EFFECTS OF INFRASTRUCTURE ON ECONOMIC GROWTH IN NIGERIA

TABLE OF CONTENTS

Title Page                                                                 i

Certification                                                             ii

Dedication                                                               iii

Acknowledgements                                                  iv

Abstracts                                                                 v

Table of contents                                                     vi-ix

CHAPTER ONE

1.0   Introduction                                                   

1.1   Background Information                                  1-3

1.2   The Ube Program                                             3-5

1.3   Linkage between Infrastructures in Nigeria

and Mdgs                                                         5-8

1.4   Infrastructure Development and Economic

Growth in Nigeria                                             8-13

1.5   Statement of the Problem                                13-16

1.6   Research Questions                                         16-17

1.7a Objectives of the Study                                    17

1.7b Specific Objectives                                           17-18

1.8   Research Hypothesis                                               18

1.9   Justification of the Study                                 18-19

1.10 Scope of the Study                                           20

CHAPTER TWO

2.0      Literature Review and Theoretical Framework         21

2.1   Theoretical Review                                           21-22

2.2   Concept of Infrastructure                                 22-25

2.3   Nature and Type of Infrastructure in Nigeria    25-29

2.4   Regulation and Competition of Infrastructure

in Nigeria Economy                                          29-30

2.5   Infrastructure Appraisal and Evaluation for an

Economic Development                                   31-33

2.6   Funding and Financing of Infrastructure

Development for Nigerian economy                  33-34

2.7   Government Expenditure and Economic Growth

in Nigeria, 1970-2008                                      34-39

2.8   Review of Nigeria Budgets (1979-2003)            39

2.9   Policy Reforms in Nigeria                                 40-42

2.9.1        Modeling the Link Between Infrastructure,

        Economic Growth and Development                        42-45

2.9.2        Problems of Infrastructural Development in

Nigeria                                                             45-47

2.9.3        Infrastructure Development in Nigeria,

Way Forward                                                    47-48

2.9.4        Broad Based Economic Growth with Equity    48-50

CHAPTER THREE

METHODOLOGY                                                    

3.0   An Overview of Nigeria Economy                      51-55

3.1   Method of Data Collection                                       55

3.2   Source and Nature of Data                               55

3.3   Analytical Techniques                                      56

CHAPTER FOUR

4.0   Empirical Analysis of Regression                     57

4.1   Variable Identification                                      57-58

4.2   Model Specification                                         58-59

4.3   Presentation of Regression Result                    59

4.4   Interpretation and Discussion                                 59-61

4.5   Research Findings and Implication                 61

CHAPTER FIVE

Summary, Conclusion and Recommendation     

5.1   Summary                                                         62-63

5.2   Conclusion                                                      63-64

5.3   Recommendations                                           64-65

References                                                              66-69

Appendix                                                                 70-71                      

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND INFORMATION

Nigerian government has made significant efforts in recent years, not only in the fair distribution of such facilities to different parts of the country but also to increase the quality and improve the quality of such facilities.

The development of infrastructural facilities today is the responsibility of the Federal and state government. However, it should be noted, that until recently most of the infrastructure facilities developed in the country were established, staffed and controlled by religious organization, private initative and other voluntary agencies such as local communities, individual and local councils as pointed out by Stolper (1982).

The fourth National Development plan of Nigeria (1981-1985) was made to address the inadequacies and imbalance in infrastructural development and it had a projected capital expenditure of about N82.2 billion, 86% of this was to be spend on public sectors especially in the development of various infrastructures. This was the first time the local government participated in their capacities as the third tier of the government created by the constitution.  

Regarding education as essential for the development of high quality manpower as been recognized in the level of public expenditure on such institution like primary, secondary and tertiary institutions in Nigeria and in the number of scholarships to Nigerians on education both at home and abroad. The literacy rate is about 20 percent in urban areas and 2 percent in the rural areas Kesside (2003).

It is the primary objective of the Federal and State government to reduce the rate of illiteracy; hence there is a rapid increase in Primary, Secondary and University enrolment to a substantially increased level. Though the enrolment in other educational institutions has shown a similar trend. The government made education free especially primary education throughout the country. The Universal Basic Education (UBE) has now made education compulsory up to Junior Secondary Level.

