ECONOMIC DIPLOMACY AND CONDUCT OF NIGERIA’S EXTERNAL RELATIONS: ANALYSIS OF THE

NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY (NEEDS)

BY

EZE, MARCEL ONYEMA PG/Ph.D/2000/28783

A DISSERTATION PRESENTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF DOCTOR

OF PHILOSOPHY (Ph.D), IN POLITICAL SCIENCE, UNIVERSITY OF NIGERIA,

NSUKKA.

SUPERVISOR: A.M.N. OKOLIE (Ph.D)

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TITLE PAGE

ECONOMIC DIPLOMACY AND CONDUCT NIGERIA’S EXTERNAL

RELATIONS: ANALYSIS OF THE NATIONAL ECONOMIC

EMPOWERMENT AND DEVELOPMENT STRATEGY

(NEEDS)

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APPROVAL PAGE THIS RESEARCH PROJECT HAS BEEN APPROVED FOR THE DEPARTMENT OF

POLITICAL SCIENCE, UNIVERSITY OF NIGERIA, NSUKKA.

BY

___________________ _____________________ DR. A. M. N. OKOLIE PROFESSOR OBASI IGWE SUPERVISOR HEAD OF DEPARTMENT

_____________________ ______________________ PROF. JONAH ONUOHA PROFESSOR E. O. EZEANI INTERNAL EXAMINER DEAN OF THE FACULTY

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CERTIFICATION

This is to certify that EZE, MARCEL ONYEMA (PG/Ph.D/00/28783), has satisfactorily

completed the requirements for the award of the Doctor of Philosophy (Ph.D) in Political

Science (International Relations). This thesis is original and has not been submitted in part of

full for any other degree of this or any other University.

………………………… ………..……………….. Dr. A. M. N. Okolie Professor Obasi Igwe Supervisor Head of Department

……………………………………. External Examiner

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DEDICATION

This work is dedicated to the memories of my late father and mother, Ali Nwa Eze and

Victoria Eze who loved and invested in education during their life time but could not live to see

me graduate from this programme. May their souls rest in peace, Amen.

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ACKNOWLEDGEMENT

The axiom that in the history of man, no man has made a man appear to be fallacious despite J.P Satre’s insistence that existence rather precedes essence. His argument that man first of all exist (or is born), encounters himself, singer up in the world and defines himself after wards may not stand the text of time in the world in view of the avalanche of forces attempting to impede a man’s endeavour. A journey to academic attainment of this height has been torturous, windy and rough. Infact, it would have been a pipe dream without supernatural and human facilitations. Firstly, is God Almighty. To him be the glory. At the human level, I lack enough words to express my gratitude to my supervisor Dr. Aloysius Michael Nnabugwu Okolie. He not only encouraged me against abandoning the programme but introduced me through to the rigours of academic research. Apart form this, the generous supervisor-supervisee relations which I enjoyed helped and consolidated my desire for academia. I count my self lucky to have been trained from my undergraduate to postgraduate level by these erudite scholars of our great university: The amiable Head, Department of Political Science, Professor Obasi Igwe, Professor Emmanuel Onyebuchi Ezeani, Dean, Faculty of the Social Science, Late Professor Mariam Ikejiani-Clark, Professor Jonah Onuoha, Professor Okechukwu Ibeanu, Dr. Ken Ifesinachi, the P.G. coordinator, Dr. Ogban Inyan , Mr. Christian Ezeibe and other members of the academic and non academic staff of Department of Political Science, University of Nigeria, Nsukka. I cannot forget to appreciate the assistance of late Professor Aforka G. Nweke who took up the task of supervising me but for his retirement after a meritorious service to the university. My lorry load of debt of gratitude is reserved exclusively for my wife, Mrs. Chinwe Eze, my sons and daughters who were victims of deprivations borne out of my inability to attend to basic family needs. I promise from now henceforth, I owe a sea of love and attention. My other family members were also of immense help towards my completion of this study. They include my uncle, Hon. Lazarus Eze who provoked in me the challenges of elitism. Also, worthy of mention are my sisters Hon. Gloria Ezeja and Mrs.Ugochukwu Eze who advised as my late mother in time of difficulties. Brothers like Okwudili Eze, Ogbonaya Eze, Benjamin Eze, Michael Ezeja and Fabian Ezeja are also worthy of mention. To the family of in-laws, thanks to Ikechukwu Onu, Theresa onu, Christopher Ugwu and Vincent Ugwu who played one role or the other that saw me through with this programme. To my friends and well wishers like Chief Joseph Ugwu, Christopher Agusi, Celestine Eze, Emmanuel Ugwu, Abel Odo, John Odo, Augustine Odo, Dominic Ugwu, Robert Chigbo, and others so numerous to mention, I owe a lot of gratitude. Thanks and God Bless. Eze, Marcel Onyema Ph.D. Department of Political Science UNN

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ABSTRACT

The study examined the nexus between economic diplomacy and conduct of Nigeria’s external relations with emphasis on the National Economic Empowerment and Development Strategy (NEEDS). The broad objective of this study was to examine how the use of economic diplomacy helped in the implementation of the National Economic Empowerment and Development Strategy; and the implication for sustainable development of Nigeria. The central thesis of this study was that the use of economic diplomacy in the conduct of Nigeria’s external relations is pronounced each time the political leadership is desperately pursuing received development model from advanced capitalist economies. The study was based on survey research design. Particularly, we adopted trend pattern of longitudinal research design. We adopted secondary source of data collection and hence, relied more on library materials and relevant primary documents from the World Bank, International Monetary Fund, Ministry of Foreign Affairs, and Nigerian Institute of International Affairs. We also relied on materials from United Nations International Development Organization, United Nations Development Programme, United Nations Educational Scientific and Cultural Organization and internet materials. Content analysis of texts, journals, seminars/conference papers, official publications, magazines, newspapers and other published and unpublished materials were effectively utilized. We adopted a logical data framework which enabled us use some basic propositions emanating from the Marxian political economy paradigm to analyze our data. The findings of this study revealed that the economic diplomacy of National Economic Empowerment and Development Strategy did not reduce the incidence of poverty in Nigeria. Secondly, the study revealed that economic diplomacy of National Economic Empowerment and Development Strategy did not reduce the incidence of unemployment in Nigeria. Again, the study revealed that economic diplomacy of National Economic Empowerment and Development Strategy remarkably enhanced the inflow of foreign direct investment from advanced capitalist economies to Nigeria. Finally, the study revealed that the economic diplomacy of National Economic Empowerment and Development Strategy was responsible for the debt relief extended to Nigeria by international financial institutions. The study recommended among others, a pro-active foreign policy of economic diplomacy that will enhance sustainable development of Nigeria.

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TABLE OF CONTENTS Title Page i Approval Page ii Certification iii Dedication iv Acknowledgment v Abstract vi Table of Contents vii List of Tables/Figures ix

CHAPTER ONE Background of the Study 1 Statement of the Problem 4 Objectives of Study 7 Significance of the Study 7 Literature Review 8 Theoretical Framework 58 Hypotheses 63 Method of Data Collection 63 Method of Data Analysis 64 Research Design 65 Validity and Reliability 68

CHAPTER TWO: ECONOMIC DIPLOMACY AND CONDUCT OF NIGERIA’S EXTERNAL RELATIONS

Definition of Nigerian Foreign Policy 69 Nigeria: Foreign Policy Making and Implementation. 1960-2010 72 Economic Diplomacy Explained 81

CHAPTER THREE: NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY AND POVERTY REDUCTION

Poverty Reduction under National Economic Empowerment and Development Strategy 86 Impact of National Economic Empowerment and Development Strategy on Poverty reduction 96

CHAPTER FOUR: NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY AND UNEMPLOYMENT REDUCTION

Unemployment Explained 102

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Unemployment: The Nigerian Experience 103 CHAPTER FIVE: NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY AND FOREIGN DIRECT INVESTMENT

Foreign Direct Investment and Nigerian Economy 111 Economic Diplomacy and Primacy of Foreign Direct Investment 115 Economic Diplomacy of Dependent Import Substitution Industrialization. 119 Economic Diplomacy and decline of Good Neigbourliness 121 Assessment of Foreign Direct Investment 124 Sectoral Analysis of Foreign Direct Investment inflows in Nigeria 130 Foreign Direct Investment and Economic Diplomacy: The Missing Link 131 Global Foreign Direct Investment Performance and Economic Diplomacy 134

CHAPTER SIX: NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY AND DEBT RELIEF

Historical Structure of Nigeria’s External Debt 137 The Journey to Debt Cancellation 142 The Establishment of Debt Management Office 146 Nigeria Debt Cancellation Deal 149 Nigeria’s Debt Relief Negotiation Before 2005 150

CHAPTER SEVEN: SUMMARY AND CONCLUSION

Summary 156 Research Findings 158 Conclusion 159 Prognosis 159 Bibliography 162

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LIST OF TABLES

Table 1.1: United Nations Human Development Index 2007 98 Table 1.2: Selected Indicators of Human Poverty in Nigeria 99 Table 1.3: Regional Breakdown of Number of People Living on less than $1 and S2 per day, 1990 1999 and 2015. 100 Table 1.4: Population living under 1.25 and 2 dollar (PPP) a day (2) for selected African States. 101 Table 2.1: Registered Unemployed and Vacancies Declared (Lower Grade Workers) 1984-2004 108

Table 2.2: Registered Unemployed and Vacancies Declared (Professionals and Executives) 1984-2004 109 Table 2.3: Unemployment Rate from 2003-2010 110 Table 3.1: Nigeria Net Foreign Direct Investment Inflow 1980-2003 (In US$ Million) 124 Table 3.2: FDI Inflow into Nigeria from 1970-2002 128 Table 3.3: FDI as Percentage of GDP 1970-2002 129 Table 3.4: Sectoral Composition of FDI in Nigeria, 1970-2001(%) 131 Table 3.5: Foreign Direct Investment in Nigeria, 1999-2006, $ Million 135 Table 4.1: Paris Club Debt Stock by Creditor as at December, 2004 139 Table 4.2: Paris Club Debt Stock By Creditor as at December, 2007 139 Table 4.3a: Summary of External Debt Stock, as at December, 2004 140 Table 4.3b: Summary of External Debt Stock, as at December 2007 141 Table 4.4a: External Debt Services Payments (2001-2005) 141 Table 4.4b: External Debt Services Payments (2006-2007) 142 Table 4.5: Nigeria’s External Debt Stock to Non-Paris Club Creditors as at 2005 150 152

Table 4.6: Nigeria’s External Debt Stock to Non-Paris Club Creditors as at 2007 152

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CHAPTER ONE

Background of the Study

The de-ideologization of international relations following the disintegration of Soviet

Union and seeming collapse of the socialist bloc has ushered in accelerated economic

globalization. This process was initiated at the end of World War II with the creation of

international economic institutions against Mercantilism. Hence, Aina (2006:2) remarked that

“as a consequence, growing interdependence prevalent in the West since the 70’s and 80’s

immediately spread across the globe and the capitalist rules came to dominate international

economy changing along side, the political face of the world”.

States with weak economies in the present world order are trapped from growing unless

they adapt fast to the new rules of the global regime. This new rule requires a refocusing of

foreign policy priorities to economic issues targeted at internal development stratagem. In this

process Nigeria is not left out in the transformation of her foreign policy thrust to largely

economic diplomacy. A country’s foreign policy guides and shapes the behaviour of that

country in international arena. According to Rosenau (1976) foreign policy may be “aggressive

or submissive, long range or short range, economic or diplomatic”. Similarly, Asobie (1991:35)

noted that “while foreign policy is the substantive aspect of external relations, diplomacy is the

procedural aspect”. It is thus “the process of putting into effect foreign policies of nation states”

(Petrovsky, 1998).

By Diplomacy we refer to “the management of international relations by negotiation,

the method by which these relations are adjusted by ambassadors and envoys the business or art

of the diplomats” (Nicolson,1950:15;Asobie,2002:47; Okodolor,2007:1).The process of

negotiation leads to compromise as a means of solving political and economic problems in

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international arena. Hence, Okolie, (2008:1) maintains that diplomacy is the art of making

compromise in international political matters which promote rather than jeopardize the basic

interest of a nation. According to Asobie it is the process of bargaining among states in order to

narrow arrears of disagreement reached.

He further remarks that economic diplomacy may be defined in one of three ways:

A. As the management of international relations in such a manner as to place ascent on the economic dimension of a country’s external relations. Thus, he noted that economic diplomacy is the conduct of foreign policy in such a manner as to give topmost priority to the economic objectives of a nation. B. Economic diplomacy as the appreciation of economic instrument in negotiation and bargaining with other countries. C. As a set of strategies and tactics formulated and applied for the achievement of a fundamental restructuring of the existing international order (Asobie, 2002:47- 48).

Asobie’s above definition attests to the fact that at the base of economic diplomacy is the

pursuit of foreign policy and the development principles through predominantly economic

precepts (Okolie, 2008). Economic diplomacy therefore reinforces the effective implementation

of economic reforms of Structural Adjustment Programme and National Economic

Empowerment and Development Strategy. Hence, Nigeria’s foreign policy since independence

has experienced about five major shifts, which under Abubakar Tafawa Balewa (1960-66) has

been characterized as pragmatic. In his words:

So far as is possible, the policy for each occasion will be selected with a proper independent objectivity in Nigeria’s national interest. (Abubakar, 1960:3)

This is in sharp contrast with the militant and radical orientation of General Yakubu

Gowon’s regime (1966-1975) and the dynamic, radical, nationalistic and even revolutionary

reformist posture of General Murtala Muhammed/Obasanjo regime of (1976-

1979),Fawole,2003;Garba, 1979). The withdrawal of the military in politics in 1979 following

3

the election of Alhaji Shehu Shagari as President of the Federal Republic of Nigeria induced the

fourth shift which in the perception of the initiator was characterized in “Afro centric” terms. In

his foreign policy thrust, President Shehu Shagari on March 18, 1980 decried that Africa remains

the corner-stone of Nigeria’s foreign policy. According to him:

My administration is committed to the cause of the total liberation of Africa and the abolition of racism in all its ramification. We shall neither relax nor relent until all Africans and all black men are free…. We want a new world, where no man and no nation is oppressed, where men as well as nations are judged by the content and quality of their human resources rather than military or economic powers (Shagari ,1980:5).

Since Shagari’s ouster and the subsequent military regimes of Buhari/Idiagbon and

General (Ibrahim Babaginda), there has been an oscillation from an assertive nationalist posture

(Buhari/Idiagbon) to a retreat from Afro-centrism or continentalism to a personalized, tightly

controlled sub-regionalist posture that relies on interventionism and activist foreign policy that

divert attention from the strains and stresses of the economy, society and polity. This

continentalism has remained a feature of Nigeria’s foreign policy since General Sani Abacha

supplanted the Interim National Government of Ernest Shonekan in a palace coup d’etat in

1993. Although economic diplomacy was popularized under the regime of Ibrahim Babaginda,

the fifth shift seems to have emerged with the administration of General Abudusalami

Abubakar. In his address at the annual patrons dinner of Nigerian Institute of International

Affairs held on December 12, 1998, he noted as follows:

This administration accepts the proposition that a sound economy is the bedrock of a strong and proactive foreign policy by any country. And for us, as nation at the cross roads of history the condition of our national economy will have a decisive impact not only on the sustenance of our democratic transition after 29 May, 1999, but also on our role in world affairs (Abubakar, 1998:3).

4

The above policy thrust underscores the primacy of economic issues over security matters in

this era of global economic liberalization. Hence, emphasis shifted to adapting to the new

competitive rules of the game. Despite all odds, Nigeria, attempts to survive and prosper

economically by adjusting in line with the dictates of the new global regime rooted in capitalist

hegemony.

In this framework, the role of economic diplomacy as a tool for promotion of national

interest gained primacy within foreign policy strategies. This informs economic diplomacy

featuring in Olusegun Obasanjo regime. In this study, we analyzed economic diplomacy of the

regime.

Statement of the Problem

In the contemporary international system where interdependence drives economic

issues, economic diplomacy emerged as the most efficient instrument of conducting foreign

policy. This is because it is absolutely necessary for any policy thrust to aim at, achieve and

maintain a self reliant and prosperous economy. Adefuye (1992:140) adopts this view and

asserts that “an economy that fails to sustain a society destabilizes that society”. Nigeria is not

left out of the strategic economic calculations since economic issue is the driving force behind

its foreign policy in the 21st century despite the attendant misconception, abuses and

misapplication. The economic diplomacy of New Economic Empowerment and Development

Strategy was applied by Olusegum Obasanjo to reverse the debilitating conditions of Nigerian

economy. These policies supposedly are activities generally focused on the affirmation of

economic interest of Nigerian state as “the health of a nation’s economy is one index of the

vigour and purposefulness it displays in her relationship with others” (Rodee, 1983; 464). In

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other words, “a strong economic foundation and a happy and contended people provide a sound

basis for effective pursuit of foreign policy” (Olusanya, 1988:525).

In Nigeria, the regime in question had a negative conception of economic diplomacy as

foreign policy thrust. They appear to place politics before economics. Their target appears to

perpetrate invidious political roles in their state not minding that our domestic structure is not

strong enough to support external outcomes. The primary thrust of economic diplomacy is to

strengthen Nigerian political economy and reposition it for sustainable human and material

development. “Economic diplomacy employs economic resources either as reward or sanctions

in pursuit of a particular foreign policy objective. This is sometimes called “economic craft”

(Harun, 2008:2). This is to enhance human welfare and create an economic environment that

will constantly satisfy the basic needs of man. Any diplomatic ties, bilateral, multilateral or

institutional relations would be conducted in a manner or intention to impact on Nigeria’s

human and material development.

In this context, Olusegun Obasanjo used economic diplomacy of new economic

empowerment and development strategy respectively to achieve pre-determined ends. In this

regard Nigerian state seems to have failed despite her abundant human and natural resources.

Government stringent reform measures seem to have failed to revamp Nigerian ailing economy

through attraction of foreign assistance and investment as canvassed by its protagonist. The

private sector which is the engine of development has not developed. The deepening incidence

of poverty and underdevelopment in Nigeria attests to this failure. This is manifested not only

with the policy thrust but on the level of implementation.

Hence, there is a tussle between politics and economic interest of Nigerian political

leadership. Government chooses policies without adequate consultations with the private

6

sector, civil society and intelligentsias and adheres to international pressure to achieve

international recognition and legitimacy. This is attributable to the personality traits of

hegemonic policy executors that are forced upon the people. Economic polices are

implemented in line with the mindset of its initiators, who act as uncommanded empires,

leviathans whose policy pronouncement became law. Besides “the implementations were prone

to personal idiosyncrasies as they acted as defactor foreign ministers and bastion of foreign

policy making and implementation (Okolie, 2008: 3-4).

Scholars like Asobie (1990) argue that economic diplomacy is the application of

economic instruments in negotiation and bargaining with other states. Ifesinachi (2000) avers

that, it is fundamentally the pursuit of foreign policy of economic development. Rana (2007)

describes it as the process through which countries tackle the outside world to maximize their

national gain in all fields of activity including trade and investment. Okolie (2008) also,

maintains that it is the art of making compromise in international political matters which

promotes rather than jeopardize the basic interest and security of the nation. Despite these

germane contributions on economic diplomacy, little or no effort has been made so far on

analysis of National Economic Empowerment and Development Strategy.

Arising from the above gap in the literature we raised the following research questions:

(i) Has the economic diplomacy of National Economic Empowerment and

Development Strategy reduced the incidence of poverty in Nigeria?

(ii) Has the economic diplomacy of National Economic Empowerment and

Development Strategy reduced the incidence of unemployment?

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(iii) Did the economic diplomacy of National Economic Empowerment and

Development Strategy increase the volume of foreign direct investment from

advanced capitalist economies to Nigeria?

(iv) Was the economic diplomacy of National Economic Empowerment and

Development Strategy Responsible for the debt relief extended to Nigeria by the

International Financial Institutions?

Objectives of the Study

The study has the general objective of providing a better understanding of economic

diplomacy as a tool for the pursuit of foreign policy objectives of Nigeria. Moreover, the

specific objectives of the study are as follows:

1. To examine if the economic diplomacy of National Economic Empowerment and

Development Strategy reduced the incidence of poverty in Nigeria.

2. To evaluate whether economic diplomacy of National Economic Empowerment and

Development Strategy reduced the incidence of unemployment.

3. To ascertain if the economic diplomacy of National Economic Empowerment and

Development Strategy increased the volume of foreign direct investment from advanced

capitalistic economies to Nigeria.

4. To explore if the economic diplomacy of National Economic Empowerment and

Development Strategy was responsible for the debt relief extended to Nigeria by

international financial institutions.

Significance of the Study

The primary goal of economic diplomacy as a tool of foreign policy in Nigeria is the

promotion and protection of national interest of the Nigerian state. Nigeria under the regime of

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Olusegun Obasanjo applied the economic diplomacy of national economic empowerment and

development strategy as reform measures to achieve pre-determined economic development.

This study has both theoretical and practical significance. At the theoretical level, it will add to

the existing literature on economic diplomacy of the Nigerian state and will assist student

researchers in economic diplomacy and related fields as reference material. It will equally

underscore the link between economic diplomacy and foreign policy. It will also highlight the

reform impact on foreign direct investment and sustainable human development. At the

practical level, the result of our investigation will be used during the formulation and

implementation of any related economic reform polices of Nigeria state. The political and

bureaucratic leaders in charge of foreign policy will apply the result of an investigation in

enhancing a proactive economic reform package for Nigerian State.

Literature Review

In this section our primary concern is to concentrate on existing literature in relation to

the subject matter of our research questions with a view to understanding what other scholars

have already written or what have not been properly and satisfactorily addressed in the

literature concerning the discourse under investigation. In this context the major thrust of our

review are as follows:

A National Economic Empowerment and Development Strategy.

B National Economic Empowerment and Development Strategy: poverty reduction and

employment generation.

C National Economic Empowerment and Development Strategy and foreign direct investment.

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D National Economic Empowerment and Development Strategy and debt relief. However, the

justification of the nexus between economic diplomacy and foreign policy forms our point of

departure.

(a). Economic Diplomacy and Foreign Policy

Economic globalization has increasingly made economic diplomacy an indispensable

factor in foreign policy. Foreign policy, though without any concise or an accepted definition,

has been defined variously by scholars, Adeniji (1992:4) observed that foreign policy is “in fact

a projection of the state’s national interest into the transnational arena and the conquest

interaction of one with the other”. Wallace (1971:10) sees foreign policy as “that area of

politics which bridges the all-important boundary between the nation-state and its international

environment. Similarly, Olusanya and Akindele (eds,) (1986) stated that foreign policy is the

“country’s national interest in its interaction with the outside world and relationship with

specific countries in the international system”. Frankel (1975:21) defined it “as a dynamic

process of interaction between the changing domestic demands and supports and the changing

international environments”. Ukeje (1999) notes that foreign policy constitutes an endless

dialogue between the powers of continuity and the powers of change. For London (1965)

foreign policy may be called the father of all things in international relations. Indeed, the fate of

the world depends upon wise foreign policy. The above definition seems not to have taken care

of the dynamics of contemporary international relations.

In our considered opinion, foreign policy is the policy thrust of states, geared towards

achieving the national interest of states in their relationship with states in international political

environment. Foreign policy pronouncement is different from foreign policy implementation

because the pronouncement is no more than an articulation of the general principles or policy

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that forms the basis of government decision maker’s action in foreign affairs. In such foreign

policy articulation the decision makers declare national goals, interest and priorities which they

consider to be of primary concern to them in international affairs.

Foreign policy implementation is therefore:

any concrete action taken by a state in response to real or potential or alleged threat to its national interest, its security and its internal stability. This action taken in response to such threat could be within or outside the country .One fundamental trait of this action is that it may or may not conform to policy pronouncement (Eze, 2009:35). Some realists like Lippmann (1943) states that a foreign policy consists in bringing into

balance, with a comfortable surplus of power in reserve, the nation’s commitments and the

nations’ power. These views indicate that what is imperative in a nation’s foreign policy is the

promotion and sustenance of her national interest. Although, national interest of a country is

often not clearly defined in specific terms, yet, two broad views exist on the concept-the

subjectivists and the objectivists. Granham Allison and Brecher represent the former. They

maintain that national interest is not an objective truth that prevails whether or not it is

perceived by members of a nation; rather, it is a pluralistic set of subjective preferences that

change when the requirement and aspirations of the nation’s member change. On the other

hand, Morganthau, (1962) who is of the later school, is of the view that the best interest of a

nation is a matter of objective reality. Although the above view seems to underscore the nexus

between foreign policy and interest of states at international arena, they failed to capture issues

of economic diplomacy in the contemporary global economic relations.

Meanwhile Harun (2008:2) correctly remarked that “economic globalization has made it

increasingly difficult to draw a clear cut distinction between what are domestic and what are

international components of a product as economies of various countries are integrated”.

According to him economic diplomacy in the past was known as trade diplomacy concerned

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with economic policy issues. In his view, economic diplomacy “is the decision making, policy

making and advocating of a country’s business interest which requires the application of

technical expertise that determine the effect of a country’s economic situation on economic

interest of other countries.

In addition, economic diplomacy employs economic resources, either as rewards or

sanction, in pursuit of a particular foreign policy objective; this is sometimes called “economic

statecraft.” This covers policies relating to production, movement or exchange of goods,

services, instrument (including official development assistance), money information and their

regulation.

Berridge and James (2001:185), state that “economic diplomacy is concerned with

economic policy questions including the work of delegations to conferences sponsored by

bodies which employ economic resources either as rewards or sanctions in pursuit of particular

foreign policy objective”. Similarly Rana (2007:3) sees economic diplomacy “as the process

through which countries tackle the outside world, to maximize their national gain in all fields of

activity including trade, investment and other forms of economically beneficial exchanges,

where they enjoy comparative advantage, it has bilateral and multilateral dimensions, each of

which is important”. Rana, concentrates on economic relations thus neglecting the political

content that reinforces the economic bid of states. In addition to the above,

Asobie (1991: 35-36) argues that “the term economic diplomacy may be discussed in

one of these ways. First, it may be understood as the management of international relations in

such a manner as to place accent on the economic dimension of a country’s external relations; it

is the conduct of foreign policy in such a manner as to give topmost priority to the economic

objectives of a nation” A second and equally limited notion of the concept is that which sees

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economic diplomacy as “the application of economic instruments in negotiation and bargaining

with other nations. Third, economic diplomacy may be seen as a “set of strategies and tactics

formulated and applied for the achievement of fundamental restructuring of the existing

international economic order. It consists of policies aimed at establishing a new international

division of labour, targeted at bringing about a radical redistribution of the pattern of

ownership and control of economic resources in the international system.

Although Asobie itemized all attributes and approaches to economic diplomacy he fails

to unvail the intrigues, manipulation by actors involved in economic diplomacy. Arising from

these opinions, economic diplomacy entails compromise between actors in international

politics. This informs Okolie’s view that economic diplomacy “is the art of making

compromises in international political matters which promote rather than jeopardize the basic

interest and security of a nation” (Okolie, 2008:1). However, these scholars failed to appreciate

that compromise has been and remain a very big tool in international politics because the

ability to make a compromise implies a high level of political culture of those who actually

make compromise in practice. Apart from this, they glossed over the fact that negotiation as

well as compromise did not eliminate the struggle between the actors. Hence, in our considered

view, economic diplomacy is a peaceful form of struggle engaged by foreign policy activist as

a means of solving mostly economic problems in international arena. This struggle manifests

through intrigues, maneuvering, and manipulation between and among ambassadors, envoys

and foreign affairs ministers in the process of discussion and negotiations. In effect,

“compromise do not make who will defeat whom irrelevant since it implies maintaining a

certain equilibrium” (Lebedev, 1989:6).

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As a corollary of the above, Sinclair (2007:10) argues that “economic diplomacy

engages contacts in foreign and sending states institutions, businesses and international

organizations to advance the sending states economic interest”. In the process it:

a. Seeks to resolve bilateral trade disputes and negotiate with trading partners to liberalize

world trade. b. Seeks to formulate official policy for development and formulate

recommendations for sending state.

b. Facilitates negotiation on trade related agreements and treaties.

c. Identifies and coordinates financial assistance to troubled areas; economic diplomacy also

engages development partners to raise standard of living in both sending and receiving

states.

d. Co-ordinate trade policy, overlook enforcement expert controls and promote open markets.

e. Promote sending states polices and interests in international and bilateral scientific

environment, and technological arena”. This implies that economic diplomacy refers to the

diplomatic service activities focused on increasing export, attracting foreign investment and

participating in the work of international economic organizations i.e. the activities generally

focused on the affirmation of economic interest of a country on the international level.

Hence, economic diplomacy is being pursed at different levels to achieve objectives of

protection and projection of a country’s major economic interest, multilateral trade and

economic negotiations, regional and bilateral trade agreements, access to foreign resources,

promotion of experts and promotion of foreign investment.

Moshud Khan the newly appointed foreign minister of Bangladesh argues that

“globalization and the new global agenda have prompted a significant shift in priorities; trade

not aid is the order of the day. He decried that Bangladesh Ambassadors must become the

14

salesman of the country; their performance would be judged on the basis of the foreign

investment, exports and employment for Bangladeshis that they can generate. They must either

produce result or they will be recalled” (Khan, 2000:4). The above statement underscores the

importance they attach to the application of economic diplomacy as a tool of foreign policy.

The above view, buttresses the fact that the disintegration of the bipolar system of

international relations and a whole range of major political and economic consequences that

followed as a result, made necessary a switch over for foreign policy priorities and those of

economic diplomacy to different directions.

In today’s world in which international relations, including economic ones, represent a system of relations of power, political and economic, a new system seeking to curb the influence of states and individual economic players is gradually taking shape Economies are losing ever more their national characters and becoming increasingly global, thus turning into a transnational division of labour (Saner and Lichia, 2007:46).

They identified the relation of power in the process of diplomacy but could not identify

the struggle inherent in power relations in applications of foreign policy. However, despite this

obvious trend in international political and economic relations, the role of states and

diplomacies, as tools for the promotion and protection of interest of countries remains highly

relevant, in particular, in the sphere of economic relations (so-called economic diplomacy).

This calls for attention because the most developed countries that base their power on

economic superiority, military supremacy and supremacy in the domain of production are

increasingly transforming their foreign policy priorities to the economic sphere and linking

them to that sphere, endeavouring to accommodate their interest, inter-alia through a thrust of

economic diplomacy. As a consequence, the contemporary system of international economic

relations and the process of globalization and integration impose the need for intensified

15

activity of economic diplomacy aimed at the realization and protection of economic priorities

and interest.

Developing countries and states in transition are bound to embrace this pattern of the

developed countries in determining their priorities in the domain of foreign policy and those in

the economic sphere.

