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TREASURY SINGLE ACCOUNT AND NIGERIAN PUBLIC SECTOR FINANCIAL ACCOUNTABILITY

J. F.Adebisi Ph.DDepartment of Accounting

Kogi State University, Anyigba

T. E. AdedoyinDepartment of Accountancy

Kogi State Polytechnics, Lokoja

AndF. O. Otuagoma

Department of AccountingUniversity of Calabar, Calabar

ABSTRACT

This study examined the effect of Treasury Single Account on Nigerian Public Sector Financial Accountability. The extent to which Treasury Single Account promotes accountability, curbs corruption and enhances financial accountability in the public sector triggered this research work. Using survey research design, data were obtained from questionnaire issued to 95 senior and management staff selected from 5 MDAs in Benue State. The data were analysed using the Analysis of Variance (ANOVA) statistics and the T-test statistics at 5% level of significance. Findings from the study revealed that Treasury Single Account significantly promotes accountability of public funds in Nigeria, Treasury Single Account significantly reduce the level of corruption in the Nigerian public sector, Treasury Single Account significantly enhance financial discipline in the Nigerian public sector and there is a significant difference between pre and post TSA towards enhancing financial accountability in the Nigerian public sector. The study concluded that Treasury Single has a significant and positive effect on the accountability of public funds, reduction in the level of corruption and enhancing financial discipline. The study recommended that in order ensure the success of the TSA policy, the federal government must demonstrate the political will to ensure the sustainability of the TSA policy and also tenaciously pursue the implementation of TSA by state and local governments in the country.Key Words: Treasury single account, Accountability, Corruption, Financial discipline, Public sector.

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Introduction

The need for a unified structure of government bank accounts to enable consolidation and optimal utilisation of government cash resources in Nigeria became fully enforced in 2015 by the President of Nigeria, Muhammadu Buhari(Abdulrasheed, 2016). On the 9th of August, 2015 President Muhammadu Buhari directed all the Ministries, Departments and Agencies (MDAs) to close all their accounts domiciled in the commercial banks and transfer them to the federation account and gave September 15 th, 2015 as deadline for total compliance. This independent revenue e-collection scheme is implemented under Treasury Single Account (TSA) initiative, which requires that government revenue collection is put into a single account for proper cash management. According to Igbokwe-Ibeto, Nkomah, Osakede & Kinge (2016), TSA is a public accounting system under which all government revenue, receipts and income are collected into one single account, usually maintained by the country’s Central Bank. It is a bank account or a set of linked bank accounts through which the government transacts all its receipts and payments and gets a consolidated view of its cash position at any given time (Onyekpere, 2015). TSA is a process and tool for effective management of government's finances, banking and cash position. In accordance with the name, it pools and unifies all government accounts through a single treasury account.

TSA was introduced to reduce the proliferation of bank accounts operated by MDAs and also to promote transparency and accountability among all organs of the government. Fatile and Adejuwon (2017) averred that TSA is a useful tool to establish centralized control over government revenue through effective cash management. It also enhances accountability and enables government to know how much is accruing to its accounts on a daily basis. TSA is believed to be an efficient and effective means of managing government revenue generation and system that provide and enforce sufficient self-control mechanism on revenue generation and budget implementation using a daily return from account balances of various MDAs into a central account (Adebisi & Okike, 2016). TSA according to Ocheni (2016) also facilitates better fiscal and monetary policy coordination as well as better reconciliation of fiscal and banking data, which in turn improves the quality of fiscal information.

Some of the laudable motives behind the introduction of TSA in Nigeria is to promote accountability, financial discipline and curb corrupt practices in the Nigerian public sector (Abdulrasheed, 2016). Accountability according to Ejere (2013) is the obligation of the administrators to give a satisfactory account of their performance and the manner in which they have exercised powers conferred on them. Accountability entails revealing, explaining and justifying what one does, or has done, or how one discharges one’s responsibilities. It is a concept that is deeply rooted in political power and democracy linking the electorates with the executive to whom enormous power is entrusted. Accountability affords reliable accounting and financial reporting and

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allocation of resources. Inadequate accounting and reporting may however lead corruption in the public sector. Theoretically, it is expected that TSA would bring about mutual benefit, halt economic injustice and engender financial discipline, transparency, accountability, a new economic and political order in Nigeria. However, in the public sector management and political economy of Nigeria, its impact has been a mixed bag of the good, the bad and the ugly (Igbokwe-Ibeto, et al, 2016).

The effect of TSA in the Nigerian public sector has received significant research attention though recently introduced. Adebisi and Okike (2016), Igbokwe-Ibeto, et al (2016),Oti, Igbeng and Obim (2016), Igbekoyi and Agbaje (2017) also examined this trend. However, most of these studies focused on the effect of TSA on financial management in the public sector with few studies specifically addressing its effect on accountability. The main objective of this study is to examine the effect of Treasury Single Account on Nigerian public sector Financial Accountability. The specific objectives are to; (i) determine the extent to which Treasury Single Account promotes accountability of public funds in Nigeria, (ii) ascertain the effect of Treasury Single Account in curbing corruption in the Nigerian public sector, (iii) examine the extent to which Treasury Single Account enhances financial discipline in the Nigerian public sector, (iv) check if there is significant difference in pre and post TSA towards enhancing financial accountability in the public. Based on the research objectives of the study, the following hypotheses are formulated and stated in their null forms; Ho1: Treasury Single Account does not significantly promote accountability of funds in Nigeria, Ho2: Treasury Single Account does not significantly reduce the level of corruption in the Nigerian public sector, Ho3: Treasury Single Account does not significantly enhance financial discipline in the Nigerian public sector, Ho4: There is no significant difference between pre and post TSA towards enhancing financial accountability in the Nigerian public sector.

This study will contribute to the literature in accountability in the public sector. it is hoped that at the end of the research, the outcome will contribute to the expansion of existing literature on Treasury Single Account while exposing its effect on accountability in the public sector.

LITERATURE REVIEW

Conceptual issuesThis sub-section presents the relevant concepts that relates to the study. Specifically, the concept of treasury single account (TSA), accountability, corruption and financial discipline are discussed.Treasury single account (TSA)Pattanayak and Fainboim (2011), defined Treasury Single Account (TSA) as a unified structure of government bank accounts enabling consolidation and optimum utilization of government cash resources. In other words, a TSA is a bank account or a set of linked bank accounts through which the government transacts all its receipts and payments

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and gets a consolidated view of its cash position at the end of each day. It an essential tool for consolidating and managing government’s cash resources, thus minimizing borrowing cost. According to Oyedele (2015), TSA is a way of unifying various governments’ bank accounts to give a consolidated view of government cash resources. For Treasury Single Account (TSA) to work effectively there must be daily clearing of and consolidation of cash balance into the central account even where the MDA’s accounts are already held at the CBN. However, this objective can be achieved through proper accounting rather than by holding cash in separate bank accounts. TSA therefore covers all funds including votes and extra-budgetary accounts or even funds held in trust by government. To actualize, this aim, accounting system must be robust and capable of accurately distinguishing trust assets in the TSA.From the forgone, it is established that, a treasury single account is a public accounting system under which all government revenue, receipts and income and collected into one single account, usually maintained by the country’s Central Bank and all payments done through this account as well. The purpose is primarily to ensure accountability of government revenue, enhance transparency and avoid misapplication of public funds. The maintenance of a Treasury Single Account will help to ensure proper cash management by eliminating idle funds usually left with different commercial banks and in a way enhance reconciliation of revenue collection and payment.

AccountabilityAccording to Preston (1992), accountability means holding public officials responsible for their actions. It is a process where a person or group of people are required to present an account of their activities and the way in which they have or have not discharged their duties (Lawton & Rose, 1994). By inference, a person is held accountable for not only his/her actions but also inactions. According to Rouse (1997), accountability entails the demonstration to someone else of success or achievement- it involves revealing, explaining and justifying what one does, or has done, or how one discharges one’s responsibilities. In the words of Laxmikanth (2006), the concept of accountability connotes the obligation of the administrators to give a satisfactory account of their performance and the manner in which they have exercised powers conferred on them. In specific terms, public accountability means the firm recognition and acceptance of the fact that all public officials owe and hold their positions on trust for the people. It implies that those who render public service must account to the people they are expected to serve (Akpan, 1982). Nkoma (2004), maintained that public accountability is the requirement that those who hold public trust should account for the use of that trust to citizens or their representatives.

From the above, accountability is the acknowledgement and assumption of responsibility for actions product decisions and policies including administration, governance and implementation within the scope of the role in employment position encompassing the obligation to report, explain and be answerable for resulting consequence.

Corruption

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Corruption is a phenomenon plaguing both public and private sectors of most economies and it is not restricted to a particular country or region. According to McShane and Nilsson (2010), corruption is when a holder of public office motivated by private gain gives preferential treatment that is not officially approved. McShane and Nilsson (2010) explained that public sector corruption means misuse of public office for private benefits.

World Bank and Transparency International as cited in Waziri (2010), defined corruption as the abuse of entrusted power for private gain. Corruption is probably as old as government itself as Shabbir and Anwar (2007) stated that it is not a new phenomenon; it is as old as the history of mankind itself. Corruption affects almost all parts of society as the single greatest obstacle to economic and social development.

Corruption undermines development by distorting the rule of law and weakening the institutional foundation on which economic growth depends. Corruption is not peculiar to developing nations alone. It is a plague that affects both developed and developing economy, although the occurrence in developing societies like Nigeria seems to be pervasive. Dada (2014) asserted that corruption seems to be the most popular issue discussed as a cause of underdevelopment in Nigeria today. Almost every section of the country is affected by corruption ranging from education sector to the various organs of government. Corruption is the largest single inhibitor of equitable economic development in many countries of the world including Nigeria.

Financial Discipline

Public financial discipline is concerned with the planning, organizing, procurement and utilization of government financial resources. Premchand (1999) sees public financial discipline as the link between the community’s aspirations with resources, and the present with future. It lies at the very heart of the operations and fiscal policy of government. Financial discipline in the public sector has to do with adequate public financial management. Adequate public financial management according to Onuorah and Appah (2012) involves budget formulation, budget structures, payment system, government accounting and financial reporting and audit.

Theoretical Framework

This subsection of the study focuses on the relevant theories pertaining to the study. The following theories are discussed; agency theory and stakeholder theory.

Agency TheoryAn agency relationship is an arrangement where one or more persons referred to as the principal(s)engages another (the agent) to perform some tasks or service on their behalf which has to do with delegating some authority in terms of decision making (Jensen &Meckling, 1976). This theory according to Ezeagba (2017) refers to a set of propositions in governing a modern corporation which is typically characterized by large number of owners who allow separate individuals to control and direct the use of their collective

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capital for future gains. These individuals may not always own stakes but may possess relevant skills in managing the corporation.

The agency theory has its roots in economic theory. This was exposited by Alchian and Demsetz (1972) and further developed by Jensen and Meckling (1976). In the agency theory, the principal (owners) delegates the decision making power to the agent (steward) who may pursue interests that may not necessarily be in favour of the principal but may in fact hurt the principal through information asymmetry (Ross, 1973; Fama, 1980).

A number of government operations can be assimilated to principal-agent relationships in Nigeria. The minister for example who is the head of the ministry, but also a political appointee heading the ministry is a principal whose objective is to make sure that his agents (the civil servants implement what he has promised to do. These serves as the tools through which relationship is strengthened (IMF, 2010). The agency theory deals with entrusting resources to the agent who in turn is required to produce a report in qualitative and quantitative manner to the principal and are expected to align the interest of the owners.

According to Kiel and Nicholson (2003), agency theory is viewed as the separation of control from ownership. This implies that the MDAs (agents) manage responsibilities on behalf of the Federal Government (Principal). Gerrit and Mohammad (2012) however argued that the agency theory states that agents have more information than the principals and as such this information asymmetry could adversely affect the principal’s ability to monitor if the organization is being run in their best interest.

Stakeholder Theory

The stakeholder theory was popularized by Richard Edward Freeman in 1970. The main idea behind Freeman's Stakeholder approach was to try to build a framework that was responsive to the concerns of managers who were being confronted with unprecedented levels of environmental turbulence and change. The theory holds that the purpose of the firm is to create wealth or value for its stakeholders by converting their stakes into goods and services or to serve as a vehicle for coordinating stakeholder interests.

The word Stakeholder was chosen on the basis of the traditional term – stockholder, which takes only a look at the economic point of view, where the stakeholders are defined as any group of individual who is affected by or can affect the achievement of an organization's objectives (Freeman, 1984). Freeman (1984) further states that stakeholder approach suggests that managers must formulate and implement processes which satisfy all and only those groups who have a stake in the business. A stakeholder approach is very much concerned about active management of the business environment, relationships and the promotion of shared interests in order to develop business strategies.

The theory assumed that adoption of Treasury Single Account by the federal government is as a result of the pressure from stakeholders/citizens majorly against

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corruption. It suggested that the government will responds to the concerns and expectations of powerful stakeholders/citizens and some of the responses will be in the form of strategic opinions. Stakeholders' theory provides rich insights into the factors that motivate government in relation to the adoption and implementation of Treasury Single Account (Ekubiat & Ime, 2016).

Empirical Review

Igbokwe-Ibeto, et al (2016) evaluated the policy of Treasury Single Account (TSA) adopted by the Nigerian government as an essential tool for enhancing transparency and accountability in public sector financial. The study adopted both qualitative and quantitative research design and descriptive analysis to gain an insight into the nature and character of TSA operations in Nigeria. The study draws its argument basically from secondary data, which include personal observation, newspapers, academic publication, and Internet sources. To improve on the reliability and validity of the study, multiple secondary sources were used to minimize errors. The study explored the gamut of issues surrounding the implementation of TSA and concluded that, for an administration that has social contract with Nigerians in terms of service delivery; it has the obligation to aggregating states’ resources to provide social services, amenities and infrastructural development to the people. Any step taking to ensure accountability and transparency by revenue generating agencies of government should be seen as a step in the right direction. However, while change is desirable, we feel there is need to exercise caution on account of the peculiar nature and character of the Nigerian state and society.

Yusuf and Mohammed (2016) examined the effect of treasury single account policy on the public financial management in Nigeria. The objective of the research was to examine the extent to which Treasury Single Account can block financial leakages, promotes transparency and accountability in the public financial management. Both primary and secondary data had been employed. The populations of the study comprised of Ministries, Department and Agencies (MDAs) within Bauchi metropolis using a sample of 72 respondents through judgment sampling. The data were analyzed using the Pearson Correlation techniques.The result of this research showed that adoption of a Treasury Single Account (TSA) is capable of plugging financial loopholes, promoting transparency and accountability in the public Financial System.

Igbekoyi and Agbaje (2017) assessed the implication of adoption of TSA on accountability and transparency in the Nigerian public sector; with a view to find out if the policy is capable of promoting government accountability function. The study was consisted of all ministries, departments and agencies (MDAs) in the public service with sample size of ten (10) MDAs involved in revenue generation selected using purposive sampling technique. The hypotheses were tested using regression analysis (ANOVA). The finding of the study showed that, TSA significant positive impact on financial leakages, transparency and curb financial misappropriation.

Fatile and Adejuwon (2017) examined the implication of Treasury Single Account on cost of governance with specific reference to Buhari civilian administration in Nigeria.

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The study was qualitative in nature, relying on secondary sources. It was anchored on Stakeholder Theory. The paper observes that increase in the cost of governance is not basically as a result of over-bloated bureaucracy rather corruption can be considered major cause of the increase. TSA therefore is primarily to ensure accountability of government revenue, enhance transparency and avoid misappropriation of public funds. The study notes that with the TSA, government expects to block all loopholes and leakages of financial resources of the government and also ensure a robust financial management system. It observes further that TSA will helps to ensure proper cash management by eliminating idle funds usually left with different deposit money banks and in a way enhance reconciliation of revenue collection and payment.

Nwaorgu and Ezenwaka (2017)ascertained effect of treasury single account and accountability in the Nigeria Public Sector. Two specific objectives guided the study, while two research questions was raised and two hypotheses were formulated in line with the specific objectives and tested at 0.05 level of significance. A descriptive survey research design was used. The population of this study consisted of 600 staff of the four federal health tertiary institutions drawn from Account Departments and simple size of 250 Account Departments staffs were selected using the proportionate random sampling technique. A structured 25-item validated questionnaire was used for data collection. The reliability of the instrument was ensured using pilot test technique, which was analyzed using Cronbach alpha method and yielded an overall reliability co-efficient of 0.85 with the aid of statistical package for social science (SPSS) 20.0. Data were analyzed using descriptive statistics and one regression models for the research questions and for test of hypotheses at 0.05 level of significance. Findings showed that adaptation of a treasury single account and accountability (TSA) in the Nigeria Public Sector is capable of plugging financial loopholes, promoting transparency and accountability in Federal Health Tertiary Institutions in South-East Nigeria. The study concluded that TSA policy would go a long way in blocking the indentified financial leakages in revenue generation and promote transparency and accountability in the public sectors financial system if it is fully implemented.

Akujuru and Enyioko (2017) examined the effects of treasury single account policy on corruption in Nigeria from 2011 to 2017. The study adopted a cross sectional survey design and used questionnaire to generate its data. The population of the study consisted of 6393 staff from the federal ministries, departments and agencies (MDAs) in Rivers State. The sample size of the study was determined at 377 staff through the use of Taro Yameme sample size method. The data were analyzed through the use of descriptive statistics. The study found that the treasury single account (TSA) policy was introduced to block financial leakages, reduce corruption, promote transparency and prevent mismanagement of government's revenue in public sector organisations. The study revealed that the major challenges hampering the effective and efficient implementation of the treasury single account (TSA) policy include: Inability of federal government to remit appropriately to the various MDAs, uncertainties underlying federal government inactions and actions, bottlenecks/ bureaucracy, internet platform delays, inefficient

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human capital development and time wasting in the banks and payment points. The study revealed that the policy will pave the way for the timely payment and capturing of all revenues going into the government treasury, without the intermediation of multiple banking arrangements. The policy will also enable the government at the centre to know its cash position at any given time without any hindrance

METHODOLOGYThe research design adopted for this work is survey design. This method of research design has been established to be an effective tool in determining the opinion, perception and in describing and explaining relationships amongst phenomena. It involves using a self-designed questionnaire in collecting data from the respondents. The population of the study consists of all 105 federal ministries, departments and agencies in Nigeria as at 2016 (FOIA Nigeria, 2016). A sample of 100 respondents was selected from 5 MDAs using convenience sampling technique. The sampled respondents consisted of senior and management staff of the selected MDAs. These MDAs included those that were solely involved in revenue generation and had state offices in Makurdi, the capital of Benue State. Twenty (20) participants were drawn from each of the 5 selected MDAs. The selected MDAs include; Federal Inland Revenue Service (FIRS), Federal University of Agriculture Makurdi, Corporate Affairs Commission (CAC), Federal Road Safety Commission (FRSC) and Federal Radio Corporation of Nigeria- Harvest FM Makurdi.In establishing the face and content validity of the instrument in this research, the prepared questionnaire was presented to some expert in public sector accounting for their input while in testing the reliability of the instrument; data from the questionnaire were collected and tested to determine the reliability of the instrument using the Cronbach Alpha Method. Thus, a content validity index of at least 0.70 is accepted for the instrument to be declared reasonably content valid (Ogutu, 2012)).

Table 1 Reliability Statistics

Cronbach's Alpha N of Items

0.780 17

Source: SPSS Output, Version 23

Table 1 presents the reliability statistics of the instrument. The Cronbach’s Alpha as presented in Table 1 revealed a value of 0.780, which is greater than 0.70, indicating that the instrument is reasonably content valid.

The study employs the use of simple percentages analysis to present and analysis results obtained from the questionnaire administered. The study made use of the Analysis of Variance (ANOVA) and the T-test statistics both at 5% level of significance to test the study’s hypotheses. ANOVA was employed to determine the extent to which Treasury Single Account promote accountability of funds, reduce the level of corruption and enhance financial discipline in the Nigerian public sector. T-test was employed to

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determine whether there is a significant difference between pre and post TSA towards enhancing financial accountability in the Nigerian public sector.RESULTS AND DISCUSSIONData Presentation and AnalysisTable 2 Responses relating to treasury Single Account and accountability of public funds in Nigeria

Item No.

Item Description SA A U D SD Mean

SD

1 Treasury Single Account encourages good accountability of public funds in Nigeria.

38

(40.00%)

32

(33.68%)

25

(26.32%)

0

(0.0%)

0

(0.0%)

4.14 0.81

2 Treasury Single Account compels public administrators to give proper account of their performance.

41

(43.16%)

42

(44.21%)

12

(12.63%)

0

(0.0%)

0

(0.0%)

4.31 0.69

3 There are no positive relationships between Treasury Single account and accountability of public sector funds in Nigeria.

0

(0.0%)

0

(0.0%)

30

(31.58%)

33

(34.74%)

32

(33.68%)

1.98 0.81

4 Accountability in the Nigeria public sector has improved with the advent of TSA.

0

(0.0%)

40

(42.11%)

5

(5.26%)

14

(14.74%)

36

(37.89%)

2.52 1.37

5 Before the introduction of TSA in Nigeria public sector accountability was at a satisfactory level.

0

(0.0%)

6

(6.32%)

10

(10.53%)

39

(41.05%)

40

(42.11%)

1.81 0.87

Source: STATA output, Version 14.2

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Table 2 presents the responses supplied by the respondents in relation to treasury single account and accountability of public funds in Nigeria. In relation to whether Treasury Single Account encourages good accountability of public funds in Nigeria, 38(26.32%) of the respondents strongly agreed, 32(33.68%) agreed and 25(26.32%) were undecided. The mean of their responses stood at 4.14 with a standard deviation of 0.81, indicating that majority of the respondents agreed that Treasury Single Account encourages good accountability of public funds in Nigeria.

In relation to whether Treasury Single Account compels public administrators to give proper account of their performance, 41(43.16%) of the respondents strongly agreed, 42(44.21%) agreed and 12(12.63%) were undecided. The mean of the responses supplied by the respondents stood at4.31 with a standard deviation of 0.69, indicating that majority of the respondents agreed that Treasury Single Account compels public administrators to give proper account of their performance.

In relation to whether there is no positive relationship between Treasury Single account and accountability of public sector funds in Nigeria, 30(31.58%) of the respondents were undecided, 33(34.74%) disagreed and 32(33.68%) strongly disagreed. The mean of their responses stood at 1.98 with a standard deviation of 0.81, indicating that majority of the respondents disagreed that there is no positive relationship between Treasury Single account and accountability of public sector funds in Nigeria.

In relation to whether accountability in the Nigeria public sector has improved with the advent of TSA, 40(42.11%) of the respondents agreed, 5(5.26%) were undecided, 14(14.74%) disagreed and 36(37.89%) strongly disagreed. The mean of the responses supplied by the respondents stood at 2.52 with a standard deviation of 1.37, indicating that majority of the respondents disagreed that accountability in the Nigeria public sector has improved with the advent of TSA.

In relation to whether before the introduction of TSA in Nigeria public sector accountability was at a satisfactory level, 6(6.32%) of the respondents agreed, 10(10.53%) were undecided, 39(41.05%) disagreed and 40(42.11%) strongly disagreed. The mean of their responses stood at 1.81 while the standard deviation stood at 0.87, indicating that majority of the respondents disagreed that whether before the introduction of TSA in Nigeria public sector accountability was at a satisfactory level.

Table 3 Responses relating to treasury Single Account and the level of Corruption in the Nigerian Public Sector

Item No.

Item Description SA A U D SD Mean

SD

1 Treasury Single Account has reduce the rate of financial corruption in the Nigerian public sector

44

(46.32

40

(42.11

7

(7.37%

3

(3.165)

1

(1.05%)

4.29 0.82

12

%) %) )

2 Treasury Single Account effectively monitors receipt and expenditures of public fund

36

(37.89%)

42

(44.21%)

11

(11.58%)

6

(6.32%)

0

(0.0%)

4.14 0.86

3 Treasury Single Account has assisted immensely in exposing financial loopholes in the Nigerian public sector

38

(40.00%)

37

(38.95%)

9

(9.47%)

11

(11.58%)

0

(0.0%)

4.07 0.98

4 There are no significant improvements in corruption after the introduction of TSA in Nigerian

0

(0.0%)

7

(7.37%)

13

(13.68%)

35

(36.84%)

40

(42.11%)

1.86 0.92

5 One of the main reason for the introduction of Treasury Single Account system in Nigeria is to fight corruption in the Nigerian public sector

34

(35.79%)

36

(37.89%)

17

(17.89%)

8

(8.42%)

0

(0.0%)

4.01 0.94

Source: STATA output, Version 14.2

Table 3 presents the responses supplied by the respondents in relation to treasury single account and the level of corruption in the Nigerian public section. In relation to whether Treasury Single Account has reduce the rate of financial corruption in the Nigerian public sector, 44(46.32%) of the respondents strongly agreed, 40(42.11%) agreed, 7(7.37%) were undecided, 3(3.16%) disagreed and 1(1.05%) strongly disagreed. The mean of the responses supplied by the respondents stood at 4.29 with a standard deviation of 0.82, indicating that majority of the respondents agreed that Treasury Single Account has reduce the rate of financial corruption in the Nigerian public sector.In relation to whether Treasury Single Account effectively monitors receipt and expenditures of public fund, 36(37.89%) of the respondents strongly agreed, 42(44.21%) agreed, 11(11.58%) were undecided and 6(6.32%) disagreed. The mean of their responses stood at 4.14 with a standard deviation of 0.86, indicating that

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majority of the respondents agreed that Treasury Single Account effectively monitors receipt and expenditures of public fund.In relation to whether Treasury Single Account has assisted immensely in exposing financial loopholes in the Nigerian public sector, 38(40.00%) of the respondents strongly agreed, 37(38.95%) agreed, 9(9.47%) were undecided and 11(11.58%) disagreed. The mean of their responses stood at 4.07 with a standard deviation of 0.98, indicating that majority of the respondents agreed that Treasury Single Account has assisted immensely in exposing financial loopholes in the Nigerian public sector.In relation to whether there are no significant improvements in corruption after the introduction of TSA in Nigerian, 7(7.37%) of the respondents agreed, 13(13.68%) were undecided, 35(36.84%) disagreed and 40(42.11%) strongly disagreed. The mean of their responses stood at 1.86 with a standard deviation of 0.92. This indicates that majority of the respondents disagreed that there are no significant improvements in corruption after the introduction of TSA in Nigerian.In relation to whether one of the main reason for the introduction of Treasury Single Account system in Nigeria is to fight corruption in the Nigerian public sector, 34(35.79%) of the respondents strongly agreed, 36(37.89%) agreed, 17(17.89%) were undecided and 8(8.42%) disagreed. The mean of their responses stood at

4.01 with a standard deviation of 0.94, indicating that majority of the respondents agreed that one of the main reason for the introduction of Treasury Single Account system in Nigeria is to fight corruption in the Nigerian public sector.

Table 4 Responses relating to Treasury Single Account and the Financial Discipline in the Nigerian Public Sector

Item No.

Item Description SA A U D SD Mean

SD

1 Treasury Single Account ensures proper cash management for collection of government revenue

40

(42.11%)

34

(35.79%)

13

(13.68%)

8

(8.42%)

0

(0.0%)

4.12 0.94

2 Efficient allocation of public funds is enhanced through the adoption of Treasury Single Account

38

(40.00%)

39

(41.05%)

10

(10.53%)

8

(8.42%)

0

(0.0%)

4.13 0.91

3 Treasury Single Account greatly enhances financial discipline in the Nigerian public sector

41

(43.16%)

39

(41.05%)

12

(12.63%)

3

(3.16%)

0

(0.0%)

4.24 0.80

4 Treasury Single Account 39 37 14 5 0 4.16 0.87

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ensures the spending of funds in line with approved budgets and financial plans of MDAs in Nigeria.

(41.05%) (38.95

%)(14.74

%)

(5.26%) (0.0%)

5 There is no improvement in financial discipline after the introduction of TSA in Nigeria

0

(0.0%)

6

(6.32%)

12

(12.63%)

39

(41.05%)

38

(40.00%)

1.85 0.87

Source: STATA output, Version 14.2

Table 4 presents the responses supplied by the respondents in relation to Treasury Single Account and the Financial Discipline in the Nigerian Public Sector. In relation to whether Treasury Single Account ensures proper cash management for collection of government revenue, 40(42.11%) of the respondents strongly agreed, 34(35.79%) agreed, 13(13.68%) were undecided and 8(8.42%) disagreed. The mean of their responses stood at 4.12with a standard deviation of 0.94 indicating that majority of the respondents agreed that Treasury Single Account ensures proper cash management for collection of government revenue.

In relation to whether efficient allocation of public funds is enhanced through the adoption of Treasury Single Account, 38(40.00%) of the respondents strongly agreed, 39(41.05%) agreed, 10(10.53%) were undecided and 8(8.42%) disagreed. The mean of their responses stood at 4.13 with a standard deviation of 0.91, indicating that majority of the respondents agreed that efficient allocation of public funds is enhanced through the adoption of Treasury Single Account.

In relation to whether Treasury Single Account greatly enhances financial discipline in the Nigerian public sector, 41(43.16%) of the respondents strongly agreed, 39(41.05%) agreed, 12(12.63%) were undecided and 3(3.16%) disagreed. The mean of their responses stood at 4.24 with a standard deviation of 0.80, indicating that majority of the respondents agreed that Treasury Single Account greatly enhances financial discipline in the Nigerian public sector.

In relation to whether Treasury Single Account ensures the spending of funds in line with approved budgets and financial plans of MDAs in Nigeria, 39(41.05%) of the respondents strongly agreed, 37(38.95%) agreed, 14(14.74%) were undecided and 5(5.26%) disagreed. The mean of their responses stood at 4.16 with a standard deviation of 0.87, indicating that majority of the respondents agreed that Treasury Single Account ensures the spending of funds in line with approved budgets and financial plans of MDAs in Nigeria.

In relation to whether there is no improvement in financial discipline after the introduction of TSA in Nigeria 6(6.32%) of the respondents agreed, 12(12.63%) were undecided, 39(41.05%) disagreed and 38(40.00%) strongly disagreed. The mean

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of their responses stood at 1.85 with a standard deviation of 0.87. This indicates that majority of the respondents disagreed that there is no improvement in financial discipline after the introduction of TSA in Nigeria.

Table 5 Responses relating to Pre and Post TSA Periods of TSA in enhancing financial accountability in the Nigerian public sector

Item No.

Item Description VH H M L VL Mean

SD

1How would you rate the level of financial accountability in the Nigerian public sector before the introduction of TSA

0

(0.0%)

35

(36.84%)

59

(62.11%)

0

(0.0%)

1

(1.05%)

3.35 0.54

2Rate the level of financial accountability in the Nigerian public sector after the introduction of TSA

1

(1.05%)

62

(65.26%)

32

(33.68%)

0

(0.0%)

0

(0.0%)

3.67 0.49

Source: STATA output, Version 14.2

Table 5 presents the responses supplied by the respondents in relation to the pre and post periods of TSA in enhancing financial accountability in the Nigerian public sector. Results from Table 9 revealed that 35(36.84%) of the respondents rate the level of financial accountability in the Nigerian public sector before the introduction of TSA high, 59(62.11%) rated moderate while 1(1.05%) rated very low. The mean of the rating stood at 3.35 with a standard deviation of 0.54.

The result also revealed that 1(1.05%) of the respondents rate the level of financial accountability in the Nigerian public sector after the introduction of TSA very high, 62(65.26%) rated high and 32(33.68%) rated moderate. The mean rating stood at 3.67 with a standard deviation of 0.49.Test of HypothesesThe hypotheses formulated for the study are tested in this section of the study. Hypotheses one to three are tested using the Analysis of Variance (ANOVA) statistics while hypothesis four is tested using the T- Test statistics at 5% level of significance.Test of Hypothesis One

Treasury Single Account does not significantly promote accountability of public funds in Nigeria.

16

Table 6 ANOVA results for Hypothesis OneTSA and Accountability Sum of Squares df Mean Square F Sig.Between Groups 539.15 4 134.79 153.15 0.0001

Within Groups 413.64 470 0.8801

Total 952.79 474

Source: STATA Output, Version 14.2

Decision

Given that the p-value as presented in Table 6 is less than the 0.05, the study rejects the null hypothesis and concludes that Treasury Single Account significantly promotes accountability of public funds in Nigeria.

Test of Hypothesis Two

Treasury Single Account does not significantly reduce the level of corruption in the Nigerian public sector.Table 7 ANOVA results for Hypothesis TwoTSA and Corruption Sum of Squares df Mean Square F Sig.Between Groups 394.41 4 98.602 120.16 0.0001

Within Groups 385.66 470 0.8206

Total 780.07 474

Source: STATA Output, Version 14.2

Decision

Given that the p-value as presented in Table 7 is less than the 0.05, the study rejects the null hypothesis and concludes that Treasury Single Account significantly reduce the level of corruption in the Nigerian public sector.

Test of Hypothesis Three

Treasury Single Account does not significantly enhance financial discipline in the Nigerian public sector.Table 8 ANOVA results for Hypothesis ThreeTSA and Financial Discipline Sum of Squares df Mean Square F Sig.

17

Between Groups 405.74 4 101.43 130.90 0.0001

Within Groups 364.21 470 0.7749

Total 769.95 474

Source: STATA Output, Version 14.2

Decision

Given that the p-value as presented in Table 8 is less than the 0.05, the study rejects the null hypothesis and concludes that Treasury Single Account significantly enhance financial discipline in the Nigerian public sector.

Test of Hypothesis Four

There is no significant difference between pre and post TSA towards enhancing financial accountability in the Nigerian public sector.

Table 9 T-test results for Hypothesis Four

Variable Obs Mean Std. Err. Std. Dev.[95% Conf.

Interval]

PreTSA 95 3.347368 .0555305 .5412441 3.237111 3.457625PostTSA 95 3.673684 .0506223 .4934056 3.573172 3.774196Combined 190 3.510526 .0393058 .5417928 3.432992 3.588061Diff -.3263158 .0751416 -.4745447 -.1780868diff = mean(PreTSA) - mean(PostTSA) t = 4.3427Ho: diff = 0 degrees of freedom = 188Ha: diff < 0 Ha: diff !=0 Ha: diff > 0Pr(T < t) = 0.0000 Pr(T > t) =0.0000 Pr(T > t) = 1.0000

Source: STATA Output, Version 14.2

Decision

Given that the p-value as presented in Table 9 is less than the 0.05, the study rejects the null hypothesis and concludes that there is a significant difference between pre and post TSA towards enhancing financial accountability in the Nigerian public sector.

Discussion of Findings

18

In line with the first hypothesis of the study which was set to determine the extent to which Treasury Single Account promotes accountability of public funds in Nigeria, a null hypothesis was formulated and tested using the ANOVA Statistics at 5% level of significance. The result revealed that Treasury Single Account significantly promotes accountability of public funds in Nigeria. This is consistent with the findings of Yusuf and Mohammed (2016), Igbokwe-Ibeto, et al (2016) and Igbekoyi and Agbaje (2017).

The second objective of the study was set to ascertain the effect of Treasury Single Account in curbing corruption in the Nigerian public sector. To this end, a null hypothesis was formulated and tested using the ANOVA Statistics at 5% level of significance. The result revealed that Treasury Single Account significantly reduce the level of corruption in the Nigerian public sector. This agrees with the findings of Igbekoyi and Agbaje (2017), Fatile and Adejuwon (2017) and Akujuru and Enyioko (2017).

In line with the third objective of the study which was set to examine the extent to which Treasury Single Account enhances financial discipline in the Nigerian public sector, a null hypothesis was formulated and tested using the ANOVA Statistics at 5% level of significance. The result revealed that Treasury Single Account significantly enhance financial discipline in the Nigerian public sector. This is similar to the findings of Adebisi and Okike (2016), Oti, Igbeng and Obim (2016) and Nwaorgu and Ezenwaka (2017).

The fourth objective of the study was set to check if there is significant difference in pre and post TSA towards enhancing financial accountability in the public. To this end, a null hypothesis was formulated and tested using the T-test Statistics at 5% level of significance. The result revealed that there is a significant difference between pre and post TSA towards enhancing financial accountability in the Nigerian public sector. This is in line with the findings of Igbekoyi and Agbaje (2017) who found that TSA significantly impact on financial leakages, transparency and promote findnacial accountability in the Nigerian public sector.

Conclusion and RecommendationsThe idea of the federal republic of Nigeria to have control of all her financial assets is not in contention. This study was set to examine the effect of Treasury Single Account on accountability, corrupt practices and financial discipline in the Nigerian public sector. In line with the findings, it is concluded that Treasury Single has a significant and positive effect on the accountability of public funds, reduction in the level of corruption and enhancing financial discipline. Also findings from the study suggest that there is a significant difference between pre and post TSA towards enhancing financial accountability in the Nigerian public sector.In line with the findings of the study, it is recommended that;

i. In improving accountability of public sector funds, there should appropriate sanctions where financial irregularities are discovered. This will strengthen the

19

goal of the TSA system in Nigeria thereby by instilling discipline and accountability of public sector funds.

ii. In maintaining financial discipline through TSA, the federal government should ensure that the TSA system does not create unnecessary bottleneck and clog in the financial operations of the MDAs.

iii. The institutions of governance - including the police, judiciary, the media and anti - graft agencies must be strengthened to tackle the issues of corruption and ensure transparency, probity and accountability in public finance and expenditure management .

iv. In order ensure the success of the TSA policy, the federal government must demonstrate the political will to ensure the sustainability of the TSA policy and also tenaciously pursue the implementation of TSA by state and local governments in the country.

REFERENCESAbdulrasheed, B. (2016). Treasury Single Account (TSA), as a tool for managing public

finances in Nigeria. A seminar presented at the department of Accounting, Faculty of Management Sciences, Usmanu Danfodiyo University Sokoto. Sokoto: Usmanu Danfodiyo University, Sokoto.

Adebisi, J.F, & Okike, B.M. (2016). The Adoption of the Treasury Single Account (TSA) and Its Effect on Revenue Leakages of Nigerian States. American Research Journal of Business and Management, 2, 1-10.

Akpan, N. (1982). Public Administration in Nigeria. Ikeja: Longman Publishers.

Akujuru, C., & Enyioko, N. (2017). Effects of Treasury Single Account Policy on Corruption in Nigeria. Retrieved from SSRN: https://ssrn.com/abstract=2940695

Alchian, A., & Demsetz, H. (1972). Production, Information Costs, and Economic Organization. American Economic Review, 62, 777-795.

Dada, S. (2014). Forensic accounting technique: a means of successful eradication of corruption through prevention, bribery prevention and embezzlement prevention in Nigeria. Arabian Journal of Business and Management review, 4(1), 176-186.

Ejere, E. (2013). Promoting accountability in public sector management in today’s democratic Nigeria. Tourism & Management Studies, 3, 953-964.

Ekubiat, J., & Ime, E. (2016). Adoption of Treasury Single Account (TSA) by State Governments of Nigeria: Benefits, Challenges and Prospects. Journal of Finance and Accounting, 4(3), 126-130.

Ezeagba, C. (2017). Impact of International Financial Reporting Standard (IFRS) adoption on financial reporting practice of selected commercial banks in Nigeria. Journal of Policy and Development Studies, 11(2), 21-42.

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Fama, E. (1980). Agency Problems and The Theory of the Firm. Journal of PoliticalEconomy, 288-307.

Fatile, J., & Adejuwon, K. (2017). Implication of Treasury Single Account (TSA) on the Cost of Governance in Nigeria: Buhari Civilian Administration in Perspectives. International Journal of Advanced Studies in Economics and Public Sector Management, 5(2), 13-29.

Freeman, E. (1984). Strategic Management: A Stakeholder Approach. Boston: Pitman Press.

Gerrit, S., & Mohammad, J. (2012). Factors associated with the internal audit function's role in corporate governance. Journal of Applied Accounting Research, 13(2), 191-204.

Igbekoyi, O., & Agbaje, W. (2017). An assessment of the implication of Treasury Single Account. European Journal of Accounting Auditing and Finance Research, 5(8), 33-49.

Igbokwe-Ibeto, C., Nkomah, B., Osakede, K., & Kinge, R. (2016). Treasury Single Account – Transparency and Accountability in Public Finance Management in Nigeria: The Journey So Far. Africa’s Public Service Delivery & Performance Review, 342-359.

International Monetary Fund IMF. (2010). Manual on fiscal transparency. Washington: IMF.

Jensen, M., & Meckling, W. (1976). Theory of the Firm: Managerial Behaviour,Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305-360.

Kiel, G., & Nicholson, G. (2003). Board Composition and Corporate Performance: How the Australian experience informs contrasting theories of corporate governance. An International Review, 11(3), 189–205.

Lawton, A., & Rose, A. (1994). Organization and Management in the Public Sector. London: Macmillan.

Laxmikanth, M. (2006). Public Administration. New Delhi: Tata McGraw Hill Publishing Company Limited.

McShane, K., & Nilsson, J. (2010). Determinant of corruption: A study of Zambian Ministries. Minor field study, 202, 101-113.

