Impact of Debt Relief on Nigerian Economy

IMPACT OF DEBT RELIEF ON NIGERIAN ECONOMY

BY

AKPA JULIET UCHENNA-M.Sc./2009406045F

BEING AN ASSIGNMENT SUBMITTED TO THE DEPARTMENT OF ACCOUNTANCY, NNAMDI

AZIKIWE UNIVERSITY, AWKA, ANAMBRA STATE

IN PARTIAL FULFILMENT OF THE SEMESTER COURSE FORENSIC ACCOUNTING AND FRAUD

MANAGEMENT ACC 622 FOR THE AWARD OF M.Sc DEGREE IN ACCOUNTANCY

LECTURER: MRS. NGOZI IJEOMA

MARCH 2011AKPA JULIET UCHENNA | MSc/2009406045F 1

ABSTRACTDebt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. For most people, saving money with one low monthly program payment meets their debt relief needs. It is not the only solution, and it is important to keep in mind that during the life of your debt settlement program, you are not paying your creditors.

We are a leader in the debt settlement industry in providing a debt solution that has helped thousands of people. Since its founding, Debt Relief has settled over one billion dollars of debt for our clients. This debt relief solution is for consumers that need one low monthly program payment to resolve their debts in as little as 24-48 months.

Despite the debt forgiveness to the tune of $18 billion received by Nigeria from Paris club since year 2005 including the subsequent payment of $12 billion to upset the remaining debt, there is no evidence of accelerating pace of growth and development of the country. It is therefore, instructive to find out the direction and the extent of the effectiveness of the debt relief granted to Nigeria. This forms the objective of this study. The secondary data used for the investigation were processed using the ordinary least square packages. The result of the OLS model showed that the debt overhang problem of Nigeria has been alleviated by the debt relief package but the debt service relief did not positively influence the growth indicator. The results strongly support the need for tougher conditionality in future

AKPA JULIET UCHENNA | MSc/2009406045F 2

debt forgiveness initiative. Donor countries should monitor the allocation pattern of debt relief maintain the conditionalities and reward sound policies and improvements of governance quality in debtor countries.

TABLE OF CONTENTAbstract - - - - - - - - - - 2

Table of content - - - - - - - - -3

CHAPTER ONE:

1.0: Introduction - - - - - - - - 5

1.1: Statement of the problem - - - - - -7

1.2: objective of the problem - - - - - - 8

1.3: justification/significance of the study - - - -9

1.4: research question - - - - - - - 10

1.5: statement of hypothesis - - - - - - 12

CHAPTER TWO:

2.1: literature review - - - - - - - -13

2.2: current challenges - - - - - - - 23


2.3: gradual reforms - - - - - - - -23

2.4: investments - - - - - - - - 23

CHAPTER THREE:

3.1: research technique - - - - - - - 25

3.2: data collection procedure - - - - - -25

3.3: sample - - - - - - - - - 25

CHAPTER FOUR:

4.1: data analysis - - - - - - - - 26

4.2: presentation and interpretation of data - - - -26

CHAPTER FIVE:

5.1 conclusion - - - - - - - - - 32

5.2 findings - - - - - - - - - 33

5.3 recommendation - - - - - - - 34


IMPACT OF DEBT RELIEF ON NIGERIAN ECONOMY

CHAPTER 1

1.0 Introduction

Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations. Traditionally, from antiquity through the 19th century, it refers to domestic debts, particularly agricultural debts and freeing of debt slaves. In the late 20th century it came to refer primarily to Third World debt, which started exploding with the Latin American debt crisis (Mexico 1982, etc.). In the early 21st century, it is of increased


applicability to individuals in developed countries, due to credit bubbles and housing bubbles.

The debt crisis of Nigeria reached a maximum proportion in year 2003 when the country was to transfer as much as $2.3 billion to service its debt. During these periods, the world leaders were granting debt relief to some highly indebted poor countries of the world. The IMF and the World Bank which initiated the move did not consider Nigeria as a poor country since it has oil. And since oil has maintained an all time high price range since 1999, getting relief was near impossible as the Paris club was not ready to listen to Nigeria. Meanwhile, President Olusegun Obasanjo in conjunction with his finance minister Okongo Iweala had prioritized securing debt relief from the creditor as a cardinal objective of his administration. This was essential because Nigeria already had a debt overhang problem which was having a debilitating effect on the economy in terms of the resources available to service debt; it’s crowding out effect on private investments and its constraint on the growth and development of the nation. However, one popular efficiency argument for the provision of the debt relief is the so-called debt overhang, which was evident in Nigeria. Thus, a strong justification really exists for the struggle for debt forgiveness initiated by the then administration. And since, it is evident that huge debt burdens was associated with low investment, poverty and low economic growth in Nigeria, the debt relief should have a stimulating effects on investment, alleviates poverty and trigger economic growth and development. As a matter of fact, the objective of debt relief programme was to reduce the external debt of severely indebted poor countries to a sustainable level to enhance investment and further economic growth. It was highly expected that the debt forgiveness initiatives especially the Heavily Indebted Poor Countries initiate (HIPC) launched by the IMF and the World Bank in 1996 and 1999, respectively would set free HIPC resources for spending on the poor.


Consequent upon the foregoing argument, the HIPC initiative introduced some guiding principles regarding a country’s eligibility for debt relief. To be considered for HIPC initiative assistance, a country must face an unsustainable debt burden, beyond traditionally available debt-relief mechanisms and establish a track record of reform and sound policies through IMF and IDA supported programmes. In the late 1999, the HIPC initiative was expanded in order to provide deeper and more rapid debt relief to a larger number of countries. The enhanced HIPC initiative (HIPC II) integrated debt relief plans into a comprehensive poverty reduction strategy requiring Poverty Reduction Strategy Papers (PRSP) on broad-based participatory process as a necessary condition to qualify for debt relief. With this approach, the global donor community for the first time took governance structures in the debtor countries (at least implicitly) into account. Furthermore, the thresholds for sustainable debt levels were redefined and lowered to a debt-per-export ratio of 150% and debt-to-revenue ratio of 250%. The eligibility of a country is proved in a staged process. If a country is deemed eligible, the debt relief is delivered at the so-called completion point. During the period of the initial decision point and the completion point, the progress of the country with respect to institutional reforms and structural adjustments is under observation and supported by the IMF and the World Bank. In practice, the time span between HIPC II and the completion point is rather large. Some countries are still waiting to reach the completion point.

Sequel to the approval of a 2 years policies support instruments that monitored Nigeria’s economic reforms drive, Paris club agreed to write off 60% of the $30.85 billion owed to its club members. The deal was finally signed in July 2005. Thereafter, the country was able to offset the remaining 40% debt owed to Paris club. By March 2006, Nigeria owed nothing to Paris club. This debt relief eventually saved the country from the yearly $2.3 billion debt service burden. It was however proposed that this amount will then be available to be ploughed back and channeled


to those areas that concern wealth creation, employment generation, agriculture, health, education, water supply, power generation and road construction.