(b) National Economic Empowerment and Development Strategy

In a preface to the NEEDS document, President Olusegun Obasanjo noted as follows:

Nigeria has all it takes (human and material resources) to become the strongest economy in Africa and one of the leading economies in the world in the longer term. The goal of NEEDS is to mobilize the resources of Nigeria to make a fundamental break with the failures of the past and bequeath a united and prosperous nation for generations to come (Obasanjo, 2004:11).

This assertion by the chief nurse of NEEDS underpins the fact that National Economic

Empowerment and Development Strategy is the response to the development challenges of

Nigeria. The executive summary of the document reinforced the above view thus:

NEEDS is not just a plan on paper, it is a plan on the ground and founded on a clear vision, sound values and enduring principles. It is a medium term strategy (2003:07) but which derives from the country’s long term goals of poverty reduction, wealth creation, employment generation and value re-orientation. NEEDS is a nationally coordinated framework of action in close collaboration with the state and local government. (with their state-Economic Empowerment and Development Strategy (SEEDS) and other stakeholders to consolidate on the achievement of the last four years (1999-2003) and build a solid foundation for the attainment of Nigeria’s long term vision of becoming one of the largest and strongest African economy and a key player in the world economy (NEEDS Document 2004:4).

Arising from the above assertions is the inherent limitation and contradictions of

NEEDS which informs scholarly comments. Obianyo, (2009:156) remarks that:

no doubt NEEDS present itself as a laudable and comprehensive development strategy with its lofty goals of poverty reduction, wealth

16

creation, employment generation and value re-orientation and the key strategies to be used in actualizing these dreams is governmental and institutional reforms, growing the private sector, social charter implementation. Our worry is that the strategies of NEEDS appear to be in discord with the lofty goals it strives to achieve.

This view reflects expectation of failure of NEEDS as no concrete stand is

taken. Although he noted that “NEEDS builds on the progress made during the

transition phase (1999-2003), yet NEEDS claims to be new and different from the

past, yet it builds on and eulogizes part of the past which was a consolidation of

Military SAP years”( Obianyo 2009:157). Emphasis here is that NEEDS is a

continuation of structural adjustment programme.

Amadi, (2004:213) maintains that “NEEDS could pass as a World Bank

reform program for two reasons: first, the content and language suggest it drew

inspiration mainly or substantially from World Bank development policies

especially as they relate to the market and the role of the state; second, “the actors

who worked out the program are affiliated with the World Bank and are

professionally trained within the discursive paradigm of the bank”. He further

contends that even without the inputs of suggestion from the World Bank, it is likely

that the reform programme of government would still have taken the path of neo-

liberal free market. This assumption by Amadi gives credence to the present

globalization of neo-liberal ideology. Reinforcing the above view Amadi quotes

Merilee Grindle thus:

The imposition of new policies and institutions occurs because international technocrats invade domestic policy making arenas-directly or through domestic acolytes who share their world view and language and introduce powerful ideologies and conditionality in support of change. Similarly, international actors also find allies among internationally-oriented economic elites who seek to take advantage of

17

new opportunities in international trade, financial intimidation and technological innovation (Amadi, 2004:18).

This brings the picture of former Minister of Finance, Ngozi Okonjo Iweala and

Charles Soludo who doubled as chief economic adviser to President Obasanjo and a consultant

to World Bank, who were chief architect of the NEEDS blueprint.

With the protagonist of NEEDS as affiliates of World Bank, Nigerians have made no

mistake in jettisoning the home grown advocacy of NEEDS coupled with its endorsement by

International Monetary Fund and World Bank. Ackerman quoted in Obianyo (2004) is of the

view that “NEEDS should be commended by bringing once more to the fore a checklist of

woes that has long conspired to obstruct effective and efficient performance of governmental

institutions in governance”. He advocates for effective state against the minimalist state which

the bank canvasses for. He attributes the woes to corruption reminiscent to weak state system.

The effective state should bring about reforms, which could establish a foundation of

law, maintain micro-economic stability as well as the capacity to invest in basic social services

and infrastructure. According to World Bank Report quoted in Nabudere (2000:39) “States

should establish effective roles and restraints, foster competition and increase the citizen’s role

and partnership with the private sector”. This not withstanding, NEEDS ability to address the

problem of social dislocations that is bound to arise from its policy strategy is still hanging. As

Amadi (2004:22) points out:

The reform does not address the substantive issue of equality and social justice in the light of the distributive consequences of the restructure short of a casual reference to short term dislocations during implementation.

Ake in Amadi (2004:19) contends that “NEEDS government/institutional reform

strategy sounds more like World Bank notion of reform which aims to achieve functionality

18

rather than empowerment”. Similarly, Nabudare (2000:35) is of the view that NEEDS is a

replica of structural adjustment programme as he notes that “its strategy which is referred to as

adjustment is needed to create favourable environment for new invasion of foreign capital to

take over former state enterprises”. The thrust of his argument is that NEEDS helps to open up

the state for new areas of investment which is monopolized by the state. To actualize this, the

state has to be portrayed as ineffective and inefficient in the delivery of services, and can best

operate as a facilitator,’ regulator and ‘enabler for private capital.

There is nothing unusual about allowing the private sector to triumph in market

economy but the argument is to “what extent did the private sector generate or sustain

developmental variables in Nigeria? Acknowledging the above impasse, Amadi (2004:28)

opines that “the real problem with NEEDS is that there is no clear framework for the provision

of essential public goods by the private sector, “in addition NEEDS fails to see the disharmony

between poverty reduction and privatization policy which thrives essentially on profit

maximization”. Even the regulatory capability of the state is questionable” The implication of

his mindset is that NEEDS does not seem to see the need for social security to protect the weak

and the vulnerable in Nigeria which it claims are its primary target.

Meanwhile, Soludo (2006) argued that this national crusade for a new economy is

embodied in Obasanjo’s socio-economic transformation agenda entitled NEEDS with a focus

on four key objects-poverty reduction, employment generation, wealth creating and value

orientation. Asobie (2005) in his introductory statement emphasized that the authors of the

newest development strategy NEEDS launched by the Federal Government of Nigeria in June

2004, are confident that it will succeed. Their confidence in the model, among many others is

19

that: it is home grown and pro-poor, and it is unlikely to suffer from the major weaknesses of

previous development plan. According to him:

The newest development strategy, NEEDS, appears to recognize the need for a huge outlay of public expenditure in financing pro-poor development. The era of government assuming the commanding heights of the economy and pursing a public sector-led economic development strategy is being replaced by a market driven private sector-led growth and development strategy (Asobie, 2005:4) In reality, the NEEDS document articulates this ‘market forces’ philosophy

unequivocally. However, Asobie (2005) argues that since the domestic wing of the Nigeria

private sector is underdeveloped, this might lead to undue dependence on external economic

actors for the financing of the development programme (Asobie 2005:12). This will undermine

the chances of success of the NEEDS programme. On the issue of social charter which NEEDS

advocates, Obianyo (2009:167) maintains that:

For a social charter that is interested in delivery to the citizens the basic necessities for a decent human existence, the government has only insured the opposite through de-regulation policy in the down stream oil sector. She further remarks that basic cooking kerosene for all Nigerian’s today is beyond the reach of ordinary man, selling at between 120 and 140 naira per litre.

Although this remark seems empirical with the experiences of an average Nigerian, de-

regulation is not only the variable for assessment of NEEDS.

(c) National Economic Empowerment and Development Strategy and Poverty Reduction

in Nigeria

Poverty like an elephant is more easily recognized than defined. This is because; the

concept of poverty does not lend itself to any unambiguous and precise definition. It is not only

an expression of life situation, but a state of the mind and a perception of self in the complex

web of social relations. Thus, the concept of poverty is fraught with a number of difficulties.

20

First, it lacks both precision and universality. It can only be meaningfully defined within a

particular historical setting of time and place. This explains why we decided to define the poor

within the Nigerian context only.

Conceptually, the concept must be defined on the prevailing conventions of the society in

question. Secondly, given its multi-dimensional essence, attempting to define poverty is like

opening a whole Pandora box of knowledge about man and society. It involves not only

economic and measurable variables, but also non-quantifiable socio-psychological

considerations. Moreover, “poverty is a relative concept depending for its meaning on

prevailing system of values, resource endowments, the stage of economic and social

organization and the degree of interaction with people form different societies” (Olayide and

Essang; 1973:153). In spite of the above definitional difficulties, it is obvious that majority of

Nigerians are malnourished, ill-clothed, ill-housed, uneducated and victims of preventable

diseases. Infact, poverty is a concrete phenomenon and the poor can easily be identified in a

crowd by the quality of the living standard.

Generally, poverty is a situational syndrome in which the following are combined;

under-consumption, malnutrition, precarious housing conditions, low educational levels, bad

sanitary conditions, either unstable participation in the production system or restriction to the

more primitive strata, attitudes of discouragement and anomie. Also, it includes little

participation in the mechanization of social integration and possible adherence to particular

scale of values different to some extent from that held by the rest of the society (Altimir,

1982:2). The poor then is a victim of poverty. Arthur Nwankwo has graphically described the

characteristics, living conditions and psychological make up of the poor in Nigeria in the

following words:

21

They look dejected, skeletal, rejected. They drink from infested springs and feed like pigs. Torn to shreds by poverty, ignorance and disease, their faces are permanently wrinkled by cynical existence at the brink between minimum life and maximum death. The protein, iron, calcium and caloric contents of the food items they consume are extremely low. Inevitably, they are dwarfed in physical appearance by malnutrition. (Nwankwo 1991:122).

In the rural areas, their homes are poorly ventilated and made of mud and thatched roofs

which collapse with heavy rains. In urban areas, they live in slums, under bridges and many of

them roam the streets daily without permanent abode. This category of people hardly knows

where their next meal will come from. As Nnoli (1989) has noted, there are no national heroes

among them. No monuments are built in their names, and no streets are named after them. It is

generally assumed that the political economy of the nation can be studied and understood

without examining their views, conditions and activities.

Beyond these descriptive efforts, concrete attempts have been made by various scholars

to define the poor. The former President of the World Bank, Robert S. Mcnamara was reported

to have remarked that 800 million people in the world live in absolute poverty described as a

condition of life so degrading as to insult human dignity(Word Bank,:2005). People include

here are small-scale farmers, tenants, share-croppers, landless workers and their families. This

view of the problem is useful because it shifts emphasis from quantification to a conception of

quality of life. However, even though this view is emotionally appealing and sociologically

relevant, it lacks operational concreteness with which a social scientist can work with. This can

only cover cases of poverty as paupers, beggars, the chronically sick, disabled, infirmed,

homeless, problem families, those who suffer form various physical and mental disabilities and

all those who eke out existence as parasites at the margin of the society.

However, Nnoli has offered a vivid description of the poor. According to him, “the poor

represents that section of the population which has been crushed by the power of money. He

22

further argued that the bourgeois state is split between those who own and control the means of

production and those who do not. This division he further noted corresponds largely to that

between the rich and the poor. Thus, the rich are essentially those who own and control the

means of production and therefore enjoy the power of money and the poor are essentially those

who do not own the means of production and are therefore the victims of the power of money”

(Nnoli, 1989:37).

This definition is the most fundamental of all the definition we have examined

essentially because it defined the concept of poverty from political, rather than economic

perspective. More importantly the definition is also useful empirically since those who own and

control the means of production in any society are known to be richer than those who do not

own and control. Nevertheless, the discourse is politics of international economic relations

which tailors towards reforms to reduce the incidence of poverty.

However, the definition is too broad, and therefore not useful in practiced terms, for

example, it is not true that only those who own and control the means of production are rich in

Nigerian society. We have numerous example of top government officials like governors,

ministers, commissioners, and even professionals like lawyers and lecturers who are very rich,

no matter how the concept is defined, yet they do not own and control the means of production.

More importantly, the concept of poverty is treated by Nnoli as if it’s a class phenomenon. This

explains why he identified the bourgeois class as the only rich group in Nigeria, while the other

subordinate classes were seen to be poor. This way of looking at the issue is faulty because

poverty cuts across class lines. It is a relative concept and could be found in any group. The

question is who is the poor in Nigeria?

23

The poor are found in every profession, group or class. One thing that is common

among them is that they are powerless, this I mean that they do not have access to state power.

In Nigeria where the state is the greatest employer, and the most precious thing to possess, lack

of access to it means poverty. “The poor in Nigeria therefore are not only those who neither

own nor control the means of production but those who do not have access to state power

(Onuoha, 1995:50).

This definition is important in three significant ways. First it recognizes the fact that

access to state power is the shortest route to success in Nigerian society. The point we are

making is that even if you own and control the means of production in Nigeria without having

access to state power, you may not make it. Your business empire could be dismantled and

shattered in matter of days if you lack the necessary access to state power. On the other hand,

you will make it to the top of your profession if you have access or somebody who has access

to state power. The implication is that you must “know somebody” “somehow” for you to

secure a good job; otherwise you may remain unemployed forever.

Onuoha (2008) argued that since hard work does not pay enough in our society, the best

way to escape from poverty is to capture state power if you can or establish a cordial

relationship with those in power. This is necessary because the state is still and will remain for

a very long time to come the largest contractor, importer, exporter, employer of labour and a

veritable source of wealth. Kudos to his capture theory of politics. .Although these scholars

unveiled the ingredients of poverty, they could not locate it within the prism of national

economic empowerment and development strategy which informs this study.

The questions on lips of many Nigerians are what is the impact of NEEDS on poverty

reduction in Nigeria. Obianyo, (2009) asserts that the real problem with NEEDS is that there is

24

no clean framework for the provision of these essential public goods. In addition, it fails to

“address government direct investment in social good provisioning either through pubic or

private market”. The effect is that NEEDS fails to observe the disharmony between poverty

reduction and privatization policy which lives essentially on profit maximization. The

implication is that NEEDS could not see the need for social security to protect, the weak and

vulnerable which it claims are its primary constituency during its implementation.

In our considered opinion, the social charter package of NEEDS tailored towards the

provision of potable water, food, clothing, shelter and access to adequate nutrition, basic

education, primary health care, productive assists, security and protection from shock and risk

did not achieve desired result cognizance of the level of poverty in Nigeria today. This is

because rural poverty appears endemic in Nigeria and this situation has attracted much

attention. It is particularly disheartening that this problem, rather than abate it proves

intractable going by food and nutrition insecurity facing majority of Nigerian families today.

Subsistence agriculture is almost on the decline because many farmers cannot afford to

purchase necessary farm inputs such as fertilizers, pesticides and improved seeds, which would

bring about increased productivity.

Amadi, (2000:40) aligning with the above view maintains that “NEEDS plan for

attaining these goals rest on its optimism of the pre-growth theory of the economy and private

sector participation and no pragmatic action plan for tackling the enumerated problems was

provided”. For example basic cooking kerosene for all Nigerians is today beyond the rich of the

ordinary man, selling between N120 and N140 a litre. In addition, the inflationary impact of

25

this policy on other basic necessities like food, clothing, shelter and transportation has

increased Tremendously (Obianyo, 2009, 168).

The fact remains sacrosanct that employment generation is a step towards poverty

reduction but NEEDS employment generation target of seven million jobs over the period

2004-2007 was predicated on private sector growth. The implementation of private sector

reforms through technology advancement marginalized direct human labour as computers have

taken over many of the jobs earlier done by human personnel. Although the communication

sector generated employment opportunities for Nigerians in the menial sector of the industry

like (hawking a few recharge cards and making commercial calls) it neither develops a person

nor his environment. Ake in Ihornvbere (ed.) (1998: 70) describes it as the “economy of

desperation”. He further notes that labour enters the informal sector when the alternative is

worklessness and a real prospect of starvation. This assertion reflects our position that NEEDS

pro-poor policy is an expression of the indomitable will to make Nigerians survive in the face

of seemingly hopeless odds. This not withstanding, the implication of NEEDS on poverty

reduction is yet unexplored, hence, the need for more inquiry.

(d) The National Economic Empowerment and Development Strategy (NEEDS),

Employment generation and Sustainable Human Development

This review targets an examination of ideas on the subject of economic diplomacy of

National Economic Empowerment and Development Strategy. However, we concentrated on

sustainable human development which is key policy thrust of national economic empowerment

and development strategy. The concept of development is dynamic particularly in developing

economies where emphasis shifts in consonance with the perceived interest of the society. “The

26

dominant philosophy and ideology of progress that have guided development in Nigeria

consider development in terms of exploitation of nature and conquest of natural force”.

Isamah (2002:123) sees development “as the quantitative transformation of societies

from one stage to another”. According to him, development process has its overriding

objectives of enhancement of the quality of people’s lives and livelihood. In this context,

development refers to gradual evolvement and advancement of all socio- cultural, political,

economic and other spheres of society for the benefit of humanity. Development therefore

exists within the framework of human thought as a relative reality, multifaceted and down to

earth social processes of life. Development’s area of coverage is comprehensive spanning from

individual, family, kinship, lineage, community, society to global levels. Olutayo and Bankople

(2002:119) observed that “development involves process of change upon socio-political

environment of society, that is, ‘what is central to the development of any nation is the

availability of means and forces of production which are owned by the indigenous members of

the society and who control the use of these means”. Rodney (1972:9) posits that

“Development in human society is many-sided processes”. In line with this emerged Nigeria’s

five main national development objectives. According to the Second National Development

Plan of 1970-74, the country aims to build; a free and democratic society, a just and egalitarian

society, a united, strong and self-reliant nation, a great and dynamic economy and a land of

bright and full opportunities for all citizens (Federal Republic of Nigeria, 1970).

The foregoing objectives of the national development plan presuppose that human

development is all-embracing and pervasive as it welcomes contributions of every diverse

element in the country without mincing matter on sexual differences in role allocation, and role

performance. Eze, (2008: 181) in line with the above view noted that the concept of human

27

development “is a reflection of the realization that we have not inherited the environment form

our parents rather, we are borrowing it from our children”. This philosophical basis led to the

definition, understanding of sustainable development as a development which meets the needs

of the present without compromising the ability of future generations to meet their own needs

hence, assessment of sustainable development is highly demanding at this juncture.

World Commission on Environment and Development (1987:43) conceived it “as

development which meets the needs of the present without compromising the ability of further

generations to meet their needs. It further states that ‘sustainable development requires meeting

the basic needs of all and to extending to all the opportunity to satisfy the aspirations for a

better life”. Drawing upon this, Adams (1990) in Miltin, (1992) sees sustainable development

as intensely synthetic concept whose second characteristic is the apparent ease with which

different ideas about development are grafted on. Bradiotti, Charkiewicz, Hausler, and

Wieringa (1995:133) argued that “any definition of sustainable development depends, of

course, upon the definition of development, and what it is, that is to be sustained, that is, the

continued high level of consumptions or the fulfillment of basic needs”. Meanwhile, Chambers

(1987) views it as ensuring of sustainable livelihoods for all people including women and

children. To him bottom-up model is central to the sustainability of development. Basically,

sustainable development entails building upon the past for better present without jeopardizing

brighter best future for citizens

In other words, sustainable development involves strategies geared towards enduring

development without destruction. This by implication means that there cannot be trade of

between development and environment as both can occur simultaneously. The confusion

generated by the ever-increasing use or over use of the concept of sustainable development

28

without concrete explanation informs Zartman (1989:27-75) argument that “concepts have no

clear beginning and ends, no unambiguous middles”. This not withstanding, Lele (1991)

explains it to mean the existence of the ecological conditions necessary to support human life at

a specified level of well being through future generation. According to him social sustainability

is also the ability to maintain desired social values traditions, institutions, cultures or other

social characteristics. From the above argument, one can infer that various connotations of

sustainability to some extent mutually influence one another.

Wolff (1995) demonstrates that in the long or short run the lack of sustainability in the

ecological sector will have a negative effect on social sustainability and vice versa. These

scholars concentrate on ecological issues thus neglecting the economy which is the driving

force of sustainable human development. Sustainable development should take into cognizance

issues of human, material and economic aspects of development. The contributions of these

scholars appear germane but they fail to discuss how these sustainable livelihoods for all people

will be achieved. In other words they appear to neglect issues of growth and diversification of

the economy which is the guarantee for providing good life for the present and further

generation.

In our considered view following the NEEDS pro-poor advocacy, sustainable

development is a systematic, planned sustainable development of the Gross Domestic product

(GDP) level, and a diversified production pattern which gives rise to the transformation of the

structures and institutions of the socio-economic condition of the state; which eventually

transforms to technological development. Arising from the above definition are the underlisted

characteristics of sustainable development: (i) Development is dependent on the level of Gross

Domestic product, in other words development is dependent on level of productivity achievable

29

in any society. (ii) a diversified product pattern that would ensure the availability of many

different resources hence, the emphasis on diversifying the economy to avoid a mono-product

economy as applicable to Nigeria’s mono crude oil economy. (iii) the existence of structures

and institutions which needs to be put in place to achieve sustainable development. (iv)

technological development which obviously will form the bedrock for the realization of

indigenous production process.

In line with the above view, Egonmwan and Ibodige (2002) argue that sustainable

development implies growth resulting from the application of scientific knowledge and

technology to the environment which determines the utilization of the resources of a state for

their emancipation according to the aspirations of the people.

In this case, the issues of growth of the economy, diversification of the economy form

the major plank of achieving sustainable human development in Nigeria .What then is

diversification? “Diversification and its implications for development and policy are now

drawing attention from policy makers and donor agencies because of the relevance of the theme

to policy and development attention’ (Bernstein et al 1992, Saith 1992, Elis, 1998, Reardon

2000). Hence, improved understandings of impacts of diversification many help in the

identification of effective means of targeting economic growth in an ailing economy like

Nigeria.

Barrett and Reardon, (2000:1) hold the premise that “diversification of assets, activities

and incomes is important to Africans, in that diversification into non farm income constitutes

an average of 45 percent of incomes, and the push and pull factors driving that diversification

are bound to persist”. They further maintain that “diversification is a norm, very few people or

states collect all their income from one source, hold all their wealth in form of one single asset,

30

or use their assets in just one activity”. Their final explanation of diversification patterns is the

existence of economies of scope in production, economies of scope exists when the same inputs

generate greater per unit profit, when spread across multiple outputs than dedicated to any one

output”.

Hymer and Resnick (1969) linking diversification to growth in income argue that if

income growth continues, then so should diversification increase; this makes rural development

to expand market access, inducing a shift from the production of traditional goods (eg. baskets)

to satisfy local rural demand to modern goods for urban and foreign markets (eg. Clothing or

metal manufacturers), thereby stimulating diversification of the rural economy away from

farming. He described it as the pull factors accelerating diversification. This view of

diversification is consistent with increasing specialization according to comparative advantage.

Attaram (1987) sees diversification as the presence in an area of a great number of

industries. In otherwords, the greater the number of industries, the greater the level of

diversification of economy of a state. In the view of Rogers (1957:16) diversification is referred

to “as the extent of which the economic activity of a region or state is distributed among a

number of categories”. Hence, emphasis is placed only on distribution of economic activity

whether it is traditional or mechanized. Parir (1965:22) advocates diversification in terms of

“balanced employment across industry classes”. He emphasize that states economic activity

should relate not only to the size of the state economy but more on the industrial linkages (i.e

the direct and indirect interaction between industries).Wegner and Deller (1993:1-3) argue that

“the logic of diversification is to situate the economic base to achieve economic stability. They

view diversification as a process of distribution of economic activities across a range of

sectors”. With this perspective, an ideally diversified economy would have equal levels of

31

activity across industries. The greater the concentration of activity in a few industries, the less

diversified, or more specialized the economy. In the opinions of Start and Craig (2004:1)

diversification can refer to “an increasing multiplicity of activities (regardless of the sector) or

it can refer to a shift away from traditional rural sectors such as agriculture to non-traditional

activities in either rural or urban space-i.e sectoral change”. Their argument is that

urbanization, sectoral diversification and industrialization of national economics are defining

features of economic development process.

Steinemann and Viloso, et al (2004) view diversification as entry of a firm or business

unit into new lines of activity, either by internal business development or acquisition. Gort

(1962) in his opinion sees diversification as an increase in the heterogeneity of markets served

by a firm. He also noted that this heterogeneity could be identified by two complementary

measures; the cross elasticity of demand and immobility of productive resources. This

emphasize that a diversified economy is one having a business segment in more than a single

monocultural industry. Weller (2007) argues that an economy that is not diversified is heavily

dependent upon single natural resources, they have all their eggs (or one big egg) in one basket

that is, they do not have several different sources of employment. He further observed that:

If a community, state or region, is not diversified, it is very vulnerable to outside forces over which it has no control. It is dependent upon others wanting the resources and being willing to pay a good price for it. It is also usually dependent upon companies extracting the resources that are headquartered elsewhere and have similar operations in many other places (Weller, 2007:1).

The above assertion by Weller Geoffery replicates Nigerian situation where multi nationals

harvests greater percentages of crude oil to their advantages thus making Nigerian government

vulnerable to the dictates of the outside forces.

32

Ramcharan (2005) maintains that economic activity is risky; returns across economic

sectors can be highly variable, potentially causing costly adjustment to consumption. However,

when returns are imperfectly correlated across sectors and insurance is unavailable,

diversification can reduce the economic impact of shocks. This statement depicts the fact that

despite the well known efficiency benefits from specialization, the risks of the little

diversification have long been acknowledged. In other words, there is the need to diversify in

order to absorb the shock that may be encountered during the failure of mono production

economic base. Hence, diversification is insurance to any state economy.

Trendle (2004) holds the implicit assumption that a diverse regional economy will enjoy

a stable employment growth rate, with the diversity acting to shield the regional economy from

fluctuation in the market for its products. Support for this hypothesis is mixed with several

studies, including Kort (1981), Brewer and Moomaw (1985) and Maliza and Ke (1993)

findings that increased industrial diversification is associated with reduced regional instability.

Extrapolating the ideas above downloads the facts that any state economy will enjoy a stable

growth rate with diversification of the economy. Their findings seem to have failed to address

the impact of national economic empowerment and development strategy on sustainable human

development in Nigeria. Critical review of the impact of NEEDS on sustainable

development becomes imperative because of the copy and paste policies and programmes

of government over the years. Onakuse etal (2007:42) maintains that “although there are

different elements to these reform polices-deregulation, privatization, commercialization , cut-

back in social sector expenditure , monetization, currency devaluation, etc, the combined effect

on the masses has been devastating, while the gains enrich only those who belong to the rulling

political class and their associates”. He argues that inspite of NEEDS pro-poor policy rhetoric,

33

the increasing income inequality and livelihood insecurity continues to be the most challenging

economic trend failing, especially rural farm economy seems to remain perpetually under

developed as do most essential services which facilitates growth and development.

In what looks like embracing the above view, Manufacturers Association of Nigeria

MAN (2006) maintains that there is a big challenge facing Nigeria government in the face of

mounting livelihood insecurity and other critical pains and sacrifices that result from these

reforms. MAN further lamented that cost associated with private energy generation account for

close to a third of overall operation for most manufacturing enterprise in Nigeria (MAN 2006).

The current debate is to what extent did NEEDS following its policy thrust “mobilize the

resources of Nigeria to make a fundamental break with the failure of the past and bequeath a

united and prosperous nation for generations to come? (NEEDS, 2004, IMF, 2005).

In our considered opinion, the poor state of other basic infrastructure in Nigeria further

impose high cost of production on domestic manufactures such as transportation and

distribution networks, government tax and continued investment in capacity building despite

NEEDS acclaimed pro-poor policy. This in essence, seems to be an obstacle to sustainable

development in Nigeria. The poor state of other basic infrastructure in Nigeria further imposes

high cost of production and distribution networks

The National Association of Chambers of Commerce, Industry, Mines and Agriculture

in their assessment of NEEDS observed that the Federal Government in 2003 has continuously

promised citizens reform in the power sector, resulting in regular, if not uninterrupted power

supply to boost the economy and to facilitate opportunities in both industry and society but

contrary to the promise, the huge investment of capital in the power sector vanished into

corrupt hands resulting in monumental failure. (NACCIMA, 2006). They rest their case that a

34

vivid example of failure in the power sector is the total power generation of 3200 mega watts

(MW) peak power generated in the country in 2006, which dropped by 30 percent despite the

projection that power sector will generate 5198 mw before the end of the year and a projection

for power generation increase to 1080 mw by December 2007, to 13821 mw and 14837 mw by

2008 and 2009 respectively and to an ultimate capacity of 15853 mw by 2010? (NACCIMA,

2006; MAN, 2006).

Utomi (2006) seems to have believed in the failure of NEEDS to attract sustainable

human development when he averred that each failure triggers citizen frustration, and each

round of frustration erodes further the legitimacy of the state, deepening the problem of

effective policy implementation due to limited support from those whose attitudes the policy

seeks to change. Boroffice (2008:40-43) lauds the impact of NEEDS on Nigerian space

programme. He maintains that “the approval of National Space Policy in 2001 and the

launching of an earth observation satellite (Nigeria. Sat.1) in September 2001 serves as a road

map to the attainment of self reliance, particularly in the fields of an indigenous critical mass of

trained space engineers, scientist and the consequent utilization of space driven data for

national development and the improvement of the quality of life of every Nigerian. The

argument is to what extent did the above view hold considering our level of development?

We are of the opinion that there is no doubt that many people in developing countries

are very skeptical about investment in space, arguing that the money spent on such programme

should be invested directly in improving the human condition on earth, forgetting that space

offers a unique opportunity to balance consumption, production and therefore attracts

sustainability of our resources and environment. Arising from our opinion, we argue that a

society that fails to invest in the future may have no future at all. In agreement with our

35

position, Alumanah(2008) in Kayode (2008:6) in cognizance of the fact that the launching of

communication satellite is a backbone for the information communication technology services

argues that “ICT manifests in all aspects of our lives, be it health, education etc and in pathway

to achieving the Millennium Development Goals (MDGs) which are consistent with Nigeria’s

NEEDS instituted in 2004”.

He further maintains that most public services in advanced countries are ICT driven as

most offices and homes are equipped with computers. In Nigeria, ICT appliances are expensive

in terms of cost of materials, installations and maintenance. In addition, irregular power supply

and the relatively under developed communication systems are also sources of worry in a

country like Nigeria to make efficient and effectively use of ICT. On the other hand, mobile

telephone which has undoubtedly become the numerous ICT factor in the developing world,

has presented the average Nigerian with a means to make ends meet (Kayode , 2008). In 2001,

when GSM was first launched in Nigeria a large number of unemployed youths have found

solace in operating telephone centres, most of these entrepreneurs are rural based while many

unemployed urban youths could be seen operating the ubiquitous call centre along most major

street, in the cities to the extent that they now account for over 58% of phones in these parts of

the world (UNCTAD, Information Economy Report, 2007, 2008). The argument is that

NEEDS welfarist policy impacts on sustainable development following the GSM innovation

but this is not the only variable needed for the assessment of NEEDS.