Nkoma, N. (2004). The Role of Accountability in Public Administration. Lagos: Centre For Constitutionalism and Demilitarization.

Nwaorgu, I., & Ezenwaka, F. (2017). Treasury Single Accounting (TSA) and Public Sector Accountability in Nigeria. Journal of Economics, Management and Trade, 19(4), 1-8.

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Ocheni, S. (2016). Treasury Single Account: A catalyst for public financial management in Nigeria . The Nation. January 25.

Ogutu, M. (2012). Research Methods. Nairobi: University of Nairobi.

Onuorah, A., & Appah, E. (2012). Accountability and public sector financial management in Nigeria. Arabian Journal of Business and Management Review, 1(6), 1-17.

Onyekpere, L. (2015). Buhari orders federal ministries, agencies to open treasury single account. The Punch Newspaper, August 9, p. 61.

Oti, P., Igbeng, E., & Obim, E. (2016). Appraisal of Policy Impact of Treasury Single Account in Nigeria. Research Journal of Finance and Accounting, 7(20), 45-52.

Oyedele, T. (2015). Nigeria: what does the new treasury single account (TSA) hold for tax? PWC Nigeria, 1-12.

Pattanayak, S, & Fainboim, I. (2011). Treasury single account. An essential management for government cash management. International Monetary Fund (IMF), 17-29.

Premchand, A. (1999). Budgetary Management in the United States and in Australia, New Zealand and the United Kingdom . San Francisco:: Jossey-Bass Publishers.

Preston, L. (1991). Governance and Development . Washington DC: World Bank,.

Ross, S. (1973). The Economic Theory of Agency: The Principal’s Problem. American Economic Review, 134-139.

Rouse, J. (1997). Resources and Performance Management in Public Service Organizations. London: Thomson International .

Shabbir, G., & Anwar, M. (2007). Determinants of corruption in developing countries. The Pakistan development review, 46(4), 751-764.

Waziri, F. (2010). Corruption and governance challenges in Nigeria. Cleen foundation monograph series working paper(12), 45.

Yusuf, A., & Mohammed, B. (2016). Effects of Treasury Single Account on Public Finance Management in Nigeria. Research Journal of Finance and Accounting, 7(6), 164-170.

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AN APPLICATION OF LINEAR PROGRAMMING TECHNIQUE TO RICE PROCESSING PLANT OF MAJESTIC COMPANY IN JIGAWA

STATE OF NIGERIA

By1Bello Malam Sa’idu, 2Kabiru Suleiman, & 3Rukkaiyatu Bashir Ribadu

1Department of Economics and Development Studies, Federal University Dutse, Jigawa State, Nigeria.

2Department of Mathematics, Yusuf Maitama Sule, Kano State, Nigeria.3Department of Mathematics, Federal University Dutse, Jigawa State, Nigeria.

AbstractThe Majestic Company has many plants, among them is rice processing plant which has the capacity of producing 16 tonnes each of parboiled rice and white rice using intuitive technique to production. The company is in need of qualitative and quantitative analysis on the best measures to undertake in production to ensure maximal profit utilization. To achieve the best optimal production, we applied the Linear Programming procedure using Graphic Method. Consequently, results reveal that, the optimal combination is to produce 16 tonnes of parboiled rice and 70 tonnes of white rice. Therefore, the paper suggest increase in the production of white rice from 16 to 70 tonnes which can generate two million, five hundred and twenty-three thousand Naira (N 2,523,000.00) profit for the company.

KeywordsMajestic, Rice Processing, Plant, Optimal Production, Intuitive Technique, Linear Programming technique

1. IntroductionThe problem of solving a system of linear inequality dates back as far as Fourier Joseph (1768 –1830) who was a Mathematician, Physicist and Historian, after which the method of Fourier – Motzkin elimination is named. Thus, linear programming arose as a mathematical model developed during the Second World War to plan expenditure and returns in other to reduce cost to the army and increase losses to the enemy. It was kept secret for years until 1947 when many industries found its use in their daily planning. Many applications were developed in linear programming which includes: Lagrange in 1762 solves tractable optimization problems with simple equality constraint. In 1820, Gauss solved linear system of equations by what is now called Gaussian elimination method and in 1866, Whelhelm Jordan refined the method to finding least squared error as a measure of goodness-of-fit. Now it is referred to as Gauss-Jordan method (see, Fagoyinbo, et al., 2011).

23

According to Sinebe, Okonkwo & Enyi (2014) optimization process usually begins with a real life problem full of details and complexities, some relevant and some not. From this, essential elements are extracted and an algorithm or solution technique is applied to it. Thus the optimization process for this research will begin with data collection from a department of Majestic Food Processing Company where the production of competing products takes place, extracting the essential data and applying a solution technique.

Furthermore, the standard techniques used in solving the problem after formulating the linear programming model involves the use of solution algorithms and the commonly used ones are; graphical method, simplex method, interior point method, cutting plane method and the ellipsoid method. Each of these methods solve the linear programs independently each having its strength and weakness. However, we are limited to the graphical method. The graphical method will be used only when the decision variables are two. In our case, parboiled rice and white rice.

A linear programming problem must have a linear relationship between variables and constraints, the model must also have an objective function, structural constraint and a non-negativity constraint. Thus, the general form of a linear programming model with n decision variables and ‘n’ constants are given as follows:

Maximize or Minimize: Z = a1 X1 + a2 X2 +…………+ an Xn (objective function)

Subject to: b11 X1 + b21 X2 +………… + bn1 Xn ≤ d1 (Maximum availability)

b12 X1 + b22 X2 +………… + bn2 Xn ≥ d2 (Minimum contentment) b1m X1 + b2m X2 +………… + bmn Xn = dm (Equality) With X1, X2 ……………………….. Xn ≥ 0 (non-negativity condition)

The Majestic Food Processing Company is situated in Birnin-Kudu, Jigawa State of Nigeria. The rice processing plant of Majestic Food Processing Company is a newly established department in the company and is in need of qualitative and quantitative analysis on the best measures to undertake in production to ensure maximal profit utilization. Presently, the company produces 16 tonnes each of parboiled and white rice. Hence, this research will focus on obtaining optimal combination of products which satisfies the constraints to production in the company.

2. Literature ReviewLinear programming is a model which is used for optimal allocation of scarce resources to competing products or activities under such assumptions as certainty, linearity, fixed technology and constant profit per unit. Thus, Lucey (1996) defined linear programming as a term that covers a whole range of mathematical techniques that is aimed at optimizing performance in terms of combinations of resources.

24

The linear programming using graphical method has been used widely by authors, such as James and Scott (1998); Yahya, et al., (2012); Adeoye, Alao, & Mashood (2013); Kanu, Ozurumbu, & Emerole (2014), etc. Firstly, James and Scott (1998) used the graphical method to solve linear programming problem. Their objective is to maximize profit in a furniture manufacturing industry. The problem was to determine the number of chairs and table the manufacturer needs to produce to obtain maximum profit giving that limitations to production are satisfied. The company uses wood and labour to produce tables and chairs unit profit for tables is $6, and unit profit for chairs is $8. There are 300 board feet (bf) of wood available, and 110 hours of labour available. It takes 30 bf and 5 hours to make a table, and 20 bf and 10 hours to make a chair.

Furthermore, Yahya, et al., (2012) demonstrates the use of linear programming methods as applicable in the manufacturing industry. Data were collected as extracts from the records of KASMO Industry Limited, Oshogbo, Nigeria, on four types of sales packages adopted for selling her medicated soap product which include 1 tablet per pack, 3 tablets per pack, 12 tablets per pack and 120 tablets per pack. Information on selling price per pack and on the cost of five basic raw materials used as well as the quantity of each of the raw material held in stock per month for the production of soap tablets were available in the records of the company. Based on the costs of raw materials, the maximum profit that would accrue to the company was given the product mix was determined.

Likewise, Adeoye, et al. (2013) conducted a research on the application of linear programming in block industry. The aim of the research was to maximize the profit in the industry. Data were obtained from Iwa block industry in Ilorin Township on two types of block, 6 inches and 9 inches, and two phase method was used to analyze the data. The optimum solution is obtained at seventh iteration with X1=400 units (6 inches block), X2=450 units (9 inches’ block) and profit of N15,200. They recommended to any Block Industry to simply specialize on the production of either 6 inches or 9 inches in order to minimize the total cost and maximize the profit.

In addition, Kanu, et al., (2014) gave some of the overwhelming applications of linear programming to practical decision making. So as to make general public aware, understand and appreciate the contributions of operations research and its component studies to work place decision making process. They discussed and showed how linear programming can be applied in finance, marketing, management applications, transportation model, assignment model, urban planning, currency arbitrage, blending model and in environmental protection.

In conclusion, the development of linear programming has been ranked among the most important scientific advances of the mid-20th century, and its assessment is accepted. Its impact since 1950 has been extra ordinary. Today it is the standard tool that has saved

25

thousands or millions of dollars of many production companies (Fagoyinbo, et al., 2011). 3. Material and Methods3.1 Formulation of Linear Programming Model.Many linear programming problems are not stated in mathematical forms. There is need to be formulated as a linear programming problem using the following steps as stated by Vishal and Tulsian (2006):

1. Identify the Decision Variables of interest to the decision maker and express them as x1, x2, x3……… xn

2. Ascertain the Objective of the decision maker whether he wants to minimize or to maximize.

3. Ascertain the cost (in case of minimization problem) or the profit (in case of maximization problem) per unit of each of the decision variables.

4. Ascertain the constraints representing the maximum availability or minimum commitment or equality and represent them as less than or equal to (≤) type inequality or greater than or equal to (≥) type inequality or 'equal to' (=) type equality respectively

5. Put non-negativity restriction as under:     Xj ≥ 0; j = 1, 2 ….n (non-negativity restriction)

6. Now formulate the LP problem as under: Maximize (or Minimize): Z = c1x1 + c2x2 …..cnxn

Subject to constraints:a11x1 + a12x2, ….a1nxn≤ b1 (Maximum availability)a21x1 + a22x2, ….a2nxn≥ b2 (Minimum commitment)a31x1 + a32x2, ….a3nxn = b3 (Equality)

… … …am1x1 + am2x2, ….amnxn≤ or ≥ bm

x1, x2 …. xn ≥ 0 (Non-negativity restriction)Where;xj = Decision Variables i.e. quantity of jth variable of interest to the decision maker.cj = Constant representing per unit contribution (in case of Maximization Problem) or Cost (in case of Minimization Problem) of the jth decision variable.aij = Constant representing exchange coefficients of the jth decision variable in the ith

constant.bi = Constant representing ith constraint requirement or availability

3.2 Data Obtained from Rice Processing Department1. Types of rice produced.

a. Parboiled rice.b. White rice

2. Machines required for processing and maximum capacity of rice required.a. Parboiling machine with capacity 16 tonnes.b. Milling machine with capacity 70 tonnes.

26

3. Total processing time required by machines when producing to maximum quantity.a. Parboiling machine = 30.4 hours.b. Milling machine = 18 hours.

4. Maximum processing time available = 9 (working hours) * 2 (shift/day) + 2 (overtime hours) = 18 hours/day.

5. Cost of unprocessed rice per tonne = ₦140,000.6. Total quantity of rice after processing.

a. Parboiled rice = 65% of unprocessed rice.b. White rice = 70% of unprocessed rice.

7. Quantity of processed rice yield per tonne unprocessed rice.a. Parboiled rice = 65% of 1 tonne = 0.65 tonnes = 13 bags (50kg size)b. White rice = 70% of 1 tonne = 0.70tonnes = 14 bags (50kg size)

8. Selling price per 50kg bag.a. Parboiled rice = ₦13,500.b. White rice = ₦12,000.

9. Profit/tonne = selling price/tonne - cost price/tonne a. Profit for parboiled rice = (13bags *₦13,500) - ₦140,000) =₦35,500.b. Profit for white rice = (14bags * ₦12,000) - ₦140,000) = ₦28,000.

10. Present quantity of rice produced by the company at time of data collection is 16 tonnes for each type of rice.

The above data obtained from rice processing department can be conveniently transform into a tabular form as shown in Table 1;

Table 1: Data for Processing Rice within two days’ intervalType of rice Time on

parboiling machine per tonne

Time on milling machine per tonne

Profit / tonne

(₦)

Parboiled rice 1.9 hours 0.25 hours 35,500

White rice 0 hours 0.25 hours 28,000

Total available time

40 hours 40 hours

3.3 Problem Formulation To formulate the problem which will enable us determine the optimal rice combination, let X1 and Y1 denote the decision variables corresponding to parboiled rice and white rice respectively. Also since the parboiling and milling system has a maximum capacity of 16 and 70 tonnes respectively, we can have the production of parboiled rice to be less or equal to 16 tonnes that is; X1 ≤ 16 tonnes and since the production of white rice is independent of the par boiler, we attempt to increase the production from 16 tonnes to a

27

maximum of 70 tonnes that is; 16 ≤ Y1 ≤ 70 (tonnes) in order to increase profit at the same time satisfy the constraint.

Formulation of the objective functionLet Z2 represent the total profit, since the aim is to maximize, we have the profit in producing each unit X1 to be ₦35,500 and the profit in producing each unit of Y1 to be ₦28,000. Hence we can have the objective function as;

Max. Z2 = 35,500X1 + 28,000Y1

Formulation of linear constraintsIn determining the combination of rice for maximum profit, the objective function has the following constraints;

1. The constraint based on milling time which is expressed as; 0.25X1 + 0.25Y1 ≤ 40

2. The constraint on parboiling time which is expressed as; 1.9X1 ≤ 40

3. The constraint based on machine capacity expressed as;X1 ≤ 16 (parboiling machine)

16 ≤ Y1 ≤ 70 (milling machine)In general, the linear programming problem can be standardized as;Max Z2 = 35,500X1 + 28,000Y1

Subject to: 0.25X1 + 0.25Y1 ≤ 40 1.9X1 ≤ 40 X1 ≤ 16 16 ≤ Y1 ≤ 70 Where X1 and Y1 ≥ 0.(Non-negativity condition)

3.4 Solution to Rice CombinationThe decision variables are two hence the graphical method will be used to find the solution to optimal rice combination. Hence we need to follow the steps in solving linear programming problem as stated earlier. The standard linear programming problem is given by;

Max. Z2 = 35,500X1 + 28,000Y1

Subject to: 0.25X1 + 0.25Y1 ≤ 40

X1 ≤ 16 Y1 ≤ 70

Y1 ≥ 16

28

Where; X1 and Y1 ≥ 0.

To construct the graph, we need to plot the constraint lines and find the feasible region, to do this, we need to find the vertical and horizontal intercept found from each constraint equation, thus we have;

C1: 0.25X1 + 0.25Y1 ≤ 40 which gives; X1 = 160 at Y = 0 and Y = 160 at X = 0.C2:X1 ≤ 16 which gives X1 = 16. C3: Y1 ≥ 16 which gives Y1 = 16.C4:Y1 ≤ 70 which gives Y1 = 70.

0

20

40

60

80

100

120

140

160

180

0 20 40 60 80 100 120 140 160 180

C1C2

C3

C4A B

C D

F.R

Figure 1: Graph with constraint lines drawn indicating the feasible region (F.R).

The coordinates of the points on the graph which satisfies the constraints to production are; A (0, 70); B (16, 70); C (0, 16); and D (16, 16).

To determine the value of the objective function for optimal solution, plug in the value of X1 and Y1 as in coordinate A, B, C and D. Then, solve for Z2 in each case and conclude that the value of X1 and Y1 which gives the highest value for Z2 is the optimal combination. Max. Z2 = 35,500X1 + 28,000Y1

For A (0, 70), Z2 = 35,500(0) + 28,000(70) = ₦1,960,000For B (16, 70), Z2 = 35,500(16) + 28,000(70) = ₦2,523,000For C (0, 16), Z2 = 35,500(0) + 28,000(16) = ₦448,000

29

For D (16, 16), Z2 = 35,500(16) + 28,000(16) = ₦1,016,000

The feasible point is B (16, 70) which gives the profit of ₦2,523,000.00, hence the optimal combination is for the department to produce 16 tonnes of parboiled rice and increase the production of white rice from 16 to 70 tonnes.4. The Result The following Table 2 depicts results of rice combination obtained from graphical method;

Table 2: Result obtained from Graphical Method Decision Variables Values Obtained

X1 16 tonnes

Y1 70 tonnes

With Z2 found to be ₦2,523,000.00

The result based on the data obtained from rice processing department of Majestic Food Processing Company reveals that the maximum profit obtainable is ₦2,523,000.00. This profit can only be achieved when 16 tonnes of parboiled rice and 70 tonnes of white rice is produced. This research is in line with the works of James & Scott (1998); Yahya, et al., (2012); and Adeoye, et al., (2013), while the works of Divya (2016) and Sinebe, et al., (2014) are not consistent with this work.

5. ConclusionsThe Majestic Company with it rice processing plant is in dilemma on the production method to adopt and has been using intuitive method which did not give it optimal production capacity and maximum profit. In this research we have seen that the plant has optimal combinations ( 16 tonnes of parboiled rice and 70 tonnes of white rice) instead of (16 tonnes parboiled rice and 16 tonnes of white rice) based on the Linear Programming procedure using Graphic Method. T he paper suggest increase in the production of white rice from 16 to 70 tonnes which can generate two million, five hundred and twenty-three thousand Naira (N 2,523,000.00) profit for the company.

Finally, the management Majestic Company may benefit from this proposed approach foroptimal production capacity and maximum profit. We therefore, recommend that this method should be adopted by this company and other related companies in order to optimize production and maximize profit in the future.

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Lucey, T. (1996). “Quantitative Techniques” DP Publications, London. Sinebe, J. E.; Okonkwo, U. C.; and Enyi, L. C. (2014). Simplex Optimization of

Production Mix: A Case of Custard Producing Industries in Nigeria., International Journal of Applied Science and Technology, 4(4): 181-185.

Vishal, P. & Tulsian, P. C. (2006). “Quantitative Techniques: Theory and Problems, https://www.safaribooksonline.com, accessed on 14th March, 2017 @10:30am.

Yahya, W. B.; Garba, M.K.; Ige, S. O.; & Adeyosoye, A. E. (2012). Profit Maximization in a Product Mix Company Using Linear Programming, European Journal of Business and Management, 4(17): 126-131.

APPENDIXMAJESTIC FOOD PROCESSING COMPANY, BIRNIN-KUDU, JIGAWA STATE

BREAKDOWN OF INFORMATION COLLECTED FROM RICE PROCESSING DEPARTMENT

1. Types of rice produced.

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a. Parboiled rice.b. White rice

2. Machines required for processing and maximum capacity of rice required.c. Parboiling machine with capacity 16 tonnes.d. Milling machine with capacity 70 tonnes.

3. Total processing time required by machines when producing to maximum quantity.c. Parboiling machine = 30.4 hours.d. Milling machine = 18 hours.

4. Maximum processing time available = 9 (working hours) * 2 (shift/day) + 2 (overtime hours) = 18 hours/day.

5. Cost of unprocessed rice per tonne = ₦140,000. Then, cost of 16 tonnes unprocessed rice= ₦2,240,000.

6. Total quantity of rice after processing.c. Parboiled rice = 65% of unprocessed rice.d. White rice = 70% of unprocessed rice.

7. Selling price per 50kg bag.c. Parboiled rice = ₦13,500.d. White rice = ₦12,000.

8. Present quantity of rice produced by the company is 16 tonnes for each type of rice.

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AN EMPIRICAL ANALYSIS OF SECTORIAL PUBLIC EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA

By

DANIA EVELYN NDIDI (Ph.D)Department of Economics, Michael and Cecilia Ibru University

Agbarha-Otor, Delta State,And

ADEGUN OLORUNWA SIMONDepartment of Banking and Finance,

Rufus Giwa Polytechnic Owo, Ondo State PMB 1019

ABSTRACT

This paper examined the impact of sectorial public expenditure on economic growth in Nigeria from 1970-2015. In line with this, appropriate models were specified for the analysis of the data collected for the study. The time series properties of the data and co-integration were tested using augmented engle and granger (AGF) approach, the short run dynamics and the long run sectoral output were examined by estimating an error correction model. The results from the co-integration test showed the presence of long run relationship between the dependent and explanatory variables in the model. Based on the empirical analysis, total government expenditure on agriculture and cost of governance has direct and significant impact on the Nigeria’s economic growth while total government expenditure on industrial sector has adverse and significant effect on the Nigeria’s economic growth. However, government spending on service sector has direct but insignificant effect on Nigeria’s economic growth. the study therefore, recommends that there is need for fiscal policy expansion of government spending on the industrial, service and agricultural sectors to bust economic growth, government should sustain the cost of governance at optimum level to create more robust effect on Nigeria’s economic growth, government should give urgent attention to the specific sectors (agricultural, industrial and service sectors) of the economy so as to increase the sectoral outputs finally, government should ensure that the capital expenditure and recurrent expenditure are properly managed in a manner that will raise the nation’s productive capacity in agricultural, industrial and service sectors .

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1. INTRODUCTION

The Wagner law hypothesis that expanding state activity in the economy is proportionally related to the increases in the degree of economic growth also public expenditure remains an important fiscal policy management tool that could put an economy on a long-term sustainable growth path when properly managed. Far-sighted government expenditure through an efficient allocation of its resources to the different sectors of the economy translates into a comprehensive and sustainable growth pattern, which serves as a driver for eradicating poverty and inequality in an economy (Akanbi, 2014). Many economists and researchers are concerned about the growing disparity between revenue and expenditure in many countries in which Nigeria is a victim of such fiscal imbalances with very serious adverse effect on the nation’s economic growth. As economists, real or pseudo, the policy makers need to be cleared on how they can allocate scarce funds effectively and efficiently to yield maximum results in the task of growing the economy.

The under-developed countries, Nigeria inclusive are characterized by extreme inequalities of income and wealth. Public expenditure tends to ameliorate this abnormality in the economy (Jhigan, 2007 as cited in Imougele and Imahe, 2012). Expenditure on Education, public health and medical facilities helps in human capital formation. As a result, the earning power of the working population is enhanced. As economic development proceeds rapidly through rising public expenditure the barriers to upward mobility are removed, occupation expand and spread, providing more jobs to the people, and with the acquisition of skills, the level of wages tends to rise within the economy. Moreover, industrialization tend to increase the share of wages and decrease the share of profit in national income in the long run and the gap between higher and lower income is narrowed (Sola, 2009).

Scholar has shown mixed relationship between government expenditure and economic growth for instance Olulu, Eravwoke and Ukavwe (2014) revealed an inverse relationship between government expenditure and economic growth. Olugbenga and Owoeye (2007) worked on the causality between Public expenditure and economic growth in 30 Organisation for Economic Cooperation and Development (OECD) countries and discovered that 10 of the countries confirmed Wagner’s law of “expanding state activity” that states that public expenditure is a function of economic growth. Also, four of the countries had feedback relationship between government expenditure and economic growth. According to Abu-Eideh (2015) there was a long-run causality relationship between public expenditure and economic growth in Palestine from 1994 - 2013. The term sector is being used inter - changeably with the sub-sectors of the economy which does not provide a clear cut on how to effectively and efficiently allocate resources to the very main activity sectors of the economy which are the drivers of economic growth. This study therefore, exposes the specific sectors to which government attention is mostly required in promoting economic growth. Consequently,

34

this is an investigation on the impact of government expenditure on the industrial, agricultural and service sectors on Nigeria economic growth.

2. LITERATURE REVIEW

Two major conceptual issues that are of interest in this study are public expenditure and economic growth. Public expenditure otherwise known as government spending is the cost of carrying out the functions of government in respect of the quantity and quality of goods and services produced and distributed to the people (Ijaiya, Bello & Ijaiya; 2003). Public expenditure as it appears in the national income account is thus represented by two broad categories of government activities. First, is the exhaustive government spending that corresponds to the government purchase of recurrent goods and services (labour, consumables etc.) and capital goods and services (government expenditures on roads, schools, hospital etc). Second is transfer spending which government is spending on pensions, subsidies, debt interest, unemployment benefits etc. This spending does not represent a claim on the society’s resources by the public sector as in the case of exhaustive government spending. Instead, transfers are redistributions of resources among individuals in the society with the resources flowing through the public sector as intermediary (Ijaiya,; Bello,; Ijaiya & Usman, 2009).Economic growth constitutes one of the most important objectives of macroeconomic policy. It is defined as the process whereby the real per capita (inflation-adjusted) income of a country increases over a long period of time. Growth takes place when the productive capacity of an economy increases overtime, in which case more goods and services are produced in each successive period. Economic growth therefore, is a desirable policy goal which should lead to economic development (Todaro, 1989). Economic growth represents the expansion of a country’s potential GDP or output. Todaro (1995) citing Kuznets, defined a country’s economic growth as long term rise in capacity to supply increasing diverse economic goods to its population. It was further stressed that the conceptual definitions around economic growth can be completely examined from the Supply-side, Demand-side, the short-term and long-term dimensions. On the supply side, economic growth emphasizes on the concurrent development of all interrelated sectors which help in increasing the supply of intermediate goods, raw materials, power, agriculture, transport, all industries producing consumer goods, etc. The demand side relates to the provision of large employment opportunities and increasing incomes so that demand for goods and services will increase. Economic growth is primarily concerned with the long run economic stabilization while the short-run variation of economic growth is termed the business cycle and almost all economies experience periodical recessions caused by Oil shocks, war and harvest.Literature are abound on the impact government expenditure on economic growth, for instance, Yusuf.; Babalola, Aninka and Saloko (2015) investigated the impact of government expenditure on adjudged critical sectors on economic growth in Nigeria (1984-2013) with the intention of evaluating the measure in which government expenditure contributes to the Nigeria’s economic growth. The study employed quantitative analysis with the use of Auto-Regressive Distributed Lag (ARDL) model to

35

examine both the short-run and long run impact of Government expenditures on economic growth. The specific ARDL estimates of the analysis revealed that government expenditure on defense slowed down economic growth and government expenditure on agriculture promoted the economic growth while government expenditure on education and transport/communication had no relationship with economic growth in the long-run. But In the short run, government expenditure any sector did not contribute to growth.

Danladi.; Akomolafe,; Olarinde and Anyadiegwu (2015) applied the Johansen co-integration test to verify the long run relationship between the variables and the Granger causality test was employed to determine the existence and direction of causality between government expenditure and economic growth in Nigeria. ARDL methodology was employed to examine the relationship between the independent variables and the dependent variable. From the findings, government spending significantly and positively affect the economic growth of the country. Agbonkhese and Asekome (2014) conducted a study on the impact of public expenditure on the growth of the Nigerian economy to ascertain whether there was a relationship between gross domestic product (GDP) and government expenditure in Nigeria between 1981 and 2011 using the Ordinary Least Squares (OLS) technique. They found out that, there was a positive relationship between the dependent and independent variables. Eboh, Oduh and Ujah (2012) used the heterogeneous panel data to study the impact of government expenditure on Nigerian economic growth. The result showed that countries with large government expenditure tend to experience higher growth. Chaido and Melina (2012) determined the direction of causality between national income and government expenditure for members; Bulgana, Cyprus Republic, Estonia, Solvenia and Slovakia. The results for Bulgaria and Cyprus was found to support the hypothesis that causality runs from government expenditure to national income the result of Granger causality test indicated that Wagner’s Law was supported by the data of Cyprus, Poland and Romania. Desmond, Titus, Timothy and Odiche (2012), examined the effect of public expenditure on economic growth in Nigeria during the period 1970 – 2009 using the OLS multiple regression model and time series data. Time series data included in the model were the GDP and various components of government expenditure. The result of the analysis showed that capital and recurrent expenditures on economic service had insignificant negative effect on economic growth during the period under study. Also capital expenditure on transfer had insignificant positive effect on economic growth.

Ramey (2012) examined increase in government expenditure stimulate private activity. It was found that in most cases private expenditure fell significantly in response to an increase in government spending. Olusegun (2014) examined the pattern and drivers of government expenditure with specific reference to capital and recurrent expenditure in Nigeria. The study employed a public choice framework and the model is estimated with time-series data from 1974 to 2012, using the Johansen estimation technique. The results show that capital and recurrent expenditure are flexible to shocks in total government expenditure. Adofu (2012) in the effects of government budgetary allocation to agricultural output in Nigeria (1995-2009) showed that the percentage,

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degree or amount of budgetary allocation to agricultural sector has a positive relationship with the total agricultural production in the country. This implies that the more the public spending on agricultural sector, the more the improvements in the performance of the agricultural sector. Also, a large degree of change in agricultural output is accounted for by change in budgetary allocation to agricultural sector. Thus, budgetary allocation to agriculture has a large impact on agricultural output. However, none of these studies employed Granger Causality to analyze the relationship between government expenditure and agricultural output that is if government expenditure granger causes agricultural output or agricultural output granger cause government expenditure. Okezie, Nwosu and Njoku (2013) examined an assessment of Nigeria expenditure on the agricultural sector: Its relationship with agricultural output 1980 – 2011 and its contribution to economic growth using time series data. It employed the Engle-Granger two step modeling (EGM) procedure to co-integration based on unrestricted ECM and Pair wise Granger Causality tests. From the analysis, it was found that agricultural contribution to GDP (Gross domestic product) and total government expenditure on agriculture were co-integrated. Oloyede (2014) studied the impact of FDI on the development of the Agricultural sector in Nigeria using time series data covering the period 1981 and 2012 and employing the Ordinary Least Square (OLS) estimation technique. The author finds FDI to positively impact agriculture. He found that instability in the political environment inversely affected the agricultural sector Ideba, Iniobong, Otu and Itoro (2013) investigated the impact of agricultural public capital expenditure on economic growth in Nigeria between 1961 to 2010. The data was analyzed using Augmented Dickey-Fuller test, Johansen maximum likelihood test and Granger Causality test. The result of the Johansen co-integration test showed that there is long run relationship between all the explanatory variables and explained variable. The result of parsimonious error correction model showed that agricultural capital expenditure had appositive impact on economic growth. Also, granger causality test showed a unidirectional relationship between agricultural capital expenditure and economic growth. This means that agricultural economic growth does not cause expansion of public capital expenditure rather; it indicated that agricultural public capital expenditure raises the nation's agricultural economic growth.

Iganiga and Unemhilin (2011) investigated the effect of Federal government agricultural expenditure on the value of agricultural output, total commercial credits to agriculture, consumer price index, annual average rainfall, population growth rate, food importation and GDP growth rate were included. The Cobb Douglas Growth Model, Descriptive Statistics and Econometrics Model were used to analyze the data. Co-integration and Error Correction methodology were employed to draw out both long-run and short- run dynamic impacts of these variables on the value of agricultural output. Federal government capital expenditure was found to be positively related to agricultural output. Ebiringa and Anyaogu (2012) investigated the Impact of Government Sectoral Expenditure on the Economic Growth of Nigeria and posit that government expenditures remain the bedrock of Nigeria’s economic growth. The work adopted the ECM method

37

to analyse the long run effect of selected macro economic variables on growth. The findings of their work showed that expenditure on telecommunication, defense and security, education and health sectors have positive effect on Nigeria economic growth. But, transportation and agricultural expenditures have impacted negatively on the economic growth. Ayo and Ifechukwu (2012) examined the causality relationship among economic growth, government expenditure and inflation rate in Nigerian over the period 1970 – 2001. The study utilized both the ADF and PP tests to examine the properties of the variable. The variables were observed to be stationary, though not in their level form but in their first difference. In addition the Johansen and Juselius (JJ) co integration techniques indicated the presence of co integration among the variable while the tri-variate vector error correction model (VECM) shoed the presence of bidirectional causality between government expenditure and economic growth both in the short run, a unidirectional causality existed from economic growth and government expenditure to inflation while no feedback from inflation rate was observed. Nazifi (2014) researched on the capital expenditure and its impact on economic growth in Nigeria: 1980-2010. The multiple regression model of Ordinary Least Square was used to analyse the data. The findings of the study showed that total expenditure, capital expenditure on administration, social community services and on transfers had positive impact on economic growth in Nigeria. It is a confirmation from the empirical study that there are diverse results by various studies. Some studies found that public expenditure has negative and insignificant effect to economic growth (Egbetunde & Fasanya 2013; Chude & Chude 2013; Adewara & Oloni, 2012). Bakare (2012) assessed the role of government spending for sustainable economic growth in Nigeria using annual data from 1975-2008 and ordinary least square multiple regression. The results showed that increase in government expenditure did not contribute to sustainable growth in Nigeria. Moreso, that there was long run and significant relationship between public spending and sustainable growth in Nigeria. Omojimite (2010) showed that there was co-integration between public expenditure and education, primary school enrolment and economic growth in Nigeria. The test revealed that there was bi-directional causality between public recurrent expenditures on education and economic growth. No causal relationship was established between capital expenditure on education and economic growth in Nigeria. Omoke (2009) as cited in Danladi, Akomolafe, Olarinde and Anyadiegwu (2015) investigated the direction of causality between Government expenditure (GE) and National Income (NI) in Nigeria using annual data. The study employed the co-integration and Granger Causality tests for the period 1970-2005. The result showed no long-run relationship existed between government expenditure and national income in Nigeria. The Granger causality test revealed that causality ran from government expenditure to national income thus concluding that government expenditure plays a significant role in promoting economic growth in Nigeria.

Chude and Chude (2013) demonstrated that aggregate demand in the direction of economic recession may be greater than before with increase in government spending,

38

meaning that government spending would be an efficient tool in economic recovery. According to the Keynesian view, government could depend on the private sector to grow the economy, they stressed that government could borrow money from this sector and spend it in various programs in other to return the money back to the society. Moreso, government expenditure could have a positive influence on economic growth if there were high levels of government consumption which affect aggregate demand. Loto (2011) examined the impact of sectoral government expenditure on economic growth in Nigeria for the period 1980-2008 and applied the Johansen co-integration technique and error correction model. The results deduced that in the short run expenditures on agricultures and education are negatively related to economic growth. However, expenditures on health, national security, transportation, and communication were positively related to economic growth. Acemoglu and Robinson, (2002) posited that the impact of government expenditure was positive and significant. Peter, Ayunku and Lyndon (2015) examine the effect of agriculture spending on economic growth in Nigeria over a period of 1977 and 2010 with particular focus on sectional expenditure analysis using some econometric techniques such as Augmented Dickey Fuller (ADF) and Phillips Perron (PP) unit root tests, as well as Johansen Co-integration and followed by Error Correction Model (ECM) tests. The empirical results indicated that RGDP was particular influenced by changes in agriculture, inflation, interest rate and exchange rate, these variables contribute or promote economic growth in Nigeria.

3. RESEARCH METHODS3.1. Theoretical Framework

The collective work of Tobin, Swan, Solow, Meade, Phelps and Johnson is termed as neo-classical theory of economic growth. The assumptions adopted by these theorists are based on the views and norms of the neo-classical economists, such as Marshall, Wicksell and Pigou. According to the neo-classical theory, the output of any economic activities is determined with the help of certain factors, such as stock of capital, supply of labour and technological development over time. The Neoclassical production function therefore, serves as the platform on which the empirical model for this study is formulated. The production function for the neo-classical theory can be expressed as follows:Y=f (K , L ,T )L, K) --------------------------------------------------------------------------- (1)Where, denotes the level of National output, denotes the stock of domestic physical capital, is the labour force and T = Scale of technological development. Following the earlier theoretical framework adopted by Ram (1986), Grossman (1988)

and later by Alexiou (2009) overnment spending for capital formation can be used to augment equation (1), that is, as part of the independent variable. This implies that equation (1) can be modified as:

-------------------------------------------------------------------------- (2)

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Spending on capital formation by government can be disaggregated into a domestic part

and a foreign part . Taking the latter into consideration and introducing a measure of openness (H), equation (2) can be re-specified as:

Y=g ( K , L , DG , FG , H ) -------------------------------------------------------------- (3)To obtain the various marginal products of the variables, we take the total derivatives as:

-------……..------------------------(4)Normalize equation (4) by using the gross domestic product (Y)

----------(5)

Given equation (5), the signs of all the partial derivatives with respect to output are expected to be positive. In particular, private investment, the labour force, government spending for capital formation and trade-openness are all envisaged to exert a positive impact on economic growth.Equation (5) can also be written as:

---------------------------------(6)3.2 Model SpecificationFrom the theoretical underpinnings, we shall adapt the model used by Alexiou (2009) in his investigation on the impact of government spending on economic growth. The model is stated thus:

---------------- (7)

With slight modification of equation (7) the model used in this study unveils the relationship between economic growth and the specified government sectoral expenditure and it’s disaggregated spending in Nigeria. The study further steps up the number of observations as well as modifying Alexiou’s model which incorporates government expenditure on service (GES), industrial (GEI), agricultural sectors (GEA), gross domestic product growth rate (rGDPgr), recurrent expenditure on agriculture (REagr), capital expenditure on agriculture (CEagr), other development assistance in agriculture (ODAagr), recurrent expenditure on service sector (REser) capital expenditure on service sector (CEser), other development assistance on service sector (ODAser), recurrent expenditure on industrial sector (REind), capital expenditure on industrial sector (CEind) and other development assistance in agriculture (ODAind) in the Nigerian economy. The vital hypothesis to be validated in the model is on how government expenditure on the above stated sectors impacts negatively or positively on the growth of the Nigerian economy. Therefore, the inclusion of the three sectors stated above in this work is an improvement over Alexiou’s (2009) model. Accordingly, we specify our models for the study in linear forms as follows:

rGDPgr = f ( GEA, GEI, GES, INV, WKF, FDI ,TGE, CSG )----------------------(8)

Where:

rGDPgr = Real gross domestic product growth rate proxied for economic growth GEA = Government spending on Agricultural sectors.

Hg dH

Hg dH/Y

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GEI = Government spending on Industrial sector. GES = Government spending on the service sector.

INV = Total Investment

WKF = Work force population

FDI = Foreign direct investment in Nigeria

TGE = Total government expenditure

CSG = Cost of governance in Nigeria.

The functional form of equation (8) above is expressed as follows: rGDPgr = α0 + α 1 GEA + α 2 GEI + α 3 GES + α 4 INV + α 5WKF + α 6FDI + α 7TGE+ α8CSG + ut ----------------------------------------------------------------------- ------------(9) Equation (9) can be written in log form except real gross domestic product growth rate which is in percentage as:rGDPgr = α0+ α 1logGEA + α 2 log GEI+ α 3logGES + α 4logINV + α 5logWKF+ α

6logFDI + α 7log TGE +α 8log CSG + ut --------------------------------------- ----------- (10) α 1, α 2, α 3, α 4, α 5, α 6, α 7 > 0 andα 8 < 0 and α0 = 0 The Error Correction version of equation (10) is presented below:rGDPgr + α 0 + α 1∆log GEA+ α 2∆logGEI + α 3∆logGES + α 4∆log WKF+ α 5∆logINV + α 6∆logFDI + α 7∆logTGE +α 8 ∆logCSG + α9ECMt-1 + ut----………….---------------(11) 3.3. Method of Data Analysis The method of analysis data analysis will be the use of convention method of Augmented Dickey Fuller method. Also co-integration test and Error Correction Mechanism will be employed to determine the long relationship between the dependent and independent variables. The data will be estimated using E-view 9.2 econometrics software package.4. DATA ANALYSIS AND DISCUSSION OF RESULTS4.1 Unit Root Test for Economic Growth Model The method of Augmented Dickey Fuller (ADF) test was used to investigate whether variables used in the study have unit roots or not. The results of the unit root tests are adequately presented below.Table 4.1: Augmented – Dickey Fuller (ADF) Test Results for Economic Growth ModelVariable ADF

value at LevelADFcalculated value at 1st Difference

McKinnon 5% Critical value

Order of Integration

rGDPgr -0.976 -5.470* -2.931 1(1)LogGEA -0.498 -5.348* -2.930 1(1)LogGEI -1.087 -5.466* -2.930 1(1)LogGES -1.115 -3.772* -2.931 1(1)LogINV -4.271* - -2.951 1(0)LogWKF -2.089 -6.482* -2.930 1(1)LogFDI -1.691 -5.470* -2.930 1(1)

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LogTGE -1.154 -4.905* -2.930 1(1)LogCSG -0.715 -7.044* -2.931 1(1)

Source: Authors ComputationNote: * = (p ≤ 0.05)In table 4.1 real gross domestic product growth rate (rGDPgr) proxied for economic growth, government expenditure on Agricultural sectors (LogGEA), government

expenditure on Industrial sector (LogGEI), government expenditure on service sector (LogGES), work force population (LogWKF), foreign direct investment in Nigeria (LogFDI) total government expenditure (LogTGE), and cost of governance in Nigeria (LogCSG) were all stationary at first differencing 1(1) since the ADF value of each of the variables at first differencing was greater than the Mckinnon 5% critical values. However, only total investment (LogINV) was stationary at level 1(0). Co-integration test using Residual co-integration test was carried out.4.2 Co-integration Test Results for Economic Growth In this study, the co-integration test was carried out through residual test. The residual co-integration result is presented below: Table 4.2: Co-integration Residual Stationary Test Results for Economic Growth ModelNull Hypothesis: ECM has a unit rootExogenous: ConstantLag Length: 0 (Automatic - based on SIC, max lag=1)

t-Statistic  P.value*

Augmented Dickey-Fuller test statistic -3.781148 0.0094Test critical values: 1% level -3.752946

5% level -2.99806410%level -2.638752

Source: Authors ComputationNote * = (p ≤ 0.05)

The result in Table 4.2 shows that the residual is stationary at level. In line with Granger - Engel, the result found out that there is co-integration among the variables. This is because the absolute value of the test statistic of 3.781 is more than the critical value of 2.998 at 5% significance level. This further indicates that there is long run relationship between economic growth and the explanatory variables.This is in agreement with the work of Olugbenga and Owoeye (2007) who investigated the relationships between government expenditure and economic growth for a group of 30 OECD countries and found out that there is existence of long-run relationship between government expenditure and economic growth, this is contrary to the finding of Komain and Brahmasrene (2007) who investigate the relationship between government expenditure and economic growth in Thailand and revealed that government expenditure and economic growth are not co-integrated.

