Nigeria: The Persistence of Underdevelopment and Imperative for Change



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Nigeria:

The Persistence of Underdevelopment and Imperative for Change


IR 322: Poverty and Developmenthd:academics:2010 spring:ir development:poverty and development:pic niger delta hands.jpg

Professor Bruce Moon

Lehigh University

Bethlehem, PA

Background Report: Nigeria

ABSTRACT: Nigeria is one of the wealthier nations in the world, yet the majority of its population is strikingly poor. This report seeks to address this issue by assessing the potential for development in Nigeria. While there are numerous obstructions to development, there are also many aspects of the country that make its prospects for development promising. This report uses this assessment to develop a proposal for a development plan focused on increasing the quality and availability of primary education in Nigeria.

Glen DeVillafranca

Nicholas Lancaster

Daniel Letts

Kate McCarthy

Diego Molina

Table of Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Section 1: State of Nigeria . . . . . . . . . . . . . . . . . . . . . . . 6

A Thriving Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The Real Problem – Poverty . . . . . . . . . . . . . . . . . . . . . . 12

Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Inequity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32



Section 2: Cause - Why the Underdevopment? . . . . . . . . 38

Nigeria Since Independence . . . . . . . . . . . . . . . . . . . . . . 39

The Impact of Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

The Real Problem: Patron-Clientage . . . . . . . . . . . . . . . . . 45

Violence Prevents Development . . . . . . . . . . . . . . . . . . 49

Violence in the Delta . . . . . . . . . . . . . . . . . . . . . . . . 49

Violence from Ethnic Conflict . . . . . . . . . . . . . . . . . . . 52

Section 3: Constraints on Future Development . . . . . . . . 56

Consolidation of Influence . . . . . . . . . . . . . . . . . . . . . . . 57

Social Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Political Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Economic Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

Section 4: Potential and Promise . . . . . . . . . . . . . . . . . . . 64

Fatalism – The Wrong Approach . . . . . . . . . . . . . . . . . . . . 65



Table of Contents

Why Nigeria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Economic and Fiscal Framework . . . . . . . . . . . . . . . . . . . . 68

System of Governance . . . . . . . . . . . . . . . . . . . . . . . . . . 68

Human Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69

Young Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72



Section 5: How to Start the Change: A Proposal . .. . . . . . 76

Introduction

Nigeria is a nation characterized by both problems and potential. It has many detriments, including widespread poverty, severe income inequity, violence, and a weak, inefficient, and corrupt government; but it also has several advantages not shared by other underdeveloped nations, such as a strong economy supported by massive oil revenues, and an enormous, largely-untapped supply of labor. In this report, we outline the major impediments to development in Nigeria, the positive factors that could assist development, and finally, we propose a plan that will address what we have found to be the most pertinent and underlying cause of underdevelopment in Nigeria.

Before any assessment of development potential can be made, however, it is essential to first come to an understanding of what ‘development’ actually signifies. Development has long proven to be a contentious term. To many, development represents the growth of the economy of a particular country as measured by levels of income and consumption. We believe that this macroeconomic conceptualization of development misses the mark in several regards. As evidenced by the polar qualities of Nigeria’s economy and its people at large, and by the vast income disparities between the few rich and many poor, positive macroeconomic indicators do not guarantee the alleviation of poverty, let alone the improvement of domestic living conditions. Arrighi, Silver, and Brewer further prove through their study of convergences in industrialization and income levels that simply achieving a strong industrial sector does not guarantee the improvement of the human condition within a nation.

Instead, we believe that the term development must reflect the progress of a nation’s people over the progress of its economy: We define development as the increased opportunity and freedom to improve one’s life and to pursue ends according to one’s interests, preferences, and needs. Aristotle wisely noted, “Wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else”1 Hungry, sick, or persecuted people have their freedoms and opportunities constrained by the immediate necessity of survival. The success of the economy can only be valid measure of a nation’s progress once its people are freed of this condition of subsistence and can act according to their own desires. As we detail in the following section, positive macroeconomic indicators fail to reflect the condition of the Nigerian people due to the continued presence of this survival-based condition.