(e) National Economic Empowerment and Development Strategy and Foreign Direct

Investment

This aspect of the study targets an evaluation of different ideas of the subject matter:

economic diplomacy of national economic empowerment and development strategy and foreign

36

direct investment in Nigeria. However, we narrowed the review to the area of economic

diplomacy with respect to foreign direct investment because of its primacy in today’s world of

interdependence, and global economic integrationism.

According to all African Global Media (2007), FDI amounts to a company from one

country making a physical investment in building a factory in another nation. Direct investment

in buildings, machinery and equipment is in contrasts with making a portfolio investment,

which is considered an indirect investment. The publication states that FDI plays an

extraordinary and growing role in global business. It can provide new markets and marketing

channels, cheaper production facilities and access to new technologies, products, skills and

finances. It noted that foreign direct investment both in the home country and the host

countries, its ripple effect is felt largely in employment creation and empowerment.

Ajayi (2004) observed that foreign direct investment is regarded as a major catalyst for

Africa’s new growth and development strategy. He stressed that Africa, like any other

development region of the world, needs a substantial inflow of external resources in order to fill

savings and foreign exchange gaps and leapfrog itself into substantial growth in order to

eliminate the current level of poverty. In a similar contribution Deluea, (2002) notes that

foreign direct investment has increased dramatically to become the most common type of

capital flowing across borders, in both developed and developing economics. In most instances

politicians and economists welcome the increase of foreign direct investment into the country

in such a way that it is not as risky as borrowing from overseas. It may also attract additional

benefits but as an economic phenomenon, there is conflicting evidence that it promotes national

income growth. This assertion seems encouraging rather than compelling.

37

In what, looks like embracing the above view, the Organization for Economic

Cooperation and Development (OECD 2002) maintains that foreign direct investment is “an

integral part of an open and effective international economic system and a major catalyst to

development”, yet the benefits do not accrue automatically and evenly across countries, sectors

and local communities. This points to the fact that national economic policy and the

international investment design counts for attracting foreign direct investment to a large

number of developing countries and for reaping the full benefits for development. Hence, there

is a task facing host countries that need to establish a transparent, broad and effective policy

environment for investment. Despite this, both the hosting country and the investing countries

scheme for profits.

This attests to the fact that the main factor motivating foreign direct investment in

Africa in recent decades appear to have been the availability of national resources in each

country, (for example, investment in oil industry in Nigeria) and to a lesser extent, the size of

the domestic economy. However, for Oguejiofor, (2004), Multi National Corporations are firms

with foreign subsidiaries, which extend the production and marketing of firms beyond the

boundaries of any country. Thus, multi nationals are foreign investors and an instrument of the

imperialist world for deepening and expanding underdevelopment and at the same time

increasing the level of dependency on external aid and grants. He argues that the Bretton

Woods Financial Institutions like World Bank and International Monetary Fund have sold a

false idea to developing countries that the only bet for their national development is to allow

foreign investors to permeate their economies. He further stressed, that Multinational

Corporations and Foreign Direct Investment are international oligopolies that discourage both

38

efficiency and real economic growth as foreign direct investment has failed to provide a

solution to poverty and hunger in Nigeria.

Similarly, Ugwu, (2004) also argues that foreign direct investments and multinational

corporations at the background of which loom the giant capitalist nations are never solution to

but the major cause of our economic weal and woes. He asserts that the development of

Western Europe and the underdevelopment of Africa are part of the same dialectical process.

Now, the foreign direct investment and multinational corporations have presented themselves

as the contemporary worthy straw in the hand of the imperialist monsters to thick away what

ever remains in Africa. He further, stressed that serious minds have been able to perceive that

what foreign direct investment and multinational corporations set out to do in Africa is to

generate economic value that is lost in the form of project to them”.

His argument is that, it is not enough to engage in production, rather, how produce is

utilized and surplus managed matters most for the economic progress. This involves re-

investing surplus is the effective way of expanding the economic base. Indeed, keeping the

economic base in progressive depreciation involves transferring this surplus elsewhere. For

him, that is exactly what foreign direct investment and multinationals have done to Africa.

Following this argument connotes that what foreign investors do is to conscript native

population to exploit their national resources and eventually drag away their profits, leaving

their host communities with noting to survive on and improve upon.

Hence, Amucheazi (2002) observes that the world has become one common market,

though controlled by multi-national corporations that dominate the world market and even

dictate economic policies of all countries particularly those of the developing countries. He

further observed that:

39

Analysts have raised alarm on this new type of colonialism but the young countries seem to be helpless. It is in fact argued that their politicians and decision makers are not fully aware of the extent of manipulation. the challenge then is for the developing countries like Nigeria to understand the situation and try to manage it in the interest of the people. That is to say, globalization including the foreign direct investment is the problem of the third millennium and the challenge is to evolve strategies to manage it Amucheazi (2002:51).

Meanwhile, Amuchieazi identified the problem but did not suggest solution against

manipulation of foreign direct investment in Nigeria. Also he did not discuss the impact of

foreign direct investment during the period of structural adjustment programme in Nigeria.

Odozi (1995) reports on the factors affecting FDI flow into Nigeria in both pre and post

national economic empowerment and development strategy eras and found that the macro

policies in place before the (NEEDS) were discouraging foreign investors. This policy

environment led to the proliferation and growth of parallel markets and sustained capital flight.

Ariyo (1998:389) studied the investment trend and its impact on Nigeria’s economic growth

over the years and found out that “only private domestic investment consistently contributed to

raising GDP growth rates during the period”.

Examining the contributions of foreign capital to the prosperity or poverty of LDCs,

Oyinlola (1995:205) conceptualized foreign capital to include “foreign loans, direct foreign

investments and export earnings”. He argues that FDI has a negative effect on economic

development of Nigeria. Ekpo (1995:59) reports that “political regime, real income per capital,

rate of inflation, world interest rate, credit rating and debt services were the key factors

explaining the variability of FDI into Nigeria”. Although, he enunciated the key factors, he

could not show its impact on Nigerian economy. Adelegan (2000:5) explored the seemingly

unrelated regression model to examine the impact of FDI on economic growth in Nigeria and

found out that FDI “is pro-consumption and pro-import and negatively related to gross

40

domestic investment.” Also Akinlo (2004) found that foreign capital has a small and not

statistically significant effect on economic growth in Nigeria.

Although these studies appears to have discussed the impact, however, they did not

consider the fact that most FDI was concentrated in the extractive industry (oil and natural

resources) on Nigeria’s economic growth. On firm level productivity spillover, Ayanwale and

Bamire (2001) assess the influence of FDI and report a positive spillover of foreign firms on

domestic firm’s productivity.

Jerome and Ogunkola (2004) assessed the magnitude, direction and prospects of FDI in

Nigeria and reports that while FDI regime in Nigeria was generally improving, some serious

deficiencies remain. These deficiencies are mainly in the area of the corporate environment

(such as corporate law, bankruptcy. Labour law,etc)and institutional uncertainty, as well as rule

of law. The establishment and the activities of the Economic and Financial Crime Commission,

the Independent Corrupt Practices Commission, and the Nigeria Investment Promotion are

efforts to improve the corporate environment and uphold the rule of law. The above institutions

are supposedly required to enthrone transparency in every business of government since that

will attract the confidence of investors in Nigeria economy. Arising from the above underscores

the relevance of FDI to the growth of any economy.

This informs the launching of New Partnership of Africa’s Development (NEPAD).

Infact, Sub-Saharan Africa as a region now has to depend much on FDI for so many reasons,

some of which are amplified by Asiodu (2001). Sjoholm,(1999) argues that the preference for

FDI stems from its acknowledged advantages. To this effect, efforts by several African

countries to improve their business climate stems from the desire to attract FDI. Hence, one of

the pillars on which NEPAD was launched is to increase available capital to US$64 billion

41

through a combination of reforms, resource mobilization and a conducive environment for FDI

(Funke and Nsouli, 2003).

The success of any country in the rapidly integrating world can be illustrated by certain

indicators. According to Owolabi (1998), these indicators include the ratio of international

trade and foreign direct investment which would provide a rough guide to the relative openness

of the country, the share of manufacturers in its export, would show the ability to produce at

world standard, while its credit worthiness rating would be a rough guide to its access to

international financial market. All these indicators are closely connected to trade sector of the

economy.

Alassanne (1997) observes that economies that open themselves to trade and capital

flow on a free basis, and are able to attract international capital, would benefit the most from

globalization. This arises because open and integrated markets place a premium on good

macroeconomic policies and on the ability to respond quickly and appropriately to changes in

international environment. He argues that success in open market and in attracting new

investment and advanced technology also means that the structure of economies is changing

more rapidly than ever before. He, however, noted that this does not mean that countries should

seek to isolate themselves from globalization. Rather, government must fully embrace it in

awareness of its potential risk and seek to provide adequate protection for the vulnerable

segment of the society during the process of change.

World Bank (1997) assessment of global economy revealed that an important trend in

the world economy in recent times is the globalization of production in developing countries.

Global production by multinational corporations at home and abroad accounts for fifth of

World Gross Domestic Product (GDP), Intra firm trade by multinationals accounts for a third

42

of world trade and their parent firms account for much of world research and development. It is

remarkable that world wide reduction in policy barriers to international trade and investment,

and continuing decline in international transportation and communication costs are making

market every where more contestable, increasing competition pressures on firms. The same

forces also stimulate and facilitate firm’s effort to improve efficiency and gain access to new

markets by recognizing production process on a global basis. Global production networks are

facilitating the integration of developing countries into world market

These global production networks are multinational corporations whose establishments

of industries/investments in form of foreign direct investment are affected by some factors.

Akhter quoted in CBN (2005:5) states that “factors that determine foreign direct investment

flow include, availability of national resources, infrastructure, market size, level of human

development, distance from major markets, labour costs, openness of the economy to the

international trade, exchange rate, fiscal and other non tax incentives. It includes political

stability, monetary policies and the extent of liberalization of the economy and stability of

modern information and communication technology”. World Bank (1995) reports that one

effect of globalization is to expand the options available to private individuals and firms while

reducing those of policy makers. The premium on sound economic policies has risen, in a more

integrated global economy, the reward of such policies is larger but much are the penalties for

policy error.

This attests to Nigerian situation as it affects the economic diplomacy understudy.

Nunnenkamp (2002) in his review of trends and determinants of foreign direct investment from

the perspectives of developing countries, claims that globalization will detect that foreign direct

investment will increasingly become efficient - seeking rather than market - seeking.

43

Accordingly, he places a premium on local competitiveness and on trade, liberalization of

capital and international goods as a means to attract foreign direct investment beyond policy

incentives. The literature discusses the major determinants of FDI that are domestic market

size, economic growth, technological capability, government policy, and other factors that

constitute the policy thrust of national economic empowerment and development strategy. In

our opinion FDI plays an important role in promoting economic development and growth,

raising a county’s technological level and creating employment. FDI works as “a means of

integrating under developed countries into the global market and rising capital availability for

investment (Dinda 2009:5).

He further argues that FDI serves as an important engine for growth in developing

countries through two modes of action: (i) expanding capital stocks in host countries and (ii)

bringing employment, managerial skills, and technology. Also Anyanwu’s (1998) study of the

economic determinant of FDI in Nigeria also confirmed the positive role of domestic market

size in determining FDI inflow into the country. He maintains that the abrogation of the

indigenization policy in 1995 significantly encouraged the flow of FDI into the country and that

more effort is required in raising the nation’s economic growth so as to attract more FDI.

Iyoha (2001) examined the effects of macroeconomic instability and uncertainty,

economic size and external debt on foreign private investment inflows. He argues that market

attracts FDI to Nigeria whereas inflation discourages it. He maintains that unsuitable

macroeconomic policy acts to discourage foreign investment inflows into the country.

Anyanwu (1998) and Iyoha (2001) have discussed the determinants of FDI in Nigeria but the

major limitations of these studies are the traditional econometric technique and non-

consideration of natural resource determination of FDI inflow. Contrary to the above views

44

raised by the proponents of foreign direct investment, the anti proponents otherwise known as

dependency school are strongly opposed to pro- foreign direct investment perspectives. They

argued that “developing countries’ economic difficulties do not originate in their isolation from

advanced countries but that most powerful obstacle to their development came from the way

they are joined to the international system” (Shiro,2009:4).

To support their position, Multer (2009:4) maintains that “MNCs transfer technologies

to developing countries that result in mass unemployment; that they monopolize rather than

inject new capital resources; that they displace rather than generate local business and that they

worsen rather than ameliorate the country’s balance of payment”. Fashola (2009) argue that

most of the polices adopted by Nigeria since the national economic empowerment and

development strategy era are qualitative in nature and as such are yet to be effective in turning

around, for the better, the economic fortunes of the nation. The implication of their argument is

that flow of foreign direct investment is associated negatively with growth in income per

capital, rate aggregate growth, unemployment and distribution of income in Nigeria.

However, there exist some irregularities in the determinants of foreign direct investment

inflow to a country. According to United Nations Conference on Trade and Development

(2002), one striking feature of foreign direct investment is that share in fatal inflow is higher in

riskier countries. Its share is also higher in countries where the quality of institutions is lower.

This assertion demands further investigation under this study, since economic diplomacy

targets foreign direct investment. In Nigeria, identification of irregularities in the flow of

foreign direct investment abounds, hence, the need for more inquiry on the motives of the

investors.

45

(f) National Economic Empowerment and Development Strategy and Nigeria’s External

Debt

In this section we reviewed some existing literatures on Nigeria’s external debt. This review

targets its debt rescheduling and negotiations especially in Nigeria. According to Olufemi

(1990:63-80), “the benefits, which have accrued to Nigeria through debt relief negotiations

with the official and commercial bank creditors, were achieved at a high cost to the country”.

This is as a result of the enormous demand, which the negotiators have made on the country’s

scarce administrative and managerial resources.

These debt negotiations have also not been conducted on an equal basis. The country

lacks the bargaining power to match the experience and organization of her creditors.

Consequently, the sharing of burden between the weak “debtors” and strong “creditors” could

be anything but equitable. He further argued that until developing countries come together in a

cartel of debtors to negotiate on equal or near equal basis with the London and Paris Clubs, the

benefits derived from negotiations with these bodies are likely to remain minimal. In essence,

he argued that the debt of third world countries in general and Nigeria in particular is far from

being the result of domestic economic problems seeking for reforms, rather they are

instruments for perpetuating Western economic and political interest. The debt crisis is a

political problem and not essentially a macro-economic one, as they appear superficially. For

him the NEEDS reform package is a replica of this design.

Olukoshi, (1990:7-8) noted that, “there is always the misconception by some scholars

who treat Nigeria’s debt management as a purely technical economic problem devoid of

politics and political implications, which should therefore be handled with technical economic

46

tools”. To these groups of scholars the debt problem has absolutely nothing to do with politics

and should not be politicized if lasting solutions are to be found.

To that effect, the decisions of a government to contract a loan, the size and type of loan

contracted and the source of the money raised, as well as the use to which the loan is put and

process by which it is repaid, serviced or rescheduled all fall explicitly within the realm of the

political. It would be the height of naivety not to appreciate the fact that the decision of

government to adopt a certain debt management strategy has direct political implication

domestically and internationally. In his contribution, Abubakar, (1990:104-118), argued that

“foreign debt, which was hitherto a useful tool for promoting international trade and

development, has now become an obstacle, undermining the system of global trade and co-

operation”. According to him, mismanagement has been the major factor crippling the Nigerian

economy. The issue of the mismanagement of the economy becomes clearer if it is noted that

the debt service ratio has been taking a major percentage of the country’s export earnings; that

if there were proper planning and management of resources, Nigeria would not have found

itself in the present debt crisis. This development ironically ensures that “Nigeria is further

entrenched into the global capitalist system” (cited in Olukoshi, 1990:104 -118).

This perhaps goes to confirm what Gbolaham (1990) presented. According to him,

loans as a rule, even from a historical perspective are offered as instrument of diplomacy to

widen the sphere of influence of lending countries. External loans ensure the penetration of the

country’s economy and politics, and in the process, it also perpetuates or attempts to perpetuate

the dependence of the periphery on the center. Today the IMF and World Bank with the

backing of Western Powers are the Chief enforcers.

47

Kayoed Komolafe (2005:7) claims that “debt is a political instrument in the hands of the

imperialist creditor-nations”. It is an open secret that external lending is used in the foreign

policies of the creditor nations. The corruption or irresponsibility of Nigerian government

officials could not be a justification for fraudulent transfer pricing, unequal exchange, and

interest rates manipulation which have defined the relationship between Paris club creditors and

Nigeria for decades.

Awom and Adetutu (2005:7) agreed with few others that “Paris Club debt issue is a

political instrument for political matter, by emphasizing on the motion sponsored by Deputy

Speaker Austin Opera alongside 27 others; they wrote, the foreign debt issue is now a political

matter that has transcended economic consideration”. The use of 20 percent of the annual

budget to service the debt is a threat to democracy, especially as the debt keeps rising. In our

considered opinion, it transcends death of democracy to survival, development of Nigeria state

and citizens. Nigeria’s debt in 1985 was about US$19 billion and between that year and 2005,

the country has repaid US$37 billion. However, the debt as at December 2004 was US$35

billion.

Chamberlain, Founder and President of New Era Capital Corporation, a financial

advisor in the Global Private Client Group, of Merrill Lynch, saw “Nigeria’s debt to Paris club

relationship as part of the genesis of “dependency” and saw Nigeria’s House of Representative

recent approach as “Autarkic” (Chamberlain, 2005:4). To explain, he wrote that lately

Nigeria’s external debt situation has been in the news a lot, not merely because of its enormity,

but also due to statistics that recently revealed the calamitous nature of the debt. The accrued

interest on the debt over the years is simply alarming and if the growth trend continues, it is

unlikely that any future generation can ever eradicate bondage associated to it.

48

Paris Club debt to him has virtually deprived Nigeria of vital resources to tackle

pressing social needs for its teeming population. At over 130 million people, per capita income

is one of the lowest anywhere in the world. With a decaying infrastructure and health

care/education system in disarray, economic activity runs at a snail speed and life expectancy

has continued to dwindle in the past 20 years; majority of inhabitants cannot afford decent

housing, lack access to clean water, basic health care, and electricity is a reality in most parts of

the country. High infant mortality and the scourge of HIV/AIDS pandemic pose considerable

threat to the very existence of the population.

The call by the House of Representative that the government should cease debt

payment in a preamble to an autarkic resistance that poor countries could increasingly wield

against the debt cabal. He concluded that “if Nigeria ultimately fails to appeal to the moral

conscience of creditors, maybe one day it will standup and call their bluff and bear the

consequences” (Chamberlain, 2005:3-9).

This record, (www.nigeisfirst.org) sees Nigeria’s debt to Paris Club as a challenge to

Nigeria’s sustainable development. It was stated that Nigeria’s debts like that of most other

African countries appear to be on a ceaseless and perpetual increase. The more we pay, the

more we seem to owe. Doubt full deals, dud projects (white elephants) and dubious debts,

Nigeria is neck-deep in the debt trap.

Debt has become a millstone on the neck of Nigeria, jeopardizing her economic growth

and compromising her social development. We spend a lion’s share of our national income

servicing debt leaving little money for social services and infrastructural development, even

still much less for investment. In the process, we have paid more than we originally borrowed,

yet our debt, like a malignant virus, continues to multiply.

49

Agreement with the Paris Club provides rescheduling as a way of providing debt relief

for debtors but as we have seen, the strategy is virtually a fiasco. After four rescheduling, with

the Paris Club since 1986, Nigeria’s external debt burden today has not gotten any lighter. The

club has in fact, turned out to be a debt enhancing rather than debt reducing association. Paris

Club style of debt rescheduling as a means of lessening the debt burden of Nigeria seems to be

a failure. Anikwe (2001:23-27) states that “recently, Nigeria has made some progress in

addressing its debt problem through a rescheduling arrangement with the Paris Club”. The

relief offered was however merely palliative. It was insufficient to address the country’s acute

debt crisis. Nigeria’s huge eternal debt burden constitutes a major impediment to the

revitalization of its shattered economy as well as the alleviation of debilitating poverty.

High annual debt service payments have constrained government’s ability to finance

needed investment for poverty reduction and infrastructure rehabilitation. In 1999 for example,

spending on health represented only about 0.2% of GDP and 0.7% of GNP respectively,

compared with 3.4% spent on debt service during the same period. Ikem (1996:2) “saw the

rescheduling agreements as a way forward in the Nigeria debt to Paris Club because of the

amount involved, but he observed that apart from 1986, there is no discernable strong

correlation between the implementation of reform and the years that debt rescheduling

agreement were signed”. Ikem’s assertion applies to structural adjustment years which are not

our emphasis in this study.

Consequently, the standby arrangement led to three debt rescheduling agreements with

the Paris Club of creditor countries:

(a) 1986 agreement that rescheduled/refinanced debt worth bout US $4.6 billion

(b) 1989 agreement that re scheduled about US$5.2 billion, and

50

(c) 1991 agreement that rescheduled about US$3.3 billion. One would have expected that

a government eager to secure a rescheduling agreement would do everything to show

stronger “commitment” especially in the year right before the next rescheduling

meeting. In our own case the reverse is the case.

Van et al (1997:12) summed up the policy implementation record, by observing thus:

“the first fund programme (January 1988) quickly went off track; the second (February 1989-

May 1990) was successfully implemented; and the third (January, 1991-April 1992) also went

off track soon after its approval”. The writers opined that what brought about Nigeria’s debt to

Paris Club was dependency.

Gbolaham,(1990:119-131) argued that “because of Nigeria’s integration into the

Western capitalist system and the weak solidarity or harmony of interest among debtor nations,

the options for cartelization, default and repudiation do not appear feasible, because of the

drastic and lasting consequence bedeviling these options”. Ihonvbere,(1989:81-91) “agreed

with the above contention and stated that the use of default, cartelization and cancellation,

albeit the most rational and far-reaching responses to the debt crisis is not feasible in the short

term”. This is because most African leaders and elites thrive on neo-colonialism and romance

with imperialism. In that the governments of imperialist states have politically supported bad

leadership that oversees these processes of underdevelopment.

One would join Olukoshi, (1990) in agreeing that the debt management strategies,

which the government of Nigeria adopted, have failed to ease the debt burden of the country

and reduce its external liabilities, and therefore do not seem capable of paving the way for a

lasting solution to the debt crisis. In his bid to proffer some alternative proposals, he stated as

follows:

51

First, any debt management strategy to be really useful must not in anyway entail compromising of domestic economic growth in the debtor country. Second, the debt management programme should be such as to help resolve the crisis to the benefits of the underprivileged classes of society. This might entail a total rejection of a linkage between debt management and International Monetary Fund dictated adjustment programmes, which because of their obsession with unregulated market forces, bring untold hardship on the poor and indisposed. Thirdly, the debt management strategy should aim at the root and branch destruction of the structures embedded in the domestic economy of the debtor country, which makes it prone to a debt crisis on a periodic basis Olukoshi, (1990:200-207).

As was aptly stated by Ofeimun (2005:10), “Nigeria’s Western creditors are genuinely

having a good laugh at Nigeria’s expense”. For him the question is how can people who are

keeping stolen money from Nigerian governments in their vaults insist that unless you are seen

to be fighting corruption they will not give you debt forgiveness? Why is it not the Nigerian

President giving the Western Creditors the unflappable condition that unless they repartrait the

looted fund in their vaults, Nigeria would not pay one kobo more of the debt supposedly owed

to the Paris club? Ofeimi seems to have ignored the weak state syndrome of Nigeria before the

West.

He further asserts that Nigerian debt managers prefer to kneel down before creditors

who have no patriotic stake in whether Nigerian economy crashes or sustains. They have opted

for prostration before the gods of the international debt rackets taking it as grand strategy to

knee with begging bowl, demanding to be treated the same ways as drought stricken and

famine ravaged countries for debt forgiveness.

Atakpu, Ugolor and Okonjo-Iweala (2001:6-8), “saw Paris Club debt as a problem of

contingent liabilities and the absence of a debt strategy”. They outlined that one major issue

that aggravated the Nigerian debt problem is that some of debt service obligations were in the

form of contingent liabilities that had to be taken on board but were unplanned for. In the early

52

1980s for example many state governments borrowed on the international capital markets for

“so called” development projects. The original idea was that many of these projects would earn

a rate of return sufficiently high to enable the borrowers to service the debt.

Due to mismanagement and wide scale corruption, this turned out not to be the case and

the obligations fell on the federal government as explicitly contingent liabilities, in those

instances where it had guaranteed the loan and implicitly where it had not. The long absence of

a national debt strategy linked to an overall macro economic framework and a development

strategy. Osae – Browin (2005:1-7) in his article Does Nigeria Deserve Debt Forgiveness stated

that “our creditor countries do not have the interest of Nigerians at heart in their deals. The

painful part of the debt issues, which makes Nigerian case insurmountable, is that despite the

huge amount going into servicing the nation’s external debts, it keeps rising”. Even though

Nigeria had spent an excess of $6.827 billion on external debts in the five years between 1999

and 2003, the nation’s external debt portfolio still rose by more than $4 billion from $28 billion

in 1999 to $32.92 billion in 2003.

There is nothing concrete to show what the billions of dollars now bleeding the nation

were spent on. It is general knowledge that a good chunk of these borrowed monies found their

way back into foreign accounts, while a good chunk never left the foreign accounts. This high

level of corruption was done with either the active connivance or knowledge of the lending

agencies, which never really had the interest of Nigerians at heart. Indeed, it seems like

collaborative conspiracy between indigenous Nigeria bourgeois and foreign counterparts.

Ugolor (2001:1-9) “saw Nigeria’s debt to Paris club as illegitimate and odious, in that military

dictators who plundered the nation’s resources including external loans for selfish ends

contracted it”. From the overthrow of democratic government in 1983 by Major General Buhari

53

(1983-1984) through General Ibrahim Babangida’s eight year rule to late General Sani

Abacha’s five year tyranny (1993-1998) and General Abdulsalami Abubakar’s regime in

(1998-1999), the nation was under military siege with serious human rights abuses and

widespread corruption, yet the Western World kept on lending to these dictators. Before the

military took over in 1983, Nigeria’s external debt was US$8.93 billion and rose dramatically

to US $19.55 billion in 1985 and ballooned to US $34.1 billion in 1995. The debt is illegitimate

and most of it was carted away to the overseas and offshore accounts of the dictators and their

cronies. Some of the money did not enter Nigeria.

Turnbull (1998:1-11) in looking at the involvement of the financial institutions on the

debt issue wrote that “there has been a willingness in government and financial circles to solve

the debt problem for sometime, and many initiatives have been considered”. When agreed

upon, these are very often carried out through Paris Club. The structural adjustment programme

(SAP) is probably the best known initiative, and most widely implemented by the World Bank

and the International Monetary Fund (IMF), two of the major creditors, also known as the

Bretton Woods Institution (BWI). They are one of the most stringent methods and are usually

imposed on a debtor country.

This initiative was supposed to be ways of helping indebted countries repay their debt,

to stabilize their economies and to regain a position in the global economic market. It was also

supposed to be “short and sharp” solution but has ended up as a long-term enforcement of cut

backs in government spending and a wholesale restructuring of a country’s economy

(www.thewhitefather.org.uk).

The International Conference on Sustainable Debt Strategy held in Abuja in 2001 after

looking at the various rescheduling agreements sought for a way forward and concluded that

54

Nigeria should pursue vigorously all the options for debt relief, including outright cancellation.

Although some participants would opt for unilateral repudiation of the debt, the dominant view

was that Nigeria should go for negotiated resolution of the crisis (DMO 2001 or

www.cludeparis.org).

Sanusi,(2005:45)stated that the proposed debt-refinancing framework raises other

domestic financial management issues: How do we relate the building up of debt arrears, with

attendant penalties, simultaneously with rising foreign exchange reserves? How do we

reconcile the intended “Swap” of $12 billion with indeterminate future reductions of debt, or

indeed buy-back payments? How can we justify the government’s announced inability to fund

the 2005 budget fully with the reason being “slower than expected growth of excess revenues”

in the same budget year during which $6-12 billion may be utilized in debt treatment in favour

of the Paris Club. Kalu (2005:7) asserts:

It is not surprising that the proposed formula is not being classified by the Paris Club as “debt relief” but the exceptional treatment of Nigeria’s debt in the Words of the Paris Club. With Considerable aplomb and sense of humor, the Paris Club press release concludes: “these exceptional treatments of Nigeria’s debt would offer a fair, sustainable and definitive solution to Paris Club creditor and Nigeria”. This proposed debt exit strategy exposes a rather poor choice of domestic priorities (www.nigeriaworld.com).

Muhtar,(2005:4-12)having seen that the many rescheduling agreements signed with

Paris Club of creditors in the past1986,1989,1991and 2000 had yielded no relief, on the horizon

feels that “Nigeria will benefit enormously from the exceptional treatment of Nigeria’s debt”.

He stated that, many people question the justification of using part of our excess crude savings

to secure a permanent exit from the debt trap. It is true, he said that one could put the money to

other uses or to rebuild infrastructure and improve social service delivery but Nigerians have to

55

judge whether they want to seize this window of opportunity to escape a debt trap, or continue

to remain in perpetual grip of Western Creditors.

He also questioned, why should Nigerians be denied the opportunity presented by this

deal to break the endless cycle of rescheduling and escape the debt trap? Why should Nigerian

people be denied the resource liberated by this debt deal as dividend of democracy which

brings concrete difference to their lives? Why should the current and future generation of

Nigerians go on suffering for the mismanagement of former days? We have been in a dreadful

debt spiral not of our making. This debt relief puts an end to that spiral. It draw a line under the

past and opens to Nigeria a fresh start. It is our second declaration of independence. It is worthy

of celebration (Muhtar, 2005:9).

In view of the ongoing, Okongwu (2005:1) stated that “On the so-called debt relief … I

hope there will be something to celebrate in the future, right now, however there is nothing to

celebrate… the current celebration by the administration is both myopic and a strategic

negotiating blunder”. Gabriel and Ujah (2005:1-4) in their views on the “exceptional treatment

of Nigeria’s debt” and the involvement of IMF opines that:

The IMF/World Bank, the Paris Club Nigeria would clear arrears of about $6 billion on its $30 billion Paris Club debt, following which there would be a stock reduction on the Naples term and a buy-back of the remainder to provide an exit for the Paris Club’s debt. The whole package is such that we can expect debt relief of about 60 percent on our current Paris Club debt. This effort would re-present a write off of close to $20 billion for Nigeria, which compares favourably with the $40 billion write-off for 18 low-income heavily indebted countries out of which 14 are Africans. An agreement to this effect had been reached between the Federal government and an International Monetary Fund (IMF) negotiating team led by the Nigerian team leader at the fund, Mr.Manachem Ratz.TheIMF would continue to monitor the home–grown economic reform being implemented by the Federal Government to ensure that the reform, which has been approved as a Policy Support Instrument (PSI), remained on track. The debt relief represents a historic achievement (www.vangaurdngr.com).