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4.3 Long Run Statistics Regression Results for Economic Growth Having established the existence of long run relationship between the variables, we applied the Ordinary Least Squares technique to determine the collective and individual impact of the independent variables on the dependent variable, as well as the direction of the relationship that exists between them. Table 4.3 below provides the information on long- run regression relationship among economic growth and the explanatory variables.Table 4.3: Long Run Regression: Dependent Variable ((rGDPgr)Variable Coefficient Standard Error t-Statistic Prob.LOG(GEA) 0.675* 0.299 2.259 0.039LOG(GEI) -0.902* 0.373 -2.419 0.029LOG(GES) 0.580 0.409 1.417 0.177LOG(INV) -1.313* 0.374 -3.509 0.003LOG(WKF) 1.668 8.574 0.195 0.848LOG(FDI) -0.170 0.134 -1.276 0.221LOG(TGE) -0.795* 0.376 -2.104 0.044LOG(CSG) 0.613* 0.084 7.277 0.000C 4.743 34.486 0.138 0.892

Source: Eview 7.1Note: * = (p ≤ 0.05)R2 = 0.945R-2 = 0.918F-Statistic = 126.934Prob (F-Statistic) = 0.000D.W Statistic 1.527In Table 4.3, it is observed that government expenditure on Agricultural sectors (LogGEA), government expenditure on Industrial sector (LogGEI), government expenditure on service sector (LogGES), work force (% of population) (LogWKF), foreign direct investment (LogFDI) met their expected signs while total government expenditure (LogTGE), cost of governance in Nigeria (LogCSG) and total investment (LogINV) were not consistent with the theoretical expectation. The cost of governance in Nigeria (LogCSG) has direct and significant impact on Nigeria’s economic growth. One percent increase in LogCSG leads to 0.613% increase in Nigeria economic growth. This is not consistent with apriori expectation. This proved that cost of governance institutional constraints on public office holders are put in place to minimize the extraction of rent from the state and enhance the available public fund for the growth of the vital sectors of the economy This result supports the fact that on the long run increase in government expenditure on cost of governance will enhance the growth performance of the economy. This is contrary to Ejuvbekpokpo (2012) who reported that cost of governance hinders economic growth in Nigeria.Foreign direct investment (LogFDI) related inversely and insignificantly on the Nigeria’s economic growth. A percent increase in LogFDI leads to 0.170% decrease in Nigeria economic growth. This is not consistent with the apriori expectation. The inverse and insignificance nature of this variable showed that FDI has a robust effect on

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Nigeria’s economic growth on the long run as a result of capital flight that characterized this type of investment and this conforms to the findings of Louzi and Abadi (2011), Danja (2012) and Saqib, Masnoonand and Rafique (2013) but contrary to Ayanwale (2007), Augustine and Chuku (2012) and Imoughele and Ismaila (2015) whose studies revealed that FDI has direct and significant impact on economic growth. The coefficient of government expenditure on agriculture (LogGEA) shows direct and significant relationship with Nigeria’s economic growth. A percentage increase in LogGEA leads to 0.675% increase in Nigeria economic growth. This is consistent with the apriori expectation. This result suggests that government expenditure does not crowd out private investment in the Nigeria agricultural sector. This study supports existing studies such as Ebere and Kemisola (2012), Okezie, Nwosu and Njoku (2013) and Shuaib, Igbinosun and Ahmed (2015) who investigated the impact of government expenditure on agriculture and economic growth. They found out that government expenditure on agriculture enhance Nigeria economic growth. The government expenditure on industrial sector (LogGEI) has an inverse and significant effect on Nigeria’s economic growth such that one per cent increase in LogGEI leads to 0.902% decrease in economic growth. This implies that government expenditure crowd out private investment in the Nigeria industrial sector. This finding is in line with the study conducted by Ademola (2012) who obtains inverse and significant relationship between government expenditure on industrial sector and Nigeria economic growth. The coefficient of government expenditure on service sector is directly related to Nigeria’s economic growth and it is not statistically significant, such that one per cent increase in LogGES leads to 0.5805% increase in the economic growth. The insignificant of this variable may be attributed to poor government budgetary allocation to service sector of the Nigerian economy. This study is in accordance with the existing studies such as Adewara and Oloni (2012) and Nwadiubu and Onuka (2015) who investigated the impact of government expenditure on economic growth. They found out that government expenditure on social and community services failed to enhance economic growth as a result of low government expenditure on social and community services in the economy and high unemployment rate. Total government expenditure (TGE) has inverse and insignificant relationship with Nigeria’s economic growth such that one per cent increase in LogTGE leads to 0.792% decrease in economic growth. The inverse and insignificant nature of these variables is that government expenditure crowds out investment in the Nigerian economy. This finding supports existing studies such as those of Adewara and Oloni (2012) and Nwadiubu and Onuka (2015) who investigated the impact of government expenditure on economic growth and pointed out that government expenditure failed to enhance economic growth.The work force population (LogWKF) has direct but insignificant effect on Nigeria’s economic growth such that one per cent increase in LogWKF leads to 1.668 per cent in economic growth indicating that active labour force is low both in quality and numbe. This result is in conformity with Ismaila and Imoughele (2015) who revealed that total labour force has direct but insignificant relationship with economic growth as a result its

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contribution to economic output is low. This may be due to the incessant strike embarked by workers in Nigeria.The coefficient of determinations R2 of 0.945 indicates that about 95% of the total variations in Nigerian economic growth is explained by the variations in the explanatory variables. The F-statistic is significant at 5% level. The probability of its value (0.000) is less than the 0.05 critical levels. We therefore, reject the null hypothesis that the model is not significant in explaining the variations in economic growth on the long run. Finally, the Durbin Watson test value is 1.527. This shows absence of positive serial autocorrelation in the estimation.4.4: Error Correction Mechanism for Economic Growth Model The existence of co-integration between the dependent variable and the explanatory variables resulted to the use of error correction mechanism, which captured the short run relationship between the variables (dependent and independent) as well as the speed of adjustment to equilibrium.Table 4.4: Results for the Short-Run Error Correction Mechanism: Dependent Variable (rGDPgr)

Variable Coefficient Standard Error t-statistic Prob.DLOG(GEA) 0.476* 0.142 3.346 0.005DLOG(GEI) -0.127* 0.049 -2.549 0.016DLOG(GES) 0.175 0.184 0.950 0.359DLOG(INV) -0.558* 0.123 -4.578 0.000

DLOG(WKF) 0.396 6.270 0.063 0.950DLOG(FDI) 0.071 0.056 1.270 0.226DLOG(TGE) 0.038 0.107 0.354 0.729DLOG(CSG) 0.228* 0.069 3.289 0.006ECM (-1) -0.492* 0.166 -2.975 0.010C 1.870 0.383 4.883 0.000

Note: * = (p ≤ 0.05)R2 = 0.811R-2 = 0.680F-Statistic = 6.186Prob (F-Statistic) = 0.002D.W Statistic 2.028Source: Authors ComputationThe empirical evidence in table 4.4 shows that cost of governance D(LogCSG) has direct and significant impact on the growth of the Nigeria’s economy in the short run. The variable is significant at 5% level. This result is not consistent with the appriori expectation. This finding is consistent with the long run result earlier reported and also total government expenditure on agricultural D(LogGEA) and industrial sector D(LogGEI) impacted significantly on Nigeria economic growth. This finding is in line with the study conducted by Lawal (2011) who examined the relationship between

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agriculture and economic growth, confirmed that the amount of federal government expenditure on agriculture showed that government spending does not follow a regular pattern and that the contribution of the agricultural sector to the GDP is in direct relationship with government funding to the sector. Government expenditure on service sector D(LogGES) has insignificant effect on economic growth. This is contrary to Omojimite (2010) on the relationship between public expenditure and education, primary school enrolment and economic growth in Nigeria which he concluded that there was co-integration. A percentage increase in D(LogGEA) and D(LogGES) leads to 0.476% and 0.175% increase on economic growth but one percent increase in D(LogGEI) leads to 0.127% decreased in economic growth respectively. The coefficient of total government expenditure D(LogTGE), work force D(LogWKF) and FDI shows direct and insignificant relationship with Nigeria’s economic growth. A percent increase in D(LogTGE), D(LogWKF) and Dlog(FDI) leads to 0.038, 0.396 and 0.071% increase respectively in Nigeria’s economic growth. This is consistent with the apriori expectation. The coefficient of total investment D(LogINV) has negative and insignificant effect on Nigeria’s economic growth. This can be attributed to poor savings culture of Nigerians and a percent increase in D(LogINV) leads to 0.558% decrease in economic growth in Nigeria.The above result shows that the coefficient of ECM ( - 0.492) is significant at 5% critical level. This shows that about 49% disequilibrium in the growth of the Nigeria economy in the previous years are corrected in the current year. The significance of the ECM is an indication and a confirmation of the existence of a long run equilibrium relationship between economic growth and the explanatory variables. The coefficient of determination (R2) of 0.811 suggests that 81% of the total variation in economic growth is explained by the independent variables. Since the F-statistic is significant at 5% level and the probability of its value (0.002) is less than the 0.05 critical level, we therefore, reject the null hypothesis that the model is not significant in explaining the variations in Nigeria economic output on the short run. Finally, the Durbin Watson test value is 2.028. This shows absence of positive serial autocorrelation in the estimation. CONCLUDING REMARKS AND POLICY IMPLICATION Economic theory has shown that government spending may either be beneficial or detrimental to economic growth. In traditional Keynesian macroeconomics, many kinds of public expenditures, even of a recurrent nature, can contribute positively to economic growth, through multiplier effects on aggregate demand. On the other hand, government consumption may crowd out private investment, dampen economic stimulus in the short run and reduces capital accumulation in the long run. Based on the above perception, this is study empirically examined sectoral analysis of the impact of government spending on economic growth in Nigeria from 1970 to 2015. Secondary data were sourced from the Central Bank of Nigeria’s Statistical Bulletin, World Bank data base, national accounts data, OECD National Accounts data. In line with the main objectives of this study, appropriate models were specified for the analysis of the data collected for the study. The time series properties of the data and co-integration were tested using

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Augmented Engle and Granger (AGE) approach, the short run dynamics and the long run economic growth were examined by estimating an error correction model. The results from the co-integration test showed the presence of long run relationship between the dependent variable and explanatory variables in the model. Based on the empirical analysis carried out, it was concluded that government expenditure on agriculture has direct and significant impact on the Nigeria’s economic growth while total government expenditure on industrial sector has adverse and significant effect on the Nigeria’s economic growth. However, government spending on service sector has direct but insignificant effect on Nigeria’s economic growth. This implies that the budgetary allocation of government to the service sector is not sufficient to have a meaningful impact on the sector. Hence, the level of increase in output that the sector has achieved over the years cannot be attributed to government expenditure. Furthermore, cost of governance has direct and significant effect on Nigeria’s economic growth which is not consistent with the theoretical expectation. The study therefore, recommends that there is need for fiscal policy expansion of government spending on the industrial, service and agricultural sectors to bust economic growth, government should sustain the cost of governance at optimum level to create more robust effect on Nigeria’s economic growth, government should give urgent attention to the specific sectors (agricultural, industrial and service sectors) of the economy so as to increase the sectoral outputs finally, government should ensure that the capital expenditure and recurrent expenditure are properly managed in a manner that will raise the nation’s productive capacity in agricultural, industrial and service sectors and finally, Finally, adequate machinery should be put in place by all sectors of government to arrest corruption and penalize those who divert and embezzle public funds this will make cost of governance to have robust effect on Nigeria economic growth.

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ADOPTION OF TECHNOLOGY AND SUSTAINABILITY OF WORLD BANK’S FADAMA III CASSAVA FARMERS IN BENUE STATE-NIGERIA

By

Ahemen, Member1 and Apeh, Ajene Sunday Ph.D2 1 Department of Economics, Benue State University, Makurdi-Nigeria

2Department of Economics and Management Sciences, Nigerian Police Academy,Wudil-Kano

Abstract

The paper evaluated the adoption of technology and sustainability of World Bank supported Fadama III cassava farmers in Benue State. The methodology used in the study is both qualitative and quantitative. The study employed the survey method and data was generated through well-structured questionnaire which was administered to 157Fadama III cassava farmers from Otukpo, Buruku and Logo Local Government Areas of Benue State. The logit regression analysis was used to analyze the socio-economic factors influencing the adoption of improved technology by Fadama III cassava farmers while the sustainability index was measured using the Sustainability Assessment of Farming and the Environment (SAFE) framework. Findings from the study show that average savings were below 10% of average income for more than 73% of the Fadama III cassava farmers. Estimates from the logit regression model showed that off-farm income and extension services significantly influenced the probability of adopting improved technology by Fadama III cassava farmers. The sustainability index of 0.43 shows that Fadama III cassava farming was not sustainable in Benue State. The study recommended that Fadama III cassava farmers should be encouraged to process their farm produce and embrace off-farm economic activities that will enhance their incomes necessary to purchase inputs and adopt improved technology necessary for the sustainability of cassava farming in Benue State.

Keywords: Fadama III, Adoption of technology, Sustainability, Cassava Farmers, Benue State

1.0 Introduction

Cassava is the third most important source of calories in the tropics, after rice and maize as reported by Food Safety Network (2014). It has broad agro-ecological adaptability and is able to produce reasonable yields where most crops cannot, it is tolerant to drought and to impoverished soils, even though it thrives on fertile, sandy-clay soils thus providing a livelihood for millions of farmers, processors and traders worldwide. Although cassava is considered as a staple, this has been changing for some countries where cassava is an industrialized and cash crop.

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The growth in cassava production and use in Nigeria has been primarily due to rapid population growth and large internal market demand. Cassava represents 70% of the calorie intake of one-third the population (Anonymous, 2017). Ezike, et al. (2011) posited that at least 80% of the population in Nigeria consumed cassava once per week. Cassava is used to produce gari (roasted granule), fufu, akpu flakes, tapioca and starch. It is produced largely by small-scale farmers using rudimentary implements, and the average land-holding is less than two hectares and for most farmers, land and family labour remain the essential inputs (FMANR, 2012). Cassava production in Nigeria which stood at 45,721,000tonnes in 2006 dropped down to 36,822,480tonnes in 2009, this increased to 50,950,292 and 57,643,271tonnes in 2012 and 2015 respectively, but still dropped to 57,134,478 tonnes in 2016 (FAOSTAT, 2018). The fluctuations in cassava production and other crops in Nigeria was evident in the rise in food insecurity, the number of food insecure people in Nigeria increased from the 3 years average (2014-2014) value of 40.7 million people to 46.1 million people for the period 2015-2017 (FAOSTAT, 2018). The goal to reduce food insecurity in Nigeria has been pursued by both government and international organizations over the years and is still ongoing. One of the projects embarked upon to achieve this goal is the World Bank’s Fadama Project.

The third National Fadama Development Project (NFDP) was introduced in 2008, a development intervention by the World Bank to enhance food security. The project incorporated the concept of sustainability to ensure that farmers adopt practices that will guarantee the survival and continuity of their farms even after the support from donor agencies. The savings scheme stipulated by Fadama III was largely to promote community–level re-capitalization as well as to ensure sustainability of the investment activities that were funded. The savings in the form of withholding of an amount equivalent to at least 10 per cent of their net annual revenue were not only for replacement of the durable asset but also to maintain a high functionality of the asset before the end of its economic life (Umeh, 2011). Now that the Fadama III project has ended in Benue State, it is not clear the extent which cassava farmers have adopted the improved technology and saved to sustain the production of the improved technology. The paper therefore, has examined the adoption of technology and sustainability of Fadama III cassava farmers in Benue State. Following this introduction is a review of relevant literature, after which the methodology is presented. Results and discussion are presented while conclusion and policy recommendation concludes the paper.2.0 Literature Review

Research works have been carried out to assess the adoption of technology and sustainability of cassava in Nigeria. Ogunsumi (2010) investigated cassava farmers’ socio- economic, adoption level, socio- cultural and environmental characteristics as they contributed to the sustained use index in South-west Nigeria. Primary data was collected using multistage random sampling and analyzed with spearman correlation methods. The results revealed that, there were significant positive correlations between age and sustained use index, organizational membership and extension contact and factors affecting adoption of cassava technologies. It was concluded that sustainable use

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of technology requires understanding better the socio-economic constraints of cassava farmers in South-west Nigeria.Okpukpara (2010) Analyzed the credit constraints and adoption of modern cassava production technologies in rural farming communities of Anambra State. The study was carried out with random selected rural cassava farmers, data were collected and analyzed with combination of descriptive and univariate probit regression model. The major findings were that though credit is important in adoption of modern cassava technologies, credit from informal institutions were the major influencing factor in adoption of modern cassava production technologies. Education and availability of modern input in the rural areas were also important variables that affected adoption. It was recommended that there should be increase in financial base of informal institutions, vigorous rural education campaign and increase in the availability of the technologies through rural community based organizations.Nkang, and Ele (2014) carried out a study to economically analyze cassava production in the Ikom Agricultural Zone of Cross River State, Nigeria. A total of 120 respondents were studied. The result of the Maximum Likelihood Estimates (MLEs) of the Cobb-Douglas stochastic production frontier function showed that the coefficient of farm size, labour, contact with extension agent, cassava cuttings and fertilizer use were positive and significant at 1 and 5% levels. Also, the coefficients of farming experience, educational level, household size, and association membership were positive and significant at 1 and 5% levels. The study recommends that the negative effect of age on technical efficiency levels of cassava producers in the area can be addressed by the formulation and implementation of policies that would encourage the younger ones to be interested and continue in cassava production.Augustine (2015) conducted a study to examine the adoption of improved cassava processing technologies by women in Ankpa Local Government Area, Kogi State, Nigeria. A total of 152 respondents were sampled using random sampling. The results showed that the average adoption level of the improved cassava processing technologies was 53%. The regression analysis showed that age, household size, processing experience and membership of association were significant to the adoption of improved cassava processing technologies. So much has been written on adoption of technology by cassava farmers. These papers however to the best of my knowledge did not account for the adoption of technology and sustainability of Fadama III cassava farming. Evaluating the adoption of technology and sustainability of yam farming is of great importance to the government and the World Bank who are concerned about how well these cassava farmers saved and managed their farms with the risk associated with withdrawal of counterpart funds from the government and donor agencies.

3.0 MethodologyThe study area is Benue State. The State is located between Longitudes 60 35’E and 100E and between Latitudes 60 30’N and 80 10’N. The State is on the Eastern side of the Middle Belt of Nigeria. Benue State is considered one of the least urbanized states in

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Nigeria with a population of 4,219,244 comprising of 2,164,058 males and 2,062,180 females (NPC, 2007). The State is categorized as one of the poorest states in the country where 67.1% of her people are living below the poverty line (NBS 2012). Benue State has abundant land estimated to be 5.09 million hectares. This represents 5.4 percent of the national land mass. Arable land in the State is estimated to be 3.8 million hectares (WARDROP, 1993; BENKAD, 1998).This study employed the survey method. Using a cross-sectional survey, the data for the study was generated through well-structured questionnaire which was administered to 157 Fadama III cassava farmers from Otukpo, Buruku and Logo Local Government Areas of Benue State. Stratified and purposive sampling techniques were used to draw out the sample. To analyze the data, both descriptive statistics and econometric methods like the Logit regression analysis and the Sustainability Assessment of Farming and the Environment (SAFE) framework were used to analyze the adoption of technology and sustainability of Fadama III cassava farmers in Benue State.

3.1 Adoption Behaviour Model Adoption is the acceptance of an idea or innovation and the willingness or intention to put it into practice, (Adams, 1982). This study is anchored on the theory of behaviour modification developed by Ndah, Schuler, Uthes and Zander, (2010). The theory identified two forces influencing behavioural change; inhibiting forces and driving forces. A graphical representation of the theory is presented in Figure 1.

Phase 1 Phase 2 Phase 3

Behaviour at different times

Inhibiting forces

Driving force Time

Disturbance of former Shift to new Stabilization of equilibrium equilibrium modified` behavior

Perception of problem Stages of Solution to problem implementation or relapse

Source: Ndah et al., (2010)

Figure 1: Theory of Behaviour modification

The figure shows that there are inhibiting forces negatively influencing behavioural change such as lack of subsidies, limited liquidity (for hiring labour, buying herbicide and seeds amongst others), lack of machinery and limited knowledge, also there are driving forces conducive to positive target (adoption) such as technical advice, training, provision of inputs, financial assistance, and linkage with market outlets disturbing the

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equilibrium. Behaviour (adoption) is thus seen as resulting from the psychological fields of these inhibiting and driving forces. Initially, these forces are present in a state of equilibrium or dis-equilibrium with varying degrees of tension between them, but once such forces are identified in the farmers decision making process, the chances of diffusion can be estimated and consequences for promoting programmes can be concluded (Ndah et al. 2010).

The application of the theory of behavioural modification to Benue State Fadama III cassava farmers is that, at the first stage of perception of problem in Figure 1, there were problems of low output and incomes from cassava production and poor knowledge of new ideas. Driving forces such as provision of technical advice, provision of inputs and financial resources by Fadama III project to cassava farmers as well as inhibiting forces such as limited liquidity for purchase of agro-chemical and fertilizer, and the cost of these inputs distort the state of equilibrium already existing, thus shifting them to the second stage, a stage of implementation. With the implementation of the ideas from Fadama III project and subsequent adoption of new technologies, it is expected that if the disequilibrium from the second stage is stabilized, it should leads to stabilization of modified behaviour and a solution to the problem earlier perceived. The question then is, to what extent the implementation of Fadama III project has affected the adoption of technology and sustainability among Fadama III cassava farmers in Benue State.

3.2 The Logit Model The socio-economic factors affecting the adoption of technology were analyzed using the logit regression analysis.The implicit form of the logit model was specified as:

ln ( p1−p

)= y=a+βx+u

------------------------------------------------------------------------ 1Where y is an indicator variable equal to unity (1) if household extent of adoption of improved technology is greater than or equal to 50 per cent and 0 (zero) if household extent of adoption of improved technology is below 50 percent ( adapted from Govereh, Jayne and Nyoro, 1999).α = the intercept which is also the value of y when the value of all the other independent variables is zero.χ = explanatory variables β = coefficient which describes the size and nature of the contributions of X to Y. A positive β means that X increases the probability of the outcome; a negative β means that X decreases the probability.u = the error termThe explicit form of the model is given as:

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Y (0,1 )= log p1−p

=βo+β ij X ij .. . βn Xn+εi

--------------------------------------------------------- 2Variables already defined.The specific form of the logit model is given as:Z=TA=βo+ β1 SAR + β2 OKG +β3 PRI + β4 ACM+β5 ADS+β6 TMF +β7 FMS + β8CTF+ β9 CTA +β10CTSS+μ−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−−3

where:SAR = savings rate (1 = If beneficiaries save up to 10% of income from Fadama

cassava farming, 0 if otherwise);OKG = Output in kg;PRI = provision of input (1 if input is provided by Fadama III, 0 if otherwise); AGE = NumberADS= Advisory services (number of advisory/ extension services attended); TMF = Timeliness of funds (1 if funds were given to the beneficiaries before the planting season, 0 if otherwise);FMS = farm size (ha);CIN = cost of inputs (N);OFY = off farm income (N);EDU= Number of years spent in an educational institutionβs=Parameter estimates; andμ = the error term.

The extent of adoption of improved technology was measured using an index adopted from Nwaiwu et al. (2013) with some modifications and is given as:

T A=NTA

N NAX 100

-------------------------------------------------------------------------------

4where:

T A = Extent of technology adopted;NTA = Number of technologies adopted; andTNA = Total number of technologies introduced.

3.3 Analysis of Project Sustainability

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The Sustainability Assessment of Farming and the Environment (SAFE) framework developed by Van Cauwenbergh et al. (2006) has been used by Ameen et al. (2011) in Spain, Westers (2012) in Sri Lanka and Kleemann (2012) in Africa. In this study, a content based framework, the sustainability assessment of farming and the environment (SAFE) framework developed by Van Cauwenbergh et al., (2006) was used to measure the sustainability of the Fadama III yam farmers. Also, only the economic indicators of sustainability: annual income, non-farm income, farm size, savings, technical efficiency, economic efficiency, farming experience, number of advisory services attended and extent of adoption of technology were developed to measure the level of sustainability of Fadama III cassava farmers in Benue State. The benefit of this type of framework is that it is easier to determine specific objectives and quantifiable parameters and allows for evaluation of specific components; however, this type of framework does not provide an evaluation of the whole system.

4.0 Results and Discussion

Table 1. Socio-economic characteristics of Fadama III Cassava farmers in Benue State Variable Frequency Percentage Mean

Age (Yrs)

<30 3 2.0

30-60 134 85.3 49

>60 20 12.7

Gender

Male 130 82.8

Female 27 17.2

Household size

< 10 56 35.7

10-20 89 56.7 12

>20 12 7.6

Farming Experience(yrs)

<10 5 3.2

10-20 45 28.6

60

21-30 57 36.4 27

31-40 42 26.7

>40 8 5.1

Farm Size(Ha)

<2 54 34.4

2-4 102 65.0 2

>4 1 0.6

Educational Qualification

No formal education 29 18.5

Primary education 64 40..76

Secondary education 27 17.20

Post secondary education 37 23.57

Source: Field Survey, 2015The result in Table 1 also show that the mean farm size was 2 hectares and 65% of the respondents cultivated between 2-4 hectares. This means that most farmers in the study area are producing on a small scale and need to be supported to embark on large scale cassava production to improve their income. This result shows that majority (82.8) of the respondents were male, the dominance of male shows that cassava production involves consuming a lot of energy, the result also show that majority (68.2%) had farming experience of over 20 years with a mean farming experience of 27 years. This means that the vast experience in cassava farming will have an effect on farm management and adoption of technology. The large household size o the respondent also indicate that birth rate in the study area is still high with a mean household size of 12 persons. Due to the labour intensive nature of cassava farming, a large household size was seen as a necessity for large farm sizes and a means to food security. The educational status show that about 18% had no formal education, majority (over 80%) of Fadama III cassava farmers had formal education. Education is seen as essential for adoption of technology. Experience of formal education can give an unparallel advantage to Fadama III cassava farmers in terms of quick understanding of innovative programmes.4.1 Savings Rate of Fadama III Cassava farmers in Benue StateThe results of the savings rate of Fadama III cassava farmers in Benue State are presented on Table 2. The results indicate that savings made by the farmers which were expected to be used as a form of recapitalization by the cassava farmers were poor, a large number (73.89%) of the respondents did not save up to ten percent (10%) of their income as stipulated by the recapitalization plan for sustainability of the Fadama Project.

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Table 2: Savings Rate of Fadama III Cassava farmers in Benue StateSavings Rate Frequency Percentage

Less than 10 per cent 116 73.89

10 Per cent or more 41 26.11

Total 157 100

Source: Field Survey, 2015The result show that over seventy percent (73.89%) of Fadama III cassava farmers saved less than ten percent (10%,) while about twenty six percent (26.11%), saved ten percent (10%) or more of their annual income from productive activities. This shows that the savings made by Fadama III cassava farmers in Benue State are not sustainable. The reasons given for the low savings could be low income from enterprises and the absence of Deposit Money Banks in two (2) Local Government councils in the study areas (Buruku and Logo). 4.2 Access to Rural advisory services by Fadama III Cassava Farmers in Benue StateTable 3 indicates that over 73% of respondents involved in cassava farming had access to rural advisory services.

Table 3: Access to advisory services by Fadama III Cassava farmers in Benue StateAccess to advisory services

Frequency Percentage

Access 116 73.89

No Access 41 26.11

Total 157 100

Source: Field Survey, 2015The result shows that majority of the beneficiaries of Fadama III project were able to access advisory services meant to educate them on ways to participate actively in their economic activities.

4.3 Value Additions to Agricultural Commodities by Fadama III Cassava FarmersThe value additions to agricultural commodities produced by Fadama III cassava farmers is presented in Table 4. The commodities include cassava processing into chips, Garri and Akpu. It was observed that most farmers in Benue State often sell their farm produce in the primary form without being processed (adding value) and this account for

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the reason why they are poor and vulnerable due to the post harvest losses they encountered.Table 4: Percentage Increase in Income of Agricultural Commodities as a result of

Value-addition.Commodity and unit cost(N)

Processing cost(N)

Processed commodity and unit cost (N)

Percentage (%)increase in income

1 wheelbarrow of cassava tubers costs 500

1300 1 basin of Garri cost 3,500

48.57

1 wheelbarrow of cassava tubers costs 500

500 1 bag of 70kg Cassava chips 2500

60

1 wheelbarrow of cassava tubers costs 500

500 1 bag of Akpu cost (20kg) 1500

50

Source: Field Survey, 2015

In a bid to alleviate rural poverty, processing activities were encouraged by Fadama III. This ranged from simple sun drying to changing the form of the commodity to enhance the storage life, ease transportation, packaging and to improve the nutritional content. Cassava was processed into cassava chips, Akpu and garri. Cassava is a unique crop with immense potential to make farm families escape poverty trap and enhance food security. A wheelbarrow load of cassava tubers on average, costs N500, this was processed into a basin of garri which was sold at an average cost N3,500. The processing technology is simple and basic. The cost elements in the processing are the labour utilized in the peeling costing N500 per wheelbarrow; washing, grating and dewatering cost N300 per wheelbarrow and labour for frying cost N500 per wheelbarrow. This brings the total processing cost to N1300. The processing of cassava from raw tubers to garri gave Fadama III cassava farmers a 48.57% increase in income due to the advantage of value addition.

The second important item in which cassava tubers are processed into is cassava chip. The cost element is the labour in peeling which is N500 per wheel barrow. A full wheel barrow will produce one 70kg bag of cassava chips. A 70kg bag of cassava flour is sold for N2,500. The processing of cassava into cassava chips gives a 60% increase in income due to value addition. The percentage increase is higher for cassava chips than garri. The households prefer cassava being processed to garri because it is faster and can be done in a small space relative to the chips that takes a long time to sun-dry and a lot of space to dry. Cassava tubers were also processed into Akpu or fufu. A wheelbarrow full of cassava tubers bought at N500 was peeled (costing N 500) and allowed to

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ferment. After two days, the water was drained and the paste sold for N1500. The processing of cassava from raw tubers to Akpu gave Fadama III cassava farmers a 50% increase in income due to the advantage of value addition.

Nigeria is currently the largest producer of cassava in the world with over 57million tons produced in 2018 (FAOSTAT, 2018). However, most of what is produced is consumed locally; and much of what is harvested is wasted due to production and post harvest inefficiencies. However, if these inefficiencies are addressed alongside the current development of improved varieties of the crop and the associated increased yield, Nigerian cassava farmers could take advantage of the increase in income as a result of value addition as this will go a long way in reducing poverty.

Table 5: Sources of agricultural inputs for Fadama III Cassava Farmers in Benue StateAgricultural input and sources

Frequency %Fertilizer

Input traders 36 22.93ADP 0 0Fadama III 41 26.11NGO/farmer group 0 0Other farmers 3 1.91Self 0 0Open market 85 54.14Improved cassava stem Input traders 84 53.50ADP 0 0Fadama III 132 84.01NGO/farmer group 0 0Other farmers 25 15.92Self 0 0Open market 31 19.75Agrochemical Input traders 128 81.53ADP 0 0Fadama III 19 12.10NGO/farmer group 0 0Other farmers 0 0Self 0 0Open market 108 68.79Source: Field Survey, 2015 multiple responses were recorded

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Fadama III was the source of improved cassava stem for about 84.01% of the beneficiaries but only 26.11% for fertilizer users. However, most Fadama III cassava farmers sourced agrochemicals from open market (68.79%) and input traders (81.53%). Only 12.10% of the respondents got agrochemicals from Fadama III. It was observed that the Agricultural Development Project (ADP) did not provide beneficiaries with any of the inputs; the reason was that they were to provide extension services where demonstrations on the application of the improved technology were needed. The high patronage for farm inputs from input traders and open market is a good indication that Fadama III cassava farmers are willing and able to buy farm inputs irrespective of project or government support.

Table 6: Improved technology adopted by Fadama III Cassava FarmersTechnologies Adopted Frequency Percentage

Improved variety of cassava stem 123 78.34

Agro-chemical for weed control 137 87.26

Pest control 70 44.59

Irrigation Farming 0 0

Soil conservation 33 21.01

Fertilizer application 54 82.80

Use of machines for dewatering 40 25.47

Use of machines for grating cassava 67 42.68

Hygienic drying method 81 51.59

Record keeping 103 65.61

Source: Field Survey, 2015, multiple responses were recordedThe result shows that 78.34 % of cassava farmers adopted improved variety of cassava stem, 87.26% used agro-chemical for weed control and none of the beneficiaries assessed adopted irrigation farming. This agrees with George, (2015) who reported that less than 1% of Nigerian agriculture is irrigated. Furthermore, 25.47% used machines for dewatering, 42.68% used machines for grating cassava and 65.61% adopted record keeping. Thus Fadama III cassava farmers in Benue State adopted improved technology in their productive activities.

4.4 Socio-economic Factors Affecting the Adoption of Technology by Fadama III Cassava Farmers in Benue StateData in Table 7 show the result of the logit regression of socio-economic factors that affect the adoption of technology by the Fadama III cassava farmers in Benue State.

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Table 7: Logit Regression Result of Factors Affecting the Adoption of New Technology by Fadama III Cassava Farmers Variable Coefficient Std. Error z-Statistic Prob.

FMS 0.22 0.36 0.59 0.55

OFY 0.93 0.53 1.73 0.08***

ADS 0.12 0.07 1.80 0.07***

PRI 5.63 9.93 0.57 0.57

TMF -5.80 4.84 -1.19 0.23

CIN -0.03 0.01 -2.39 0.02**

AGE -0.02 0.03 -0.64 0.52

SAR -0.09 0.03 -3.25 0.00*

EDU 0.03 0.05 0.59 0.55

OKG 5.51 0.00 0.20 0.84

C 0.35 2.39 0.14 0.88

McFadden R-squared 0.16 Mean dependent var 0.68 LR Statistics 18.54 Prob (LR Statistics) 0.04 P.value *,**,*** sig. at 1, 5 and 10% respectivelySource: Author’s computation using E-views

The result shows that farm size (FMS), output (OKG), education (EDU), off farm income (OFY), advisory services (ADS), and provision of inputs(PRI) positively influence the adoption of new technology by Fadama III cassava farmers but only the effects of off farm income and advisory services were significant at 10% level. On the other hand, age (AGE), timeliness of funds (TMF), cost of inputs (CIN) and savings rate (SAR) negatively affect the adoption of technology by Fadama III cassava farmers. But only the effects of cost of inputs and savings rate were significant at 5 and 1% respectively. Specifically, for each unit increase in farm size of Fadama cassava farmers, the probability of adopting new technology increases by 0.22 units, for every unit increase in output of Fadama III cassava farmers, the probability of adopting new technology increases by 5.51 units. For each increase in age of Fadama III cassava farmers, the probability of adopting new technology reduces by 0.02 units. For each increase in educational level and formal employment, the probability of adopting technology increases by 0.03 and 0.93 units respectively. For each increase in advisory service to Fadama cassava farmers, the probability of adopting new technology reduces by 0.12 units. For every unit increase in the cost of fertilizer, the probability of adopting new technology reduces by 5.80 units. For every unit increase in the cost of agrochemicals, the probability of adopting new technology increases by 5.63 units. For

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every unit increase in the cost of seedling, the probability of adopting new technology reduces by 0.03 units and for every additional male beneficiary of Fadama III cassava farmer, the probability of adopting new technology falls by 0.09 units.

Factors such as formal employment and advisory services positively and significantly influence the probability of adopting improved technology by Fadama III cassava farmers. This implies that the involvement of Fadama III cassava farmers into other formal employment aside farming is an added advantage because income from such formal employment may be used to purchase input and other farming tools. Therefore, the involvement of Fadama III cassava farmers in off-farm activities, if encouraged will enhance the adoption of improved technology. Furthermore, advisory services provided by agricultural development project (ADP) also significantly encourage their adoption of technology. On the other hand, the cost of fertilizer and additional male beneficiaries tend to have adverse effects on the adoption of technology by Fadama III cassava farmers.The McFadden R-squared value of 0.16 suggests that the model presents a good fit. The L-R statistics value of 18.54 which is significant at 5% level shows a relatively strong joint effect of the explanatory variables on the dependent variable in the model.

4.5 Analysis of the Sustainability of Fadama III Cassava Farmers in Benue StateThe sustainability of Fadama III cassava farmers was analyzed using the SAFE model, only the economic indicators of sustainability were calculated using the min-max normalization. The result is presented Table 8.Table 8: Sustainability indices for Fadama III Cassava Farmers in Benue State

Indicators ANNY OFY

FAMSZE

SAV

TEFF

EEFF

FAMEXP

NADV

EXADPT

SUST INDEX

Index 0.45 0.51 0.14 0.26 0.61 0.33 0.47 0.42 0.68 0.43Source: Field Survey, 2015 ANNY= annual income, OFY= off-farm income, FAMSZE= farm size, SAV = savings, TEFF = Technical Efficiency, EEFF = Economic Efficiency, FAMEXP = farming experience, NADV = number of advisory services EXADPT = extent of adoption of technology and SUST INDEX = sustainability index

The economic indicators of sustainability show that technical efficiency (TEFF), and off-farm income (OFY) of Fadama III cassava farmers in Benue State had sustainability indices above average, while savings (SAV), farm size (FAMSZE) and economic efficiency (EEFF) had sustainability indices below average. This shows that the indicators that contributed more to the sustainability of Fadama III cassava farming in Benue State were technical efficiency and off-farm income of farmers. On the other hand savings, farm size and economic efficiency were the indicators responsible for the low sustainability index for Fadama III cassava farmers. It was observed that the low savings index could be as a result of poor savings of the farmer as only about twenty six

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percent (26.11%) of Fadama III cassava farmers were able to save up to ten percent (10%) of their annual income as expected. The low savings implied that these farmers may not meet up with the community level recapitalization necessary for the sustainability of the Fadama project. This finding agree with Ahemen, Abachi and Bakkihs (2018) who reported that savings were very low among Fadama III yam farming households in Benue State.

5.0 Conclusion and Policy RecommendationThe study used both descriptive and econometric methods to analyze the adoption of improved technology and sustainability of Fadama III cassava farmers in Benue State. Results show that the processing of cassava into finished product such as garri, cassava chips and fufu, Fadama III cassava farmers were able to make more than 40 % increase in income. Using the logit regression model, findings showed that off-farm income and access to extension services had significant effect on the probability of adopting improved technology by Fadama III cassava farmers in Benue State. The policy implication is that if these farmers have the necessary infrastructure in place to enable their off-farm businesses strive; income from such businesses would to used to purchase inputs and machinery, thereby enhancing the adoption of improved technology and sustainability of the fadama project. The sustainability index of 0.43 shows that Fadama III cassava farming was not sustainable in Benue State. The study recommended that Fadama III cassava farmers should be encouraged to process their farm produce and embrace off-farm economic activities that will enhance their incomes necessary to purchase inputs and adopt improved technology necessary for the sustainability of cassava farming in Benue State.

ReferencesAdams, M.E. (1982). Agricultural Extension in Developing Countries. London:

Macmillan Press Ltd.

Ahemen, M., Abachi, P.T. & Bakkihs, D.T.(2018) Analysis of technical efficiency and sustainability of World Bank’s Fadama III yam farmers in Benue State, Nigeria.

Dutse Journal of Economics and Development Studies Vol. 6No.1Ameen, F., Manrique, E. & Olaizola A.M. (2011). Sustainable Evaluation of Sheep

Farming systems in the “Sierra y Caǹones de Guara Natural Park” SpainOption Mediterraneennes Retrieved from http://om.ciheam.org/article.php?ID PDF

Anonymous, (2017) https://agroecology.ifas.ufl.edu/2017/09/26/september-26-2017-a-closer- look-at-cassava-production-in-nigeria-and-tanzania/Augustine (2015) Analysis of adoption of improved cassava processing technologies by women in Ankpa Local Government Area Kogi State, NigeriaBENKAD (1998). Diagnostic Survey of Roots and Tubers in Benue State. Consultancy

Report by BENKAD Consultants for BNARDA, 35p.

