EVALUATE THE LEVEL OF DEFICIT OF INFRASTRUCTURAL DEVELOPMENT IN NIGERIA RAILWAY CORPORATION AND THE ADVANTAGES OF FOREIGN AID AND A CALL FOR MORE ASSISTANCE TO NIGERIA
CHAPTER ONE
INTRODUCTION
- Background to the Study
In international relations, aid (also known as international aid, overseas aid, foreign aid or foreign assistance) is from the perspective of governments – a voluntary transfer of resources from one country to another. Aid may serve one or more functions: it may be given as a signal of diplomatic approval, or to strengthen a militaryally, to reward a government for behaviour desired by the donor, to extend the donor’s cultural influence, to provide infrastructure needed by the donor for resource extraction from the recipient country, or to gain other kinds of commercial access. Countries may provide aid for further diplomatic reasons. Humanitarian and altruistic purposes are at least partly responsible for the giving of aid. Aid may be given by individuals, private organizations, or governments. Standards delimiting exactly the types of transfers considered “aid” vary from country to country. For example, the United States government discontinued the reporting of military aid as part of its foreign aid figures in 1958. The most widely used measure of aid is “Official Development Assistance” (ODA).
The type of aid given may be classified according to various factors, including its intended purpose, the terms or conditions (if any) under which it is given, its source, and its level of urgency.Official aid may be classified by types according to its intended purpose. Military aid is material or logistical assistance given to strengthen the military capabilities of an ally country.Humanitarian aid is material or logistical assistance provided for humanitarian purposes, or typically in response to humanitarian crises such as a natural disaster or a man-made disaster. Aid can also be classified according to the terms agreed upon by the donor and receiving countries. In this classification, aid can be a gift, a grant, a low or no interest loan, or a combination of these. The terms of foreign aid are oftentimes influenced by the motives of the giver: a sign of diplomatic approval, to reward a government for behaviour desired by the donor, to extend the donor’s cultural influence, to enhance infrastructure needed by the donor for the extraction of resources from the recipient country, or to gain other kinds of commercial access.Aid can also be classified according to its source. While government aid is generally called foreign aid, aid that originates in institutions of a religious nature is often termed faith-based foreign aid. Aid from various sources can reach recipients through bilateral or multilateral delivery systems. “Bilateral” refers to government to government transfers. “Multilateral” institutions, such as the World Bank or UNICEF, pool aid from one or more sources and disperse it among many recipients.International aid in the form of gifts by individuals or businesses (aka, “private giving”) are generally administered by charities or philanthropic organizations who batch them and then channel these to the recipient country.
Aid may be also classified based on urgency into emergency aid and development aid. Emergency aid is rapid assistance given to a people in immediate distress by individuals, organizations, or governments to relieve suffering, during and after man-made emergencies (like wars) and natural disasters. The term often carries an international connotation, but this is not always the case. It is often distinguished from development aid by being focused on relieving suffering caused by natural disaster or conflict, rather than removing the root causes of poverty or vulnerability. Development aid is aid given to support development in general which can be economic development or social development in developing countries. It is distinguished from humanitarian aid as being aimed at alleviating poverty in the long term, rather than alleviating suffering in the short term.
Foreign Aid from International Donor is aimed at enhancing economic progress in the recipient country. It is the belief of many economists that there is a positive relationship between aid and growth. This is the main reason why most aids are tied to specific projects or targets. The United States currently provides $0.15 in foreign assistance for every $100 in gross national income, as against an average of more than $0.80 in the Scandinavian countries. About 20 percent of U.S. foreign aid goes to about four countries: Egypt, Pakistan, Jordan, and Colombia. American assistance to Africa in 2003 exclusive of that related to emergencies, military assistance, debt service, and research amounted to about $1 billion (Werlin, 2005). However, According to recent statistics, Nigeria as one of the beneficiaries of foreign aid in Africa has endured a lot of economic ups and downs in recent times. For instance, Nigerian economy slowed down in 2012. Despite the robust economic growth, unemployment rate in the country yet increased from 21 per cent in 2010 to 24 per cent in 2011. Also, poverty remains widespread, with a headcount that declined marginally from 48 per cent in 2004 to 46 per cent in 2010. In addition, during the first, second and third quarters of 2012, Nigeria‘s exports increased while its imports decreased, resulting in a 59 per cent improvement in its trade balance and foreign direct investment (FDI) of 24 per cent relative to 2011. Official Development Assistance (ODA) decreased from USD 2.0 billion in 2010 to USD 1.8 billion in 2011. Total FDI in 2011 was USD 8.9 billion, representing 20 per cent of the total FDI to Africa in 2011 (World Bank, 2013). HThis paper has attempted infrastructural development and its effect on economic growth: The Nigerian perspective. In Nigeria under investment in infrastructural development could be a bane to her vision of becoming a top 20 economy by the year 2020. Despite her economic growth over the years, this has not translated to economic development due to lack of infrastructure, high poverty rate, unemployment etc. The methodology adopted for this paper is a simple model of an economy with foreign investment and public infrastructure with a diversified equilibrium where the model is used to examine the impact of increased labor on production of private goods, public infrastructure, foreign investment, welfare and complete specialization. The paper went on further to advice the nation on measures to take to accelerate economic development, as economic growth alone is not enough. owever, these investments are mostly in the oil and gas sector