The significant debt relief as a matter of fact should help the country’s goal of reducing poverty, accelerating the pace of growth and development and provide some boost for the ongoing reforms and millennium development goals. One would expect that by now, 4 years after debt forgiveness to Nigeria, the country should be on the path of economic recovery characterized by improved power supply, greater budgetary allocation to health and education, reduction in unemployment rate, improvement in road network, improvement in the living standard etc. which will be a good sign with respect to the expected impact of recent debt forgiveness benefit. But to the contrary, the country appears to be deteriorating further with worsen power supply, higher rate of unemployment poorer road network and lower living standard.

There is no evidence of accelerating pace in the growth and development of the country. Rather what we have is the signal of economic stagnation characterized by double digit inflationary trend and set back in poverty alleviation initiatives. This situation is quite worrisome. It is instructive therefore to find out the direction and the extent of the impact of the debt relief on the economic growth of the country. This forms the basic objective of the study. In this study however, we analyze the effectiveness of the debt forgiveness. For this purpose, we ask whether or not the debt relief has been effective in stimulating economic growth.

1.1 STATEMENT OF THE PROBLEM

It is no exaggeration to claim that Nigeria’s huge external debt burden was one of the hard knots of the Structural Adjustment Programme (S.A.P) introduced in 1986 by the Babangida administration. The high level of debt service payment prevented


the country from embarking on larger volume of domestic investment, which would have enhanced growth and development. With the recent debt forgiveness granted to Nigeria, one would expect the economic process of the country to be increased.

However, given the number of years, since the Nigerian capital market has been established and the substantial financial resources available in the country, coupled with the existing institutions, one can claim that the entire spectrum of the capital market has not been sufficiently active, especially when compared with the capital unit of similar or lesser aged units in other developing countries. The main interest of this study then is the relevance of the debt cancellation to economic growth in Nigeria.

Having established a background of the study, it could be stated that there are problems encountered. This research work is been carried out so as to ascertain the real cause of the debt problem in the Nigerian economy, and also to investigate the relationship of the debt relief and why the country appears to be deteriorating further with worsen power supply, higher rate of unemployment poorer road network and lower living standard.

There is no evidence of accelerating pace in the growth and development of the country. Rather what we have is the signal of economic stagnation characterized by double digit inflationary trend and set back in poverty alleviation initiatives.

It is evident that a huge debt burden was associated with low investment, poverty and low economic growth in Nigeria.

1.2 OBJECTIVE OF THE STUDY

The objective of debt relief programme is to develop a realistic picture on how to reduce the external debt of severely indebted


poor countries to a sustainable level to enhance investment and further economic growth.The debt relief should have a stimulating effect on investment, alleviates poverty and trigger economic growth and development in the Nigerian economy.

This study will outline the impact of debt economic recovery characterized by improved power supply, greater budgetary allocation to health and education, reduction in unemployment rate, improvement in road network, and improvement in the living standard

Most economies especially in the third world countries have at one time or the other experienced shortfalls between domestic savings and investment. External borrowings have often been resorted to, in order to fill such gaps, which have caused a lot of problems. On the backdrop of the recent debt cancellation granted to Nigeria, this study aims to:

(i) Examine the external debt trend of Nigeria in the past and how it has affected the growth process of the country;

(iv) Discuss the politics of the debt forgiveness and the possible effect on Nigerian economy.

(ii) Empirically investigate the effect of external debt on the growth process of the country;

(iii) Explore the impact of the debt cancellation on the Nigerian economic growth;

(iv) Investigate the politics of the debt forgiveness and the possible effect on Nigerian economy.


1.3 JUSTIFICATION/SIGNIFICANCE OF THE STUDY

The significance of this study is as follows:

(i) The study would provide an econometric basis upon which to examine the effect of debt relief on Nigeria’s economic growth.

(ii) It would provide an objective view to the relevance of the debt relief to Nigerian economy.

1.4 RESEARCH QUESTIONS

The following research questions would be considered in the course the study: culled from the article center for global development

1. Isn’t Nigeria too corrupt to deserve debt relief?

Only if you view Nigeria as an unchanging monolith. The country certainly has a problem with corruption and the ubiquitous 419 e-mail scams are a constant irritating reminder. And no one would want to minimize such graft or its devastating effects on development. But those that suffer the most are ordinary Nigerians who deserve better government and better public services. Fortunately, the current democratically-elected administration appears to be trying hard to rein in the dominant patronage system and to attack criminal theft by public officials. This is no easy task, and many


of the key reformers already face death threats and possible recriminations. If the reformers fail and the thugs win, things will get even worse in Africa’s biggest country. On the other hand, debt relief could help to strengthen the reformers in their fight against entrenched interests. In the least, shouldn’t donors give the reformers the best chance to succeed?2. Isn’t this giving Nigeria special treatment?

No. Changing its IDA status would actually require creditors to treat Nigeria just like the rest of the world’s low-income countries. A debt buyback would merely give Nigeria the same benefits through other means. If anything, Nigeria has so far faced an unfair double-standard. Many of the countries which have already been granted substantial debt relief, such as Chad or the Democratic Republic of Congo, face similar levels of corruption as Nigeria. Indeed, Cameroon reached its HIPC decision point within weeks of being ranked by Transparency International as the world’s most corrupt country.

3. Doesn’t Nigeria have enough resources from its oil?

Nigeria is oil rich, but still deeply poor. The country earns billions each year from oil exports, but it also has at least 130 million people. In all, oil earns less than 50 US cents per day per Nigerian. This means that Nigeria has to get its non-oil economy going too, and resolving the debt problem would be a key step in the right direction.

4. Won’t debt relief for Nigeria reward over-borrowing and fiscal recklessness?

Not in this case. Unlike many indebted poor countries, Nigeria’s debts are not from massive over-borrowing and then wasteful spending. Its $33 billion in external debt is mostly from arrears, penalties, interest, and export credit defaults accrued by military regimes, such as the notorious General Sani Abacha. And since


he came to power in 1999, President Obasanjo has not been particularly fiscally lax; the average budget deficit has been less than 2% of GDP. Indeed, the government ran a fiscal surplus in 2004, has projected another surplus 2005, and it has used the recent spike in oil prices to build reserves.

5. Won’t debt relief for Nigeria cost donors too much money?

Not really. The face value of Nigeria’s debt is a fiction. Most of the debt only exists on paper, since treasuries have likely already written off such debts internally. Even if there is a direct budget hit, the value is likely to be less than 20 cents on the dollar.

6. Isn’t this letting the commercial creditors off the hook?

Possibly, but it’s not relevant. About 9% of the debt is owed to commercial creditors. But if the bilateral accept a steep discount of 67-80%, the Nigerians will be in a much stronger position to negotiate a commercial debt buyback. In any case, this is a small amount, and does not present the same political barrier to reform that the official debt does.