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Ezike, K.N.N., Nwibo, S.U. & Odoh, N.E.( 2011) Cassava Production, Commercialization and Value Addition: Proceedings of the 25th National Conference of Farm Management Association of Nigeria, held at the Federal College of Agriculture, Akure, Nigeria, 5th-8th September, 2011, pp173

FAO(2018) Food and Agricultural Organization. FAOSTATDATA FAO Rome ItalyFederal Ministry of Agriculture and Natural Resources (FMANR) (2012). Cassava Development in Nigeria: A Country Case Study towards a Global Strategy for Cassava Development, Nigeria, Department of Planning, Research and Statistics, Abuja Nigeri

Food Safety Network . (2014). Cassava Nutritional Network. 1‐866‐50‐FSNET: University of Guelph, March 14, 2005; 2 pages.

George, E. (2015). Nigeria: West Africa’s Agribusiness giant. Retrieved from www.ecobank.com/upload/20150623111430679766FVGDxTQfWa.pdf

Govereh, J., Jayne, T.S., & Nyoro, J. (1999). Smallholder Commercialization. Interlinked Markets and Food Crop productivity: Cross-Country Evidence in Eastern and Southern Africa. Retrieved from www.aec.msu.edu/fs2/ag transformation /atw govereh

Kleemann, L. (2012). Sustainable Agriculture and Food Security in Africa: An Overview. Kiel Institute for the World Economy Retrieved from www.ifw-kiel.de

National Bureau of Statistics (2012).Nigeria Poverty Profile 2010. 30pNational Population Commission (2007). National Population Commission For Benue

State. Federal Republic of Nigeria official gazette Vol.94 No. 4. Federal Government Printers, Lagos.pp.4

Ndah, H. T., Schuler, J., Uthes, S.& Zander, P. (2010, March). Adoption Decision Theories and Conceptual models of Innovations Systems. Paper presented at the CA2Africa Inception Workshop, Nairobi. Retrieved from ca2africa.cirad.fr/index.php?...Nairobi%2FAdoption+theories.

Nkang, M. O.1& Ele, I. E. (2014)Technical Efficiency of Cassava Producers in Ikom Agricultural Zone of Cross River State- Nigeria Journal of Research in Agriculture and Animal Science Volume 2 ~ Issue 10 (2014) pp: 09-15

Nwaiwu, I.O.U., Ohajianya, D.O., Orebiyi, J.S., Eze, C.C. & Ibekwe, U.C. (2013). Determinants of Agricultural Sustainability in Southeast Nigeria- The Climate Change Debacle. Global Journal of Agricultural Research 1(2) 1-13

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Extension and Rural Development Vol. 2(7), pp. 123-132, September 2010Available online http://www.academicjournals.org/jaerd

Okpukpara, B.(2010)Credit constraints and adoption of modern cassava production technologies in rural farming communities of Anambra State, Nigeria

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Fadama III Implementation in Benue State.A Consultancy Report Submitted to Benue State FadamaCoordinating office 57P

Van Cauwenbergh, N., Biala, K., Bielders, C., Brouckaert, V., Franchois, L.Hermy, M., Mathijs, E., Muys, B., Reijnders, J., Sauvenier, X., Valckx, J., Vanclooster, M. Van der Veken, B., Wauters, E.&Peeters, A. (2006).SAFE-A Hierarchical Framework for Assessing the Sustainabilityof Agricultural Systems.Agriculture, Ecosystems and Environment 120 (2007) 229–242

WARDROP Engineering INC (1993). A study of irrigation potential of shallow aquifers in Fadama Area of Benue State. Benue State Agricultural and Rural Development Authority (BNARDA).Final Report, 400P.

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ANALYSING THE EFFECT OF ENERGY POLICY ON MANUFACTURING SECTOR OUTPUT PERFORMANCE IN NIGERIA.

Bernard, Ojonugwa Anthony Ph.D1. & Adenuga Oludare2

Department of Economics, Kogi State University, Anyigba, Nigeria.

Abstract

The Nigerian energy policy of 2003 was established with the sole aim of stimulating energy productive sector of the country. There is no doubt that this policy ought to have affected the structure of manufacturing sector as a major consumer of energy in Nigeria. It is on this background that this study provides detail analysis of the effect of energy policy on manufacturing output in Nigeria. The study employed time series data on energy policy proxied by dummy variable, oil consumption, natural gas consumption, electricity consumption, coal consumption and manufacturing output from the period 1981 to 2017. The OLS technique was used to analyse the dummy variable regression model. From the result, a case of similar regressions for the two time periods was discovered. These results show that energy policy has not exert any effect on manufacturing output in Nigeria. This study finally recommends that to maintain the current diversification policy of the government, energy policy formulation in Nigeria should not be considered in isolation. Rather, effort should be made to incorporate all stakeholders in the energy sector. This will enhance monitoring and proper implementation of the policy to achieve its objectives of stimulating energy productive sector of the country.

Key Words: Energy Policy, Energy Consumption, Manufacturing Output.

1. INTRODUCTION

The importance of manufacturing sector as a component of the industrial sector to any economy cannot be over emphasized. It contributed immensely to employment creation, availability of raw materials for producers and finished goods for final consumers, economic growth and foreign earnings. This sector employs more energy in the form of oil, natural gas and electricity for production. Energy is an important contributing factor in the development of any country or region. Indeed, energy is fundamental to the fulfilment of basic individual and community needs such as lighting, transportation, provision of water, food, health and education. Since all these services are the indices by which a nation’s progress and development are measured, it follows that energy is a major determinant of every country’s economic and social development (Temilade, 2008).

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In recognition of the central roles of manufacturing sector to economic growth in Nigeria (employment generation, income generation, exchange rate earnings), the Nigerian government led by General Olusegun Obasanjo embarked on a radical policy and institutional reforms in the energy sector in 1999. Oil, Gas and Electricity was on top of the government’s reform agenda. In this regard, the national energy policy was approved by the government in 2003. Its basic aim was to provide for a well synchronized development, utilization, and management of all energy resources in Nigeria. In particular, it recognizes the alternative ways of meeting rural energy supply and demand with conventional energy (petroleum product, gas, coal, electricity) and non-conventional and renewable energy (solar, wind, hydro, biomass, fuel, and wood) (Iwayemi, Diji, Awotide, Adenikinju & Obute, 2014). Without doubt, these reforms were aimed at improving the industrial sector (manufacturing sector inclusive) as a major driver of economic growth in Nigeria.

In response to the Nigerian energy policy, total energy consumption experienced slight fluctuation between 1991 to 2000 but as a response to the policy, a record of a gradual growth rate was observed between 2001 and 2003 which continued to the year 2006 where a more rapid growth was experienced in Nigeria. This could be attributed to the implementation of the comprehensive energy policy of 2003. Though, the year 2007 experienced a ridiculous fall in the growth of energy consumption in Nigeria. This was a period of transition in government which brought about political tension, fear of investors which led to fall in productivity. After 2007, the total energy consumption increased. It can be said that the growth rate of energy consumption in Nigeria has been positive but not highly significant. Nevertheless, we expect that the increase in energy consumption should have effect on the growth of the industrial sector (manufacturing sector inclusive) in Nigeria.

The significance of energy consumption has been an issue of concern by energy economist across the globe. It has been emphasized that energy consumption has been very imperative to economic growth as capital and labour is. As such, increased energy consumption is perceived to lead to economic growth. Going by EIA (2015), increase in energy consumption is expected to increase economic growth. This argument was supported by the early works of Kraft & Kraft (1978), Yu & Choi (1985).

Taking cognisance of the importance of energy in driving economic growth through the activities of the manufacturing sector, this study focuses on the importance of the Nigerian energy policy on the industrial sector of Nigeria with emphasis on manufacturing sub-sector. Empirical analysis of this issue is appropriate now that the federal government of Nigeria is facing economic challenges which require the formulation of appropriate policies to drive economic growth.

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2. LITERATURE REVIEW

Energy Production in Nigeria

Nigeria is endowed with and enjoys the benefit of abundant and diverse natural energy resources like oil, gas and hydro resources. According to the International Energy Statistics (IES) in 2015, the energy production in Nigeria was 5.45 Quadrillion Btu. It increases slightly to 6.27 and dropped to 5.90 Quadrillion Btu in 2008 and remain at 6.69 quadrillion btu in 2012. (see figure 1 below). This includes petroleum, natural gas, coal, lignite, and combustible renewable and waste and primary electricity. Nigeria also had oil reserves of 37.2 billion barrels and natural gas reserves of 187 trillion cubic feet in 2011 (IES, 2015).

Figure 1: Total Energy Production in Nigeria.

Source: Computed from International Energy Statistics, 2015

Nevertheless, accessibility to electricity in the country still remains low and irregular. Friends of the Earth International (FOEI) (2005) confirm that biomass, which consists of mainly fuel wood, dominates the composition of energy consumption in Nigeria. Petroleum production and export play a dominant role in Nigeria’s economy and account for about 90 per cent of its gross earnings and about 83 per cent of federal government revenue. Crude petroleum contributed only 0.3 per cent to GDP in 1960 and this increased over the years to 40.6 per cent in 2002. Nigeria contributed 2.9 per cent of the total world oil production in 2011. There has, however, been an increase in the demand for energy and this can be attributed to the increase in economic activity and the high rate of population growth. Much of the development in energy demand in the country has in turn been accompanied by increases in oil demand and use of fossil fuel.

20012002

20032004

20052006

20072008

20092010

20112012

0

1

2

3

4

5

6

7

Total Energy Production in Nigeria (Quadrillion Btu)

Years

Ener

gy P

rodu

ction

in N

iger

ia

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Energy consumption in Nigeria

Energy use in a society is connected to a large number of diverse activities undertaken by different sectors which conveniently may be divided into three: commercial, industrial and residential sectors.

Figure 2: Total Energy Consumption in Nigeria.

20012002

20032004

20052006

20072008

20092010

20112012

0

0.2

0.4

0.6

0.8

1

1.2

Total Energy Consumption in Nigeria (Quadrillion Btu)

Years

Ene

rgy

Cons

umpti

on in

Nig

eria

Source: Computed from International Energy Statistics, 2015.

From figure 2 above, the total energy consumption in Nigeria increased from 0.911 quadrillion btu in 2001 to 1.082 quadrillion btu in 2005 and later dropped to 0.909 quadrillion btu in 2007. Total energy consumption increased from 0.909 quadrillion btu to 1.027 in 2008. However, a continuous decline was experienced between 2009 and 2012. The total energy consumption in Nigeria was attributed to the activities of commercial sector, industrial sector and residential sector in Nigeria (IES, 2015).

Energy Resources in Nigeria

Nigeria is a vast country and has the benefit of abundant and diverse energy resources such as crude oil, natural gas, coal and lignite, and renewable energy resources such as solar, hydro, and wind. These energy resources can be used for electricity generation. Nigeria with 36 states and the Federal Capital Territory (FCT) have a population of over 178.2 million and a growth rate of 2.25 per cent (World Bank, 2014). Nigeria is a leading producer of crude oil and has been a member of the organization of petroleum Exporting Countries (OPEC) since 1971. Nigeria has an oil reserve of 37.2 billion barrels in 2011 and a large natural gas reserve of 187 trillion cubic feet (OPEC, 2015). Nigeria is the largest oil producer in Africa and ranks 11 th in the world. If the resources are harnessed properly, they will have a positive impact on the level of development of the nation.

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Energy Policy in Nigeria

The nature and extent of energy demand and utilization in a national economy are, to a large extent, indicative of its level of economic development. For a productive economy and for rapid and secure economic advancement, the country must pay maximum attention to the optimal development and utilization of her energy resources and to the security of supply of her energy needs. To do this, the country needs to put in place a co-ordinated and coherent energy policy, which will serve as a blueprint for the sustainable development, supply and utilization of energy resources within the economy, and for the use of such resources in international trade and co-operation. The policy must also address the issues of energy manpower development, indigenous participation, domestic self-reliance, the energy needs of various sectors of the economy, energy sector financing, as well as private sector participation in the energy sector. Luckily, the country is endowed with many energy resource types, including oil, gas, coal, tar sands, solar, hydro, biofuels and other renewable energy resources. The national policy should therefore promote the harnessing of all the viable energy resources so as to have an optimal energy mix, while ensuring sustainable and environmentally friendly energy practices (ECN, 2003).

It is pertinent to note that the impact of energy goes beyond national boundaries. Energy supply can be used as an instrument of foreign policy in the promotion of international cooperation and development.

The figure 3 below expressed the response of energy consumption to the energy policy framework in Nigeria.

Figure 3: Trend of Growth Rate of Energy Consumption in Nigeria.

200

150

100

50

0

-50

YEAR

GROWT

H RATE

OF EN

ERGY Actual

Fits

Variable

Linear Trend ModelYt = 4.0 + 0.88×t

Source: Computed from IEA, 2014.

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Total energy consumption experienced slight fluctuation between 1991 to 2000. The year 2001 started a pickup of energy consumption to 2005. A record of a gradual growth rate was observed between 2001 and 2003 which continued to the year 2006 where a more rapid growth was experienced in Nigeria. This could be attributed to the implementation of the comprehensive energy policy of 2003. The year 2007 experienced a ridiculous fall in the growth of energy consumption in Nigeria. This was a period of transition in government which brought about political tension, fear of investors which led to fall in productivity. After 2007, the total energy consumption increased but at a decreasing rate. The increase could be attributed to the amnesty programme of the late President Yaradua’s led administration. The growth rate in energy consumption for the period 1990 to 2013 in Nigeria was positive except the period 1994 and 2009. After the transition of 2009, there was an increase between 2010 and 2013. It can be said that the growth rate of energy consumption in Nigeria has been positive but not highly significant. This can as well be examined by looking at energy intensity in Nigeria.Over view of Manufacturing Sub-Sector Performance in Nigeria.

Manufacturing industries came into being with the occurrence of technological and socioeconomic transformations in the Western countries in the 18th-19th centuries. This period was widely known as industrial revolution. It all began in Britain and replaced the labour intensive textile production with mechanization and use of fuels. Manufacturing sector are categorized into engineering sector, construction sector, electronics sector, chemical sector, energy sector, textile sector, food and beverage sector, metal-working sector, plastic sector, transport and telecommunication sector (CBN, 2012).

In recent times, some manufacturing industries in Nigeria have been characterized by declining productivity rate, by extension employment generation, which is caused largely by inadequate energy supply, smuggling of foreign products into the country, trade liberalization, globalization, high exchange rate, and low government expenditure. Therefore, the slow performance of manufacturing sector in Nigeria is mainly due to massive importation of finished goods, inadequate financial support and other exogenous variables which has resulted in the reduction in capacity utilization and output of the manufacturing sector of the economy (Tomola et’al, 2012). Looking at the growth rate of manufacturing sector share in the GDP in recent years (1995-1998), it has not been relatively significant. In 1995, it was about -6.78% while it dropped to -8.45% in 1998. A positive growth of 9.28% was observed in 1999 and fell to-6.44 in 2000. The year 2003 was worst hit with a negative fall of -14.80. Other periods from 2004 to 2012 experienced a positive growth rate, (CBN, 2014). Figure 5 shows that manufacturing subsector contribution to GDP over the years has not been encouraging. The fitted regression line supported the statistical information by expresses a negative slope over time. According to Elijah & Nsikak, (2013), this may be attributed to several factors including infrastructural decay, particularly energy deficiency.

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Figure 5: Percentage Growth Rate of Manufacturing Share of GDP in Nigeria

20112008200520021999199619931990198719841981

6.5

6.0

5.5

5.0

4.5

4.0

3.5

3.0

YEAR

% MANU

CONTR

IBUTION

TO GD

P ActualFits

Variable

Linear Trend ModelYt = 5.053 - 0.04482×t

Source: Computed from CBN Statistical Bulletin, 2017.

Empirical Review

Large numbers studies exist on energy consumption and economic growth, energy consumption and industrial, but little or no study exist on energy policy and manufacturing output. However, earlier studies on energy consumption included Kraft & Kraft (1978), Yu & Choi (1985), Erol & Yu (1987), Abosedra & Baghestani (1989), Masih & Masih (1996), Soytas & Sari (2003), and Wolde-Rufail (2005), among others. This study however, reviews the recent studies in this regard.

Anjum & Muhammad (2001) investigate the relationship between energy consumption and economic growth in Pakistan, using time series data from 1955 to 1996. The co integration technique and Hsiao’s version of granger causality test was employed. The co integration result shows the existence of a co integration relationship between the variables in the series. The result of the causality test reveals a unidirectional causality running from GDP to oil, gas and electricity, but a bidirectional relationship exist between GDP and coal.

Erbaykal (2008) examined the relationship disaggregated energy and economic growth with evidence from Turkey. A time series data on energy consumption and economic growth was analysed using the auto regressive distributed lag (ARDL) bounds test developed by Pesaran at’al (2001). The bounds test revealed the existence of co integration relationship between the variables.

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Sari, Ewing & Soytas (2008), employed time series data on energy consumption and industrial production in the United State to examine the relationship between disaggregated energy consumption and industrial production. The auto regressive distributed lag model (ARDL) was used. Variable employed in the model are both renewable and non-renewable energy sources in the form of fossil fuel, conventional hydroelectric power, solar, waste and wind energy, coal, natural gas and industrial output. Long–run relationship exists between variables. Except Solar and waste, fossil fuel, hydro power, coal and gas were found to contribute significantly to industrial output in USA.

In Nigeria, Olusegun (2008) conducted a study using the ARDL bounds testing co integration approach to analyse the relationship between energy consumption and economic growth in the country between 1970-2005. The result shows a long run relationship between total energy consumption, oil consumption and economic growth while no long run relationship is found between gas consumption, electricity consumption and economic growth. The causality test revealed a unidirectional causality running from total energy consumption, oil consumption and gas consumption to economic growth. No causality was found between electricity consumption and economic growth.

Ziramba (2009) investigated the relationship between energy consumption and industrial output and employment in South Africa using annual time series data from 1980 to 2005. The co integration and Toda-Yamamota (1995) technique to Granger causality test was used. The co integration result revealed that industrial output and employment are strong force for driving electricity consumption in South Africa. The causality test found a bi-directional causality between oil consumption and industrial output. Further evidence of causality was shown between employment and electricity consumption as well as coal consumption and employment in South Africa.

Gbadebo, Odularu, & Okonkwo, (2009) investigated energy consumption contribution to economic performance in Nigeria. Co integration and error correction technique was employed to analyse the contribution of crude oil consumption, gas consumption, electricity consumption, coal consumption and economic growth proxied by GDP in Nigeria. A long run relationship exists between variables in the equation. The results further show that a positive relationship exists between crude oil consumption, electricity consumption and real gross domestic product in Nigeria.

Loto (2012) investigates the determinants of output expansion in the manufacturing industries between 1980-2010. The OLS method was adopted to estimate the

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contribution of real GDP growth rate per capita, real GDP, gross domestic capital formation, inflation and capacity utilization. He observed that real GDP and per capita income contribute positively to manufacturing output in Nigeria.

The impact of economic reforms on the performance of manufacturing sector in Nigeria for the period 1981-2009 was explored by Bernard & Oludare (2012). The study employs the OLS technique and Granger causality test to analyse the impact of exchange rate, electricity power consumption and federal government capital expenditure and manufacturing output in Nigeria. It was discovered that unidirectional causality runs from exchange rate to electricity power consumption and federal government capital expenditure. It was also revealed that exchange rate and electricity consumption have positive impact on manufacturing output in Nigeria.

Energy requirement and industrial growth in Nigeria was examined by Elijah & Nsikak (2013). Time series data on electricity consumption, natural gas consumption, coal consumption, petroleum product consumption, exchange rate, physical capital and industrial sector output from 1970 to 2011 was employed. The autoregressive distributed lag (ARDL) bound testing approach was used to estimate the relationship between variables. The study observed that, the long run estimates show that physical capital, exchange rate, coal consumption and petroleum products consumption have positive relationship with industrial output in Nigeria, while human capital, electricity consumption and natural gas consumption have negative impact on industrial output in Nigeria. The short run results shows that, one period lag of industrial output, physical capital and petroleum product consumption have positive impact on industrial output, whereas changes in human capital, exchange rate, electricity consumption, coal consumption and natural gas consumption were negatively related.

Olumuyiwa (2013) examined the interaction between economic growth, domestic energy consumption and energy prices in Nigeria. The error correction method was employed to measure the interaction between per capita energy consumption, per capita real Gross Domestic Product and domestic energy prices. The three variables were specified as endogenous variables. The models were specified having each variable influencing the other in a system of equations. The result revealed strong interactions between variables.

Aguegboh & Maduene, (2013) examined the nexus between energy consumption and economic growth with evidence from Nigeria. The vector auto regression model and the co integration technique were adopted. Their study contradicts other study on energy consumption and economic growth in Nigeria. A unidirectional causality was observed

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between petroleum consumption to GDP, gas consumption to GDP and capital to GDP. Also, the impulse response result shows that energy consumption do not contribute to economic growth. On the contrary, capital formation contributes to economic growth as oppose to labour force that does not contribute to GDP in Nigeria.

Energy consumption and economic growth was revisited in Nigeria by Udo & Ikpe (2014). They employed the Granger causality test and VAR to examine the relationship between GDP and capital, labour and total energy disaggregated into crude oil, natural gas, electricity and coal. The result of the studies shows that energy consumption had a bidirectional relationship with GDP and contributes significantly to economic growth in Nigeria.

Further studies on energy consumption and manufacturing output can be traced to the work of Danmaraya & Hassan (2016). An Autoregressive Distributed Lag (ARDL) model was employed to estimate the relationship between electricity consumption and manufacturing sector productivity in Nigeria. Other variables specified in the model include capital formation and labour. The cointegration result revealed a long-run relationship among variables. Also, a bi-directional causality exists between manufacturing productivity and electricity consumption in Nigeria.

From the review of related studies, it was found that many studies have carried out on the relationship between energy consumption and economic growth. While a few current studies examine the relationship between energy consumption and industrial output in Nigeria, studies on the impact of energy consumption on industrial sector growth are very scanty. Few studies can be traced to the works of Elijah & Nsikak, (2013) Sari, et,al (2008), Ziramba (2009), Titilpoe (2013) Danmaraya & Hassan (2016). These studies however, did not recognize the importance of government energy policy on manufacturing sector. Energy policy without doubt was aimed at stimulating productive activities in the sector. Therefore, we expect a structural change in manufacturing sector as a result of the Nigerian energy policy.

3. RESEARCH METHODS

As far as energy infrastructure is concerned, ecological economists have strongly considered energy as an essential factor of production. According to the law of thermodynamics, no mechanized production can occur without the conversion of energy. For this reason, it is expected that energy policy should affect the structure of manufacturing out. Therefore, the dummy variable regression as describe by Gujarati & Porter (2009) was employed. The model is specified as:

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MANOUT =αo+ α1DUMY + α2OIL + α3GAS + α4ELEC + α5COLC +ε - - - 3.1

The use of dummy variable can be considered as a test of stability of the estimated parameters in a regression equation. When an equation includes both a dummy variable for the intercept and a multiplicative dummy variable for each of the explanatory variables, the intercept and each partial slope is allowed to vary, implying different underlying structures for the two conditions (0 and 1) associated with the dummy variable. Therefore, using dummy variables is like conducting a test for structural stability (Gujarati & Porter, 2009). In essence, two different equations are being estimated from the coefficients of a single equation model. So, in this study the differential impact of Nigeria energy policy on manufacturing sector output was estimated using dummy variable regression technique.

The dummy variable regression equation is specified as follows:

MANOUTt = αo+ α1DUMYt + α2OILC t + α3NAGCt + α4ELECt + α5COLCt + α6DUMY*OILC*GASC*ELEC*COLC + Ut. - - -

3.2

:

DUMY = Dummy Variable, representing energy policy in Nigeria. The dummy variable is ascribed a value 0 in the period of no energy policy and 1 in the period of energy policy in Nigeria. That is, the period 1981 to 2003 have a time series value of 0 and 2004 to 2014 have a value of 1. OILCt = Petroleum Consumption, NAGCt = Gas consumption, ELECt = Electricity consumption, COLCt = Coal Consumption, α0 = Intercept, α1 = Differential Intercept and α6 = differential slope coefficient.

The differential intercept indicates how much the intercept of the second period of the MANOUT function (the category that receives the dummy value of 1) differs from that of the first period. The differential slope coefficient indicates how much the slope coefficient of the second period’s MANOUT function (the category that receives the dummy value of 1) differs from that of the first period. The probability value of the t statistic from the slope coefficient indicates the significant influence of energy policy proxied by the dummy variable on manufacturing sector output in Nigeria (Gujarati & Porter, 2009).

The F-statistic is interpreted following these decisions: if F-calculated is greater than the F-tabulated, we reject the null hypothesis that the parameters are stable for the entire data set and conclude that there is evidence of structural instability. It is based on the following assumptions: V1 = K–1 and V2 = N-K

Where: K = number of parameters, N= number of observations.

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The dummy variable regression technique is used in place of Chow test which is another form of examining structural stability of a regression model. “The Chow test procedure tells us only if two or more regressions are different without telling us what the source of the difference is” (Gujarati & Porter, 2009). However, as earlier mentioned, the dummy variable regression shall tell us the source of difference and the significance using the differential Intercept and differential slope coefficient.

The OLS method was used to analyse the model in equation 3.2. The differential intercept and differential slope coefficient was analysed, where the differential intercept was used to determine if the difference between both periods was caused by the dummy variable and the differential slope coefficient was used to determine if the difference between both periods is caused by the interaction of the dummy variable and other energy consumption variables. The F statistic was analysed to ascertain the evidence of structural stability of parameter in the model. This study employed time series data collected from US International Energy Agency and Central Bank of Nigeria statistical.

4. RESULTS PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

4.1. Result of the Dummy Variable Regression Model

The dummy variable regression model in equation 3.2 was estimated. The first difference of the time series data of the variables in the regression equation are used in the estimation. This because according to Gujarati (2004), most economic time series are generally I(1); that is they generally become stationary only after taking their first difference. Table 4.1 shows the dummy variable regression results.

Table 4.1 Dummy Variable Regression Results

Dependent Variable: DLNMANOUT

Variable Coefficient Std. Error t-Statistic Prob.  

C 0.020642 0.028630 0.721000 0.4776

DUMY 0.037064 0.042438 0.873370 0.3908

DLNOILC 0.048070 0.214572 0.224028 0.8246

DLNNAGC 0.174049 0.107341 1.621447 0.1175

DLNELEC 0.085221 0.187188 0.455272 0.6528

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DLNCOLC 0.027774 0.036594 0.758981 0.4550

DDUMYOILCNAGCELECCOLC 2.58E-09 1.41E-09 1.821296 0.0806

R-squared 0.203549

F-statistic 1.064877    Durbin-Watson stat 1.544715

Prob(F-statistic) 0.409329

Source: Author’s Computation using Eviews 9.5

From table 4.1, we found that the values of differential intercept and differential slope coefficient are 0.037064 and 2.58E-09 respectively. The result shows that the intercept of the first and second period are the same. The result also shows that the slope coefficients of both first and second periods of the manufacturing output dummy variable model are the same. This indicated by the statistical insignificance of the differential intercept and differential slope coefficient. This is a case of similar regressions for the two time periods. These results show that the energy policy has not exert any effect on manufacturing output in Nigeria.

4.2. Policy Implication of Research Findings.

The comprehensive energy policy of 2003 that was aimed at increasing energy access with emphasis on oil, natural gas and electricity could not meet its objectives of promoting manufacturing sector in Nigeria. From the result of the study, its impact is insignificant in driving manufacturing output within the scope of study in Nigeria. This implies that the energy policy has not been properly monitored for effective implementation. This should be a source of concern to the Nigerian government as the aim of the policy has not been met.

5. CONCLUSION AND RECOMMENDATIONS

Evidence shows that energy policy could not meet its objective of changing the output of manufacturing sector in Nigeria. This result does not reflect the current position of Nigeria economy. The economy of Nigeria requires such policies that could increase the demand for energy by the manufacturing sector. However, this may have resulted from the inability to monitor the proper implementation of the policy. In reality, we should expect that increase in energy consumption could result from energy policy implementation, but the reverse is the case in Nigeria. By implication, the demand for energy by manufacturing sector may not have been influenced by energy policy but the activities of the manufacturing sector.

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The comprehensive energy policy of 2003 was identified not to have any effect on manufacturing sector output in Nigeria. This is contrary to the objective of the policy. To maintain the current diversification policy of the government, energy policy formulation in Nigeria should not be considered in isolation. Rather, effort should be made to incorporate all stakeholders in the energy sector. This will enhance monitoring and proper implementation of the policy to achieve its objectives.

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ANALYZING THE EXISTING THREATS AND POTENTIALS OF THE MYTH AND REALITY OF THE PREDICTION OF POSSIBLE BREAK-UP OF

NIGERIA

By

GUDAKU, B. T

The Kukah Centre, Abuja. AND

OGAH, M. A Ph.D

Department of Political Science,

Nasarawa State University, Keffi.

ABSTRACT

There were predictions that Nigeria is likely break up by 2015. Among the reasons marshalled to support the possible break up of Nigeria was the likely manipulation of the 2015 general election that saw a Muslim northerner contesting against a Christian southerner. Even though the election has come and gone with winners as well as losers, the Nigerian state is not in flames, (at least not yet). Of course, this is said without prejudice to existing socio-economic and security challenges that have bedevilled the nation since its return to the path of multi-party democracy in 1999. The question that begs for answer is; are the indicators threatening the cooperate existence of Nigeria quashed and thrown into the waste bin of history? The findings of this paper suggests that it is not yet uhuru in Nigeria and its divisive forces are still active, and more fierce than, they were before the general elections of 2015 and 2019. Based on the observations of the body polity and palpable dispositions of the citizenry, the paper argues that much more needs to done to have one united and indivisible Nigeria. In order to place the discourse in proper perspective, the roles of the United States of America and her allies as well as the Nigerian government are appraised. The paper points out that Nigeria is a nation that is been consumed by nemesis of centenary long divide and rule violent politics. The conclusion of this paper is that Nigeria is a nation in dire need of renaissances, if it must occupy its rightful place in comity of states as one indivisible nation. Meanwhile, the methodology for this paper is a mixed of desktop research as well as primary sources from interviews conducted.

Key words: Ethnic politics, religious bigotry, insecurity, good governance, nationalism

INTRODUCTION

An espionage arm of United States intelligence apparatchik, the Central Intelligence Agency (CIA), in 2006 released a report titled ‘Mapping the Global Future’ that

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predicted the disintegration of Nigeria by 2015. Mixed reactions greeted this report from both within and outside the country. As reactions to the report continue to reverberate, what followed was diplomatic denials and counter denials. For instance, Awolaja (2014) says that while speaking with the media in Ibadan the former US Ambassador to Nigeria, Mr Terence McCulley, is quoted to have insisted that the US never predicted that Nigeria would break up by 2015, claiming that the prediction was made by a private agency that carried out a survey rather than the US government.

Despite this denial, the factors mentioned in the CIA’s report as accounting for the possible break-up of Nigeria have continued to raise their ugly heads; thereby making the prediction more of a reality than a myth. For it is true today, as it was when the National Intelligence Council’s 2020 Project Report (2014) warned that While, Nigeria’s leaders are locked in a bad marriage that all dislike but dare not leave, there are possibilities that could disrupt the precarious equilibrium in Abuja. The most important would be a junior officer coup that could destabilize the country to the extent that open warfare breaks out in many places in a sustained manner. The National Intelligence Council’s 2020 Project Report (2014) further cautioned that if Nigeria were to become a failed state, it could drag down a large part of the West African region.

Gerald & Cletrence (2013) in another security report entitled ‘Nigerian Unity in the Balance’, again warn Nigerian leaders to beware of another civil war or an outright break-up.  They are particularly worried that having already experienced one brutal civil war, Nigeria is at risk for a recurrence of conflict or dissolution, especially since some of the underpinning motivations of the war remain unresolved.

In all these reports, the following are identified and itemized as the fault lines of the possible disintegration of the country: Ethnic and regional bias; historic Christian-Muslim rivalry; pandemic insecurity and terrorism; corruption and impunity; as well as the inability of the state authorities to live up to its statutory responsibilities.

At the National Confab of 2014, delegates were antagonistically divided along regional lines of north and south. This was evident virtually on every issue that was discussed. At the moment, public discourse is rife with hate along religious and regional fault lines to the extent that ‘call in’ radio programme: the morning cross fire on a FM station, Nigeria info, in Abuja, the nation’s capital reveal that over 70% of the callers support or argue for or against issues based on regional and religious sentiments. Other callers simply stop short of calling for outright division of the country. This has damming implication for the nation especially that traditional and religious leaders are also not left out. For instance, the Lamido of Adamawa at the National Confab threatened the nation with cessation.

More damming is even the new phenomenon that has never been since the history of Nigeria. At the threshold of the 2015 elections some states, particularly Imo in the South East and Kano in the North West threatened to undertake the registration of Nigerians who are not indigenous to the mentioned states. Aside, the unconstitutional clout of the

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action, the whole exercise, even before its execution had widen the yawning divide of north and south Nigeria. For example, Emmanuel (2014) observe that vexed by the plan to register northerners in Imo state, Arewa Youth Development Foundation had called for peaceful dissolution of Nigeria and has also issued a two-week ultimatum for southerners residing in the north to relocate southwards, while northerners should abandon their dwellings in the southern part and to move up north. In response, the Ohanaeze Youth Council had made no pretence of calling off the bluff, not only of Arewa Youth Development Foundation, but also the Arewa Consultative Forum: the socio-political umbrella body of the north. This development was worrisome, to say the least. In addition, it gave credence to 2015 break-up prediction theory.

It is therefore against this background that the need for this study is borne, with the reports of the CIA and the United States Army War College as motivation. Another insight that has now serve as motivation to undertake the study is what the former Libyan strongman, the late Muammar Gadafi said in March, 2010. While commenting on the Jos pogrom even before its denigrated to the present situation, Gadafi is reported to have called for the splitting of Nigeria into two along religious lines in order to avert further bloodshed. From the fore-going, it is obvious that what will doom Nigeria’s cooperate existence is beyond the issue of 2015 election, especially that the nation toddles on even after the 2015 elections. This suggests that the catalyst to the break-up of Nigeria might likely be bad leadership and lack of good governance. The context of this is highlighted in the next sub-heading.

Internal Tensions and Bickering of Centenary long Corporate Existence: the Nigerian Context

Tension along ethno-religious lines is rife in the country. This is because the nation right from the onset was built on what could be described as unbalanced tripod of ethnicity, religion and regionalism. The colonial masters cannot be said to be unaware of the potential danger this had for the nation. However, it was either neglected due to the overwhelming desire to tap whatever was ‘tapable’ out of the country. Or it was ignored as a deliberate time bomb that would explored with attendant consequences that will warrant yet another opportunity for international ‘helpers’ to come rebuild the country.

The principle that remote controlled the operations of the British colonial masters was simply to explore and destroy. This they did by setting up structures that are counterproductive on the long term basis, let alone to contribute to the consolidation of national unity. It therefore stand to reason why resource control and census figures were the most contested issues at the 2014 National Confab as both have political history rooted in the activities of the colonial masters.

A little of the politics of census in Nigeria will be relevant at this point. On his dead bed, one of the few courageous colonial masters, Herold Smith made this revealing confession as stated by Olagbaiye (2011). According to him Nigeria’s census was announced before they were counted. Despite seeing vast land with no human but cattle in the north, we still gave the north 55 million instead of 32 million. This was to

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maintain majority vote and future to power bid. The colonial fictitious population figures is the only explanation to the fact that when you look at the map of west Africa, starting from Mauritania to Cameroon and take a population of each country as you move from the coast to the Savannah, the population decreases. Or conversely, as you come from the desert to the coast, right from Mauritania to the Cameroon, the population increase. The only exception through the zone is Nigeria.

In line with the colonial principle of securing the political future of northern Nigeria and based on the fictitious census figures, the British overlords in 1959 created 312 seats for the Nigerian National Assembly without elections. Out of these 312 seats, the north was allocated 174 and the south 138as reiterated by Olagbaiye (2011). Even as at today, the situation has not changed in Nigerian political structure that the levers of power have been in the hands of the north for much of post-independence history.

It is indeed ironic that in the 2006 census, Kano state has a population of 9,401,288 and is closely followed by Lagos with a population of 9,113,605.The difference is just a population of 287,683.Yet Lagos has only 20 local government areas as against a huge figure of 44 in Kano. Even Sokoto, with a population of 3,702,676 only has as much as 22 local government areas, 2 local government much more than Lagos. This is inconsequential of the fact that Lagos has a population of 5,410,929 much more than Sokoto. Rivers state that produces oil, the lifeblood of the nation’s economy, has a population of 5,198,716 but with only 23 local government areas as against the 27 that Borno has, with a less population of only 4,171,104. What it simply means is that aside from fictitious population figures as confessed by Herold, the north also benefit political largess in terms of numbers of local government areas and many members of the National Assembly that simply defy every justification. Could it be because of land mass? But what is land mass without people?

Nowhere is George Owell’s principle of all animals are equal but some are more equal than others applicable than in northern Nigeria. For instance, while it may sound as if the entire of northern Nigeria benefits from many local government areas despite its thin population, this is only true within the Muslim-controlled states of northern Nigeria. An example in view is that the Christian dominated Benue state has a population of 4,253,641 but has only 23 local government areas as against the 25 in Muslim controlled Niger state that has a less population of just 3,927,563.

The population difference of Muslim controlled Kebbi state and Christian controlled Plateau state is only 50,010 in favour of Kebbi, yet Kebbi state has 21 local government areas as against 17 in Plateau state. It is purely the case of colonial logic of population taken too far to say that the difference of 50,010 people account for the variance and margin of 4 local government areas as in the case of Kebbi and Plateau states. This would suggest that the colonial political template bequeathed to Nigeria was so designed to favour only the Muslim north. From this available statistics of census figures in states and the number of local governments, the author of this paper has concurs with Levenstein (2010) that statistics are like Bakins; what they reveal is suggestive, but what

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they conceal is vital. This captures aptly the comic drama of the politics of census figures and outlying benefits in Nigeria.

The unitary government that Nigeria operates is such that the more the local governments, the more the allocation that comes to the state from the federal government. Thus, from this stand point, the Muslim controlled northern states have pecuniary benefits that others do not enjoy. It is the opinion of many, particularly from southern and eastern zones of the country that this status quo can be likened to ‘killing’ the proverbial geese that lays the golden egg. The proverbial goose here is the southern regions that produce the oil that accounts for over 50% of national income of Nigeria. It needs no retelling that this has caused hate and bickering among the populace to the extent that pundits are of the opinion that the Nigerian project is a ‘marriage’ of corny and strange bed fellows, glued by oil money and other fringes.

Within the north, there is hue and cry over socio-political marginalization, based on ethno-religious lines. Rogers (2017) in an oral interview on political machinations in Nigeria revealed that most Tiv areas in Taraba state are not electoral wards as deliberate measure to frustrate their political participation in local government affairs. He maintained that even where they population is more than a ward, the Tiv will still not be given the ward, adding that doing so will mean political emancipation and empowerment. In an interview, Tyodugh (2018) reveals that same is the fate of the Tiv in Nasarawa state. Ethnic identity of the Tiv is what the colonial masters targeted and is still been targeted as part and parcel of the colonial heritage. Shapera (2018) in an oral conversation regrets that minority ethnic groups in Nigeria are not treated in a like manner at all as the Hausa-Fulani Muslims. Rather, they control wards even when they are in less numbers and are given chiefdoms to further consolidate their stronghold on the levers of political power that is deeply rooted in traditional institutions.

Probably, this underscores why Christians are seldom made traditional rulers, particularly in the middle belt region of northern Nigeria. The preference of Muslims as traditional rulers is predicated on the wisdom of the principle of: Cuius regio, eius religio: (Whose realm, his religion), which means the religion of the ruler dictates the religion of the ruled. Following the spirit and detect of this principle, the Muslim backed government, in most northern states have always ensured that Muslims emerged as traditional rulers in the middle belt. Christians and votaries of African Indigenous Religion (AIR) are out rightly disfavoured in contesting/vying to be traditional rulers. Where they insist and are even elected, they are not appointed because they are unlikely to use their influence in the context of Cuius regio, eius religio to propagate Islam.

Alaga (2018) explained that in Agwatashi of Obi local government of Nasarawa state, a traditional ruler died and in pursuance of the selection of a new one, six of the seven king makers voted Peter Ashiki, a Christian, as against the only vote that Umar Abubakar Apeshi, a Muslim got. However, the government of Nasarawa state under the helmship of Muslim governor Aliyu Akwe Doma still crowned the Umar who got only

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one vote as the Osoho of Olusoho- Agwatashi to the dismay of the people and Peter who was chosen.