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Aluko,(2001) argued that:

the foreign debt overhang in Nigeria increased from zero in 1960, to $1 billion in 1979, $11.5 billion in 1986, $33.2 billion in 1990, and $35 billion in 2000, about $18 billion of which was the current accumulated interest. In actual fact, Nigeria borrowed about $17.5 billion between 1979 and today, repaid about $33 billion during the period, and still owes $35 billion. Nigeria’s and the London Club of creditors (the Paris Club is the same creditor countries when they act as governments, as the London Club when they act as bank lenders) have involved Nigeria, like other African debtor countries, in debt rescheduling, debt conversion, debt-buyback and deferred payments, all of which had exacerbated the debt burden, rather than debt relief or debt cancellation,(Aluko,2001:3).

The British Broadcasting Corporation (BBC, 2005) on the exceptional treatment of

Nigeria’s debt remarked that about $18 bn (E 10 bn) of debt will be written off and Nigeria

plans to buy back a chunk of outstanding loans. The country owes the rest of the world $35 bn,

and the new talks are linked to an agreement between Nigeria and the IMF on debt repayments.

Nigeria is the world’s seventh largest oil exporter and Africa’s most populous nation, but also

one of its poorest. About $31 bn of Nigeria’s debt is owed to members of the 19 – nation –

strong – Paris Club. It has not received any fresh loans since 1992, but repaid $8 bn debt since

then. Part of Nigeria’s case in asking for debt relief has been that most of the money it owed

was lent to corrupt military dictators, a fact the African country says was well known by

foreign banks and governments.

The UK’s Chancellor of the Exchequer, Gordon Brown, said debt relief combined with

debt buy-back would “mean that there is 100% debt relief for Nigeria possibly over the next six

months” (newbbc.co.uk). Omoh (2005:1-10) stated that the Paris Club recently agreed to offer

Nigeria debt relief in principle. The proposed debt relief is subject to the country reaching an

agreement with the IMF on payment of debt arrears. The IMF team was in the country to begin

the talks with a view to developing a policy framework. The talks focused on how to direct

57

policy framework in Nigeria to channel resources to meet the challenges of Millennium

Development Goals (MDGs).

On June 30, the Paris Club of creditor countries agreed in principle to open talks with

Nigeria on “comprehensive debt treatment” in the coming months. The talks with the IMF, and

in September with the Paris Club would be based on the Club’s So-called Naples terms,

implying a 67 percent reduction of debt after a possible “topping up” of amounts due(Paris

Club 2005) . However, Nigeria is proposed to get 60 percent debt relief as against 67 percent

for the Highly Indebted Poor Countries (HIPC). It is envisaged that the debt relief would be

significant, ensuring long-term debt sustainability. It represents an important contribution by

Nigeria’s Paris Club creditors to its National Economic Empowerment Development Strategy

(NEEDS). Nigeria had opted for a home grown economic policy called the National Economic

Empowerment Development Strategy (NEEDS). It would also help Nigeria in its fight against

poverty as advocated by its protagonist.

The Club had stated at its meeting, where the debt deal was agreed, that member

countries had noted the economic reform programme implemented by the Nigeria authorities

since 2003 and of its willingness to take advantage of exceptional revenues to finance an exit

treatment form the Paris Club. The Club also said it had noted that Nigeria had recently been

declared eligible for loans from the International Development Association (IDA), the soft-loan

arm of the World Bank (DMO, 2007). Nigeria had also decided to renew closer relations with

International Financial Institution.

The Club agreed that as soon as Nigeria concluded a policy support instrument with the

IMF, and since it had shown it was ready “to pay all its arrears toward Paris Club creditors and

to treat them equitability”, debt treatment by the Club would include debt reduction up to so-

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called Naples terms “on eligible debts and a buyback at a market-related discount”

(www.vanguard-ngr.com). The question of whether NEEDS attracted debt relief is still

hanging, hence the need for more inquiry. Scholars like Asobie (1990); Ogwu (1991); Adefuye

(1992); Ifesinachi (2000); Fawole (2003); Okolie (2008) among others have made useful

contributions on economic diplomacy of Nigerian state but the existing literature did not

attempt analysis of economic reform package of the new economic empowerment and

development strategy.

Theoretical Framework

In the midst of variety of tools used in explaining the conduct of Nigeria’s foreign

policy, we adopted some basic propositions emanating from the Marxist political economy

approach despite the fact that “attempts by scholars and practitioners to evolve universally

applicable theoretical framework in the explanation of global issues has always ended in

contradictory intellectual nullity and barefoot prognosis (Okolie 2007:146). Hence, Asobie

(1990:3-52) unfolds the “competing paradigm and theoretical tradition” existing in the

literature on Nigeria’s foreign policy and identified the realist paradigm, the behavioural

approach and the Marxist political economy as the dominant paradigmatic orientations in the

study and analyses of foreign policy.

He also noted that only few attempts have been made to apply explicit theoretical

paradigms to the analysis of foreign policy. To bridge the gap, he noted that there is need to

integrate selected elements drawn from the Marxist structural approach to the analysis of

foreign policy. His view blends with elements of decision- making model rooted in behavioural

paradigm with Marxist political economy orientation. However, how this blend would be done

was not properly articulated. This not withstanding, we shall not be saddled with much

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theoretical and analytical debate. Arising from the above analysis underscores the fact, that

most writings in Nigeria’s foreign policy are mere assemblage of empirical descriptions and

researches with the balance of power model, billiard ball approach to the analysis of

international relations ( Asobie, 19901).

Nweke, (1988:44) identified four categories of theories which have informed writings

on Nigeria’s foreign policy. They include, “the behavioural theory, the decision-making

theory, the strategic and defense theories and Utopia and realist theories”. Infact, the realist

tradition holds sway since virtually all the writings on Nigeria’s external relations has been

shrouded in state-centrism that has its intellectual roots to the realist theories. Exponents of this

perspective not only regard states as clearly the principal actors in the international arena but

also the makers and implementors of foreign policy that bind every other actor. They argue that

the “external behaviour of states is shaped, influenced or to a large extent, determined by the

traditional element of national power and the external environment” ( Morgenthau, 1983,

Asobie 1990:10).

Nevertheless, the realist persuasion is found to be fraught with fundamental defects. It

proved to be unuseful as analytical framework in international relations, as it merely

rationalizes the existing global development inequality. In a similar vein, the behavioural

approach is preoccupied with how decisions are made at official level. It hence focuses on the

official decision maker and explains political process in terms of motivations, feelings and

personalities of the participants as individual human beings and thereby seeks to evolve a

general theory of human behaviour.

Despite the fact, that Gray (1965); Idang (1973); and Asobie (1980) applied this

framework in their distinct works, it has proved to be counter-productive, as the attempt to

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understand international relations by focus on the prism of individual decision makers has

made theorizing virtually impossible. Arising from the above arguments, Marxist political

economy therefore forms the plank of our analysis. Marxist political economy started with Karl

Marx (1818-1883) and Fredrick Engels (1820-1895). They view political economy as a

comprehensive social science of change from the profit and exploitative capitalist class to a

humane, social and public property system.

Although Marx and Engels developed the idea, it was V.I. Lenin that presented it in

the study of world capitalist system. The Marxist political economy paradigm has two

distinguishing features in terms of orientation: First, it stresses the dynamic character of social

reality and secondly, assumes the relatedness of the different and complex elements of society.

Above all, in terms of focus, it highlights the “primacy of material conditions, particularly

economic factors in the explanation of social life” (Ake, 1981). As a preferred alternative

framework. It contains a strong and explicit theoretical formulation as a focus of research

which will, no doubt, continue to be significantly inductive and empirical (Moon, 1991:34).

He further asserts that “the environment which shapes the character and behaviour of

States must also be understood in global terms and with respect to both economic and political

phenomena; the health of many Nations foreign policy lies in the sphere of economic relations

which bear upon the balance of class forces and the distribution of economic surpluses within

the nation” (Moon,1991:36).Classical Marxian political economy analysis conceives political

economy in terms of the laws governing the social relations that evolve between people in the

process of production, distribution, exchange and consumption of the material benefits in

human society at various stages of its development (see Marx and Engels 1975; Nikitin 1983;

Buzuev and Gorodov 1987). Also, while liberal economics concentrates primarily on the

61

workings of the economy neglecting the linking network between the economy and political

affairs; Marxian scholarship closes the gap, by focusing on the social structure of the society

with particular emphasis on dialectical materialism as a method of analysis.

Dialectical materialism otherwise known as economic determinism treats the economy

and the political as monolithic units that continue to exert remarkable influence on each other.

According to Ogban, this is akin to the dynamics of social production which posists among

others that:

The fundamental concern of human beings, and perhaps of other living things, is

survival and security.

And that for the human being to survive and have security he/she must produce and

reproduce human needs, including the production and reproduction of human kind. It is

also accepted as self evident that managerial production and reproduction of human

needs is essentially so (interpersonal relation), not individual.

In every social production and reproduction system there must be someone or people

to make binding decision on what is produced, distributed, exchanged, and or consumed

by who and for who.

Those who decide, choose what to produce, when, how, where, by who and for who,

also control the social production process and in their favour (Ogban , 2005:15-16).

This also explain economic relations among states and the international conditions of

production including international division of labour, international exchange, world market and

crisis. Hence, the reform package of national economic empowerment and development

strategy was complemented by adjustment in international behaviour/relations of Nigerian State

to suit the interest of the dominant class that initiated the reform agenda as follows:

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First, Marxist political economy paradigm explains the interest of the dominant class in

contemporary international system which is market expansionism. Industrialized countries

control the global economic pot and they have also open influence on determining what

happens at international financial institutions like International Monetary Fund and World

Bank. The framework enhances our appreciation of the fact that the principles of anti-

protectionism of liberalization, deregulation, devaluation, removal of subsidies and

monetization imposed on us are mere exploitative design by the industrial West.

Secondly, although liberalization impacts positively on expansion of Nigerian market

through inflow of foreign goods, capital, resulting in the increase in foreign direct investment

from advanced countries, it benefits them more because their goods find solace in Nigeria

markets to the detriment of out domestic goods. Our asymmetrical economic relationship with

the industrialized countries empowers them to decide, choose what to produce, distribute and

mode of exchange all in their favour. Hence, the dominance of multi oriented reform packages

aimed at transforming our economy is more of a design for the survival and security of the

West. The economic structure of exploitative production relations with Nigeria enhances role

dominance in international economic relations.

Thirdly, the reform’s welfarist policies impacted negatively on the people as they were

forced to pay more for social services with a fall in real income and unemployment becoming

endemic. Its effect is the infliction of poverty on Nigerian masses and the consequent

movement of high skilled experts from Nigeria to industrialized countries. The brain drain

deprives us personnel that end up contributing to the economies of the developed countries

hence, poaching the best and brightest highly skilled work force that desperately needs them

thereby undermining human development.

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Fourthly, the debt relief extended to Nigeria through the reform subordinates Nigerian

economy against the advanced economies to a beggar thy neigbour status in international

economic relations. Its effect is the low value imposed on Nigeria Naira by International

Monetary Fund and World Bank through the reform package of devaluation, debt repudiation,

re-financing and re-scheduling.

Hypotheses

We shall explore the following hypotheses:

1. Economic diplomacy of national economic empowerment and development strategy did

not reduce the incidence of poverty in Nigeria

2. Economic diplomacy of national economic empowerment and development strategy did

not reduce the incidence of unemployment in Nigeria.

3. Economic diplomacy of national economic empowerment and development strategy

remarkably enhanced the inflow of foreign direct investment from advanced capitalist

countries to Nigeria.

4. Economic diplomacy of national economic empowerment and development strategy

was responsible for the debt relief extended to Nigeria by International Monetary Fund

and World Bank.

Method of Data Collection

According to Leege and Francis (1974:192) “the dominant family of methods and

techniques for data collection in the social sciences involves respondents or subject’s self report

of behaviour, knowledge, meaning and location”. They maintain that commonly an interview

schedule or questionnaire is used to generate self report are autobiographies, letters, recorded

conversation and diaries are also employed. They argued further that many important

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governmental reports and most of files stored by social science data achieves had their origin in

a questionnaire. In other words, documentary data is generated through instruments that require

an oral or written verbal act removed in time from the original act. However, in the opinion of

Uniarmikogbo (1972:21) data collection “can be broadly classified into two: primary and

secondary sources”.

In this study, the method of data collection is documentary method which will be based

on secondary source of data. The secondary source is particularly useful where information is

already documented in official records. “These are useful of past events and their contexts are

independent of our selection process” (Madge, 1967). Also, the use of secondary data saves

time, money through a target and random selection of existing materials for investigating stated

problems and hypotheses testing. These include books, journals, articles, workshop

papers/seminar, magazines, newspapers, printed materials from existing policy documents from

international organization and non governmental organization as well as internet source

materials that deals on diplomacy and conduct of Nigeria’s external relations, with particular

emphasis on economic reform agenda of Olusegun Obasanjo’s administration.

Method of Data Analysis

It is imperative that data generated in the course of any research must be analyzed

through the application of a given method. In the light of the above the study adopted the

logical content analysis. Content analysis, as a matter of fact implies the search for the

objective description of the manifest content of communication. White (1990:24) maintains that

content analysis “enables us to scrutinize the contents of a document in order to quantify the

message it relates”. Therefore, the application of content analysis which involves rigorous and

65

systematic analysis of the contents of documents becomes appropriate in our analytical

methodological requirements.

In the process we shall provide a documented description of outcomes of economic

diplomacy arising from implementation of Nigeria’s foreign policy. Secondly, we will attempt

to capture the driving force behind economic diplomacy of Nigerian state. The analytical

narrative will therefore be used to address issues relating to the economic diplomatic pattern

understudy. To complement the descriptive and analytical methods, a qualitative testing of the

hypothesis highlighted in the study shall be employed.

Research Design

Research design means the structuring of investigation aimed at identifying variables

and their relationship with one another. “This is used for the purpose of obtaining data to

enable the researcher test hypotheses or answer research question” (Asika1991:27). In the

opinion of Leege and Francis (1974:66) “As a logic each research design is like a blue print

that tells us how to reach plausible answers to research problems”. They maintain that we

many ask three questions of the blue print or research design viz: (1) Will the design provide

plausible answers at the desired level of explanation and in a highly sensitive way? (2) Does it

allow for the plausible rival hypothesis? and (3) Is the design practical and ethical? All these

points to the fact that research design serves as a useful guide in our efforts to generate data for

the research.

In the process, we shall employ trend pattern of longitudinal survey. In trend, economic

indicators, variables are observed over the years. Time counts or exists as a variable although

we tend not to measure but accept it as factor responsible for changes in the independent

variables. Thus time is stated as [T] in the design. In trend, each set of observation is directed at

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different samples of the same population at various points in time as represented

diagrammatically thus:

Trend

The observations are fused on one or more independent variable. Economic trend

following the reform package of national economic empowerment and development strategy

and its impact on Nigeria external relations will be observed with particular emphasis on key

socio economic indicators like per capita income, Gross Domestic Product, Gross National

Product, Poverty Level, health, human development and education. Economic trends in this

case, are the focus of our observation and analysis. The choice of this method is informed by

the fact that the research is geared towards the collection of data for hypothesis testing,

answering the research question as well as explaining the relationship among variables. In the

process the trends of economic diplomacy of national economic empowerment and

development strategy and its impacts on Nigeria’s foreign policy with be observed with

emphasis on foreign direct investment and sustainable human development of Nigeria.

Logical Trend Data Framework

Logical trend data framework is an auxiliary compass that directs the researcher how to

extract and direct observation that validates the hypothesis. In the process it identifies

independent variable, dependent variable, main indicators, data sources and methods of data

analysis.

T1

T2

T3

Tn

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S/N

Hypotheses Variables Main Indictors Data Source Data Analysis

1 Economic diplomacy of NEEDS did not reduce the incidence of poverty in Nigeria

X:Independent Gross Domestic product, Gross National product. Y: Dependent Low Per Capital income

Low per capital Income. low GDP, GNP Poverty level, illiteracy , poor, health situation infant mortality rate, death rate, condition of HIV/ aids pandemic, environmental related diseases, unemployment

Documentary Content Analysis

2 Economic diplomacy of NEEDS did not reduce the incidence of unemployment in Nigeria

X:Independent Low economic growth Y:Dependent Low industrialization

Prevalence of subsistence agriculture Non availability of infrastructure for mechanization i.e power supply, machines

Documentary Content Analysis

3

Economic diplomacy of NEEDS remarkably enhanced the inflow of foreign direct Investment from advanced Capitalist economies to Nigeria

X:Independent Reform package of NEEDS to attract GDP &GNP Y: Dependent Liberalization, removal of subsidy, deregulation and devaluation of currency, privatization &commercialization

Increase in volume of trade, and investment. Stable foreign reserve Influx of foreign goods and investment into Nigeria markets i.e telecommunication gadgets: MTN,GLO, Zain, Etisalat

Documentary Content Analysis

4

Economic diplomacy of NEEDS was responsible for the debt relief extended to Nigeria by International Financial Institutions

X: Independent Debt relief on Nigeria’s external loan Y: Dependent IMF & World Bank Conditionalities for debt relief

Debt service/relief obligations: debt rescheduling, refinancing,. repudiation, forgiveness & cancellation Devaluation of Naira, deregulation of the down stream sector, removal of subsidies, privatitization, Commercialization, Monetization.

Documentary Content Analysis

Source: (Researcher’s Framework) 2011

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Validity and Reliability

According to Asika (1991:69) validity is the degree to which a measuring instrument

measures what is designed to measure. If research design is correctly designed, it measures

what it is supposed to measure. If it is faulty, it measures something which may be not what it

is supposed to measure to lead to incorrect findings. Validity can be applied systematically in

three areas of research: validity of findings, validity of measurements and validity of checking

the correspondence between the variable or concept being-measured and other variables or

concepts. Asika (1991:73) defines reliability as the consistency between independent

measurements of the same phenomenon. Reliability implies the stability, dependability and

predictability of a measuring instrument. Two ways to look at reliability are internal and

external consistencies. The basic question we wish to address here is to find out whether the

research technique is reliable or consistent; and whether it is actually measuring what it ought

to measure.

In view of the research method adopted for this study, content validity measurement is

applied. Content validity emphasizes on the scope implied by the topic of study. Content

validity ask the following questions:

a. Have all the relevant dimension of the topic been fully explored.

b. Does the measuring instrument adequately cover the entire dimension or at least a good

representation of all the dimensions of the topic research?

Rigorous content analysis of documents for information related to the topic of study, such as

research papers, government official documents/newspapers and publications, textbooks was

69

applied effectively to achieve validity and reliability of research on economic diplomacy and

conduct of Nigeria’s foreign policy. It is expected that our hypothesis will be validated accordingly.

CHAPTER TWO

ECONOMIC DIPLOMACY AND CONDUCT OF NIGERIA’S EXTERNAL

RELATIONS

This chapter introduces the concept of foreign policy and economic diplomacy. It also

addressed the process of foreign policy making and implementation in Nigeria. This has been a

challenge for the political leadership and bureaucrats in the Ministry of Foreign Affairs in view

of their conflicting perception and self interest. This makes it difficult to arrive at a common

position. Even when this is done, the difference between their perception and self interest

distorts the implementation. The problem associated with the implementation of economic

diplomacy of national economic empowerment and development strategy is akin to this

scenario.

Nigerian Foreign Policy

In international environment, states act as dominant actors irrespective of the roles of

non- state actors like non governmental organizations. The configuration of forces in the

contemporary international system has placed complementary roles of non- state actors at a

strategic point. Hence, Asobie, (1993:1) avers that “the concept of social forces, social

movement and correlation of forces provide a basis for a deeper and more comprehensive

understanding of the structure of international system than the traditional notions of states,

alliances of states and balance of power”. However, this view fails to underscore the fact that

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these social forces and movement had their roots at the states or amalgamation of states in the

international system.

Foreign policy therefore, is the policy pronouncement of states, geared towards

achieving the national interest of states in their relationship with other states in international

political environment. Foreign policy pronouncement is no more than an articulation of the

general principles or policy that forms the basis of government decision makers’ actions in

foreign affairs. In such foreign policy pronouncement, government decision makers declare the

national goals, interests and priorities which they consider to be of primary concern to them in

international affairs. According to Okolie (2008:4) “as an act of internationalizing domestic

resolve, foreign policy is used by constituent states to articulate and project national interest of

a given state”. It is therefore “the frame work through which states responds to both domestic

and international demands and challenges” (see, Ogunsannwo, 1986; Olusanya and Akindele,

1990; Idang, 2003). In the opinion of Ogwu (2006:6), “the ultimate objective of any foreign

policy is to achieve short range or long range goals that ensure the superiority of one sovereign

national actor over another”. Foreign policy therefore is the pursuit of national interest.

Foreign policy pronouncement is different from policy implementation in so far as

policy implementation is any concrete action taken by a state in response to real or potential or

alleged threat to its national interest, its security and its internal stability. This action taken in

response to such threat could be within and outside the country. One fundamental trait of this

action is that it may or may not conform to policy pronouncement” (Eze, 2009:35). The

inconsistencies in policy make it necessary not to accept the reality of any Nigerian leader’s

policy pronouncement until policy action is taken. The argument goes that characters,

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personality factors override the major thrusts in the implementation of foreign policy among

respective Nigerian leaders since independence.

This personality factors have influenced several shifts in Nigerian foreign policy. Under

Sir Abubakar Tafawa Balewa (1960-1966), it has been characterized as “pragmatic” in sharp

contrast to the “militant and radical” orientation of General Yakubu Gowon’s regime (1966-

1975) and the revolutionary reformist posture of General Muhammed/Olusegun Obasanjo’s

regimes (1975-1979). In 1979 a fourth shift emerged, which in the perception of its prime

mover, Alhaji Shehu Shagari, can be characterized as a globalist defined in “Afro-Centric’

terms.

Since Shagari’s ouster and successive military interregnum of Buhari/Idiagbon, after

Ibrahim Babaginda, Nigeria witnessed another oscillation of personality influences from an

assertative nationalist posture of Buhari/Idiagbon to a retreat from Afro-centrism to a

personalized tightly controlled sub - regionalist posture that emphasized interventionism and

activist economic diplomatic foreign policy that diverts attention from the strains and stress of

the economy, society and polity. This features in Nigerian foreign policy since General Sani

Abacha supplanted the Interim National Government of Ernest Shonekan to the regime of

Abdulsalami Abubakar.

Arising from the interplay of personality traits of Nigerian political leaders is a replay of

the diplomacy thrust of the most recent democratically elected leaders like Olusegun Obsanjo’s

economic/shuttle diplomacy which is at variance with economic diplomacy of Ibrahim

Babangida and the beaming citizen diplomacy of late President Shehu Musa Yar’adua in

operation today. Aligning with this personality influence on foreign policy Igwe, (2002:157)

maintains that “foreign policy is the coordinated application of the elements of national power

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for the promotion of the national interest as defined by the ruling class in relation between

states and other international actors”. The President at any regime is the arrow head of the

ruling class, his interest points to the real definition of his policy. Nuamah (2003:6) adopts the

view that “personalities and characters have influenced foreign policy formulation and

implementation”. Embracing these views shows that configuration of personality traits of both

political and bureaucratic leaders in charge of foreign policy making and implementation either

undermine or facilitate policy at any particular point in time.

Nigeria: Foreign Policy Formulation and Implementation from 1960 to 2010

Foreign policy refers to “the totality of a country’s official actions and relations with

other countries, carried out not only by the Ministry of External Affairs but also by other

ministerial and quasi – Ministerial Departments, like Defense, Information, Education

Transport, Communication and Finance” (Ogwu, 2005:20). That is, it denotes the official

conduct of external or international relations by designated political office holders and

bureaucrats of States. It outlines the objectives of states in political, economic, cultural and

security relations with the outer world. These policies assist the domestic ministries to plan and

shape policies.

The Chairman, Senate Committee on Foreign Affairs, Aminu Jubril conceptualizes

foreign policy “as a contraction of domestic policies which, to all intents and purposes, enables

any nation’s relevance and participation in the international system” (PAC, 2005:23). That is, it

is the decisions a nation take in respect of its relations with another nation or the aggregate of a

country’s policies in its interaction with other members of the international community and

taking considerations of certain variables of domestic and external environment. Aminu further

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states that, no nation can pursue a meaningful, certainly successful, foreign policy removed

from its actual status, politically, economically and socially.

The foreign policy of states world over “are not only determined and shaped by factors

of geographical location, population, economic endowment, national ideology, personality and

the perception of policy makers etc, they are increasingly affected by the structure and

configuration of powers in the international system” (Nigerian Forum, 1999:13). The foreign

policy of any nation therefore may represent a reflection of its domestic reality.

The business of foreign policy according to Adegbule, (2006:250) is to protect the

national interest of the sovereign state actors within the international system in whatever

manner the national interest is understood and articulated. Thus, national interest of a state

usually is as defined by its government and used by politicians in seeking support for a

particular course of action especially in foreign policy. Mclean, (1999:333) argues that

“national interest is a powerful device for invoking support. The term is used to seek support

for domestic policy objectives”. In foreign policy matters, it invokes an image of the nation or

the nation-state, defending its interest within the anarchic international system where dangers

abound and the interests of nations are always at risk. Foreign policy pragmatically speaking,

deals with the perennial controversy over the limits of enlightened self-interests of each actor in

the international system. The pre-occupation of foreign policies include the survival of the

nation itself, the enhancement of national security, prosperity or economic interest, protection

of national prestige and, promotion of national peace (Obiozor, 2003:34).

In the process of policy making and implementation “institution matter a great deal”

(Olusanya and Akindele, 1999:532). These institutions legitimize both the policy process and

outcomes. Thus, in the formulation and implementation of Nigeria’s foreign policy, the

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seemingly anarchical but definitely pluralistic institutional structure that emerged since 1960

confronts scholars with the tantalizing challenges of providing an informed analysis of the

organizational paradigm through which specific decisions are processed, made and

implemented by the relevant actors. There is no doubt therefore, that the institutionalization of

structures and process enhances prospects for administrative modernization, hence, assist in

consolidating development.

The analysis of Nigeria’s foreign policy according to Salami (2007:71), “is generally

influenced by some seemingly accepted precepts and practices to the extent that any deviation

from the precept and practices appear out of standard and fashion”. The mechanism for the

administration of Nigeria’s foreign policy commenced fully in the late 1960. “At independence,

Prime Minister Balewa created the Ministry of Foreign Affairs and Commonwealth Relations”

(Olusanya and Akindele, 1986:17). Arrangements began to be put in place for the conduct of

modern diplomacy through the training of the initial staff that manned the various diplomatic

missions (Adeniji, 2000:5). These staff however, was recruited in 1957. Among the officers are

Messrs Tayo Ogunsulire, Philip Asiodu, Aminu Sanusi, John Garba, Leslie Harriman,

Adedokun Haastrup, Chuks Ifeagwu, Chika Chukwura, Dickson Igwe, John Ukaegbu, Olu

Omololu and Soji Williams (Vanguard on line, 2009:1). They were the nucleus of Nigeria

Foreign Service Officers.

These staff was trained in West-Minister model and this influenced the early foreign

policies of the young states. Olusanya and Akindele, (1960:72) observes that “in terms of the

processing of foreign policy decision making, six patterns in Nigeria’s foreign policy history

can be readily identified”. This is the decision making input by the Presidency, the Parliament,

the Ministry of Foreign affairs, the foreign policy elite, the national elite and popular cultural

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groups. However, it is important to state that the Ministry of Foreign Affairs in co-operation

with its external arms all over the world remains the dominant agency in foreign policy

decision making. That is, foreign policy advice and foreign policy implementation constitute its

broad twin responsibilities. Ogwu, (2008:53) argues that

foreign policy making structures must take into cognizance of the fact that in a Presidential system of government where a popularly elected President is the Chief Executive, as is in Nigeria, the conduct of foreign policy, as in any other public policy, must, in the final analysis, also be examined in the wider context of the large institutional interaction between the executive and the legislative arm as well as other non state actors.

What is obvious, therefore, is that no single person or institution makes the states’

foreign policy. While the President is the principal foreign policy actor, he, as a matter of

routine, relies on the advice from the Minister of Foreign Affairs who in turn relies on the

advice from Professional Foreign Service Officers in the Ministry; other actors whose opinion

build into the foreign policy process include the legislative arm of government, the high

echelon of the military, the press, academics and students of higher institution, trade unions and

many professional and economic associations. “All these contributors have at one time or the

other influenced the course of Nigeria’s foreign policy” (Adeniji, 2000:5).

Diplomacy, intelligence, aid and Military force in the extreme are major means of the

implementation of foreign policy of any nation. The most commonly employed is the

combination of diplomacy and economic and other assistance and the skillful use of

intelligence. While intelligence is secret, and sometimes illegal, “it is in use by virtually every

nation” (Adeniji, 2000:6). Nigeria’s short exploit at democratic rule and long period of military

rule adversely affected her foreign policy posture.

At independence in 1960, Prime Minister Tafawa Balewa created the Ministry of

Foreign Affairs and Commonwealth Relations, the Ministry has metamorphosed in its

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nomenclature to Ministry of External Affairs (1963 – 1992) and lately the Ministry of Foreign

Affairs. The Ministry remains the basic machinery for the conduct and management of

Nigeria’s external relations. The Ministry has Missions and Agencies abroad which assist in the

shaping and management of Nigeria’s affairs. In designing the strategy for Nigeria’s bilateral

and multilateral relations, the Ministry relies more on advice from and actions by the country’s

Mission abroad. This explains why it becomes necessary for such Missions to be well

organized and funded to enable them cope with their diplomatic task, particularly policy

formulation and implementation. It is the function of the National Assembly, whose statutory

duty is, to appropriate funds for the efficient and effective functioning of these Missions and to

a greater extent the Ministry. The Ministry has been reorganized and restructured three times

viz: 1972, 1981 and 1988. The aim is to reposition it for policy advice and policy

implementation in foreign affairs. This was due essentially to the fact that the functions and

responsibilities of the Ministry and its staff were not clearly defined (Fafowora, 2001).

