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TOWARDS ENHANCING NIGERIA’S ECONOMIC DEVELOPMENT:
SOME LESSONS FROM CHINA’S ECONOMIC POLICY
BY
YUSUF KAZEEM OLATUNDE
MATRIC NO: 06/66MF185
BEING A RESEARCH PROJECT SUBMITTED TO THE
DEPARTMENT OF POLITICAL SCIENCE, FACULTY OF
BUSINESS AND SOCIAL SCIENCES,
UNIVERSITY OF ILORIN, NIGERIA.
IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE
AWARD OF THE BACHELOR OF SCIENCE (B.Sc. HONS) IN
POLITICAL SCIENCE
1
JUNE
2010
TABLE OF CONTENTSTITLE PAGE
i
CERTIFICATION ii
DEDICATION
iii
AKNOWLEDGEMENT iv
CHAPTER ONE1.0 INTRODUCTION 1
1.1 BACKGROUND TO THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 3
1.3 RESEARCH QUESTIONS 4
1.4 OBJECTIVES OF THE STUDY 6
1.5 RESEARCH METHODLOGY 7
1.6 SIGNIFICANCE OF THE STUDY
7
1.7 THEORETICAL FRAMEWORK 8
1.8 SCOPE AND LIMITATION OF THE STUDY 9
1.9 DEFINITION OF BASIC TERMINOLOGIES
10
2
1.10 ORGANIZATION OF THE STUDY
11
REFERENCES
13
CHAPTER TWO2.0 LITERATURE REVIEW 14 -
30
REFERENCES
31
CHAPTER THREE3.0 EVALUATION OF THE ENHANCEMENT OF NIGERIA’S
ECONOMIC DEVELOPMENT
35
3.1 PRESENT STATE OF NIGERIA’S ECONOMY
35
3.2 ECONOMIC PERFORMANCE IN DEMOCRATIC ERA
36
3.3 OVERVIEW OF FOOD AND AGRICULTURAL PRODUCTION
IN NIGERIA
44
3.4 PROFILE OF FEDERAL GOVERNMENT OF NIGERIA’S
FISCAL ACTIVITIES SUGGESTING FISCAL INDICIPLINE:
3
1970 – 2002
49
3.5 ASSESSMENT OF TRANSPORT SECTOR
54
3.6 PRESENT STATE OF CHINA’S ECONOMY
62
3.7 CURRENT POLICY CHALLENGES IN CHINA
64
3.8 ECONOMIC REFORM IN THE PEOPLE’S REPUBLIC OF
CHINA
69
REFERENCES
90
CHAPTER FOUR4.0 SUMMARY,RECOMMENDATION AND CONCLUSION
96
4.1 SUMMARY
96
4.2 RECOMMENDATION
97
4.3 CONCLUSION
101
4
REFERENCES
101
BIBLIOGRAPHY
102
5
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background to the Study
Generally speaking, economic development refers to
the problems of undeveloped countries while economic
growth to those of developed countries. Madison makes a
distinction between the two terms in this sense when he
writes: “The raising of income levels is generally called
economic growth in rich countries and in poor ones it is
called economic development”. This view does not specify
the underlying forces which raises the income levels in
the two types of economies. Mrs. Hicks points out in this
connection that the problems of underdeveloped countries
are concerned with development of unused resources, even
though their uses are well known, while those of advanced
countries are related to growth, most of their resources
6
being already known and developed to a considerate
extent.
In fact, the terms ‘development and growth’ have
nothing to do with the type of economy. The distinction
between the two relates to the nature and causes of
change. Schumpeter makes the distinction clearer when he
defined development as a continuous and spontaneous
change in the stationary state which forever alters and
displaces the equilibrium state previously existing;
while growth is a gradual and steady change in the long
run which comes about gradual increase in the rate of
savings and population.
Thus economic growth is related to a quantitative
sustained increase in the country’s per capita output or
income accompanied by expansion in its labour force,
consumption, capital and volume of trade. An economy can
grow but may not develop because of poverty, unemployment
and inequalities may continue to persist due to the
7
absence of technological and structural changes. But it
is difficult to imagine development without economic
growth in the absence of an increase in output per
capita, particularly when population is growing rapidly.
Hence, economic development is measured in four ways:
Gross National Product (GNP);
GNP Per Capita;
Welfare;
Social indicators.
An underdeveloped country is one which has no
prospect of development. An underdeveloped country, on
the other hand, is one which has no potentialities of
development. It should be noted however, that these two
terms are easily distinguishable. In other words, a more
respectable term “developing countries” has also come to
be used in economic literature. Nigeria is however in
this sense considered to be an “underdeveloped country”
or “a developing country”.
8
Features of an underdeveloped country are:
General poverty;
Agriculture, the main occupation;
A dualistic economy;
Underdeveloped natural resources;
Economic backwardness;
Lack of enterprise and initiatives;
Insufficient capital equipment;
Technological backwardness;
Foreign trade orientation.
Therefore, this research work will try as much as
possible to analyze the causes of Nigeria economic
problem and proffer enduring panacea to the menace
borrowing from some lessons from China’s economic policy
so that the dream of economic development success will
become a reality.
1.2 Statement of the Problem
9
The last two decades witnessed series of reforms
aimed at the revitalization of the Nigerian economy owing
to series of crises that rock the economy during this
period.
The problems were seen to be a direct derivative of
structural imbalances in our economic system. The
imbalances started right from colonial era, nurtured by
inappropriate policies after independence in 1960, and
reinforced by the windfall gains from petroleum in the
1970s. These structural defects consisted of
undiversified, monolithic and monoculture production
bases, undue reliance on agricultural products from
1960s, and a total shift to exclusive reliance on
petroleum after 1973. The outcome of these events was
that the growth process relied heavily on external
factors instead of the internal ones.
However, of all the dependencies, the exclusive
reliance on petroleum turned out to be the most
10
devastating to the economy. The sudden surge in revenues
from the oil boom engendered a policy attitude which
regarded resources as not a problem but considered how to
spend it as the problem. The increased level of foreign
exchange receipts was also perceived as a permanent
occurrence. This led to an uncontrolled expansion in
expenditure. On the other hand, reductions in foreign
exchange receipts during lean years (as in 1978) were
considered transitory. This inelasticity of expectation
resulted in a situation where expenditures were not
reduced immediately the adverse shocks occurred. On the
contrary, external borrowing were undertaken to finance
government activities. Consequently, fiscal deficits and
external payment problems emerged and lingered through
various regimes up to the present day.
More so, Nigeria can be said to be lagging behind
because of her less contribution on technology,
education, agriculture, unemployment, and half executed
11
economic strategic reform by different administrations
from the past till date. In fact, there has been
different argument that Nigeria’s economic problem
ignited from the authoritarian rule of the military
rulers and calls for a democratic rule. Meanwhile,
Nigeria soon attained Democracy in 1999 under the
administration of Chief Olusegun Obasanjo, and
unfortunately still deepens in the problems of economic
development.
Having identified different problems militating
against the development of the country, it is also a true
statement that official corruption is also inimical to
the sustainable economic development of Nigeria, there is
therefore an urgent need to salvage the country from the
calamity by ensuring that the existing Economic and
Financial Crimes Commission (EFCC), and Independent
Corrupt Practices and other related offences Commission
(ICPC) are truly impartial, competent and a genuine body
12
in the service to extricate the bad eggs among the public
office holders.
1.3 Research Questions
The research question to be beard upon this research
work shall be as follows:-
i. What are the likely causes of economic development
problems in Nigeria?
ii. Are policies formulated and implemented adequately and
efficiently?
iii. What has been happening to poverty?
iv. What has been happening to each sector in the country?
v. What has been happening to unemployment?
vi. What then is the role of the government sector under such
a disposition?
vii. Has the anti-corruption agencies been working
independently and impartially in the fight against
corruption?
13
1.4 Objective of the Study
The objective of this research work is to make checks
on the causes of the country’s economic underdevelopment
with help of discussing various issues of Nigeria’s
position on different sectors. Frankly speaking, the
country has suffered a lot of troubles on corruption
issues in the past till date. The political leaders are
so self-centered and the idea of political godfathers
should be stopped. Since the attainment of Democracy
under the administration of Chief Olusegun Obasanjo who
established the Economic and Financial Crimes Commission
(EFCC) and the Independent Corruption Practices and Other
Related Crimes Commission (ICPC), the two commissions
though have worked immensely in exposing the fraudsters
and looters but still obvious that they work not only on
14
their own orders but at the president and other so called
political money bags’ discretion.
More so, it has been observed that due to negligence
and inappropriate appointment of leaders who are willing
and capable of ruling at people’s interest in the past
and mismanagement of the country’s natural resources and
a very weak strategic plan has also contributed to the
country’s economic backwardness. In view of this, this
research works wants to examine carefully and proffer an
enduring panacea that will remedy the nagging obstacles
in the country’s economic development in this aspect.
Furthermore, this study will leave no stone unturned in
assessing Nigeria’s economic development by suggesting
some lessons that can be learnt from china’s economic
reforms and stating clearly the present state of
Nigeria’s economy, China’s economic profile and her
various economic reform.
15
1.5 Research Methodology
The descriptive and analytical approaches will be
used un this study which aims at understanding the
concept of economic development since the attainment of
independence in Nigeria through an extensive review of
literature. Also, the research methodology will be based
on secondary sources of data such as various publication
in newspapers, magazines, textbooks, articles, journals,
literature etc.
All data collected shall be evaluated, compared,
cross analyzed and then utilized to suit the purpose of
study.
1.6 Significance of the Study
This study will be immense importance in extricating
Nigeria from her present mess, row, and disturbances
endangered by underdevelopment. Also, the study will
16
indicate vividly how to constitute possible successful
strategic plans which can lead the country to a better
and sustainable achievement of economic development.
This study is equally significant because it will
contribute to the body of existing knowledge in our
efforts to eradicate corruption, underdevelopment and
avaricious attitude of the country’s political leaders.
This research work will also act as a reference or
guideline for academicians willing to make comment or
research on economic restructuring of the country in
future contributing to the successful achievement of a
positive result of the country’s economy.
1.7 Theoretical Framework
Structural functionalism is a methodological tool
which examines a system in terms of the structure which
examines the system is composed, and the functions
17
performed by those structures. It is an important off-
shoot of general system theory. However, when related to
politics, it can be functions of the political structures
in the political system and is a tool of investigation.
In essence, it explains the relationship between the
part (structure) on one hand and between the parts and
the whole (political system). It is the contribution of
each structure (part) that helps to sustain the political
system (whole). The structures are many and they can take
different involvement in the issue of economic
development of the country. They include: anti-corruption
agencies, commissions involved in economic development
strategic planning etc. For instance, the Economic and
Financial Crimes Commission and other related anti-
corruption agencies, development commissions and
different sectors that have impact on the country’s
economy as a structure within the political system
performs many functions including those of strategy
18
laying specialist towards the successful development of
the country.
Therefore, empowering the economic development of
the country, these bodies or commission and sectors
should not be left out. The utility of this theory is
seen in the fact that as a part of the system, the anti-
corruption and economic planning agencies if truly
independent, transparent and effective, and the sectors
if effectively managed would have succeeded in keeping
the function of solidifying the national structure and
positive result of Nigeria’s economic stand.
1.8 Scope and Limitation of Study
This study will cover the possible enhancement
strategies of Nigeria’s economic development and some
lessons that can be learnt from China’s economic policy.
This will enable us to determine the way forward in the
future.
19
However, issues will be discussed on the Economic
performance of Nigeria in the democratic era, assessment
of Nigeria’s transport sector, agricultural sector and
food security in Nigeria and also, the rate of official
corruption. The causes of Nigeria’s economic growth
problem, Nigeria and China’s state of economic profile,
china’s economic reform and likely solution to the
problem of the country’s economic problem, among others
will make this study to be narrowed to suit the desired
purpose. Thus, focus also on China’s economic reform.
1.9 Definition of the Basic Terminologies
To avoid ambiguity, the following terms will be
clarified. They include the following:
20
1. AGENCY: This describes any department, office,
commission, authority, administration, board,
government-owned corporation, or other independent
establishment of any branch government in Nigeria.
2. COMMISSION: This refers to an official group of people
who have been given responsibility to control something
or to find out about something usually for the
government.
3. CORRUPTION: This can be described as dishonesty or
illegal behavior, especially of people in authority. It
can also be referred to as the unauthorized use of
public fund for private gain.
4. DEMOCRACY: This can be described as government by
persons freely chosen by and responsible to the
governed.
Lipset (1983) defined democracy as a political
system which supplies regular constitutional
opportunities for changing the governing officials, and
21
a social mechanism which permits the largest possible
part of the pe0ple’s major decision by choosing among
contenders for political offices (Lipset, 1983:27).
However, in relation to ‘elitism’ are those successful
persons who rise to the top in every occupation and
stratum of the society (Olaniyi, 1997:13). This is
because their interest is often paramount to them than
outsider’s interests.
5. ECONOMIC GROWTH: The increase in a nation’s
productivity capacity, leading to an increase in
production of goods and services. Economic growth
usually is measured y the annual rate of increase in
real Gross National Product.
6. ECONOMIC POLICY: This is the process by which a
government manages its economy. Economic policy
generally consist of three dimensions fiscal policy,
monetary policy and those other facets of public policy
22
with economic implications, such as energy policy, farm
policy, and labour union policy.
7. GDP (Gross Domestic Product): This refers to the total
value of all the goods and services produced by a
country in a year.
8. GNP (Gross National Product): This refers to the
monetary value of all goods and services produced in a
nation in a given year, one of the important tools for
measuring the health of a nation’s economy.