Section One

The State of Nigeria


A Thriving Economy


Figure GDP (current US$)
By classical, liberal standards Nigeria’s economy is thriving. Macroeconomic data suggests that recent years have been productive, promising times in Nigeria. While we will soon demonstrate that this is, in fact, not nearly the case for real people, this section will present some of the impressive economic statistics that have been reported of late. While the follow figures do present bright spots in Nigeria’s overall situation (certainly a falling GDP would not be a good thing) their juxtaposition with following sections on endemic problems (like poverty) brings the overall purpose of this paper into focus – why is this “growth” not reaching the people?


Figure GDP per capita (current US$)
When one measures economic performance they usually turn first to Gross Domestic Product (GDP). With regard to Nigeria, this is perhaps the most impressive figure of their entire economy. As Figure 12 shows, in recent years GDP has been growing at an increasing rate. Correspondingly, GDP per capita has also been increasing, and, as Figure 2 shows, income in Nigeria is not only higher than many of its neighbors, but has risen impressively faster. Such improvements in overall wealth of the country are significant and provide, at the most basic level, increased liquidity and capacity for the greater economy.

This growth is almost entirely a product of participation in international markets. Exports have largely been driving economic activity. As such, Nigeria has been maintaining a trade surplus (Figure 33). Increased trade has attracted substantial Foreign Direct Investment (FDI)4 and capital inflows as well. More economic activity in the country and a thriving export sector has afforded the government substantial revenue, resulting in a positive balance of payments since 1998.5



Figure Trade Balance




2000

2005

2007

2008

Exports of goods and services (% of GDP)

54

47

40

43

Imports of goods and services (% of GDP)

32

31

30

30

Trade Balance (% of GDP)

(+)22

(+)16

(+)10

(+)13

This spur in economic activity corresponds to the global rise in demand for oil – the dominating force in Nigeria’s economy. As Figure 46 illustrates, Nigeria has one of the largest reserves of oil in the worlds and is one of the largest exporters of primary energy products. The enormous demand for and high value of oil across the globe leaves the Nigerian economy quite comfortably supported, for the time being, by the massive capital inflows, FDI, and revenue streams that come from such a sector. Figure 47 also shows that much of Nigeria’s recent economic performance can actually be attributed to its oil sector. Later, we will discuss several, noneconomic ramifications of this.

Largely as a result of oil revenue, Nigeria does not suffer from the bottlenecks frequently plaguing the developing world. Savings gaps8, for example, are usually quite problematic, leaving people without the available savings needed to invest.



Figure Trade in Oil

Oil


bbl/day

Rank

Production

2.169 million

16th

Consumption

286,000

45th

Exports

2.327 million

8th

Imports

170,000

54th

Proven Reserves

36.22 billion

10th

Picture Source Emmanuel Dogbevi

Developing nations also usually suffer from currency bottlenecks9. Without sufficient inflows, investing (and developing) becomes problematic, as foreign currency is not available to import required capital from other countries. Additionally, many governments in the global south lack the revenue needed for expenditures requisite for development10 (welfare programs, infrastructure projects, etc.). With the enormous revenues that come from being a large oil exporter, however, Nigeria does not suffer from any of these problems. On paper, at least, there is enough savings, consistent trade surpluses and positive balance of payments – again, almost solely due to oil revenue.

Thus, through many macroeconomic indicators, the status of the Nigerian economy can be summed in two words – impressive and promising. No economist would call $1,400 wealthy, but with GDP growth rates as high as 10.6%, liberal economics would look at Nigeria not with an eye of concern, but with one of excitement. In fact Goldman Sachs, one of the largest investment firms in the world, has even crowned Nigeria as one of the “Next Eleven”11 rising economies. What the rest of our report will analyze, contemplate and explain is why then, despite such “progress” and “promise” are most of Nigerians still desperately poor, starving, undereducated, without healthcare and, more troublingly, not currently on course to see any of this change.