7. Why hasn’t Nigeria gotten debt relief already?

Nigeria should have already received a major debt stock reduction on 'Naples terms' from the Paris Club, but did not because of its World Bank status as 'blend' rather than an IDA-only. This technicality also excluded Nigeria from consideration for HIPC status (although its debt ratios probably were too low to qualify). The buyback proposal has also not yet happened, apparently because of a first mover problem. Creditors seem distracted with other matters and may not want to expend the political capital to seek a Nigerian debt deal. The Nigerian government could make an informal proposal, but is also treading a careful line with parliament, which seems willing to sabotage reform initiatives to score political points.


1.5 STATEMENT OF HYPOTHESISHYPOTHESIS I

1. That the debt relief affected the economic growth of Nigeria.

2. That the external service payment impacted on the economic growth Of Nigeria.

3. Gradual reforms and investment will help bring back a healthy economy for the nation

CHAPTER 2

2.1 Literature review


As of 2001, the most conspicuous fact about Nigeria's economy is that the corruption and mismanagement of its post-colonial governments has prevented the channeling of the country's abundant natural and human resources especially its wealth in crude oil into lasting improvements in infrastructure and the construction of a sound base for self-sustaining economic development. Thus, despite its abundant resources, Nigeria is poorer today than it was at independence in 1960. Still one of the less developed and poorer countries of the world, it has the potential to become a major economic power if the leaders resolve to learn from past mistakes and to harness the country's rich natural and human resources for a productive and sustained effort to promote economic development.

Before the country was colonized by Britain, during the second half of the 19th century, the various nationality groups that currently make up Nigeria were largely an agricultural people. They were food self-sufficient and produced a variety of commodities that were exported overseas. British colonial administrators amalgamated (joined together) the nationality groups in 1914 into a larger economy for exploitation for the benefit of British industrial classes. Under colonial rule, Nigeria remained an agricultural country, exporting raw materials to Britain and importing from it finished goods. Therein lay the origins of the dependence of Nigerian economy on commodity markets of the industrialized Western world for its foreign exchange. While the industrialization of the country was discouraged, rudimentary foundations for a modern Nigerian economy, however, were laid. Colonial economic policies shaped future independent Nigeria's economy, particularly in marketing, labor supply, and investment. The process of colonial rule and formal economic exploitation ended in 1960 but left Nigeria a relatively strong but undiversified economy. Thereafter, Nigerians were poised to remedy this defect and to build a self-sustaining Nigerian economy comprising agricultural, industrial, and service sectors.


From independence in 1960, the state took up the direction and planning of economic growth and development. Education was progressively expanded at all levels to reduce the rate of illiteracy and to provide the requisite skills and labor force for development. Infrastructure of roads and communication networks were constructed far beyond what was inherited from colonial rule. Hydroelectric dams were built to generate electricity. Secondary industries and automobile assembly plants were established to create more employment opportunities. Because of the paucity (small number) of indigenous (native or local) private capital, these activities were undertaken and financed by the government, often with foreign assistance from such countries as Britain and the United States. Foreign oil companies, such as Shell-BP, Exxon-Mobil, Chevron, Agip, and Texaco, operate in partnership with the government in the oil sector, the mainstay of Nigeria's economy. The capital-intensive oil sector provides 95 percent of Nigeria's foreign exchange earnings and about 65 percent of its budgetary revenues.

Because the established, government-owned industries and businesses were often inefficient and corrupt, productivity was low at best. In particular, mismanagement and corruption were endemic (characteristic of) in the successive governments and throughout the nation. However, the gravest problem was caused by the government's decision to stress the industrial sector above all others. Caught in a web of competing demands for scarce resources, the officials took the path of rapid, large-scale industrialization at the expense of the agricultural sector, as well as light manufacturing. They directed the bulk of investment capital towards the promotion of what Western adviser’s captioned "industrial take off." This decision to abandon the known—agriculture—for the unknown—rapid large-scale industrialization—was a fundamental error. The capital and the skill needed for rapid, large-scale industrialization were not sufficiently available. Thus, an unskilled workforce and insufficient funds severely handicapped the industrial sector. Also, Nigeria's neglect of the agricultural sector aggravated


already problematic food shortages. Nigeria had raised enough food to meet domestic needs during its colonial period and in the decade following independence. However, it experienced food shortages in the 1970s and 1980s, which necessitated the importation of food from foreign countries. Among the imports were palm oil (from Malaysia), of which Nigeria had been the world's largest producer and exporter, and rice (from the United States) which was considered less nutritious than Nigerian brown rice. Once Africa's largest poultry producer, Nigeria lost that status because of inefficient corn production and a ban on the importation of corn. Furthermore, it is no longer a major exporter of cocoa, peanuts, and rubber.

Several forces compounded the problems of the agricultural sector. The migration of labor from the rural areas to the urban centers reduced the traditional agricultural labor force. Ecological constraints such as poor soil, erosion, drought, and the absence of agricultural research added to the problem. Other constraints on agricultural production include the use of antiquated technology due to a lack of capital, the low status given to agriculture in the education of the youth, inefficient marketing, an inadequate transportation infrastructure, lack of refrigeration, trade restrictions, under-investment due to unavailability of credit, low prices, and unstable pricing policies which resulted in farmers literally subsidizing urban dwellers and other sectors of the economy. In addition to these handicaps, import constraints limit the availability of many agricultural and food-processing plants. In general, land tenure discourages long-term investment in technology and modern production techniques.

The problem of food shortages and imports was addressed in the late 1970s and early 1980s. In the late 1970s the military government of Olusegun Obasanjo embarked upon "Operation Feed the Nation." His civilian successor, President Shehu Shagari, continued the program as the "Green Revolution." Both programs encouraged Nigerians to grow more food, and urged unemployed urban dwellers to return to the rural areas to grow


food crops. The government provided farmers with fertilizers and loans from the World Bank. The food situation has stabilized, although Nigeria still imports food. A related problem which has not been completely resolved is the pollution of water in the Delta region and Ogoniland by oil companies. Water pollution disrupts farming efforts and has been a source of friction between farmers on one side and the national government and the oil companies on the other.

The oil boom which Nigeria experienced in the 1970s helped the nation to recover rapidly from its civil war and at the same time gave great impetus to the government's program of rapid industrialization. Many manufacturing industries sprang up and the economy experienced a rapid growth of about 8 percent per year that made Nigeria, by 1980, the largest economy in Africa. The growth, however, was not sustained. The new oil wealth did little to reverse widespread poverty and the collapse of even basic infrastructure and social services. The iron and steel industry, started with the help of the Soviet Union, still has not achieved a satisfactory level of production. The oil boom also provoked a shortage of labor in the agricultural sector as members of the rural workforce migrated to jobs in the urban construction boom and a growing informal sector. When the price of crude oil fell and corruption and mismanagement still prevailed at all levels, the economy became severely depressed. The urban unemployment rate rose to 28 percent in 1992, and crime also increased as 31.4 percent of the population lived below the poverty line.