1.10 Organization of the Study
This study will be organized into five main
chapters. This includes:
Chapter one which is the introductory part
containing: General introduction or background to the
study, statement of problem, research questions objective
of the study, research methodology, significance of the
study, theoretical framework, scope and limitation of
23
study, definition of basic terminologies and lastly
organization of the study.
Chapter two is devoted to literature review as in
the review of relevant concepts viz: economic growth,
government and economy nexus, and democracy and economy.
Chapter three focuses on the assessment of the
economic development in Nigeria.
Chapter four which is the last chapter comprises of
summary, conclusion and recommendations.
24
REFERENCES
Bauer, P. T. (1973), Dissent on Development, Haryana,
Vrinda Publications Ltd.
Friedman, J. (1972), Growth Centres in Regional
Development, London, Corporate Publishers Ltd.
Hicks, U. (1957), Learning About Economic Development,
London, Powman Publishers Ltd.
Jhingan, M. L. (2003), Advanced Economic Theory, Haryana,
Vrinda Publications Ltd.
Lipset, S. M. (1983), “The Military and Government in
Nigeria” in Humanities and Social Sciences
(ed.) General Studies, Ilorin, University of
Ilorin, PP. 25–30.
Maddison, A. (1970), Economic Progress and Policy in
Developing Countries, New York, Universal
Publishers Ltd.
25
Olaniyi, J. O. (1997), Introduction to Contemporary
Political Analysis, Lagos, Fabsony Nig. Ltd.
Schumpeters, J.A. (1934), The Theory of Economic
Development, London, Powell Publications Ltd.
Shafritz, J. M. (1988), The Dorsey Dictionary of American
Government and Politics, Chicago, The Dorsey
Press.
CHAPTER TWO
2.0 LITERATURE REVIEW
Many writers have contributed on the question of
economic development in Nigeria in different books,
newspapers, magazines, journals e.t.c. with the effort of
shedding light on the causes of sluggish growth in a
country and what could possibly be the problem facing
economic growth or development in a country and
suggesting what kind of policy could be adopted or the
26
kind of practice that could bring about sustainable
economic development in a country. However, some
literature of renowned scholars have been reviewed in
order to achieve a genuine and quality research that suit
best in acquiring information and procedure of a way of
tackling the problem being faced by Nigeria as a country
lagging behind in sustainable economic development. Some
of the concepts or issues that was put into consideration
were economic growth, government and economy nexus, and
democracy and economy.
Economic Growth
The concept of economy is simply defined as a set of
activities, within a geographical region, which deals with
generation and utilization of resources (which are relatively
scarce) for the satisfaction of human wants. It should be noted
that the generation and utilization of the resources could be
undertaking by both the public and private sectors. Put
27
differently, economy may be described as an act of making a
special effort to avoid waste or misuse of resources,
controlling and managing of money and other resources of a
community. The methodology of management varies from one
country to the other and the ability of a government to
seriously manage the resources determines whether such a
country will be tagged developed or less developed.
An economy is regarded as having recorded economic growth
or development if there are sustained significant
improvements in quantitative and qualitative terms
respectively. Thus, an economy may be growing without really
developing. For instance, if there is a sustained increase in
the level of national output or per capita income, the economy
is as having recorded economic growth. However, economic
development would involve qualitative dimension such as
modernizing the economy, transforming the economy from
basically an agricultural one to an industrial one, increasing
28
the choices open to people in terms of goods and services,
increasing people’s freedom, etc.
Consequent upon the above therefore, an economy is
regarded as underdeveloped if all or some of the following
indicators exist: low levels of living and productivity; high
rates of population growth and dependency burdens; high and
rising levels of unemployment and underemployment;
significant dependence on agricultural production and
primary products exports; and dominance / dependence and
vulnerability in international relations, (Todaro, 1982).
Seer (1969) perhaps best posed the basic questions about
the meaning of economic development by asserting that: “the
questions to ask about a country’s development are therefore:
What has been happening to poverty? What has been happening to
inequality? What has been happening to unemployment? If all
the three have declined from high levels, then beyond doubts,
this has been a period of development for the country
concerned. If one or two of these central problems have been
29
growing worse, especially if all three have, it would be
strange to call the result development, even if per capita
income double”. However, dearth of reliable statistical data
on the key variables highlighted above usually poses stumbling
block on the use of the variables, especially in developing
countries including Nigeria. Moreover, economic growth is
much easier to measure by looking at the Gross Domestic Product
(GDP). The concept economic growth refers to sustained
increase in the per capita output or income of a country over a
specific period of time. Economic growth is unimpressive if
the sustainable increase is impaired.
The question that may readily come to mind is why is
economic growth a widely held macroeconomic goal? The answer
is not far fetched. The growth of total output relative to
population means a higher standard of living. An expanding
real output means greater material abundance and implies more
satisfactorily answer to the economizing problem. Thus, a
growing economy is in a superior position to meet new needs and
30
resolve socio-economic problems both domestically and
internationally. A growing economy, by definition enjoys an
increment in its annual real output, which it can use to
satisfy existing needs more effectively or to undertake new
projects. An expanding real wage or salary income makes new
opportunities available to any given family, without the
sacrifice of other opportunities and enjoyments.
Similarly, a growing economy can, for example undertake
new programmes to alleviate poverty and clean up the
environment without impairing existing levels of
consumption. Economic growth lessens the burdens of scarcity.
A growing economy unlike a static or deteriorating one can eat
its cake and still have it too. By easing the burden of
scarcity- by realizing society’s production constraints-
economic growth allows a nation to realize existing economic
goals more fully and to undertake new output- absorbing
endeavors. If a country suffers from unimpressive economic
31
growth, the inhabitants lose the above-enumerated socio-
economic benefits.
Government and Economy Nexus
Perhaps an appropriate point to commence the examination
of the theoretical need of government in any economy is to
simply ask the question: why in a supposedly private economy, a
substantial part of the economy is subject to some form of
government direction, rather than being left to the invisible
hands of market forces? Musgrave and Musgrave (1989) had
argued that the prevalence of government might reflect the
presence of political and social ideologies, which depart from
the premises of consumer choice and decentralized decision-
making. They also argued that the market mechanism alone
cannot perform all economic functions. Thus, there is the
32
need for public policy to guide, correct, and supplement the
market mechanism in certain respects.
Furthermore, they argued that in a free enterprise
economy the composition of output should be in line with the
preferences of individual consumers, and that decisions
concerning what to produce, the method of production, the
quantity, etc, should be decentralized. The question that
arises is what then is the role of the government sector under
such a disposition? The answer to the above question can be
found in the major traditional functions of government.
First, it should be noted that the price mechanism could
lead to efficient resource allocation if and only if the
assumptions of the system hold. In cases where they fail, as
often the case, visible hands are needed to ensure efficient
allocation. In fact, where they do not fail, government
regulations may still be needed to guarantee the sustenance of
such conditions. Thus, government intervention is
necessitated by the failure of the market system to guarantee
33
efficient provision of certain goods referred to as public
goods. A public good can be defined as a good, which is equally
available to all members of a community (sharing group), but
whose cost of provision is a function both of the level of
provision and the size of the sharing group.
Second, the distribution of income and wealth based on
free competition may lead to Pareto optimal situations, but
which in normative terms considered unfair by the society.
Thus, in the absence of government, income and wealth
distribution would be determined strictly by factor
endowments. The social status of each individual in a freely
competitive situation would be determined by ownership of
capital, land, physical and mental capabilities. Therefore,
individuals would deserve whatever status achieved so long as
factors are rewarded adequately under conditions of the market
system. However, factor endowments are often lopsided, in as
much as rewards may not be determined strictly by market
forces, thus leading to unfair income distribution. Under such
34
a situation less than 20 per cent of the population may be
controlling over 70 per cent of national wealth. The
implication from the above is that income distribution may
therefore be seen as a task for a third party in the system or a
matter of public policy.
Thirdly, full employment and price stability cannot be
achieved automatically without the application of some fiscal
measures. In fact, without such public policy guidance, the
economy becomes subject to unemployment or inflation or both
simultaneously. The overall level of employment and prices
depend on the level of aggregate demand, relative to potential
output valued at prevailing prices. The level of demand is in
turn dependent on some factors. At any time, aggregate
expenditures may not be adequate to guarantee full employment
for some reasons, notably wage rigidity. In such a situation,
expansionary policy would be needed to increase aggregate
demand. On the other hand, aggregate demand may exceed
available output, and so long as full employment is not yet
35
attained, public policy may be used to engage more resources in
order to increase output.
However the World Bank (1995 and 1996) has re-defined the
role of the state, through what it called modern roles. These
role unlike those in earlier paragraphs are now limited to the
central functions of providing for justice, law and order, and
domestic security. It also includes formulation and
implementation of broad macroeconomic policies, establishing
the regulatory framework to support an enabling environment
for sustainable development as well as providing public goods
and services notably basic education, health care, and basic
infrastructure. The deduction from the foregoing is that
government’s intervention had been and would continue to be
very difficult to do without in any economy. The mechanism of
government intervention in the economy operates through the
public budget. The public budget contains the revenue
estimates, expenditure decisions of the government and the
fiscal actions of the government within a specified period
36
usually twelve calendar months. Thus, anything that impairs
the normal process of government budgeting (such as fiscal
indiscipline and official corruption) would also impair the
objectives of government intervention in the economy i.e. the
promotion of the macroeconomic goals and especially
impressive economic growth.
Democracy and Economy
Democracy as a concept is one of the most striking
features of contemporary politics. There are few people or
nation-states nowadays that do not practice democracy and
claim democracy. However, in an attempt to theorize the
concept, it would be appreciated that democracy is a very
loaded concept whose entire essence cannot be captured by a
singular school of thought. In fact, it means different things
to different people. According to Churchill “Democracy is the
worst form of government except all those forms that have been
tried from time to time”. In line with this view, MacPherson
37
opined that until about 100 years ago, democracy was a bad
thing, while Santori rounded it up by asserting that
“democracy is more intricate than any other political form”.
All these views show that the concept is victim of definitional
pluralism.
The above notwithstanding, there are still some agreed
definitions of the concept among scholars of repute.
Linguistically, democracy means government by the people, but
it appears this leaves a great problems unresolved. For
instance, no political system at anytime, democratic or
otherwise has ever provided for all the people even to choose
the government much less to exercise governmental powers. In
different time and countries, citizenship has been restricted
on a number of grounds. Thus restriction on age, sex, social
status, colour and religion have all at one time or another
prevented certain people from the enjoyment of political
rights enjoyed by others. Although there exists divergent
views and misunderstanding of what the concept implies, it is
38
still considered imperative to provide at least some minimum
requirement s for democracy.
Democracy is a set of institutions that fulfils at least
two essential requirements. It must be able to elicit as
accurately a possible the opinion of as many people as possible
on who shall be their representatives and on how the country
ought to be governed. This means a minimum universal suffrage,
political parties, and the organization of fresh voting in
acceptable elections at relatively frequent intervals.
It should provide some way of ensuring that those chosen
by the public do what the electorate wants them to do or that
they can be replaced if they do not otherwise even between
elections. This simply means that the process of government in
a democracy is essentially a dialogue between the rulers and
the ruled.
This supports Sergent’s view when he itemized elements of
democracy as follows:
1. citizens involvement in political decision making;
39
2. some degree of equality among citizens;
3. some degree of liberty, freedom granted or retained by
citizenry;
4. a system of representation and;
5. An electoral system of majority.
Thus it should be noted that democracy is contested concept and
that there are some levels of constant competition, largely
rising from different political ideologies, especially
social and liberal democrats. Generally, liberal, social and
people’s democracies are the main vision of democratic idea in
the modern world configuration. Yet in as much as democracy
fundamentally upholds people’s will and collective dignity of
mankind, it shows that it is only desirable but should also be
made strong and secured against all forms of either internal or
external efforts.
The foregoing shows that democracy remains the best form
of government anywhere in the world. Hence, it becomes clear
that following the triumph of capitalism, the global political
40
mood is certain in favour of democratization. Thus any state
that refuses to comply is seen as a pariah state, with its
attendant consequences. To further reinforce democratization
the post-Cold War days is the idea of using democracy as
condition for aid and grants. The International Monetary Fund
(IMF) and International Bank for Reconstruction and
Development (IBRD) often insist on he process before they give
out loans to countries.
However, despite the acclaimed favourable global mood
for democracy especially, Marxist scholars have not freed the
concept and its practice from academic and ideological
criticisms. They are of the opinion that liberal democracy, if
allowed to grow unchecked, is an orchestrated attempt by the
capitalist states by the west to marginalize, exploit,
manipulate and impoverish the less developed countries of the
world thereby maintaining the present asymmetric situation in
the international system. Thus they perceive the strength of
41
democracy as a political and socio-economic tool for
exploiting underdeveloped countries.
These criticisms have generated considerable debate
within the academic and policy circles about whether any
relationship exists between democracy and economic
development. These debates were aptly surprised summarized by
Olufemi:
One school of thought argued that democracy was
unrealizable and unsustainable without requisite dose
of economic development. Recently, however, many have
come to the realization that a country does not have to
patently wait for the due passage of time to bring
economic development before realizing the fruit of
democracy.
The latter view supports the Marxists notion (critique) of
liberal democracy but this notwithstanding, Olufemi further
argued that scholars, policy makers, the BrettonWoods
institutions and other multilateral agencies have accepted
42
that there is a positive relationship between democracy and
economic development. This position has equally been well
elaborated by Przeworski:
Te durability of the new democracies will depend,
however, not only on their institutional structure and
the ideology of the major political forces, but also to a
large extent on their economic performance. Profound
economic reform must be undertaken if there is to be any
hope that the deterioration in living condition
experienced by many nascent democratic countries will
ever cease.