1.2   THE UBE PROGRAM

Curriculum renovation that is realistic and child centered, that is quick in rejuvenating and revitalizing hope and passion for acquisition of broad based knowledge that is worthwhile in a learner should be the focus of the structure. Methodology that will aid self discovery and problem-solving ability which allow learners the opportunity for creativity should be entrenched in the curriculum. Quality and relevance are the two features that curriculum development in Nigeria now needs. Equally, changes and innovations of a school system of our globalized environment must involve the emergence of elastic curricula models and educational policies which emphasize interdisciplinary courses, open-ended systems, intergenerational and inter-professional relationships, multi-culturalism and sustainability. The need for a paradigm shift from theoretical and paper certification to a practical application of knowledge necessary for future employment and skills development for self-employment should be the cardinal objectives of Nigerian education. Curriculum developers should also adopt the interdisciplinary approach to curriculum especially at the primary and junior secondary school levels. Emphasis should be on the changing needs of the society through enhance on the understanding and application of new technologies. Finally, to teach a new curriculum at all levels of education, the teachers and instructors currently employed by the Government have to receive further training.

According to Ukpong (1979), inspite of the growth rate in electricity production and consumption in Nigeria, the per capital consumption of electricity is among the lowest in Africa. In term of per capital consumption 107HWHK for developing countries per capital consumption of less than 40KWH etc.

The role of infrastructure and its effects as an agent of growth and development is not a new phenomenon’s is a very important parameter for economic growth that no one can deny. Development of infrastructure implies a complete modernization of the economy as a while which leads to substantially increased output and productivity. It entails conversion from peasant farming society to an industrial nation; it is a way of change in the living standard, life expectancy, reduction in infant mortality. It is perhaps for these reasons that there is no unanimity as to the criteria for measures development of infrastructure.

1.3   LINKAGE BETWEEN INFRASTRUCTURES INNIGERIA AND MDGS.

The millennium development Goals (MDGS) are a series of time-bound development targets aimed at addressing the challenge of under-development. The MDGS address issues on infrastructural facilities and global partnerships for development, agreed by the international community to be achieved by year 2015. This is perhaps the most significant step in the war against poverty.

Attainment of the Millennium Development Goals (MDGS) is largely dependent on the availability of functional infrastructure. Decentralization is an opportunity that can be used to realize the MDGS especially at the lower levels of the society and Government. Decentralization, which is about central government increasingly devolving certain jurisdictional functions to local authorities, has diverse impact. A major impact area that can have direct benefit to communities in the provision of infrastructure. This is because economic growth is linked to poverty reduction and improved access to infrastructural services induces economic growth in a cyclical manner. Therefore, carefully thought out mechanism that ensures functional nexus of infrastructural services and economic activities are rudimentary ingredients for liveable human settlements.

The suitability and sustainability of human settlement for economic development is strongly linked to the level of serviceability and liveability. Serviceability connotes the quality of being able to provide good services and the extent to which these services are adequately available in an area. Liveability, refers to overcoming poverty, providing basic public services, maintaining minimum level of environmental standards, adequate housing, security and safe environment, access to amenity and learning institutions. The issue of settlement service ability and liveability is infrastructure-based, where water services function, as a basic amenity.

Water is the worlds most important resource and a necessity of life. Adequate access to social welfare services, such as medical services, education, portable water supply, roads, electricity e.t.c. are strong indices of development (Adeyemo, 1989). Portable water supply is both a function of adequate and accessible functional water infrastructure.

Water infrastructure stands out of all infrastructures (Physical and social) as critical to the attainment of the MDGS. This is because beside goal number 7 and target 10 which are specifically water based, issues addressed by goal 1-7 in general directly or indirectly relate to water availability. Meeting the water needs of African countries would be many steps closer to attaining the overall MDGS (AWDR 2006).

The United Nation’s estimates 1.1 billion people lacking access to safe drinking water, is compounded by the record of 2.4 billion people without access to adequate sanction (Cunningham, 2004). African countries have embraced the decentralization as a mark of good governance, given that it is an antidote to poverty perpetuation. Nigeria and Ethiopia are the most populous countries in Africa and operates decentralized systems.

In 2004 for example, safe water coverage in Nigeria was only 48 percent (FGN, 2004). Ironically, water is very important for socio-economic development, this is in addition to portable drinking water supply being a basic human need and sufficient water for good hygiene is a prerequisite for public health (World Bank, 1994) when access to water is disrupted, people therefore face acute human security risks transmitted through poor health and the disruption of livelihood (UNDP, 2006).