Nigeria's debts mounted as administrators engaged in external borrowing and subsidized food and rice imports and gasoline prices. In the 1980s, economic realities forced Ibrahim Babangida's military regime to negotiate a loan with the World Bank and to reschedule Nigeria's external debts. His regime undertook an economic structural adjustment program (ESAP) to reduce Nigeria's dependence on oil and to create a basis for sustainable non-inflationary growth. However, external


borrowing to shore up the economy created more problems than it alleviated. Much of the borrowed money never reached Nigeria. The portion that reached the country often went towards abandoned or nonperforming public sector projects. External loans escalated Nigeria's debts to US$30 billion during the Babangida regime and consumed external earnings in debt servicing. Similarly, the ESAP prescribed by the International Monetary Fund (IMF) failed to advance the economy, and aggravated the problems of inflation and unemployment. It caused a reduction of state spending on education and health care. Continuing political instability due to Babangida's annulment of the presidential election results in June 1993 and the subsequent authoritarian rule of Sani Abacha (1993 to 1998) made the general economic situation worse. The gross corruption by the Abacha regime and its violations of people's fundamental rights turned Nigeria into an international pariah for 6 years, and thus discouraged foreign investment in the economy. Many industries and manufacturing companies could not obtain raw materials and closed down. Others operated under severe handicaps, including rampant power outages and refined petroleum scarcity. Not enough had been done in the years of plenty to diversify the economy or to sustain the development. Military coups (military overthrow of civilian governments) and political instability worsened the situation.

There was considerable optimism in May 1999 when Oluseguan Obasanjo became Nigeria's civilian president. Many hoped that he would lift Nigeria from the verge of economic bankruptcy. One of Obasanjo's objectives to that purpose was to secure debt relief from Nigeria's foreign creditors. However, these creditors insisted that Nigeria's wealth of untapped resources provided the means for the country to pay off its debts, and refused to cancel its debts of US$30 billion.

In spite of some opposition, Obasanjo embarked upon a program of privatizing some parastatals in order to reduce corruption, promote efficiency, and raise productivity. He introduced an anti-


corruption bill which passed through the legislature, and recovered some of the revenues that had been stolen from the country and deposited in Western banks. The inflation rate, which was estimated at 12.5 percent at the start of his administration, was estimated at 6.6 percent in 2000. Significant exports of liquified natural gas started in 1999, and increased crude oil prices in 2000 provided his administration with additional revenues. So far, however, he has been unable to bring about economic recovery. Industrial capacity utilization appears to have diminished. Worse still, infrastructural facilities, including the National Electric Power Authority (NEPA), continue to be in a state of disrepair. Expected massive inflow of foreign investment, on which the government had hinged its economic revival program, failed to materialize. This is in part because of the high cost of doing business in Nigeria and a lack of transparency in economic decision-making in the country. In addition to these realities, the unemployment situation in the country remains unchanged months after the restoration of civilian government. In fact, it has worsened among university graduates and ranged from 30 to 40 percent in 2000. Political uncertainties due to ethnic and religious conflicts between Muslims and Christians, and constant feuding between the president and the legislators aggravate the economic climate. Widespread armed robbery and a crime syndicate known locally as 419 preys on foreign nationals, further hindering foreign investment and tourism. The country's economy needs the collective efforts of the president and the National Assembly as well as more definite measures to address its ills in order to foster its recovery and growth. Currently, funds available to the government are insufficient to meet the needs of all sectors of the economy at once. External investors can contribute through long-term investment and joint ventures in Nigeria's large national market. Crude oil, the price of which rose sharply recently, remains a very considerable asset. Properly managed, it could provide a solid platform for more sustained Nigerian development and prosperity in the 21st century and beyond.


The rationale for debt relief: One popular efficiency argument for the provision of debt relief is the so called debt overhang. Several studies have examined the existence of a debt overhang in developing countries. Despite a few ambivalent and mixed results, the empirical literature mainly provides support of the debt overhang hypothesis. Deshpande (1997) finds the debt overhang effect to be valid for a small sample of 13 countries in the period from 1971-1991. Pattillo et al. (2002), using panel regressions for 93 developing countries over the period 1970-1999 for a group of 55 low-income countries. Imbs and Katada (1996) provide non-parametric evidence supporting the existence of a debt Laffer curve among developing countries. Their results indicate that debt overhang occurs when the face value of debt reaches 60% of GDP or 2000% of exports.

Since, both theoretical literature and empirical evidence suggest that huge burdens tend to be associated with low investment and low economic growth in low-income countries, debt relief might have a stimulating effect on investment and economic growth. This justification of debt relief seems to be quite convincing at first glance. But the clincher with respect to the resource position of low income countries and therefore to the capacity to pay their obligations at least in the short run and to invest is still the net resource transfer from donors including bilateral and multilateral aid which is of special importance for HIPCs. Since, the reduction of multilateral debt is partly financed by bilateral donors (e.g., through their contributions to multilateral funds) and these contributions usually come from the same political reservoir, namely the donor’s aid budget, there might be a trade-off between debt relief and official development assistance (Birdsall et al., 2002). As Martin (2004) suggests, there is evidence of aid diversion to fund debt relief. However, the empirical study on additionality does not provide strong support for these qualms about it.

Ndikumana (2003) investigating the relationship between debt alleviation programmes and Official Development Assistance (ODA) does not find a direct causal link between the volume of


debt relief or debt forgiveness, respectively and the volume of ODA disbursed, although the total supply of ODA and grants declined in the 1990s. Hernandez and Katada (1996) find a slight crowding-out effect between ODA debt relief and new lending from bilateral resources in a sample of 32 sub-Saharan African countries during the period 1989-1993. While, there is at least no clear-cut empirical evidence of a crowding out of ODA or other sources of finance by debt relief, there is no evidence for additionality either. In the face of very little if not zero additionality, the question turns out to be whether it is better to have debt relief or more conventional forms of aid (Bird and Milne, 2000).

Furthermore, taking into account the net resource transfer given to highly indebted low-income countries, the incentive argument becomes more complex than in the traditional debt overhang theory. If the net resource transfer from donors is positively related to a country’s level of indebtedness, the (dis) incentive effects of initial external debts and debt services to invest and to repay the credits may switch in the opposite direction. Bird and Milne (2003) show that higher levels of outstanding debt are usually associated with higher levels of net resource transfers from official sources.

This fact contradicts the hypothesis of debt overhang: countries that increase their capacity (and willingness) to pay are expected to receive less future resource transfers. These disincentives to introduce promising but costly adjustments do not occur because of the so called debt overhang of the tax on development, which stems from the declining share in aid budgets given to relatively successful developing countries. The researchers found that HIPCs indebtedness did not effect either investments or growth. In their findings the so called debt irrelevance threshold is situated between 50 and 60% of GDP. One explanation is that severely indebted low-income countries benefit most from the resource transfer provided by donors.