In line with Przeworski’s argument is Diamond who posits that:
It is a truism that the better performance of a democratic
regime in producing and broadly distributing
improvement in living standards, the more likely is to
endure.
Thus the following logical questions readily come to mind: Has
there been any faithful/genuine search for democracy in
43
Nigeria? Is Nigerian political and economic environment
conducive to democracy? Does an impressive economic
performance have any role to play in ensuring sustainable
democracy in Nigeria? What was the economic performance of the
country under the current democratic dispensation?
Before we provide answers for these questions it is
imperative to take a look at the concept of economy. The
concept of economy is simply defined as a set of activities
within a geographical region. The set of activities deals with
generation and utilization of resources (which are relatively
scarce) for the satisfaction human wants. It should be noted
that the generation and utilization of the resources could be
undertaken by both the government and the governed, i.e.
public and private sectors. Put differently economy may be
described as an act of making a special effort to avoid waste or
misuse of resources; controlling and managing of money and
other resources of a community. The methodology of management
varies from country to the other and the ability of a
44
government to seriously manage the resources determines
whether the country will be tagged developed or less
developed.
An economy is regarded as having recorded economic growth
or development if there are sustained significant
improvements in quantitative and qualitative terms
respectively. Thus, an economy may be growing without really
developing. For instance, if there is a sustain increase in the
level of national output or per capita income, the economy is
described as having recorded economic growth. However,
economic development will involve qualitative dimensions
such as modernizing the economy, transforming the economy from
basically an agricultural one to an industrial one, increasing
the choices open to people in terms of goods and services,
increasing people’s freedom, etc.
As a result, an economy is regarded as underdeveloped if
all or some of the following indicators exist: low levels of
living and productivity; high rate of population growth and
45
dependency burden; high and rising levels of unemployment and
underemployment; significant dependence on agricultural
production and primary product exports; and
dominance/dependence and vulnerability in international
relations.
In alleviating these economic problems, government has a
role to play. This role could be carried out through
appropriate and proper development planning. Development
planning refers to a deliberate mobilization of resources
(both local and foreign) to achieve economic development. It
is thus a source of visible intervention in the economy. It
also involves the setting of economic targets and goals, the
arrangement of priorities, the establishment of policies such
as improvement in the quality of life, etc.
Policy Implementation
46
The development process is built around the
following cycle planning, programming, budgeting,
implementation monitoring and evaluation. Planning or
plan formulation involves analysis of the situation,
determination of goals, defining objectives and selecting
targets, formulating policies/strategies and identifying
programmes/projects. Programming involves the formulation
and prioritization of investment programmes designed to
put into operation the development plans. These
investment programmes should be able to specify their
target beneficiaries, locations, implementation schedules
and financing sources. Budgeting is the translation of
investment programmes into their financial requirements.
The financing of prioritized programmes and projects in
the investment programmes may come from the national
government budget, local government and/or foreign
financial assistance.
47
Implementation refers to the actual execution of
projects or delivery of services in support of
development plans. Undertaking monitoring and evaluation
enables the planning and implementing agencies to compare
the actual performance of programmes and projects against
development plans; to identify the problems and issues
encountered by programmes and projects; and identify
solutions to improve programme and project
implementation. The feedback mechanism allows revisions
or updates in the output on earlier activities,
undertaken. Evaluation is a process which addresses the
questions of what has happened and why. It involves the
identification and measurement of the overall economic
and social impact of development programmes and projects
on their goals or concerns like income, employment
health, and productivity (Sobaepena, 1996).
Implementation is not without problems, though.
48
However, a good idea is of little value unless
someone puts it to use. Accordingly, in order to
understand why things go wrong we must also consider the
difficulties of implementing a well designed policy
initiative.
Deficits are recorded in sluggish years. Now suppose
that there is need to stimulate the economy through a tax
cut. Obviously, in ademocratic dispensation, the
president and his aides cannot go ahead to implement the
tax cut; because all tax variations must be legislated by
congress (the law makers). The latter must give the
president authority to take the required action. This
means a delay in implementing and possibly no policy at
all. The tax cut proposal must work its way through
separate committees, get on the congressional calendar
and be approved in each chamber. If there are any major
differences in Senate and House versions of the tax cut
legislation, these differences must be compromised in a
49
joint conference. The modified proposal must then be
returned to each chamber for approval.
The same kind of process applies to the outlay size
of the budget. Once the president has submitted his
budget proposals (in January, for example), congress
reviews them, then sets its own spending goals. After
that, the budget is broken down into different
categories, and a separate Appropriation Bill is written
for each one. These bills spell out in detail how much
can be spent and for what purposes. Once congress passes
them, they go to the president for acceptance or veto.
All this is to show that “even if the right policy
is formulated to solve an emerging economic problem,
there is no assurance that it will be implemented. And if
it is implemented, there is no assurance that it will
take effect at the right time”. One of the most
frightening prospects for economic policy is that a
policy design intended to serve a specific problem will
50
be implemented much later, when economic conditions have
changed. The policy’s effect on the economy may then be
the opposite of what was intended. There are always
delays between the time a problem emerges and the time it
is recognized. There are additional delays between
recognition and response design, between design and
implementation, and finally between implementation and
impact. Not only may mistakes be made at each juncture,
but even correct decisions may be overcome by changing
economic conditions (Schiller, 1996, p.339).
More so, we must confront the politics of economic
policy. Tax hikes and budget cuts rarely win votes. On
the other hand, tax cuts and pork-barrel spending tend to
make voters happy. Accordingly, serving politicians tend
to stimulate the economy before elections, and then
tighten the fiscal restraints afterward. The conflict
between the urgent need to get reelected and the
necessity to manage the economy may result in a seesaw
51
kind of instability. The political content of fiscal
policy was very visible in 1995 in the USA. The
Republican party had scored stunning victories in the
1994 congressional elections by promising tax cuts and
spending reductions. Shortly after the election results
were in, President Clinton jumped on the tax cut band
wagon, too. The Democrats and Republicans then competed
to see who could promise the largest tax cut. Meanwhile
the economy was closing in on full employment, and
economists were wondering how much fiscal restraint might
be needed to keep price levels from rising. The
politicians would hear nothing of fiscal restraint,
however, when voters had responded so eagerly to the lure
of tax cuts (Schiller, 1996, PP. 341).
We must also recognize that policy design is
obstructed by a certain lack of (political) will. Policy
makers are apt to become complacent about economic policy
as long as economic performance is within a tolerable
52
range of desired outcomes. With the above problems at the
back of our minds, how do we go about implementing
solutions that is getting the economy working again?
The preparation of the implementation plan should be
the responsibility of a group of people. The
implementation plan is envisioned to link plan
formulation and plan implementation. Generally there is a
weak relationship between these two (Sobaepena, 1996,
p.209). This is probably one of the reasons for the
inability of development plans in achieving their
targets. The implementation plan is, therefore, a serious
attempt at ensuring that the plans are translated into
concrete measures and activities supportive of the goals,
objectives and priority thrusts embodied in the current
development plan. The implementation plan also serves as
the guide or tool for the allocation of government
resources. It will serve as a basis for monitoring and
assessing success and failure as well as to single out
53
accountability for it, since entities responsible for
carrying out specific activities are identified in the
document.
54
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Anyawu, J. C. (1997), Nigerian Public Finance , Onitsha,
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Bhagwati, J. and T. S. Srinivasan (2004), “Trade and
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Collier, P. and Gunning, J. W. (1999), “Explaining
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Dollar, D. and Kraay, A.(2001), Trade, Growth and
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Dollar, D. and Kraay, A.(2001), Growth is Good for the
Poor, Washington DC. World Bank Working
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Easterly, W. and Schmidt-Hebbel, K. (1992), The
Macroeconomics of Public Sector Deficits: A
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Research, Documentation and University
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Leff, N. H. (1970), “Economic Development through
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Musgrave, R. A. and Musgrave, P. B. (1989), Public Finance
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59
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D. C., Oxford University Press.
60
CHAPTER THREE
3.0 EVALUATION OF THE ENHANCEMENT OF NIGERIA’S
ECONOMIC DEVELOPMENT
3.1 Present State of Nigeria’s Economy
Nigeria is a low-income country coming under sub-
Saharan Africa region according to the classification of
economies by income and region, FY 2005 made by the World
Bank.
Due to the poor performance of the government
programs, the major multinational oil companies have
launched their own community development programmes in
the country is a member of the Organization of Petroleum
Exporting Countries (OPEC) and new entity, the
Niger/Delta Development Commission (NDDC), has been
created to help catalyze economic and social development
in the country. The country had a surface area of 923.8
thousand square kilometers in the year 2003.
61
Furthermore, according to the report of Demography
and social indicators, the total population of the
country in the year 2004 was estimated at 139.8 million
in comparison to 136.5 million in previous year.
The annual percentage growth of population in the
country was 2.4% in the year 2004.
The key economic indicators stated that the Gross
National Income, Atlas method of the country (current
US$) has reached 54.4 billions in the year 2004. The GNI
per capita Atlas method (current US$) in the country was
390.0 in the year 2004.
The Gross Domestic Product (GDP) (current US$) in
the country was 72.1 billion in the year 2004 with an
annual growth rate of 3.6 percent.
The average annual growth rate of GDP for the
country is estimated at 6.5% for the period of 2004-2008.
62
3.2 Economic Performance in the Democratic Era
Without prejudice to the poor performance of the
past military regimes in economic development and
management, and despite the lofty promises and good
intentions that must have informed the General Abdulsalam
Abubakar agenda-settings broadcast of 20 July, 1998, on
assumption of office as Nigerian military head of state
as interlia:
We intend in the limited time at our disposal, to take
urgent and decisive steps to bring relief to our people.
We shall implement short-term macro-economic measures
targeted at specific sectors whose revitalization would
have multiplier effects on the economy, productive
activities, household income and purchasing power.
Central to these measures is the resolution of the issues
militating against the supply and distribution of
petroleum products and fertilizer, reliable power and
63
telecommunication services, which are necessary for
reproductive activities.
When it handed over to the new democratic government on
May 29, 1999 he left the economy in a very worse
position. Unfortunately the successor civilian regime
fell short of the people’s expectations. For instance,
while the nation’s GDP had grown by 3.2 per cent during
the Abacha’s regime, it fell to 2.4 per cent in 1998; the
industrial capacity fell from 34.3 per cent in the second
half of 1997 to 31.3 per cent in the second half of 1998.
Exchange rate slumped from about 85 Naira to one US
dollar in June 1998 to 95 Naira in May 1999. While the
rate of inflation, according to the figures from the
Federal Office of Statistics (FOS), rose from 8.3 per
cent in 1997 to over 10 per cent in 1998.
The analysis of Nigerian economic sector saw an
embarrassing and ridiculous result to the extent that it
was opined and described that the high expectation of a
64
strong performance was frustrated. A virtually collapsed
social and economic infrastructure, climaxed by
unprecedented energy crisis, laid the economy prostrate.
It was all these problems, which characterized the
Abubakar military regime that infected the President
Obasanjo, not oblivious of these problems, formulated
some economic policies, which are inspired by the
principles stated below
1. The economy exists for and belongs to the people,
and at all times the general wellbeing of all the
people shall be the overriding objective of the
government and proper measure of performance.
2. Given the state of the economy, which is equivalent
to national emergency, economic management shall
involve total commitment of the leadership at all
tiers of government and the mobilization of the
populace without creating a bloated government.
65
3. Government shall be lean, efficient, honest,
transparent, cooperative and friendly; operate on
the basis of extensive devolution of power, and
shall function mainly as facilitator. Government’s
primary role shall be to ensure, in cooperation with
the private sector, the urgent creation of adequate
and efficient infrastructure, particularly of
energy, telecommunication, water and financial
services to bring about a positive and
internationally competitive environment for economic
activities.
4. Private enterprise, private effort, and non-
governmental action shall play the major role in
achieving the goals of the society and derived
targets of the government.
5. Everything shall be done to foster a strong work
ethic to drive productivity.
66
Obvious from these principles is the demonstration of
commitment, faithfulness and dedication on the part of
the civilian regime to run a government characterized by
a conducive environment attractive to run foreign
investors and enhanced good government based on equity,
fairness, justice, transparency, accountability and
devoid of corruption, nepotism and political manipulation
of our public institutions. However, the first term in
the office of Obasanjo’s civilian regime (1999-2003) and
even up till present no significant success has been made
in achieving lofty aims and objectives as well as the
guiding principles of the regime. There have been high
record and widespread allegations of looting of
government treasury, misappropriations, rent seeking and
outright embezzlement of public funds. Instead, there
have been unprecedented capital flights from the country
in the past four (4) years. For example, 1999 and 2002,
there was a capital flight of $4.66 billion annually. In
67
addition; government policy of privatization and
liberalization as well as its acclaimed reasons and
benefits has not yielded any fruits. The policy, rather
than being an effective antidote, has since its
implementation been an unmitigated disaster for the
working masses and the economy in general. It has created
serious unemployment and not only this, the manner in
which the policy agenda is being implemented has made it
a sort of wholesale conversion of public goods for
private gains. In fact, the policy has been applied
described as morbidly anti-poor and slavishly pro-rich.
In politics, it has been opined that the regime is
anti-opposition and that there is a high tendency for the
country to drift toward a one-party state, a situation
that not only disastrous for a multi-ethic and multi-
lingual state but against the tenets of democracy. This
tendency is obvious from the results of the recently
concluded local government election of 27 April 2004.
