Poverty Alienation through Increased Private Sector - Research Paper Example

Poverty alleviation through increased private sector participation or control in Nigeria: What is the way forward? Introduction Nigeria is situated in West Africa and is the most populous country in the region with an estimated population of approximately 160 million and is the 8th most populous in the world, according to 2009 statistics. With a landmass of 433.8 sq. miles the country is already having numerous problems in the form of extreme poverty in some areas, the deprivation of basic amenities, lack of resources, a dearth of infrastructure, illiteracy, Nigeria’s economy depends heavily on the capital-intensive oil sector. Petroleum and Petroleum products constitute 95 percent of the Nigeria’s exports. Despite providing 95 per cent of foreign exchange earnings and about 60 per cent of government revenues, the oil sector’s contribution to GDP is less than 25 per cent. The agriculture sector is largely subsidized and has made a 26.8 per cent contribution to GDP in 2005. Industry and services contributed by 48.8 and 24.4 per cent respectively. Although, Nigeria had once been a large net exporter of food, it is now importing some of its food products. Nigeria’s economic progression has been disturbed by corruption, political instability and poor macroeconomic management for years. Following the restoration of democratic rule in 1999, Nigeria is now undergoing substantial economic reform (Anthony Maduagwu, 09/09/00). During the period 2003 to 2007, Nigeria put into effect National Economic Empowerment Development Strategy (NEEDS) which aimed towards raising the standard of living of the people by establishing macroeconomic stability through deregulation of the economic environment privatization of government ventures, economic liberalization and accountability. This initiative also addressed the basic deficiencies such as unreliable power supplies, poor infrastructure and lack of fresh water for household and irrigation. It was also aimed towards creating 7 million employments, boosting non-energy exports, increasing industrial capacity utilization, improving agricultural productivity and diversifying the economy. Similar initiative called State Economic Empowerment Development Strategy was also implemented at the state level. The UN sponsored the National Development Goals program for Nigeria, as a long-term economic development program, covering the period 2000-2015. Under this program Nigeria is committed to achieve number of set targets in the areas of poverty reduction, gender equality, health, education, environment and international development cooperation. Despite these efforts and with the presence of enormous resources, both physical and human and potential for development, Nigeria still remains the 20th among the world’s poorest countries. It is also predicted that Nigeria is far away from meeting the global development targets. According to UN statistics, Nigeria has made progress in providing universal primary education, protecting the environment, and developing global development partnerships. However, no significant achievement has been made in eliminating extreme poverty and hunger, reducing child and maternal mortality, and combating diseases such as human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS) and malaria. 2. Background Widespread poverty has been an enormous challenge to the development of Nigeria. Per capita GDP in Nigeria increased from US $ 1,200 in 1981 to US $ 2260 in 2007, but 55 per cent of its population falls below the poverty line (World Bank). About 92 percent of its population survives less than $2 per day and 71 per cent survives on less than $1 per day (2010 Global Monitoring Report, UNESCO). Poverty conditions are more acute in rural areas. However, city dwellers, especially thousands of those living in urban slums also face severe economic and social hardships. Increasing incidences of crime and kidnapping are indicative of the alarming level of insecurity in the country. Political violence, prostitution and child trafficking are among the other major issues which have direct linkages to poverty that hinder country’s development. It has been opined that the rising level of poverty is the consequence of mass unemployment and corrupt leadership. While Nigeria’s economy is making all efforts to leverage the country’s vast wealth in fossil fuels witch undoubtedly contributed to reduce poverty that affects about 70 per cent of its population, it has been reported that out of the 80 per cent of Nigeria’s energy revenue that flows to government, investment is only 4 per cent. 16 per cent of it is for covering the operational cost. Most of governments poverty alleviation programmes under donor funding have been seriously criticized for direct transfer of cash to politically selected beneficiaries. In September 2005, Nigeria was able to recover US $ 458 million of illicit funds, with the assistance of World Bank (Akpajiak & Pyke, 2003), These funds have been deposited in a Bank of Sweden by its former ruler, Sani Abacha. The campaign against corruption launched by the President, Olusengun Obasanjo arrested officials accused of misdeeds and recovering stolen funds. Progressively declining quality of the life of the people of Nigeria has therefore seen as a consequence of large scale corruption prevailed in the country. 