Similarly, Usman (2018) in an interview laments that when the Oseshi of Aloshi, Solomon Obiokpa died, his son who is the heir to throne was denied his birth right for no other reason than his faith; which the current conspiracy to propagate Islam using the principle of Cuius regio, eius religio is totally against. In his place, a Muslim, Usman Aye was appointed and turbaned as the Oseshi of Aloshi. In Farin-Ruwa Development area of Nasarawa state that borders Bokkos Local Government of Plateau state, the stool of the paramount ruler, the Gom Mama erected in 1998 seems to be a special preserve of the Muslims. Due to the sensitive nature of religion in Nigeria, our informant reveal that there 22 Kingmakers, 11 from the Arum ethnic group and 11 also from the Kantana ethnic nationality that make up the Farin-Ruwa Development Area. He explains that of the 22 Kingmakers, Christians are about 70%, but are not allowed to choose a Christian to the stool of Gom Mama .

In Zing local government area of Taraba state, the principle of Cuius regio, eius religio is rife. And to achieve this by all means, imposition of Muslim traditional rulers is said to be the order of the day. For instance, Luka (2018) in an interview explained the paramount ruler of Zing- the Kpanti Zing- has imposed four Muslims on the people as district heads out of the seven newly created districts as lamented by Kalako Luka. He regrets that in Mazing District, one Muslim, Danlami Ibrahim Sambo whose village (kwana) that is not even within the jurisdiction of the new district is appointed as the new district head. According to him, this is the most brazen form of impunity, expressed by Kpanti’s fiat and imposition. The action of Kpanti Zing angered the people to the extent that they took to the streets in peaceful protest but their protest did not yield the desired results.

Before this incidence, Nyazing (2018) in an interview disclosed that in Kakulu, a suburb of Zing town, a Muslim by name Alhaji Sale Nyatoba was forced on the people as the kpanti Kakulu as against the popular and selected candidate: Donatus Nyameh. There are indications that areas such as Lau, Karim-Lamido, Bali and Gassol local government of Taraba state are not devoid of this related problems. The people of Southern Kaduna too are facing these same challenges just as some parts of Adamawa state. For instance, Tihze (2018) in an interview said that in Bazza town of Michika local government of Adamawa state, the Christian elected district head was rejected by Government not on the account of any other reason than faith. In his place, a Muslim is installed.

Now it is palpable that if Nigeria breaks up, it is unlikely that the middle belt region will wish to go be part of the north. Already, ethno-religious temperature is at its boiling point, which is why the region is the worst victim of ethno-religious conflicts. What obtains in some of these places is a microcosm reflection of what is obtainable in a country that is been hunted by years of violent politics of divide and rule that has now become the keg powder that will explode the nation. These are skirmishes and

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grievances endured for too long to bear any more. Thus, the stage is set, what is left is the rendezvous for the disintegration, if urgent steps are not taken.

Religion has continued to generate tension in Nigeria, particularly in northern Nigeria and in the middle belt region. Religious motivated killings in Plateau, Kaduna, Benue, Nasarawa and Taraba states have widen the yawning gap created hate along religious lines. For now, the killings are alarming. For instance, Segun & Olakehan (2018, p.3) attest that “the Church of Christ in Nations, COCIN, as at February 2014 said it has recorded 25,000 widows. These are widows whose husbands are killed in the wave of ethno-religious crisis in Jos the capital of Plateau state and its environs. Having a data of 25,000 widows in a nation where data collection is at its lowest ebb means that the figures could actually be higher”. Meanwhile, the 25,000 widows are just from one church, in one state. If all churches collect this data across northern states, the figures will be simply breathtaking and indeed a challenge to the very essence of government and nationhood.

It give a deeper insight into the on-going carnage in the country, by January 1, 2018, over 73 persons were killed in coordinated attacks in some villages of Benue state. Since then more than the figure has been killed in same state. Another tragic havoc was wrecked on communities in Barkin-Ladi, Riyom and Jos-South local government areas of Plateau state on Saturday June 23, 2018 during which over 200 persons were killed, including women and children. It is feared that the entire of the middle belt is on the verge of been flattened by suspected Fulani herdsmen, who, despite the atrocities caused have not been proscribed as a terrorist group when compared to the disturbances of Indigenous People of Biafra (IPOB) that are outlawed by the Nigerian state. Compilation of killings by Amnesty International, AI (2018) indicates that between January to May 2018, at least 1,813 people have been murdered. This spectre of atrocities evince the scent of war that if not properly handled, it might snowballed into some conflagration that will threatened the corporate existence of the country.

Aside the killings, there are other critical issue that question the fairness of even the constitution to all faiths in the country. For instance, Nigeria’s 1999 Constitution (as amended) is seen by many as highly unfair to other faiths. This was pointed out by Bishop Joseph Bagobiri of the Catholic Diocese of Kafanchan in Kaduna state that flared tempers between the Muslims and Christians at the 2014 National Confab. According to Premium Times (2014), he observed that the Islamic legal code, Sharia is mentioned 73 times, Islam- 28 times and Muslims- 10 times in the constitution. Meanwhile, Christianity, one of the dominant faiths in the country is not mentioned at all. The Customary Court, which could be associated with votaries of African Indigenous Religion (AIR) has a passing mention of seven times. Therefore, Bishop Bagobiri surmises that this gives the impression that Nigeria is an Islamic state. What this portents is that even the constitution is seen as creating tension and tearing the populace apart. The fireworks of arguments and counter arguments that greeted Bishop

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Bagobiri’s submission is a clear indication of how the constitution has not helped in uniting the nation.

On the possible break up of Nigeria, it needs to be mentioned that right from the onset the Nigeria project with a lifespan of hundred years. For instance, Awolaja (2014) reports that a colonial secret document, the Tinubu Square Edict’ or Accord of 1914, which was  reportedly signed into law at the amalgamation of Nigeria in 1914 and similar to the  British/China accord of Hong Kong, showed that the Nigerian experiment meant to last for an initial 100 years, following which it should be reviewed. However, appraising the last one hundred years of Nigeria’s corporate existence, one will arrive at the sad commentary of cantankerous relationship among the federating units of the Federal Republic of Nigeria. It is even as a result of this that the civil war was fought between 19767-1970, which claimed lives and property. However, it seems that only the date of the war is kept not the lessons. Therefore, Nigeria is taking to the dreaded path of war again and possible disintegration.

America’s Divisive and Deceitful Tact: Lessons for Nigeria

Aside the Prediction of the possible break up of Nigeria in 2015 by the USA agencies, it’s a well-known fact that the US played a key role in the dissolution of countries like Vietnam, Korea and the Soviet Republic. However, this sinister prediction has failed elsewhere. Cuba is a good example. It is one country that prove international validation of its break up wrong, to the utmost chagrin of proponents. Whether Nigeria will demonstrate this feat remains to be seen. However, the prevailing circumstance in the country is far from encouraging.

It needs to be pointed out that this sort of sinister prediction is usually backed up by high level conspiracy to bring about the predicted result. This conspiracy often contradicts the official policy of government. Kelvin (2014) explains that such a conspiracy theory is run by the unofficial deep state, which he described as the government that has nothing to do with the elected officials who are supposed to be in charge. He concludes that this is a plutocracy, which intersects with organized crime. An elaborate explanation on the Situation in the Middle East will shed light for better understanding of what is happening in Nigeria. In addition, it will provide cautionary lessons for Nigeria.

Conspiracy theories seem to argue that the USA is the one sponsoring to create transnational Islamic Caliphate in the Middle East. To this extent, the proponents of the transnational Islamic State of Iraq and Syria who are now fighting in Iraq and Syria are not doing so as their capacity as independent political entity but covert construct of US (military) intelligence. Michael (2014) is therefore right on point when he revealed that the decision by Washington to channel its support (covertly) in favor of a terrorist entity which operates in both Syria and Iraq and which has logistical bases in both countries is for self-serving interest of the US.

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John (2014) argues that providentially, the Islamic State of Iraq and Syria (ISIS) project coincides with a longstanding US agenda to carve up both Iraq and Syria into three separate territories: A Sunni Islamist Caliphate, an Arab Shia Republic, and a Republic of Kurdistan. These divisions are based on long standing sectarian rivalry. The ISIS territory runs from northern Syria to the Iraqi province of Diyala- a vast stretch of land straddling the border that is already largely under ISIS control.

Whereas the (US proxy) government in Baghdad purchases advanced weapons systems from the US including F16 fighter jets from Lockheed Martin, the would-be-Islamic State, which is fighting Iraqi government forces are supported covertly by Western intelligence. Daily Telegraph (2014) says that the objective is to engineer a civil war in Iraq, in which both sides are controlled indirectly by US-NATO. To achieve this, the US has supported militant rebel groups which have since mutated into ISIS and other al-Qaeda connected militias.

Michael (2014) observes that uunder the banner of a civil war, an undercover war of aggression is being fought which essentially contributes to further destroying an entire country, its institutions, its economy. The undercover operation is part of an intelligence agenda, an engineered process which consists in transforming Iraq into an open territory. Meanwhile, public opinion is led to believe that what is at stake is confrontation between Shia and Sunni. Michael (2014) further explains that the truth is that America’s military occupation of Iraq has been replaced by non-conventional forms of warfare. In order to conceal this sad development, these realities are blurred by USA government as a deliberate measure. In a bitter irony, the aggressor nation is portrayed as coming to the rescue of a “sovereign Iraq”. An internal “civil war” between Shia and Sunni is fomented by US-NATO support to both the Al-Maliki government as well as to the Sunni ISIS rebels.

In his brilliant analysis of the smokescreen created by the US, Michael (2014) interpreted that ISIS is a caliphate project of creating a Sunni Islamist state. It is not a project of the Sunni population of Iraq which is broadly committed to secular forms of government. The caliphate project is part of a US intelligence agenda. In response to the advance of the ISIS rebels, Washington is envisaging the use of aerial bombings as well as drone attacks in support of the Baghdad government as part of a counter-terrorism operation.  It is all for a good cause: to fight the terrorists, without of course acknowledging that these terrorists are the foot soldiers of the Western military alliance. Needless to say, these developments contribute not only to destabilizing Iraq, but also to weakening the Iraqi resistance movement, which is one of the major objectives of US-NATO.

The truth is that for now, ISIS is so powerful that its influence is spreading so fast. According to John (2014) with brutal efficiency, ISIS has carved out a large chunk of territory that has effectively erased the border between Iraq and Syria and laid the foundations of its proto-state. The self-proclaimed caliphate has redoubled its effort in

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Syria, launching a series of unprecedented offensives last week that now leave it in control of 35 percent of Syrian territory and nearly all of Syria’s oil and gas fields. The tumor is growing. ISIS has shown remarkable military capability. As a matter of fact, ISIS has an ambitious plan of expansion in due course. The expansion will run through the Middle East, North Africa, and large parts of western Asia, parts of Europe. Indeed, Spain, which was ruled by Muslims for 700 years until 1492, is marked out as a territory the caliphate plans to have under its control by 2020. 

Elsewhere, ISIS plans to take control of the Balkan states - including Greece, Romania and Bulgaria - extending its territories in Eastern Europe as far as Austria, which appears to be based on a pre-First World War borders of the Austro-Hungarian Empire. John (2014) notes that ISIS regularly make statements and releases propaganda calling for the return of the geographical boundaries in place before the Great War. The group insists the carving up of the Ottoman Empire by Allied forces after the conflict - commonly known as the Sykes-Picot Agreement - was a deliberate attempt to divide Muslims and restrict the likelihood of another caliphate being established.

What Nigeria Needs to Know and Do

Nigeria as a nation needs now more ever to redefine her foreign policy and diplomatic style. Her alliance with the USA needs to be appraised. This is because there seems to be a palpable fear in USA that Nigeria is strategizing to be a hegemon in West African sub region. To buttress this point, it could be recalled that during the war in Liberia, the federal government of Nigeria intervened and achieved success beyond anybody’s imagination. This made the USA to fear that Nigeria is eclipsing the influence of her colonial masters on the African continent. Meanwhile, African Crisis Response Initiative (ACRI) was established to provide framework and implement actions that could lead to the restoration of peace, reconciliation and reconstruction in Liberia as a way of demonstrating that Nigeria can coordinate Africa to achieve her set goals.

Meanwhile, America’s Central Intelligence Agency (CIA) sought partnership with ACRI and this led to the establishment of Africa-America Institute in collaboration with the Brooklings Institute to work towards peace on the continent. However, it was later to be discovered that these foreign institutions were out for subversive activities and enhanced the operations of ECOMOG in Liberia. CIA cautioned that USA government that Liberia being its own creation should not be allowed to fall into the hands of Nigeria, as this will further embolden Nigeria to challenge Western influence on the continent. CIA recalled with regret the role Nigeria played in liberating southern African states in 1970’s and 1980’s in clear defiance and opposition to USA’s interest and that of her allies, which resulted in setback for western initiatives in Africa at that time.

From the foregoing, it is not surprising when the USA refused to sell arms to Nigeria to fight boko haram during the administration of President Goodluck Jonathan. More to this refusal is the need for the Nigerian government to critically examine the covert role

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of USA and Boko Haram insurgency. It is possible that USA is not too willing to support the fight against Boko Haram because the insurgents are doing what it wanted in Nigeria long before now; namely weakening Nigeria’s foreign influence on the African continent by creating internal conflict. This is an assessment that is long overdue for Nigeria to undertake. However, it can be done as expected if Nigeria moves away from the diplomatic smokescreen that the USA has also created in order to conceal injurious intents. Therefore, unearthing USA covert intention is a task that must be done as a major milestone in its war against Boko Haram insurgents.

There are concerns that Nigeria needs to avoid the mistake of operating with Black box philosophy. It is a known fact that a black box in Aircraft does not give warning signal but only provide information after the damage is done. This means that operating with black box philosophy implies not been proactive. It connotes not been preemptive as far as impending danger is concerned. However, considering her enviable endowments of human and natural resources, Nigeria needs to be more aggressive in ensuring her security than what obtains at the moment.

Conclusion

Making this analysis in this paper is risky, but avoiding it is more risky and dangerous. It is in the desire to avoid this pitfall that the paper courageously points out the existing imbalances that have fermented layers of grievances that could be likened to a proverbial time bomb that is waiting to explode and to consume the corporate unity of Nigeria. The imbalances in themselves are worrisome enough and tough challenges to deal with. However, what might be the last stroke that will break the Carmel’s back regarding the unity of the country might be the spate of unprovoked killings by herdsmen. This portends danger for the nation, particularly as Nigeria matches towards the 2019 elections. The reason is that President Mohammadu Buhari who has indicated his interest to run for a second term in office by 2019 is seen as an accomplice of the herdsmen because of the inability of his government to deal decisively with them.

An interview with Daniel (2017) reveals that citizens in this part of the country are not likely to vote the President’s APC ruling party in 2019 elections. And the president who might have perceived this seems not to be too concerned about the insecurity that is looming in the region. It is argued that the killings are likely to escalate and eventually state emergency will be declared in the affected states. Under this arrangement, the military and other security agencies could be used to manipulate the 2019 elections to his favour as opined by Jauro (2018). In other words, the conflict is seen as a potential political capital that will guarantee the incumbent president easy awkward crossing on the ocean of blood to electoral victory in 2019.

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Another critical point on note is that terrorism has redefined international relations and diplomacy. Therefore, Nigeria must rise to the occasion by identifying who are her friends and enemies that wish her corporate existence compromised. In this context, any blind socio-political ties can only sail the ship of the nation’s destiny to the dreaded proverbial Bermuda triangle. The attendant consequences of this are better imagined than experienced. Therefore, the leadership of Nigeria all levels must make national integration of the citizenry prioritized agenda of development. Segregation and discrimination based on tongue and creed are corrosive enough to cut the bound of the Nation thereby realizing the prediction of the break up. Citizens’ welfare, irrespective of socio-cultural backgrounds should be the concern of government. The era of different strokes for different folks by government on the basis of regional identity and ideological persuasion must be discarded. A virile Nigeria that can defy prediction of break-up is only possible if there is renaissance in all facets of the nation.

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Alaga, A. (2018). Oral Interview in Obi, Obi Local Government Area of Nasarawa state.

Amnesty International, (2018). “Nigeria 2017/2018”. Retrieved from https://www.amnesty.org/en/countries/africa/nigeria/report-nigeria/, on 08/12/2018.

Awolaja, A. “Nigeria and 2015 Prediction” Nigerian Tribune, May 29, 2014.

Daily Telegraph, June 2014.

Daniel, K. (2017). Oral interview in Kwoi, Jabba Local Government Area of Kaduna State.

Emmanuel, U. (2014) “Ohanaeze Youth Tackle Arewa over Call for Nigeria’s Disintegration”, ThisDay, Wednesday, July 23.

Gerald, M. and Cletrence J. B. (2013). Nigerian Unity in the Balance. USA: US Army War College Press.

John, H. (2014). “The ISIS map of the World: Militants Outline Chilling Five-Year Plan for Global Domination as they Declare Formation of Caliphate – and Change their Name to the Islamic State.” Retrieved from https://www.dailymail.co.uk/news/article-2674736/ISIS-militants-declare-formation-caliphate-Syria-Iraq-demand-Muslims-world-swear-allegiance.html, on 13/07/2018.

Jauro, A. (2018). Oral interview in Yola, Adamawa State

Kelvin, B. (2014). “ISIL funded by US to break up region” Retrieved from http://kauilapele.wordpress.com/2014/07/08/kevin-barrett-vt-7-8-14-isil-funded-

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by-us-to-break-up-region-or-how-to-be-a-big-daddy-and-get-a-free-rolex/, on 21/04/2017

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Luka, D. (2018). Oral interview in Zing, Zing Local Government Area of Taraba State.

Michael, C. (2014). The Engineered Destruction and political Fragmentation of Iraq”. Global Research. Retrieved from https://www.globalresearch.ca/the-destruction-and-political-fragmentation-of-iraq-towards-the-creation-of-a-us-sponsored-islamist-caliphate/5386998, on 18/12/2018

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Olagbaiye, O. A. (2011) “Lagendary herold Smith Speaks about Nigeria ‘Hidden Agenda’-an Except” Retrieved from http://community.vanguardngr.com/profiles/blogs/legendary-harold-smith-speaks, on 12/11/2018.

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Segun, Olugbile and Olalekan Adetayo. (2018) “Un Condemns Plateau killings, AI says FG Encouraging Murderers”, The Punch, Friday, June 29.

Shapera, Z. (2018). Oral Interview in Dooshima, Ibi Local Government Area of Taraba state.

Tihze, A. (2018). Oral Interview in Bazza, Michika Local Government Area of Adamawa State.

The National Intelligence Council’s 2020 Project Report (2014). Mapping the Global Future. Pittsburgh: GPO.

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EFFECT OF RELATIONAL CAPITAL ON PERFORMANCE OF LISTED CONSUMER GOODS COMPANIES IN NIGERIA

ByABUBAKAR, Halimatu Saadiya

Department of Accounting, Nasarawa State University, Keffi

Abstract

Increasing investment in relationships with internal and external agents in trying to improve performance usually produces multiple effects in companies. This study examines the effect of relational capital on the performance of consumer goods companies (CGCs) listed in Nigeria for a period of six (6) years from 2012 to 2017. The dependent variable for this study is performance proxy by value added while the independent variables are customer capital (proxy by trade and other receivables and cash receipts from customers) and supplier capital (proxy by trade and other payables and cash payment to suppliers). This study carried out descriptive statistics, correlation analysis, panel regression and post diagnostics test to analyze the variables. The regression result reveals that trade & other receivables and trade & other payables do not significantly affect performance of CGCs while cash receipts from customers and cash payment to suppliers significantly affect performance of CGCs for the specified period. The study recommends that CGCs should decrease trade and other accounts receivables and increase cash receipt from customers in order to improve performance by encouraging more cash sales to increase revenue generation. CGCs should also decrease trade and other accounts payables and cash payment to suppliers to increase performance by reducing credit purchase and improving more cash purchases, so that cash payment to suppliers usually based on credit terms will be reduced.

Key words: Relational Capital, Customer Capital, Supplier Capital and Value Added.

Introduction

Relational capital originated from the work of Sveiby (1989) used the invisible balance sheet to express factors that are responsible for the difference between the stock market value of a firm and its net book value. These factors are three interrelated components of capital; human capital (employee competence), organizational capital (internal structure) and customer capital (external structure). External structures involve relationship with customers and suppliers, brand names, trademarks and reputation or image, some of which are considered legal property. Kaplan and Norton (1992) used the scorecard methods describe external presentations and internal monitoring of performance as one the basis for dialogue between firms and stakeholders. The method describes the image of firms to their customers, the perception of customers about the firms, the internal operations put in place that will satisfy customers, the ability of managers to create new

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products and services, ability of managers to penetrate new markets and increase revenue, managers ability to use financial measures to perform financial analysis that will improve shareholders value and improve financial reporting quality, the need for companies to assess their reliability as suppliers and monitor the speed and accuracy in the measurement of growth and renewal of intangible assets. CIC (2003) developed the Intellectus Model where relational capital (RC) is framed into knowledge and its management regarding the relations that certain organizations can maintain with the agents that are part of its closer industry and managing the relationships with agents located further than its own competitive environment. Carlucci, Marr and Schiuma (2004) argued that increasing investment in relationships with internal and external agents in trying to improve performance usually produces multiple effects in an organization. For instance, relational capital increases supplier-customer and end-user relationship and could directly impact on the performance of organizations, but could also generate indirect effect on the organization when suppliers and labour increase their supply price which kills employee creativity and a number of patents and the reputation of the company. It is that observed that increased sophisticated customers and the importance of innovation have shifted the bases of competition for many businesses away from traditional physical and financial resources towards managing relationships. More so, there is a widespread recognition that relational capital represents a portion of the company`s market value that is attributable to its portfolios of business relationships that is responsible for business growth.

Furthermore, the multiplier effect of relational capital is embedded in the problem of measurability of its indicators. Tumwine, Kamukama and Ntayi (2012), Emmanuel (2012) and Raza (2013) examined effect of relational capital on performance of companies. Firstly, their study explored data gathered from questionnaires administered to managers, employees, customers and suppliers of companies and measured customer capital, supplier capital with opinions and responses obtained. Though, their studies show positive and significant relationship between relational capital and performance, but the argument is that, customers and suppliers are stakeholders in companies and their interest is represented in the financial statement of companies. Their capital is used for the day to day operations of businesses and as such there are associated cost and volumes represented in the financial statement of companies such as value of credit sales, value of credit purchases, number of customers, number of suppliers, cash receipt from customers and cash payment to suppliers to mention a few. These indicators will better represent customer capital and supplier capital. Secondly, the studies have used returns on asset, returns on equity, market value, returns on investment, dividend policy to represent performance of companies, but with responses generated from questionnaires. For instance opinions about whether the company is highly profitable, whether the company has a positive stock (equity) returns, whether the company has a higher market value, whether the company has a good return on investment (ROI), whether the company’s shareholders are happy with our policy on dividends and so on. These indicators are financial measures and have related values recorded in the financial statement of companies that could represent them instead of mere beliefs that could be

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biased. Nonetheless relationships are regarded as capital when it can be quantified and its multiplier effect on firm performance is better explained. Based on the identified setback, this study seeks to find out what is the effect of the quantitative measures of relational capital on performance of listed consumer goods companies in Nigeria.

The main objective of this study is to assess effect of relational capital on performance of listed consumer goods companies in Nigeria. The specific objectives are to examine effect of customer capital on performance of listed consumer goods companies in Nigeria and to examine effect of supplier capital on performance of listed consumer goods companies listed in Nigeria.

Relational Capital

According to Ordonez de Pablos (2003) defined relational capital as the organizational relations with internal and external associates of firm, including customers, employees, suppliers, strategic alliance partners, shareholders other stakeholders, and industry associations. Castro, Lopez, Muina and Saez (2004) relational capital is defined as social capital and business capital which includes companies’ relationships with public administrators, media and corporate image, environmental protection, trade unions, labour market institutions, as well as customer relations, supplier relations, shareholders and investor relations, competitor relations, relationship with allies and relationship with quality improvement and promotion institutions. Baygi, Zolfani, Rezaeiniya and Aghdaie (2011) relational capital is the sum of all assets which arrange and manage organizations’ relations with the environment which includes the relations with customers, suppliers, shareholders, the rivals, community, the official institutions, and society. Raza (2013) relational capital is composed of customer satisfaction, customer loyalty, negotiating capacity, company image, and interaction with suppliers by employees, distribution channels, knowledge of organizational patterns, treaties, contracts, supplier channels and licensing agreements.

Relational capital is the inclination, preference and loyalty that customers have over a company’s brand over other products and services, that is, the relationship which an organization has with external groups and persons over time such as trade relationships with past, present and potential customers, suppliers, partners and the public at large. Nonetheless, the basic elements of relational capital are the customer capital and supplier capital which will discussed in subsequent paragraphs.

Customer capital is defined as customer profitability, customer acquisition, customer retention, customer satisfaction, customer technology, social bonding, financial bonding, customization bonding, and relationship management (Ngambi & Ndifor, 2015). Customer relations involve the integration of marketing, sales, customer service, and the supply-chain functions of the organization to achieve greater efficiencies and

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effectiveness in delivering customer value. Customer capital is represented by customer satisfaction, growth in business or service volume, customer loyalty, number of customer complaints, percentage of sales by repeat customers, number of alliances or partnerships, market share and potentials, ratio of customers to employees, ratio of sales to total customers, supplier/customer networks and profits per employee, unit sales to customers, sales channel construction and investment in customer relationship (Miller, DuPont, Fera, Jeffrey, Mahon, Payer, & Starr, 1999; Chen, Zhu & Xie, 2004). Companies reliance on these indicators makes customer capital difficult to determine because they require a survey or field research to generate the data, whereas there are other indicators such as amount of receivables and number of credit sales granted to customers to determine the strength of relationship between companies and customers, and periods in which receivables are collected to assess whether companies should continue relationship with customers. Customers are stakeholders of companies and want to see their interest represented in financial reports of companies. Receivables are the quantitative evidence of customer capital that can easily be viewed in the financial statement of companies and can be used to describe customer relations with companies. The number of credit sales to customers can be determined by dividing the amount of receivables by the number of customers. An increase in amount of receivables and number of credit sales will indicate good relationship between companies and customers and also increase short-term monetary activities that can be used to settle short-term obligations.

Supplier capital is a supply chain relational capital integrated in social structures of the groups through which resources are approached. The level of supply chain relational capital may be assessed by the degree of trust, mutual respect, and interactions that occurs between organization and its suppliers (Cousins, Handfield, Lawson & Petersen, 2006). The relationship between companies and their suppliers is important in capital determination. Supplier capital is the contribution of suppliers to company capital by way of amount of credit purchase considered as payables and as company short-term obligations. Companies need to know the extent of relationship with suppliers and whether to continue relationship with suppliers by way of number of credit purchase and periods in which payables are settled. An increase in the volume of payables and amount of payables signifies that the relationship between companies and suppliers is strong but the implication on firm performance is the obligation that has to be monitored by companies. It is not enough to determine qualitative data like trust and interaction between suppliers and companies as capital but it is very important to assess quantitative data like payables that are better related with firm performance. This is because suppliers are stakeholders in companies and want to view their interest (financial data) represented in company reports.

Performance A measure of efficiency that is usually avoided by researchers in the assessment of firm performance is value added. Value added is used as a measure of output that represents

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the wealth created through the organization’s production process or provision of services. Value added measures the difference between sales and the cost of materials and services incurred to generate the sales (Deep & Narwal, 2014;Kamath, 2015). The resulting wealth is generated by the combined efforts of those who work in the organization (employees) and those who provide the capital (employers and investors). Value added is thus distributed as wages to employees, depreciation for reinvestment in machinery and equipment, interest to lenders of money, dividends to investors and profits to the organization. Value added for a firm is the sum of interest expense, depreciation expenses, dividends, corporate taxes, equity of minority shareholders and profit retained for the year. Unlike other measures of performance that are specific in nature such as returns on asset, returns on equity, net profit margin, gross profit margin, asset turnover, market capitalization and so on, value added has the ability to determine efficiency of companies in carrying out the objective to pay employees, to pay providers of interest capital, to pay government and to make provisions for growth and enhancement of assets.

Effect of Qualitative Characteristics of Relational Capital on Performance of CompaniesLuo, Shi, Griffith and Liu (2004) expressed the relationship between customer relations, social capital and performance of two hundred and sixty-two (262) businesses that operate in metropolitan Chinese cities. Proxies for the study were customer relationships, business-partner social capital, and governing-agency social capital, strategic and financial performance. Control variables were ownership structure, management position, market knowledge, firm size and industry. The study revealed that customer relationships, business-partner social capital and governing social capital enhance performance.

Fatoki (2011) examined effect of social capital on performance of Small and Medium-Sized Enterprises (SMEs) of four sectors: manufacturing, retail, wholesale and service in South Africa using 122 self-administered questionnaires. The study used descriptive statistics, chi square, Pearson correlation and regression analysis to associate and relate variables. The study found that there is a significant positive relationship between social and the performance of SME.

Tumwine, Kamukama and Ntayi (2012) assessed the relationship between relational capital and performance of seventeen (17) tea manufacturing companies in Uganda. Relational capital was measured by employee relationship, community relationship, competitor relationship, government relationship and supplier relationship while firm performance was measured by profitability. Questionnaires were distributed to estate managers, field managers, finance managers, human and administrative managers of the selected firms and responses were converted to rates for purpose of analysis. Correlation matrix and multiple regressions were used to analyze variables. The results showed that relational capital components (customer capital, internal network capital, competitor capital and community relations capital) positively influence performance of tea

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manufacturing firms. The study revealed that a significant and positive relationship existed between customer capital and firm performance and an insignificant negative relationship between supplier capital and firm performance. Community/social responsibility and internal networking capital are positively related with firm performance while a weak relationship existed between government and firm performance. The study did not express the indicators used to represent profitability.

Similarly, Emmanuel (2012) examined the effect of relational capital components on performance of Abeokuta and Osogbo Tie and Dye Small Medium Enterprise Clusters located in Ogun and Osun State respectively in South Western Nigeria. Relational capital was measured by customer capital, supplier capital and employee capital while the indicator for performance was not specified. The data for the measures of the variables are collected through questionnaire adapted from Tumwine (2010) survey using five-point Likert’s scale. A total of 94 questionnaires were distributed while 80 were returned and found useful for the analysis. Cronbach alpha test of reliability, correlation matrix and multiple regression models were used to test the hypotheses. The relationship with suppliers, customers and internal networks among the employees were found to be positively and significantly related to and predictor of the performance of the companies.

In the same way, Raza (2013) investigated the relationship between relational capital and firm performance. Relational capital was measured by business relational capital and social relational capital. Business relational capital was proxy by customer capital, supplier capital, internal network capital and strategic alliance capital. Social relational capital was proxy by competitor capital, community capital, government capital and moral and integrity capital. Firm performance was measured by ten (10) items developed by Bontis (1999) with five (5) point Likert scale. Using convenient sampling method, 255 questionnaires were administered to a population of senior managers of eighty-five organizations from which one hundred and eighty-two questionnaires were returned as responses from sixty-two (62) organizations. Chronbach’s alpha test of reliability of data was carried out and regression analysis using SPSS was used to investigate relationship between variables. Results indicated that relational capital is significantly related with firm performance. Also, customer capital, supplier capital, internal network capital, competitor capital and community capital are positively related with firm performance. The study did not express the ten (10) indicators which Bontis (1999) used to represent firm performance.

Likewise, Siddiqul and Asad (2014) examined the relationship between relational capital and firm performance of thirty-four (34) brand developing firms in Pakistan. Relational capital was measured by supplier relations, consultant client relations, customer (end-user) relations and retailer relations using responses obtained from one hundred and two (102) questionnaires administered to managers of the selected firms. Organizational performance was measured using ten (10) items developed by Bontis (1999). The five (5) point Likert scale was used to modify eighty-four (84) responses returned by twenty-

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eight (28) firms and Chronbach’s alpha test, correlation and regression models were used to analyze association and relationship between variables. It was established that the correlations between relational capital components are associated with firm performance. The results showed that relational capital components (supplier relational capital, consultant client relational capital, end users relational capital and retailer relational capital) positively influence performance of brand developing firms. The study did not also express the ten (10) indicators which Bontis (1999) used to represent firm performance.

Additionally, Mbula, Memba and Njeru (2016) established the effect of accounts receivable on financial performance of twenty-four (24) companies funded by government venture capital in Kenya. A structured questionnaire was used to collect data. The study used the SPSS software to carry out test of reliability, Cronbach’ alpha, factor analysis, descriptive statistics, pearson correlation, ANOVA and regression analysis. The results show there is a positive relationship between accounts receivables and financial performance of firms funded by government venture capital in Kenya (0.038). Accounts receivable explain 25.7% of the financial performance of firms funded by government venture capital in Kenya while the variation of 74.3% is explained by other factors.

Lastly, Datta and De (2017) analyzed effect of relational capital components on the performance of bell-metal clustered firms in Dharmada region of Nadia district in the State of West Bengal in India. The study combined eight components of relational capital indicators into a single overall index by using principal component method. The indicators were sharing of technological knowledge, customer relations, supplier relations, informal relations with firms in the cluster, linkage with external bodies, location advantage, trust and good faith relationship and reputation while performance was indicated by value of per capita profit. A sample of 60 firms was covered in the study on the basis of face to face interview with the owner of the firms, based on a pre-structured questionnaire. The owners were favored as respondents to the questions, since they shouldered the day to day management responsibility and actively participated in overall decision making process. Cronbach alpha was used to assess the reliability of the set of individual relational capital indicators. The overall index of relational capital was found strongly associated with profitability. The overall regression of profitability figures on individual relational capital indicators has been observed to be significant and some of the indicators are also found to significantly influence firm performance level.

The above studies have indicated relational capital with data gathered from questionnaire administered to managers, employees, customers and suppliers of various companies. Indicators like customer capital and supplier capital should not view as a mere relationship between companies, their customers and their suppliers but quantifiable facts that can be verified from financial reports. Customer capital and supplier capital constitute the daily operations of a business and so performance of

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companies is dependent on these capital items. However, the studies were unable to specify the period for which variables were related. Effect of Quantitative Characteristics of Relational Capital on Performance of CompaniesTaghieh, Taghieh and Poorzamani (2013) examined effect of relational capital (customer) on the market value and financial performance of 96 companies listed in Tehran Stock Exchange during the period 2007 to 2012. Relational capital (customer) was indicated by sales growth rate while market value and the financial performance of the company were measured by market value (MV) to book value (BV) of ordinary shares and return of assets (ROA) respectively. Univariate linear regression models were used using panel data and to analyze the data. Hypothesis test results indicate that relational capital has a significant positive effect on financial performance and firm value.

Tang (2014) focused on the relationship between trade credit and profitability of SMEs in Netherlands from 2009 to 2013. Trade credit was measured by accounts receivable and accounts payable, further proxy by accounts receivable to total assets and accounts payable to total debt respectively while profitability was represented by returns on asset. Control variables considered in the study were leverage, growth and company size. The study found that accounts payable is positively and significantly related to the profitability (ROA) while accounts receivable to total assets is negatively and insignificantly related to profitability (ROA).

Kroes and Manikas (2014) examined the relationships between cash flow management and firm financial performance using data from 1,233 manufacturing firms for twelve (12) quarters from third quarter of 2008 to second quarter 2011. The aim of the study was to determine whether the average number of days: required to collect revenue after a sale is made, that inventory is held before it is sold, that company takes to pay creditors, required to convert cash invested in supplies into cash collected and that cash is tied up in working capital before payment is received from customers affects financial performance. Cash flow was measured by Change in Days of Sales Outstanding (ΔDSO), Change in Days of Inventory Outstanding (ΔDIO), Change in Days of Payables Outstanding (ΔDPO), changes in Cash Conversion Cycle (∆CCC) and changes in Operating Cash Conversion (∆OCC) while financial performance was indicated by Tobin Q. Control variables are Sales, Debt to Assets Ratio. The study found that ∆CCC and ΔDPO does not significantly relate to changes in firm performance while ∆OCC, ΔDSO and ΔDIO significantly related with changes in Tobin’s q.

Kapkiyai and Mugo (2015) assessed the relationship between trade credit and financial performance for a sample of 50 audited Kenyan Small and Medium Enterprises. The measures of financial performance were liquidity, profit margin and return on assets while trade credit was measured by trade credit ratio and proxy by accounts payable to total purchases. Descriptive statistics, Pearson correlation coefficient and multiple regression models was used to test the hypotheses. Findings indicated that trade credit

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positively and significantly affected liquidity, profit margin and return on assets. The results appear to be consistent with pecking order theory by SMEs in pattern of using trade credit instead of other external source of finance.

Achode and Rotich (2016) investigated the effects of accounts payable on financial performance of publicly listed manufacturing companies on the Nairobi Securities Exchange, Kenya for a period of five (5) from 2009 to 2013. Accounts payable was measured by accounts payable financing, term loan financing, lease financing and bond financing while performance was measured by profitability and liquidity proxy by current ratio, quick ratio gross profit margin, net profit margin and returns on equity. Descriptive statistics and multiple regression models were used to test the relationship between the accounts payable and firm performance. The results from this research show accounts payable has positive and significant relationship with profitability and liquidity, thus, supports the Pecking Order Theory.

Gorondutse and Ali (2016) investigated the effect of trade receivables and inventory management on SMEs profitability of 66 sample of SMEs Manufacturing in Malaysia for a period of seven (7) years ranging from 2006-2012. Trade receivable was indicated by days of accounts receivables while inventory management was indicated by inventory turnover. Profitability was represented by return on assets (ROA), return on equity (ROE) and net operating profit (NOP). Ordinary least square (OLS) regression was used to estimate the relationship between independent and dependent variable. The result indicated that days account receivable, days of accounts payable and inventory turnover in days are negatively and significantly related to SME profitability (net operating profit).

Liman and Mohammed (2018) examined the relationship between operating cash flow and corporate financial performance of five (5) listed Conglomerate companies in Nigeria over a period of 10 years from 2005 to 2014. The data were analyzed using descriptive statistics, correlation analysis, panel data regression technique and ordinary least square (OLS) regression. The result shows a positive and insignificant impact between Cash Flow from Operating activities (CFO) proxy by net cash flow from operating activities divided by cash and cash equivalent and financial performance proxy by ROA while the impact is positive and significant when financial performance was proxy by ROE of the listed conglomerate companies in Nigeria. The control variable Size and Financial Leverage have a positive and negative significant impact on ROA respectively, while their impact on ROE is positive and insignificant

Stakeholders TheoryThe stakeholder theory was originally proposed by Ian Mitroff in his book "Stakeholders of the Organizational Mind", published in 1983 in San Francisco. In late 1983 Edward R. Freeman had an article on Stakeholder theory in the California Management Review, but makes no reference to Mitroff's work, attributing the development of the concept to internal discussion in the Stanford Research Institute. He followed this article with a book Strategic Management: A Stakeholder Approach. This book identifies and models

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the groups which are stakeholders of a corporation, and both describes and recommends methods by which management can give due regard to the interests of those groups. The theory attempts to address the "principle of who or what really counts. In the traditional view of a company, the shareholder view, only the owners or shareholders of the company are important, and the company has a binding fiduciary duty to put their needs first, to increase value for them. Stakeholder theory instead argues that there are other parties involved, including employees, customers, suppliers, financiers, communities, governmental bodies, political groups, trade associations, and trade unions. Even competitors are sometimes counted as stakeholders – their status being derived from their capacity to affect the firm and its stakeholders. The nature of what constitutes a stakeholder is highly contested with hundreds of definitions existing in the academic literature (Miles, 2012). The stakeholder view of strategy integrates both a resource-based view and a market-based view, and adds a socio-political level. One common version of stakeholder theory seeks to define the specific stakeholders of a company (the normative theory of stakeholder identification) and then examine the conditions under which managers treat these parties as stakeholders (the descriptive theory of stakeholder salience).Empirical literatures like Tumwine et al (2012) and Raza (2013) have evidenced that company relations with other stakeholders: customers, suppliers, competitors, community and government, and their various interest are a representation of relational capital.

Methodology

This study employed the ex-post facto research design to establish the relationship between relational capital and the performance of consumer goods companies listed in Nigeria. The choice of this design is anchored on the fact that event of study has already taken place. This type of design is used to predict present or future occurrence from historical information (secondary data). The dependent variable for this study is performance proxy by value added. The independent variable is relational capital indicated by customer capital and supplier capital.

The population for this study is twenty-two (22) consumer goods companies listed on the Nigerian stock exchange. The sample for this study is eight (8) consumer goods companies selected based on purposive sampling method. The sampling method and companies were selected based on their peculiarity and the availability of data within the relevant period of the study.

Data is sourced for this study from the published annual reports of the selected companies and for the period specified. Panel data involving data required for variables for the eight (8) consumer goods companies and for a period of six (6) years from 2012 to 2017 were combined to make up forty-eight (48) observations. This study explored the group income statement, group statement of financial position, notes to the accounts and value added statement of the annual reports to obtain data for value added, customer capital and supplier capital.