Birdsall et al . (2002) suggest that net transfers are larger in high debt and especially in the high multitlateral debt regimes. Countries with high debt ratios and high debts due to multinational institutions have received larger net transfers. This can be interpreted as a debt subsidy rather than a debt tax.

Considering these theoretical and empirical findings high debt burdens seem on the one hand to be detrimental to economic growth in low income countries. On the other hand because of the crucial role of net transfer’s especially through bilateral and multilateral aid and because of ambivalent incentive effects, it is far from sure that debt relief alone can enhance further economic growth in highly indebted poor countries. In the next sub-section, we will present a brief overview of the existing study on the effectiveness of debt relief.

Debt relief and its impact on growth: Any debt relief would be economically irrational if the success was low. Therefore, future policy measures should be based on careful analysis with respect to effectiveness (and efficiency). Is debt a proper instrument to reduce debt overhang, to diminishes poverty to increase growth and to improve governance structures Hernandez and Katada (1996) in analyzing grants and ODA debt forgiveness to 32 Sub-Saharan African countries, reveal that debt relief did not reduce the debt overhang of Sub-Saharan African countries at all but that the nominal debt stock of many countries even doubled between 1984 and 1993 and their arrears increased dramatically. The researchers suggest that it may be the case that it may be the case that the ODA debt which had been forgiven was not being serviced which indicates that debt relief activities have not freed additional resources for the recipient countries. They also find that receiving more debt relief did not increase a country’s import capacity. Some countries that have received less debt relief have been able to expand their imports more than countries that have received debt relief to a substantially larger extent. Since, the written-off debt has not been serviced this shows that debt relief does not free resources.


Because the consensus of opinion in economic literature is that decent institutions and governance structures play a crucial role for economic development and growth, the question remains if debt forgiveness can be expected to contribute to improvement in governance quality in low-income countries, thus creating institutional conditions that are conducive to economic growth. Chauvin and Kraay (2005) show that debt relief in 62 developing countries between 1989 and 2003 did not improve the institutional quality nor lead to rising FDI or higher rates of economic growth. Easterly (1999) finds that highly indebted poor countries became highly indebted mainly because of poor policies not because of external shocks or wars. He estimates a statistically significant association between debt relief and new net borrowing in 40 HIPCs during the period 1989-1997. He concludes that official lenders did not adhere to prudential rules and the IMF and the World Bank provided far more financing to HIPCs over 1979 than to other developing countries of similar income levels, although the policies in many HIPCs have been worse. Given these rather unsatisfying results, the effectiveness of debt relief with respect to governance quality and economic development in low-income countries become highly questionable, because it might cause moral hazard and incentives to delay institutional reforms necessary for growth. Bauer (1991) raises moral hazard and disincentive issues, too claiming that the beneficiaries of debt relief are governments that have not fulfilled their obligations and have been allowed to do so very largely unscathed. Thomas (2001) points out that some HIPCs had no policy responses to poverty, Hiv/Aids or corruption until they were required to do so as conditions for debt relief under the HIPC Initiative. Therefore, he suggests unless debt relief is effectively conditioned on the proper use of funds and the pursuit of structural reforms, it is unlikely to help the poor. Clements et al . (2005) , using data for 55 low-income countries over the period 1970-1999, find that large debt burdens have not seriously hampered public investment in low-income countries and that in most cases debt relief has led to greater public consumption rather than investment that could


have contributed to further economic growth. Taking into account that only a relatively small share of debt is supposed to be channeled into public investment, the impact of debt relief on growth will at best be modest.

To the contrary, Arslanalp and Henry (2005) on the other hand, show that the debt Restructuring and reduction under the Brady Plan led to rising asset prices, increased investment and foster growth in the 16 countries that received Brady deals between 1989 and 1995. According to the researchers, the Brady Plan worked quite well because debt relief was granted to a group of middle-income developing countries where debt overhang genuinely stood in the way of profitable new lending and investment.

It is far from certain that the positive results of the Brady Plan can be used to forcast the potential impact of further debt relief on HIPCs (Arslanalp and Henry, 2005). Consequently, Arslanalp and Henry (2006) do not expect that further debt relief will address the fundamental problem of inadequate economic institutions that impedes investment and growth in the world’s poorest countries. In their opinion, the (indirect) approach of debt relief does little, if any good. Given the overwhelming evidence that debt relief cannot be expected to have notable positive effects on governance quality and economic growth, why do creditor countries actually grant debt forgiveness and what are the main determinants of the allocation of debt relief?

Oil-rich Nigeria has been hobbled by political instability, corruption, inadequate infrastructure, and poor macroeconomic management but in 2008 began pursuing economic reforms. Nigeria's former military rulers failed to diversify the economy away from its overdependence on the capital-intensive oil sector, which provides 95% of foreign exchange earnings and about 80% of budgetary revenues. Following the signing of an IMF stand-by agreement in August 2000, Nigeria received a debt-restructuring deal from the Paris Club and a $1 billion credit from the IMF, both contingents on economic reforms. Nigeria pulled out of its


IMF program in April 2002, after failing to meet spending and exchange rate targets, making it ineligible for additional debt forgiveness from the Paris Club. In November 2005, Abuja won Paris Club approval for a debt-relief deal that eliminated $18 billion of debt in exchange for $12 billion in payments - a total package worth $30 billion of Nigeria's total $37 billion external debt. Since 2008 the government has begun to show the political will to implement the market-oriented reforms urged by the IMF, such as modernizing the banking system, curbing inflation by blocking excessive wage demands, and resolving regional disputes over the distribution of earnings from the oil industry. GDP rose strongly in 2007-10 because of increased oil exports and high global crude prices in 2010. President JONATHAN has pledged to continue the economic reforms of his predecessor with emphasis on infrastructure improvements. Infrastructure is the main impediment to growth and in August 2010 JONATHAN unveiled a power sector blueprint that includes privatization of the state-run electricity generation and distribution facilities. The government also is working toward developing stronger public-private partnerships for roads. Nigeria's financial sector was hurt by the global financial and economic crises and the Central Bank governor has taken measures to strengthen that sector.

Nigeria has a bad history and so there are many people who do not think well of Nigeria. They don't realize that things have changed and are changing - constantly changing. People don't realize the efforts that are being made for greater transparency, lessening corruption. Efforts are being made to reform the economy. Resources are being freed to concentrate on public health, education and the country's basic infrastructure. We're telling this story. We're telling people how Nigeria has been a helpful stabilizing influence in West Africa, with peacekeeping missions in Sierra Leone and Liberia as well as in Sudan. We informed them about the role Nigeria played [to ensure] that democracy continues to thrive in Africa.

2.2 Current Challenges


Despite recent successes, Nigeria faces many challenges in sustaining economic growth and improving its broad development indicators. An historic opportunity exists for Nigerian policymakers to consolidate recent gains from reform and to address outstanding areas of reform in the future.