68
In economic (quantitative) term the fiscal
operations of the federal government indicated on overall
fiscal deficit/GDP ratio of 4.0 per cent in 2001. This
was much higher than the 2.1 per cent recorded for 2000
and the deficit was financed entirely from domestic
sources, through the use of excess crude oil proceeds
accumulated in 2000 as well as the issuance of Treasury
bill. The GDP per capita from 1999 to 2003 did not only
remain static but deteriorated in real terms.
Consequently on all these poverty becomes more
visible in Nigeria, although there are methodological
problems associated with measuring, testing, quantifying
and validating it (poverty). It is a relative term that
varies from one social formation to the other, and these
variations may have to do with differences in the
development of productive forces. It is still an
incontrovertible fact that it is a situation
characterized by hunger, ignorance, malnutrition,
69
disease, unemployment, poor access to credit facilities
and low life expectancy as well as general level of human
hopelessness.
Thus if from certain indicators (GNP, GDP,
unemployment, and inflation levels) as published by the
Federal Office of Statistics is anything to go by,
poverty has been massive, pervasive and it engulfs a
large proportion of the Nigerian society. Due to this,
human conditions in Nigeria have greatly deteriorated
since the last 7 years. There has been an increase in the
rate of malnutrition, while the real disposable incomes
have dwindled. For example, in 1978 the World Bank in its
investigation ranked Nigeria as a middle-income country
with per capita income of about $1,000 and an exchange
rate of 2 US dollars to one Naira. In 1990the World Bank
report equally showed that per capita income had declined
to $290, a situation which made n Nigeria to drop from a
middle income to the 17th poorest country in the world in
70
terms of per capita income. In 1990 the official exchange
rate stood at 9.00 Naira to $1.00! By 1996, Nigeria per
capita income had dropped to $280.
All these go to show that life in Nigeria is nothing
but a daily struggle against hunger a total lack of
housing and health facilities, contrary to the
expectations of the Nigerian electorates, about the
dividends of democratic governance. A cursory examination
of the trends of poverty level in Nigeria between 1980
and 1996 will allow an insight into what could be the
expectations inferences about the subsequent
period/years.
The level of poverty in the country is increasing at
an increase rate. In fact, it became fair between 1985
and 1992 while it worsened between 1992 and 1996 as
poverty level increased from 43.7 per cent to 65.6 per
cent in 1996. According to the Nigerian Human Right
Report (NHDR), as at 1998 Nigerians living I poverty was
71
estimated at 48.5 per cent, while in 2000 NHDR ranked the
country 151st position out of 174 countries and among the
poorest in the world. This in itself is an indication
that if as at 2000 the country could still be ranked
among the poorest nations, one is forced to ask, “Has
democracy yielded any dividend to Nigeria?
Some majority of Nigerians have had little or no
access to social amenities, no social welfare networks to
ameliorate the condition of the poor. There is inadequate
access to unemployment opportunities for the poor, lack
of access to assets such as land and capital by the poor,
inadequate access to education, health sanitation and
water services. Despite the establishment of several
schemes and programmes such as Family Economic
Advancement Programme, the National Directorate of
Employment, The People’s Bank programme, The Petroleum
Trust Fund, The Directorate of Food, Roads and Rural
Infrastructure, The Better Life Programme, The Family
72
Support Programme, the Oil and Mineral Producing Areas
Development Commission, National Agriculture Land
Development Authority, the Nomadic Education Programme
and the River Basin Development Authorities (RBDAS),
etc., the desired results have still not been achieved as
poverty is still prevalent in National society.
Apart from the fact that most of them suffered from
duplication of efforts and targets, unnecessary plurality
of influences, wrong identification of roles and
functions, very importantly is that Nigerian successive
governments’ political institutions lack the requisite
capacity for effective performance. The current
dispensation has witnessed the government concentration
on security matters and unnecessary publicity in terms of
public image rather than focusing on the formulation and
implementation of poverty alleviating policies and
programmes. More attentions have been devoted to the
satisfaction of the interest of political
73
elite/godfathers who could offer support for second- or
third-term bids.
Not only that, Nigeria has witnessed crises and
conflicts between and among the political elite and the
godfathers over the allocation of state resources and the
distribution of socio-political and economic benefits
instead of diverting attention to, and concentrating on
citizen-oriented policies. Due to the inability of the
preponderant majority (who are poor) to have access to
power and economic resources that could enable them to
participate decision –making process, they are sidelined
in the allocation process.
Given the above it is doubtful if this country will
ever be able to enjoy the dividend of economic
development. This pessimism is against the backdrop of
the fact that since the coming into power of Obasanjo
regime, nothing significant has been achieved as shown by
the economic indicators. The preponderant majority are
74
yet to reap and feel the dividend of democracy as well,
as their lots have not been improved. Many of them are
living below poverty level: unemployment rate is
increasing at a geometric rate. For example, the Nigerian
railway corporation has only 14,000 workers left after
years of persistent retrenchment. In spite of the Federal
Government policy on alleviation, many Nigerian able-
bodied men are yet to find appropriate employment.
Another worrisome feature is that Nigeria is
characterized by a high level of economic policy failure
in all ramifications. The above situation was best
captured by The Times when it posited that: if the years
of military dictatorship have failed the Nigerian people,
four years of democracy (including the second term) under
Obasanjo has done little or nothing to improve their lot.
Thus there is need for caution on the part of the
government in implementing her economic policies,
particularly in ways that could improve investment (both
75
foreign and local), reduce poverty and unemployment. This
is imperative in that a poverty/unemployment-ridden
society is prone to political unrest and other socio-
economic vices inimical to sustainable political and
economic development. Without this in place, there is
doubt that the masses of our country will benefit from
the current democratic waves and its accompanying
dividend.
3.3 Overview of Food and Agricultural Production in
Nigeria
In pre-colonial Nigeria, pure subsistence production
was dominant control brought about some development in
agricultural. Prior to independence in 1960, Nigeria
produced enough food for its population and for export.
Before the discovery of oil in the late 1950s,
agriculture, apart from providing nearly all or most of
76
the foreign exchange and generated a significant
proportion of the nation’s revenue. The driving force
behind the economy during this period was the primary
sector – agriculture, livestock, fishing and forestry.
The strength of the economy was dependent on revenue
obtained from such export crops as cocoa, rubber, palm
produce, groundnuts and cotton. Efforts to develop the
country’s agriculture were concentrated on export cash
crops to provide raw materials for the industries of the
colonial masters back home. The food sector was treated
with the assumption that it would care for itself in
relation to the economy and population growth.
In 1964, some four years after independence,
agriculture accounted for 70-80 percent of the total
export value and 60 percent of the gross national
product. By 1970, it accounted for only 4.6 percent of
the gross national product. Petroleum export which
started in Nigeria in 1958 had, by 1977, taken over
77
almost absolutely and accounted for 93 percent of total
export earnings. The philosophy of government up to 1970
was one of the minimum interference with production and
market forces, except in the cases of scheduled export or
cash crops. The period from 1970 to 1985 was
characterized by a much greater involvement of government
in agricultural development efforts. New policies were
put in place for which programmes and projects were
launched. This was probably because of the rapid
deterioration in he state of the country’s agricultural
economy with the advent of petroleum, the outbreak of
civil war and the period of the Sahelian drought, among
other factors.
Consequent upon what appeared to be some realization
on the part of the national leadership about the danger
of food insecurity. Some programmes were initiated,
beginning from the late 1970s. these included Operation
Feed the Nation, a National Accelerated Food Production
78
Programme, a National Grains and Root Crops Production
Programme, an Integrated Rural Development Programme, the
direct production activities of the River Basin
Development Authorities, the Green Revolution Programme,
etc. the programmes were launched but very little impact
was recorded. The federal government also took over the
procurement and distribution of fertilizers in 1976.
The programmes and projects failed to stop the
decline in agricultural production because they were
based on false assumptions. Government had not taken into
the account the needs of the actual producers – the
peasant farmers – in formulating the programmes. For
example, centralized public procurement of fertilizers
resulted in the late arrival of fertilizer during periods
when farmers no longer needed them, and in the wrong
sequencing of fertilizers types.
By 1975, it had become imperative that there should
be a reordering of priorities in the agricultural
79
development of the country with a view to providing
enough food for the ever-increasing population. At this
time, even the technologically advanced and richer
countries of the world had become troubled by the
accelerating demand for food stuffs and by providing an
increasing level of per capita meat consumption for the
countries. It had become imperative for the United States
of America to modify its domestic price support programme
to ensure the accumulation of grain reserves. It was in
order to address the situation in Nigeria that the
government adopted a number of measures. One of this was
these was setting up a special food production drive
tagged Operation Feed the Nation (OFN) in 1975. OFN
created tremendous awareness amongst Nigerians of
different socio-economic strata of the need to produce at
least part of their own food, thereby rapidly increasing
domestic food supply.
80
In spite of the substantial financial and political
backing it enjoyed, OFN failed to increase food
production, even though it prompted and enhanced the
massive importation of fertilizers, seeds, livestock
feeds, vaccines and fishing inputs. While the government
continued to exhort everybody to grow anything anywhere,
the effort yielded only on short-run gains and eventually
resulted un colossal waste of the nation’s resources.
Indeed while OFN’s declaration – that farmers, civil
servants, students, housewives, etc., should be involved
in farming, and that it was the duty of everybody to feed
the nation – had some political and news effect at that
time, its economic content was grossly limited.
Five years later, the OFN was replaced by Green
Revolution Programme which was introduced to take Nigeria
to self-sufficiency in the production of basic foods
within five years. The Green Revolution has been
conceived not only to boost agriculture production, but
81
also to ensure development of agro-based industries, the
construction of feeder roads, the provision of water,
housing, education, health facilities and electricity in
the rural areas.
In spite of the lofty ideals of the Green Revolution
Programme, especially its objective to transform the
rural areas, the rural population did not benefit from
the programme. The implement was left in the hands of
bureaucrats whose planning and decisions were taken
without reference to the farmers. For example, some brand
of fertilizer were imported which was rejected by the
farmers on the grounds that the fertilizers destroy the
crops, possibly because of wrong application. The loans
meant for farmers were appropriated by non-farmers who
became ‘emergency farmers’ – they happen to be political
leaders. The Green Revolution was thus doomed from the
beginning because it became an instrument of party
patronage rather than one to mobilize the people towards
82
agricultural production and development. Consequently, it
alienated the peasant farmers.
The failure of Green Revolution Programme led
government to prepare a ‘Food Production Plan for
Nigeria’. In the plan, Agricultural Development Projects
(ADPs), partly financed by World Bank loans, were to be
used to increase food production in states where they
operated. The basic strategy was to increase food and
cash crop production through improvements in extension
services – communication, input distribution and physical
infrastructure. Besides agricultural extension, the ADPs
were involved in construction and maintenance of rural
feeder roads, and the construction of small earth dams
and boreholes to provide water for livestock, irrigation
and domestic use.
In 1985, the government banned the importation of
food items such as maize, rice and wheat in order to
stimulate production. The Structural Adjustment Programme
83
(SAP) of 1986 had a significant impact on the
agricultural sector. Official producer prices were
raised, input subsidies were removed and, as a result,
there were shift in relative prices due to the
depreciation of local currency. This induced some farmers
in some areas to shift from food to cash crops such as
cotton and palm oil. Despite the huge price rises from
1988 onwards, however, food productions have not kept the
pace with food demand.
In 1986, the government established the Directorate
of Foods, Roads and Rural Infrastructures (DFRRI) because
rural development holds the key to sustained agricultural
transformation and national security. Unfortunately,
DFRRI lost a golden opportunity to serve as a major
instrument for attaining national food security. Its
resources were too widely dispersed across too many
unwieldy projects. Rural feeder roads were built that did
not last one rainy season, and rural water supply schemes
84
were established that did not provide assured supplies of
portable water beyond the initial commission ceremonies,
etc. unsuitable supplies of rural infrastructural
services resulted in non-sustainable national food
security. Again, the Structural Adjustment Programme
(SAP) introduced in 1986 led to increased attention to
policies which affected agriculture such as prices and
subsidies, exchange rate and credit. The effects of these
policies have been mixed, at best for food production and
food security. The adjustment programme not only ignored
the interest of smallholders but worsened their
conditions. There was emphasis on cash crops, while the
price change and devaluation led to input price
adjustments. The SAP brought about a reduction in the
basic infrastructure, such as roads and storage, which
contributed to the high cost of input and lower output
prices.
85
3.4 Profile of Federal Government of Nigeria’s
Fiscal Activities Suggesting Fiscal
Indiscipline: 1970-2002
In Nigeria, Federal Government expenditures have
consistently exceeded revenue most of the time since
1970. Nigeria’s persistent overall and current budget
deficits have increased significantly over the years. The
resultant public debt that has been accumulated has to be
serviced from current or future budgets. In fact, in
Nigeria about 30-40 per cent of total public expenditure
is spent on servicing the country’s external debt.
However, because the accumulated public debt has
become so large and the servicing of such debt has
escalated tremendously without an offsetting or even
proportionate increase in revenues, the debt is
approaching the point where it can be characterized as
unviable and unsustainable.
86
From table 1, it shows that during the 33 years
under study, fiscal operations of the Federal Government
recorded overall fiscal surpluses in only 6 years while
the remaining 27 years recorded overall fiscal deficits.