Nigeria is endowed with a total land mass of 351,649 sq. miles (910,771 sq. km) with a total population of about 170 million (Sanusi, 2014). The movement of people and goods is currently done inefficiently through road transportation, but in contrast, efficient rail transport could provide an efficient distribution that is both cost effective and assists in achieving Nigeria’s economic development initiatives. Jaekel, (1997) argues that “an efficient NRC will act as an aid to the development of other sectors such as agriculture, mineral resources, tourism and manufacturing, through the effective transportation of people and goods throughout the country to and from the seaports, linking companies with the outside world”. Odeleye (2010), in concluding a research paper, noted that, “today, Nigeria’s economy ultimately relies on road mode for sustenance of its economic activities.” Ironically, the road mode is largely constrained due to its limited carrying capacity relative to rail transport. According to (Nworji and Oluwalaiye, 2012), the total collapse of the roadway infrastructure, due to the lack of infrastructure investment, poor maintenance and over use of the existing roads, will further restrain the transportation boost required for speedy economic growth. In order for Nigeria to join the league of world developed economies by 2020, as per its projected national plan, it requires a mode of transport, like rail, which not only has a capacity advantage over other land modes, but also enjoys the advantages of energy efficiency as cost-effectiveness. Therefore, a rejuvenation of the existing railway structure and construction of a new rail network, will act as a spring board for sustainable economic development and growth in the country (Oni, 2010).
Essentially, Nigeria’s problem of underdevelopment has, for a long time, been connected to the lack of infrastructural facilities, wrong policy frameworks, hostile environment, backwardness in technology, problem of unemployment and over-dependence on imported products amongst other constraints. If the economic postulation of direct or positive relationship between foreign aid and economic growth is to be considered, then, the dwindling foreign assistance to the country recently might have contributed to the economic problem confronting Nigerian economy. According to Bashir (2013) the benefits and access to foreign aid by most developing countries is largely affected by fiscal behaviours of government institutions in these countries. Over the years fiscal policy has been a major policy used side by side monetary policy to maintain economic stability, increase output and promote overall economic development of a country. However, attention of researchers in recent times have been more driven towards fiscal policy and one of the reasons for this is the general consensus that monetary policy only have transitory effect on output (Tobins 1965, Sidrauski 2003, Papademous 2008).
Aid may serve one or more functions: it may be given as a signal of diplomatic approval, or to strengthen a military ally, to reward a government for behaviour desired by the donor, to extend the donor’s cultural influence, to provide infrastructure needed by the donor for resource extraction from the recipient country, or to gain other kinds of commercial access. Countries may provide aid for further diplomatic reasons. Humanitarian and altruistic purposes are at least partly responsible for the giving of aid. Aid may be given by individuals, private organizations, or governments. Standards delimiting exactly the types of transfers considered “aid” vary from country to country. For example, the United States government discontinued the reporting of military aid as part of its foreign aid figures in 1958 (Carol Lancaster, 1972). The most widely used measure of aid is “Official Development Assistance” (ODA).The Development Assistance Committee of the Organization for Economic Co-operation and Development defines its aid measure, Official Development Assistance (ODA), as follows: “ODA consists of flows to developing countries and multilateral institutions provided by official agencies, including state and local governments, or by their executive agencies, each transaction of which meets the following test: a) it is administered with the promotion of the economic development and welfare of developing countries as its main objective, and b) it is concessional in character and contains a grant element of at least 25% (calculated at a rate of discount of 10%).(OECD, The DAC in Dates, 2006. Section, “1972”).Foreign aid has increased since 1950’s and 1960’s (Isse 129). The notion that foreign aid increases economic performance and generates economic growth is based on Chenery and Strout’s Dual Gap Model (Chenery and Strout1966). They also claimed that foreign aid promotes development by adding to domestic savings as well as to foreign exchange availability, this helping to close either the savings-investment gap or the export-import gap (Chenery and Strout1966).Lancaster (1972) defines foreign aid as “a voluntary transfer of public resources, from a government to another independent government, to an NGO, or to an international organization (such as the World Bank or the UN Development Program) with at least a 25 percent grant element, one goal of which is to better the human condition in the country receiving the aid. Lancaster (1972) also states that for much of the period of her study (World War Two to the present) “foreign aid was used for four main purposes: diplomatic (including military/security and political interests abroad), developmental, humanitarian relief and commercial. (Chenery and Strout1966).
