertilizer),
therefore there is interdependence of industry which could lead to direct and indirect
repercussions of planned changes in the demand for the products of any one industry on
outputs, employment, and imports of all other industries can be traced throughout the entire
economy in an intricate web of economic interdependent.

Project Appraisal and Social Cost-Benefit Analysis or Decentralized Models:

This category of planning models is an interesting decentralized model known to build on sector
of project level variables which are used to prepare models for individual sectors or projects. This
type of models are useful in the early stages of a country’s economic development when
information is available for only individual sectors or projects, project evaluation or project
appraisal social cost benefit Analysis are techniques that fit into this category. The most
important component of plan formulation is the detailed selection of specific investment
projects within each sector through the decentralized models.

Problem of Plan Implementation and Plan Failure

We can identify interrelated sets of answers, one dealing with the gap between the theoretical
economic benefits and the practical results of development planning and the other associated with
more fundamental defects in the planning process, especially as it relates to administrative
capacities, political will and plan implementation. These we have as follows;

1. Theory versus Practical; most especially the case of government failure rather than market
failure. Government policy often tended to increase rather than reduce the divergences between
private and social valuations in most third or developing countries of the world.

2. Deficiencies in plans and their implementation; they try to accomplish too many objectives
at once without considering that some of the objectives are competing or even conflicting.

3. Insufficient and unreliable Data; the attempt to formulate and carry out a comprehensive
and detailed development plan is likely to be frustrated at all levels due to the quality and reliability
of the statistical data on which it is based, which most often in Nigeria is weak, unreliable,
inconsistent even.

4. Institutional Weaknesses; this is noticed in the planning processes of most developing

countries especially the separation of the planning agency from the day-to-day decision-making
machinery of government, the failure of planners, administrators, and political leaders to engage
in continuous dialogue and internal communication about goals and strategies, and the
international transfer of institutional planning practices and organizational arrangements that may
be inappropriate to local conditions.

5. Lack of political will; poor plan performance and the wide gap between plan formulation
and plan implementation are also attributable to a lack of commitment and political will on the
part of many developing country leaders and high-level decision makers to challenge powerful
elites and vested interest groups and to persuade them that development is in the long run interest
of all citizens even though some of them may suffer short term losses.

6. Unanticipated economic disturbances, External and Internal; Given that most developing
countries have open economies dependent on the fluctuations of international trade, aid, hot
speculative capital inflows, and private foreign investment, it becomes difficult for them to engage
in even short-term forecasting, let alone long term planning. For instance, the Nigeria crude oil
prices situation in 2015 to 2016.

7. Conflict, Post-conflict, and Fragile states; In extreme cases, violent conflict or the large-
scale failure of a state to otherwise function meaningfully has resulted in catastrophic failure of
even the most basic development objectives.

INPUT-OUTPUT ANALYSIS

The input-output method is an adaptation of the neoclassical theory of general equilibrium to the
empirical study of the quantitative interdependence between interrelated economic activities. It
was originally developed to analyze and measure the connections between the various producing
and consuming sectors within a national economy, but it has also been applied to the study of
smaller economic systems, such as metropolitan areas or even large integrated individual
enterprises, and to the analysis of international economic relationships.

In all instances, the approach is basically the same: The interdependence of the individual sectors
of the given system is described by a set of linear equations. The specific structural characteristics
of the system are thus determined by the numerical magnitude of the coefficients of these
equations. These coefficients must be determined empirically; in the analysis of the structural
characteristics of an entire national economy, they are usually derived from a so-called statistical
input-output table.

Application of the input-output method in empirical research requires the availability of basic
statistical information. By 1963, input-output tables had been compiled for more than forty
countries. The principal economic applications, as distinct from engineering and business-
management applications, have been made in such fields as economic projections of demand,
output, employment, and investment for the individual sectors of entire countries and of smaller
economic regions (for example, metropolitan areas); study of technological change and its effect
on productivity; analysis of the effect of wage, profit, and tax changes on prices; and study of
international and interregional economic relationships, utilization of natural resources, and
developmental planning.

Some of these applications require the construction of special-purpose input-output models. A

great variety of special models is used, for instance, in the analysis of interregional relationships
and in the study of problems of developmental planning.

An input-output table describes the flow of goods and services between all the individual sectors
of a national economy over a stated period of time—say, a year. An example of an input-output
table depicting a three-sector economy is shown in Table 1. The three sectors are agriculture,
whose total annual output amounted to 100 bushels of wheat; manufacturing, which produced 50
yards of cloth; and households, which supplied 300 man-years of labor. The nine entries inside the
main body of the table show the intersectoral flows. Of the 100 bushels of wheat turned out by
agriculture, 25 bushels were used up within the agricultural sector itself, 20 were delivered to and
absorbed, as one of its inputs, by manufacturing, and 55 were taken by the household sector. The
second and the third rows of the table describe in the same way the allocation of outputs of the two
other sectors.