The overall fiscal surpluses / GDP ratio stood at 1.5 per
cent in 1973 and skyrocketed to 9.8 per cent in 1974
during the oil boom, it fell to 3.4 percent in 1979. It
stood at an all time low 0.1 per cent in 1995 and started
to rise in 1996 when it stood at 1.2 per cent. This could
be attributed to expenditure retrenchment and intensified
revenue enhancement efforts. In 1975, overall fiscal
deficit was N427.9 million, representing 2.0 percent of
overall fiscal deficit / GDP ratio and rose to
N3902.1million in 1981, representing 7.7 per cent of the
ratio. Consequent upon the abolition of the fixed
exchange rate system in 1986, value of fiscal deficits
skyrocketed to N8254.3million, representing 11.3 per cent
of the fiscal deficit / GDP ratio. Between 1990 and 1994,
87
the fiscal deficits have been large and increasing,
accounting for significant proportions of the GDP. The
fiscal deficit / GDP ratio moved from 8.5 per cent in
1990 to 11.1 and 15.6 per cent in 1991 and 1993
respectively. The ratio fell to 4.8 per cent in 1998 and
stood at 8.8 per cent in 1999. In year 2000, it recorded
a 2.1 percent! The fiscal operations recorded deficit of
N301.4 billion or 5.1 percent of GDP in 2002 compared
with 4.0 per cent recorded in 2001.
The critical limit for the fiscal deficit / GDP
ratio is 4.0 per cent. In fact, except for a few years,
the ratio exceeded the critical limit throughout the
period under review. The implication from the above is
that fiscal deficits have become more or less a permanent
feature of the Nigerian fiscal activities. However, as
argued elsewhere, (see Abiola, 1997), there was nothing
economically wrong with deficit financing, it has been
the direction of expenditure, mostly on unproductive
88
ventures (including official corruption) that has been
posing serious economic problem in Nigeria.
Year Growth
Rate of
GDP at
1984
Factor
Cost (%)
Inflat
ion
Rate
(%)
Balance
of
payment
(N’milli
on)
Interes
t Rates
(%)
Overall
Deficit
(N’mill
ion)
Defici
t/GDP
%
1970 -------- 13.8 -46.6 7.00 455.1 8.71971 21.35 15.6 -117.4 7.00 171.6 2.61972 5.4843 3.2 -57.2 7.00 58.8 0.81973 6.42 5.4 -192.0 7.00 166.1 1.51974 11.74 13.4 -3102.2 6.00 1,796.4 9.81975 -2.96 33.9 -1.572 6.00 427.9 2.01976 11.08 21.2 339 6.00 1,090.8 4.11977 8.15 15.2 529.2 7.00 781.4 2.51978 -7.37 16.6 -1293.6 7.50 2,821.9 8.21979 2.44 11.8 -1868.9 7.50 1,461.7 3.51980 5.48 9.9 -2402.2 7.75 1,975.2 3.91981 -26.81 20.9 3020.8 10.25 3,902.1 7.71982 -0.34 7.7 1398.3 10.00 6,104.1 11.81983 -5.37 23.2 301.3 12.50 3,364.5 5.91984 -5.10 39.6 -354.9 9.25 2,660.4 4.21985 9.38 5.5 -349.1 10.50 3,039.7 4.31986 3.13 5.4 784.3 17.50 8,254.3 11.3
89
1987 -0.47 10.2 -159.2 16.50 5,889.7 5.51988 9.91 38.3 2294.1 26.80 12,160.
9
8.5
1989 7.39 40.9 -8727.8 25.50 15,135 6.81990 8.20 7.5 -18498.2 20.01 22,116 8.51991 4.73 13.0 -3959.6 29.80 35,755 11.11992 2.98 44.5 -65271.8 36.09 39,533 7.31993 2.65 57.2 -3615.9 21.00 107,735 15.61994 1.31 57.0 -7194.9 20.18 70,271 7.71995 2.15 72.8 15325.1 19.74 1,000.0 0.11996 3.39 29.3 -
183950.6
13.54 32,049.
4
1.2
1997 3.16 8.5 -
251593.1
20.46 5000.0 0.2
1998 2.31 10.0 -3960.3 21.22 133,389 4.81999 3.05 6.6 152356.4 20.46 2,851,0
45
8.8
2000 3.64 6.7 -
453413.5
19.45 1,037,7
73
2.1
2001 3.91 18.9 29228.3 23.76 221,049 4.02002 3.30 12.9 -525700 25.00 301,400 5.1
Sources: Central Bank of Nigeria, Statistical Bulletin
(2002);
90
Figures in parenthesis Under Overall Deficit/surplus are
negative.
Large and persistent budget deficits and the
substantial amounts of government borrowings that are
required to fund such fiscal deficits, can ‘crowd out’
private investment, since large government borrowing puts
upward pressure on interest rates. The lending rates of
interest in Nigeria are on the high side. The rate of
interest was 7 per cent in 1971 and rose to 10.25 per
cent in 1981; by 1991 it had skyrocketed to 29.80 per
cent but had to be pegged at 23.76 per cent in 2001. As a
result, smaller businesses may be unable to afford the
higher interest rates to purchase loan able fund for
investment. The resultant decline in economic activity
leads to slower economic growth, which invariably leads
to further lowering of government budgetary revenue
(given that tax is a function of output / income), and
91
thereby increases the possibility of future fiscal
deficit spending.
The real growth of the economy has recorded
unimpressive performance. In 1972 the year before the oil
boom the real growth rate stood at 5.48 per cent, and
collapsed to an all low level of negative 0.32 percent in
1982 just after collapse of the world oil market, during
1980/81. It rose slightly to 2.98 per cent in 1992 and
stood at 3.30 per cent in 2002.
Furthermore the years when the overall fiscal
deficit / GDP ratio exceeded the critical limit of 4 per
cent, the real GDP performed significantly poorly. For
example, in 1978, 1982, 1998 and 2002 the deficit / GDP
ratio stood at 8.2, 11.8, 7.3 and 5.1 per cent, the real
GDP stood at -7.37, -0.34, 2.31 and 3.3 per cent for the
corresponding years. Specifically Nigeria’s persistent
fiscal deficits and accumulated public debt have been
incurred as a result of constant misplacement of economic
92
priorities such as the expansion of public sector
expenditure to the detriment of investments in capital
projects and, bloated and inefficient civil service.
3.5 An assessment of Nigerian Transport Sector
Transport is the part of economic activities which
is concerned with increasing human satisfaction by
changing the geographical position of goods or people.
Alternatively, it has been conceived as the spatial
reposition of persons or goods from origin to destination
for economic, political, social military, cultural,
leisure and any other utility. The above definition shows
that the demand for transport is derived from the
activities of other sectors. The demand for transport is,
therefore, a derived demand. Transportation is a
necessary concomitant of the exchange economy, and is
indispensable to economic growth. Mumby asserts that
93
there is no escape from transport. Even in the most
remote an least developed of inhabited regions, transport
in some form is a fundamental part of the daily rhythms
of life.
The transport-development relationship is a
essentially a two-way interaction process as a result, or
as a cause of economic development, depending upon the
type of economy under consideration, and the level at
which transport investments are affected. However, if
transport is conceived as a cause of development, there
are basically three lines of arguments on the impact of
transport on development based on Storey’s
classification. It could be positive, neutral or
negative. In the positive case, transportation acts as a
positive stimulus to development. It is neutral when
transport investments do not themselves bring about any
productive change. The negative case relates to situation
where there are absolute decline in the level of
94
development indicators. This is called the backwash
effect.
In Nigeria, the transport sector has played crucial
positive roles in economic development. It is an
indispensable catalyst for activating and stimulating the
tempo of economic, social, political, strategic
development of Nigeria in collaboration with other
critical development and integration factor. It has
bridge the producer-consumer gap, as production zones are
different consumption zones. In pre-colonial Nigeria,
bush paths and rivers were the main routes of transport
used by porters, pack animals and canoes. The contact of
advent European traders, colonialists and Christian
missionaries provided the impetus for the development of
the Nigerian transport system as European merchants,
missionaries and colonial administrators needed it to be
able to move, evangelize and conquer the souls and the
economies of the hinterland. It is not out of context to
95
state that the development of a modern system of
transport in Nigeria can be validly ascribed to colonial
and post-colonial era. The believe in the role of
transportation in economic development by the
colonialists as expressed by Lord Lugard that the
“material development of Africa may be summed up in the
one word – Transport” can be said to be guiding principle
in the post-independence importance attached to
transportation in accelerating the economic growth and
development of post-colonial Nigeria. In fact, it has
been asserted that the economic development of Nigeria
has reflected the development of her transport system.
The Nigerian government is a strong advocate of
transportation as a catalyst of development. This is
evident from funds allocated to the transport sector in
the various national development plans between 1962 and
1985, and in subsequent rolling plans. Table 1 show that
96
the transport sector not less than 15 per cent of the
total capital outlay in any of the development plans.
Table 1
Plan Period Total Plan
Size
Transport
sector
Percentage
share of
Transport in
the total plan
size1962 – 1968 1,586.000 309.092 191970 – 1974 2,050.738 472.398 231975 – 1980 43,314.009 9,677.541 221981 – 1985 70,500.000 10,706.616 15
Source: FRN (1981:217)
In subsequent national Rolling Plans which replaced
the development plans, the transport sector was allocated
#2,210.000 million, #2,695.428 million, #8,376.674
million, #6,017.250 million, #32,491.422 million and
#52,801.165 million for 1990- 1992, 1991-1993, 1993-1995,
1994-1996, 1996-1998, 1997-1999 respectively. This
underscores the importance attached to the transport
97
sector in Nigeria. The main objective of investment in
the transport sector apart from the accessibility benefit
is to reduce the cost of production by lowering the cost
of distribution.
In spite of this, evolution of each transport mode
in Nigeria will be stated thus;
Road Transport
The development of modern roads transport system in
Nigeria is not unconnected with the British colonialists
who got the administration of the country in the Berlin
conference in 1884-85, and the subsequent establishment
of the rail in 1898. Roads were to serve as feeders to
the rail system. Efforts were geared toward the clearing
of the path through the bush, often to 20ft in width, to
the cutting of drifts (crossings) at unabridged rivers or
streams and to the construction to bridges where
possible. There are early road evidences in the first
98
decade of the 20th century as the cart roads for mules and
ox-carts in Zungeru in 1904, and the start of the survey
and construction of Calabar-Obubra and from Oron-onitsha
in 1903. The first motorable road in Nigeria particularly
outside the limit of a township was built in 1906 from
Ibadan Oyo. Incidentally, it was in 1906 that Nigeria
recorded her first road crash or accident in Lagos. In
spite of early road evidence as stated above, coordinated
road development in Nigeria did not start until 1925 when
the road board was established. It was later christened
Communication Board. The first bituminous surface outside
the limits of a township was laid in 1926 on the section
of the Lagos-Abeokuta road. By 1951, official records
show that 44,414km of roads had been developed, out of
which 1,782kmwere bituminous roads and the rest 42,632km
were earth/feeder roads.
As at December 2002, Nigeria had an estimated road
network of about 194,000km with the Federal Government
99
responsible for 17 percent, State Governments 16 percent
and the Local Governments 67 percent. Various types of
vehicles used these roads. In 1946, the total vehicle
stock in Nigeria stood at 6,822 and rose to 143,610 in
1966 before the civil war started. Estimate show that
vehicle stock in Nigeria stood at 1,067,139 in 1979;
1,088,361 in 1980; 1,235,324 in 1985; 1,502,961 in 1990;
1,828,582 in 1995 and; 2,224,749 in 2000. In spite of the
stoppage in publication of vehicle stock in Nigeria and
generation of estimated data, evidences on our roads show
that there is a high volume of vehicle and vehicular
movement in Nigeria. The latest evidence from the Federal
Road Safety Commission shows that as at September 2005,
the total number of vehicles on Nigerian roads stood at
5,933,656.
Rail Transport
100
The railways started as a government department in 1898
and became a commercial concern by an Act of parliament
No. 20 of 1955 in 1898; the first rail track began in
Iddo stretching to Otta. The rail lines reached Ibadan in
1901, Oshogbo in 1907, and Jebba in 1909. The main
railway in Nigeria was constructed between 1898 and 1965.
The present railway system in Nigeria comprises 3,218-
route kilometer of 3’6” (1.067 meter) gauge of single
track running north-south wards in two trunks. Given that
the rail network in Africa estimated at 73,000-route
kilometer, it implies that Nigeria accounts for 4.4
percent of the total rail network in Africa. Axle load is
limited by several stretches of lightweight rail;
operating speeds are restricted by extensive distance of
curved tracks as well as steep grades in parts of the
system.
101
Air Transport
Nigeria after World War II experienced a change in
the landscape of her transport system with the injection
of the air transport mode on 15 May, 1946 with the West
Africa Airways Corporation (WAAC). WAAC was disbanded in
1958 giving way for the establishment of Nigerian
Airways. Nigeria airways came into existence in 1959. It
then took over the operations of domestic air services in
Nigeria and the Lagos London route. Nigeria has 19
domestic airports with Lagos, Abuja and Kano airports as
the hubs of international air services. The bulk of the
domestic airports are underutilized, while domestic
flights are operated using second-hand aircrafts with
doubtful worthiness.
Water Transport
102
The lack of modern road and railways made the
earliest effort at developing the Nigerian transport
system to be focused on dredging inland waterways in
southern Nigeria. This was to make them navigable all-
year round by river craft, lighter, stern-wheelers, etc.
It provided opportunities for the colonial traders the
exploitation of resources in the hinterland. Water
transportation is also a vital mode of transport in
Nigeria when viewed in relation to the seaports where the
bulk Nigeria’s imports and exports are discharged and
loaded.