2.3 Gradual ReformNigeria's economic team, led by Finance Minister Ngozi Okonjo-Iweala enjoys an excellent reputation in the international community. The team produced an encouraging body of work during the last nine months, notably a FY 2004 budget described as "prudent and responsible" by the IMF and a detailed economic reform blueprint, the National Economic Empowerment and Development Strategy (NEEDS). Other positive developments during the past year included: (1) Government efforts to deregulate fuel prices; (2) Nigeria's participation in the Extractive Industry Transparency Initiative (EITI) and commitment to the G8 Anticorruption/Transparency Initiative; (3) Creation of an Economic and Financial Crimes Commission (EFCC); and (4) Development of several governmental offices to better monitor official revenues and expenditures. During 2000 the government's privatization program showed signs of life and real promise with successful turnover to the private sector of state-owned banks, fuel distribution companies, and cement plants. However, the privatization process has slowed somewhat as the government confronts key parastatals such as the state telephone company NITEL and Nigerian Airways. The successful auction of GSM telecommunications licenses in January 2001 has encouraged investment in this vital sector.

2.4 InvestmentsAlthough Nigeria must grapple with its decaying infrastructure and a poor regulatory environment, the country possesses many positive attributes for carefully targeted investment and will expand as both a regional and international market player. Profitable niche markets outside the energy sector, like specialized telecommunication providers have developed under


the government's reform program. There is a growing Nigerian consensus that foreign investment is essential to realizing Nigeria's vast but squandered potential. Companies interested in long-term investment and joint ventures, especially those that use locally available raw materials, will find opportunities in the large national market. However, to improve prospects for success, potential investors must educate themselves extensively on local conditions and business practices, establish a local presence, and choose their partners carefully. The Nigerian Government is keenly aware that sustaining democratic principles, enhancing security for life and property, and rebuilding and maintaining infrastructure are necessary for the country to attract foreign investment.


CHAPTER 3

3.1 RESEARCH TECHINQUEIn order to obtain facts and figure for this research work, questionnaire in the topic were distributed to the respondents in selected firms in Onitsha. Relevant books and journals were consulted in order to air the views of experts and authors in this research topic.

3.2 DATA COLLECTION PROCEDURE15 questionnaires were distributed to the respondents by hand and about and none of the questionnaires were returned by the same method and this provided the database i.e. about 100% response rate. One way analysis of variance (ANOVA) was used to test the hypothesis.

3.3 POPULATIONMy target population is the corporate firms in Onitsha. This is a population of about 30 people 25 questionnaires were answered and collected while 5 were not answered and were returned by the same method. For the purpose of this study, a detailed analysis was carried out with a sample.

Sample The sample used in this study constitutes of about four firms in Onitsha which were randomly selected. The simple random sampling technique was used because every firm or organization has equal chance of being selected for the purpose of the study (Baridam 1994 p.75)


CHAPTER 44.0 DATA ANALYSISThe one way ANOVA is used in testing the hypothesis based on the questionnaire administered.The various questionnaires were logically and rationally selected in other to give a detailed analysis of the topic studied. Three number hypothesis were tested to give more light on the topic.

4.1 PRESENTATION AND INTERPRETATION OF DATA

HYPOTHESIS TESTINGTest of Hypothesis oneH0: That the debt relief did not affected the economic growth of Nigeria.

H1: That the debt relief affected the economic growth of Nigeria.

RESPONDENT

A SA

D SD

U

The pattern of Nigeria’s external debt in the past helped to improve the economy?

1 9 0 8 8 0

External debt has a negative impact on the Nigerian economic growth

2 13 7 5 0 0AKPA JULIET UCHENNA | MSc/2009406045F 30

Debt relief has any impact on the economic growth of the country

3 11 5 5 4 0

"Industrial take off." i.e. the decision to abandon the known—agriculture—for the unknown—rapid large-scale industrialization—was a fundamental error that has led Nigerian into external debt.

4 3 3 9 7 3

The present administration will help in the debt relief of the economy by investing money on projects that will help to raise revenue for the government.

5 6 0 13

6 0

TOTAL 42 15

40

25 3

WORKINGS:Mean: total 42 15 40 25 3 No of respondent 5 5 5 5 5

8.4 3 8 5 0.6

CFM = (42+15+40+25+3)2 = 15,625 =625 5 * 5 25

TSS = 416 + 83 + 364 + 165 + 9 =1,037 -625 = 412

TRSS = (42)2 + (15)2 + (40)2 + (25)2 + (3)2 - 625 5 5 5 5 5 = 352.8 + 45 + 320 + 125 + 1.8 =844.6 – 625 = 219.6TSS – TRSS = 412 – 219.6 = 192.4

Source of variation Degree of freedom

Sum of squares

Mean square F

Among k-1 412 TRSSDF

48


5-1

=4

192.44

= 48.1

9.62

= 5

Within n-k

5*5 – 5

25-5

= 20

TSS–TRSS

412 – 219.6

= 192.4

192.4 20

= 9.62

Five variables as shown in table 1 are employed to test the first hypothesis. The decision rule will be based on 5% degree (or 0.05) of significance. The greater variance has df = 4 and the smaller variance has df = 20, therefore the critical F-value is (2.8661) at .05 significance, since the F-value we obtained by calculation (5) is greater than the critical F-value (2.8661) we conclude that there is a significant difference, in effect we accept the alternate hypothesis that the debt relief affected the economic growth of Nigeria. While we reject the null hypothesis that the debt relief did not affected the economic growth of Nigeria.

Test of hypothesis twoH0: That the external service payment did not impacted on the economic growth of Nigeria.H1: That the external service payment impact on the economic growth of Nigeria.

RESPONDENT

A SA

D SD

U


The politics behind the debt relief will help to salvage the economic problem in the country.

1 6 19

0 0 0

The economic recession that affected the Nigerian economy is because Nigeria is one of the (HIPC) highly indebted poor countries.

2 8 13

4 0 0

The Nigerian economy is most likely to fall into debt again if the resources are not well managed.

3 16 4 5 0 0

The gross corruption by the Abacha regime and its violations of people's fundamental rights turned Nigeria into an international pariah for 6 years, and thus discouraged foreign investment in the economy.