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This study carried out descriptive statistics, correlation analysis, and panel regression with the aid of statistical package STATA version 13. Descriptive statistics is used to describe the general characteristic of the data. In this sense, mean, maximum, minimum, Skewness and Kurtosis are used. The mean value provides all the relevant information with respect to the averages of the data within the period of the study. This will help in understanding magnitude of the variable for the industry or for the selected sample. The minimum tells which firm recorded the lowest values for each of the variables and in which year. This helps in understanding whether there is a trigger for which variables has to fall. Also, the maximum tells us the largest data point for each of the variables, again it is used to identify the factor that causes such a rise. This is used to identify the level of dispersion and volatility in the data. Finally, in descriptive statistics, the Skewness and Kurtosis is used to examine the distribution of the variables.

Pearson correlation analysis is used to tests the association among the variables, while panel regression is used to examine the relationship between the dependent and independent variables.

Panel data is used for panel regression which combines the characteristics of time series data (the number of years) and cross sectional data (the number of firms) to source data from the annual report of the selected companies and for the selected period. This allows for the result to be analyzed with respect to firm level effects and periods effects.

Hypotheses:H0: Customer capital has no significant effect on the performance of consumer goods companies listed in Nigeria.H0: Supplier capital has no significant effect on the performance of consumer goods companies listed in Nigeria.

Model Specification

The following model is formulated for this study:

VA¿=α +β1 REC¿+β2 PAY ¿+β3 CRC¿+β4 CPS¿+ε¿

VAit = Value added per annum for selected companies and for period selected.

REC¿= Trade and other receivables per annum for selected companies and for period selected.

PAY ¿ = Trade and other payables per annum for selected companies and for period selected.

CRCit = Cash receipt from customers per annum for selected companies and for period selected.

CPSit Cash payment to suppliers per annum for selected companies and for period selected.

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b0 = constant

b1, b2, b3 and b4 are coefficients for the independent variables.

eit = error termVariables Measurement of Variables Source

Value Added Total pay to employees, providers of capital, government and provision for the enhancement and growth of assets. This is the sum of salaries, wages, and other benefits, interest on loan and bank overdraft, taxation, depreciation and retained earnings.

Public (2000)

Trade and Other Receivables

Trade receivables are after deduction of impairment for doubtful debts and adjustment for amounts due from related parties, employee loans and advance and other receivable. Other receivables include advance to vendors, insurance claim receivables and provision for doubtful debt.

Tang (2014).

Trade and Other Payables

Trade and other payables include trade payables, amounts due to related parties, value added tax, withholding tax payable, unclaimed dividend, staff pension, accrued audit fees, other accrued expenses, customers’ deposit and other payables.

Kapkiyai and Mugo (2015)

Cash Receipt from Customers

Trade and other receivables at the beginning of the year plus revenue for the year, less trade and other receivables at the end of the year.

Adejola (2014)

Cash Payment to Suppliers

Trade and other payables at the beginning of the year plus purchases less trade and other payables at the end of the year. Purchases are derived from inventories at the end of the period plus cost of sales, less inventories at the beginning of the year.

Adejola (2014)

The model specified above is an adapted version of the model expressed by Tang (2014). The original model is shown below:ROA¿=α0 +β1 REC¿+ β2 PAY ¿+β3 LEVERAGE¿+β4 GROWTH ¿+β5¿¿¿+ε ¿

Where:ROA = Earnings before interest and tax/Total AssetsREC = Accounts Receivables/Total Assets

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PAY = Accounts Payables/Total DebtLEVERAGE = Total Debt/Total AssetsGROWTH = Changes in assetsSIZE = Natural Log of assetsThis study modified the model by replacing returns on assets with value added. Additionally, ratio of accounts receivable to total assets and ratio of accounts payable to total debt were adjusted and their original values were used, that is, value of trade and other accounts receivable and value of trade and other accounts payables. Furthermore, this study introduced two other variables to the model cash receipt from customers (CRC) and cash payment to suppliers (CPS) using the direct method of determining cash flow from operations of businesses as prescribed by IAS 7 Statement of Cash Flows. The variables used to determine CRC and CPS are trade and other accounts receivable at the beginning and at the end, trade and other accounts payables at the beginning and at the end, revenue for the period ended, cost of sales for the period ended and inventories at the beginning and at the end (See Appendix). CRC and CPS are a modification of days required to collect revenue after sale is made (DSO) and days required to pay creditors after purchase (DPO) as used by Kroes and Manikas (2014).

Results and DiscussionThe results from descriptive statistics, correlation analysis, panel least regression analysis and post diagnostic tests are expressed and discussed below: Descriptive Statistics

stats rec pay crc cps va mean 14.80171 33.59548 114.1636 70.2479 37.1383

max 31.43045 127.947 344.1524 213.1965 127.9538 min 0.724183 1.247559 11.0035 6.321873 -1.111131  skewness -0.0659789 1.507295 1.107777 1.008685 1.366076

kurtosis 2.262053 4.82699 3.513937 3.80417 3.698394The table above represents the descriptive statistics of the observations in the data set. Firstly, the minimum value for REC, PAY, CRC and CPC is 0.724183 (₦724,183,000), 1.247559 (₦1,247,559,000), 11.0035(₦11,003,500,000) and 6.321873 (₦6,321,183,000) respectively and recorded by Nascon Allied Industries in the year 2013 and 2014 while minimum value for VA is -1.111131 ((-₦1,111,131,000) recorded by Dangote Flour Mills in 2015. The maximum value for REC is 31.43045 (₦31,430,045,000) and VA is 127.9538 (₦127,953,800,000) recorded by Nestle Nigeria Plc in 2017 while maximum value for PAY, CRC and CPS are respectively 127.947 (₦127,947,000,000), 344.1524 (₦344,152,400,000) and 213.1965 (₦213,196,500,000), all recorded by Nigerian Breweries in the year 2017. The mean score for REC, PAY, CRC, CPS and VA are respectively 14.80171, 33.59548, 114.1636, 70.2479 and 37.1383 (₦14,801,710,000; ₦33,595,480,000; ₦114,163,600,000; ₦111,211,200,000 and ₦37,320,138,300). In general, Nascon Allied Industries recorded the minimum values for customer capital and supplier capital. Observation from the study data (See Appendix) show that as credit sales to customers (trade and other receivables) and credit purchases to suppliers (trade

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and other payables) decreased between 2012 and 2014, cash receipt from customers and cash payment to suppliers also decreased. Conversely, maximum values for variables recorded by Nigerian Breweries are explained by the continuous increase in customer capital and supplier capital between 2012 and 2017, as such, more receivables and payables brings about more cash receipts and cash payments.

Skewness/Kurtosis tests for NormalityJoint

Variable Obs Pr(Skewness) Pr(Kurtosis) adj chi2(2) Prob>chi2rec 48 0.8347 0.2161 1.65 0.4374

 pay 48 0.0001 0.0230 15.16 0.0005

crc 48 0.0025 0.2562 8.91 0.0116

 cps 48 0.0049 0.1471 8.59 0.0136

 va 48 0.0004 0.1800 11.61 0.0030

The joint probability for the combination of skewness and kurtosis test for normality for REC is 0.4374 (44%) which is more than 10%. This implies that data for REC are normally distributed. The probability of other variables (PAY, CRC, CSP and VA) is less than 10% which is significant, thus, the null hypothesis is rejected. This indicates that the data for PAY, CRC, CPS and VA are not normally distributed.Correlation Analysis

rec  pay  crc  cps  va rec  1.0000pay  0.5305 1.0000crc  0.5533 0.9115 1.0000cps  0.5845 0.8623 0.9411 1.0000va  0.4743 0.8411 0.9606 0.8453 1.0000

The table above shows the results of the extent of correlation among the variables REC, PAY, CRC, CPS and VA. REC has positive and moderate correlation with PAY, CRC, CPS and VA to the tune of 0.53 (53%), 0.55 (55%), 0.58 (58%) and 0.47 (47%) respectively. PAY has positive and strong correlation with CRC, CPS and VA by 0.91(91%), 0.86 (86%) and 0.84 (84%) in that order. CRC positively and strongly correlates with CPS and VA by 0.94 (94%) and 0.96 (96%). CPS has positive and strong correlation with VA by 0.85(85%). This signifies all the variables positively associate.

However, multicollinearity test on the variables reveals that mean of variance inflation factor (Mean VIF) of 7.50 is less than 10. This indicates there is no problem of multicollinearity (variables are not highly correlated) and no need to drop any variable.

Panel Regression

Test Constant Coefficients R2 Prob > F

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β1 β2 β3 β4

Fixed Effect GLS Regression

-1.8164 0.2905 -0.2943 0.3731 0.0276 0.9093 0.0000

P > |t| 0.707 0.126 0.001 0.000 0.776

Hausman Specification test 0.0005

From the table above the regression equation is expressed based on the constant value and coefficients:

VA¿=−1.816+0.291 REC¿−0.294 PAY ¿+0.373 CRC¿+0.028 CPS¿+ε¿

The probability of Hausman specification test is 0.0005 (0.05%) which is less than 5%. This shows that fixed effect model is more appropriate and the null hypothesis is rejected. The regression results for fixed effect indicates that REC has a positive coefficient of 0.291 with p-value of 0.126 (12.6%) which is more than 5%. This indicates that REC has positive and insignificant effect on VA, thus, the null hypothesis is accepted. Similarly, CPS has a positive coefficient of 0.028 with p-value of 0.776 (77.6%) which is more than 5%. This depicts CPS has positive and insignificant effect on VA; hence, the null hypothesis is accepted. Conversely, PAY has a negative coefficient of -0.294 with p-value of 0.001 (0.1%) which is less than 5%. This implies that PAY has negative and significant effect on VA, thus, reject the null hypothesis. On the other hand, CRC has a positive coefficient of 0.373 with p-value of 0.000 (0%) which is less than 5%. This shows CRC has positive and significant effect on VA; therefore, the null hypothesis is rejected. Furthermore, the coefficient of determination (R2) of 0.909 indicates 91% variations in VA is explained by REC, PAY, CRC and CPS put together while the remaining 9% is explained by other factors (error term) not included in the regression equation. Lastly, the probability of F-statistics is 0.0000 (0%) which is less than 5% test criteria, thus, implies the model is of best fit and capable of explaining the relationship between the dependent variable (VA) and the independent variables (REC, PAY, CRC and CPS).

Post Estimation Test

Test Constant Coefficients R2 Prob > F

β1 β2 β3 β4

OLS Regression -7.0770 -0.1524 -0.2427 0.7242 -0.3993 0.96 0.0000

P > |t| 0.010 0.425 0.017 0.000 0.000

Robust Regression -6.607 -0.1697 -0.1832 0.6863 -0.3744 - 0.0000

P > |t| 0.012 0.357 0.058 0.000 0.000

Heteroskedasticity 0.0103

The regression line for ordinary least square regression is:

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VA¿=−7.077−0.152 REC¿−0.243 PAY ¿+0.724 CRC¿−0.399 CPS¿+ε¿

Though, Hausman test suggest fixed effect model but OLS is required to carry out post diagnostic test. The result for OLS regression is different from that of fixed effect. REC has a negative coefficient of -0.152 with p-value of 0.425 (42.5%) which is more than 5%. This indicates that REC has negative and insignificant effect on VA, thus, the null hypothesis is accepted. On the opposite, CRC has a positive coefficient of 0.724 with p-value of 0.000 (0%) which is less than 5%. This depicts CRC has positive and significant effect on VA; hence, the null hypothesis is rejected. Similarly, PAY and CPS has a negative coefficient of -0.243 and -0.399 with p-value of 0.017 (1.7%) and 0.000 (0%) respectively, less than 5%. This implies that PAY and CPS has negative and significant effect on VA, thus, reject the null hypothesis.

Furthermore, the probability of Breusch-Pagan / Cook-Weisberg test for Heteroskedasticity is 0.0103 (1.03%) which is less than 10%, thus, significant. This implies the problem of Heteroskedasticity in the regression and the need for a robust regression.

The equation for robust regression is stated as follow:

VA¿=−6.607−0.169 REC¿−0.183 PAY ¿+0.686 CRC¿−0.374 CPS+ε¿

There are similarities in the results for robust regression and ordinary least square regression. Robust regression shows that REC and PAY has negative coefficient of -0.169 and –0.183 with p-values of 0.357 (35.7%) and 0.058 (6%) respectively. This indicates that a positive change in REC and PAY will cause a negative change in VA and p-values of more than 5% indicate REC and PAY has insignificant effect on VA. Lastly, CRC has positive coefficient of 0,686 while CPS has negative coefficient of -0.374. This implies that a positive change in CRC will cause a negative change in VA while a positive change in CPC will cause a positive change in VA. Both CRC and CPS have p-values of 0% less than 5% which implies significance. Therefore, CRC and CPS have significant effect on VA. However, the p-value of F- statistics 0.0000 (0%) is less than 10% and would lead us to conclude that at least one of the regression coefficients in the model is not equal to zero. Finally, results from robust regression are quite different from that of fixed effect and so conclusions for this study will be drawn from robust regression.

Conclusions and Recommendation

The objective of this study is to examine the effect of relational capital on the performance of consumer goods companies (CGCs) listed in Nigeria, specifically to determine whether customer capital (trade and other receivables and cash receipts from customers) and supplier capital (trade and other payables and cash payment to suppliers) affects the performance (value added) of CGCs listed in Nigeria for the period 2012 to 2017. Customer capital and supplier capital constitutes the working capital of companies, required for short-term operations. However efficiency of companies to pay employees, providers of capital, taxes to government and provision for the

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enhancement/growth of assets is dependent on the cost and proceeds from these short-term operations, therefore, the need to examine the relationship between relational capital and performance. This study concludes on the effect of customer capital and supplier capital on performance of CGCs listed in Nigeria.

Firstly, this study concludes that trade and other receivables does not significantly affect performance of CGCs listed in Nigeria and this is consistent with the findings of Tang (2014) that accounts receivable does not significantly affect performance of companies but inconsistent with the result of Gorondutse and Ali (2016) that accounts receivable significantly affects the performance of companies. However, cash receipts from customers significantly affect performance of CGCs is similar to the results of Kroes and Manikas (2014) that the number of days required to collect revenue after sale is made significantly related with performance. This implies that when customer capital is based on customer credit it does not influence performance but when it is based on customer revenue it influences the performance of CGCs listed in Nigeria.

Secondly, this study concludes that trade and other payables does not significantly affect performance and this is not consistent with the conclusions of Kapkiyai and Mugo (2015) and Achode and Rotich (2016) that accounts payable significantly affect performance of companies. Additionally, cash payments to suppliers significantly affect performance of CGCs which is dissimilar with the findings of Kroes and Manikas (2014) that days required to pay creditors insignificantly relate with performance. This indicates that supplier capital when viewed as supplier credit influence performance but as supplier cost does not influence performance of CGCs.

This study recommends that CGCs should majorly monitor the behaviour and changes in customer capital, supplier capital and its performance. Specifically, CGCs should decrease REC and increase CRC in order to improve performance. To adjust for REC and CRC, the selected companies should encourage more cash sales to increase revenue generation. The implication of increasing revenue is less credit sales and more cash sales. Although, companies and their customers have the notion that more credit sales attract more customers but fail to examine the implication on the performance of companies. This empirical evidence shows real effect of customer capital on performance of CGCs in Nigeria. Similarly, CGCs should decrease PAY and CPS to increase performance. Reducing credit purchase connotes more cash purchases and so cash payment to suppliers usually based on credit terms will be reduced. However CGCs should monitor movement in inventories, payables and cost of sales to be able to adjust PAY and CPS.

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Appendices:. xtset id year, yearly panel variable: id (strongly balanced) time variable: year, 2012 to 2017 delta: 1 year

. xtreg va rec pay crc cps, re

Random-effects GLS regression Number of obs = 48Group variable: id Number of groups = 8

R-sq: within = 0.7150 Obs per group: min = 6 between = 0.9723 avg = 6.0 overall = 0.9543 max = 6

Wald chi2(4) = 507.35corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000

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------------------------------------------------------------------------------ va | Coef. Std. Err. z P>|z| [95% Conf. Interval]-------------+---------------------------------------------------------------- rec | .0952237 .1986083 0.48 0.632 -.2940414 .4844889 pay | -.3051735 .0892564 -3.42 0.001 -.4801128 -.1302341 crc | .6616309 .0554301 11.94 0.000 .5529899 .7702718 cps | -.2751943 .0768432 -3.58 0.000 -.4258043 -.1245843 _cons | -10.22104 3.282336 -3.11 0.002 -16.6543 -3.787778-------------+---------------------------------------------------------------- sigma_u | 3.1052499 sigma_e | 5.0841292 rho | .27169118 (fraction of variance due to u_i)------------------------------------------------------------------------------

. xtreg va rec pay crc cps, fe

Fixed-effects (within) regression Number of obs = 48Group variable: id Number of groups = 8

R-sq: within = 0.7859 Obs per group: min = 6 between = 0.9265 avg = 6.0 overall = 0.9093 max = 6

F(4,36) = 33.04corr(u_i, Xb) = 0.6823 Prob > F = 0.0000

------------------------------------------------------------------------------ va | Coef. Std. Err. t P>|t| [95% Conf. Interval]-------------+---------------------------------------------------------------- rec | .2905248 .1854043 1.57 0.126 -.0854926 .6665423 pay | -.2943063 .0776325 -3.79 0.001 -.4517524 -.1368603 crc | .3731484 .0940169 3.97 0.000 .1824733 .5638235 cps | .0276429 .0962561 0.29 0.776 -.1675735 .2228592 _cons | -1.816406 4.787263 -0.38 0.707 -11.52543 7.892615-------------+---------------------------------------------------------------- sigma_u | 15.050207 sigma_e | 5.0841292 rho | .89757225 (fraction of variance due to u_i)------------------------------------------------------------------------------F test that all u_i=0: F(7, 36) = 9.63 Prob > F = 0.0000

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. hausman random fixed

---- Coefficients ---- | (b) (B) (b-B) sqrt(diag(V_b-V_B)) | random fixed Difference S.E.-------------+---------------------------------------------------------------- rec | .0952237 .2905248 -.1953011 .0712074 pay | -.3051735 -.2943063 -.0108671 .0440443 crc | .6616309 .3731484 .2884824 . cps | -.2751943 .0276429 -.3028372 .------------------------------------------------------------------------------ b = consistent under Ho and Ha; obtained from xtreg B = inconsistent under Ha, efficient under Ho; obtained from xtreg

Test: Ho: difference in coefficients not systematic

chi2(4) = (b-B)'[(V_b-V_B)^(-1)](b-B) = 19.99 Prob>chi2 = 0.0005 (V_b-V_B is not positive definite)

. regress va rec pay crc cps

Source | SS df MS Number of obs = 48-------------+------------------------------ F( 4, 43) = 255.95 Model | 63621.7823 4 15905.4456 Prob > F = 0.0000 Residual | 2672.14025 43 62.1427966 R-squared = 0.9597-------------+------------------------------ Adj R-squared = 0.9559 Total | 66293.9225 47 1410.50899 Root MSE = 7.8831

------------------------------------------------------------------------------ va | Coef. Std. Err. t P>|t| [95% Conf. Interval]-------------+---------------------------------------------------------------- rec | -.1524065 .1890858 -0.81 0.425 -.5337343 .2289214 pay | -.2427691 .0976794 -2.49 0.017 -.4397584 -.0457799 crc | .7242031 .0502689 14.41 0.000 .6228262 .82558 cps | -.3993066 .0757907 -5.27 0.000 -.5521531 -.2464601 _cons | -7.077034 2.624176 -2.70 0.010 -12.36919 -1.78488------------------------------------------------------------------------------

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. estat vif

Variable | VIF 1/VIF -------------+---------------------- crc | 13.29 0.075270 cps | 9.23 0.108382 pay | 5.94 0.168218 rec | 1.53 0.654974-------------+---------------------- Mean VIF | 7.50

. estat hettest

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity Ho: Constant variance Variables: fitted values of va

chi2(1) = 6.59 Prob > chi2 = 0.0103

. rreg va rec pay crc cps

Huber iteration 1: maximum difference in weights = .58763876 Huber iteration 2: maximum difference in weights = .1018367 Huber iteration 3: maximum difference in weights = .01072632Biweight iteration 4: maximum difference in weights = .13981533Biweight iteration 5: maximum difference in weights = .0224198Biweight iteration 6: maximum difference in weights = .01865661Biweight iteration 7: maximum difference in weights = .00439715

Robust regression Number of obs = 48 F( 4, 43) = 264.98 Prob > F = 0.0000

------------------------------------------------------------------------------ va | Coef. Std. Err. t P>|t| [95% Conf. Interval]-------------+---------------------------------------------------------------- rec | -.1697093 .182307 -0.93 0.357 -.5373665 .1979479 pay | -.1832586 .0941776 -1.95 0.058 -.3731858 .0066685 crc | .6863019 .0484667 14.16 0.000 .5885595 .7840444

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cps | -.3744338 .0730736 -5.12 0.000 -.5218007 -.2270669 _cons | -6.607338 2.530098 -2.61 0.012 -11.70977 -1.504909------------------------------------------------------------------------------

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WAITING LINE MANAGEMENT AND QUEUE PERFORMANCE OF HEALTHCARE FACILITIES IN NIGERIA

By Hanmaikyur, Tyoapine (Ph.D)

Department of Business AdministrationFederal University of Agriculture

Makurdi, Nigeria

And IIOR Akombo Christopher

Department of Business AdministrationFederal University of Agriculture

Makurdi, Nigeria.Email: ochrystu@gmail.com

ABSTRACTThis study investigated the effect of waiting line management on the performance of healthcare facilities in Nigeria. The study specifically examined the effect of queue discipline, server points and appointment systems on the performance of healthcare facilities in Nigeria. Relevant data were collected and analyzed using simple percentages and hypotheses were tested using correlation analysis with the help of SPSS 22. Findings reveal that waiting line management has a positive effect on the performance of healthcare facilities in Nigeria. The study concluded that there is positive effect of waiting line management on queue performance of healthcare facilities in Nigeria in terms of maintaining a good queue discipline, having sufficient server points as well as the use of proper appointment systems by the hospital administrators. The study recommended based on the finding that queue discipline be maintained, adequate servers points be provided and proper appointment systems be made so as to reduce the average queue length, average waiting time and optimal server utilization of the healthcare facilities.

1.1 Introduction Waiting line or queue management is part of our everyday and indeed the most unwanted part of our life and is critical part of service industry. It deals with the treatment of customers to reduce wait time and improve service. A waiting line system or queue system is defined by two elements: the population source of its customers, and the process or service system. Albright and Wayne (2005); Hall (2011); Moore (2008); and Ragsdale (2008) opine that certain variables are important in the management of customer waiting line. First is to appoint a service leader to coordinate customer-employee interaction and secondly is to keep it moving, i.e. actively working to move

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customers on queue, thirdly give the customers something to do in line or queue, and fourthly be fast, i.e. customers are happier when employees are fast

In our day to day life, everyone is facing the problem of standing in queue for the service. Some of the common examples of waiting line include; waiting at doctors’ waiting room at a clinic, customers waiting at a supermarket checkout counter, waiting at ticket purchasing counter, waiting for a bus or train, waiting at the telephone booth or a barbers’ saloon, waiting for service in banks and banks ATM counters, waiting at toll paying counter, waiting at electronic bill paying counter, and so on. Waiting line (queuing) describes a system of having customers arriving for the service, waiting for service if the numbers of customers are more in numbers and leave the system after getting the service.

In day to day life, it has been observed that there is increase in demand of facilities and if the service facilities are not up to the mark to satisfy the customer in a specific time, customers require too much time to get service from a service mechanism, and this result in the formation of queue(s). The situation where you have waited in line for service illustrates to this scenario. The amount of time you waited in line depends on a number of factors. Your wait is as a result of the number of people served before you, the numbers of servers working and the amount of time it takes to serve each individual customers.

In the healthcare facility in particular, waiting is a common phenomenon in the doctor’s waiting room. This is because issues relating to service/queue discipline, service points, appointment systems and among others are not properly handled. Patients are aware that they should wait to see a doctor; however, there is no known acceptable ‘waiting’ or ‘consultation’ time. Evidence shows that patients are less likely to be dissatisfied if their waiting time is within 30 minutes (McKinnon, Crofts, and Rhiannon, 2016). The experience while waiting can also affect patient satisfaction and is influenced by other factors such as the condition and attractiveness of the waiting area. The availability of entertainment such as television, health information and reading materials may improve the anticipation of waiting (Feddock, Hoellein, and Griffith, 2015). The presence of helpful and friendly staff is also important to improve the waiting experience. High number of patients, shortage of staff and aging equipment are among the factors contributing to a lengthy waiting time. A long and complicated registration or work process with unnecessary duplication of tests can prolong waiting time in clinics.Consultation length often varies from one country to another and is determined by both patient’s and doctor’s characteristics. Experience has shown that the average consultation time in a primary care setting ranges between 10 to 15 minutes (Cape, 2012; Britt, Valenti, and Miller, 2012). In general, studies including that of Deveugele, Derese, and Brink-Muinen, (2011) have shown that patients prefer longer consultations as Doctors with longer consultations tend to prescribe less and offer more advice on lifestyle and other health-promoting activities (Freeman, Horder, and Howie, 2010). In

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some cases, consultation time increases to nearly twice especially when doctors explore psychosocial issues, a development that is associated with better recognition and handling of psychosocial problems. It is against the above background that this study examined the effect off waiting line management on queue performance of healthcare facilities in Nigeria.

1.2 Statement of the Problem

At any time there is more customer demand for a service than can be provided, a waiting line occurs. In a waiting line system, managers must decide what level of service to offer. A low level of service may be inexpensive, at least in the short run, but may incur high costs of customer dissatisfaction and frustration, such as lost future business and actual processing costs of complaints. A high level of service will cost more to provide and will result in lower dissatisfaction costs. Because of this trade-off, management must consider the optimal level of service to provide. Waiting lines actually exist in order to encourage discipline among customers while receiving a service at a service centre.

However, the way and manner in which hospital administrators manage waiting line system in their hospitals calls for attention. Issues relating to improper appointment systems resulting to high number of patients at the hospital premises, inadequate service points, poor service discipline shortage of staff and aging equipment, complicated registration process, attitudes of both staff and patients, duplication of tests and among others are the factors contributing to prolong waiting time in clinics. Similarly, some patients come and get quicker services than others while others stay in queue for hours before getting a service. Patients experience while long minutes/hours of waiting can be traumatic and is influenced by other factors such as the condition and attractiveness of the waiting area. Evidence shows that patients are less likely to be dissatisfied if their waiting time is within 30 minutes (McKinnon, Crofts, Rhiannon, 2006). Others studies have shown that patients are willing to wait an average of between 30 and 45 minutes to see a doctor (Barlow, 2002). In Malaysia for example, the average waiting time in hospital outpatient departments is between 1 to 2 hours (Pillay, Ghazali, and Manaf, 2011).

Waiting line management is associated with human existence. A lot of studies and researchers have investigated its effect of the performance of healthcare facilities globally and in Nigeria with no consistency in their conclusion. This has created a gap that need to be filled. For this purpose, this study employ dimensions that are different from prior studies including those of Agada and Korve (2017, 2016, and 2015), Ndukwe, Omale and Opanuga (2011), Obamire (2010) for Nigeria; Afrane and Appah (2014) for Ghana; and Ahmed, Khairatuh and Farnaza (2017) for Malaysia and so on, to examine their effects on queue performance in healthcare facilities in Nigeria.

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1.3 Objectives of the Study

The main objective of this study is to examine the effect of waiting line management on the queue performance of the healthcare facilities in Nigeria. Specific objectives are:

i. To assess the effect of queue discipline on queue performance of healthcare facilities in Nigeria.

ii. To examine the effect of service points on queue performance of healthcare facilities in Nigeria.

iii. To ascertain the effect of appointment systems on queue performance of healthcare facilities in Nigeria

1.4 Research Questions

To achieve the objectives of this study, answers are to be provided to the following research questions:

i. What effect has queue discipline on the performance of healthcare facilities in Nigeria?

ii. Has service points of any effect on queue performance of healthcare facilities in Nigeria?, and

iii. Does appointment systems of any effect on queue performance of healthcare facilities in Nigeria?

1.5 Research Hypothesis.

For this study to achieve its purpose, The following research hypotheses formulated in their null form were tested.

Ho1: Queue discipline has no significant effect on queue performance of healthcare facilities in Nigeria,

Ho2: Server Points have no significant effect on queue performance of healthcare facilities in Nigeria, and

Ho3: Appointment systems have no significant effect on queue performance of healthcare facilities in Nigeria.

1.6 Scope of the Study.

This study seeks to establish the effect of waiting line management and queue performance of healthcare facilities in Nigeria. The study have two variables; waiting line management (independent variable) measured in terms of queue discipline, service

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points, and appointment systems; and queue performance of private healthcare facilities (dependent variable) measured in terms of average queue length, average waiting time, and server utilization. A population of ten (10) private hospitals was and a sample of 120 employees was selected using simple random sampling. The scope covers a period of ten years, from 2009 – 2018 a period of increased waiting line cases in the country’s medical facilities.

2.0 LITERATURE REVIEW

The existing body of literature concerning the subject matter is reviewed under theoretical framework, conceptual framework, empirical review of related studies and other subheadings.

2.1 Theoretical FrameworkThe foundation of this study is grounded on Queuing Theory. Queuing Theory was propounded by an engineer Agner Krarup Erlang in 1909. Erlang experimented the fluctuating demand in telephone traffic. Eight years later he published a report addressing the delays in automatic dialing equipment. At the end of World War II, Erlang’s early work was extended to more general problems and to business applications of waiting lines.

Queuing theory is the mathematical study of waiting lines, or queues. In queuing theory a model is constructed so that queue lengths and waiting times can be predicted. g theory is generally considered a branch of operations research because the results are often used when making business decisions about the resources needed to provide service (Dhar, Rhaman, 2013). Customers, service institutions, and queuing phenomenon are a queuing system. The basic model includes the input process, the service time, the service institution, and queuing rule. According to (Jie, Lexshimi, Zaleha, and Shamsul 2010), there are different variety model of Queuing Theory, which include:

Model A (M/M/1): Single-Channel Queuing Model with poison arrivals and exponential service times, is it use in most common case of queuing problems involves the single-channel or single-server, waiting line. In this situation, arrivals form a single line to be serviced by a single station. The most common case of queuing problems involves the single-channel, or single-server, waiting line. In this situation, arrivals form a single line to be serviced by a single station.

Model B (M/M/S): Multiple-Channel Queuing Model, it is use in multiple-channel queuing system in which two or more servers or channels are available to handle arriving customers. We still assume that customers awaiting service form one single line and then proceed to the first available server. Multichannel, single-phase waiting lines are found in many supermarkets today. A common line is formed, and the customer at the head of the line proceeds to the first free cashier

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Model C (M/D/1): Constant-Service-Time Model, some service systems have constant service times. When customers or equipment are processed according to a fixed cycle, as in the case of an automatic car wash or an amusement park ride, constant service times are appropriate

Model D: Limited-population Model, when there is a limited population of potential customers for a service facility. 

In the hospital service system, some authors have argued that the appropriate model is the Model B (M/M/S) Multiple-Channel Queuing Model in M/M/C model. The service institution means lots of service stands. The queuing rule is for service institution Service is First Come, First-Served, and all servers are assumed to perform at the same rate. The waiting system means customers have to wait if the service stand is in busy state. The queuing theory which is considered very relevant to this study has been employed and used extensively by similar studies including Agburu (2011), Dhar et al (2013), Jie et al (2010) and others.

Many think, Queuing Theory is very complex rocket science, but it is definitely not so complex, if you really understand the fundamentals properly. It is a mathematical study of waiting lines or queues. Its principles are widely used in many industrial domains. Anywhere you see queues – Bank, ATM, Road traffic, Shopping mall, etc., queuing theory can be applied and help in effective planning.

2.2 Conceptual Framework

The major concepts related to this study are explained below:

2.2.1 Waiting Line (WL)

According to Pruyn and Smidts (2008), the concept of waiting line is defined as a line of people or vehicle waiting for something (service). It is also refers to as a formation of people or things one behind another, the line stretched clear around the corner, you must wait in a long line at the checkout counter. The waiting line or queue management is a critical part of service industry. It deals with issue of treatment of customers in sense reduce wait time and improvement of service. Queue management deals with cases where the customer arrival is random; therefore, service rendered to them is also random.

2.2.2 Waiting Line Management (WLM) According to Britt, Valenti, and Miller (2002), WLM refers to the issue of treatment of customers in sense to reduce their wait time and improvement of service. Queue

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management deals with cases where the customer arrival is random; therefore, service rendered to them is also random. Waiting in line is common phenomena in daily life, for example, banks have customers in line to get service of teller, cars queue up for re-filling, workers line up to access machine to complete their job, and patients waits at doctor’s waiting room for service. Therefore, management needs to work on formulae, which will reduce wait time and create delighted customers without incurring an additional cost. Generally, queue management problems are trade off’s situation between cost of time spent in waiting verses cost of additional capacity or machinery (Oche and Adamu, 2013).

Taylor (2014) shows that delay significantly influences the feelings of anger. Moreover, Pruyn and Smidts (2008) find that the perceived waiting time affects the cognitive dimension of the wait appraisal. Consequently, we do consider perceived waiting time as a determinant of customer satisfaction. Indeed, real waiting time is an antecedent of perceived waiting time rather than an antecedent of waiting time satisfaction (Pruyn and Smidts, 1998). Baker and Cameron (1996) present an integrative review of customers' perception of waiting time. Other variables that determine customer satisfaction with waiting line management are the information provided in case of delay (Hui, Zhao, Law 2014; Antonides, 2012), the characteristics of the waiting environment (Pruyn and Smidts, 2008) and Queue discipline. Studies have suggested that any information on the waiting duration can reduce the uncertainty of the wait and lower the overall level of stress experienced by consumers (Maister 1985 in Britt, Valenti, and Miller, 2002). Previous research highlights the impact of queuing information and waiting duration information on the cognitive and affective aspect of the wait when the wait is long (Hui, Zhao, Law 2014) and during busy periods (Clemmer and Schneider, 2009). Moreover, the uncertainty influences service evaluation through consumers' affective responses to the wait (Taylor, 2014). The attractiveness of the waiting environment is related to its physical design in terms of comfort, space and decor. Service environment influences the affective aspects of waiting time (Baker and Cameron, 2010). A pleasant environment promotes positive feelings within consumers. Pruyn and Smidts (2008) show that perceived attractiveness positively influences the affective response to the wait, a known component of satisfaction.

Finally queue discipline is another variable for waiting lines management that influences customer satisfaction. The queue discipline is the method by which customers are selected from the queue for processing by the service mechanisms. The queue discipline is normally first-come-first-served (FCFS), where the customers are processed in the order in which they arrived in the queue, such that the head of the queue is always processed (Anderson and Shih, 2013)). Key determinant in satisfaction with the experience of waiting is the degree of social justice, whereby if the principle of FCFS is violated customers become dissatisfied (Larson 2011).

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In this work, the researcher adopt the definition giving by Pruyn and Smidts (2008), which stated that waiting line is defined as a line of people or vehicle waiting for something (service). Or it is also refers to as a formation of people or things one behind another, the line stretched clear around the corner, you must wait in a long line at the checkout counter. The waiting line or queue management in this wise refers to way and manner in which customers (patients) are treatment or handled why waiting for service in the queue.

2.2.3 Dimensions of Waiting Line Management (WLM)

According to Albright and Wayne 2005; Hall, (2011); Moore, (2008) and Ragsdale (2008), the waiting line include: the queue discipline, the service points, the appointment systems, the customer population, and the arrival and service patterns. This adopted only three dimensions which are the queue discipline, the service points, and the appointment systems.

Queue Discipline

A waiting line priority rule determines which customer is served next. A frequently used priority rule is first-come, first-served. This priority rule selects customers based on who has been waiting the longest in line. Generally, customers consider first-come, first-served to be the fairest method for determining priority.However, it is not the only priority rule used. Other rules include best customers first, highest-profit customer first, quickest-service requirement first, largest-service requirement first, emergencies first, and so on. Although each priority rule has merit, it is important to use the priority rule that best supports the overall organizational strategy. For example, a first- come, first-served rule doesn’t make sense in a hospital emergency room and in fact could cause unnecessary deaths. According to Albright and Wayne 2005; Hall, (2011); Moore, (2008) and Ragsdale (2008), the priority rule used affects the performance of the waiting line system. As an example, first-come, first served is generally considered fair, yet it is biased against customers requiring short service times. For the purpose of the study therefore, the researcher made use of two dimensions of waiting line i.e. the queue discipline and the service facility.

The Service Points

The service point is characterized by the number of waiting lines, the number of servers, the arrangement of the servers, the arrival and service patterns, and the service priority rules:

a. The Number of Waiting Lines

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Waiting line systems can have single or multiple lines. Hospitals often have a single line for customers (patients). Customers wait in line until doctor is free and then proceed to that doctor’s room. Other examples of single-line systems include airline counters, rental car counters, restaurants, amusement park attractions, banks and call centers. The advantage of using a single line when multiple servers are available is the customer’s perception of fairness in terms of equitable waits. That is, the customer is not penalized by picking the slow line but is served in a true first-come, first-served fashion.

The single-line approach eliminates jockeying behavior. Finally, a single-line, multiple-server system has better performance in terms of waiting times than the same system with a line for each server. The multiple-line configuration is appropriate when specialized servers are used or when space considerations make a single line inconvenient. For example, in a grocery store some registers are express lanes for customers with a small number of items. Using express lines reduces the waiting time for customers making smaller purchases.

b. The Number of ServersSystem serving capacity is a function of the number of service facilities and server proficiency. In waiting line systems, the terms server and channel are used interchangeably. It is assumed that a server or channel can serve one customer at a time. Waiting line systems are either single server (single channel) or multi-server (multichannel).

c. The Arrangement of the ServersServices require a single activity or a series of activities and are identified by the term phase. In a single-phase system, the service is completed all at once, such as with a bank transaction or a grocery store checkout. In a multiphase system, the service is completed in a series of steps, such as at a fast-food restaurant with ordering, pay, and pick-up windows or in many manufacturing processes.

d. Arrival and Service PatternsWaiting line models require an arrival rate and a service rate. The arrival rate specifies the average number of customers per time period. For example, a system may have ten customers arrive on average each hour. The service rate specifies the average number of customers that can be serviced during a time period. The service rate is the capacity of the service system. If the number of customers you can serve per time period is less than the average number of customers arriving, the waiting line grows infinitely.

Appointment System

The appointment system refers to the period of time allocated in the schedule to a particular patient’s visit. Appointment systems can be seen only in the secondary and tertiary levels. The server time refers to the amount of time the physician actually spends

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with the patient. This may be shorter or longer than the appointment duration. According to Cayirli and Veral (2013), appointment system scheduling can be classified into two broad categories:Static: Here all decision must be prior to the beginning of a clinical session, which is the most common appointment system in healthcare.

Dynamic: The schedule of future arrivals are revised continuously over the course of the day based on the current state of the system. This is applicable when the patient’s arrivals to the service area can be regulated dynamically, which generally involves patients already admitted to a hospital or clinic. The most primitive form of appointment management is the single block scheduling. The single block rule assigns all patients to arrive at the same time. The patients are served on first come serve bases. Another, nowadays more common, form of appointment scheduling is the individual block rule. Patients are assigned unique appointment times that are spaced throughout the clinical session.

2.2.4 Performance 

Performance comprises the actual output or results of an organization as measured against its intended outputs (or goals and objectives). According to Richard (2009) and Upadhaya, Munir, & Blount, (2014), organizational performance encompasses three specific areas of firm outcomes:

i. Financial performance (profits, return on assets, return on investment, etc.); ii. Product market performance (sales, market share, etc.); and iii. Shareholder return (total shareholder return, economic value added, etc.)

Therefore, for queue performance of the healthcare facilities to be effective, the average queue length must be short, little average waiting time, and optimal server utilization. This means that if the average queue length is short, average waiting time will be minimal and the service utilization of hospital is high, it is an indication that the healthcare facilities is performing well..

2.2.5 Healthcare FacilityA healthcare facility is, in general, any location where healthcare is provided. Healthcare facilities range from small clinics and doctor's offices to urgent care centers and large hospitals with elaborate emergency rooms and trauma centers (Cayirli and Veral, 2013). The number and quality of health facilities in a country or region is one common measure of that area's prosperity and quality of life. In many countries, health facilities are regulated to some extent by law; licensing by a regulatory agency is often required before a facility may open for business. Health facilities may be owned and operated by for-profit businesses, non-profit organizations, governments, and in some cases by individuals, with proportions varying by country. Therefore, the queue performance

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of healthcare facility refers to how well the industry is doing in the business in managing queues

2.2.6 Types of Healthcare FacilityThere are the types of healthcare facility (McGuire, Kimes, Lynn, Pullman, and Lloyd, 2010), but for this study shall focus on hospitals.

Hospitals A hospital is an institution for healthcare typically providing specialized treatment for inpatient (or overnight) stays. Some hospitals primarily admit patients suffering from a specific disease or affliction, or are reserved for the diagnosis and treatment of conditions affecting a specific age group. Others have a mandate that expands beyond offering dominantly curative and rehabilitative care services to include promotional, preventive and educational roles as part of a primary healthcare approach.