Table 2
The pattern of Seaport Evolution in Nigeria
Phase Time
Period
Composite
form
Leading
ports in
Hierarchy
Overall
trend
I 1500-1670 Initial
Concentrati
on
Gwata,
Bonny, Old
Warri
103
II 1670-1750 Diffusion Old
Calabar,
New
Calabar,
Bonny Brass
Unstabilize
d Port
Structure
III 1750-1860 Concentrati
on
Bonny,
Lagos
IV 1860-1910 Diffusion Lagos,
Akassa,
Sapele, Old
Calabar,
Warri,
Dengena
Consolidati
on with
Lagos as
point of
sustained
V 1910-1950 Concentrati
on
Lagos, Port
Harcourt
dominance
VI 1950- Diffusion Lagos,
Bonny,
Okrika,
Port
Harcourt
Source: Ogundana, B., “patterns and problems of Seaport
Evolution” in Hoyles, B.S. and Hilling, D. (eds.) Seaport
104
and development in Tropical Africa, London: Macmillan and
Co. 1970, PP. 167-82.
Ogundana’s model of port evolution as shown in Table
2 provides a useful brief on the spatial-temporal aspect
of Nigeria’s port development. The classifications based
on some 500 years of evolution organized the spatial-
temporal development of the seaports in Nigeria into six
phases. Nine new ports were built between 1976 and 1981.
Three main factors have been identified for the growth
and development of ports in Nigeria. These are
historical, economic and political factors.
The Nigerian Ports Authority which is an autonomous
public corporation was established in 1955 for the
management, operation and administration of the seaports.
It is important to note that water transportation
includes inland waterways, coastal and ocean shipping
seaports, river ports and other related handling and
terminal facilities. Nigeria has a vast potential for
105
inland waterways transport, with the Niger-Benue river
system constituting the main segment.
Pipeline Transport
The use of pipelines for transportation of any
product other than water had its beginning on 23 December
1955. It was the 11km crude oil linking Oloibiri oil
field to Kugbo Bay. However, pipeline transport did not
constitute a significant freight transport mode in
Nigeria until the late 1970s. Twenty years earlier
pipelines were merely one of the several issues in
internal routine functioning of the oil industry.
Pipeline transportation in Nigeria is woven around the
operations of the oil and gas sector. In fact, between
1958 and 1964, shell-BP of Nigeria had about 300km of oil
pipeline connecting its eastern and western oil fields
with point of evacuation. The rapid development of
private crude oil pipeline systems of producing areas to
106
export terminals and domestic refineries, and the rapid
growth in the domestic consumption of petroleum products
provided the stimuli for the interest and rapid expansion
in pipeline transport particularly in the 1970s.
The three prominent pipeline systems before the
Third National Development Plan (1975-1980) were the
Central Swamp pipeline system, the trans-Niger pipeline
system and the South Forcados pipeline system. The Third
Plan laid the foundation for the present oil pipeline
system in Nigeria. It was then that a 3,001 kilometre of
crude oil and petroleum products pipeline was commenced,
completed and commissioned. The oil pipeline system in
Nigeria is made up of gathering pipelines, trunk line
pipeline and distribution pipeline. The ongoing West
Africa Gas Pipeline project is another major development
in pipeline transport in Nigeria, which will benefit some
West African countries. Nigeria presently has about
5000km crude oil and product pipeline network.
107
3.6 Present State of China’s Economy
China’s economy is huge and expanding rapidly. In
the last 30 years the rate of Chinese economic growth has
been almost miraculous, averaging 8% growth in Gross
Domestic Product (GDP) per annum. The economy has grown
more than 10 times during that period, with Chinese GDP
reaching 3.42 trillion US dollars by 2007. In Purchasing
Power Parity GDP, China already has the biggest economy
after the United States. Most analysts project China to
become the largest economy in the world this century
using all measures of GDP.
However, there are still inequalities in the income
of the Chinese people, and this income disparity has
increased in the recent times, in part due to a
liberalization of market within the country. The per
capita income of China is only about 2,000 US dollars,
which is fairly poor when judged against global
108
standards. In per capita income terms, China stands at a
lowly 107th out of 179 countries. The Purchasing Power
Parity figure for China is only slightly better at 7,800
US dollars, ranking China 82nd out of 179 countries.
Economic reform started in China in the 70s and 80s.
The initial focus of these reforms was on collectivizing
the agricultural activities of the country. The leaders
of the Chinese economy, at that point in time, were
trying to change the center of agriculture from farming
to household activities. At later stages the reforms
extended to the liberalization of prices, in a gradual
manner. The process of fiscal decentralization soon
followed.
As part of the reforms, more independence was
granted to the business enterprises that were owned by
the state government. This meant that government
officials at the local levels and the managers of various
plants had more authority than before. This led to the
109
creation of a number of various types of privately held
enterprises within the service sectors, as well as the
light manufacturing sectors. The banking system was
diversified and the Chinese stock markets started to
develop and grew as economic reform in China took hold.
The economic reforms made in China in the 70s and
80s had other far reaching effects as well. The sectors
outsides the control of the state government of China
grew at rapid pace as a result of these reforms. China
also opened its economy to the world for the purposes of
trade and direct foreign investment.
China has adopted a slow but steady method in
implementing their economic reforms. It has also sold the
equity of some of the major Chinese state banks to
overseas companies and bond markets during the middle
phase of the first half of the 21st century. In recent
years the role played by China in international trade has
also increased.
110
3.7 Current Policy Challenges in China
Meeting with the president of the United States in
late 2005, China’s president Hu Jintao frankly
acknowledged that problems of the political corruption,
rural unrest, a growing wealth gap, and severe pollution
consume nearly all his time. Some of these problems
represent new policy challenges for Chinese leaders;
others are not new, but their magnitude impacts have only
recently been understood. The new and ongoing policy
challenges arise very significantly from China’s economic
successes in the past quarter-century.
Since 1978, Chinese leaders have agreed to be judged
mainly by their ability to foster economic growth and
deliver a better material life for Chinese citizens.
China’s development has in fact been very impressive. Its
economy has grown at a rate of nearly 10 percent per year
111
since 1980, a record of sustained growth comparable only
to Japan and Korea in the later half of twentieth
century. In case of purchasing power parity, china is now
world’s second largest economy (after the United States)
and third largest recipient of foreign direct investment
(largest among developing countries). In 2006, it
overtook Japan as the world’s biggest holder of foreign
exchange reserves.
Economic success has not been costless. It has
provided more opportunities to pursue private gain,
legally and also illegally through the abuse of public
office. Despite decades of anticorruption efforts, year
after year, ordinary citizens tell pollsters that
corruption is one of China’s most serious problems. In
the cities, Chinese poke fun at the perceived insecurity
of the anticorruption reforms: “not daring not to fight
corruption, not daring to fight corruption seriously” .In
the countryside, villagers rise up to protest abuses of
112
power by” local emperors” imposing illegal fees and
excessive taxes.
In recent years, the requisition, rezoning, and sale
of agricultural land by local governments has provoked
rural riots, usually suppressed with great violence. Land
is not privately owned, but contracted for agricultural
use by Chinese farmers. Local governments have seized on
more lucrative opportunities for land use provided by
real estate and industrial development. Farmers tend to
be poorly compensated in these instances of eminent
domain for local economic development (and local
government profit). Top Chinese have commended these
actions, not least of all because arable land is already
scarce.
The growing wealth gap fuels the perceptions of
official abuse. Chinese policymakers have promoted a
policy that “some get rich first”. One result is rapidly
raising inequality. Rural incomes and coastal regions
113
have been advantaged over the interior. Urban Chinese in
modern Shanghai enjoy annual incomes exceeding $2,000,
while rural Chinese in backward Ghizhou province make do
with $200. While some struggle for a basic livelihood,
there are also Chinese entrepreneurs and venal officials
who travel in luxury sedans, do business on cellular
phones, and feast ostentatiously at expensive
restaurants. In 2006, Chinese authorities admitted to a
Gini coefficient of 0.46, mostly reflects a gap between
urban and rural residents. As the wealth gap has exploded
within a single generation, it has great potential to
impact social stability.
According to the ministry of public security, in
2005, China experienced 87,000 “public disturbances,”
both urban and rural – up 7 percent from the previous
year. Land takings, economic distress, and political
corruption certainly provoked much of this unrest. A
nontrivial number of rural “disturbances” are directed
114
against pollution, which has displaced tens of millions
of farmers.
Although the Chinese have developed a significant
legal and organizational infrastructure of environment al
protection in the past decade, environmental pollution
and degradation have increased at rate that far outpaces
the capacity of the state to protect the environment.
This reflects developmental priorities: indeed as late as
the mid-1990s, Chinese leaders routinely articulated the
principle of “first development, than environment.” The
World Bank estimates that annually 300,000 Chinese die
prematurely from air pollution. Children breathe in the
equivalent of smoking two packets of cigarettes per day.
Sixteen of the world’s twenty most populated cities are
Chinese cities – including Beijing, the site of the 2008
Olympic Games. The expanding ownership of private
automobiles by the new middle class exacerbates the
problem: Chinese domestically designed and manufactured
115
automobiles emit ten to twenty times more pollutants than
American or Japanese models.
As Chinese leaders confront their domestic
challenges, they do so in a global context that they now
actively engage. The U.S. government now uses the term
“stakeholder” to describe the new role of china in the
world. This has much to do with china’s accession to the
World Trade Organization (WTO) in 2001, which has further
open the economy, subjecting it to a new discipline of
global competition and pushing development of the
economic legal infrastructure. WTO accession agreement
require china to fully open its banking sector to foreign
investors in 2007 – and this will accelerate an already
rapid process of economic reform. China is not only an
economic player, however. It has also show its
willingness to play a role in helping to resolve
international crises, such as the production and testing
of nuclear weapons by North Korea. As the only country
116
with political influence over North Korea, China
organized the six-party talks, bringing the United States
to the negotiation table in a multilateral situation.
China has thoroughly abandoned the strictures of
communist ideology, has experienced an awesome economic
revolution, and is taking its place as an important world
power. Yet, unlike most other communist regimes, which
topple in face of popular uprisings, china has
experienced no second political revolution. Today, it is
still a communist party-state. Chinese policy makers have
limited liberation, sometimes as an antidote to
corruption at the grassroots. While they have opened up
political processes to more diversified inputs, they have
also firmly suppressed organized challenges to the
Communist Party. A handful of leaders at the very top
still monopolize the authority to choose what sort of
inputs from what sorts of groups are accepted, and the
decision rules are not always transparent.
117
Strikingly little remains of Mao’s grand revolution
schemes. Viewed from the perspective of the 1970s, the
magnitude and pace of change in China in the past
quarter-century are practically unimaginable. Chinese
politics today is “post-Mao” politics in the sense that
there is a new regime, not simply a change of leaders
and, given its dynamics, there appears to be turning
back. Of course, without a grasp of china’s rich
political history, it is not only impossible to
appreciate what has (and has not) changed, but also
impossible to understand the crucial context of post-Mao
reform: what has been rejected.
3.8 Economic Reform in the People's Republic of
China
The first reforms in the late 1970s and early 1980s
consisted of opening trade with the outside world,
118
instituting the household responsibility system in
agriculture, by which farmers could sell their surplus
crops on the open market, and the establishment of Town
and Village Enterprises (TVEs).
The process of economic reform began in earnest in
1979, after Chinese leaders concluded that the Soviet-
style system that had been in place since the 1950s was
making little progress in improving the standard of
living of the Chinese people and also was failing to
close the economic gap between China and the
industrialized nations.
The reforms of the late 1980s and early 1990s
focused on creating a pricing system and decreasing the
role of the state in resource allocations. The reforms of
the late 1990s focused on closing unprofitable
enterprises and dealing with insolvency in the banking
system. After the start of the 21st century, increased
119
focus has been placed on narrowing the gap between rich
and poor in China.
Chinese economic reform, unlike perestroika, has
been an economic success, generating over two decades of
rapid economic growth. The standard of living of most
Chinese has improved markedly since 1978. The CCP goal of
modernization also seems to be moving forward. Throughout
China one can witness the rapid modernization of
infrastructure, including new superhighways, airports,
and telecommunications facilities.
The first part of Chinese economic reform involved
implementing the household responsibility system in
agriculture, by which farmers were able to retain surplus
over individual plots of land rather than farming for the
collective. This was followed by the establishment of
TVE's, which industries were owned by townships and
villages. An open door policy was introduced by which the
PRC began to allow international trade and foreign direct
120
investment. These initiatives immediately increased the
standard of living for most of the Chinese population and
generated support for later, more difficult, reforms.
The second phase of reform occurred in the 1980s and
was aimed at creating market institutions and converting
the economy from an administratively driven command
economy to a price driven market economy. This difficult
task of price reform was achieved using the dual-track
pricing system, in which some goods and services were
allocated at state controlled prices, while others were
allocated at market prices. Over time, the goods
allocated at market prices were increased, until by the
early-1990s they included almost all products.
In the late 1980s the Chinese economy was still
transitioning steadily, as it moved cautiously away from
central planning and gradually adopted some more of the
institutions and mechanisms of a market economy.
121
The first major success of the economic reform
program was the introduction of the responsibility system
of production in agriculture, a policy that allowed farm
families to work a piece of land under contract and to
keep whatever profits they earned. By 1984 the
responsibility system had dramatically increased food
production, and the government had eliminated the
people's communes--the hallmark of Chinese socialism for
over twenty years. In most other sectors of the economy
the role of government was reduced, managers were given
more decision-making power, enterprises were encouraged
to produce for profit, the role of the private sector
increased, and experimentation with new forms of
ownership began in the state sector. Constraints on
foreign trade were relaxed, and joint ventures with
foreign firms were officially encouraged as sources of
modern technology and scarce foreign exchange. With
rising incomes, greater incentives, and rapid growth in
122
the service and light industrial sectors, the People's
Republic of China began to exhibit some of the traits of
a consumer society.