Before the period under review, Nigeria had eleven different Heads of governments as

follows: Sir, Abubakar Tafawa Balewa, Major General Aguiyi-Ironsi, General Yakubu Gowon,

General Murtala Muhammed, General Olusegun Obasanjo, Alhaji Shehu Shagari, General

Muhamadu Buhari, General Ibrahim Babangida, Chief Ernest Shonekan, General Sani Abacha

and General Abdulsalami Abubakar. Three out of the eleven were civilians, the rest being

military dictators. Even the three leaders mentioned, one – Chief Ernest Shonekan was not

democratically elected, but, was an imposition of the dictatorship of the military led by General

Babangida.Shonekon remains the shortest serving Head of State, having been removed through

a bloodless palace coup by Babangida’s compatriot, General Sani Abacha. The other two heads

of government that went through democratic process were not allowed to conclude their tenures

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in office. While Alhaji Tafawa Balewa was brutally murdered in 1966 by Major Chukuma

Nzeogu and his cohorts in a bloodful coup, Shehu Shagari was ousted form office by General

Muhamadu Buhari at the early days, to be precise three months into his assumption of office

for a second term of four years as the democratically elected President of Nigeria. Under each

of the governments, the conduct of Nigeria’s external relations has been publicly declared to be

guided by the same well-established principles as highlighted in the introductory part of this

study. Thus, from Sir, Abubakar Tafawa Balewa to General Abdulsalami Abubakar, Nigeria

has made it clear in her foreign policy pronouncements and actions that in spite of her

comparative advantage in size, population and resources over other African countries, she

would neither seek to dominate nor seek to carry out aggressive military action against them.

Undisputedly, Nigeria is a giant and primus inter pares in Black Africa. Successive Nigerian

leaders have been very careful to draw a distinction between ‘domination’ and ‘leadership’; she

has preferred to play a leadership but not an imperial role.

The First Republic (1960 – 1966) sought to pursue a policy of non-alignment in the face

of bitter East-West rivalry. At the same time, “we were careful not to antagonize our friends in

the West on whom much of the success of the First National Development Plan depended” Iroh

in ( Ogwu, 2005:343). Two foreign policy issues stand out during this period; the Anglo-

Nigeria Defense Pact of 1961, and the French Nuclear Task in the Sahara Desert. Through deep

public opinion, the Balewa government was able to scrap the Ango-Nigeria Defense Pact. The

regime of Gowon (1966-1975) was significant in institutionalizing regional cohesion; during

this period, a policy objective of making Africa as the centre piece of our foreign policy and

liberation movement in Africa received tremendous support and attention.

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The pro-active government of Generals Murtala/Obasanjo brought vigor and vitality

into the realization of our foreign policy objectives. A lot of attention was focused on Africa. In

the area of decolonization, not only was Nigeria recognized as a credible voice of Africa

internationally, she devoted enormous resources to the attainment of independence of the

frontline States. She served as Chairman of the UN’s Committee against Apartheid. Nigeria

further consolidated her stands on African brotherliness and cohesion with the formation of

regional organizations; she played a pivotal role in the formation of Economic Community of

West African States (ECOWAS) in 1975. The hosting in 1977 of the 2nd Black and African

Festival of Arts and Culture (FESTAC) “was a manifest expression of Nigeria’ commitment to

promoting and advancing the cause of the black in diaspora” (PAC, 2005:30). This period

despite being managed by military dictatorship may be heralded as the brightest in Nigeria’s

foreign policy process.

At the rebirth of democracy in 1979 – 1983, the new President, Alhaji Shehu Shagari

continued with the promotion of African brotherliness and unity and commitments were made

to promote total political, economic, social and cultural liberation in Africa. His foreign policy

outlook was “characterized by indecision and ambivalence. The excessive pro-western posture

of this administration coupled with domestic instability often made it look like a throw-back to

Balewa days” (Mamman 1999:16). However, it is important to state that there was downward

slide in Nigeria’s vibrant and dynamic foreign policy consolidated by the predecessors. This

regime 1976 – 1979 marked the beginning of the gloomy foreign policy process.

The Buhari’s regime of 1983-85 started with the War against Indiscipline (WAI) at the

domestic level and the campaign against trafficking was to open the doors of the country to

international acceptance. The period of discord came with the attempted extradition of Alhaji

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Umaru Dikko to answer corruption charges leveled against him. This face-off strained Anglo-

Nigerian relations. Perhaps in so many ways “the West saw in Buhari’s foreign policy the

betenoire of radicalism and anti – imperialism” (Asobie and Ibeanu, 1988:9).

In his determination to re-brand Nigeria and revert the somewhat ‘isolationist’ posture

assumed by the Buhari’s regime towards the international community, General Ibrahim

Babangida seized power through a palace coup on 27th August, 1985. The Babangida’s coup

was, in more general terms, a coup for peripheral capitalism. A regime was needed to once

again bring closer and re-hegemonize the two factions of capital whose co-operation made

peripheral accumulation possible: foreign capital and local compradors (Asobie and Ibeanu,

1988:9-10).

Thus, the administration started a restructuring of the foreign policy potentials of

Nigeria. At the domestic front, Structural Adjustment Programme (SAP) was introduced. SAP

met the admiration of the Western capitalist nations and they became the most vocal praise

singers of the programme; while at the foreign front, Babangida adopted economic diplomacy

as the thrust of its foreign policy. During this period, it could be said rightly too that Nigeria

contributed to the beginning of the end of colonialism and apartheid in the continent. Namibia

was liberated and Nelson Mandela was released. Also, ECOWAS Monitoring Group

(ECOMOG), a Region intervention mediation force to end the protracted civil war in Liberia

and Sierra Leone was formed. Nigeria further established ties with Israel broken since 1963 and

instituted the Technical Aid Corps Scheme (TACS).

The Shonekan Interim National Government (ING) (September, 1993 – November,

1993) did not make any landmark achievement of note because the government was still

understudying the system before it was ousted by General Abacha. The regime of General Sani

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Abacha (1993 – 1998) sets Nigeria back as a ‘Pariah State’. Its isolationist posture towards the

International community, inability to reach agreement with the multilateral credit institutions of

the West and insincerity on the return of the country to democracy, finally, the brutal hanging

of Ken Saro-Wiwa and his kinsmen forced the West to slam partial sanction on the country.

Commonwealth of Nations suspended Nigeria. However, Abacha could be credited to making

commitment to ECOMOG and Regional brotherliness.

The Abubakar’s Administration of (8th June, 1998 – May 29, 1999) was remarkable.

Realizing the causes of the failure of his predecessor, at domestic front, the government

commenced convincingly the process of return of the country to democratic rule. He expanded

the frontiers of international co-operation, and doors were opened for dialogue with major

actors in world arena. Emphasis was placed on multilateral co-operation and participation in

regional activities. Nigeria was finally returned to civil democracy.

In the economic front, President Abudusalam Abubakar set a prelude target anchored on

economic diplomacy to his successor. In his address to the annual Patron’s Dinner, Nigeria

Institute of International Affairs he asserts:

This administration accepts the proposition that a sound economy is the bedrock of a strong and pro-active foreign policy by any country. And for us, as a nation at the cross roads of history, the condition of our national economy will have a decisive impact not only on the sustenance of the democratic transition after 29th May, 1999, but also on our role in world affairs, (Abubakar, 1998:3)

With this statement one may not be faulted to say that he set a pace for the national economic

empowerment and development strategy which President Olusegun Obasanjo eventually nursed

into being. Today it forms the focus of our study. The emphasis that foreign policy is a

reflection of the domestic environment informs the shift of policy thrust more to economic

issues than security. The citizens’ diplomacy of President Shehu Musa Yar’adua further

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strengthened the position of primacy of economic issues in the contemporary international

economic relations.

Economic Diplomacy Explained

As a prelude to knowledge of economic diplomacy, a conceptual definition of

diplomacy becomes imperative at this juncture. By diplomacy we refer to the display of

creative and intuitive power capabilities in government-to-government relations, through

accredited national representatives. For the avoidance of doubt, diplomacy is not foreign

policy, though it is often employed as a synonym for it. While foreign policy broadly represents

the principles, objective and attitudes struck by one State towards another; diplomacy is a key

instrument employed for conveying and giving effect to the spirit of foreign policy (Bridge,

45:135).

Diplomacy is an instrument of conflict and conflict resolution. It would, however, be

wrong to describe diplomacy as an instrument of conflict. To do so amount to placing it in the

same category of secret intelligence, force, economic statecraft and propaganda. In its very

character and essence, diplomacy expresses the idea that States have both competitive and

cooperative values and interest, which need statecraft management.

As an instrument for the formulation, implementation and monitoring of foreign policy,

it promotes pacific settlement of disputes, differences or conflicts through lobbying,

negotiation, mediation, conciliation, arbitration; treaty making; information gathering and

reporting. The whole task of diplomacy may be summarized as that of:

(a) building and rebuilding relationship;

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(b) defining and redefining relationship;

(c) healing and not hurting feelings in relations (as much as possible); and

(d) Promoting and not undermining mutual interest (Okogwu & Aja, 2004:2).

The whole lot of diplomacy is oriented towards the support of peace initiative especially in the

era of multi polar international system. It may also be used to rationalize a nation’s case for

aggression, or intent for aggression. Yet, even in a state of conflict or war, diplomacy is at play.

It seeks to achieve a ceasefire, roundtable conference and ultimately to resolve issue involved

by way of a treaty.

In terms of strategy, modern diplomacy engages the aids of the following to extract

influence:

(a) persuasion;

(b) isolation; and

(c) Militant-destructive- confrontation.

Diplomacy of persuasion is verbal, explanatory, preventive and pacific in orientation. It

seeks to condemn; make promises and threats; promote government-to-government dialogue.

“Isolation takes the forms of ostracisation, severance of diplomatic ties, sanctions or

embargoes, withdrawal of grants and aid, or economic assistance. The militant phase of

diplomacy has to do with the actual threat and engagement of force” (Aja, 1999:28). This

compliments the view that power politics is inherent in diplomacy. In the opinion of Wright

(1946) it is the polities of force, the conduct of international politics by force or the threat of the

use of force without consideration of right and justice. However, diplomatic strategies of

exercising influence are designed to signal, and convey the interest, intentions, perceptions and

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aspirations of States to one another. For this, nations and States have, over time, developed

vested interest in diplomatic art and science.

Today, diplomacy is the hallmark of international relations. Without the value of

diplomacy in world politics, the present world system (without World Government) would

have been too chaotic, jungle-like and anarchical for the survival of human civilization. Every

issue begs diplomacy. Every relation invites diplomacy. The making of either war or peace

relies on diplomacy. War or peace begins, first, in the minds of diplomats, who act as a buffer

or bridge between and among governments.

Negotiation is central to war and peace. It is the job of highly skillful diplomats. Neither

can negotiation be successful unless there is a minimum of trust between the sides involved;

trust in the truth of what is being said, and trust in the promises made. Honesty is among the

other attributes of the successful diplomat. And so, too, is precision of language. This is

because vagueness and muddle can lead to inconsistent actions with agreed objectives. It may

also lead to the charge of bad faith, and thus vitiate subsequent negotiations. Occasionally,

ambiguity or fledging can, sometimes, play a constructive role in negotiation, particularly when

parties are uncertain of their government’s positions on the issues involved, or where there are

unsettled differences. In such circumstances, it is better to ‘fudge’ or ‘paper over’ these

differences or communication gaps with vague language rather than (to) allow them to

undermine the whole sprit of the negotiations.

In developing states where idiosyncratic bias amongst political and bureaucratic leader a

bound; diplomats are caged more in this process. Meanwhile, many label diplomacy in

stereotypic terms. There is a common image that it is also negotiation over green-felt-covered

table in ornate rooms. This is not absolutely wrong, but modern diplomacy extends much

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further. In its true charter, diplomacy is a communication between two or more governments

conducted by accredited representatives. In an interdependent world system, which is now a

global village, every state depends on one another. Every state has a set of interest. Diplomacy

is an instrument used by governments to communicate with those ideals, actions and behaviour

they wish to influence, deter, alter, or reinforce. The environment of diplomacy is not specific.

Hopes, values, wishes and threats to order may be communicated at press conferences, political

realities, international assembles, and banquet or through direct communication between

foreign ministries and Heads of State and Government. Arising from the above informs the

argument that the mechanics of diplomacy varies with the states, the situation, the political

environment and interest of the actors involved.

Once foreign policy is made, it is the duty of diplomats to convey the modified

objective to foreign governments through any of the several channels of communication until

consensus is reached through lobbying, bargaining, negotiation, mediation, conciliation; threat

of the use of force or actual use of force. In our considered opinion, economic diplomacy is a

peaceful from of struggle engaged by foreign policy activist as a means of solving mostly

economic problems.

This struggle manifests through intrigue maneuvering, and manipulation between and

among ambassadors, envoys and foreign affairs ministers in the process of discussion and

negotiations. The argument is that diplomacy involves compromise in international political

gaming; although this act of compromise does not make who will defeat who irrelevant, hence

national interests of one state overides another state (weaker state) in each deal involving

especially international economic matters.

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However, the general accepted communication links with governments are their

diplomatic missions abroad. Among the Commonwealth Countries, their Heads of diplomatic

missions are designated High Commissioners, though many tend to address all Head of Mission

as Ambassadors. The designation fits well the cap of those serving in non-Commonwealth

countries. Yet, High Commissioners and Ambassadors perform exactly the same function.

None is superior to the other. An Ambassador will become a High commissioner once the

posting changes from a non-Commonwealth country (USA) to a Commonwealth country

(Ghana). This not withstanding, Ambassadorial designation holds sway in developing states

like Nigeria.

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CHAPTER THREE

NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY:

POVERTY REDUCTION IN NIGERIA

This chapter examined the impact of national economic empowerment and development

strategy on poverty reduction in Nigeria. This will assist us in validating our hypothesis that

NEEDS’ pro-poor policy of poverty reduction and wealth creation did not achieve the desired

target.

Poverty Reduction in Nigeria under National Economic Empowerment and Development

Strategy

Nigeria possesses the unenviable reputation of being classified amongst the poorest nations in

the world. In spite of the glaring evidence of the pervasiveness of poverty in the Nigerian

economy, the attitude of Nigerian leaders is to deny its existence. For instance, Ahmadu

Adamu Mu’azu, the former Governor of Bauchi State was reported to have said that:

There is no poverty in Nigeria. We have no business with poverty in Nigeria. I totally disagree with those people who say Nigeria is in difficulty. We must know that we are endowed with so many beautiful things people take for granted (cited in Nwuke 2004:20).

This denial was in the face of the incidence of poverty which was officially estimated at

70 percent in 2000 but which declined to 54.4 percent following the result of Nigeria Living

Standard Survey conducted by the National Bureau of Statistics (then known as Federal Office

of Statistics) in 2004 (CBN, 2004: xxx). Nwuke, (2004:20) underpins the pervasiveness and

intractability of Nigeria’s poverty when he asserts that “each year, with depressing consistency,

Nigeria is declared among the 20 poorest countries in the world, its substantial wealth

notwithstanding”. CBN Briefs (2002/2003:75) has situated what poverty connotes in the

following manner:

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Poverty concerns individual’s inability to cater adequately for the basic needs of food, clothing and shelter. It reflects inability to meet social and economic obligations; lack of gainful employment, skills, assets and self-esteem. It is anchored on limited access to social and economic infrastructures such as education, health, potable water and sanitation, thus limiting the chance of advancing welfare to utmost level of capability.

There are several methodologies that guide the measurement of poverty. Corbett (2007)

identifies these measurements as including the measurement of poverty through a country’s

wealth, that is, its gross domestic product (GDP). GDP measures the aggregate yearly monetary

income of all of a country’s people and business. To determine poverty level, the GDP figures

are usually calculated as GDP per capita. Another measurement framework is to determine a

threshold or poverty line; people whose earnings are below this line are classified as poor.

People so categorized as poor are unable to purchase or have easy access to basic goods and

services, such as food, clothing, housing, transportation and education. In other words, these

people cannot sustain minimum standard of living.

The European Union (EU) has its own measurement of poverty which is in the context

of having fewer resources than average. This definition bases the poverty figure on income less

than mean or median income. Another measure of poverty defines it in terms of a person’s

earning potential. In other words, people with relatively high earning potentials are not poor

because they should be able to find jobs.

The Nigerian economy before the 1980s was described as a middle income economy

and a potential developing industrial nation. However, this positive scenario of Nigerian

economy was replaced by negative indicators that signaled its transformation into captive

economy that is characterized by poverty. CBN briefs (2002/2003) opines that the incidence of

poverty has been high and upward swinging since 1980 – rising from 28.1 percent in 1980 to

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46.3 percent in 1985 and 65.6 percent in 1996. The inability of successive Nigerian

governments to contain the galloping effect of poverty led Nwuke (2004:20) to conclude as

hereunder:

The country has fared very poorly in many indicators of economic and social development on just about any metric used since the 1980s in spite of having earned over US$200 billion from oil. Its income per capita of US$55.0 (PPP) is below the $3,579 for oil producing countries and below the $2,076 for all developing countries.

Beyond Nigeria’s monocultural economy and wasted resources, the Nigerian economy is

plagued by institutional distortions manifesting in weak institutional capacity for economic

policy management and coordination among the tiers of government, macroeconomic

inconsistency, instability and policy reversal, corruption and infrastructural inadequacies as

exemplified by energy crisis, moribund rail system and poor health delivery system amongst

others (Nwozor, 2006:154). All these combine in various ways to exacerbate the incidence of

poverty. Between 1996 and 1999 when the political landscape of Nigeria was democratized, the

incidence of poverty was put at 70 percent. An interesting thing in the incidence of poverty in

Nigeria is its permeation to every segment of the Nigerian society. Whereas poverty was

considered a rural affliction in the 1980s, by 1990s poverty had become entrenched in the urban

areas. The same bridging trend was also common in the distribution of poverty among gender,

geopolitical zones, and people of different educational levels (Ogwumike, 2003; Obadan 2003).

Obadan (2003) observes that despite the pervasiveness of poverty in Nigeria, efforts at

poverty alleviation were essentially ad-hoc. In other words, no clear-cut plans were put in place

to address the poverty monster. The National Development Plans over 1962-1985 period did

not identify poverty as an outright problem desirous of immediate solution. Indeed, poverty

related objectives were not central but only inferably and as such their concern with poverty

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alleviation and strategies in the plans were not lucidly direct and explicitly specific (Obadan

2003). In elaborating the peripheral concern of the Development Plans with poverty alleviation

or eradication, Ogwumike (2003) notes that:

Many of the programmes which were put in place in Nigeria by the government (either wholly or in association with international agencies), had positive effects on poverty reduction although the target population for some of the programmes were not specified explicitly as poor people or communities.

It was in the aftermath of the Structural Adjustment Programme (SAP) and its debilitating

effect on the economy that poverty and its alleviation began to attract government policy

intervention. Obadan (2003) observes that:

This emphasis arose from an awareness of the unintended negative effects of structural adjustment policies on the vulnerably groups in the society. While structural adjustment and its salutary effects on economic growth, it lacked emphasis on development and also accentuated socio-economic problems of income inequality, unequal access to food, shelter, education, health and other necessities of life. It indeed, aggravated the incidence of poverty among many vulnerable groups in the society.

The government took steps to mitigate the negative impact of SAP on the people by

evolving pro-poor policies. Obadan (2003) estimates that between 1986 and 1998 sixteen

poverty alleviation institutions had been created in Nigeria. The prevalent wholesale poverty in

Nigeria in the immediate post-military era prompted the setting up of the Poverty Alleviation

Programme (PAP) in 2000 with ambitious programmes of reducing the problem of

employment, increasing national productivity and drastically reducing crime wave, the

implementation of PAP was holistic in nature (Obadan 2003). However, Ogwumike (2003)

notes that as at the end of 2000 the impact of the billions of Naira sunk into poverty alleviation

did not ameliorate the poverty of the Nigerian people.

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In 2001, the National Poverty Eradication Programme (NAPEP) was set up to provide

strategies for the eradication of absolute poverty in Nigeria, the incidence of which was put at

70 percent (FRN, 2001:3; CBN, Annual Report 2004: xxxiv). Nigeria, in the same year, was

also involved in the development of Poverty Reduction Strategy Papers (PRSPs). According to

the World Bank and the IMF, the PRSPs “describe a country’s macroeconomic, structural and

social policies and programmes to promote growth and reduce poverty, as well as associated

external financing needs” (Cited in Igbuzor 2004:142).In a discussion of this nature, what

comes readily comes to mind is to what extents have Nigeria invested in human capital as a

solution to poverty? Significant economic growth in any country hinges on deliberate

investment in its human capital. Out and Adenuga (2006) contend that no country has achieved

sustained economic development without substantial investment in human capital. Human

capital, therefore, is at the epicenter of national economic growth and development. As has

been observed by Out and Adenuga (2006:2-3):

People are assets – in fact, a country’s most valuable assets. It is essential for human development that these assets be deployed sensibly. A defective incentive system can result in a waste of human resources and often, too, in a higher incidence of poverty and greater inequality in the distribution of income. It is not enough to use existing resources wisely, we must also add to the existing resources through human capital formation.

Human capital formation is characterized by the enhancement of people’s skills,

knowledge, productivity, creativity and inventiveness. These factors, aforementioned, assist the

people, indeed empower them to identify their own priorities and implement programmes and

projects of direct benefit to them and the country. The collective deployment of the people’s

potentials translates to economic growth and development. The development trajectories of

Southeast Asian countries bear testimonies to the indispensability of human capital

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development in railroading the economy into the tracks of development. As Balaam and Veseth

(2004:342) notes:

The combined impact of investment strategies in education and job training in the NICs (newly industrializing countries) has resulted in a quality labour force, creating increased economic efficiency, industrial flexibility, and greater economic equality. Government initiatives in reducing the illiteracy rate and providing adequate access to job training are evident in comparatively higher enrolment rates and government investment in rating an educated and skilled workforce. The important point here is not that government expenditures on education have resulted in economic development, in a number of NICs, the emphasis on education has led to the growth of literate and skilled work force, which has been essential to the success of the industrial and investment policies and has promoted growth in productivity.

Nigeria did not seem to have evolved a framework for the harnessing of its human capital.

The exemplification of this was the dearth of policies concerned with deliberate and sustained

human capital development. Out and Adenuga (2006) note that planning in Nigeria was devoid of

official consideration of the importance of human capital in the development process. What

preoccupied planners was the accumulation of physical capital for rapid growth and

development. But capital alone cannot transform a society. Soyode (1983) opines that even where

capital is adequate, the absence of adequate supply of manpower lead to stunted development.

The mindset of Nigerian development planners, prior to and in the years following independence

in 1960, was that a major inhibitor to Nigeria’s economic development was dearth of capital.

Therefore efforts were geared towards tackling capital shortage which was identified as the major

constraint to development. Soyode (1983:48) observes that:

When machines and equipment have been put together to facilitate a process, the productive capacity is “enfeebled” when there is shortage of personnel to execute plans, use, maintain and repair equipment and machinery, as well as shortage of supervisory staff.

With the exponential upsurge in Nigeria’s earning from the “oil boom” in the 1970s,

capital was no longer the issue. The development objectives of the various regimes could not be

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achieved because of inadequate manpower whose competencies were doubtful. Lack of

adequate local manpower to meet the development challenges in the 1970s and 1980s was

evident in the preponderance of expatriates in the different projects that were executed in the

country in that era. Soyode (1983) observes that expatriates accounted for 40 percent of

technical officers and 100 percent of engineering corps in the construction of Kaduna township

road projects. Similar dominance of expatriates in projects all over the country was recorded.

As Soyode (1983:49) put it, “in short, in the construction of roads and bridges, Nigerians

dominate the unskilled labour and artisan grades of manpower while expatriates dominate the

engineering corps and form a substantial proportion of the technical officers”.

A country which is desirous of developing must have an appropriate mix of manpower

from high-level to low-level and anything in-between. Harbison appreciates this when he states

that:

a country which is unable to develop its human resources, cannot build anything else whether it be a modern political system, a sense of national unity or a prosperous economy, where there is disagreement is where the emphasis should be placed: widespread literacy; high-level manpower; or middle-level manpower or the appropriate mix (cited in Soyode 1983:49).

Most countries pursue a simultaneous development of all classes of labour in order to

meet the demands of wide spectrum developmental objectives. The Nigerian government

through the Third Development Plan (1975-80) embarked on massive education and manpower

development. Usoro (1983:141) chronicles it thus:

The rate of progress made in education within the last two decades remains one of the most outstanding since independence. In primary, secondary, technical, teacher training and university level education the incredible surge in the number of institutions established and in enrolment illustrates the desire of successive administrations to satisfy the nation’s yearning for qualified manpower in various fields of learning.

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There was astronomical surge in the number of schools as well as enrolment. The

Nigerian Government introduced the universal primary education (UPE) in 1976 which

positively affected primary education in terms of enrolment and number of schools. For

instance, the number of primary schools rose from 21, 223 in 1975/76 to 37,467 in 1979/80.

Also enrolment shot up from 5 million to 12 million during the same period (Usoro, 1983).

There was also a multiplier effect on both post-primary and tertiary education; for tertiary

institutions, the number rose from two in 1960 to thirteen in 1980 and so was the enrolment

which rose from a little over 400 to over 57, 000 students in 1980 (Usoro 1983; Out and

Adenuga 2006). Since then there has been a continuous increment in both the number of

schools and enrolment statistics.

As at 2004 there were 65, 627 primary schools, 13, 333 post-primary schools and 215

tertiary institutions covering polytechnics, colleges of technology, colleges of education and

universities in Nigeria. For enrolment, about 2.8 million pupils were in primary schools, 7

million in post-primary schools and 6.7 million in the tertiary institutions (Otu and Adenuga

2006).

The development need in Nigeria was such that the manpower development embarked

upon by the different levels of educational institutions was immediately mopped up by the

economy. As Balogun et al (2003:222) opine that:

In the 1960s and 1970s, the Nigerian economy provided jobs for its teeming population and absorbed considerably imported labour in the scientific sectors. The wage rate compared favourably with international standards and there was relative industrial peace in most industry sub-groups.

A corollary to this state of affairs was that very few people were below the poverty line

as the agricultural, industrial and public sectors absorbed most of the labour force. However,

from the late 1970s and early 1980s, the Nigerian economy began to have problems which

94

made it impossible for it to continue to provide for its teeming population. Central Bank of

Nigeria Research Department (2003) attributes the cause to oil shocks, world economic

recession, deteriorating terms of trade, debt overhang and macroeconomic imbalances. The

response of the Nigerian government to the deteriorating economic situation was deferment to

the tenets of the Structural Adjustment Programme (SAP) and wholesale implementation of its

conditionalities. Balogun, et al, (2003) traced the precipitating factor to the manpower crisis in

Nigeria to the adoption of the conditionalities of SAP especially the implementation of

currency devaluation. As they put it:

A major consequence of the rapid depreciation of the naira was the sharp rise in the general prices level, leading to a significant decline in real wages. The low wage in turn fuelled a weakening purchasing power of wage earners and declining aggregate demand. Consequently, industries started to accumulate unintended inventories and, as rational economic agents, the manufacturing firms started to rationalize their workforce. In the public sector, an embargo was placed on employment (Balogun et al, 2003:222-223).

National economic empowerment and development strategy represented a watershed in

human capital development in Nigeria as it had far-reaching effect on every aspect of the

Nigerian system. The institution involved in human capital development was sucked into the

eddy of crisis that enveloped the government. With dwindling resources government could not

meet the obligations of funding. The effect of this economic crisis was overwhelmingly

negative. Yagub (2007:2) notes that “the consequence of this development led to the beginning

of the worst aspects of the phenomenon of brain drain whose impact has been with the

universities”.

The economic crisis resulting in the problem of inadequate funding and poor

infrastructure and facilities for learning did not affect the potential of the human capital

development in Nigeria. Available data showed that adult literacy which was 50.1 percent in

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1989 rose to 55 percent in 1993 and 1994 and remained at 57 percent between 1995 and 2003.

Otu and Adenuga (2006) laments that literacy rate notwithstanding, there was a worrying

lopsidedness in the acquisition of educational skills amongst students. Students tended to prefer

arts and business-oriented courses as against development-related disciplines such as

agriculture, engineering and information and communication technology (ICT).

It is generally agreed that human capital is indispensable both in unleashing the forces

of development and in sustaining development. And this notion underlined the policy changes

in Nigeria’s education sector. A major policy change was the replacement of the colonially

inherited 6-5-2-3 educational system with the home-grown system of 6-3-3-4 system. The new

system meant that instead of spending six years in primary school, five years in secondary

school and two years for higher secondary and three years for university, students would spend

six years in the primary and six years in the secondary (broken into three years a piece for

junior and senior secondary) and four years of higher education. There appears an overlapping

in the control of the education sector in Nigeria. Initially, it appeared as if tertiary education

was the exclusive preserve of the federal government but both the state and private sectors got

involved in tertiary education (to cater for the increasing number of students desiring higher

education) which underlines the massive expansion in that sub sector (Otu and Adenuga, 2006).

With the collapse of public schools as a result of inadequate funding and poor

infrastructure and facilities for learning, private sector began to make incursion into the

provision of education. Combined with the public sector schools, the private sector schools

deepened the expansion of the educational system. Otu and Adenuga (2006:15) have argued

that “the expansion in the educational system was accompanied by structural defects,

96

inefficiency and ineffectiveness, which affect Nigeria’s level of human capital development

and utilization”.

A major effect of NEEDS on Nigeria was its assault on the state provision of education

as a variable catalyst for economic development. The IMF and World Bank conceptualization

had “tended to condemn expenditure on education and wage increases as wasteful and

inflationary and therefore undesirable” (Toyo, 2002:538). The trajectory of government

policies on Nigerian economy in the NEEDS era reflected this mindset and therefore less and

less resources were spent on education. Contrasted with the period prior to NEEDs especially

in terms of salary and fringe benefits in the education sector, a National Universities

Commission (NUC) report showed that “Only the Chief Justice of the Federation on an annual

salary of 3,600 British Pound per annum earned more than a University professor. Not only

were university lecturers better than their civil service counterparts, fringe benefits such as

housing, allowances, social status and working conditions were very attractive, making

academics the envy of civil servants. Adequate funding of universities, attending overseas

conferences every three years, and such other fringe benefits were the order of the day. The

prevailing economic situation in Nigeria was such that annual salary of a lecturer was sufficient

to buy a car and so the liquidation of a car loan in five years was not a strain” (NUC, 1994).

Impact of National Economic Empowerment and Development Strategy on Poverty reduction National Economic Empowerment and Development Strategy (NEEDS) introduced

negativities that robbed the economy of whatever remained of its buoyancy which left everyone

evolving strategies on how to cope. The hitherto adequate salaries of Nigerian workers became

peanuts as the devaluation of the Nigerian currency, the Naira, eroded the purchasing power of

that currency. As Yaqub (2007:7) put it “one of the implications of the economic downturn

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manifested as the purchasing power of the Naira plummeted so precipitously and workers

found that their standard of living could no longer be guaranteed”. The natural response was

that people began to look for greener pastures. The university system was not the only victim,

indeed all the other levels of the educational system experienced in varying degrees, crisis in

the education sector as strikes became the order of the day.