Nigeria is Rife With Poverty

Capital


Picture Source World Politics Review
Nigeria is rife with poverty – a major impediment to development. Despite having Africa’s third-largest GDP, and regardless of successive efforts by the Nigerian government to alleviate poverty, the 2010 Global Monitoring Report by the United Nations Education, Scientific and Cultural Organization (UNESCO) revealed that about 92 percent of the Nigerian population survives on less than two dollars daily and about 71 percent survive on less than one dollar daily. Nigeria is now considered one of the poorest twenty countries in the world.12 These figures, when taken into consideration along with Nigeria’s lucrative oil industry, abundant mineral resources, and overall economic potential, are more than startling.

GDP per capita, though not a holistically useful approach for measuring development, does indicate the vast discrepancies between highly developed countries, such as the United States, and what UNDP has classified as countries that have achieved “medium13” development, such as Nigeria, Kenya, Ghana, and Uganda. In 2007, the difference between the GDP per capita of the United States and Nigeria was over USD 43,000. This figure is alarming as it testifies how far behind highly developed countries Nigeria is in terms of economic development. Still, measuring Nigeria’s level of development solely by GDP does not adequately represent the severity of Nigeria’s underdevelopment. Figure 5 below shows that the GDP per capita in Nigeria was actually higher than that of countries that ranked much higher on the Human Development Index than Nigeria.



Figure HDI Compared to Income

Country

HDI Rank

GDP per capita (US$/PPP)

United States

13

45,592

Kenya

147

1,542

Ghana

152

1,334

Uganda

157

1,059

Nigeria

158

1,969


Picture Source HDI
While Kenya’s GDP per capita is significantly lower than that of Nigeria, Nigeria is ranked eleven positions lower than Kenya according to the Human Development Index. The Human Development Index appropriately represents the severity of underdevelopment in Nigeria by evaluating GDP per capita, life expectancy, adult literacy and gross enrollment in education. As demonstrated by the Nigeria-Kenya example, measuring development through GDP per capita does not accurately represent a country’s real level of development14macintosh hd:users:katemccarthy:desktop:nga-1.png

Employment

Poverty and unemployment are inextricably related. The problem, though, for one seeking to analyze the relation is first, what is employment? Is it a universal term or rather a conditional interpretation? Below we provide an answer with the hope of being able to explore the following themes: the size of the labor force, unemployment and the subsequent geographic inequality, unemployment across age groups, male/ female unemployment rates, the effect of education on employment, exogenous factors and their effect on employment, and unemployment as a corollary to size of population.



It is important to note that Nigeria’s definition of “unemployment” is roughly based upon the International Labor Organization’s (ILO) criterion. In other words, an individual must be without work and available for it. Most conventional definitions also include a third provision of “actively seeking work,” but even the ILO notes how this can be relaxed in countries with very limited options for employment15. It is also essential to understand that self-employment, which is considered to be “at work,” is a fairly all-encompassing term consisting of people who, during the reference period, performed some work for profit or family gain, in cash or in kind16.

Figure National Unemployment Rates

Survey Period

Composite (%)

Urban (%)

Rural (%)

2003

14.8

17.1

13.8

2004

11.8

11

12.1

2005

11.9

10.1

12.6

2006

14.6

10

15.1

*2007

10.9

10

12.6

The problem when dealing with underdeveloped countries is that rarely does a sufficient supply of records exists to detail such a vital metric. The International Labour Organization’s Thirteenth International Conference of Labour Statisticians convened in 1982 to adopt their “Resolution Concerning Statistics of the Economically Active Population, Employment Unemployment and Underemployment.” It spelled out the need for countries around the world to develop a comprehensive system of statistics in order to provide a dependable base for those wishing to implement policy proposals17.


Picture Source UNDP

As aforementioned, macroeconomic figures (such as GDP) do not provide any true insight into a country’s level of development. Simply put, they fail to reflect how the majority of the population is living. Likewise, unemployment rates on a national level do little to paint a meaningful portrayal of the hardships endured by Nigerians on an everyday basis. Yes, the national unemployment rate does infer that a great number of people are without work. However, it offers no further detail in regards to which age groups are affected the most, the difference in unemployment between rural and urban populations, or even where the majority of unemployed Nigerians live. These are basic statistics fundamental to any understanding of human development within Nigeria.