Today, hospitals are usually funded by the state, health organizations (for profit or non-profit), by health insurances or by charities and by donations. Historically, however, they were often founded and funded by religious orders or charitable individuals and leaders. Hospitals are nowadays staffed by professionally trained doctors, nurses, paramedical clinicians, etc., whereas historically, this work was usually done by the founding religious orders or by volunteers.

2.2.8 Measuring Queue Performance in the Healthcare FacilitiesPerformance measures are used to gain useful information about waiting line systems. These measures include (Cayirli and Veral, 2013):

1. The average queue length: The number of customers waiting in line can be interpreted in several ways. Short waiting lines can result from relatively constant customer arrivals (no major surges in demand) or from the organization’s having excess capacity (many cashiers open). On the other hand, long waiting lines can result from poor server efficiency, inadequate system capacity, and/or significant surges in demand.

2. The average waiting time: Customers often link long waits to poor-quality service. When long waiting times occur, one option may be to change the demand pattern. That is, the company can offer discounts or better service at less busy times of the day or week. For example, a restaurant offers early-bird diners a discount so that demand is more level. The discount moves some demand from prime-time dining hours to the less desired dining hours. If too much time is spent in the system, customers might perceive the competency of the service provider as poor. For example, the amount of time customers spend in line and in the system at a retail checkout counter can be a result of a new employee not yet proficient at handling the transactions.

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3. The service utilization: Measuring capacity utilization shows the percentage of time the servers are busy. Management’s goal is to have enough servers to assure that waiting is within allowable limits but not so many servers as to be cost inefficient.

2.3 Reviews of Related Empirical Studies In the course of investigating the effects of waiting line management on queue performance of healthcare facilities in Nigeria, the study reviewed the following empirical work as done prior researchers:

Ndukwe, Omale, and Opanuga (2011) conducted a study on Reducing Queues in a Nigerian Hospital Pharmacy in Lagos, Nigeria. The study was aimed at characterizing the queue; describe the queue discipline of the outpatient pharmacy, to institute a cross-sectional intervention by streamlining queue behaviour and to measure the impact of streamlining queue characteristics and queue discipline on waiting time of patients. Results showed that queue characteristics existing at the pharmacy during the situation analysis was a single server-multiple queue model. However, after the intervention was done involving staff re-orientation, the streamlined process reduced waiting time from 167.0 to 55.1 minutes. The study recommended that the hospital management should intensify the effort of the hospital pharmacists to reduce patient queues and improve efficiency of services, following the results of snapshots from this work. The study mention was made concerning the service points and the appointment systems of the hospital as these are also key variables of queue management.

Obamire (2017) conducted a study on Queuing Network Analysis and Optimal Bed Determination: An Evaluation of Nigerian University Teaching Hospital Emergency Department in Lagos, Nigeria. This study was meant to decomposed queuing network model to determine optimal beds to serve an emergency department where patients have low tolerance for delay. M/M/∞ and M/M/C of queuing models were used to analyze the data obtained from Emergency Department (ED) for a period of 18 months. The findings reveal that the ED requires at least 64 beds to provide efficient emergency services to the existing population. The study recommended that that improving patient flow and reducing waiting time for patient can be achieved through the following ways: (1) managing the arrival rate by different appointment methods such as online appointment management system to spread arrivals and call in appointment system; (2) increasing the number of servers; and (3) optimizing the service rate. The study focused on optimal bed utilization and neglects other factors like the averaging waiting time for a patient to get bed as well the average number of patients waiting to get a bed.

Agada and Korve (2017) studied A Simulation Model for Hospital Bed Occupancy Management. The purpose of the study was to solve the problem of under-provision and over-provision of hospital beds of the accident and emergency (A & E) wards of the Benue State University Teaching Hospital (BSUTH) Makurdi. Simulation modeling approach was used for preliminary data analysis with the help SPSS for computations. Finding reveals that the optimal number of bed required is 10, 9, 7, and 2 for the male,

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female pediatrics and gynecology wards respectively, while the mean number of empty beds are 3, 3, 3, and 1 respectively for these wards. The study recommended among others that the result of the simulation model should be implemented to improve bed occupancy management in the accident and emergency unit of the Benue State University Teaching Hospital (BSUTH) Makurdi. The study focused on optimal bed utilization and neglects other factors like the averaging waiting time for a patient to get bed as well the average number of patients waiting to get a bed.

Obamire (2010) conducted a study on Queuing Theory and Patients Satisfaction: An overview of terminology and application of Ante-natal Care Unit in Lagos, Nigeria. The study was meant to provide an insight into the general background of queuing theory and its associated terminology, and how queuing theory can be used to model ante-natal clinic care unit of the Federal Teaching Hospital, Lagos, Nigeria. The study uses TORA optimization system to analyze the data collected from the ante-natal care unit of a public teaching hospital Lagos, Nigeria, over a period of three weeks. Findings of the study reviewed that pregnant women spend less time in the queue and system in the first week than during the other succeeding two weeks. The recommended that more personnel and facilities be provided in the teaching hospital to ensure that pregnant women spend less time in queue as observed in the first week.. The study to fail to tell us how many pregnant women were on queue (average queue length) at the time of talking their records from the first to the third week. Similarly nothing was said concerning the time taking to attend to a pregnant (average waiting time). Finally, the study was mute about the service utilization, which would have given us the idea of whether system was being idle or busy during the time of record taking. This therefore leaves a gap for which this study is set out to fill.

Afrane and Appah (2014) conducted a study on Queuing theory and the management of Waiting-time in Hospitals: The case of Anglo Gold Ashanti Hospital in Ghana. This study investigates the application of queuing theory and modeling to the queuing problem at the out-patient department at Anglo Gold Ashanti hospital in Obuasi, Ghana. The study established that the optimum system performance can be achieved with eight doctors effectively at post from contrast to the prevailing five doctors that were effectively at post. The study recommended that applying queuing theory and modeling to queuing and capacity challenges can enhance decision making with regards to what will provide optimal performance. Here emphases were only made concerning increasing service points and ignoring other factors like queue discipline and appointment systems of the clinic.

Ahmad, Khairatul, and Farnaza (2017) conducted a study on the assessment of patient waiting and consultation time in a primary healthcare clinic in Malaysia. This audit was conducted at a primary care clinic for four (4) weeks using the universal sampling method. The waiting time for registration, pre-consultation, consultation, appointment, payment and pharmacy were recorded as well as consultation time. The data were entered into the statistical software SPSS version 17 for analysis. Results showed that more than half of the patients were registered within 15 minutes (53%) and the average total waiting time from registration to seeing a doctor was 41 minutes. Ninety-nine percentage of patients waited less than 30 minutes to get their medication. The average consultation time was 18.21 minutes. The study concludes that the clinic needs to

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improve its waiting time and to make the recommended changes to improve its services to patients. The study did not tell us any about the average queue length, but stated that the average waiting time from registration to seeing a doctor was 41 minutes. Second no mention was made concerning the service utilization factor. Thirdly, the study was silent on the issue concerning the appointment system of the primary healthcare unit. Thus this leaves a gap for which this study is set out to fill. Agada and Korve (2016) worked on simulation of queues and appointment systems in specialist outpatient clinic of the tertiary healthcare institutions in Nigeria. The study was concern with the simulation of queues and appointment systems in the specialist outpatient clinic of the tertiary healthcare institution in Nigeria. The study has been able to study the existing queues and appointment system of the Antenatal and Gynecology specialist outpatient clinics of the Federal Medical Centre Makurdi, Nigeria. Findings reveal that the alternative mixed block appointment simulation model which has been shown in the paper have significantly reduced average time in queue, and ensure that doctors are not over utilized. The study recommended that, the alternative mixed block appointment should replace the existing single block appointment system across all the outpatient clinics of the tertiary healthcare institutions in Nigeria, and those off the Federal Medical Centre Makurdi in particular. The findings of this study are quite valuable but are limited to Antenatal and Gynecology units of the hospital instead of the entire Federal Medical Centre Makurdi.

3.0 Methodology Data were collected from 95 employees of the selected ten (10) private hospitals in Makurdi metropolis. Simple random sampling technique was deployed. Data collected were analyzed using SPSS Version 22.

4.0 Data Presentation and Analysis

Table 1 Respondents views on to what extent has queue discipline affected queue performance of healthcare facilities in Nigeria

Variables Respondents PercentagesTo a greater extent 86 90.5To an average extent 5 5.3To a low extent 4 4.2To no extent - -Total 95 100.00

Source: Field Survey, 2019

In table I above, 86 respondents representing 90.5% opined the queue discipline to a greater extent has effect on queue performance of private healthcare facilities, 5 respondents (5.3%) stated that the queue discipline to an average extent and has effect on queue performance of private healthcare facilities, 4 (4.2%) respondents were for low extent. This shows that queue discipline to a greater extent has significant effect on queue performance of private health care facilities in Nigeria.

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Table 2 Respondents views on to what extent has service points affected queue performance of healthcare facilities in Nigeria

Variables Respondents PercentagesTo a greater extent 95 100.0To an average extent - -To a low extent - -To no extent - -Total 95 100.0

Source: Field Survey, 2019

In table II above, all the 95 respondents representing 100 00% unanimously agreed that service points to a greater extent has effect on the queue performance of healthcare facilities in Nigeria This means that the more number of server points the faster rate of service rendered to customers. Table 3 Respondents views on to what extent has appointment systems affected

queue performance of healthcare facilities in Nigeria

Variables Respondents PercentagesTo a greater extent 85 89.5To an average extent 7 7.4To a low extent 3 3.1To no extent - -Total 95 100.00

Source: Field Survey, 2019

In the table III above, 85 respondents representing 89.5% were of the opinion that appointment to a greater extent has effect on the queue performance of private healthcare facilities in Nigeria, 10 respondents (10.5%) opined that to an average extent appointment systems has effect on the queue performance of private healthcare facilities in Nigeria, 7 respondents (7.4%) opined to a low extent and 3 respondents (3.1%) went for to no extent. The implication is that appointment systems have effect on queue performance of private healthcare facilities in Nigeria.

Test of hypotheses.

Table IV Hypothesis I Queue discipline has no significant effect on queue performance of healthcare facilities in Nigeria

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Correlations

Queue Performance Queue DisciplineQueue Performance

Pearson Correlation 1 .618Sig. (2- tailed) .000N 95 95

Queue Discipline Pearson Correlation .618 1Sig. (2- tailed) .000N 95 95

Correlation is significant at the 0.01 level (2- tailed)

In table IV above, the correlation result shows that the queue discipline has effect on the queue performance of private healthcare facilities in Nigeria. i.e. r(95= 0.618, P<0.05(0.000). We therefore reject the null hypothesis and accept the research hypothesis.

Table V Hypothesis II Server Points have no significant effect on queue performance of healthcare facilities in Nigeria

Correlations

Queue Performance Server Points Queue Performance

Pearson Correlation 1 .684Sig. (2- tailed) .000N 95 95

Server Points Pearson Correlation .684 1Sig. (2- tailed) .000N 95 95

Correlation is significant at the 0.01 level (2- tailed)

In table V above, the correlation result shows that the service points have effect on the queue performance of healthcare facilities in Nigeria. i.e. r (95= 0.684, P<0.05(0.000). We therefore reject the null hypothesis and accept the research hypothesis.

Table VI Hypothesis III Appointment systems have no significant effect on queue performance of healthcare facilities in Nigeria

Correlations

Queue Performance Appointment SystemsQueuePerformance

Pearson Correlation 1 .600Sig. (2- tailed) .000N 95 95

AppointmentSystems

Pearson Correlation .600 1Sig. (2- tailed) .000N 95 95

Correlation is significant at the 0.01 level (2- tailed)

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In table VI above, the correlation result shows that appointment systems have effect on the queue performance of private healthcare facilities in Nigeria. i.e. r(95= 0.600, P<0.05(0.000). We therefore reject the null hypothesis and accept the research hypothesis.

3.0 Conclusion and Recommendations.

3.1 Conclusion This study examined the effect of waiting line management on the performance of the private healthcare sector in Nigeria. It uncovered that:

Firstly, queue discipline can be strictly instituted by designed tally cards that were serially numbered, and that the characterization and discipline that was instituted has eliminated the challenge of shunting, balking or jockeying and reduced reneging. This is in agreement with Ndukwe, Omale, and Opanuga (2011).

Secondly, more servants points be provided to handle the existing population, i. e. for optimum system performance to be achieved more doctors can be provided at different server points to handle existing population. Obamire (2017); Afrane and Appah (2014) are also in support of this finding.

Thirdly, the use of alternative mixed block appointment simulation model will significantly reduced average time in queue, and ensures that doctors are not over utilized. The above finding is supported by Agada and Korve (2016); and Agada and Korve (2015).

The study therefore concludes based on the findings waiting line management has effect on queue performance of healthcare facilities in Nigeria in terms of maintaining a good queue discipline, having sufficient server points as well as the use of proper appoint systems in the hospitals.

4.2 RecommendationsBased on the findings from this study, the following recommendations are made:

1. More service points should be provided to reduce lengthy queues and encourage patient satisfaction of the healthcare services including identification of patient’s needs and to improve the quality of waiting by having distractions and facilities for patient comfort;

2. Proper server utilization be encouraged so as to avoid the system being idle.3. Appointment systems be strictly adhered in order to reduce average queue length

at hospitals.

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CHALLENGES OF HUMAN RESOURCE DEVELOPMENT AND PLANNING IN NIGERIA PUBLIC SERVICE: CASE STUDY (GOMBE STATE CIVIL

SERVICE)

By

James H Landi (Ph.D)Department of Economics

University of Jos, Jos.Nigeria

Linda SukarDepartment of Economics,

University of Jos, Jos – Nigeria.

ABSTRACTNowadays, organizations operate in a complex and changing environment that greatly influences their growth and expansion. To cope up with this changing environment they need to develop their human resources. This is because the survival and growth of any organization depends on the quality of human resources. Having this in mind this study was conducted to assess challenges of human resource development and planning in Nigeria public service using Gombe state civil service as a case study. The study used both primary and secondary data sources. A survey was employed taking a sample of 392 respondents selected through simple random sampling technique to collect data through questionnaire. Data were analyzed and interpreted using descriptive statistics based on SPSS 23.0 vision. The finding of the study showed that the employees have good awareness towards HRD concepts and they were able to relate those concepts with HRD. Therefore, the results proved that public service were in a good track in practicing training and development, career development, performance appraisal, personal analysis and utilization of trained staff. While organizational development and how HRD practice is administer was uncertain by the respondent. Nevertheless, the public service is still confronted with the variety of challenges in the practice of HRD. Generally, based on the findings, public service in Nigeria do not have good HRD system. To minimize the problems in the practice of HRD first and foremost, HR should get due attention since it is an engine for other resources. In Meeting HR need, the HRD practices should also focus on career development and post training evaluation should be exercised in order to increase the effectiveness of service delivery. And also, to overcome the challenges of HRD practice there is a need for skilled human and financial resources, to differentiate high and low performers by using performance criteria and providing the necessary technical and interpersonal support to make HRD process more sustainable. Key words: Human Resource Development, Planning, Nigeria Public Service.

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INTRODUCTIONEvery nation has a stock of resources called natural endowment, but by far the

most important resources is the people themselves. According to Okafor and Imohnopi (2006) pointed out that development of society is the major preoccupation of most Government in the third world countries. As a result, human resources has been identified as one of the most important catalyst in the nation’s development. In fact, it is the major propeller for development. In the twenty first century organizations, countries are faced with the task of achieving the best possible results in terms of efficiency and effectiveness in product/service delivery and profit maximization with available employees at their disposal. As a result, the concept of human resource development (HRD) has emerged as strategy to enhance the capacity of available employees in organizations for performance.

In Nigeria this important and critical resources has not been fully utilized in such a manner that would engender development. Human Resource Development and Planning in Nigeria requires urgent attention of all the economy stakeholders, both the government, organizations and the concerned private and public outfit. While government objectives during the first, second, third and fourth development plan (1962 -68; 1970-74; 1975-80; and 1981-85) Operation Feed the Nation in 1976, Green Revolution Programme in 1979-81, Structural Adjustment Programme of 1985-93, Rolling Plans 1990-1999, Vision 2010, National Economic Empowerment And Development Strategy (NEEDs) 2004-2007, State Economic Empowerment And Development Strategy (SEEDs), seven point agenda, vision 2020, Millennium Development Goals (MDGs) and Economic Recovery programs have all failed to address the development of manpower which hitherto supposed to be the bedrock of Nigeria economy. Public organizations are lagging behind in appreciating the need for functional, effective employee development programme. This is particularly the regrettable situation with the public services that are characterized by little or no meaningful manpower planning. Even in the face of apparent human resource surplus evidenced by the current alarming rate of graduate unemployment, post entry training is often lacking. Therefore, the aim of the study is to identify the challenges of human resource development and planning in Nigeria public service, To know how government plans affect human resource development, To know how human resource training affect employees performance. In doing so this paper has been divided into six sections namely; introduction, literature review, human resource development and planning in Nigeria public service, methodology, data analysis and conclusion/recommendation.

LITERATURE REVIEWConcept of Human Resource DevelopmentAccording to Singh (2012), HRD implies that the talents and energies of

employees in an organization as potential contributors in turn has a critical role for the creation and realization of the organization’s visions and goals. It is also the process of increasing knowledge and capacities of the people in a given organization. According to McLean (2001), HRD is conceptualized as any process or activity either short or long

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term that helps to develop employees‟ work based on knowledge, expertise, productivity, and satisfaction for personal, organizational, community and country at large. Based on Singh (2012), in the national context, HRD is considered as a process by which the people in various groups are helped to get new knowledge continuously and make them self-reliant.Concept of Human Resource Planning

The success of every organization depends on how well it plans and utilizes it human resources. Both personnel and human resources management as argued by Gerald and Ronald (1996) are often viewed as a series of activities designed to process people into, through and out of organizations. This means the first activity of human resource management is human resource planning. Randall (1995:95) defined human resource planning as “forecasting personnel needs for an organization and decision on the steps necessary to meet these needs”. This mean it seeks to determine the number and kinds of people the organization needs now, and what it may need in the near future and seek ways to satisfy those needs. The emphasis however is how organization assesses the future supply of and demand for human resources. Dessler (2001) sees HR planning as employment planning which, in his view, is the process of formulating plans to fill future openings based on an analysis of the positions that are expected to be open and whether they will be filled by inside or outside candidates. This is why Ogunniyi (1992) in handling the subject says that manpower planning is a concept that involves critical analysis of supply, demand, surplus, shortage, wastage and utilization of human resources. Its primary goal is the adoption of policy actions and strategies which will not be stressful and or be a negation of endeavors to balance the equation of supply and demand required for socio-economic and political development of a nation.

Nigeria Public ServiceThe origin of the Nigerian civil service date back to the beginning of the 20th

century with the introducing of British rule in Nigeria. The colonial masters introduced a dual system of administration: direct rule in the south and indirect rule in the north. A more formal civil service emerged only in 1914, when the Northern and Southern protectorates were amalgamated to form the present geographical space called Nigeria. This however, did not immediately lead to a unified civil service until 1945 when significant changes were introduced based on the recommendation of Walayn Committee.

The public service is an organization that is responsible for managing the resources of a nation on behalf of the people who are the owners of these resources; it is run by both elected and appointed officials. According to section 318 (1) of the constitution of the Federal Republic of Nigeria, 1999 (as amended), elective as well as appointed officials include: The President, Vice President, Governors and their Deputies, Ministers and commissioners, members and staff of legislative Houses, Chairmen, Directors of all corporations and companies in which the government has controlling shares. The public sector, therefore, represent the realm where the government operates for the benefits of the citizenry. This is different from the private sector where individual operates. The public service is a typical Bureaucratic organization made up of public

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servants who are recruited on the basis of their Skills/qualification and expertise. A part from the 1999 Constitution of the Federal Republic of Nigeria, which is regarded as the grand norm and which creates the public service, there is also the Revised Public Service Rules, 2006 for the public servants to obey and follow.Theories of Human Resource Development

Economic Theory of Human Resource Development (Contributed by Richard J. Torraco 1998)

An organization is an organic entity through which business is carried out primarily for achieving economic objectives of the organization. Moreover, the economic theory holds the critical position in the evolution of the concept of HRD in context of an organization. Economics is the study of how scarce resources are optimally utilized and how these scarce resources are allocated. It consists of certain concepts of efficiency which could help in designing a framework for ensuring maximum societal well-being. Thus, economics is considered to be one of the theories of human behavior (Deb, 2010).

Psychological Theory of Human Resource Development (Contributed by Elwood F, Holton III, 1996)

From the organizational point of view psychology is concerned about the individual behavior at work. This theory asserts that the behavior and mental process of employees and their effect organizational system performance. For an organization to be effective and well-organized in the competitive edge and global scenario, it must take great care of maintaining a cohesive working environment. This is undertaken where the working conditions are integrated with the talents and skills of the HR. The application of psychological tools to solve problems of the employees working in the organizations facilitates their integration with the organizational climate and results in enriched and enhanced performance (Deb, 2010). Theory of Human Resource Planning

Systems TheoryBertalanffy (1950) is generally regarded as the founder of "systems theory" and

the broad sweep of its applications for almost all disciplines, the natural as well as the social sciences. The systems theory has had a significant effect on management science and understanding organizations. A system is a collection of part unified to accomplish an overall goal. If one part of the system is removed, the nature of the system is changed as well. A system can be looked at as having inputs (e.g., resources such as raw materials, money, technologies, and people), processes (e.g., planning, organizing, motivating, and controlling), outputs (products or services) and outcomes (e.g., enhanced quality of life or productivity for customers/clients, productivity). Systems share feedback among each of these four aspects of the system.Team Building Approach or Theory

This theory emphasizes quality circles, best practices, and continuous improvement. It is a theory that mainly hinges on reliance on teamwork. It also emphasizes flattening of management pyramid, and reducing the levels of hierarchy.

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Finally, it is all about consensus management that is involving more people at all levels in decision-making.Empirical StudiesKayani (2008) has identified the challenges of human resource development to pace with globalization based on the following points: performance appraisal, induction in -service education, organizational difference, service stature difference. As the study stated, limited performance appraisal, unclear human resource development strategies, organizations difference capability in induction in -service education and learning are major challenges. Major findings of the study revealed, that experience difference, organizational difference, working in unisex or co-education, service stature difference have a significant impact on human resource development climate.

A study by Swarajya (2005), entitled with human resource development in selected public enterprise in India has dedicated the knowledge in and often neglected area human resource development in public sector enterprises. The researcher has assessed the efficiency of human resource development processes undertaken in the selected study areas. The study identified the key problems occurred in the course of implementation of HRD programs and ascertained the attitudes of employees towards these programs. The study found that no much worthwhile work was done in the study areas for developing and upgrading the competencies, skills, knowledge, abilities, experience, welfare, motivation, career development of employees.

Sundararajam (2009) has observed the emerging trends of human resource development practices on the basis of survey of employees working in few cooperative organizations the overall HRD climate as neither good nor bad. The study identified that the employees shown unfavorable attitude towards human resource development policies and practices. The researcher said that HRD climate should be improved in the competitive environment. As the overall conclusion indicated by the study human resource has not been properly implemented. Study Gaps

Despite the fact that extensive research has been done in the area related to human resources development and planning, there are some gaps left which need further study. Some of the gaps that needs to be breached includes: Most of the related research work were carried out over 7 years and this research is coming at this time. Therefore one of the gap is the timing of the research. Another gap is the location of the research. The related research were done at different locations rather than the Nigeria public service. HUMAN RESOURCE DEVELOPMENT AND PLANNING IN NIGERIA PUBLIC SERVICE.

HRM as a concept got introduced into the Nigeria literature in 1940 during the colonial era; with industrialization and commercialization, which later became wage employment. Ever since then, there has been a tremendous growth of HR in Nigeria, which in recent years has been characterized by lack of professionalism and specialization. Different reasons have been accounted, for as the challenges facing HRM practices in Nigeria.

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The socio-cultural diversity of Nigeria has influenced the HRM practices in Nigeria. Nigeria is characterized by over reliance on culture, language, religion, gender and educational qualifications as a basis for determining who get employed. What this means is that, the opportunity for an average Nigeria to get employed is a factor of the aforementioned variables.

METHODOLOGY Following the completion of data collection, data processing will be conducted

through filtering inaccuracy, inconsistency; incompleteness and illegibility of the raw data to make analysis very easy. To solve such problems, manual editing, coding, data entry, and consistency checking will be done. To analyze the data, quantitative techniques is employed. The data collected from questionnaire were analyzed through quantitative descriptive statistical tools such as percentages and frequencies, mean and standard deviations using SPSS computer software to test the hypothesis. The rule for decision making for the research is that any score with higher percentage will be used as a factor for decision making, while the score with the lower percentage will not be considered but will only be recognized. Finally, the results will be discussed and interpreted to draw important conclusions, recommendations and implications. The statistical tools to be used are shown below;

Mean X = ∑Xi n

Where X = the symbol we use for mean (pronounced as X bar)∑ = Symbol for summationXi = Value of the ith item X, i = 1, 2… n

n = total number of itemsStandard deviation s.d = ∑ (Xi - X) 2

nThe mean and standard deviation formulas above will be used to analysis the

research questions and for testing the hypotheses.

DATA PRESENTATION AND ANALYSISFor this study, a total of 392 questionnaires were distributed to the civil servant

currently working in different ministries of Gombe State to assess the challenges of human resource development and planning. The questionnaires filled up and returned were 379 with response rate of 100% in most of the questionnaires.Demographic Characteristics of the Respondents

With regard to sex, the overwhelming majority of the respondents were 219 (57.8%) males and the rest 160(42.2%) were females. This implies that civil service is dominated by more of male employees and females‟ participation is low relative to male.

For the marital status, the majority of the respondents 196 (51.7%) were married, 160(42.2%) were single and 23(6.1%) of the sample population were divorced. This shows that Gombe civil service have a higher number of work force who are married

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and single. This implies that service delivery will be more effective because civil service is in the hands of matured and responsible individuals.

Considering the respondents’ level of education, 70 (18.5%) of the total respondents were certificate holders, while 109 (28.8%) of the respondent were diploma holders. Whereas, the majority 163 (43.0%) of the respondent were degree holders, and 35 (9.2%) which is the lowest were second degree holders and respectively. This signifies that the majority of respondents were first degree holders. The implication of this is that, service delivery of the civil servant will be more effective and efficient due to their educational level. The sector should plan for the development of its workers to masters’ level so as to increase their job performance.

The work experience of the respondents shows that the majority of 132 (34.8%) of the respondents have relatively longer service times above 11 years. Following 113 (29.8 %) of them have 2 – 6 years’ work experiences, 100 (26.4%) ranged from 6-10 years. The rest 34 (9%) of the respondents were new to the service with less than one year to one year work experience. From this we can conclude that most of the staff have good work experiences which can help them to do their responsibilities effectively and efficiently. In other words, the civil service is in a good track in capturing well experienced staffs. Descriptive Statistics of Scale Type Questionnaire

In this part descriptive statistics in the form of mean and standard deviation were presented to illustrate the feedback of the respondents. The feedback of the respondents for the variables indicated below were measured on five point Likert scale with measurement value 1= Strongly disagree; that is very much dissatisfied with the case described; 2= Disagree, that is, not satisfied with the case described; 3= Neutral, that is, uncertain with the case described; 4= Agree, that is, feeling all right with the case described and considered as satisfied; and 5 =strongly agree, that is very much supporting the case described and considered as highly satisfy. To make easy interpretation, the following ranges of values were reassigned to each scale: 1 - 1.8 = strongly disagree; 1.81 - 2.60 = Disagree; 2.61 - 3.40= Neutral; 3.41 - 4.20= Agree; and 4.21 - 5 = Strongly Agree. Best, 1977 (cited in Yonas, 2013). To analyze the collected data in line with the overall objective of the research undertaking, statistical procedures were carried out using SPSS version 23.0 software.

Table 1. Descriptive Statistics  ITEMS

AVGN

AVGMEAN

AVG STD. DEVIATION

Awareness of HRD Concepts 376.25 3.43 0.980

Training and development practice 376.25 3.42 1.037

Career Planning and Development 377.4 3.41 0.990

Organizational Development 377 3.33 0.953

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Performance Appraisal 376 3.43 0.943

How HRD is Administered? 377.86 3.35 0.941

Utilization of trained staff 377.67 3.95 0.875

Challenges of HRD Practices 377.5 3.62 0.895

Source: Field survey (2018)

The average scored mean of employees awareness towards the concept of HRD was 3.43. The scored mean value shows that the respondents of the civil service were well equipped or aware of the concepts of HRD i.e. training and development, organizational development, career planning and development and performance appraisal and the standard deviation was 0.980 approximately. Based on this finding one can deduce that employees are aware of human resource development from its components perspective. This could make HRD conducive for both enhancement of the capacity of employees and achievement of organizational goals.

The average mean of the practice of training and development in the organizations was 3.42 with the average standard deviation of 1.037. This indicates that, training and development is an important factor for building continuous human resource development. However, due emphasis was given by public sector towards the issue. On the other hand, as the study findings revealed that the training conducted by public service was sufficient and satisfactory. From this fact, it is possible to conclude that the sector were in a good track in practicing training and development.

The average mean for career development was 3.41 and the standard deviation is 0.990. This implies that the respondent were in agreement that their organizations are working hard to improve employees career. It then indicate that employees know their jobs well and good turnout is expected from them.

The average scored mean concerning organizational development was 3.33 and the standard deviation was 0.953. This implies that the respondent were neutral about organizational development which means that they are not certain or they are indifferent about the case presented. This signifies that, is either the organization is not doing anything about it or they are not doing enough. This could result to poor staff input, which will also result to poor output.

The average scored mean value of employees’ perception towards performance appraisal in their respective working sector was 3.43 and the standard deviation was 0.943. This scored mean value displays that respondents were satisfied with the appraisal systems. Sorab (2006) found that performance appraisal in the public sector has a positive relationship with human resource development. Accordingly, performance appraisal is useful for self-development and individual counseling, remuneration, quality feedback, communication and motivation. However, from this perspective the respondents were satisfied with the appraisal system conducted by the sector. Study survey conducted by Shefali and Thakur (2007), towards performance appraisal as tool of human resource development in few organizations. The researchers have found

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certain weaknesses and strengths of the system. They suggested that some measures for achieving the objectives of performance appraisal system. They stated that many of public organizations have tailored their appraisal systems efficiently manage the performance of human resource development in the era of intense competition; however, many changes have not been made in the system. The only changes that have been made by the organizations were the introduction of self-appraisal system according to the observations taken by the researchers.

The respondents were indifferent on a general term concerning how HRD is administered with the total scored mean value of 3.35 indicating that they were neutral with the case described and the standard deviation was 0.941. From this it is possible to deduce that there were a lot of things that organizations have to do in meeting the issues described. Since the employees are indifferent about the issue, it then mean the effort made by the organization is not good enough, And unless the sector assess the issues, that could limit them in doing these tasks which have paramount role in building HRD, they may not improve their performance in the desired way.

With regards to the utilization of trained staff, the total average mean was 3.95 and the standard deviation was 0.875. This implies that training motivate employees and the organizations utilizes their trained staff for maximum production and service delivery. Dean (1972) pinpoint situations that may cause underutilization of manpower. These include: Poor coordination and control by agencies and ministries, failure to produce required information, failure to properly analyze and use available information and failure to make decision and take action when needed. It would appear that in any system, especially at the state civil service, the deployment of human resources is flashily guided by the desire to get the best out of the staff. In other words, the use of human resource is apparently driven by the goal of effective utilization. In spite of this desire, Onah (2007) observed that the under-utilization or ineffective use of human resource is a serious problem confronting many state civil service in Nigeria today.

The challenges of human resource development with the total average scored mean value of 3.62 showing that the respondents answered the statements given with agreement rating scale “agree” and the standard deviation was 0.895. From this, one can understand that the challenges mentioned in the questionnaire are some of the human resource development challenges of the civil service that need to be overcome. From this fact it is possible to conclude that in the public service there were challenges that hindered and constrained the efficiency and effectiveness of human resource development practices. Habib (2012), found that similar findings with this study designing comprehensive HRD strategies, linking with strategic priorities, lack of technology, creating positive HRD climate, promoting positive workforce attitude, lack of sufficient budget and accepting modern technological changes as the key challenges in public sector in developing countries. Wachira (2012), also pointed out in his study giving due emphasis for personal and professional development is considered as the basic challenge that need to be addressed in the practice of human resource development in Africa which supports the findings of this study. Moreover, this study came with consistent findings assessed

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by Gebrekidan (2011), as he outlined that inadequate training, lack of accountability and enforcement and lack of good merit system as bottleneck problems that organization should tackle in achieving HRD in his systematic review conducted in some Africa countries.

This study tends to answer the following research question;1. How does organizational plans affect human resource development? 2. How does human resource training affect employee’s performance?

The study reveals that, though employees were neutral about organizational development in the questionnaire, nevertheless, concerning career planning and development, the respondent were in agreement that their organizations are working hard to improve employees’ career. It then indicate that employees know their jobs well and good turnout is expected from them. This then means that the for the first research question, organizational plans affect human resource development positively.

For the second research question that says, how does human resource training affect employees’ performance?

From the training and evaluation practices in the analysis, it was revealed that due emphasis was given by public sector towards the issue. That is, this study showed that the training conducted by public service was sufficient and satisfactory. This implies that the sector were in a good track in practicing training and development. Also, questions that talked about the utilization of trained staff, was revealed by the study that training motivate employees and the organizations also utilizes their trained staff for maximum production and service delivery. This then implies that human resource training affect employee’s performance positively.CONCLUSION AND RECOMMENDATIONConclusion

Development of society is the major concern of most governments in the third world countries. As a result, human resource has been identified as one of the important catalysts in the nation’s development. In fact, it is the major propeller for development. In Nigeria, this important and critical resource has not been fully developed, managed and utilized in such a manner that would engender development.

From the response of the employees it is clear that civil service is working hard to improve human resource performance, and yet there are challenges that still exist and need to be improved. Therefore for effective and efficient service delivery, Government should pay more attention to the challenges experience by human resources in civil service.

Recommendations Based on the findings of the study the following recommendations are forwarded:

i. HR of the public service should get greatest emphasis on their development since they are engines for other resources such as physical resources, information resources, and financial resources.

ii. Public Service should also focus on individuals and satisfying their needs for career development.

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iii. An extensive personal need assessment should be exercised through analyzing the substantive knowledge and skills possessed by the employee in order to reduce wasting time, resource, demotivation and negative attitudes towards future programs.

iv. Post training evaluation should also be exercised in order to increase the effectiveness of HRD program to be held in the next session, to help participants to get feedback for their improvement and to find out to what degree the HRD objectives are achieved.

v. There should be continuous follow up, strengthening of the monitoring and evaluation role and providing the necessary technical and interpersonal support to make the HRD process more sustainable.

The issue of HRD requires further research, therefore further research should be made to look in to HRD dimensions of the research areas. Also the case study used in this research is Gombe State, therefore further research should also be carried out in other part of the country, so that HRD challenges can be rectified and resolved.

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Ltd, New-Delhi.

Dessler, G (2001). Human Resources Management, New Jersey: Prentice Hall Inc. Gebrekidan, A. (2011). Capacity Building workshop on “promoting professionalism in

the public service: Strengthening the role of Human Resource Managers in the public sector for the effective implementation of the charter for public Service in Africa , Addis Ababa, Ethiopia.

Gombe state bureau of statistics (2015) Gombe state manpower.

Habib, M.N. (2012). The Role of Developing Countries Governments in HRD Programs the Egyptian Experience. International Journal of Business and Social Science, 3(3), 1-2.

Kayani, T. (2008). Challenges of Human Resource Development to pace with Globalization. Pakistan; Allameh eqbal open university.

McLean, G.N. (2001). If we can’t define HRD in one country, how can we define it in an international context? Human Resource Development International, 4(3), 313-326.

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Onah, F.O. (2007) Strategic Manpower Planning and Development (Revised ed). Nsukka: Great AP Express Publishers Ltd.

Oguniniyi, O. (1992), “Manpower Planning: Issues and Problems in Nigeria”, in Yahaya, A.D. and Akinyele, Caleb. I. (ed) New Trends in Personnel Management: A Book of Readings. Lagos: Administrative Staff College of Nigeria.

Okafor E.E., & Imohnopi (2006). Towards improved human resource development in Nigeria; challenges and prospects.

Randall. L. (1987). Resource economics: An economic approach to natural resource and environmental policy (2nd Ed.). New York: John Wiley.

Shefali, N., & Thakur. Y.S. (2007). Performance Appraisal: A Tool of HRD after detailed analysis of the appraisal system of an organization - Scooters India Ltd.

Singh, S. (2012). Key Components of Human Resource Development (HRD): Research Journal of Social Science and Management, 1(9), 118.

Sorab, S. (2006). The Three Sixty Degree Performance Appraisal, Personnel Today, JulySept. 2006, 6-11.

Sundararajam, S. (2009). Emerging Trends of HRD Practices in Cooperative Sector-Perspective Approach, Tamilnadu Journal of Cooperation. 2(1), 3-6.

Swarajya, L.C. (2005). HRD in select public enterprises in Andhra Pradesh. New Delhi: Discovery publishing House.

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Yonas, B. (2013). The effect of customer loyalty with reference to commercial bank of Ethiopia; Hawassa University, unpublished material.

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APPENDIX A

Department of Economics School of Post Graduate Studies University of Jos, Plateau State

Dear Respondents, I would like to express my deepest appreciation for your generous time, honest and prompt responses. Objective This questionnaire is designed to gather data about the challenges of human resource development and planning in public service. The information will be used as primary data in the research I am conducting as a partial fulfillment of Master’s Degree in Economics at University of Jos. The data you provide are believed to have a great value for the success of this research. I assure you that all data will be used for academic purpose and analyzed anonymously through the authorization of the university. As a result, you are not exposed to any harm because of the information you provide. Finally, this research is to be evaluated in terms of its contribution to our insight about the challenges of human resource development and planning in public service in the study area in particular and the country at large.

General Instructions No need of writing your name In all cases where answer options are available please tick (√) in the box provided For scale typed questions please circle your preferred level of agreement Thank you for your honest cooperation!!

Yours Sincerely,

Linda Sukar08139731051

Part I: Demographic Information 1. Sex : Male 1, Female 2

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2. Marital status : Single 1, Married 2, Divorced 3 3. . Education level :

Certificate 1, Diploma 2, Degree 3, MA/MSc and above 4

4. Work experience (in years): 1 and below 1, 2-6 2, 6-10 3, 11 and above 4 Part II: Please state your level of opinion for each given statement using the following scales: 1= strongly disagree 2= disagree 3= neutral 4= agree 5= strongly agree

I Awareness towards the concepts of HRD Agreement scales

1. I am aware of training and development from HRD point of view

1 2 3 4 5

2. I know career planning and development as crucial part of HRD 1 2 3 4 5

3. I am acquainted with organizational development from HRD standpoint

1 2 3 4 5

4. I am familiar with performance appraisal from HRD point of view

1 2 3 4 5

II Training and Development Agreement scales

1. My organization has good training and development programs. 1 2 3 4 5

2. The organization has access to employee training needs. 1 2 3 4 5

3. The organization has set performance goals and objectives 1 2 3 4 5

4. The organization Evaluates training efforts 1 2 3 4 5

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III Career development Agreement scales

1. The organization is working to improve career development

1 2 3 4 5

2. The organization is Working to upgrade employees potential

1 2 3 4 5

3. The organization has good career planning and development

1 2 3 4 5

4. The organization integrates HRD with organizational objectives

1 2 3 4 5

5. They have Good counseling center that benefits all employees

1 2 3 4 5

IV Organizational development Agreement scales

1. The organization has Good management with required profession

1 2 3 4 5

2. They have Good culture of openness 1 2 3 4 5

3. Good credibility and fairness of top management 1 2 3 4 5

4.Encouraging problem solving culture 1 2 3 4 5

5.Good team spirit 1 2 3 4 5

6. Sound recruitment systems 1 2 3 4 5

7. Better compensation and job security 1 2 3 4 5

V Performance appraisal Agreement scales

1. Good performance appraisal systems 1 2 3 4 5

2. There is Evaluation of what is expected from each employee

1 2 3 4 5

3. There is Immediate action when employees lack capacity

1 2 3 4 5

4. There is Acknowledgement of good performances 1 2 3 4 5

5. The organization identifies area in need of improvement

1 2 3 4 5

VI Scale your ministry how HRD is administered? Agreement scales

1. They have good personnel analysis 1 2 3 4 5

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2. There is appropriate job analysis 1 2 3 4 5

3. Prioritizing needs in practicing HRD 1 2 3 4 5

4. The organization identifies and designs HRD objectives

1 2 3 4 5

5. There is Implementation based on stated objectives 1 2 3 4 5

6. Evaluation and follow up 1 2 3 4 5

7. The organization Interpret evaluation results and feedbacks

1 2 3 4 5

VII Utilization of trained staff Agreement scales

1. Training motivate you as a staff 1 2 3 4 5

2. There is effective Staff engagement 1 2 3 4 5

3. staff training enhances productivity and/or service delivery

1 2 3 4 5

VII Challenges of human resource development Agreement scales

1. Developing comprehensive HRD strategies 1 2 3 4 5

2. Developing a positive work environment 1 2 3 4 5

3. Creating managerial and leadership capacity 1 2 3 4 5

4. Utilizing HR assessment technology to plan HRD 1 2 3 4 5

5. Promoting positive workforce attitudes towards HRD

1 2 3 4 5

6. Allocating sufficient financial resources 1 2 3 4 5

7. Accepting the challenges of modern technological changes

1 2 3 4 5

8. Paying attention to profession al development 1 2 3 4 5

9. Inadequate training and development 1 2 3 4 5

10. Lack enforcement and accountability 1 2 3 4 5

11. Attracting and retaining qualified personnel 1 2 3 4 5

12. Lack of proper merit system 1 2 3 4 5

APPENDIX B

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Statistics

SEXMARITAL STATUS

EDUCATION LEVEL

WORK EXPERIENCE

N Valid 379 379 377 379Missing 0 0 2 0

Frequency TableSEX

Frequency Percent Valid PercentCumulative

PercentValid MALE 219 57.8 57.8 57.8

FEMALE 160 42.2 42.2 100.0Total 379 100.0 100.0

MARITAL STATUS

Frequency Percent Valid PercentCumulative

PercentValid SINGLE 160 42.2 42.2 42.2

MARRIED 196 51.7 51.7 93.9DIVORCED 23 6.1 6.1 100.0Total 379 100.0 100.0

EDUCATION LEVEL

Frequency PercentValid

PercentCumulative

PercentValid CERTIFICATE 70 18.5 18.6 18.6

DIPLOMA 109 28.8 28.9 47.5DEGREE 163 43.0 43.2 90.7MA/MSC AND ABOVE 35 9.2 9.3 100.0Total 377 99.5 100.0

Missing System 2 .5Total 379 100.0

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WORK EXPERIENCE

Frequency Percent Valid PercentCumulative

PercentValid <1 34 9.0 9.0 9.0

2-6 113 29.8 29.8 38.86-10 100 26.4 26.4 65.2>11 132 34.8 34.8 100.0Total 379 100.0 100.0

Descriptive Statistics

  N Minimum Maximum MeanStd.