4 9 3 9 4 0

creditors insisted that Nigeria's wealth of untapped resources provided the means for the country to pay off its debts,

5 8 11

6 0 0

TOTAL 47 50

24

4 0

WORKING:Mean: total 47 50 24 4 0 No of respondent 5 5 5 5 5

9.4 10 4.8 0.8 0

CFM = (47+50+24+4+0)2 = 15,625 = 625 5*5 25

TSS = 501+676+158+16+0 = 1,351-625 = 726

TRSS = (47)2 + (50)2 + (24)2 + (4)2 + (0)2

5 5 5 5 5 = 441.8 + 500 + 115.2 + 3.2 + 0 = 1,060.2 – 625 = 435.2 TSS – TRSS = 726 – 435.2 = 290.8


Source of variance

Degree of freedom

Sum of squares

Mean square

F

Among k-15-1= 4

726 TRSSDf435.24= 108.8

108.814.54

= 7.48

Within n-k 5*5-525-5= 20

TSS-TRSS726-435.2=290.8

290.82014.54

Five variables as shown in table 2 are employed to test the second hypothesis. The decision rule will be based on 5% degree (or 0.05) of significance. The greater variance has df = 4 and the smaller variance has df = 20, therefore the critical F-value is (2.8661) at .05 significance, since the F-value we obtained by calculation (7.48) is greater than the critical F-value (2.8661) we conclude that there is a significant difference, in effect we accept the alternate hypothesis that the external service payment impact on the economic growth of Nigeria. While we reject the null hypothesis that the external service payment did not impacted on the economic growth of Nigeria.

Test of hypothesis threeH0: Gradual reforms and investment will not help bring back a healthy economy for the nationH1: Gradual reforms and investment will help bring back a healthy economy for the nation

RESPONDE A S D SD U


NT AExportation of cash crops, together with the exportation of oil, will create jobs, increase revenues for the country, settle external debts and stabilize the Nigerian economy.

1 12

8 0 0 5

Reductions in external debt service could also provide an indirect boost to growth through their effects on public investment.

2 8 13

0 0 4

Debt relief helps the country’s goal of reducing poverty, accelerating the pace of growth and development and provides some boost for the ongoing reforms and millennium development goals. Do you think that is happening in Nigeria

3 7 7 7 0 4

crude oil if Properly managed, could provide a solid platform for more sustained Nigerian development and prosperity in the 21st century and beyond

4 10

11

4 0 0

Gradual reforms and investment will help bring back a healthy economy for the nation

5 12

13

0 0 0

TOTAL 49

52

11

0 13

WORKING:Mean: total 49 52 11 0 13 No of respondent 5 5 5 5 5 = 9.810.4 2.2 0 2.6

CFM: (49+52+11+0+13) = 15,625 = 625 5*5 25 TSS = 501+572+65+0+57 – 625 = 1,195 – 625 = 570

TRSS = (49)2 + (52)2 + (11)2 + (0)2 + (13)2 - 625 5 5 5 5 5 = 480.2 + 540.8 + 24.2 + 0 + 33.8 - 625 = 1,079 – 625 = 454TSS – TRSS = 570 – 454 = 116SOURCE Degree of

freedomSum of squares Mean

squareF


Among k-15-1=4

570 TRSS Df116 4= 29

29 5.8= 5

Within n-k5*5-525-5=20

TSS – TRSS570 – 454= 116

11620= 5.8

Five variables as shown in table 2 are employed to test the second hypothesis. The decision rule will be based on 5% degree (or 0.05) of significance. The greater variance has df = 4 and the smaller variance has df = 20, therefore the critical F-value is (2.8661) at .05 significance, since the F-value we obtained by calculation (5) is greater than the critical F-value (2.8661) we conclude that there is a significant difference, in effect we accept the alternate hypothesis that Gradual reforms and investment will help bring back a healthy economy for the nation. While we reject the null hypothesis that Gradual reforms and investment will not help bring back a healthy economy for the nation


CHAPTER 55.1 CONCLUSIONThis study discussed and investigated whether or not debt relief granted to Nigeria is effective in improving its economic growth and development. We used Nigeria database to assess whether or not our data are consistent with the general thrust of the literature. The result shows that the debt overhang problem of Nigeria had been alleviated by the debt forgiveness but the growth indicator was not positively influenced by the debt service relief which one would expect. We included the usual variables that determine growth and found that only export earnings were positively correlated with growth indicator. The economic relationship of the country with other countries of the world measured by the exchange rate index has a negative and preponderantly insignificant effect on growth in the estimation. This variable did not show the expected sign. The only good thing found is that the country being an oil exporter is able to accumulate more foreign exchange earnings with the debt relief. The resources which were formerly transferred for debt service are now at least saved from capital flight. The answer to the question of the study-if debt relief has brought an improvement to the economic performances of the nation so far is therefore disillusioning. All in all, the findings suggest that the debt relief has not led to high economic growth in Nigeria. This result is similar to what were found in similar studies for some highly indebted countries, which have received debt relief.

One reason for the unsatisfactory results of debt relief is the inappropriate allocation pattern of the gains of debt relief. Governments of the creditor countries must have granted debt relief to Nigeria rather because of political than of economic reasoning. One can confirm a path dependence with respect to the debt relief granted as institutional quality and good governance were not taken into account in the discussion-making processes of the creditor countries. Nevertheless, before the


result is taken for granted, more research is necessary into the governance quality with respect to the allocation pattern of debt relief. It remains to be seen whether or not the policy-makers are mindful of the rationale behind the debt forgiveness. The results strongly support the need for tougher conditionality in future debt forgiveness initiative. Donor countries should monitor the allocation pattern of debt relief maintain the conditionalities and reward sound policies and improvements of governance quality in debtor countries.5.2 FINDINGSFor Africa's second largest economy to realize its full potential, its leaders need to tackle a host of difficult and complex challenges: encouraging broader-based wealth creation, improving basic infrastructure and services, combating corruption, and avoiding crippling sectarian political disputes. Besides more efficient domestic resource mobilization, they also must secure greater external financing and debt relief and attract more foreign investment to sectors other than oil. The entire research revealed so many obstacles that the government sector faces the legacy of mismanagement and decay. OIL PRICE SHOCKNigeria's political well-being will for some years be haunted by the state of its economy, unless immediate corrective measures are taken to arrest and reverse the steep downward slope, given the sheer size of Nigeria's economy, how it fares in this effort will have repercussions far beyond the country's own borders.MIXED RECORD OF REFORMSNigeria has had a mixed experience with market reforms. Lack of national consensus on the need for extensive liberalization made governments often circumspect and hesitant in carrying out tough reform policies. Poor implementation or the failure to observe conditionalities in the adjustment programmes led to deterioration in relations with multilateral financial institutions, particularly the IMF and World Bank, from the early 1990s. Opinion in Nigeria is divided on whether the failure of the reform process to turn the economy around was due to weak implementation or the inappropriateness of the policies, which