Brain drain has had far-reaching negative effect on the Nigerian economy. It is estimated

that by the end of twentieth century the number of Nigerians in the US (alone) has risen to a

quarter of a million (cited in Yaqub, 2007:5). Related to brain drain (to other claimes where

services would be adequately compensated) is brain waste. Brain waste syndrome characterized

the Nigerian economy. He also avers:

In the case of academics, where some of them did not take to their flight (that is, brain drain out of the country or relocate to the private sector within the country) others combined sometimes most degrading job part times (such as turning their vehicles into commercial undertakings, the forceful sale of handouts and worthless books, etc) with their teaching (Yaqub, 2007:7).

In spite of this human development crisis, Obasanjo, ostensibly designed plans to

transform the country into a developed country: through the instrumentality of national

economic empowerment and development strategy. This not withstanding a major shortcoming

of such plans was the absolute lack of consideration of the importance of human capital in

national development. Although, the above information and explanations underscores the

negative impact of national economic empowerment and development strategy, tables 1.1 and

1.2 below also portrays the endemic poverty in Nigeria.

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Table 1.1: United Nations Human Development Index 2007 HDI value Life expectancy

at birth (years) Adult literacy rate (% ages 15 and above)

Combined gross enrolment ratio (%)

GDP per capita (PPP US$)

1. Norway (0.971)

1. Japan (82.7) 1. Georgia (100.0) 110. Lao

1. Australia (114.2) 1. Liechtenstein (85, 382)

156. Lesotho (0.514)

165. Mali (48.1) Peoples Democratic Republic 972.7)

148. Bhutan (54.1) 139. Djibouti (2,061)

157. Uganda (0.514)

166. Mozambique (47.8)

111. Tanzania (United Republic of) (72.3)

149. Togo (53.9) 140. Kyrgyzstan (2, 006)

158. Nigeria (0.511)

167. Nigeria (47.7)

112. Nigeria (72.0)

150.Nigeira (53.0) 141. Nigeria (1,969)

159. Togo (0.499)

168.Congo (Democratic Republic of the (47.6)

113.Malawi (71.8)

151. Benin (52.4) 142. Mauritania (1,927)

160. Malawi (0.493)

169. Guinea-Bissau (47.5)

114. Madagascar (70.7)

152. Cameroon (52.3) 143. Cambodia (1, 802)

182. Niger (0.340)

176. Afghanistan (43.6)

151. Mali (26.2) 177. Djibouti (25.5) 181. Congo (Democratic Republic of the) (298)

Source: (United Nations Human Development Report 2009) T.1 above refers to 2007 development index. It highlights the very large gaps in well-

being and life chances that continue to divide our increasingly interconnected world. The HDI

for Nigeria is 0.511, which gives the country a rank of 158th out of 182 countries sampled with

data. On life expectancy at birth, Nigeria ranks 167 with 47.7% while the adult literacy rate of

those between 15 years and above is 72.0% which places Nigeria on the 112th position on the

list. On the combined gross enrolment ratio, Nigeria has 53% and ranks 150th behind Togo and

Bhutan while Nigeria’s Gross Domestic Product (GDP) in Dollars using the Purchasing Power

Parity (PPP) is 1,969, placing Nigeria on the 141st position on the log.

Table 1.2 below presents some selected indicators of human poverty in Nigeria. The

Human Development Index (HDI) measures the average progress of a country in human

development. The Human Poverty Index (HPI-I) focuses on the proportion of people below

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certain threshold levels in each of the dimensions of the human development index – living a

long and healthy life, having access to education, and a decent standard of living. By looking

beyond income deprivation, the HPI-1 represents a multi-dimensional alternative to the $1.25 a

day (PPP US$) poverty measure (UNDP, 2009). Nigeria has a HPI-1 value of 36.2% and ranks

114th among 135 countries for which the index has been calculated.

Table 1.2: Selected Indicators of Human Poverty in Nigeria

Human Poverty Index (HPI-1)

Probability of not surviving to age 40 yrs (%)

Adult illiteracy rate (% ages 15 yrs and above)

People not using improved water source (%)

Children underweight for age (% aged under 5 yrs)

1. Czeh Republic (1.5)

Hong Kong, China (SAR) (1.4)

1.Georgia (0.0) 1. Barbados 1. Croatia (1)

112. Bangladesh (36.1)

144. Congo (Democratic Republic ) (37.3)

110. Lao People’s Democratic Republic (27.3)

140. Chad (52) 109. Indonesia (28)

113. Madagascar (36.1)

145. Guinea-Bissau (37.4)

111. Tanzania (United Republic of) (27.7)

141. Fiji (53) 110.Central African Republic (29)

114. Nigeria (36.2) 146. Nigeria (37.4) 112. Nigeria (28.0) 142. Nigeria (53) 111. Nigeria (29) 115. Mauritania (36.2)

147. Angola (38.5) 113. Malawi (28.2) 143. Madagascar (53)

112. Djibouti (29)

116. Burundi (36.4)

148. Central African Republic (39.6)

114. Madagascar (29.3)

144. Congo (Democratic Republic) (54)

113. Sri Lanka (29)

135. Afghanistan (59.8)

153. Lesotho (47.4) 151. Mali (73.8) 150. Afghanistan (78)

138. Bangladesh (48)

Source: (United Nations Human Development Report 2009)

The HPI-1 measures severe deprivation in health by the proportion of people who are not

expected to survive to age of 40. Education is measured by the adult illiteracy rate. And a

decent standard of living is measured by the unweighted average of people not using an

improved water sources and the proportion of children under age 5 who are underweight for

their age (UNDP, 2009).

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Table 1:3 Regional breakdown of number of people living on less than $1 and S2 per day,

1990, 1999 and 2015

Region 1990 1991 2015 1990 1999 2015

East Asia and the

Pacific

452 260 59 1,084 849 284

(Excluding China) 92 46 6 285 236 93

Europe and Central

Asia

7 17 4 44 91 42

Latin America and

the Caribbean

74 77 60 167 68 146

Middle East and

North African

6 7 6 59 87 65

South Asia 495 490 279 976 1,098 1,098

Sub-Saharan

Africa

242 300 345 388 484 597

Total 1,276 1,151 753 2,718 2,777 2,230

(Excluding China ) 916 936 700 1,919 2,164 2,040

Source: World Development Index (2009) ‘key Indicators’. Retrieved on 24 August 2009 from http://siteresources.worldbank.org/DATASTATISTICS/Resoruces/reg.wdi.pdf. Similarly, table1:4 below presented population of people living under 1.25 and 2 dollar (PPP) a

day for selected African states.

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Table 1:4 Population living under 1.25 and 2 dollar (PPP) a day (2) for selected African

states.

Country $1.25< $2<

Angola 54.3 70.2

Benin 47.3 75.3

Botswana 31.2 49.4

Burundi 81.3 93.4

Cameroon 32.8 57.7

Central African Republic 62.4 81.9

Cahd 61.9 83.3

CDR 59.2 79.5

Egypt <2 18.4

Ethiopia 39 77.5

Gabon 4.8 19.6

Ghana 30 53.6

Guinea 70.1 87.2

Kenya 19.7 39.9

Liberia 8.7 94.8

Malawi 73.9 90.4

Morocco 2.5 14

Mozambique 74.7 90

Niger 65.9 85.6

Nigeria 64.4 83.9

Source: Wikipedia (2008) list of countries by percentage of population living in poverty.

Retrieved on August 25, 2009

These tables with other explanations therein validates our hypothesis that despite the

introduction of national economic empowerment and development strategy, poverty still

remain endemic in Nigeria.

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CHAPTER FOUR

NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY

AND UNEMPLOYMENT REDUCTION IN NIGERIA

Employment generation is one issue that is central to the social and economic life of

every country. This is because continuous improvement in employment generation in any

polity is the surest way to breaking the vicious circle of poverty in any developing country like

Nigeria. Unemployment on the other hand, constitutes a serious impediment to social progress.

Infact, “it is a serious issue in Africa and particularly in Nigeria” (Oladeji, 1994; Umo, 1996).

The need to avert the negative effect of unemployment has made employment generation to

feature prominently in governments’ reform programmes. This chapter interrogated the impact

of national economic empowerment and development strategy on unemployment reduction in

Nigeria.

Unemployment Explained

There seems to be a consensus on the definition of unemployment. The International

Labour Organization (ILO), defines the unemployed “as numbers of the economically active

population who are without work but available for and seeking work, including people who

have lost their jobs and those who have voluntarily left work” (World Bank, 1998: 63).

Although there seems to be convergence on this concept, its applications have been bedeviled

with series of problems across countries. First, most published unemployment rates are

recorded open unemployment. Hence, People’s attitude on this varies from country to country.

While this perception may be high in developed countries and where government is committed

to resolving unemployment problems, it is likely to be very low in countries with the opposite

attributes.

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Okigbo (1991) also points out that the problem arising from the concept of labour force

in most countries, particularly Nigeria, is that people below the age of 15 years and those above

the age of 55, who are actively engaged in economic activities, is usually excluded from labour

statistical surveys. All these factors have the tendency to result in underestimation of

unemployment thereby making international comparison very difficult. Factors such as the

preponderance of full housewives (but who are willing to be engaged in paid jobs) and unpaid

family workers also contribute significantly to the underestimation of unemployment.

Unemployment: The Nigerian Experience

According to Briggs (1973) unemployment is the difference between the amounts of

labour employed at current wage lends and working conditions, and the amount of labour not

hired at these levels. However, Gbosi (1997) defined unemployment as a situation in which

people who are willing to work at the prevailing wage rate are unable to find jobs. The

implication of this definition by Gbosi is that anyone who is not counted as part of the

unemployed labour force, in order to avoid overestimation of the official rate of unemployment

is employed.

In recent times, the definition of unemployment by the International Labour

Organization (ILO) is said to be more encompassing, According to ILO “the unemployed is a

member of the economically active population, who are without work but available for and

seeking for work, including people who have lost their jobs and those who have voluntarily left

work (World Bank, 1998). The application of this definition across countries has been faulted,

especially for the purpose of comparison and policy formulation, as countries’ characteristics

are not the same in their commitment to resolving unemployment problems. Also, “the

preponderance of housewives who posses the ability and willingness to work, the definition of

104

the age bracket all stand as limitations to the definition by International Labour Organization”

(Douglason et al, 2006).

According to the Central Bank of Nigeria (2003) the national unemployment rate, rose

from 4.3 percent in 1970 to 6.4 percent in 1980. The high rate of unemployment observed in

1980 was attributed largely to depression in the Nigerian economy during the late 1970s.

Specifically, the economic downturn led to the implementation of stabilization measures which

included restriction on exports, with the implication of import dependency of most Nigerian

manufacturing enterprises, which in turn resulted in Operation of many companies below their

installed capacity. This development led to the closure of many industries while the survived

few were forced to retrench large proportion of their workforce. Furthermore, the Nigerian

Government also placed an embargo on employment.

Specifically, total disengagement from the Federal civil Service rose from 2, 724 in

1980 to 6,294 in 1984 (Odusola, 2001). Owing to this, the national unemployment rate

fluctuated around 6.0% until 1987 when it rose to 7.1 percent. It is important to state here, that

SAP adopted in 1986, had serious implications on employment in Nigeria, as unemployment

rate declined form 7.1 percent in 1987, to as low as 1.8 percent in 1995, after which it rose to

3.4 percent in 1996, and hovered between 3.4 and 4.7 percent between 1996 and 2000

(Douglason et al, 2006). The analysis by educational status also suggests that people who have

been affected by unemployment are those without basic education. For instance, persons with

and without primary school education accounted for 76.8/ 80.6 percent of the unemployment in

1974 and 1978 respectively. In recent times, however, the situation has been compounded by

the increasing unemployment of professionals such as accountants, engineers, among others.

According to 1974 survey, reported by Aigbokhan (2000), graduate unemployment accounted

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for less than 1 percent of the unemployed, in 1974, by 1984, the proportion rose to 4 percent for

urban areas and 2.2 percent in the rural areas.

Also, graduate unemployment, as noted by (Dabalen et al, 2000) accounted about 32%

of the unemployed labour force between 1992 and 1997. It is impressive to note here that, in

2003, Nigerian’s unemployment rate declined substantially to 2.3 percent. This decline was

attributed to the various government efforts aimed at addressing the problem through poverty

alleviation programmes. This decline also pointed to an increased number of people who got

engaged in the informal sector activities. Recent studies have attempted to examine the

contributions of informal sector to employment creation. Ajibefun and Daramola (2003)

examined the efficacy of micro enterprises in the Nigerian economy using a sample of

180micro enterprises.

They reported evidence of a wide variation in technical and locative efficiencies, both

within and across industries; they also found that education of owner of business enterprise was

a significant factor influencing efficiency. Observed also is that proof of variations in

efficiency calls for emphasis on the need for more efficiency. They conclude that the evidence

of variations’ inefficiency is indicative of the need for more proactive actions to raise the level

of efficiency and employment among the firms in the sample. Also, Sanda et al, (2006) used a

sample of 360 firms in Kano and its environs to examine whether or not, in comparison to large

firms, small firms are relatively better at creation of employment opportunities. Their results

were positive in that small firms were found to be relatively better, and the conclusion they

derived was that a policy that gives special preference to small firms is justifiable.

Unemployment is a perennial problem facing Nigeria right from colonial era. The

tables 2.1 and 2.2 overleaf demonstrate the seriousness of this menace and the poverty level in

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the country. For the purpose of this study, inferences would be drawn from 1999 to 2010 to

analyze the data generated. Table 2.2 illustrates that lower grade applicants who registered with

the Federal Ministry of Employment, Labour and Productivity in 1999 were 86, 024; vacancies

declared the same period were 7,313, while placement was 1,611. This figure represented 1.873

percent of the total registered applicants in 1999. This, in effect indicates that 5,702 vacancies

were unfilled. Therefore, the number of unemployed registered applicants under this category

within the year 1999 reduced to 84, 413.

In 2000, “unemployed registered applicants in the same category of lower grade

workers were 85,368; vacancies declared were 6,583, while placements recorded were 923 and

this represented 1.081 percent of the number in this category. This also reveals that 5,660

vacancies were unfilled and this figure pushed up the total registered unemployed in 2000 to

84,445. By 2001, the registered unemployed applicants under lower grade workers category

were 85,921; vacancies declared from the period were 6,264, while 1,856 candidates were

employed, and this represented 2.160 percent of applicants under this

category”(Nwagwu,2009:227).

In effect, the grand total of registered unemployed lower grade workers category from

1990 to 2001 was 257,313 jobless people; vacancies declared for the period stood at 20,160 out

of which 4,390 placements were made and 15,770 vacancies existed unfilled. This figure

represented 78.224 percent of the total vacancies declared for the period, while 21.776 percent

of the total vacancies declared for the period were filled. This reveals that 252,923 applicants

were thrown back into the labour market. Hence, the government failed grossly to

provide/create jobs for the people.

107

As one can observe in table 2.2, the registered unemployed professionals and executives

from 1999 to 2001 stood at 232,680 candidates and vacancies declared during the period were

287, while placements made within the period were 188, leaving 99 vacancies unfilled. The

188 applicants recruited out of 232, 492 candidates represented 0.080 percent, as 232,680

candidates were thrown back into the labour market. This demonstrates that poverty alleviation

programme has failed woefully to create jobs for jobless Nigerians.

To redress the situation, the Nigerian government launched Poverty Reduction Fund

(PRF) with initial release of twenty billion naira (N20 billion) out of which N10 billion was

released to the Federal Ministry of Works for creation of 200,000 job opportunities in the first

instance. Besides, specific measures were employed to address the problems of low economic

growth and high poverty incidence which included the provision of menial jobs aimed at

engaging the poor into somewhat meaningful means of livelihood to cushion the effect of the

harsh economic condition in the country. Each state coordinator was mandated by executive

fiat to engage the poor on menial job in their respective states. Table 2.3 below also denotes the

unemployment rank in Nigeria from 2003-2010 and testifies that unemployment has been on

the increase despite the introduction of national economic empowerment and development

strategy. The table displays the unemployment rate for year 2007,2008,2009,and 2010 as

5.80%,4.90%,4.90%and 4.90% respectively with a stagnant 0.00%,and 0.00% change in year

2009and 2010.

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Table 2.1 Registered Unemployed and vacancies Declared (Lower Grade Workers) 1984-

2004

Year Old

Registration

Fresh

Registration

Re-Registration Total Vacancies

Declared

Placement

1984 30,670 50,108 40,167 120,945 14,612 3,865

1985 27,926 36,039 21,615 96,580 11,156 2,139

1986 27,210 31,273 26,675 85,158 13,050 2,378

1987 33,967 79,718 31,399 145,084 16,502 4,988

1988 66,625 30,003 19,534 116,162 14,154 2,506

1989 52,737 26,128 7,190 96,055 14,052 3,474

1990 55,043 20,355 14,354 89,752 7,637 1,917

1991 77,769 19,896 12,848 110,513 14,529 2,924

1992 66,812 3,449 4,882 75,143 3,864 985

1993 69,463 2,492 3,432 75,387 3,735 1,251

1994 68,930 2,052 1,295 72,277 3,786 859

1995 76,658 3,085 1,990 81,730 4,182 1,119

1996 79,897 3,580 1,964 85,441 7,873 2,020

1997 81,546 3,099 1,1187 85,832 7,831 2,134

1998 82,094 1,804 829 84,727 6,895 1,352

1999 82,313 2,584 1,127 86,024 7,313 1,611

2000 82,959 1,662 747 85,368 6,583 923

2001 83,388 2,006 527 85921 6,264 1,856

2002 83,167 1,844 637 85648 7,010 1,389

2003 112,968 18,871 11,645 143,484 2,8890 2,005

2004 252,362 22,784 15,532 290,678 2,841 12,113

Source: Federal Ministry of Employment, Labour and Productivity (2006)

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Table 2.2 Registered Unemployed and Vacancies Declared (Professionals and Executives)

1984-2004

Year Old

Registration

Fresh

Registration

Re-Registration Total Vacancies

Declared

Placement

1984 706 1,324 484 2,514 657 26

1985 1,234 2,038 992 4,165 748 145

1986 2,295 2,329 1,499 6,123 606 148

1987 2,116 10,917 2,067 15,100 444 175

1988 9,31 3,646 3,616 16,293 591 281

1989 10,287 2,545 1,449 14,281 3,091 678

1990 6,436 2,853 893 10,182 3,695 986

1991 10,253 1,073 298 12,624 3,989 164

1992 21,324 744 138 22,206 3,088 10

1993 100,234 688 1,039 108,153 12,605 79

1994 27,191 657 275 28,123 3,307 8

1995 31,202 1,259 482 32,942 3,708 49

1996 6,,235 673 344 67,252 250 91

1997 65,864 588 9 66,461 83 2

1998 99,133 243 - 99,376 38 15

1999 60,117 3,550 2 63,669 138 75

2000 194,588 372 - 104,960 115 110

2001 63,821 227 3 64,051 34 3

2002 93,471 1,167 25 94,663 121 102

2003 56,858 3,479 1,624 61,961 917 657

2004 79,686 6,383 1,662 84,731 617 510

Source: Federal Ministry of Employment, Labour and Productivity (2006)

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Table 2.3 Unemployment Rate from (2003-2010)

Year Unemployment rate Rank Percent change Date of information

2003 28.00% 30 1992 est.

2006 2.90% 27 -89.64% 2005 est.

2007 5.80% 65 100.00% 2006 est.

2008 4.90% 65 -15.52% 2007 est.

2009 4.90% 60 0.00% 2008 est.

2010 4.90% 45 0.00% 2009 est.

Source: CIA World facebook extracted on November 3, 2010

These tables with other explanations therein validate our hypothesis that despite the

introduction of national economic empowerment and development strategy did not reduce the

incidence of unemployment in Nigeria.

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CHAPTER FIVE

NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY:

FOREIGN DIRECT INVESTMENT

This chapter examined the policy impact of national economic empowerment and

development strategy on foreign direct investment in Nigeria. This will assist us delineating

and interrogating the influx of foreign capital into Nigerian economy.

Foreign Direct Investment and the Nigerian Economy

In 2004, the Nigerian National Planning Commission released a document entitled

“Meeting Everyone’s Needs”. NEEDS is an acronym for National Economic Empowerment

and Development Strategy. It can rightly be viewed as a National Development Plan. Indeed,

what makes it quite different from previous National Development Plan in Nigeria is the fact

that this time around, the private sector is expected to play a significant role in Nigeria’s

development drive. Consequently, the privatization theme runs through the entire NEEDS

document. In fact, privatization and the down-sizing of the public sector (weakening the power

of the state) have been core themes in liberal economic prescriptions for reforming the entire

state (See Amadi and Ogwo, 2004).

According to Obasanjo (2004), in the foreword to the NEEDS Documents, he argued

that NEEDS is the response to the development challenges of Nigeria. Over the next few years

(2003-2007), NEEDS targets to lay a solid foundation for sustainable poverty reduction,

employment generation, wealth creation and value reorientation. NEEDS is reported to be a

home-grown reform programme with the goal to mobilize the resources of Nigeria to make a

fundamental break with the failures of the past, so as to catch up with our contemporaries in

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international arena, and become the largest and strongest economy in Africa. In the above

context, NEEDS is seen as Nigeria’s plan for prosperity. NEEDS focuses on four key

strategies: Re-orientating values, reducing poverty, creating wealth and generating

employment. To this end, Soludo (2006:68-73) posits that:

The national crusade for a new economy is embodied in Obasanjo’s socio-economic transformation agenda entitled “National Economic Empowerment and Development Strategy” (NEEDS) with a focus on four key objectives – poverty reduction, employment generation, wealth creation and value re-orientation.

The writers of NEEDS document are of the notion that these goals can be achieved only

by creating an environment in which business can thrive, government is redirected to providing

basic services, and people are empowered to take advantage of the new livelihood opportunities

the plan will stimulate. The target is that under NEEDS, the Government will:

Diversify the economy away from oil and solid minerals in order to increase economic

stability and generate jobs.

Privatize, deregulate, and liberalize publicly owned industries to promote competition,

expand industries, generate employment, create wealth, and revive values for money.

Develop infrastructure, particularly power generation, transport and

telecommunications infrastructure, to stimulate growth of the private sector. (see

NEEDS Document, 2004)

As a matter of fact, the success of NEEDS rests on three pillars: empowering our

people, creating a legal and financial environment that enables us to utilize our natural

resources and develop flair for business, and reforming our laws and the way our government

works. NEEDS recognizes that a dynamic and competitive non-oil private sector is essential to

achieve rapid and sustained growth (www.nigeria.gov.org/reformsoverview.aspx).The

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immediate precursor to National Economic Empowerment and Development Strategy

(NEEDS) was the IMF/World Bank’s Poverty Reduction Strategy Paper (PRSP), a programme

designed to promote growth and reduce poverty in Nigeria, adopted in 2001 but abandoned in

2003.

The abandonment of PRSP in 2003 by the Nigerian government and subsequent switch

over to NEEDS does not suggest a shift in economic thinking rather it is a revalidation of the

operating strategies of the IMF (Nwozor, 2006). The originators and disciples of NEEDS claim

that “it is a home-grown strategy of economic reform that has a conspicuous deviation from

and improvement on the various National Development Plans and such economic reform

programmes as Structural Adjustment Programme (SAP) of 1986, Vision 2010 of 1997 and the

National Poverty Eradication Programme (NAPEP) of 2002” (Akpederi, 2005:154).

Contrary to this position, NEEDS is a quintessential capitalist framework of adjustment

based on neo-classical theory. It shares in the vision as SAP; indeed it is a repackaging of SAP

by other names. There is nothing to suggest that NEEDS is home-grown as it incorporates all

the extant irreducible basics that make up standard IMF and World Bank prescriptions

(Nwozor, 2006). In reality, the NEEDS document articulates this “market forces” philosophy

unequivocally. It emphasizes the era of government assuming the commanding heights of the

economy and pursuing a pubic sector led economic development strategy as replaced by a

market driven private sector led growth and development strategy (Asobie, 2004). However,

the neo-liberal emphasis on the supremacy of market forces and insistence that government

should not intervene in the economy are contradictory and misleading. In fact, it is argued that

market forces cannot independently engender reforms that are people-oriented. This is because

the Third World economics lack the critical capacities to withstand the backlash that is

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triggered off by market forces in view of the fact that our domestic goods cannot compete

favourably with those of the west which today found solace in third world markets.

The present reforms labelled (NEEDS) can be likened to a new wine in an old wineskin

or the proverbial resurrection of the phoenix from its ashes: for it is merely SAP with a

different nomenclature colouration. The IMF and World Bank have always dictated and

superintended over all the reforms that have been attempted in Nigeria and elsewhere in the

Third World (Moon, 2006). As it concerns the response of the western industrialized countries,

as well as the international financial institution – IMF and World Bank to the economic reforms

in Nigeria under NEEDS, it is well observed that because the authors of the NEEDS package

ensured a painstaking navigation of the traditional policy prescription of the Bretton Woods

Institutions, the IMF and World Bank had no problem in approving and supporting the NEEDS

agenda. This is exemplified in the favourable disposition of the former World Bank President,

James Wolfenson, who pledged US $ 1 billion in support of the programme. This financial

philantropism came in the wake of the influence of World Bank apologist like Okojo Iwella,

Soludo and others who doubles up as World Bank Staff and advisers to President Obasanjo.

However, we are of the opinion that there is no free launch in international economic relations

between and among nation states. Hence, the donation is with strings attached. “It is set trap by

the west using the instrumentality of international financial institutions to consolidate their

imperialist economic interest through Nigeria’s reform programme” (Researcher’s View 2011).

In the same vein, shortly after the launch of NEEDS in 2004, the World Bank under

IDA soft loan window granted the Federal government of Nigeria on December 14, 2004, a

total credit of US $ 140 million of 10 years grace period and maturity period of 40 years to

support and encourage economic reforms and governance in Nigeria. In addition, to this, the

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World Bank on June 28, 2005 granted the Federal Government of Nigeria an IDA credit of US

$ 18.1 million for State governance and capacity building projects. In fact, since 2004 when

Nigeria launched the NEEDS package till 2006, the World Bank has granted Nigeria a total

credit of US $1.1 billion in support of the economic reforms.

Therefore, the repackaging of SAP as NEEDS under the guise of a home-grown

economic reform package was a way out of stigmatizing of Nigeria as IMF/World Bank stooge

by the Obasanjo government. Indeed, there is nothing home-grown about NEEDS; rather; it is

Western teleguided economic reform package according to the prescriptions of the IMF/World

Bank for economic development in developing countries like Nigeria. Our argument in this

study is that although the economic reform package of national economic empowerment and

development strategy is a domestic policy tailored toward welfarism, interest of the dominant

west which is market expansionism propelled the policy intrusion on Nigerian economy.

Economic Diplomacy and Primacy of Foreign Direct Investment

In this study, we made effort to interrogate if there is any relationship in the rise of

foreign direct investment flow into Nigeria and the introduction of national economic

empowerment and development strategy. Inotherwords, we examined the primacy given to FDI

particularly, in the conduct of Nigeria’s economic diplomacy; we also examined the trends of

FDI in the conduct of Nigeria’s economic diplomacy. As noted earlier, the cardinal objective of

Nigeria’s economic diplomacy is to maximize the mobilization of external material and

financial resources for economic development of the nation.

Hence, the primary strategy of Nigeria’s policy of economic diplomacy was to attract

foreign direct investment (FDI) and increase the investor’s confidence in the country. In fact,

the importance of FDI to national development cannot be disputed, as noted by Okolie (2007),

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Foreign Direct Investment is a major component of international capital flows (investments)

which involves not only a transfer of funds (including the investment of profits) but also a

whole package of physical capital, techniques of production, managerial and marketing

expertise, products advertising and basic practice for the maximization of global profits. In

sum, Okolie (2007) conceived foreign direct investment as embracing new equity from the

foreign company in the host country; and reinvested profits from foreign business concerns.

Emphasizing the primary position given to FDI in the conduct of Nigeria economic

diplomacy, Olukoshi and Idris (2002:188 – 189), “have pointed out that in order to achieve the

objective of economic diplomacy, several steps were taken at the foreign policy level,

complemented by a host of domestic measures”. Specifically, as regards foreign investments,

they noted that a unit for Trade and Investment Promotion was established in the Ministry of

External Affairs. Information officers in the embassies were also instructed to include publicity

on the country’s natural resources endowment and the investment opportunities available as

part of their normal schedule of duty. Moreover, within the period, various trade and

investments missions were organized by the Ministry of External Affairs, in conjunction with

other governmental departments to various parts of the world.

Apart from this foreign policy dimension, Olukoshi and Idris also noted that efforts

were also made at the domestic level to make the economy more attractive to foreign investors.

These include the adoption of a new investment code whose overall objective was to make the

process of company incorporation simpler. There was also the amendment of the indigenization

decree of the 1970s to increase the influx of foreign investors in the economy. Thirdly, there

was the elimination of bureaucratic procedures associated with profit repatriation and dividend

remittance, and the introduction of new tax relief measures. All these were done by the

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administration of Ibrahim Babangida to encourage the inflow of foreign direct investment into

Nigeria.

Essentially, attraction of FDI has occupied prominent position in the conduct of

Nigeria’s economic diplomacy. For example, much of the shuttle diplomacy embarked upon by

Professor Bolaji Akinyemi, Nwachukwu’s predecessor as Foreign Minister, centered on

attracting the goodwill of the West in such matters as debt rescheduling and attraction of

foreign direct investment. Similarly, in 1987, at a conference on Economic Development and

Foreign Policy, Professor Gabriel Olusanya, Director-General of the Nigerian Institute of

International Affairs at the time, stated the need to establish a direct linkage between Nigeria’s

domestic economic requirements (especially attraction of FDI) and its foreign policy with a

view to ensuring that the latter served the needs of the former more systematically (See Ogwu

& Olukoshi 2002:16).

The prominence given to foreign direct investment in the conduct of Nigeria’s

economic diplomacy was predicated on the argument that since independence in 1960, Nigeria

had pursued a foreign policy line that was too heavy on politics or in which the country’s own

needs and interest in terms of economic well-being were relegated to the background. This

alleged deficiency is, in part, what economic diplomacy seeks to redress by placing much

emphasis on the attraction of FDI .In fact, Nwachukwu, in an address to newly appointed

Nigerian Ambassadors in 1991, stated unequivocally that:

The ball-game today in international relations is self-interest and economic development…in your utterances and in your behavioural pattern, please remember that Nigeria is a developing country. It needs support from the international community and that support can only come when you can win the confidence of those whose support you seek (Nwachukwu, 1991:38).