In view of the foregoing, it is obvious that water front is where the war of poverty and by implication attainment of the MDGS would be won or lost. The contention is that infrastructure, especially water infrastructure is critical if MDGS are to be attained.

1.4   INFRASTRUCTURE DEVELOPMENT AND ECONOMIC

GROWTH IN NIGERIA

The role of infrastructure as an agent of development is not a new phenomenon. A wide range of evidence on the importance of infrastructure on an economy, drawing the conclusion that infrastructure contributes to economic growth both through supply and demand channels by reducing cost of production, contributing to the diversification of the economy and providing access to the application of the modern technology, raising the economic return to labour (by reducing worker time in non-productive activities and improving health with skill). (Smith 1776).

Furthermore, infrastructure raises the quality of life by creating amenities, providing consumption goods (Transport and Communication services) and contributing to Micro economic stability (Kesside 1993).

World Bank Report (2003), examined that ICT has definitely influenced, “Capital deepening”, (Increased the intensity of Physical capital per unit labour) and shown additional gains in assisting more efficient work organization outside of ICT sector, where productivity gain have been significant both inside and outside of ICT sector, it is proposed that this is the result of policy and institution setting conducive to innovation and adoption of new technologies. The report further stated that “Sound infrastructural development policy setting is a key ingredient for sustainable long term growth”. Investment in human, physical and knowledge capital is identified as the key driver of economic growth and macro economic policies (including price stability, inflation control, tax structure system, facilitating of international trade growth, pro-competitive regulation facilitating the entry of innovation firm, facilitating the skill and education of the existing and potential work force, encouraging R and D (Research and Development) removing barrier to network access) are found to facilitate investment.

As observed by the United Nation, the provision of adequate amount of electric power is important in the establishment and maintenance of a modern economy and ensuring its growth.

Ukpong (1979) stated that the disparities in the level of development between the different states and geographical regions of Nigeria are attributed in part to the uneven distribution of such facilities as education, health, transport, power and Communication, he stated further that Nigeria has made significant efforts in recent years, not only in the fair distribution of such facilities to the different parts of the country but also increase the quality and improve the quality of such facilities.

GOOD GOVERNANCE, TRANSPARENCY, ACCOUNTABILITY, SOCIAL RESPONSIBILITY AND INFRASTRUCTURE DEVELOPMENT IN NIGERIA.

Corruption is generally acknowledged as having adversely affected previous infrastructural development effort in Nigeria. Corruption is one of the aspects of bad governance. The anti-corruption crusade of the past and present administration is expected to have favorable implication on infrastructural development and poverty alleviation, if successfully carried out. The communiqué earlier referred to as one of the imperatives for success of the infrastructure development, “Ensuring that corruption and other sharp practices at any stage of the programme are not condoled but severely punished”.

The manifestation and problem associated with corruption have various dimensions. Among these are project substitution, plan distortion, mis-representation of project finances, diversion of resources for usage to which were not meant for, conversion of public funds to private use etc. The effect of corruption is both direct and indirect on infrastructure shortage and increase in poverty. On the other hand, the indirect effect follows from the reduction or misapplication of resources which paralyses growth rate and growth potential. When growth rate are lowered, there will be no output and income to be redistributed, so poverty will escalate. Direct effect is that the poor in the society are denied resources and access to required life support infrastructural facilities that could have been provided through judicious application of siphoned or diverted resources.(Todaro, 2007).

A related problem is that lack of social responsibility manifest in vandalization or willful destruction of facilities that benefit the poor. It is expected that the bottom up approach identification with attendant association of beneficiaries with the project, will minimize vanadilization. But beyond that, it is crucially necessary that efforts and resources are committed to security of provisions.

Finally, in order to ensure transparency and accountability in the management of poverty reduction and infrastructure development programmes and projects, all the stakeholders should be involved in the monitoring and evaluation of such projects. To this end, there is the need for agreed infrastructure development and poverty reduction agenda that can be used by all stakeholders’ i.e. Federal government, state government, local government, NGO’s and the international donor community.

Nevertheless, it is generally agreed that development of infrastructure is multi-dimensional in nature having political and socio-economic implications.