Development aid is given by governments through individual countries’ international aid agencies and through multilateral institutions such as the World Bank, and by individuals through development charities. For donor nations, development aid also has strategic value; improved living conditions can positively effects global security and economic growth. Official Development Assistance (ODA) is a commonly used measure of developmental aid.Aid given is generally intended for use by a specific end. From this perspective it may be called:
Project aid: Aid given for a specific purpose; e.g. building materials for a new school.Programme aid: Aid given for a specific sector; e.g. funding of the education sector of a country. Budget support: A form of Programme Aid that is directly channelled into the financial system of the recipient country.Sector-wide Approaches (SWAPs): A combination of Project aid and Programme aid/Budget Support; e.g. support for the education sector in a country will include both funding of education projects (like school buildings) and provide funds to maintain them (like school books).Technical assistance: Aid involving highly educated or trained personnel, such as doctors, who are moved into a developing country to assist with a program of development. Can be both programme and project aid.Food aid: Food is given to countries in urgent need of food supplies, especially if they have just experienced a natural disaster. Food aid can be provided by importing food from the donor, buying food locally, or providing cash.International research, such as research that used for the green revolution or vaccines.Official development assistance (ODA) is a term coined by the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD) to measure aid. ODA refers to aid from national governments for promoting economic development and welfare in low and middle income countries. ODA can be bilateral or multilateral. This aid is given as either grants, where no repayment is required, or as concessional loans, where interest rates are lower than market rates.Loan repayments to multilateral institutions are pooled and redistributed as new loans. Additionally, debt relief, partial or total cancellation of loan repayments, is often added to total aid numbers even though it is not an actual transfer of funds. It is compiled by the Development Assistance Committee. The United Nations, the World Bank, and many scholars use the DAC’s ODA figure as their main aid figure because it is easily available and reasonably consistently calculated over time and between countries. The DAC classifies aid in three categories:Official Development Assistance (ODA): Development aid provided to developing countries (on the “Part I” list) and international organizations with the clear aim of economic development.Official Aid (OD): Development aid provided to developed countries (on the “Part II” list).Other Official Flows (OOF): Aid which does not fall into the other two categories, either because it is not aimed at development, or it consists of more than 75% loan (rather than grant). Official Development (OECD, 2009) Aid is often pledged at one point in time, but disbursements (financial transfers) might not arrive until later.In 2009, South Korea became the first major recipient of ODA from the OECD to turn into a major donor. The country now provides over $1 billion in aid annually.
Development as a term means a lot to many people across the globe. From the daily interactions and aspirations of people on the streets to debates and government policies at various levels, to the numerous discussions, agencies and assemblies of the United Nations dedicated to addressing the question of development globally. Since the emergence of nation states, the discussion on development has shifted from a general age overview of development to debates, discussions and measurement of development on national, regional and global basis. Development today is hinged on several indicators which include education, health, infrastructure, trade, economy and growth, agricultural and rural development, information and technology, transport, energy and mining, political stability and so on. Foreign aid intervention has been seen and described as a panacea to the plight of the developing world by the developed countries, because the United Nation’s efforts which are basically directed towards a vast array of works that touch every aspect of people’s lives around the world and these are grouped into two main areas namely, facilitating economic regulation and the economic and infrastructural development of the less develop countries (Hassan & Fatai 2013). That is why the stated goal of foreign aid is a rather large one: to end extreme world poverty and achieve infrastructural and several other developments in poor countries. Nigeria as a country, has struggled with development since independence in 1960. However, the situation of the country as described by (Oshewolo, 2011) is a ‘bewildering paradox. More than half of the age of the country was governed under military dictatorship until the country returned to democracy in 1999. He noted that the pervasive poverty situation in Nigeria clearly betrays the high hopes at independence that the country would emerge as a major industrial haven in the world. The high hopes were hinged on the availability of abundant natural and material resources in the country.
While Nigeria as a country has benefitted from various schemes of foreign aid, some countries that have benefited from foreign assistance at one time or the other have grown such that they have become aid donors (South Korea, and China etcetera); however, Nigeria has remained backward. Oshewolo (2011) quoted in Chukwuemeka (1999) who observe that the country is blessed with natural and human resources, but in the first four decades of its independence, the potentials remained largely untapped and even mismanaged. In other words, despite the huge human and mineral resources that Nigeria is endowed with, the country still wallows in poverty, poor infrastructural development in the area that are more critically essential to the general populace, like the power, Road and Rail ways and underdevelopment that warrant more penchants for foreign aid intervention. Against this background, a research work of this nature to evaluate the impact of foreign aid on infrastructural development in Nigeria is considered inevitable at this time. For the purpose of time and resources, the researcher will limit this research to look at foreign aid on infrastructural development in the Area of Nigerian Railways Corporation. This research intends to analyzed the effects of foreign aid on infrastructural development in Nigeria within the limited area which is developing Nigeria through Investments in Rail Transport