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Nwachuwku went on to tell the diplomats that: “You begin to win that confidence through

friendliness and loyalty to their cause (i.e. the cause of those whose support you seek). What

matters is our ability to win for Nigeria what we cannot for ourselves, that is, the economic

well-being of our people and physical well-being of Nigeria” (Nwachukwu 1991 in Ogwu &

Olukoshi 2002:18).

Apparently, this statement shows that the attraction of FDI into Nigeria is one of the

cardinal points of Nigeria’s economic diplomacy as all efforts are made to attract and increase

the level of FDI in the country. The priority given to the attraction of FDI in Nigeria’s

economic diplomacy becomes apparent when one examines extra efforts made by the Nigerian

government to secure and retain the good will of the leading Western powers. For instance, in

1988, against strong domestic opposition and even in contempt of the advice of the Foreign

Minister, the Nigerian government received in Lagos, Margaret Thatcher, the then British

Prime Minister, whose government’s inflexible policy on South African was the very antithesis

of Nigerian government.

Similarly, the Nigerian government took several steps calculated to bring the country

closer to the United States and other Western countries. In fact, Nigeria, became one of the

African champions of the American-sponsored move to bring about a political settlement

between the two-warring parties in Angola, namely UNITA and the government-led MPLA. It

accepted, under the Structural Adjustment Programme, to embark on significant reversal of the

indigenization decrees of 1972, 1974 and 1977; privatization of the economy; liberalization and

devaluation of naira. Again, the regime also, contrary to the demand of leading Nigerian

political forces, put Nigeria under a controlled return to civil rule, under an American-type

constitutional democratic arrangement.

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Furthermore, the Nigerian government made overtures to both France and West

Germany. The Nigeria President paid a state visit to France in early 1990. Early in 1988, the

West German President, Frederick Von Weisacker, had paid a state visit to Nigeria when he

was given both a National Honour and an Honorary Degree. The determination of the Nigerian

government to be in the good book of the leading Western powers was essentially an

expression of its economic motive of attracting FDI which is the cardinal objective of Nigeria’s

economic diplomacy.

As an expression of the pursuit for FDI, some Western-sponsored projects which

Nigeria either spurred or reluctantly supported in the pre-economic crisis days are now

enthusiastically embraced. For instance, Nigeria was initially a reluctant party to the Lome

Conventions, but with the advent of her economic diplomacy especially since 1986, Nigeria’s

attitude changed such that under Lome III, Nigeria had the largest share of the aid allocations

and disbursements. It has also been noted that one of the pillars on which the New Partnership

for Africa’s Development (NEPAD) was launched and especially spearheaded by the Nigerian

government of President Olusegun Obasanjo, was to increase available capital (in this case

FDI) through a combination of reforms, resource mobilization and a conducive environment for

FDI (Funke and Nsouli, 2003).

The Economic Diplomacy of Dependent Import Substitution Industrialization

Another form in which attraction of FDI was given primacy in Nigeria’s economic

diplomacy was in the form of the much vaunted import-substitution strategy. Hence, the great

powers were seen as channels for attracting foreign direct investment (FDI). The goal in view

was the establishment of industries in Nigeria, which would produce locally, those goods

previously imported from other countries. Thus, in this connection, it was perceived that a

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positive relationship could be established between Nigeria’s economic diplomacy and industrial

development fostered via import-substitution-industrialization. In support of the need to grant

attraction of FDI prominence in the conduct of Nigeria’s economic diplomacy, the then

Nigerian Prime Minister, Sir Abubakar Tafawa Balewa argued that:

At present, we lack the necessary capital and technical skill to develop our own resources by ourselves alone… how are we to obtain help from outside and still keep free from being under the influence of one power bloc or another? (Federal Government of Nigeria 1991, in Asobie 2002:54).

Apparently, during this era, attention was placed on attraction of foreign direct

investment for economic development. Further, because economic development was defined in

quantitative terms largely as growth in the GNP, it mattered little whether it resulted from the

increased capacity of indigenous inputs or from rise in the proportional contribution of external

inputs.

As noted by Asobie (2002), quite a number of factors combined to place the attraction

of FDI in position of prominence in the conduct of Nigeria’s economic diplomacy. First was

the capitalist structure of the inherited economy, together with its external orientation. Second,

and more important, was the vested interest of the Nigerian political leaders in perpetuating that

structure and the orientation of the economy. Hence, the choice of industrial development

strategy, namely dependent-import-substitution-strategy, was the product of the orientation of

these vested interests. The third was the competition for external financial and among the

regional governments and the political parties which controlled them.

As a result, the Nigerian political leaders in the 1960s, operated on a number of

premises. One was that the infusion of foreign direct investment was indispensable for the

attainment of industrial development. Another assumption was that Nigeria’s foreign policy

could be conducted in such a manner as to achieve a net inflow of foreign direct investment

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from a variety of international actors. Another assumption was that international actors were

basically friendly and selfless; they would, therefore, show interest and willingness in assisting

Nigeria to develop. It was on these premises that Nigeria’s economic diplomacy of the 1960s

was built – a diplomacy directed primarily at attracting foreign investment without putting in

jeopardy, Nigeria’s internal security and political independence (Asobie 2002). Arising from

this view informs the argument that Nigeria’s economic diplomacy placed much emphasis on

the attraction of foreign direct investment into the country because it is believed that FDI

inflow will boost economic growth and development in the country. This is a negation of the

purpose of foreign direct investment in international economic relations since all FDI inflow

into a country is not always for charity but for enhancement of national interest.

Economic Diplomacy and the Decline of Good Neighbourliness

As noted earlier, the overall thrust of Nigeria’s economic diplomacy was to give

primacy to economic factors. With the intensification of this foreign policy thrust especially

under Obasanjo’s administration, there has been serious decline in Nigeria’s foreign policy

thrust of being benevolent to her immediate neighbours in Africa especially when it comes to

helping them out economically. This manifested when former President Obasanjo assumed

power in 1999 and immediately embarked on ‘shuttle diplomacy” by visiting all the major

countries and institutions of the world. This form of economic diplomacy was also replicated in

his choice of finance ministers and chief economic advisers. He appointed Ngozi Okonjo-

Iweala and Professor Chukwuma Charles Soludo as his Finance Minister and Chief Economic

Adviser respectively. This was based on his assumption that these caliber of people will be

respected by the Western countries especially their financial institutions (IMF and World

Bank). More so, the credibility of such people in the international community was believed to

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be of help in not only attracting FDI and donors, but also in attracting sympathy of Western

countries to salvage the country out of its economic quagmire.

As noted by Asobie (2002:81), “cost-consciousness has been an aspect of Nigeria’s

diplomacy since 1982”. Consideration of the opportunity cost, in terms of possible loss of

financial assistance from the West was a factor in the decision of the government of President

Shehu Shagari to boycott the OAU summit in Libya. More importantly, calculation of the huge

financial cost of keeping Nigerian troops as part of OAU peace-keeping force in Chad

contributed to the decision to withdraw Nigerian troops from the territory before the task of the

OAU force was accomplished. Under Mohammmed Buhari’s regime, the retrenchment of

Nigeria’s external affairs officers and the reduction in the number of Nigeria’s diplomatic

missions abroad were also undertaken as part of cost-cutting measure.

Asobie further noted that in the early days of Ibrahim Babangida’s administration, even

before SAP was introduced, there was evidence of cost-consciousness in Nigeria’s diplomacy.

For example, the calculation of opportunity costs was evident in the speed with which

Babangida’s administration normalized relations with Britain in 1985. Economic diplomacy

and its concomitant cost-consciousness was also reflected in the very early moves made to

break the deadlock in the negotiations for an extended credit facility of US$2.5 billion from the

IMF. In fact, this cost-consciousness and the decline of good neighbourliness all of which are

results of economic diplomacy are evident in the so-called Akinyemi doctrine – the principle of

reciprocity and consultations. According to Akinyemi:

If Nigeria is going to be regarded as an African leader, it is going to entail some cost to the Nigerian government and people, and then respect for Nigeria should dictate that the views of Nigeria should be sought when the situation allows for consultation. (Akinyemi 1986 in Asobie 2002:232).

123

The above statement by Akinyemi shows explicitly that Nigeria has come to terms with

the cost of trying to be a good neighbour as being detrimental to the economic diplomacy of the

country. It further shows the overriding concern for profitability in Nigeria’s foreign policy,

which also became the central element of SAP. In fact, in September 1986, Nigeria for the first

time, warned African states that they should realize that she was no “Father Christmas”; they

should therefore, not continue to expect aid without strings from her. This reinforced the

Nigerian government’s new insistence that, in return for Nigeria’s support and sympathy for the

cause of other African states, they should, in turn, defend and protect Nigeria’s national

interest.

Further, in intra-African and intra-Third World relations, Nigeria’s economic diplomacy

and its cost-consciousness consists in being very calculative on expenditure on some foreign

policy projects. Hence, all aids and expenditures made in neighbouring countries were made in

such a way that it furthered the economic interest of Nigeria. For instance, in May 1986, after

the bombing raids carried out by the racist South African government’s Air force on Zambia,

Zimbabwe and Botswana, Nigeria’s Foreign Minister visited these countries and, in a show of

solidarity, pledged an aid package of US$10 million to the affected countries.

On June 16, 1986, the Nigerian President himself promised another $50 million, to be

spread over five years period to the frontline states and liberation movements in Southern

African. Also, Nigeria sent some policemen to serve as part of the United Nations Transition

Assistance Group (UNITAG) in Namibia. On the face value, it is difficult to justify such

expenditure, in terms of cost-benefit calculations. However, on deeper analysis and reflection,

“it becomes obvious that any amount spent to further the process of liberation in Southern

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African is considered also as an expression of economic diplomacy especially on the groups of

national security and economic benefits”( Asobie 2002:86).

Assessment of Nigeria’s Economic Diplomacy and FDI Performance

It is now widely acknowledged that attraction of foreign direct investment (FDI) is one of

the pillars of Nigeria’s economic diplomacy. On a general note, UNCTAD (2001) notes that FDI in

the world rose from US $57 billion in 1982 to US $1,271 billion in 2000. Even so, only a few

countries have been successful in attracting significant FDI flows. Indeed, African as a whole and

Sub-Saharan Africa in particular seems to have not particularly benefited from the FDI boom. For

most of the time since 1970, FDI inflows into Africa have increased only modestly, from an annual

average of about US$1.9 billion in 1983 – 87 to US$3.1 billion in 1998 – 2002 and US $4.6 billion

in 1991 – 1997.

However, Nigeria is one of the few countries that have benefited from the FDI inflow into

Africa albeit minimally. Nigeria’s share of FDI inflow to Africa average around 10%, from 24.19%

in 1990 to a low level of 5.88% in 2001 up to 11.65% in 2002. In fact, UNCTAD (2003) showed

Nigeria as the continent’s second top FDI recipient after Angola in 2001 and 2002. (See, Ayanwale

2007:15). The table below further shows the details of FDI inflow into Nigeria for the period 1980

– 2003.

Table 3.1: Nigeria Net Foreign Direct Investment Inflow 1980-2003 (in US$ million) Year Africa Nigeria % of Africa 1980 392 -188.52 - 1990 2430 588 24.19 1995 5119 1079 21.07 1997 10667 1539 14.43 1998 8928 1051 11.77 1999 12231 1005 8.22 2000 8489 930 10.96 2001 18769 1104 5.88 2002 10998 1281 11.65 2003 15033 1200 7.98 Source: UNCTAD FDI Database in Ayanwale 2007:15

125

The above table could be represented in a bar chart to show the trend of FDI movement

especially between the periods 1999 to 2003 which is the first tenure regime of President

Olusegun Obasanjo as herunder:

1980 1990 1995 1997 1998 1999 2000 2001 2002 2003

Am

ount

(US

$ m

illio

n)

1800 1600 1400 1200 1000 800 600 400 200 0 -200

Years

Source: UNCTAD FDI Database in Ayanwale 2007:15

126

From the above chart, it is apparent that FDI in Nigeria has risen from a discouraging

US$-188.52 to an appreciable height of US$1200 in 2003. It is pertinent to note that prior to the

early 1970s foreign investment played a major role in the Nigerian economy until 1972, when

much of the non-agricultural sector was controlled by large foreign owned trading companies

that had a monopoly on the distribution of imported goods. “Thus, between 1963 and 1972 an

average of 65% of total capital was in foreign hands” (Jerome and Ogunkola, 2004 in

Ayanwale 2007:16).

In view of the fact that successive Nigeria governments have viewed FDI as a vehicle

for political and economic domination, the thrust of government’s policy through the Nigeria

Enterprise Promotion Decree (NEPD) (Indigenization policy) at that period was to regulate

rather than promote FDI. The NEPD was promulgated in 1972 to limit foreign equity

participation in manufacturing and commercial sectors to a maximum of 60%. In 1977, a

second indigenization decree was promulgated to further limit foreign equity participation in

Nigeria business to 40%. Hence, between 1972 and 1995 official policy toward FDI was

restrictive as the regulatory environment discouraged foreign participation resulting in an

average flow of only 0.79% of GDP from 1973 to 1988 (Ayanwale 2007).

As noted earlier, Nigeria’s commitment to the pursuit of economic diplomacy was “first

officially stated in June 1988 by the Retired Major-General Ike Nwachukwu in his first policy

address as Nigeria’s Foreign Minister” (Ogwu and Olukoshi 2002:16). This pursuit initiated the

process of termination of the hostile policies towards FDI. A new industrial policy was

introduced in 1989 with the debt equity conversion scheme as a component of portfolio

investment. The Industrial Development Coordinating committee (IDCC) was established in

1988 as one-step agency for facilitating and attracting foreign investment flow. This was

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followed in 1995 by the repeal of the Nigeria Enterprises Promotion Decree and its replacement

with the Nigerian Investment Promotion Commission Decree 16, of 1995.

The NIPC absorbed and replaced the IDCC and provided for a foreign investor to set up

a business in Nigeria with 100% ownership. Upon provision of relevant documents, NIPC will

approve the application within 14 days (as opposed to four weeks under (IDCC) or advise the

applicant otherwise. Furthermore, in consonance with the NIPC decree, the Foreign Exchange

(Monitoring and Miscellaneous Provision) Decree 17 of 1995 was promulgated to enable

foreigners invest in enterprise in Nigeria or in money-market instruments with foreign capital

that is legally brought into the country. The decree permits free regulation of dividends

accruing from such investment of capital in event of sale or liquidation. Furthermore, an Export

Processing Zone (EPZ) scheme adopted in 1999 allows interested persons to set up industries

and business within demarcated zones, particularly with the objective of exporting the goods

and services manufactured or produced within the zone.

Essentially, the policies of economic diplomacy embarked on by the Nigerian government to attract foreign investors which is also encapsulated in SAP could be categorized into five: the establishment of the Industrial Development coordinating Committee (IDCC), Investment Incentive Strategy, Non-Oil Stimulation and Expansion, the Privatization and Commercialization Programme, and the shift in macroeconomic management in favour of Industrialization, Deregulation and market-based arrangements (Ayanwale 2007:17).

More so, Table 3.2 provides details of FDI inflow into Nigeria for the period 1970 to

2002. The nominal FDI inflow ranged from N128.6 million in 1970 to N434.1 million in 1985

and N115.952 billion in 2000. This was an increase in real terms from the decline of the 1980s.

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Table 3.2: FDI Inflow into Nigeria from 1970 – 2002 Year Nominal FDI (N

million)

FDI as percentage

of GDP

Real FDI (N

million)

1970 128.6 2.47 1,190.70

1975 253.0 1.21 1,222.20

1980 -404.1 -0.81 -955.32

1985 434.1 0.61 434.10

1990 4,686.0 1.81 1,598.23

1995 75,940.6 3.87 3,721.85

1999 92,792.5 2.91 2,763.66

2000 115,952.2 2.39 2,955.09

2001 132,433.7 2.39 3,102.90

2002 225,036.5 3.93 4,368.37

Source: CBN Statistical Bulletin (various years) in Ayanwale (2007:16)

The figure of the FDI percentage of GDP is represented in the bar chart below. The

chart reveals that FDI as a percentage of the GDP has equally increased over the years from

1970 to 2002. The increase is more significant in the period under our investigation, that is,

from 1999 to 2007 when the FDI as a percentage of GDP never went below 2.0%.

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Table 3.3: FDI AS PERCENTAGE of GDP 1970 – 2002

1980 1970 1975 1985 1990 1995 1999 2000 2001 2002

FDI a

s a %

of G

DP

5 4 3 2 1 0 -1 -2

Years

Source: CBN Statistical Bulletin (various years) in Ayanwale (2007:16)

130

Sectoral Analysis of FDI Inflow in Nigeria

Although there has been some diversification into the manufacturing sector in recent

years, FDI in Nigeria has traditionally been concentrated in the extractive industries.

Agriculture, transport and communications, building and construction remained the least

attractive hosts of FDI in Nigeria. Nigeria is currently described as the fastest growing mobile

phone market in the world. Since 2001, when the mobile telecommunication operators were

licensed, the rate of subscription has gone up and does not show any sign of fluctuating. In fact,

MTN (Nigeria) – the leading mobile phone operator, V-mobile, Glo,Etisalat and M-tel – are

currently engaged in neck and neck competition that has forced the rates down and in the

process fostered consumer satisfaction. The effect of this development is yet to be translated to

the rest of the economy. However. Table3.4 shows the sectoral composition of FDI in Nigeria

from 1970 – 2001. Data from the table record a diminishing attention to the mining and

quarrying sector, from about 51.2% in 1970 – 1974 to 30.7% in 2000 /01.

On the average, the stock of FDI in manufacturing sector over the period of analysis

compares favourably with the mining and quarrying sector, with an average value of 32%. The

stock of FDI in trading and business services rose from 16.9% in 1970 – 1974 to 32.6% in 1985

– 1989, before fluctuating to 8.3% in 1990 – 1994. However, it subsequently rose to 25.8% in

2000/01.

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Table 3.4: Sectoral Composition of FDI in Nigeria, 1970 – 2001 (%)

Year Mining

&Quarrying

Manufacturing Agriculture Transport &

Communication

Building

Trading

1970-74 51.2 25.1 0.9 1.0 2.2

1975-79 30.8 32.4 2.5 1.4 6.4

1980-1984 14.1 38.3 2.6 1.4 7.9

1985-89 19.3 35.3 1.4 1.1 5.1

1990-94 22.9 43.7 2.3 1.7 5.7

1995-99 43.5 23.6 0.9 0.4 1.8

1999-01 30.7 18.9 0.6 0.4 2.0

2000-2001 30.3 32.2 1.7 1.1 4.7

2001-2007 31.3 34.5 1.6 1.3 5.4

Source: CBN Statistical Bulletin (2008)

FDI Performance and Economic Diplomacy: The Missing Link

It is pertinent to know that although, there has been increase in FDI flow in Nigeria over

the years, this can not be fully attributed to Nigeria’s economic diplomacy. In fact, CBN (1989

as cited in Asobie 2002:99) noted that “there has been an increase in FDI, such increase in FDI

has not been strictly as a result of Nigeria’s economic diplomacy because the investments were

not strictly new foreign investments”. For instance, in respect to the apparently phenomenal

increase of FDi in 1989, the CBN Report commented that the increase was accounted for

mainly by the purchase of Federal Government shares in Shell Petroleum Development

Company Nigeria Limited by three oil companies namely, Shell, ELF and AGIP. Other sources

of foreign investment inflows were re-invented earnings of oil companies and proceeds from

debt-conversion all of which were responsible for the increase in cumulative direct foreign

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investment. Apparently, foreign private investors are motivated by profit motive. In their quest

for profit in countries like Nigeria, they try to reduce risks by investing mainly on capital which

has been mobilized locally. This fact was recognized by the Nigerian government many years

ago when the then Head of state, Olusegun Obasanjo sadly observed:

Experiences have shown that most of the so-called foreign investors come with little or nothing in finances; they raise internal loans from the savings of ordinary Nigerians and within months, they are devising all means of repatriating huge sums out of Nigeria in form of dividends, profits, management fees, loaded invoices, etc (cited in Nwachukwu 1991:106).

Based on the above, it is evident that Nigeria’s economic diplomacy is quite naïve

because by focusing on attracting increased amount of FDI, it assumes not only the goodwill,

but also the benevolence of foreign private investors. It assumes that these international actors

are interested in assisting Nigeria to develop, all they need is to be encouraged and wooed (via

economic diplomacy) especially with attractive package of incentives. Fortunately, the

Nigerian experience over the years especially during the Olusegun Obasanjo’s regime of 1999

– 2007 shows that the rise in the country’s FDI is significantly related to Nigeria’s economic

diplomacy.

Also, the current rise of FDI inflow to Nigeria could be attributed to the wave of

globalization and contemporary investment practices which has significantly increased the rate

of global FDI growth.

Essentially, contemporary investment practices aims at protecting and advancing the rights of international investors vis-à-vis host governments and countries. The main elements include the right of entry and establishment of foreign investors and investments; the right to full equity ownership; national treatment (treating foreign investors at least as well as local investors); the right to free transfer of funds and full profit repatriation; protection of property from expropriation and other accompanying measures such as national treatment rights in privatization (Khor 2001:71).

133

It is pertinent to note that contemporary investment practices are anchored on certain

codes of conducts provided by global institutions like World Trade Organization (WTO) which

encourages growth and influx of FDI. Hence, empirical fact shows that with the liberalization

of investment milieu and coupled with rapid advances in technology within the period –

especially in transport and communication; there has been a tremendous increase in FDI.

Global inward FDI flows rose from US $59 billion in 1982 to a peak of US $1,491 billion in

2000. On an annual average basis, FDI inflows increased from 23.1% in the period 1986-90 to

40.2% over the period 1996-2000. Furthermore, FDI outflows rose from 25.7% to 35.7%

within the same period (UNCTAD, 2003; Okolie, 2008).

Furthermore, the growth of FDI underscores the enormous role of Transnational

Corporations (TNCs) in economic activities (especially FDI) worldwide. There is an

unprecedented expansion all over the world of the flows of FDI as new companies are

expanding their commercial operations, extending them beyond the borders to their own

countries to explore not only new markets but also locations where their production can be

more profitable. The TNCs has therefore become the quintessential vehicle for global

investment. Significantly, the global assets of TNCs were estimated over 8000 billion US

dollars in 1994 with an FDI stock across the globe amounting to 2.7 trillion as at 1995 all

contributing to the global growth of FDI.

In summary, our argument is that attraction of foreign direct investment (FDI) has been

given top priority in the conduct of Nigeria’s economic diplomacy, in order to attain this

objective, various strategies were employed among which is the Dependent Import-

Substitution-Industrialization, the reduction of unnecessary expenses in playing “the good

neighbour” in Africa etc. Again, empirical evidence shows that there has been increase in the

134

inflow of FDI into Nigeria especially in the telecommunication sector. Nevertheless, in real

terms, what is seen as investment in developing economies were strictly speaking not FDI but

mopping up of speculative capital which adds little to domestic capital stock. Rather than bring

improved management, new production techniques, quality control and access to foreign

markets, as well as exerting competitive pressures on local producers, foreign investments

rather decapitulate the economy and intensify capital flight as the actions of investors in the

communication sector of African economy shows (Okolie 2007).

Further, our analysis shows that there is positive correlation between this increase in FDI

inflow to Nigeria and Nigeria’s policy of economic diplomacy of National economic

empowerment and development strategy although other factors especially the wave of

globalization and the concomitant liberalization of investment practices have contributed to

inflow of FDI to the country. This underscores the fact that there is a link between the rise in

Foreign Direct Investment (FDI) to Nigeria and Nigeria’s policy of economic diplomacy.

Global FDI Performance and Economic Diplomacy

Examination of global trend in FDI inflow to Nigeria from 1999-2000 points to great upward

trend in the inflow of FDI from advanced capitalist countries to Nigeria. Table 1.5 Present

global picture of FDI inflow to Nigeria for different regions from 1999 to 2006. All the regions

showed insignificant increase in FDI inflow from the 1999 level. Thus, the upward increase in

the aggregate FDI flows to Nigeria from about $190.61 million in 1999 to about $4169.14

million in 2006 is a joint increase in the levels of FDI by all the regions.

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Table 3.5 Foreign Direct Investment in Nigeria, 1999-2006, $ Million Region/Country 1999 2000 2001 2002 2003 2004 2005 2006

North America 7.35 9.84 12.10 36.16 40.34 4354.14 5166.32 1601.28

South America 1.15 2.96 0.39 0.05 7.14 60.04 24.56 11.26

Asia/Pacific 2.94 5.93 4.45 5.17 1.54 32.12 47.29 39.63

China 0.02 1.08 2.39 0.0 0.05 0.51 1.88 5.50

Middle/Far East 7.41 2.75 10.92 5.30 6.74 23.27 21.22 13.39

Europe 164.95 136.46 98.86 200.24 293.66 2624.30 3084.68 2441.52

Africa 6.79 9.45 8.24 24.30 91.41 173.62 169.04 56.06

Total 190.61 168.47 137.35 271.22 440.88 7268.00 8514.99 4169.14

Source: Based on Data from Nigerian Investment Promotion Commission (NIPC).

Relative to other region, South American region contributed the least to the level of FDI

inflow to Nigeria. This was followed by the Asia-Pacific region. By 2006, though the relative

positions remained unchanged as the South America maintained its position, FDI inflow from

Asia Pacific region have surpassed the inflows from the Middle and Far East region. Thus,

between 1999 and 2006, FDI inflows from Asia-Pacific region to Nigerian increased at a higher

rate than their similar inflows from the middle and Far East region. This suggests increasing

importance of China in the observed trend. This analysis of inflow of FDI from this region

revealed that although China ranked 5th in the magnitude of FDI inflows from the region to

Nigeria behind India, Singapore, Hong Kong and Japan in that order, the country seems set to

overtake these leading countries. This signifies that Chinese FDI inflows to Nigeria increased

from an average of $0.55 million in 1999-2000 to about $5.5 million in 2006. This is a tenfold

increase compared to 9 fold increase by the region as a whole.

136

These tables with other explanations therein validate our hypothesis that the

introduction of national economic empowerment and development strategy remarkably

enhanced the inflow of foreign direct investment from advanced capitalist economies to

Nigeria.

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CHAPTER SIX

NATIONAL ECONOMIC EMPOWERMENT AND DEVELOPMENT STRATEGY

AND DEBT RELIEF

As noted earlier in this study, Nigeria’s policy of economic diplomacy also involves

efforts at wooing the Western creditor nations to grant Nigeria debt cancellation. In this

chapter, we traced the origin of Nigeria’s debt and examined how economic diplomacy of

national economic empowerment and development strategy was implicated in debt relief

extended to Nigeria from international financial institutions.

History and Structure of Nigeria’s External Debt

The origin of Nigeria’s external debt dates back to 1958 when a sum of 28 million dollars

was contracted for railway construction. Between the period of 1960 and 1970, there was no

significant external borrowing, in fact at the end of the civil war in 1970, Nigeria’s total

outstanding external debt was a mere N488.8 million, thereafter, it declined sharply to N214.5

million in 1975 which represents the highest during the oil boom era. Thus, between 1958 and

1977, Nigeria’s external debt was insignificant and constitutes no serious problem to the

country as debts contracted during the period were mainly confessional debts from bilateral and

multilateral sources with longer repayment periods and lower interest rates (DMO, 2001).

The oil glut of 1978 led the country into borrowing the first “Jumbo loan” of 1 billion

dollars from the international capital market (ICM). In July of the same year, Nigeria sought

another 1 billion dollar loan, this was more difficult to obtain because oil prices were still

falling, the country’s external balance was in deficit for the third consecutive year. However, in

late 1978, Nigeria obtained a 750 million dollars loan ringing the total external debt stock to 2.2

billion dollars ( DMO, 2001).

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The poor economic situation in the country, inappropriate debt management, and the

ever increasing interest brought Nigeria’s debt to records heights. Thus, as at 1983, Nigeria’s

external debt amounted to about $17.76 billion, with the Paris Club debts or official debts (i.e.

debts insured by export credit agencies of Paris Club members) estimated at $5.30 billion. By

1990, however, this official debt, had more than trebled and by the year 2000, amounted to

nearly four times the level in 1983 and represented 75% of Nigeria’s total debt ( DMO

2001:31). This astronomical growth in the stock of debt owed to Paris Club creditors since the

mid-1980s is accounted for partly by new maturities falling due and partly by growth in arrears.

The build up of arrears reflected debt service due but unpaid, penalty interest on outstanding

payments and exchange rate changes in respect of the dollar vis-à-vis other currencies.

Meanwhile, private debt outstanding in 1983 amounted to $9.9 billion. Between 1994 – 98, the

government refinanced uninsured short term trade arrears amounting to $4.8 billion and

covered them with promissory notes. This private debt (London club debt) included arrears of

commercial bank debts incurred through the medium of letters of credit after December 31,

1987 (DMO, 2001).

By 2000, Nigeria’s outstanding debt stock stood at about 28 billion dollars, official

debts accounted for 87.66 percent of the total debt stock while private debt accounted for about

12.59 percent of the total debt stock. An actual debt service payment for the year was 1.9

billion dollars, translating to about four times the Federal Government budgetary allocation to

education and about 12 times allocation to health. In 2001, the external debt stock remained

almost stable at about 28 billion dollars about 149.9 percent of the country’s export earnings.

Between the periods of 1985 to 2001, the country has spent over 32 billion dollars in servicing

her external debt (DMO ,2001). Again, “the total debt stock of Nigeria by January 2005 stood

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at $34 billion (Okonjo Iweala 2005), while the Paris Club share of the debt stood at over $30

billion (Paris Club, 2005). Table 4.1 below shows Paris Club Debt stock by creditors as at

December, 2004.