included currency devaluation, the abolition of import licensing, dismantling of commodity boards and deregulation of banking.AMBITIOUS PRIVATIZATION PROGRAMMEAs with the broader structural adjustment reforms, however, opinion is sharply divided in Nigeria over the presumed virtues and shortcomings of privatization, and it is unclear whether the administration will be keen to implement a sweeping divestment programme. "I believe in privatization," Mr. Obasanjo told trade unions some days before the 27 February presidential elections, "but I don't believe in privatization as the solution to all our problems."PERVASIVE CORRUPTIONCorruption, however, is not found only at the apex of government, but permeates every level of the state. The culture of kickbacks, bribery and embezzlement has encouraged mismanagement and wasted huge amounts of limited national resources. It also has fuelled political instability by placing a high premium on the control of state office.INFRSASTRUCTURE IN DECAYViews may differ on the value of market-oriented reforms, but everyone agrees that the deterioration of services provided by badly managed and corruption-ridden public enterprises is a major obstacle to economic recovery. Vital state-run facilities, such as the electrical utility and public roads, have been decaying for years, causing billions of dollars in economic losses.SHRINKING INDUSTRIAL JOB MARKETNigeria's failure to diversify its economy stems in part from weaknesses in the nation's small and insular private sector. Few local entrepreneurs have drawn on the international market in ways producers in some other developing countries. Most industries are struggling to survive, with capacity utilization in manufacturing. Industries using local inputs, such as breweries, cement, soap and textiles, tend to perform better than those highly dependent on imports, like radio and vehicle assembly.STIMULATING SMALL SCALE BUSINESSWith hundreds of small companies forced to close in recent years by the deterioration in economic conditions, especially


inadequate credit, rising production costs and diminishing consumer demand, the capacity of the economy to provide full-time employment has diminished. One vital challenge facing the new government, therefore, will be to stimulate new businesses and support the development of the many small enterprises that exist in the informal sector, which accounts for most employment but lacks capital investment.

5.3 RECOMMENDATIONIn view of the research carried out, the following recommendations are made

1. Focus on non-oil growth and employment generation

2. Improve the domestic business climate the report examines various regulatory issues such as the time taken to start and close a business, the effectiveness of property registration, and the ease of obtaining licenses.

3. Expand and maintain investments in infrastructure. Major infrastructural bottlenecks exist in areas such as power, road and rail transportation, and ports. To address the infrastructure bottleneck in Nigeria, any future administration must focus on three main issues.

4. Strengthen domestic institutions. Ultimately, Nigeria’s central challenge is one of building strong domestic institutions to support long term growth and development. When domestic institutions are strong and functional, day-to-day political configurations are less important for private sector investment decisions.

5. Tackle unrest in the Niger Delta. Unrest in the Niger Delta remains an important challenge for policymakers now and in the future. By disrupting total exports of crude, there is less revenue earned for the nation and, consequently, less


financial allocations to their states – the very situation which some militants claim they want to reverse. Kidnappings are also counterproductive, frightening away investments not only from the oil sector but also from other potential sectors of the Nigerian economy. I suggest that a broader long-term economic development program is needed for the region, building on current efforts of the federal government. Such a program must have two components. First, it must have a bottom-up strategy, and provide resources directly to local communities to enable them to own, prioritize, and choose their social sector programs. Second, the program must stress skills training, employment generation and equity participation of local residents in the oil and gas sector. This is essential for long-term economic development and diversification in the Niger Delta region.

REFERENCESPakistan Journal of Social Sciences Year: 2010 | Volume: 7 | Issue: 2 | Page No.: 34-39 DOI: 10.3923/pjssci.2010.34.39

Bresciani, F., G. Feder, D.O. Gilligan, H.G. Jacoby, T.Onchan and J. Quizon. 2002. “Weathering the Storm

Ajayi, S.I. 2001. “What Africa Needs to Do to BenefitFrom Globalization.” Finance and Development,38 (4): 6 - 8.

Debt Management Office 2001. Annual Report and


http://dx.doi.org/10.3923/pjssci.2010.34.39

Statement of Accounts for the year Ended 2001.Abuja: Debt Management Office.

Obadan, M. I. 1998. “Managing the Nigerian Economyinto the Next Millennium: Strategies and Policies.”Journal of Economic Management, 5(1): 1 - 38.

Obadan, M. I. 2001. “Africa and the Challenge ofGlobalization: How Should the Continent Respond?”Nigerian Journal of Economic and FinancialReview, 6(2): 35-42.

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Central Bank of Nigeria, (2006a), “First Quarter Economic Report 2006”, Abuja: Central Bank ofNigeria

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Okogu, Bright, E. (1999), “Understanding Nigeria’s Economic Reform Experience: An Application of Negotiation Theory”, in V. Kremenyuk and G. Sjostedt (eds.), International Economic Negotiation: Models versus Reality, Cheltenham, UK: Edward ElgarNational Planning Commission (2004), the National Economic Empowerment and DevelopmentStrategy (NEEDS), Abuja: National Planning Commission

Tunde Obadina Africa Recovery, Vol.13#1 (June 1999), page 8

Globalization and Economic Development:


The Nigerian Experience Emmanuel Chike Onwuka1 and Agatha Eguavoen2 1. Department of Economics, 2. Department of Sociology,Ambrose Alli University, Ekpoma, Nigeria E-mail: <[email protected]> [email protected]

Nigeria’s Economic Reforms Progress and Challenges Ngozi Okonjo-Iweala Distinguished Fellow Global Economy and Development Program The Brookings InstitutionPhilip Osafo-Kwaako Visiting Research Associate Global Economy and Development Program The Brookings Institution

QUESTIONNIARE

Please tick appropriately from any of the alternative answers or supply information you find necessary


mailto:[email protected]

NOTE: A (agree) SA (strongly agree) D (disagree) SD(strongly disagree) U (undecided/not sure)

Name of company _____________________________________Location ____________________________________________Designation __________________________________________

s/n Questions A SA D SD U1 The pattern of Nigeria’s external debt in the past

helped to improve the economy2 External debt has a negative impact on the Nigerian

economic growth3 Debt relief has any impact on the economic growth of

the country

4 The politics behind the debt relief will help to salvage the economic problem in the country

5 The economic recession that affected the Nigerian economy is because Nigeria is one of the (HIPC) highly indebted poor countries.

6 The Nigerian economy is most likely to fall into debt again if the resources are not well managed.

7 Exportation of cash crops, together with the exportation of oil, will create jobs, increase revenues for the country, settle external debts and stabilize the Nigerian economy.

8 Reductions in external debt service could also provide an indirect boost to growth through their effects on public investment.

9 Debt relief helps the country’s goal of reducing poverty, accelerating the pace of growth and development and provides some boost for the ongoing reforms and millennium development goals. Do you think that is happening in Nigeria

10 "industrial take off." i.e. the decision to abandon the known—agriculture—for the unknown—rapid large-scale industrialization—was a fundamental error that has led Nigerian into external debt

11 The present administration will help in the debt relief of the economy by investing money on projects that will help to raise revenue for the government.

12 The gross corruption by the Abacha regime and its violations of people's fundamental rights turned Nigeria into an international pariah for 6 years, and thus discouraged foreign investment in the economy.

13 creditors insisted that Nigeria's wealth of untapped


resources provided the means for the country to pay off its debts,

14 crude oil if Properly managed, could provide a solid platform for more sustained Nigerian development and prosperity in the 21st century and beyond

15 Gradual reforms and investment will help bring back a healthy economy for the nation?


Impact of Debt Relief on Nigerian Economy

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