2.1. Research Questions What’s the incidence and prevalence of poverty in Nigeria? What significant role, if any, the private enterprise can play in alleviating poverty in Nigeria? Does government control over the economy help in alleviating poverty in Nigeria? If private enterprise were to be involved in economic activity in such a manner that poverty levels in the Nigerian society could be reduced to achieve some specified long term goals, how far would the government of Nigeria has to permit such private sector participation? Do the IMF/World Bank poverty indicators effectively show the current level of poverty in Nigeria? Why have the existing poverty alleviation programs in Nigeria failed despite the government’s professed economic reform policies and programs that encourage private enterprise to take part in economic activity? What remedial measures might be adopted in order to achieve progress in reducing poverty in Nigeria? 2.2. Key Terms ► Poverty ►indicators ►contingency frameworks ►theoretical and conceptual models 2.3. Key Definitions 1. Poverty is defined as the relative deprivation in terms of the individual’s ability/ inability to purchase and consume a minimum amount of calories per diem. 2. Indicators are those measures or metrics which the IMF/World Bank and other UN bodies have adopted to measure poverty. 3. Contingency frameworks are models that have been built by authors for analysis of poverty levels in different countries. 4. Theoretical and conceptual models are those frameworks that draw on the existing theories and concepts to describe poverty. 2.4. Aims and Objectives To identify parameters of intervention for possible participation by private enterprise in poverty alleviation efforts in Nigeria. To ascertain the relevance/irrelevance of total state control over economic activity in Nigeria. To determine the extent to which private enterprise involvement could effectively help in poverty alleviation efforts in Nigeria. To build up a theoretical and conceptual framework of analysis for the determination of poverty alleviation efforts through private enterprise. To build up a consistent methodological framework for the effective private sector participation in poverty alleviation efforts against the existing backdrop of near total state control. 2.5. Hypothesis This study would be focused on finding and establishing such correlations as between and among incidence of poverty in Nigeria and the effective private sector involvement in the economy and the subsequent alleviation or/and reduction of poverty. 2.6. Significance of the problem There is an enormous potential for increased private sector participation in the Nigerian economy. Such economic expansion will in turn have a positive impact in reducing the poverty incidences in Nigeria. Therefore, identifying the parameters of intervention for possible participation by private enterprise in poverty alleviation efforts in Nigeria has been a timely consideration. A positive correlation between the reduction in the poverty level and private sector participation would be found. Poverty in Nigeria can be reduced through effective intervention of the private sector. 3. Literature Review Economic development theories on poverty alleviation range from classical approaches to neo-classical and from Monetarist approaches to Keynesian and from IMF/World Bank approaches to hybrid Marxian theories (Timberlake, 1985). However the fundamental principles of them all rest on the fact that economic reality cannot be negated “people are poor because they are poor”. Against this backdrop, it’s pertinent to find out how best Nigeria could benefit from the possible participation of private enterprise in the production process of the country. According to World Bank reports on Africa poverty in the entire region is basically due to a relative shortage in resources such as fertile land, marketable mineral deposits, lack of capital, very poor inflow of foreign capital and technology, government corruption, lack of political will, absence of regulations to control state enterprise and above all poor investment in education (Psacharopoulos, & Nguyen, 1997). Private enterprise in Nigeria has so far been relatively much less involved in poverty alleviation either through direct participation in the programs or indirect involvement in economic activity. Different schools of thought have cropped up on the possibility of engaging private enterprise in the national production process as active entities that are much less controlled by the state so that they can add to the gross domestic product (GDP) and increase employment opportunities. The existing private enterprise participation is limited to some primary, secondary and tertiary production. According to many authors it’s the tax system which is one of the primary culprits in a country that has the third fastest growing economy in the world, has to be overhauled. Secondly there is no progressive and cohesive regulatory regime in Nigeria. This shortcoming has curtailed the effective participation of private entrepreneurs in the national economic activity. Some private firms are leaving