Table 4.1: Paris Club Debt Stock by Creditor as at December, 2004 Country Total Original Loan

Amount Outstanding at 31-12-04

% as Compared to Original Amount

UK 4,707.17 8,000.32 169.96 France 2,132.81 6,249.61 293.02 Germany 2,226.59 5,288.66 237.52 Japan 3,927.24 4,447.47 113.26 Italy 1,026.86 1,975.94 113.26 Netherlands 438.45 1,707.98 389.55 USA 641.97 984.49 153.40 Belgium 694.52 608.19 87.57 Denmark 246.80 571.75 231.67 Austria 342.83 521.38 152.08 Spain 185.29 249.541 134.38 Switzerland 151.55 201.01 132.64 Russia 67.50 36.97 54.77 Finland 3.98 3.99 100.25 Sub-total 16,793.38 30,847.80 183.69 All figures in million US$ Source: DMO December 2004 Table4.2: Paris Club Debt Stock by Creditor as at December, 2007 Country Total Original Loan

Amount Outstanding at 31-12-07

% as Compared to Original Amount

UK 4,707.17 0.00 0% France 2,132.81 0.00 0% Germany 2,226.98 0.00 0% Japan 3,927.24 0.00 0% Italy 1,026.86 0.00 0% Netherlands 438.45 0.00 0% USA 641.97 0.00 0% Belgium 694.52 0.00 0% Denmark 246.80 0.00 0% Austria 342.83 0.00 0% Spain 185.29 0.00 0% Switzerland 151.55 0.00 0% Russia 67.50 0.00 0% Finland 3.98 0.00 0% Su-total 16,793.38 0.00 0% All figures in million US$

Source DMO 2008 December

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In 2005 both federal and states existed Paris club debt, through not without

controversies. Some analysts faulted the exit process and terms, while others insisted that

Nigeria was short-changed. In March 2007, under an obligor substitutions arrangement, Nigeria

paid 519 million U.S. dollars to exist obligation to holders of promissory notes. Similarly, in

March 2007 Nigeria issued a call notice and about 21 percent were returned at 220 U. S. dollars

per unit of oil.

According to recent Debt Management Office (D.M.O.) report, the total debt service

payment for the year 2007 amounted to 1.022 billion U.S. dollars or 3.211 percent, was for

external debt service payments. Of the debt service payments, 46.63 percent constituted the

payment to promissory notes holders, while 38.43 percent was payment made to multilateral

creditors. Further, Tables 4.3 (a) and (b) and 4.4(a) and (b) below shows total debt stock by

December 2004 and Nigeria’s debt service payment from 2001 to 2007 respectively.

Table 4.3a: Summary of External Debt Stock, as at December 2004

Figures in $ million

Principal Balance Arrears and Penalties

Total Percent of Total

Multilateral institutions

2,822 2 2,824 7.86

Paris Club 25, 199 5, 649 30, 848 85.8 Non-Paris Club

47.5 0 47.5 0.13

London Club 1,442 0 1,442 4.01 Promissory Notes

783 0 783 2.2

Total 30, 294 5,651 35,945 100 Source: DMO, 2005

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Table4.3b: Summary of External Debt Stock, as at December 2007 Figures in $ million Principal Balance Arrears and

Penalties

Total Percent of

Total

Multilateral

institutions

3,080 - 3,080 84.31%

Paris Club Nil Nil Nil Nil

Non-Paris

Club

2.114 - 2.114 15.69%

London Club Nil Nil Nil Nil

Promissory

notes

Nil - Nil Nil

Total 5.194 Nil 5.194 100%

Source: DMO, 2008 Table 4.4a: (US$ Million) External Debt Services Payments (2001- 2005)

Creditor Category 2001 2002 2003 2004 2005

A. Official

1. Bilateral Paris Club

Non-Paris Club

1,273.62

33.81

161.58

75.86

1,020.18

13.26

994.44

11.65

8,072.55

15.83

2. Multilateral

Non-Pairs Club

491.48

121.21

472.12

0.43

509.23

55.55

487.28

.018

471.66

-

Sub-Total

B. Private

1,798.91 709.54 1,542.66 1,493.37 8,560.06

1. Promissory Notes 195.18 192.12 176.42 171.23 213.55

2. Banks (London

Club)

134.08 266.75 90.21 90.15 169.86

Sub-total 329.26 458.87 266.62 261.38 383.41

GRAND TOTAL 2, 128.17 1,168.40 1,809.28 1,754.75 8,943.45

Source: DMO, (2005). Federal Ministry of Finance

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Table 4.4b (US$ Million) External Debt Services Payments (2006-2007)

Source: DMO, (2008). Federal Ministry of Finance The Journey to Debt Cancellation

In recognition of the connection between debt reduction and poverty reduction, the

civilian regime of Olusegun Obasanjo (1999 – 2007) attached priority to obtaining rapid and

substantial external debt reduction, this, the regime believed would be attained via her policy of

economic diplomacy.

As a result, efforts were made to regularize relations with the international financial

community to pave the way for constructive engagement; negotiation of favourable terms for

debt rescheduling and reconstructing under “traditional debt relief mechanisms in the short

term; and, building on that in the medium term, to secure deeper and more substantive debt

reduction” (http://www.nigeriafirst.org ).

Further, having an economic programme supported by the Bretton Woods institutions

was a precondition for meeting with the Paris Club of creditors and obtaining favourable debt

relief negotiation. Hence, in order to actualize its debt relief strategy, the Obasanjo

Creditor Category 2006 2007 C. Official 1. Bilateral Paris Club Non-Paris Club

Nil 45.356

Nil -

2. Multilateral Non-Pairs Club

0.426

0.503

Sub-Total D. Private

45.782 0.503

1. Promissory notes 0.477 .519 2. Banks (London Club) Nil Nil Sub-Total 0.477 .519 GRAND TOTAL 46.259 1.022

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administration embarked on bold macroeconomic stabilization and structural reform policies,

supported by a standby arrangement that was approved by IMF on August 4, 2000. The good

track record of implementing these policies, amidst difficult socio-political circumstances,

paved the way for discussion with the Paris club of creditors on the restructuring of the

country’s debts.

In 2000, President Obasanjo pressed Nigeria’s creditors hard and succeeded in securing

an invitation to the Paris Club. But creditors were only willing to offer a re-scheduling of the

debt, not a write-off. By then, interest and penalties constituted nearly $ 10 billion of the $ 24

billion rescheduled in 2000. Still the rescheduled debt continued to grow-not because Nigeria

continued to borrow, but because of foreign exchange movements.

By his second term in 2003, President Obasanjo had resolved to deepen economic

reform within Nigeria, by challenging corruption and implementing economic programmes

supported, dictated and commended by the Western countries and Institutions. He appointed

internationally reputed personalities like Mrs. Ngozi Okonjo-Iweala (Finance Minister), Prof.

C. C. Soludo, Oby Ezekwesili, Dora Akunyili, to mention but a few, to carryout these reforms.

Others include Dr. Mansur Muhtar, another Harvard graduate who was appointed Director

General of the Debt Management Officer, while Mrs. Obi Ezekwesili was in charge of

formalizing due process unit for government action.

There were however, several major hurdles in the journey to Nigeria’s debt

cancellation. Foremost, Nigeria did not have sustained IMF programme, again, history shows

that debt cancellation had only ever been extended to countries with sustained IMF

programmes. Also, Nigeria has not been granted International Development Agency (IDA)

status by the management of the World Bank and was not eligible for concessional debt relief.

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Further, some creditors regarded Nigeria as “oil-rich” and argued that the debt was affordable,

especially after the rise in the oil price. Nigeria also suffered from what is known as “reputation

overhang” as a result of high levels of corruption. There was very little public support in OECD

countries for debt cancellation (Pettifor 2006:3).

Despite these setbacks, Obasanjo’s administration did not relent in its effort to achieve

debt cancellation for Nigeria. Hence, Obasanjo and his key ministers embarked on an

exhausting round of formal visits to meet heads of government in Japan, France, Germany and

the U.S. Meanwhile, Dr. Okonjo-Iweala was holding series of meetings with other world

influential ladies like Mrs. Anne Kruegar – Deputy Director of IMF; Condoleeza Rice, then

National Security Adviser to President Bush; Nancy Birds, Director of the Center for Global

Development in Washington (see http:www.clubparis.or/en/news/nagedefilnews/php?fiche=

com112978884.).

In one of her campaign speeches, Okonjo –Iweala noted as follows:

Nigeria desperately needs debt cancellation and a new start. But we as hobbled by misconceptions, which are understandable given past decades of misrule and instability. People think that because Nigeria has oil, it is a rich country, and that debt cancellation would be wasted because the money would disappear into a black hole of corruption… across government, we have cleaned up our act, embedding accountability and transparency…changes have not been popular with vested interests and there is a real fear that without the support of international creditors, disillusion and resistance will overwhelm our dedication to democracy, to rooting out corruption and to reform. We desperately need to invest more in public services. We are asking for debt cancellation to help us succeed. (Okonjo Iweala, 2005:25).

Dr. Okonjo Iweala and Dr. Muhtar embarked on endless meetings and flights to capitals

across the globe meeting with finance ministry officials, checking and reconciling data and

briefing officials on Nigeria’s economic reforms. At the same time, they work closely with the

World Bank and IMF to produce a report on the sustainability of Nigeria’s debts. In Abuja,

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Nigeria, the National Assembly appears restless and called for debt repudiation. It gave the

executive all the required support in its quest for debt cancellation. It is pertinent to note that

the various diplomatic visits to Western countries/institutions, economic policies and reforms

implemented by the Obasanjo administration generated support from all the G8 finance

ministers.

The country also made a case for debt relief by show-casing to the world the account of

her important peace keeping role it has been playing in the ECOWAS sub-region. According to

her, the effort has cost the country more than US $ 8 billion, moreover it has sacrificed the

precious lives of substantial number of its soldiers. The developed countries have encouraged

Nigeria’s participation in these endeavours but are reluctant to get directly involved. Hence, the

developed countries should be able to reciprocate Nigeria’s sacrifices for regional and global

peace in form of debt relief.

Furthermore, through the Debt management Office (DMO), the country successfully

hosted International Conference on Sustainable Debt Strategy form 17th – 18th May, 2001. The

conference was very productive and largely accomplished the objectives for which it was

convened. Over three hundred (300) participants were in attendance as against the initial

projection of one hundred and fifty (150) participants for the conference. With the roll call

including the President, Vice President and Ministers of the Federal Republic of Nigeria,

Distinguished Senators and Honourable Members of the National Assembly, the International

conferences received widespread support from Government. Also in attendance were the

Director of African Region (IMF), the Vice President of the African Development Bank

(ADB), and the Vice President of the World Bank (African Region).

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The debates generated useful arguments about economic reform and the useful ideas

advanced for developing a sustainable debt strategy have provided much impetus to fruitfully

drive debt management offices work forward. Nigeria also carried her debt relief campaign

through the New Partnership for African Development (NEPAD). NEPAD is a vision of

African leaders for the continent to eradicate widespread and severe poverty; promote

accelerated growth and development; halt the marginalization of Africa in the globalization

process and to also use it as a platform for debt relief campaign.

Other programmes implemented in order to gain support of creditor nations included the

National Economic Empowerment and Development Strategy (NEEDS), the launching of the

Extractive Industries Transparency Initiative (EITI) to better expose and make transparent oil

industry accounts and understand the structure of expenditure and revenue in the sector; the

Economic and Financial Crimes Commission (EFCC) to fight corruption; setting up of

intensive budget monitoring mechanisms, and other reform programmes aimed at creating an

enabling environment including a rational system of incentives and values, characteristic of a

private sector driven economy ( Okonjo-Iweala, 2005).

The Establishment of Debt Management Office

In order to gain support of creditor countries and to adequately manage the country’s

debt, President Olusegun Obsanjo regime established the Debt Management Office which

commenced operations on October 4, 2000. The establishment of an effective and efficient debt

management system is a major element of sound economic management, because of the crucial

link with fiscal and monetary policies as well as overall macroeconomic management. It is also

supportive of the overall efforts to strengthen governance by improving transparency and

147

accountability while serving as an important comfort to creditor seeking to extend new credit

lines or reschedule debts.

The broad objective of the DMO is to assist Nigeria in achieving a sustainable debt

profile and to rationalize and streamline the management of the country’s debt with a view to

sharpening strategic focus and achieving operational efficiency.

The specific functions of the DMO includes inter alia:

Maintaining a comprehensive inventory of loans together with forecast of debt service.

Provision of timely and accurate information on the country’ debt to assist policy

makers and improve transparency in debt management.

Effecting debt service payments accurately and on time.

Negotiating with, and securing debt relief from the Paris Club and other creditors

Publishing up to date statistics so as to improve transparency in debt management etc. (

DMO 2001:23).

Interestingly, in May 2001, the Debt Management Office (DMO) was granted full

membership of the Geneva-based World Association of Debt Management Offices (WADMO)

as its 36th member. This membership provides an opportunity for DMO to achieve the

following: Learning about best-practices in debt management; gaining access to technical

assistance, training and funding from relevant bilateral and multilateral agencies for the

development and implementation of effective debt management programmes; publicizing the

efforts of the Nigeria government in enshrining transparency in debt management; and using

the organization as platform to advance Nigeria’s campaign for debt relief. This is indeed a

landmark achievement for Nigeria in her journey to debt cancellation.

148

Within just one year of its establishment, the DMO was able to produce an accurate

external debt database via the auditing of the country’s loan portfolios, updating and

computerization of the debt database, all of which put the country in a confident position to

approach its creditors for negotiations.

The DMO also contributed significantly in the preparation of borrowing guidelines – a

borrowing policy which covers the period of the stand by arrangement (SBA) agreed with the

IMF. The office equally played a major role in facilitating debt rescheduling negotiations

between Nigeria, the London and Paris Club of creditors, and in securing debt relief. It also

provides important input into macroeconomic management, particularly in drafting an overall

debt strategy that addresses issues relating to future borrowing and debt restructuring

operations.

Further, with the establishment of DMO, the country was able to effect more timely

payment of its debt service obligations. As a result of this the country was able to secure

waivers from our creditors for the first time. The “waivers secured amounted to US$ 4.238

million which translates into N487.37 million. The amount of waivers secured is definitely a

remarkable achievement given that access to such rebates had been lacking in previous debt

management arrangements” (see, DMO 2001:58).

Again, DMO was actively involved in negotiation for the rescheduling of Nigeria’s

external debts which resulted in agreement with the Paris Club on the rescheduling of the

country’s external debts owed to this group of creditors. In fact, the DMO played significant

role in the 2005 debts cancellation.

It is the accumulation of all these strategies i.e. constant visit to creditor countries and

institutions, campaign, establishment of the DMO that result in the debt cancellation deal

149

obtained in 2005 with the Paris Club group of creditors. In fact, in March 2005, the House of

Representatives passed a motion asking the executive to stop debt repayments. The lower house

stated that interest and penalties imposed by creditors had turned Nigeria’s debt into an

unbearable burden. The motion was not passed in the Senate, but it was agreed with President

Obasanjo to give creditors one more chance for a negotiated settlement before opting for the

extreme route of repudiation.

Nigeria’s Debt Cancellation Deal

Nigeria is officially classified as a low income country by the World Bank. Nigeria is

excluded from the Highly Indebted Poor Countries (HIPC), although its per capita income

levels and ratio of debt to gross national product are comparable with those of the 40 countries

included in the HIPC initiative today. In 2002, Nigeria’s debt was 93% of its GNP. A higher

percentage than that of 15 countries on the HIPC list, including Burkina Faso, Senegal and

Uganda. In fact, Nigeria was originally classified as a HIPC country in 1998. This

categorization was later cancelled, because Nigeria is eligible for non-concessional loans

through the International Bank for Reconstruction and Development as well as concessional

loans from the International Development Association, making it a “blend” country. However,

this was time when it was originally classed as a HIPC country in the first place, and nothing

had changed since then except for democratic elections.

The official logic for Nigeria’s exclusion from the HIPC list also includes its $20 billion

annual exports for oil. Such huge exports do not comply with the criteria set by the World Bank

to decide countries eligible for HIPC. The World Bank concludes that with the oil, Nigeria can

service its debts on condition that the country puts its resources into proper use for

development. Other reasons why the big economics say they are reluctant to give debt relief

150

include the problematic relationship between the country and the International Monetary Fund.

The ongoing problems and accusations led to Nigeria’s decision to break off formal links

between Nigeria and the IMF in 2002. This meant further negotiations of debt relief were not

possible, as these were dependent on the successful realization of the medium-term IMF

programme. The Nigeria government did not actively seek to enter the HIPC initiative because

85% of Nigeria’s debt was bilateral i.e. to individual countries-and only 8% to multilateral

institutions like the World Bank, whereas HIPC focuses on multilateral debt. Hence, Nigeria

decided a deal with the Paris club.

Nigeria’s Debt Relief Negotiations Before 2005

Before the debt cancellation of 2005, Nigeria has been engaged in series of negotiations

with its creditors. In 1985, Nigeria owed $19 billion to the Paris Club of creditors and $6

billion to the London Club. Nigeria sought what was then traditional debt relief from the Paris

club and rescheduled four times: in 1986, 1989, 1991 and 2000. Each time it had a

rescheduling; Nigeria had to agree to stringent IMF programmes that were ultimately not

successful. None of the Paris Club rescheduling offered the needed relief. However, the

London Club rescheduling of commercial debt in 1992 did help to decrease Nigeria’s

unsustainable commercial debt burden by 60%.

During the 1990s, Nigeria’s military dictators effectively broke off working

relationships with Paris Club of creditors. In December 2000, Nigeria went to the Paris Club to

ask for help paying its debt. In line with this, Nigeria’s Debt Management Office (DMO)

worked out that of the $21 billion that was being negotiated about 44% was penalty and 22%

was interest on arrears.

151

The 2005 Nigeria – Paris Club Debt Deal

In June 2005, a deal on Nigerian debt reduction finally emerged from the Paris Club.

This deal did not include debts to multilateral agencies and private creditors, which constitute

8% of Nigeria’s debt. The deal offered a cancellation of 60% of Nigeria’s bilateral debt

amounting to $ 18 billion, if Nigeria paid up the outstanding 40%, or $ 12 billion, within six

months. It was the largest debt deal ever secured by an African nation. This deal was to be

implemented in two phases:

Phase One

Nigeria will clear up-front US$6.3 billion in arrears owed to the Paris club in exchange,

the club will grant a 33% cancellation of the country’s eligible debts. This agreement is

contingent upon the authorities implementation of the IMF Policy Support Instrument (PSI)

approved by the Fund’s Executive Board on 17 October 2005. The IMF Policy Support

Instrument essentially promotes tightened macroeconomic policy (higher exchange rates and

lower government spending), and promoting the accumulation of foreign exchange through

export led development. This interference by the IMF into Nigeria’s economic policies

undermines national sovereignty.

Phase Two

On approval of the first review of the IMF Policy Support Instrument (PSI) planned for

March 2006, Nigeria will obtain a further tranche cancellation of 34% on eligible debts. Under

the arrangement, Nigeria also commits to pay Paris club creditors the full debt service due on

non-eligible debt, that is, debts contracted after the cut off date of 16 December, 1986 which

are not cancelled under this arrangement.

152

This arrangement implied that Nigeria would obtain a debt cancellation of US$ 18

billion (including moratorium interest). By April, 2006 Nigeria cleared $30 billion dollar of

debt owed to foreign creditors. The deal saved Nigeria almost $47 billion over the next 15

years (http:www.newstartnigeria.org). This arrangement concluded Nigeria’s exist from Paris

club debt trap.

Non Paris Club Debt Exit

It is pertinent to note at this juncture that even after the Paris Club debt cancellation;

Nigeria still owed quite some money to other external creditors. This amount was however

insignificant compared to the money owed to the Paris Club. Paris Club debt according to the

DMO as at 2005 accounted for about 75.26% of Nigeria’s external debt stock. This implies that

the other categories of debts make up the balance of 24.74%. Table 3.4 below shows a break

down of Nigeria’s debt as at 2005.

Table 4.5: Nigeria’s External Debt Stock to Non-Paris Club Creditors as at 2005 Categories Amounts ($) Multilateral Debts 2.70 billion Bilateral Debts 121.04 million London Club Debts 1.44 billion Promissory notes 580.49 million Source: D.M.O 2006

Table 4.6: Nigeria’s External Debt Stock to Non-Paris Club Creditors as at 2007 Categories Amounts ($) Multilateral Debts 3.080 billion U. S. $ Bilateral Debts 2.144 billion U.S$ London Club Debts Nil Promissory Notes Nil Source: D. M. O. 2008

All these debts approximated to $5 billion but were more manageable because a large

chunk of them was owed to multilateral institutions, and were secured under concessionary

153

arrangement with little or no interest rate, with 10 years moratorium and about thirty (30) years

payment period.

By September 2006, the Obasanjo regime disclosed that the nation was making

arrangement to exit the London club debt by January 2007. It stated that Nigeria was making

progress in her negotiation with the London club. The then Finance Minister (Nenadi Usman)

further pointed out that Nigeria’s London club debt of $2.1 billion is made up of oil warrants of

$300 million and promissory note of $515 million. The minister was optimistic that the same

way Nigeria exited the Paris club, Nigeria will also exit the London club in no distant future,

targeting January 2007.

To exit from the debts according to DMO, Nigeria has to repurchase and restructure.

They have to repurchase by government making budgetary provision for the purchase of par

bonds and promissory notes, using embedded call option to redeem par bonds and promissory

notes, and raising additional resources to retire oil warrants after verification process. Whereas

to restructure require Nigeria to launch two benchmark bond issues of five and ten years

maturity respectively for a total amount of US$ 1.5 billion, use the proceeds of these issues to

redeem par bonds and promissory notes using embedded call options and balance of proceeds

contributed toward the retirement of oil warrants given completion of verification process

(Yaqub, 2006).

The repurchasing option was eventually implemented and the result paved way for the

exit of both the London and promissory notes debts. The outstanding par bonds (US $1.5

billion) were prepaid in November 2006, promissory notes amounting to US$500 million were

discharged in March, 2007, and oil warrants which was a three phase process of redeeming

through cash tender offer launched in February 2007 was completed. The final exit from these

154

debt has given the country freedom from external debt peonage, what is left are the multilateral

loans (World Bank, ADB etc) which are sustainable with 0.75 percent commitment charge and

a payback period of over 40 years and a 10-year moratorium ( DMO, 2007).

Nigeria’s external debt peonage exit was confirmed by a renowned international

investment bank (Goldman Sactis). The bank in disclosing the information on the new report

on Nigeria, noted that Nigeria was no longer vulnerable to external shocks as a result of

settlement of the Paris club and London club debts (http://www.efcnigeria.org/indet.phpopti).

Further, the bank reported that the country’s debt to Gross Domestic Product (GDP) ratio

declined to 3 percent as at December 2006, compared to a 60% debt to GDP ratio as was the

case in the 1990’s. The bank however attributed the success for the debts restructuring to the

laid down reform of Obasanjo’s regime which is economic diplomacy of national economic

empowerment and development strategy.

The then Finance Minister – Mrs. Nenadi Usman also confirmed that Nigeria has

actually exited the external debt trap peonage. She explained that Nigeria had in 2006, exited

her $30 billion Paris Club debt after the repayment of $12.2 billion in three tranches. The

government had also repaid $ 1.486 billion par bond of the London club debts as well as $512

million promissory notes and $82 million oil warrants exiting the London Club debt (DMO,

2007).

The London Club debt is made up of:

i) Par Bonds, that include the following:

Arrears of commercial bank loans, which include some arrears of letter of credit

bills for collection, etc accumulated during the 1980s.

155

Issued in 1992, collateralized with US treasury zero coupon bonds maturing in

2020.

Interest rate of 6.25% paid semi-annually among to $90 million a year.

Par bond holders issued with additional debt instruments – oil warrants.

ii) There was also debts incurred through oil bonds:

Issued along with par bonds;

Approximately 2 million oil warrants issued along with par ponds in 1992

maturing in 2020.

Semi-annual interest payment subject to rise in oil price above reference price of

$28 consistently for 6 consecutive months, but capped at $15.

Current payment liability amount to $52.7 million per year.

iii) Promissory notes debts are incurred as a result of:

Issued through the CBN, resulting form uninsured short-term trade debts,

accumulated in the early 1980s.

Verification exercise carried out by Chase Manhattan in the mid 1980s.

Quarterly payments totaling $170.85 million a year, to be fully amortized/paid off

in 2010 (DMO, 2008).

These tables with other explanations therein validate our hypothesis that the introduction of

national economic empowerment and development strategy is responsible for the debt relief

extended to Nigeria by International Financial Institutions like the World Bank and

International Monetary Fund.

156

CHAPTER SEVEN

SUMMARY AND CONCLUSION

Summary

The study interrogated the relationship between economic diplomacy and foreign policy

making and implementation in Nigeria with emphasis on the economic diplomacy of national

economic empowerment and development strategy (NEEDS). Africa’s weak economics in the

present global order are trapped form growing in view of external influence on her economies

and policies by advanced capitalist economies. In this process, the reform package of the

national economic empowerment and development strategy was inspired by apologist of

International Monetary Fund and World Bank as the viable development model. Infact, its

implementation could not jump start Nigerian economy. Some analyst argue that the reform

package of liberalization, deregulation, devaluation seems to have failed to revamp Nigeria’s

ailing economy through attraction of foreign direct investment and therefore recommended

another proactive foreign policy. Others argued that deregulation, devaluation and monetization

have instead of reducing poverty and unemployment has exacerbated it. Many of them were

unable to engage on an analysis of the national economic empowerment and development

strategy.

Based on the Lacuna in the extant scholarship, we interrogated the following research

questions:

i. Has the economic diplomacy of national economic empowerment and development

strategy reduced the incidence of poverty in Nigeria?

ii. Has the economic diplomacy of national economic empowerment and development

strategy reduced the incidence of unemployment in Nigeria?

157

iii. Did the economic diplomacy of national economic empowerment and development

strategy increase the volume of foreign direct investment from advanced capitalist

economics to Nigeria?

iv. Was the economic diplomacy of the national economic empowerment and development

strategy responsible for the debt relief extended to Nigeria by the international financial

institutions?

The above questions enabled us to arrive at the following hypotheses below:

i. Economic diplomacy of the national economic empowerment and development strategy

did not reduce the incidence of poverty in Nigeria.

ii. Economic diplomacy of the national economic empowerment and development strategy

did not reduce the incidence of unemployment in Nigeria.

iii. Economic diplomacy of the national economic empowerment and development strategy

remarkably enhanced the inflow of foreign direct investment from advanced capitalist

economies to Nigeria.

iv. Economic diplomacy of national economic empowerment and development strategy

was responsible for the debt relief extended to Nigeria by international financial

institutions.

These hypotheses were interrogated in chapter three to six of this study while chapters

one, two and seven dwelt on introduction, foreign policy making and implementation in

developing states and conclusion respectively.

Chapter two demonstrated that there is a nexus between economic diplomacy and

foreign policy making and implementation. It established the fact that while foreign policy is

the substantive aspects of external relations, diplomacy is the procedural aspects. Chapter three

158

and four ratified the impact of economic diplomacy of the national economic empowerment

and development strategy on poverty reduction and unemployment generation in Nigeria. We

observed in this process that the economic diplomacy of the national economic empowerment

and development strategy instead of reducing poverty and unemployment in Nigeria

exacerbated it to an alarming proportion.

Chapter five, traced the influence of reform package of the national economic

empowerment and development strategy as it relates to liberalization, deregulation of down

stream sector of Nigeria oil economy, Privatization and commercialization. It discovered that

although the national economic empowerment and development strategy significantly enhanced

the inflow of foreign direct investment from advanced economies to Nigeria, it benefits them

more because our domestic goods could not withstand the competition from their manufactured

goods that floods and found solace in Nigeria market.

Chapter six discovered that national economic empowerment and development strategy

was implemented in accordance with the reform conditionality of the international momentary

fund through devaluation, deregulation, and monetization. The impact was the attraction of

debt relief to Nigeria from international monetary fund through the process of debt repudiation,

conciliation and forgiveness.

Research Findings

The following findings emerged from discussions and investigations made in the process of

this study:

1. The national economic empowerment and development strategy did not reduce the

incidence of poverty in Nigeria.

159

2. The national economic empowerment and development strategy did not reduce the

incidence of unemployment in Nigeria.

3. The national economic empowerment and development strategy remarkably enhanced

the inflow of foreign direct investment from advanced capitalist economies to Nigeria.

4. The national economic empowerment and development strategy was responsible for

the debt relief extended to Nigeria by International Monetary Fund and World Bank.

Conclusion

Based on these starling discoveries, this study arrived at the conclusion that the use of

economic diplomacy in the conduct of Nigeria’s external relations is pronounced each time the

political leadership is desperately pursuing received development model from advanced

capitalist economies which end up serving external, rather than collective interests of the

Nigeria citizens. Hence, the economic diplomacy of national economic empowerment and

development strategy was pronounced and implemented in line with the dictates of advanced

capitalist economies. In a bid to impose their desired development model on developing

economies like Nigeria, they use international financial institutions like international monetary

fund and World Bank under their control to impose conditionality which impinge on

sustainable development of developing economies like Nigeria. The result is poverty,

unemployment and de-industrialization occasioned by foreign expropriation and the consequent

resource inequality between Nigeria and the west in international economic relations. This

conclusion prompts the study to proffer the following suggestions.

Prognosis

The need for new economic order targeted through the application of foreign policy of

economic diplomacy have been eliciting an avalanche of proposals as remedies for sustainable

160

development from political economist, diplomats, policy makers, politicians, government

officials and research institutions. This deluge of remedies is as captivating, and appealing to

escape being acknowledged in a scholarly work of this rank.

The introduction of national economic empowerment and development strategy as a

development model was a medium term strategy to jump start Nigerian economy through its

four key policies of wealth creation, employment generation, poverty eradication and value

reorientation. Its application could not achieve the desired outcome using all the common

indices of development. On this note, we posits an introduction of pro-active foreign policy of

economic diplomacy that will change the mind set of political and bureaucratic leaders in

change of foreign policy making and implementation from laizzaire faire to practical policies

that will enhance sustainable development.

To this effect, Nigerian investors should be encouraged by the appropriate government

agencies to change from trade related investment pattern to production sector. It has been

observed that huge human and material resources are going into trading at the expense of

manufacturing which impact negatively on job needs of Nigerian. On this note, we suggest a

re-engineering of the manufacturing sector as this will serve as a catalyst to lure our people out

of overdependence on imported goods.

We are of the view that only manufacturing holds the key to employment generation

and this is the time for Nigeria to do away with excessive dependence on the west considering

our experience that their overbearing exploitative economic interest is entrenched and attached

to their pressured assistance to us.

We therefore suggest that we need a new road map for energy which is the bastion of

industrialization. In a similar approach, we view that the present liberalization which forms the

161

key reform package of the national economic empowerment and development strategy is not

employment enhancing because our domestic industries were not protected, thereby declining

due to international competition which then lead to reduction in employment levels. We

recommend regulated liberalization which will target export success which is equally building

domestic capacities and leveraging international markets and resources.

In our oil industry, the need to increase local participation cannot be over emphasized.

Nigerians have very little share of oil and gas business because local participation has been

very low thereby inducing capital flight. Besides, the obvious negative impact of

unemployment on the economy, poor participation of indigenous companies in juicy oil

contract jobs has denied the nation of opportunities for industrialization and technology

transfer. This suggests that there is need for a revolution of conscience in our approach to

development so that Nigeria will launch herself into a scientific and technological

breakthrough. This is possibly with an aggressive pro-active foreign policy.

162

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