1.5      STATEMENT OF THE PROBLEM

The state of the Nigerian roads has not been satisfactory despite its enormous potentials for growth and development. The poor transport facilities and infrastructure have severally delayed economic development, and this has weakened the transport sector. However, only purposeful and realistic planning can lay the solid foundation for sustained economic greatness of the Nigerian roads which will form the base for the coming generation to build upon.

The provision of roads and transportation facilities are fundamentally important to the development of Nigeria as well as the well-being of her citizens (Minton, 2000).

Nigerian roads needs urgent attentions, considering that an average of 50 people die everyday by road accidents, as claimed by a survey (Minton 2000).

Only 80% of federal roads in Nigeria are partially paved, out of the nation’s over 900,000km2 landmass (World Bank report 2004). Technically, over N200b will be required to construct and maintain it. The entire roads in the country are just a bit less than 200,000km2 of federal state and local roads of which only about 50,000km are paved. Considering president Obasanjo’s inaugural address of May 1999: “Transport is the lifeline of the economy and social interactions. An efficient transport system implies stagnation in all sectors”. The federal ministry of works is charged with the responsibility for the planning, design, construction and maintenance of the Federal Highways. The 36 states ministries of works and transport have similar responsibility for the state roads while the 774 local government works departments have the responsibilities for local roads (Adeyemo 1999). Simply put, they have failed. The works and the workings of the works ministry are no longer workable. As at date, the ministry has committed the total sum of over N360 billion during the period from May 1999 up to July 2003, however, they have only a very scantly in road maintenance and construction to show for it. The drafted budget of 2002 provides only N5.1 billion for maintenance works only compared to the N38.6 billion provided for rehabilitation. This only shows the extent of our understanding in differentiating between rehabilitation and maintenance. We are only interested in design and construction of roads network, neglecting the normal simple international procedures of planning, design, construction, maintenance and rehabilitation (PDCMR) Federal ministry of works (2003).

It is obvious that “Numbers of accidents on the particular road, political interest and concern and economic benefits form proposals submitted from stakeholders serves as characteristics of pavement condition used in evaluating pavement rehabilitation to Nigerian roads.

With a 23, 000km of federal roads network, a workable senerio is the tasking of about 60 small size specialized company to maintain about 400km of federal roads each. This will only involve just 2 contractors per states with the total cost per states with the total cost per year less than N160m.(Eberts & McMillan 1996) there is urgent need to preach breakage from past wastefulness, negligence, deceit and bad policy as regard the road network in the country. However, the state of infrastructure in the country is alarming and calls for urgent intervention of the government, private initiatives, public-private partnership etc. so as to make infrastructure perform its role of nation-building and development.

1.6      RESEARCH QUESTIONS

The importance of this study is to show the role of infrastructure and its effects on economic growth of Nigeria. To achieve these purposes, the following research questions are raised and answered, these research questions includes:

1.          What are the effects of infrastructural development on the overall economy of Nigeria?

2.          How can reliable infrastructure development plan be achieved?

3.          How can Nigeria improve the existing infrastructure for the overall growth of her economy?

4.          What are the benefits of building additional infrastructure to the existing ones?

1.7a.OBJECTIVES OF THE STUDY

The broad or major objective of this study is to examine the role of infrastructure and its effects on the economic growth of Nigeria likewise to examine the rate of overall growth in the economy.

1.7b.SPECIFIC OBJECTIVES

i.            To determine the trend of expenditure on infrastructure?

ii.            To examine the relationship between various infrastructure expenditures and economic growth?

iii.            To make useful recommendations based on the research findings.

1.8   RESEARCH HYPOTHESIS

Ho: There is no significant relationship between infrastructure expenditures and economic growth.

Ha: There exist a significant relationship between infrastructure expenditures and economic growth.

1.9      JUSTIFICATION OF THE STUDY

The purported drastic changes that lead to overall infrastructure development is being expected to bring about a higher growth rate for economic production, implying high output and supply of goods and services resulting in a reduction in the general price level of goods and services. Ironically, this has not been the case for instance; inflation has continuously rage against the economy.

Also inspite of the numerous natural attraction of investment within the economy such as the abundance of natural resources, extensive markets and enormous amount of entrepreneurial skills e.t.c. This is as a result of several unfavorable factors such as uncertainty about the policy environment, restrictive and cumbersome regulatory framework, inadequate incentives, political instability, reduction in cash flow as a result of w

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