Figure

Unemployment Rates by State
With a labor force of 46,113,831 in 2007,18 10.9 percent translates into over 5 million unemployed. The data also reflects an important trend in the distributional elements of unemployment. While the urban rate has been consistently declining since a peak of 17.1 percent in 2003, rural unemployment and consequently composite Nigerian unemployment has been unpredictable to say the least19.:picture 2.png

The data provided in Figure 7 demonstrates not only unemployment levels but also reiterates the issue of inequity prevalent in Nigeria. Picture 4, on the previous page, gives a geographic translation of this data.

What we can infer from this map and the other figures provided is that although pockets of above average and below average states do exist, positive instances lie in all regions of the country. In looking at the data on a state-by-state basis, we can appreciate the impact of distributional elements such as sector, geographic location and availability of natural resources. The central, agrarian state of Niger, for example, had an unemployment rate of 17 percent in 2007, while the oil-rich state of Bayelsa in the south had a much lower employment rate of 6.9 percent.

Lastly, we find it important to note that the two states at the heart of the Niger Delta, Bayelsa and Rivers, have experienced extreme variation in their unemployment rates. This is a reflection of the region’s dependency on oil exports sensitivity to fluctuations in world oil prices, and the high incidence of violent conflicts that disrupt productivity.




Picture Source time.com

Education also directly affects levels of unemployment in the urban and rural sector. While in rural areas the majority of unemployment is seen amongst those with no schooling, urban areas tell a different tale. The best example of this is seen through Nigerians with post-secondary educations. In the rural sector, they account for only 3.6 percent of total unemployment while the urban sector accounts for a far greater 16.6 percent. At first glance this may appear surprising, but understanding the tendency of educated Nigerians to reside in or move to urban areas provides the understanding necessary to analyze such a statistic. Simply put, there are far more people with post-secondary educations in Nigeria’s urban districts than rural areas. With accessibility to more qualified jobs severely limited, at best, the dynamic becomes perfectly reasonable. The conclusion to be reached here is not that increased education has a negative impact on chances of employment but rather that employment for a particular skill level might be rather competitive, as presented above20.

In a country as ethnically diverse as Nigeria, the archetypal definition used to characterize unemployment may be incompatible with various cultural norms amongst the peoples. With the assistance of the World Bank, however, the Nigerian government has been steadily increasing its capacity to gather key statistics throughout its states21. Not only does this provide policy analysts with the ability to distinguish important trends in employment on the ever-important micro level, but also by allowing the government to conduct surveys and localized counts in each of its states, a more culturally relativistic picture is painted.

As noted by Seers, population affects development22 – so long as the workforce is growing at an accelerated rate it is almost impossible to relieve unemployment. According to the World Bank’s compilation of WDI’s (World Development Indicators), Nigeria’s population growth for 2008 was 2.23 percent. Although exceeding the world average in 2008 of 1.17 percent, a more appropriate comparison to other “developing” countries reveals it to be in the middle of the pack. An even more localized comparison (relative to Western African countries) depicts it as relatively small in terms of its growth rate.

Despite this, the problem remains that as the world’s eighth most populous country, Nigeria’s above average growth rate translates into a far greater amount of people are to be sustained. In fact, of the world’s ten most populous countries, Nigeria’s annual population growth rate is the highest, with only Pakistan coming close.

From the information gathered, although Nigeria’s situation appears to be improving, it is far from perfect. Volatility in worldwide oil prices, instability of urban businesses seeking to increase production, lack of electricity necessary for industrial practices, and inefficient agricultural practices throughout the country provide just some of the many explanations as to why there are so many without work. The effects of unemployment in Nigeria are paramount and widespread. It is a discriminatory force, affecting some more than others. Indeed, certain measures can be taken to repudiate its unequivocally adverse effects but, as is the case in Nigeria, many times the force is too big to stop (at least as a unitary actor).

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