Movement toward a market system, however, was
complex and difficult, and in 1987 the transition was far
from complete. Relaxing restrictions on economic activity
quickly alleviated some of China's most pressing economic
difficulties, but it also gave rise to a new set of
problems. Inflation, the greatest fear of Chinese
consumers--became a problem for the first time since the
early 1950s, and along with new opportunities to seek
profit came growing inequality in income distribution and
new temptations for crime, corruption, and Western
cultural styles, regarded by many older Chinese people as
decadent and "spiritually polluting." The state still
owned and controlled the largest nonagricultural
enterprises, and the major industries were still
primarily guided by the central plan.
123
Thus, the Chinese economy in the late 1980s was very
much a mixed system. It could not be accurately described
as either a centrally planned economy or a market
economy. The leadership was committed to further
expansion of the reform program as a requisite for
satisfactory economic growth, but at the same time it was
compelled to keep a tight grip on key aspects of the
economy--particularly inflation and grain production--to
prevent the emergence of overwhelming political
discontent. Under these circumstances, forces in the
economic system worked against each other, producing what
the Chinese leadership called internal "contradictions."
On the one hand, the economy was no longer tightly
controlled by the state plan because of the large and
growing market sector. On the other hand, the market
could not operate efficiently because many commodities
were still under government control and most prices were
still set or restricted by government agencies. Under the
124
leadership of Deng Xiaoping, the entire nation was
"riding the tiger"--making great progress but not
entirely in control--and therefore unable to stop the
process without risk.
Despite the burst of progress in the 1980s, the
Chinese economy still shared many basic characteristics
with the economies of other developing countries. The
gross national product per capita in 1986 was ¥849, or
about US$228 (at the 1986 exchange rate), reflecting the
low average level of labor productivity. As in many
countries that did not begin sustained industrialization
efforts until the middle of the twentieth century, the
majority of the Chinese labor force over 60 percent was
still employed in agriculture, which produced around 30
percent of the value of national output. Agricultural
work still was performed primarily by hand. Modern
equipment was in general use in industry but was largely
125
typified by outdated designs and low levels of
efficiency.
In other respects China's economy was quite
different from those of most developing nations. The most
important difference was that the Chinese economy,
although in the midst of far-reaching changes was
organized as a socialist system, directed by a central
planning structure. The predominance of state and
collective ownership, firm central control over the
financial system, redistribution of resources among
regions, rationing of grain, and subsidized provision of
housing resulted in a pattern of income distribution that
was much narrower than those in almost all other
developing countries. There was relatively little true
capitalism in the form of private ownership of productive
assets. Agricultural land was farmed under lease by farm
households but was formally owned by villages, towns, and
126
townships--the collective units that had replaced the
rural commune system.
In the mid-1980s most Chinese were still very poor
by American standards, but several important measures
indicated that the quality of their lives was
considerably better than implied by the level of gross
national product (GNP) per capita. According to World
Bank data, in 1984 energy consumption per person was 485
kilograms of oil equivalent, higher than that for any
other country ranked as a low-income country and greater
than the average for lower middle-income countries. In
1983 the daily calorie supply per capita was 2,620--11
percent above the basic requirement and nearly as high as
the average for countries classified as upper middle-
income countries. Significantly, infant mortality in 1985
was 39 per 1,000, well below the average for upper
middle-income countries, and life expectancy at birth was
127
69 years, higher than the average for upper middle-income
countries.
Despite the major economic gains made by China since
1949 and the dramatic advances of the 1980s, serious
imbalances and deficiencies have persisted. Contributing
to these deficiencies were the political turmoil that
disrupted the economy during the Cultural Revolution
decade (1966-76), insufficient flexibility in the
planning process, and serious inaccuracies in price
structures. Power shortages, inadequate transportation
and communication networks, shortages of technicians and
other highly trained personnel, insufficient foreign
exchange for procurement of advanced technology from
other countries, and inadequate legal and administrative
provisions for both foreign and domestic trade further
hindered modernization.
An important by-product of the reform program since
the late 1970s has been an enormous increase in the
128
amount of information available on the economy. The
government collected and published basic national
economic data in the 1950s, but the centralized
statistics-keeping system broke down at the end of the
1950s, and very little statistical information was
available during the 1960s and early 1970s. It was not
until 1979 that the State Statistical Bureau ended the
statistical "blackout" with the publication of an
economic statistical communiqué. In subsequent years the
State Statistical Bureau published larger and more
frequent compendia, including annual almanacs of the
economy and annual statistical yearbooks, which became
progressively more sophisticated and informative. In
addition, most provincial-level units and cities, as well
as the major industries and economic sectors, such as
coal mining and agriculture, began to produce their own
specialized statistical yearbooks. In the early 1980s,
numerous new periodicals, many of which specialized in
129
economic data and analysis, started publication. Although
Chinese statistical definitions and practices still
differed from those in other countries in many respects
and the accuracy of some figures was called into doubt
even by Chinese economists, foreign analysts in 1987 had
access to a rich and growing body of data that would
support extensive analysis of the Chinese economy.
However the transition to a market based system in
the early 1990s created two major problems. First the end
of central planning required the creation of mechanisms
to set monetary policy, and a system of banking and
capital markets. Work was done throughout the 1990s to
put these systems in place.
Another problem involved that of state owned
enterprises. Under a system of fixed prices, the inputs
and output prices of SOE's were fixed, allowing them to
use the difference to fund social services. Once input
and output prices were market based most of the SOE's
130
then became extremely unprofitable, both because they
were responsible for social service provision to their
employees and because they were producing outputs that no
one wanted to buy. This was temporarily resolved by
borrowing from the banking system, but this created the
problem of massive non-performing loans. In the late
1990s and early 2000s, this problem was dealt with by the
closing of unprofitable state-owned factories and the
development of social security systems.
The Chinese economic reform refers to the program of
economic reform called "socialism with Chinese
characteristics" in the People's Republic of China (PRC)
that were started in 1978 by pragmatists within the
Communist Party of China (CPC) led by Deng Xiaoping and
are ongoing as of the early 21st century. The goal of
Chinese economic reform was to generate sufficient
surplus value to finance the modernization of the
mainland Chinese economy. Neither the socialist command
131
economy, favored by CPC conservatives, nor the Maoist
attempt at a Great Leap Forward from socialism to
communism in China's agriculture (with the commune
system) had generated sufficient surplus value for these
purposes. The initial challenge of economic reform was to
solve the problems of motivating workers and farmers to
produce a larger surplus and to eliminate economic
imbalances that were common in command economies.
Economic reforms started since 1978 have helped lift
millions of people out of poverty, bringing the poverty
rate down from 53% of the population in the Mao era to
12% in 1981. Deng's economic reforms are still being
followed by the CPC today and by 2001 the poverty rate
became only 6% of the population.
Chinese economic reform has been undertaken through
a series of phased reforms. In general, these reforms
were not the results of a grand strategy, but as
immediate responses to pressing problems. In some cases,
132
such as the closing of state enterprises, the government
has been forced by events and economic circumstances to
do things that it did not want to do. As of 2005, 70% of
China's GDP is in the private sector. The relatively
small public sector is dominated by about 200 large state
enterprises concentrating mostly in utilities, heavy
industries, and energy resources.
Although Chinese economic reform has been
characterized by many in the West as a return to
capitalism, Chinese officials have insisted that it is a
form of socialism, because to do otherwise would call
into question the very validity of Marxism, centralized
government planned economy and the legitimacy of the
regime itself. However, they have not argued against the
premise that many of the reforms involve adopting
economic policies that are in use in capitalist nations,
and one of the premises of Chinese economic reform is
133
that China should not avoid adopting "whatever works" for
ideological reasons.
In addition, many of the economic structures that
have been created in the course of Chinese economic
reform may appear superficially similar to those found in
other nations, but are in fact unique
State Budget Reformation
The nature of the state budget also was significantly
altered by the reform program. Before 1979 the state
budget was the financial component of the national
economic plan. It was made up of the budgets of both the
central government and the local governments and included
the revenues and expenditures of all state-owned
enterprises. All profits from state enterprises were
remitted to the state budget, and investment funds were
allocated from the state budget. Under the reform, there
was increased separation of enterprises from direct state
134
control. Enterprises now paid proportional taxes on their
incomes rather than remitting their entire profits to the
state. Investment funds were, in principle, no longer to
be allocated directly to state enterprises from the state
budget but were to be obtained from the banking system in
the form of interest-bearing loans.
In 1985 total state revenues of ¥186.6 billion included
¥51.4 billion in income taxes from state-owned
enterprises and only ¥4.4 billion in enterprise incomes.
The largest category of revenues was industrial and
commercial taxes, which amounted to ¥110.1 billion.
Agricultural taxes were ¥4.2 billion, continuing the
previous policy of levying only negligible taxes on the
farm sector. Revenues also included borrowing equal to ¥9
billion, a practice followed annually since 1978. As of
1983 roughly 30 percent of total revenues were collected
by the central government and 70 percent by local
135
governments, while each accounted for about 50 percent of
expenditures.
In 1985 the largest category of budget expenditure was
appropriations for capital construction, which received
31.3 percent of the total allotment. Culture, education,
science, and public health constituted the next largest
category, with 17 percent of expenditures. National
defense, which averaged 19 percent of budgetary
expenditures in the 1960s and 1970s, received only 10.3
percent of the total in 1985. Administrative expenses
were 7.7 percent of the budget and new technology in
enterprises 5.5 percent. In 1984 the state paid out ¥37
billion in price subsidies, an amount equal to 24 percent
of total expenditures in that year. The bulk of the
subsidies - ¥32 billion - were for consumer goods.
An important function of the state budget was to
transfer resources from prosperous regions to poor
136
regions. The budgets that were finally approved by the
Ministry of Finance for the provinces, autonomous
regions, and special municipalities allowed surplus funds
from affluent areas to be transferred to cover planned
expenditures in the deficit areas, while bringing the
budget for the entire country into balance. The resulting
pattern of revenue sharing between provincial-level
administrations and the central government was one in
which the advanced industrialized regions paid a much
higher rate of net taxation than most areas, and the
least-developed regions were heavily subsidized. For
example, in 1985 Shanghai remitted ¥8.4 billion in
profits and taxes, equal to 4.5 percent of national
budget revenues, although it had only 1.1 percent of the
national population.
137
Influence of Public Opinion
Because of the loss of iron rice bowl jobs due to the
reforms, many people were initially opposed to further
liberalization of the economy. Protestors at the 1989
Tiananmen Square Incident included workers who felt that
reforms had gone too far and threatened their
livelihoods.
However, according to a study done by the Program on
International Policy Attitudes, University of Maryland in
2006, 74% of Chinese surveyed feel that the "free
enterprise system and free market economy work best in
society's interests when accompanied by strong government
regulations", the highest percentage among the 20 nations
surveyed. In comparison, 71% of people surveyed in the
United States felt the same.
Poverty Reduction
138
Since 1978, when Deng Xiaoping acquired power in the
CCP and started the reforms, economic reforms in the PRC
have finally given the people of China an opportunity to
choose a job they want.
139
However, before these reforms, workers may not have had
the opportunity to earn higher wages, gain benefits from
employers, or even choose their jobs. For example if a
student got a scholarship to a reputable university and
wanted to become a lawyer instead of becoming a farmer,
said student would have a better opportunity in life (due
to the ability to choose a career or a job). Agricultural
jobs, such as farming in China do not pay high wages
(similar to the agricultural sector in the United
States). However, during the era of Mao Zedong, there was
a surplus of farmers that were forced to stay in their
jobs (due to the agrarian nature of his policies). Post-
economic changes, many farmers then decided to work in
factories that offered better pay. Since there were fewer
farmers, competing food companies then had to buy more
products from the scant supply farmers, in turn,
resulting in better pay for those people. Now, farmers
are frequently switching jobs (sometimes a farmer earns
140
1,000 Yuan a month, while a factory worker can make up to
3,000 Yuan a month; however, by the next year it could be
the reverse) because the pay differences between the two
sectors, agriculture and industrial. Therefore, it is
nearly impossible to predict what jobs will pay better
over the years.
Wealth Disparity
Living standards for everyone in China have drastically
increased in comparison to the pre-reform era, but so has
the wealth disparity. Many foreign and domestic Chinese
scholars and researchers argue that political reforms are
required to counter the widespread corruption in China,
which results in corrupted cadres and their associates
acquiring wealth at a much faster pace than most people
in China. Such accumulation of wealth via illegitimate
means has fueled widespread discontent.
141
A report released during the All-China First Planetary
Session of the Tenth Chinese People's Political
Consultative Conference in March 2003 by its standing
committee member Mr. Chen Mingde, and subsequently
published on the website of Xinhua News Agency,
highlighted various causes of concern including:
i. By the late 1990s, China had already become second
in the world in wealth disparity (Zimbabwe was the
first). By 2003, China surpassed Zimbabwe and
climbed to the number one spot.