Table 5 - Examlpe of an input-output table (in physical units)

Into From Sector 1: Sector 2: Sector 3: Total output
Agriculture Manufacturing Households
Sector 1: 25 20 55 100 bushels
Agriculture of wheat
Sector 2: 14 6 30 50 yards of
Manufacturing cloth
Sector 3: 80 180 40 300 man-
Households years of labor

The figures entered in each column of the main body of the table thus describe the input structure
of the corresponding sector. In producing 100 bushels of wheat, agriculture absorbed 25 bushels
of its own products, 14 yards of manufactured goods, and 80 man-years of labor received from the
households.
In producing 50 yards of cloth, manufacturing absorbed 20 bushels of wheat, 6 yards of its own
products, and 180 man-years of labor.

In their turn, the households used their income, which they received for supplying 300 man-years
of labor, to pay for 55 bushels of wheat, 30 yards of cloth, and 40 man-years of direct services of
labor, which they consumed.

All entries in this table are supposed to represent quantities, or at least physical indexes of
quantities, of specific goods or services. A less aggregative, more detailed input-output table
describing the same national economy in terms of 50, 100, or even 1,000 different sectors would
permit a more specific qualitative identification of the individual entries. In a larger table,
manufacturing would be represented not by one but by many distinct industrial sectors; its
output—and consequently also the inputs of the other sectors—would be described in terms of
yards of cotton cloth and tons of paper products, or possibly yards of percale, yards of heavy cotton
cloth, tons of newsprint, and tons of writing paper.

Input-output tables and income accounts

Although in principle the inter-sectorial flows, as represented in an input-output table, can be

thought of as being measured in physical units, in practice most input-output tables are constructed
in value terms. Table 2 represents a translation of Table 1 into value terms on the assumption that
the price of wheat is $2 per bushel, the price of cloth is $5 per yard, and the price of services
supplied by the household sector is $1 per man-year. Thus, the values of the total outputs of
agriculture, manufacturing, and households are shown in Table 2 as $200 (= 100 x $2), $250 (=
50 x $5). And $300 (=300x$l), respectively. The last row shows the combined value of all outputs
absorbed by each of the three sectors. Such column totals could not have been shown on Table 1,
since the physical quantities of different inputs absorbed by each sector cannot be meaningfully
added.

Table 2 - Examlpe of an input-output table (in dollars)

Into From Sector 1: Sector 2: Sector 3: Total
Agriculture Manufacturing Households output
Sector 1: 50 40 110 200
Agriculture
Sector 2: 70 30 150 250
Manufacturing
Sector 3: 80 180 40 300
Households
Total input 200 250 300

The input-output table expressed in value terms can be interpreted as a system of national accounts.
The $300 showing the value of services rendered by households during the year obviously
represents the annual national income. It equals the total of the income payments (shown in the
third row) received by households for services rendered to each sector; it also equals the total value
of goods and services (shown in the third column) purchased by households from themselves and
from the other sectors. To the extent that the column entries (showing the input structure of each
productive sector) cover current expenditures but not purchases made on capital account, the
capital expenditures being paid out of the net income should be entered in the households’ column.

All figures in Table 2, except the column sums shown in the bottom row, can also be interpreted
as physical quantities of the goods or services to which they refer. This requires only that the
physical unit in which one measures the entries in each row be redefined as the amount of output
of the particular sector that can be purchased for $1 at prices that prevailed during the interval of
time for which the table was constructed.

Input coefficients

Let the national economy be subdivided into n + 1 sectors. Sectors 1,..., n are industries—that is,
producing sectors—and sector n + 1 is the final demand sector, represented in input-output Tables
1 and 2 by households. For purposes of mathematical manipulation, the physical output of sector
i is usually represented by xi, and the symbol xi j stands for the amount of the product of sector i
absorbed as an input by sector j. The quantity of the product of sector i delivered to the final
demand sector, xi.n+1, is usually identified in short as yi

The quantity of the output of sector i absorbed by sector j per unit of j’s total output is represented
by the symbol ai j and is called the input coefficient of sector i into sector j. Thus,

A complete set of the input coefficients of all sectors of a given economy arranged in the form of
a rectangular table, corresponding to the input-output table of the same economy, is called the
structural matrix of that economy. Table 3 presents the structural matrix of the economy whose
flow matrix is shown in Table 1. The flow matrix constitutes the usual, although not necessarily
the only possible, source of empirical information on the input structure of the various sectors of
an economy. The entries in Table 3 are computed, according to equations (1), from the figures
presented in Table 1—for example, a11 = 25/100 = 0.25, and a12 = 20/50 = 0.40.

Table 3 - Structural matrix corresponding to the input-output table of Table 1

From Into Sector 1: Sector 2: Sector 3:
Agriculture Manufacturing Households
Sector 1: Agriculture 0.25 0.40 0.183
Sector 2: 0.14 0.12 0.100
Manufacturing
Sector 3: Households 0.80 3.60 0.133
In practice, the structural matrices are usually computed from input-output tables described in
value terms, such as Table 2. In any case, the input coefficients must be interpreted, for analytical
purposes described below, as ratios of two quantities measured in physical units. To emphasize
this fact, we derived the structural matrix in this example from Table 1, not Table 2.