the country due to the fact that regulations governing quality and standards have been selectively applied in some instances while in many instances they are ignored, especially by state enterprises (World Bank, 1994). Poverty in Nigeria has a special dimension. In the first instance poverty among ethnic minorities is rampant despite the fact that there are only two major communities – Muslims and Christians – along with insignificant numbers of minorities. Secondly there is little or no national coordination effort to alleviate poverty at a holistic level. Finally foreign investors have done very little to reduce poverty through the adoption of meaningful corporate social responsibility (CSR) initiatives and programs (Bureau of African Affairs, November 1, 2010). The existing literature on the subject of poverty alleviation in Nigeria predicates on the premise that state intervention in the economy is almost complete and the system of registration and licensing of private enterprise is corrupt. Therefore there is very little encouragement to private entrepreneurs to be involved in business. Yet again some of the regions are prospering faster than others because there are no proper labor supply channels there. Labor Poor infrastructure has all the more been blamed for the current level of apathy among private entrepreneurs, both local and foreign. As a result writers point out that economic development in Nigeria is biased in favor of those regions where powerful political and bureaucratic interests are concentrated. Thus it’s obvious that poor planning and skewed distribution of resources are two other main reasons for the current level of poor private investment in the country(World Bank 2002). Next since the government has a near total monopoly in some of the sectors resources are not properly and competitively used. Annual budgetary allocations for government business are passed without question. Private sector participation, in some sectors of the economy like secondary education, IT education and training, biotechnology research and some manufacturing, is almost absent totally (Amankwah & Anim-Sackey, 2003) According to some writers meaningful private sector involvement in industry requires tax holidays for capital investment to take place. If the state withdraws from some of the areas of production and allows private enterprise to be involved with full or partial tax exemptions many business ventures would come into effect and reduce poverty through the generation of employment opportunities. 4. Research methodology 4.1 Primary research The methodology chapter of this study consists of primary and secondary research segments. The primary research segment consists of a survey to be administered to 10 interviewees and a questionnaire to be handed in to 40 odd participants/respondents at government and private policy design and implementation institutions located in Nigeria. Similarly there will be a considerable amount of effort to identify the path of the literature growth trajectory so that related learning outcomes – correlations, regressions, variances and co-variances – would be delineated in a systemic manner to adequately address the implications tentatively referred to in the research problem/questions. The primary research material will be analyzed to produce supporting evidence. 4.2. Secondary research The secondary research segment would consist of both internet based research and library centric research. A considerable amount of diverse literature on the subject of poverty alleviation through private sector involvement would be studied and analyzed in order to arrive at the conclusions. Conclusion In spite of abundant natural and human resource endowment, Nigeria suffers from pervasive, multifaceted, and chronic poverty. Most recent data reveals that estimated 69 million (or 54.4 per cent) Nigerians lived in poverty in 2004, an increase of more than 24 percent since 1980. Even though significant amount of resources were been able to mobilize by the state poverty alleviation programs delivery of those resources has been found inefficient and obscure. This has brought the capacity of the state to effectively deliver poverty interventions into question. References 1. Akpajiak, S.C.A.A. & Pyke, T. (2003), Measuring Poverty in Nigeria , Oxford: Oxfam Publishing . 2. Amankwah, P. and Anim-Sackey, C. (2003) Strategies for sustainable development of the small-scale gold and diamond mining industry of Ghana. Resources Policy. 29 (3-4) pp.131-138, ISSN 0301-4207. 3. Anthony Maduagwu, (09/09/00) AfricaEconomicAnalysis, http://www.africaeconomicanalysis.org/articles/gen/alleviatingpovertyhtm.html, 1/23/2008 4. Bureau of African Affairs, (November 1, 2010) U.S Department of States , http://www.state.gov/r/pa/ei/bgn/2836.htm#gov, 01/11/2010 5. Psacharopoulos, G. & Nguyen, N. X. (1997), 7. The Role of Government and the Private Sector in Fighting Poverty, Washington, DC: World Bank Publications. 6. Timberlake, L. (1985) Africa in Crisis: the Causes, the Cures of Environmental Bankrupcy. Earthscan. 7. World Bank (1994) Adjustment in Africa, Oxford University Press. 8. World Bank (2002) Growth, Distribution and Poverty in Africa: Messages from the 1990s. World Bank. 9. Top of Form 10. Bottom of Form Read More