142
ii. The fact mentioned above was supported by the
findings of the official Chinese governmental
statistics, which was quoted during the same report
from the All-China First Planetary Session of the
Tenth Chinese People's Political Consultative
Conference: the Gini coefficient for China had
already reached 0.417 since the beginning of 2000,
above the commonly internationally recognized danger
level of 0.40.
iii. The same findings mentioned above also included
additional causes of concern, there were only 3.5%
of the 1.3 billion people in China who earned more
than ¥20,000 annually (approximately $2,500, or
$11,000 when PPP adjusted), while 50% of the 1.3
billion population earned less than ¥2,000 annually
(approximately $250, or $1,100 when PPP adjusted).
Additional studies include:
143
iv. The Chinese branches of the Boston Consulting Group,
on the Chinese government's behalf, published an
investigative report on October 17, 2006, which was
covered by numerous Chinese periodicals such as the
Chinese Youth. According to the report, the top 0.4%
of Chinese families (about 1.5 million) own over 70%
of the nation's wealth while in contrast, in most
developed nations, the top 5% of the families own
around 60% of the total wealth.
v. Furthermore, the report only included the obvious
assets such as real estate, stock, bank accounts,
salaries, and personal property such as cars and
furniture. The report could not account for illegal
and semi-legal income sources; if it had, wealth
disparity would have been found to be even greater.
144
vi. In a separate report by the World Bank for 2006, the
income of the bottom 10% of the population in China
actually decreased by 2.4% in comparison to the
previous year, while the income of the rest of the
population increased.
The issue of extreme wealth disparity caused by the
Chinese economic reform has prompted some New Left
thinkers in China to advocate the return of Maoist-style
socialism. However, others believe that further reform of
the existing system is the answer to current problems.
Industrial Development Policies
China economic growth mainly comes from three
sources: (1) exports; (2) the domestic consumer market;
and (3) government investment on infrastructure and
industries. Due to the Asian financial crisis, China
expects that it may have difficulties experiencing high
145
growth in exports in 1998, so that the export
contribution to economic growth will decrease. Domestic
consumption also is expected to be weak, mainly because
of the growing unemployment problem, which not only
reduces many people’s purchasing power but also shakes
consumer confidence. Therefore, government investments
must be the major source of economic growth. It is
estimated that the government plans to invest about 3
trillion Yuan (more than 300 billion U.S. dollars) to
boost economic growth. The government also intends to
use these huge investments to modernize its economic
structure. The development strategies focus on three
areas:
1. Infrastructure and public sectors. Because
China needs to improve its infrastructure to
boost economic growth, it has undertaken
several major infrastructure projects, such as
146
the three Gorge Dam and the Pu Dong
international airport, in the next few years,
the Chinese government will invest heavily in
dams, water supply, ports, airports, and power
generation and distribution. The World Bank
estimated that from 1995 to 2004, China needs
$280 billion to invest in infrastructure and
public facilities. The Chinese government,
however, predicted that the country will need
some $800 billion to develop its public
facilities and infrastructure in the next ten
years (People’s Daily, December 27, 1997).
These investments will not only drastically
improve China’s economic infrastructure but
will also become critical driving forces for
China’s economic development.
2. The Chinese government has decided to develop
modern and strategically important industries,
147
such as electronics, information technology,
software, automobile, pollution control and raw
material industries. China wants to develop
these sectors not only to modernize its
industries, but also to create new economic
growth sources. To develop in these sectors.
3. The Chinese government also plans to invest in
traditional industries. Currently, many small
SOEs use very backward equipment and
facilities. Most of their products are of low
quality. Many of these firms are too small to
enjoy economies of scale. These firms face
great difficulties in the increasingly
competitive Chinese markets. In some of these
sectors, excessive manufacturing capacity also
exists, which causes further difficulties for
firm survival. To change the situation, the
148
Chinese government encouraged small firms to
merge, successful firms to grow and acquire
weak firms. In addition, the government will
invest heavily in the sectors. But these
investments are not to increase capacity. The
government has made it clear that it will
restrict investments in projects that have low
market potential or in which China already has
excessive manufacturing capacity. The main
objective is to use advance technologies to
renovate and upgrade existing facilities and
help companies develop new products, thus
increasing competitiveness.
149
Foreign Investment in China
In the past few years, China has been the second
largest country in the world in attracting foreign
investment. Foreign invested enterprises (FIEs) not only
provided China with development capital but also brought
to China new technologies and management knowledge. More
importantly, foreign enterprises are a major source of
the rapid growth for China’s exports, which created new
employment opportunities. These growing job opportunities
greatly alleviate the unemployment burden caused by SOE
reform. Thus, the growth of foreign investment becomes an
important factor affecting the success of SOE reform.
The Chinese government has become very sensitive in
defending and promoting Chinese brand-name products. The
government has also removed some favorable policies given
to foreign firms. For example, in 1996, it cut foreign
firms’ value-added tax rebate for exports from 17 to 9
150
percent. It has also planned to withdraw the privilege
enjoyed by FIEs to import capital equipment tax and duty
free, although the government has recently modified this
plan. In short, the Chinese government has become more
selective and careful in attracting foreign investments.
Being selective does not mean that the Chinese
government no longer welcomes foreign investments. In
December 1997, government officials repeatedly indicated
that China still needs foreign capital to help its
economic development. The only change is that the
government wants to be more effective in steering foreign
investments to the country’s most needed sectors, in
order to boost its economic growth and develop and
upgrade its domestic industries.
Financial System Reform
151
Financial system reform is also an important factor
affecting the implementation and success of China’s
economic development agendas. In the past, Chinese banks
have been government affiliates supporting government
policies and SOEs. For example, more than 75 percent of
bank loans in China go to SOEs. Given that almost 50
percent of the SOEs are loosing money, it creates a large
amount of bad loans. It is estimated that such bad loans
account for 30 percent of Chinese bank loans. This has
put a considerable amount of pressure on Chinese banks.
In order to change this situation and effectively use
financial mechanisms to influence China’s economic
development, it is important to let Chinese banks be
independent of government control. Although China passed
a 1995 banking law that gives banks full autonomy,
government influence remains very strong. But the Chinese
government has decided to continue the efforts to make
152
most Chinese banks independent and to become truly
commercial banks.
In addition, the success of China’s economic
development also depends upon the opening of its
financial market to foreign banks. As more foreign
companies in China demand financial services from foreign
banks, and more importantly, as China needs to open its
financial market in order to enter the World Trade
Organization (WTO) the Chinese government has to make
greater efforts to open its financial service sector.
Currently, only a few foreign banks are allowed to
provide local currency services (i.e., deposits and
lending) in the Pu Dong district of Shanghai. The Chinese
government has indicated that after China enters the WTO,
it will remove the restriction that only the Pu Dong
district of Shanghai. The Chinese government has
indicated that after China enters the WTO, it will remove
153
the restriction that only the Pu Dong district of
Shanghai is allowed to deal in local currency (i.e.,
local currency deposits and lending) by few government-
approved foreign commercial banks. Government-licensed
foreign banks can also provide local currency services in
five other economic special districts (including three
districts in Guangdong province, one district in Fijian
and one in Hainan province). Furthermore, the Chinese
government plans to permit more foreign commercial banks
to deal in local currency (World Journal Daily News,
December 15, 1997). It is possible that China may become
more cautious in its financial system reform after the
Asian financial crisis. The development of a sound
financial system is very important for China’s economic
development and transformation into market economy.
154
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158
Federal Republic of Nigeria (FRN) (1999), Annual
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159
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160
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161
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162
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163
CHAPTER FOUR
4.0 SUMMARY, RECOMMENDATION AND CONCLUSION
4.1 Summary
It is a true statement that Nigeria is blessed with
different natural resources. The country’s economy had done
well in the past but just that there is the problem of
maintenance, ineffectiveness, divergence between policy
formulation and implementation, role conflicts and inability
to demarcate the role of various players in the policy process
and poor commitment of government to the social contract with
the people are the major problems plaguing implementation in
Nigeria. One other aspect that has called our attention is the
agricultural sector and fiscal indiscipline. There seems to be
no other explanation to give for Nigeria’s present economic
problems except the men and women whom government appointed
(Etuk, 1987:134).
164
Ani (1987:7) goes a step further. He points out that one
of the reasons for failure in the past was the absence of
“economic macro – management”, adding that plans were easily
made but there was no modus operandi for the management of the
Nigerian economy. For instance, there were no monthly
appraisals, no reports prepared, no review of macro indices,
etc. He then challenges the Ministry of Finance to produce a
detailed plan as to how Nigerian economic policies are to be
implemented. This plan should be well detailed, articulated,
and should assign responsibilities to the different
ministries and officials who must meet on regular basis to
appraise that plan and manage the economy. We should also note
that China has also one time fell into these shoes before the
implementation of their new policies and economic reform which
this study has culled out to help the economic situation in
Nigeria.
4.2 Recommendation
165
There is an aspect in every society for which
development effort can take place. This is the
agricultural sector. It would produce the minimum answer
to food insecurity and problems. If something is going
wrong in this sector, then development will be retarded
and there would be problem. Even if a state is aiming at
the industrialization particularly in the area of food
processing or area that require agricultural produce and
the agriculture is not well taken care of, that
industrialization will fail.
There is need for the effective take off of the
Commodity Exchange Market (COMEX). The COMEX will be
entirely a private initiative with government providing
support services such as regulation, control and
monitoring.
Adequate infrastructure such as stable
electricity, potable water, and good roads will go a long
way in reducing the problems facing the agriculture
166
sector. While the concept such as liberalization,
deregulation, privatization, and commercialization are
desirable in the sector. It is recommended that where it
is absolutely necessary government can provide grants and
subsidies on input to assist farmer and other stakeholder
in the sector. These inputs should however be provided
timely.
In addition to the above, the following
recommendations are given to reduce problems of
agriculture in Nigeria.
i. Purchase of surplus farm produce by government.
ii. Adequate training and retraining farmers.
iii. Research and development and extension services
should be given adequate attention.
iv. Restructuring of National Agricultural and Rural
Development Bank (NACRBD) for better performance
and adequate funding.
167
v. Budgetary allocation to agriculture must be revived
up to 10.0 percent each year.
In concluding this regards, this research work will
outline the elements of a near-term agenda for action and
share with you my optimism that Nigeria will achieve
self-mastery and rise again. Given the enormity of our
country’s problems, the long list of conditions for
restoring and sustaining viability in the face of obvious
resource, time and capacity constraints, there is need
for prioritization and proper phasing and sequencing of
measures. More specifically, instead of dissipating
resources and energy over a wide front, with no
significant overall impact, as appears to be the case
now, government needs to concentrate on a few key sectors
in order to achieve the greatest short-term impact.
Accordingly, this research work proposes the following
near-term agenda for action.
168
First, place economic growth on top of the national
agenda of unfinished business and set a realistic time
frame for achieving economic recovery and robust growth.
Second, restore law and order. In this connection, we
assert that there is a minimum of coercion consistent
with orderliness, good governance and macroeconomic
effectiveness. Under democratic governance the trade-off
between individual freedom and government effectiveness
has tilted in favour of the former. There is, therefore,
a need to redress the imbalance in the interest of
greater effectiveness and development. It cannot be urged
too strongly that we need both democracy and development.
Third, put in place urgently a comprehensive
framework for achieving macroeconomic stability, since it
is a precondition for achieving sustainable economic
recovery and growth.
Fourth, reprioritize government expenditure in favour
of the growth-inducing sectors, e.g., agriculture,
169
education, health, infrastructure, security of life and
property, transport systems e.g. rail transport system,
science and technology, uninterrupted electricity supply
etc., and ensure prudent use of available resources. With
respect to the health sector, a massive programme for
prevention and checking the spread of AIDS should be
launched.
Fifth, integrate the short-term recommendations of
the Nigerian Economic Summit into the most recent year
Budget and ensure diligent implementation. In this
connection, the privatization programme should be
accelerated.
Sixth, intensify the war against corruption and
ensure cleansing of anti-corruption agencies ad-hoc
staffs by recruiting trustworthy staffs.
Seventh, launch a 10-year Perspective Plan (2010-
2020) not only as a framework for pursuing the long range
vision for the country but also as a vehicle for
170
achieving the development goals set for 2020 under the
auspices of the United Nations.
Above all, let us earnestly hope and pray that
President Goodluck Jonathan will fulfill the uncompleted
historical mandate of his predecessor, Late President
Umar Musa Yar’Adua, which in our view, is to deliver both
sustainable democracy and development. These times call
for strong but selfless leadership and a President who
will, if need be and for the utmost good of the country,
but acting within the letter and spirit of the
Constitution, think less of his party, the sub-national
governments and other self-serving interests, and appeal
to the country at large as his constituency.
The need for a strong, charismatic, inspiring but
selfless leader that will be ready to serve the people
and see himself as a civil servant for the people and
having professionals as his advisers and think tanks.
171
With these suggested recommendation, Nigeria is likely to
move to a greater height now and forever.
4.3 Conclusion
The study stated clearly that there is very high level of
poverty in Nigeria. Majority of Nigerians live in abject
poverty. Unemployment is also a major problem plaguing many
Nigerians. Unemployment is highly correlated with poverty.
Nigeria needs broad-based and labor intensive growth
strategies. Adequate social services and infrastructure to
reduce the depth and severity of poverty in Nigeria should be
provided. Growth strategies should be targeted at the poor,
more investment should be made in human capital. Agriculture
should be adequately boosted and adequate emphasis should be
placed on manufacturing and petroleum industries. Moreover,
exports should be increased and imports reduced. Savings
should be sufficiently channeled to profitable investment.
172
Adequate and effective monetary policies should be used for
rapid and sustainable growth; and finally, government should
know that the efficacy of all the measures recommended depends
to a great extent on the integrity of its officials and public
servants because level of corruption In the country calls for a
change.
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