Deviationi am aware of training and development from HRD point of view

378 1 5 3.52 1.002

i know career planning and development as crucial part of HRD.

378 1 5 3.54 .974

i am acquainted with organisational development from HRD stand point.

374 1 5 3.34 .974

i am farmiliar with performance appraisal from HRD point of view.

375 1 5 3.31 .968

my organisation has good training and development programs.

379 1 5 3.48 1.128

the organisation has access to employee training needs.

377 1 5 3.33 1.013

The organisation has set performance goals and objectives.

377 1 5 3.52 1.024

The organisation evaluates training efforts.

372 1 5 3.35 .984

The organisation is working to improve career development.

379 1 5 3.52 1.006

The organisation is working to upgrade employees potential. 379 1 5 3.47 .968

The organisation has good career planning and development.

379 1 5 3.47 1.039

the organisation integrates HRD with organisational objectives. 377 1 5 3.38 .926

they have good counseling center that benefits all employees. 373 1 5 3.20 1.010

The organisation has good management with required profession.

379 1 5 3.37 .940

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They have good culture of openness. 376 1 5 3.35 .923

Good credibility and fairness of top management.

376 1 5 3.38 .910

Encouraging problem solving culture. 375 1 5 3.38 .943

Good team spirit 378 1 5 3.45 .979

Sound recruitment systems. 377 1 5 3.15 .963Better compensation and job security. 379 1 5 3.24 1.012

Good performance apprasial system 378 1 5 3.44 .894

There is evaluation of what is expected from each employee.

377 1 5 3.45 .980

There is immediate action when employees lack capacity.

376 1 5 3.27 .950

There is acknowledgement of good performance.

375 1 5 3.45 1.012

The organisation identifies area in need of improvement.

374 1 5 3.52 .881

They have good personal analysis. 376 1 5 3.29 .946

There is appropriate job analysis. 379 1 5 3.39 .957

prioritizing needs in practicing HRD. 378 1 5 3.31 .902

The organisation identifies and designs HRD objectives.

378 1 5 3.29 .903

There is implementation based on stated objectives.

377 1 5 3.46 .973

Evaluation and follow up. 378 1 5 3.43 .923

The organisation interpret evaluation results and feedbacks.

379 1 5 3.27 .986

Training motivate you as a staff. 379 1 5 3.97 .898

There is effective staff engagement. 379 1 5 3.85 .869

Staff training enhances productivity and/ or service delivery.

375 1 5 4.04 .858

Developing comprehensive HRD strategies.

379 1 5 3.42 .940

Developing a positive work environment.

376 1 5 3.63 .883

Creating managerial and leadership capacity.

378 1 5 3.69 .882

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Utilizing HR assessment technology to plan HRD.

376 1 5 3.61 .848

Promoting positive work force towards HRD.

379 1 5 3.57 .853

Allocating sufficient financial resources. 377 1 5 3.62 .977

Accepting the challenges of modern technological changes.

379 1 5 3.72 .882

Paying attention to professional development

377 1 5 3.76 .785

Inadequate training and development. 378 1 5 3.65 .924

Lack enforcement and accountability. 376 1 5 3.49 .969

Attracting and retaining qualified personnel.

378 1 5 3.64 .887

Lack of proper merit system. 377 1 5 3.62 .906

Valid N (listwise) 324        

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CHALLENGES TO CURBING ARMS PROLIFERATION IN NIGERIA.

By

Luka Ruth CalebDepartment of Political Science,

Faculty of Social Sciences,Nasarawa State University, Keffi.

Prof Eugene Aliegba Department of political science,

Faculty of Social Sciences,Nasarawa State University, Keffi.

and

Dr. Bello OhianiDepartment of Political Science,

Faculty of Social Sciences,Nasarawa State University, Keffi.

AbstractThe study focuses on the challenges of curbing small arms and light weapons proliferation in West Africa. The proliferation of small arms and light weapons is an evolving trend and a universal evil; posing challenges to human development and security. This is as a result of the fact that contemporary world is faced with various degrees of crisis which involves the use of arms of different sophistications, many of which are possessed illegally despite laws prohibiting illegal arms trade. Small arms and light weapons exacerbates conflicts, which leads to the use of arms in conflicts situations. Incidences like gang shooting, kidnapping, terrorism, armed robbery, and communal conflicts are essentially promoted and sustained by arms at the disposal of illegal users. Many others are victims of legitimate arms abuse by some ruthless law enforcement agents. The study found out that efforts put in place by West African states in particular Nigeria to curb arms proliferation has not achieved much because of so many challenges such as poverty, porous borders, local manufacturers, incessant crisis and soon. Nigeria has not achieved much in tackling domestic issues leading to arms proliferation such as poverty, unemployment, insecurity, conflict amongst others. The data obtained for this study was generated from the secondary source and documentary method applied in data analysis. It adopted ‘‘Attribution Theory’’ as a theoretical underpinning, to show how domestic issues are attributed to arms proliferation.

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To this end, the study recommends that the government should place emphasis on finding solutions to reasons for the demand of arms in the country by providing jobs and employments in other to reduce the high rate of crime and to discourage local manufacturers, who go into the venture for economic purposes. In conclusion there should be community focused mopping of illegal arms in circulation, closure of arms black market to destroy the network, clampdown on syndicates and dealers on illegal arms and promulgation of deterrent laws with severe penalty to discourage trading on illegal arms.

Keywords: Global Trends, proliferation, small arms, light weapons, challenges, security.

INTRODUCTION

Globally, the phenomenon of the proliferation of illicit SALW has recently emerged as a major concern of the international community, posing a complex challenge that involves security, humanitarian and development dimensions.The majority of African countries became independent between 1960 and 1963, when the Organisation of African Unity (now African Union) was formed in Addis Ababa. At independence in the early 1960s, SALW were not a problem. Apart from Portuguese colonies of Angola, Mozambique, and Guinea–Bissau where Portugal imported millions of SALW to fight African nationalist and freedom fighters, and Algeria, where France also imported large quantities of the same kind of weapons to pursue its colonial agenda, the rest of the continent, more or less, were free from the ‘tools of death’ [International Action Network on Small Arms (IANSA)]. The end of the cold war led to a decline in control over these weapons in many parts of the world, resulting in a significant increase in their circulation worldwide. The accelerated pace of globalization in the same period facilitated both legal and illegal cross-border transfers of these weapons, while a sudden upsurge in intra-state conflicts in West Africa created a staggering demand for them which pushed for more supply thereby making them weapons of choice in majority of recent conflicts and in non-war settings such as sectarian violence (ethnic, religious and chieftaincy conflicts), suicides, murders, homicides and accidents.Presently, it is estimated that there are about 845 million small arms in the world today of which about 10 million are in the West Africa Sub-region. Experiences in intra-state conflicts and mercenary activities in Africa, Asia, the Middle East attest to the fact that SALW are indeed ‘tools of death’ and barrier to development. Other negative experiences are general crime, narcotics and drug related violence in the Americas and worldwide terrorism.Indeed, the SALW problem is a global one which requires global attention and the creation of solutions at all levels of political and social organization. As a result, many governments have signed a number of agreements at the global and regional levels to stop the illegal spread of SALW across borders.

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There are two different types of global and regional agreements on SALW: legal and political. The most important difference between these two types of agreement is that legal agreement is legally binding. By signing the agreement, states commit themselves to comply with its requirements. A political agreement is an expression of will and intent to behave in accordance with certain norms and principles.There are two international agreements dealing with the illicit proliferation and trade of SALW:1. The UN Protocol against the Illicit Manufacturing of and Trafficking in Firearms, their Parts Components, and Ammunition (UN Firearms Protocol). 2. The UN Programme of Action to Prevent, Combat and Eradicate the Illicit Trade in Small Arms and Light Weapons in All its Aspects (UN PoA).At the Sub-regional level, the ECOWAS Convention on Small Arms and Light Weapons, Their Ammunition and Related Material was adopted in 2006. It succeeded the ECOWAS Moratorium of 1998, the first political agreement on SALW in the Sub-region that bans the illicit importation and manufacture of SALW. Similarly, the ECOWAS Convention prohibits the illegal manufacture of SALW, and is legally binding for its members.The target of this paper is West Africa as a whole and Nigeria in specific case. The results of the preponderance of SALW in the Sub-region are that, West Africa has become the most unstable Sub-region on the continent of Africa. Since 1960, of the 15 member states that make up ECOWAS most have been through several military coups, 37 of which were successful. SALW have particularly fuelled conflicts in Côte d’Ivoire, Guinea-Bissau, Liberia, Mali, Niger, Senegal, Sierra Leone and Togo and the Sub-region is still struggling to survive ongoing conflicts in which small arms play a central and destabilizing role. It is also rapidly changing the cultural and traditional fabric of the Sub-region, drifting towards self-destruction where uneducated and semi-educated youth who wield the power of the gun are ruling the educated and the older generation with their wisdom. The conflict ridden West Africa is therefore a showcase of uncontrolled SALW proliferation - a region where in the not-too-distant past, SALW were alien to the society apart from the crude and primitive ones used by hunters in the hinterland.

CONCEPTUAL FRAMEWORK: SMALL ARMS AND LIGHT WEAPONS Small arms‘Small arms’ are weapons designed for personal use, including: light machine guns, sub-machine guns, including machine pistols, fully automatic rifles and assault rifles, and semi-automatic rifles. ‘Small arms’ also include:1) ‘Firearms’, meaning:(a) Any portable barrelled weapon that expels is designed to expel or may be readily converted to expel a shot, bullet or projectile by the action of an explosive, excluding antique firearms or their replicas. Antique firearms and their replicas shall be defined in accordance with domestic law. In no case, however, shall antique firearms include firearms manufactured after 1899.

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(b) Any other weapon or destructive device such as an explosive bomb, incendiary bomb or gas bomb, grenade, rocket launcher, missile, missile system or mine.2) ‘Ammunition’, meaning the complete round or its components, including cartridge cases,primers, propellant powder, bullets or projectiles, that are used in a small arm or light weapon, provided that those components are themselves subject to authorisation in the respective State Party.3) ‘Other related materials’, meaning any components, parts or replacement parts of a small arm or light weapon, that are essential to its operation.Light weapons‘Light weapons’ include the following portable weapons designed for use by several persons serving as a crew: heavy machine guns, automatic cannons, howitzers, mortars of less than 100 mm calibre, grenade launchers, anti-tank weapons and launchers, recoilless guns, shoulder-fired rockets, antiaircraft weapons and launchers, and air defence weapons.

THEORETICAL FRAMEWORKAttribution theory is basically an approach that relates events to their likely causes. This approach was made prominent in the works of Heider (1958), Jones and Davis (1965), and Kelley’s (1967). In particular, Kelley’s (1967) developed co-variation model of attribution theory. It was a logical model for judging whether a particular action should be attributed to some characteristic of the person (internal) or the environment (external). The term co-variation simply means that a person has information from multiple observations, at different times and situations, and can perceive the co-variation of an observed effect and its causes. He asserts that in trying to discover the causes of behavior, one takes into account some kinds of evidence embedded in two types of causal information which influence judgments. These are Low factors = person (i.e. internal) attribution and High factors = situational (i.e. external) attribution. However, the approach, according to Fiske & Taylor (1991), focuses on how the social perceiver uses information to arrive at causal explanations for events. It examines what information is gathered and how it is combined to form a causal judgment.Applying the method to this study, many scholars and public commentators have attributed the cause of arms proliferation to many factors based on varied observations. Their judgments recognize the internal and external dynamics of the problem. The external factors relate essentially to national policies of countries regarding production and distribution of small arms and light weapons, how they treat the regulatory laws guiding small arms and light weapons and the overall assessment of economic interests attached to their production and distribution. In other words, the internal influence emanates from peculiar state’s characteristics involving her leadership style, pattern of sharing social, economic and political rewards; the nature of relationship between and among her constituent units and the ways her laws are enforced. When these indices operate in the negative, the consequence degenerates into conflict that frequently

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escalates into armed violence; thereby necessitating the needs for arms and weapons that translate to arms proliferation.

CHALLENGES TO CURBING ARMS PROLIFERATION IN NIGERIA While SALW supply and regulations regarding the proliferation, manufacturing and marking of SALW have been discussed for many years, the demand side of SALW has only more recently moved into focus with the realisation that successful and sustainable disarmament needs to address underlying causes for weapons acquisition. Small arms are attractive tools of violence for a number of reasons. They are widely available, low in cost, extremely lethal, simple to use, durable, highly portable (even by children), and easily concealed. As a consequence, they are present in virtually every society. Those seeking to acquire arms often have complex and overlapping motivations for seeking particular weapons, and a constantly shifting set of means that constrain or facilitate the acquisition of these weapons.It is worth noting that state-level demand for weapons is also influenced by a range of internal and external political, economic, social and security conditions. Routine modernization programmes and evolving technology, as well as changing regional security dynamics and internal political conditions, all contribute to persistent but changing demand for small arms and light weapons.Demand for SALW on the part of civilians may be boosted by the following;Economic factors/ PovertyMusa (1999) poverty and criminality is the base of SALW proliferation in Nigeria is widespread poverty, despite Nigeria’s status as a major oil exporting country. A sharp contradiction exists between the fact that Nigeria is one of the world’s largest exporters of crude oil, and the fact that the standard of living of Nigerians is the 36th lowest in the world in terms of human development indicators. The Niger Delta region is a case in point. The situation in the region is symptomatic of what has been referred to as ‘criminal social neglect and ecological degradation’. The consequence of this is that the region of the country which is responsible for some 70% of the country’s income displays a degree of penury and poverty which stands in sharp contradiction to the wealth it produces. This has led to a militarised and militant youth population, which has been known to kidnap oil workers and defy security agencies, using their knowledge of the localities and their access to SALW. Economic factors, such as high rates of unemployment and low incomes, may cause people to turn to crime using SALW as a means of survival. This could mean becoming involved in gangs, militias or other armed groups that bring some economic benefits. Young people may be particularly vulnerable in these situations. Culture, attitudes and tradition: In some cultures, the display of weapons is seen as important. This is often referred to as a ‘gun culture’. ‘Macho’ cultural norms may prevail, in which both males and females place symbolic social value in the armed male as a source of status and security. In many cultures across the African continent, weapons are used for traditional rites and ceremonies. While the Fulanis in northern Nigeria make use of swords, arrows and

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sticks, the communities of traditional hunters of the west and east carry shotguns (Ayissi and Sall, 2005:59). In the North-West Province of Cameroon, there is a traditional rite of gun-firing at events such as at the traditional burial of local dignitaries. These are mostly locally-made so called dane guns, operating with gunpowder. Projectiles like metal pellets can be inserted into their muzzles making them very lethal. For the sake of prestige, many have now turned to the use of a wide range of more modern equipment like shotguns, revolvers, semi automatic pistols and even high caliber rifles. Of course there are gun laws limiting such open use but they are hardly respected and can be easily circumvented. The Prevalence of Internecine Conflicts and CriminalityCivil conflict often stems from state policies that fail to protect people and recognize their basic rights, leading citizens to seek power or liberation through weapons. The demand is not limited to armed groups: wherever there are internal conflicts or groups engaged in violent conflict, there will be a growing demand for SALW among civilians, due to fears of continuing or resurgent conflict. The desire to possess small arms and the unlawful use of same in Nigeria has also been attributed to the prevalence of organised armed conflicts and the increasing culture of violence which has become a defining character of the socio-political scene since 1999. Except for self-defence and other lawful purposes, the possession of illicit firearms usually follows a premeditation of mayhem, violence or criminal act. (Howden, 2010) This correlation between crime and conflicts on one hand, and the demand for arms on the other has caused the multiplicity of conflicts and criminality to consequentially increase the demand for illicit SALW by civilians and non-state actors. (Jegede, 2010) While criminals, militants and hoodlums require them to perform their nefarious acts, their activities create an arms race between rival gangs wanting to maintain an edge over each other; and also between the State security forces and the criminals. The conflicts in the Niger Delta and the emergence of the Niger Delta militias are very important dynamics in the SALW situation in Nigeria because of the amount of weapons they have at their disposal and their active involvement in gun running. The government recognised this fact when it initiated a number of disarmament programmes in the region in 1999 and 2004, and recently extended amnesty to the militants in the region in 2009. (Xan, 2009) Insecurity and the Privatisation of Security The failure of the Nigerian government to guarantee human security and freedom from fear has transformed security from a public service and necessity to be provided by the government to a private necessity which individuals and groups have to provide for themselves. The government’s inability to prosecute persons arrested in respect of the various religious and ethnic crises fans violence and its continuity; while the weakness of law enforcement exacerbates the culture of impunity and robs the criminal justice system of the deterrence role. The Nigeria Police Force suffers from poor training, lack of equipment, corruption and other inherent and extraneous handicaps.(Human Rights Watch,2015) Criminals and dissidents are often better equipped than the police thereby making the police incapable of repelling their attacks and unable to defend the public from criminals. Most recorded incidents of armed violence occur without the

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intervention of the police, a situation which the public perceive as a lack of willingness on the part of the former to engage armed crime and wilfully putting their lives in danger. (Hazen and Hormer, 2008) Entities therefore rely on private security companies and vigilantes, possession of guns and installation of security gadgets, thereby increasing the demand for SALW. (Alemika,1993). Public office holders, thus protected, they commit flagrant and gross human rights violations against persons including extra-judicial executions of perceived criminals without been called to account for their actions.( Human Rights Watch ,2012) The scenario equally develops into a vicious circle where, civilians and various armed groups and criminals acquire more arms to outweigh each other.( Ginifer and Ismail,2012) This development represents failure on the part of the Nigerian State to fulfil the legal and due diligence obligation imposed by international human rights laws requiring her to “maximise human rights protection for the greater number of people”. It depicts failure in the obligation to reduce small arms violence by private actors and consequently reduce the demand for small arms and the need for people to arm themselves. Supply factors responsible for arms proliferation in Nigeria includes: Diversion:According to the United Nations, it has been estimated that as much as 60 percent of the licit global arms trade has been diverted through illicit markets to the regional conflicts that have erupted since 1990.Theft: All stockpiles are subject to the risk of theft. Physical security and stockpile management, which refers to the procedures and activities regarding safe and secure accounting, storage, transportation and handling of munitions and weapons, is necessary for reducing the risk of theft.Misuse by government military or police forces: A large portion of illicit firearms consist of leakages from members of the armed forces and the police both serving and retired. This includes the remnants from the Nigerian civil war and leakages from returnees of peace keeping operations. (Hazen and Horner, 2016) According to the UN, private arms brokers play a particularly negative role in supplying weapons to areas of actual or potential conflict. Arms brokers include negotiators, financiers, exporters, importers, and transport agents, and are used to arrange every aspect of an arms deal between the supplier and an intended client. They trade most heavily in SALW and landmines. These intermediaries seldom own or even possess the arms supplies outright, and typically live neither in the country where the weapons are supplied nor the one in which they are received. Arms brokerage is still fairly weakly regulated and the strongest mechanisms that exist are regional ones, for instance the EU Common Position on Regulating Arms Brokering. This is a legally binding agreement that obliges all EU Member States to develop controls over brokering based on the licencing of all individual brokering transactions. The Nairobi Protocol, to which the Republic of Sudan is a signatory, also requires both the registration of SALW brokers and the licencing of individual transactions. However, despite these agreements, many national legal systems still do not prohibit or clearly

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regulate the activities of arms brokers or when they have measures in place, do not enforce these effectively. This leaves a lot of opportunity for brokers to exploit the gaps and continue with their activities. Other factors that allow arms brokers to continue operating include deficits in the national capacity of many countries to control and monitor their airspace. Air cargo firms play an essential role in arranging the actual delivery of arms shipments, particularly in Africa, where the size of the continent and lack of road and rail infrastructure make air transport more convenient. Studies have indicated that some air transport agents even have expertise in the falsification of documentation and circumvention of inspection to conceal cargoes. Two UN Panels of Experts on Sierra Leone and Liberia that examined illegal arms transfer to the respective countries identified a number of ways in which the brokers managed to obtain ship and deliver weapons despite international sanctions. These included using false aircraft registration certificates, false flight plans and using end-user certificates that indicate Nigeria as the final recipient of the arms shipment while the arms were going to Liberia instead and Nigeria had no knowledge of the transaction. Illegal arms brokering is further enabled by corrupt government officials, especially at points of entry and exit and a lack of border control. This situation also makes it possible for certain governments to use brokers in order to conceal their small arms exports or procurement if they wish to do so. Porous Borders:Another factor is that Africa by virtue of its size, the second largest continent in the world and population, the second most populated and given the level of its development experience persistent problem of border control. Also, due to the sheer size of some of its countries, for instance, Nigeria, has 770 km of shared land border with the Republic of Benin to the west, about 1500 km with Niger to the north, 1700 km with Cameroon to the east, 90 km with the Republic of Chad to the north-east and 850 km maritime border on the Atlantic Ocean. Out-stretched these tally up to 4910 km of borders which have to be controlled. Each of these entry points, along with the airports, has been used to smuggle arms into the country. One can imagine how tasking it is to effectively control these borders. It is also interesting to observe that all three largest sub-Saharan countries, namely Sudan (the continent’s overall largest), the Congo DRC (3rd overall largest) and Chad (5th overall largest) have been experiencing instability and armed conflict for long. It may well be that their size and their porous borders make it easy for weapons to be smuggled inflaming and protracting violence (Ngang, 2007). Ayissi and Sall (2005:55) argue that it will be very hard to find any country in the world capable of effectively controlling such extensive borders. Arms traffickers exploit this situation to smuggle SALW into the country. Globalization: The forces of globalization bring with it opportunities and challenges, the elimination of state enforced restrictions on exchanges across borders and the increasingly integrated and complex global system of production and exchange that has emerge as a result further complicate the challenge of containing SALWs proliferation. The idea of globalization and its advocate for free market forces with minimum economic barriers

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and open trade for world development provides ground for illicit trade in arms by minimizing custom regulations and border control, trafficking of small arms becomes easier. Malhotra, (2011), stressed that, a miniscule percent of container ships have cargo checks, therefore making the arms movement smooth. Faking documents bribing officials and concealing arms as humanitarian aids are common practices. Malhotra (2011) identified globalization factors that facilitate proliferation of illicit trade in arms: (a) Political and economic integration are coupled with lesser restrictions in migration and human movement. This helps the arms dealers to fortify their present business connections and tap new ones. Dealers migrate to various regions, motivated by business expansion or reduced operational risks. (b) Banking reforms and capital mobility have aided the black market to spread its trade internationally, utilizing every angle of the well linked financial market. This also gives rise to offshore markets and tax shelters. An illustration of banking innovation is E-money. Banks have introduced cards bearing microchips, which are able to store large sums of money. These cards are portable outside conventional channels or can be easily bartered among individuals. (c) The linkage of banks with the internet has posed a new challenge in combating illegitimate activities in the financial sector. E-banking has digitized money making it prone to criminality. Even though, it has numerous benefits for the world at large, it is misused for money laundering, credit card scams and check-kiting. Adding to this, economic integration among regions blesses arm brokers with more opportunities to shelter their money, by investing in different stock exchanges. Numerous other illegal practices are a by-product of a deregulated financial sector, but money laundering is at the apex. Money Laundering or ‘cleansing of money’ is an unlawful practice of concealing the point of origin, identity or destination of the funds, when performing a particular financial transaction. The criminals manoeuvre money across borders gaining from banks in countries with lax anti-laundering policies. (d) Profound expansion of commercial airline and freight industry (making transport cheaper and easier) are instrumental in increased penetration of arms in conflict zones. Global merger of airline companies, supply chains, shipping firms make it tough to supervise unlawful practices in air and water. (e) The growth of global communication in the past two decades has been unfathomable. This has enhanced the ability of arms dealers to communicate internationally through the web at a cheap rate. Local Manufacturing: Home-made weapons: These usually circulate in small quantities, used by militia groups that do not have resources to acquire proper weapons and ammunition. An example is the case of the 200-plus Obo scouts of the Central Africa Republic (CAR), who have grouped together since 2008 to fight the Lord’s Resistance Army (LRA). Too poor for military-grade weapons or even the kind of firearms American hunters take for granted, these ad hoc groupings have set about building an arsenal of homemade, single-barrel shotguns loaded

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Nigeria also has a significant local supply of legitimate and illicit SALW through local manufactures. (Wali,2005). Section 22 of the Firearms Act prohibits the manufacture of firearms. However, the government established Defence Industries Corporation of Nigeria (DICON) set up in 1964 via the Defence Industries Corporation of Nigeria Act, is legally empowered to produce arms and ammunitions in the country mainly for use by the military and the police. Given the legal status of its mandate, this does not constitute a significant source of illicit small arms.However, this is not the case with the cluster of unlicensed local craftsmen located in different parts of the country, who produce on the aggregate, a substantial quantity of illicit guns in contravention of section 22 of the Firearms Act. The clandestine nature of their activities negates due diligence, transparency and regulation as required by international standards. It also makes their products difficult to trace and makes the SALW position of Nigeria opaque. Protracted military rule,Corruption adds to SALW proliferation However, a major dynamic in the proliferation of illicit SALW in Nigeria is the legacy of protracted military rule. Until the return to civilian rule in May 1999, the country had been under military rule during 75% of its existence. This led to the entrenchment of a militarised national psyche and a culture of violence. The widespread use of SALW to take over and maintain a grip on power had its own effects on the attitude and perception of Nigerians regarding the role of violence in society in general, and the use of SALW in particular. Following years of protracted transition programmes and worsening civil-military relations, the military lost control of their monopoly over the means of coercion, as various groups within the society increasingly sought military responses to military oppression. This created the impression that political power flowed from the barrel of the gun. Many civilians sought power either by being allies of the military or by acquiring their own weapons. Conclusion and RecommendationsArms proliferation poses serious security threats to any state or human society. In most third world countries, it exacerbates insecurity and stimulates volatility of crimes that attract some economic benefits and others that unleash dastard consequences on human safety. The injustices associated with the distribution of nation’s wealth and other political or economic benefits by government, are found to nurture grievances to astonishing destructive level. With grandiose public display of wealth by the rich in the midst of widespread poverty, hardship and intractable unemployment rate, crime becomes a waiting employer of the displaced and frustrated class, who seek to dislocate the economic rewarding system and restructure the imbalance. In the event, it creates socio-economic and political problem that the state authority battles with scarce resources and inadequate security personnel. With persistent material scarcity and inability of individuals and groups to meet their simple financial obligation, it results in implosion of tendencies towards commission of crimes. These are made possible by arms and weapons, which are at the becks and call of the prospective users. The major concern is the fact that production and exportation of these arms and weapons of war by the

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developed countries of the world have assumed a threatening dimension and contradicts the clamour for global peace and security that drives the visions of the UNO which lie on maintaining a peaceful world. The fact that virtually all the UNSC permanent members are the prime movers in arms production and export endangers human existence and survival. It aggravates internal crisis; generates armed conflicts at most destinations and produces dislocated world order; one which is characterized by widening human annihilation which is inconsistent with the principle of global security. This trend is worsened by local production and circulation that bridges the yawning supply gap from external sources. In that vein, attention must focus on enforcement of all laws on arms proliferation by government to enhance national and global security. As earlier noted, the demand and supply factors of SALW proliferation are mutually dependent. Therefore, addressing one without the other may not produce the desired results. For instance, addressing the supply factor without simultaneously addressing the demand end may create a situation where arms become more expensive to acquire without necessarily preventing their acquisition, since those acquiring it may still be able to afford it. In such a situation, SALW will remain affordable to groups like the Niger Delta militias that generate large funds from illegal oil bunkering activities and those sponsored by politicians and other influence members of the society. Moreover, as long as the need for SALW subsists, persons in need of same will always circumvent legal restrictions on obtaining them regardless of the vigilance of the law. An effective approach requires coordinated and sustained legislative, administrative and judicial strategies that address the factors encouraging demand for arms and concurrently dam the outlets through which illicit arms are proliferated. The strategies should go beyond the national level because of the cross-border implications of SALW.The UN should invoke all treaties and laws relating to arms proliferation and other weapons of war to limit their circulation and use for criminal and subversive operations. Nigerian leaderships should develop a proactive strategy that facilitates mopping up of arms from various rural locations with the assistance of community leaders, police and other stakeholders. The seeming failure of police to brace up with the task of securing lives and property has made communities, local and state authorities to turn to alternative securityarrangements (Vigilante or Neighbourhood Watch). Arming of these groups should be approached with sense of caution. Police should be well equipped and motivated to perform their constitutional and professional duties. This will save further arms from drifting intounauthorized hands with the potentials for security breaches Generally, it will be mirage and unimaginative dreaming, to hope that the world will be secure when the concern of the developed world is to continue to export these weapons to the third world countries, which have the potential for deepening ethnic antagonism and religious volatility, including political violence commonly experienced in their societies. Such crises become an excellent opportunity to create viable markets for the arms (despite arms embargo) to further increase the spate of the violence with the consequent damages. There will be considerable differences in the rates of conflict/crime in Nigeria in

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particular and the world in general if there is adequate reduction in arms production and curtailment in the number of illegal arms in the hands of unauthorized publics.

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ASSESSING THE CONTRIBUTION OF SOLID MINERALS SECTOR TO ECONOMIC DEVELOPMENT IN NIGERIA

BYUger, Francis Iorbee & Anzaku, Elias. Darlington (Ph.D)

DEPARTMENT OF ECONOMICS,FACULTY OF SOCIAL SCIENCES

NASARAWA STATE UNIVERSITY, KEFFI

ABSTRACTNigeria is richly endowed with diverse and abundant, but largely yet unexploited natural resources including solid minerals and arable land. Contributions from solid minerals to GDP in rich countries are usually between 2 to 8 percent. In Nigeria, the contribution from solid minerals sector keeps on dwindling from 12.5 percent to as low as 0.14 percent of the gross domestic product(GDP). In the light of this, the study presents an assessment of the contribution of solid minerals sector on economic development in Nigeria from 1960 to 2016.It employs Error Correction Model (ECM) to examine the short run and long run effects of solid minerals sector’s contribution to Nigeria’s economic development. The study adopts time series data to evaluate the impact of the specified key sectors like crude petroleum and gas, solid mineral, manufacturing and agriculture on the economic development proxied by per capita income. The finding revealed that the value of solid minerals sector has strong impact on economic development in Nigeria. It concluded that if problems militating against the solid minerals sector in Nigeria are addressed and the strategies for its transformation put in place, the country in no distant future will be an industrial economy. Finally, the study recommends the need to urgently develop especially the solid minerals and agricultural sectors in view of their potentials to expand and diversify the Nigerian economy for the attainment of the goal of rapid economic development.

Keywords: Solid Minerals, Economic Development, Gross Domestic Product, Per-capita income, Error Correction Model (ECM)

INTRODUCTIONThe goal of attaining economic development through solid minerals exploitation entails the employment of macroeconomic variables which is said to be a major cause and consequence of facilitating development. These include attainment of full-employment rate, poverty reduction, job creation, investment in human and physical capital. These can be as a result of increase in funding for innovations, technological change and increased financial mobilization by domestic borrowing or direct foreign investment (Todaro and Smith, 2011). According to Orya (2017), a total of N2.5 billion investment portfolio has been committed for the exploitation and development of solid minerals sector for 33 commercially viable solid minerals out of the 44 solid identified mineral types in Nigeria between 2009 and 2017 by the Nigerian Export-Import Bank.

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It is observed by (Jhingan, 2009) that the availability of natural material base for any nation offers it a major opportunity to overcome challenges of economic under-development. For such a nation, dependence on other nations to develop such natural resources becomes a non issue unless where it lacks the capacity to do so. These natural resources like minerals and agricultural materials when exploited and processed can feed its industries and people or export the products to earn the needed foreign exchange to finance the process of economic growth and development. The capacity of such a country to fully exploit such raw materials guarantees it the benefits of domestic growth for maximum outcome. On other hand, the inability to optimally exploit such raw material base would surely limit the full benefits derivable from the ownership of such natural endowments (Ahuja, 2008). The implication is that such solid mineral resources endowed country if remained underdeveloped may be forced to rely on other countries for the development of the ownership of its natural resources.Across the globe, the exploitation of natural resources for utilization is as old as the evolution of human society which has always depended on it for sustained interaction between the people and their natural environment. This interaction rests on the ability of the human society to create tools to harness the natural resources in its quest for survival and for meeting the desired development needs (Machigan, 1981). In essence, natural resources are those things available to mankind as “gifts” of nature (Common, 1988). Kesler and Simon (2015), observed that these “gifts” of nature are either renewable or non-renewable endowments of the earth that serve as sources of food, raw materials and energy that are environmental inputs to economic activities, such that when exploited and processed can add-value for development of the economy. These natural resource endowments include land, soil, minerals, forest, water and atmospheric resources (Berry, Mason and Dietrich, 2004). Exploitation of solid mineral resources play vital role in contributing to economic growth and development of a country. For example, Wright (1990) and Romer (1990 observed that the evolution of industrial and economic expansion of United States of America between 1870 and 1940 was highly attributed to the exploitation of its abundant mineral resources. This is reflective of Canada, Sweden, Australia, Chile and even Britain that depended on mineral resources exploited from its colonies (Wright and Czelusta, 2004). This affirms Howe (1979), earlier observation that mineral resources especially solid minerals provide economic support for development and sustenance of human population. In a similar vein, Bridge (2008), noted that the exploitation of mineral resources for extractive industries acts as a major catalyst for driving economic expansion which accelerates economic growth to higher levels of development. This agrees with the earlier position of Kogbe and Obialo (1974) on a study on statistics of minerals production in Nigeria 1946-1974 and the contributions of mineral industry to the Nigerian economy in the pre-oil boom.The discovery of crude in 1956 leading to the oil booms of the 1970s and early 1980s adversely affected the solid minerals industry to such an extent that its overall contribution to the national Gross Domestic Product (GDP) declined drastically from more than 12.5% in 1960s to less than 0.5% in 2015 (CBN, 2016; David, Noah and

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Agbalajobi, 2016). But with the collapse of the world oil price, global economic recession, restiveness in the Niger-Delta Region among other reasons leading to dwindling oil revenues and youth unemployment; government efforts are now directed towards the development of potentially viable sectors of the economy like solid minerals, agriculture (the hitherto mainstay of the economy) and manufacturing as viable alternatives for economic survival and development (Fayemi, 2016). The question asked is to what extent can solid minerals sector contribute to economic development of Nigeria? The main objective of the study is to examine the contribution of solid minerals sector to economic development in Nigeria. While the null hypothesis is stated that solid minerals sector has no significant contribution on economic development in Nigeria. The study covers the period from 1980 to 2016, using data from Central Bank of Nigeria Statistical Bulletin, employing error correction mechanism model for the time series data analysis. The outline of the paper has the following sections, comprising an introduction, review of literature which consists of conceptual clarifications of solid mineral, mining and economic development. In addition, is the theoretical review which consists of staple theory and neo-classical theory of economic development. Also, is the empirical review of related literature on the contribution of solid minerals on economic development The methodology follows with model specification, theoretical framework, presentation of the data analysis and results. Discussion of the results, conclusion and recommendations of the study constitute the ending sections of the paper.

2.0 Review of Literature2.1 Conceptual Review 2.1.1 Concept of Solid Minerals

Minerals generally are naturally occurring chemical compounds usually in crystalline form and abiogenic in origin (Bates and Jackson, 1980). A crystal is a solid body bounded by natural planar surfaces, usually called crystal faces that are external expression of regular internal arrangement of constituent atoms or ions (Berry, Mason and Dietrich, 2004). Crystal is a Greek word meaning ice, used generally in the Middle Ages to designate rock-crystal (quartz) that has been frozen and cannot melt. This term is now applied to solid objects of natural origin that exhibit external crystal form, which can be applied to solid minerals (Mitchell,1979). Excellent crystals undergo processes of slow cooling or evapouring of saturated solutions such as salt, diamond gold among others. The Nigeria’s Committee on National Policy on Solid Minerals (CNPSM, 1994), defines solid minerals to cover broad groups as ferrous, non-ferrous and non-metallic substances excluding crude oil, gas and water.

Minerals can be distinguished by their various chemical and physical properties. The differences in chemical composition and crystal structure do distinguish the various geological environments, when changes in the temperature, pressure or bulk

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composition of rock mass cause changes in minerals formation (Dey, 1968). Minerals can be described by their various properties which are related to their chemical structure and composition. Common distinguishing characteristics include; crystal structure and habit or external shape, hardness, lusstre, diaphaneity, colour, stark, tenacity, cleavage, fracture parting and specific gravity (Berry et. al., 2004). Also, specific tests for describing mineral types include; magnetism, taste or smell, radioactivity and reaction to acid. Other less general tests include fluorescence phosphorescence, magnetism, radioactivity, tenacity, which is response to mechanical induced change, piezoelectricity and reactivity to dilute acid.According to Nickel (1995) and Berry et. al., (2004), the basic concept of minerals generally encompass characteristics which include naturally occurring, stable at room temperature, represented by a chemical formula, usually abiogenesis, that is originating from lifeless matter and ordered in atomic arrangement. The first two features mean that a mineral has a form by natural process which excludes anthropogenic compounds. Stability at room temperature is synonymous to mineral been solid, as a compound has to be stable at 25 degrees centigrade. However, classical exceptions are mercury which crystalises at -39 degrees and water-ice which is solid at below zero degree.

Kogbe (1989) and Obaje (2009), recorded that solid mineral resources in Nigeria occurred in the geological components of basement complex of Pan African and older (Precambrian rocks) of ≥ ± 600 million years, younger granites of Jurassic 200 – 145 million years and sedimentary basins of Cretaceous to recent ≤ 145 million years. The Nigerian geology is dominated by crystalline rocks which are made up of the Precambrian basement complex and the Phanerozoic rocks which occur in the Eastern and North Central region of Nigeria (Obaje, 2009). Sedimentary sequences have filled up the basins which are vast depressions between landmasses, basement complexes and younger granites creating the various basins. The Benue trough in which Nasarawa State is located was formed by rifting of the West African basement along the Central African shear zone at the start of the Cretaceous (145-66 Ma) The aid by the abnormal heat rising from the mantle plume thinned and weakened the crust, facilitating rifting (Wright, 1989). This is where most of the coal deposits in Nigeria estimated to contain > 6,000m of Cretaceous sediments and volcanoes’ are found (Obaje, 2009). That explains why Nasarawa State has the largest share of the estimated coal deposit in the country 2. 1. 2 Concept of MiningThe term mining according to Dictionary of Etymology as edited by Harper (2015), has an uncertain origin probably from Celtic, as the people extensively used mining in the early 1400 century by building tunnels for fortification against invaders. From the old French study, mining means digging the earth for treasure like gold, diamond, silver, tin among others (Lokanathan, 2010). Mining is the extraction of valuable minerals of metallic or non-metallic or other geological materials from the surface of earth or deep in the earth, usually from an ore body, leads, vein, seam or placer deposits (Moody, 2007). These deposits form mineralized package that is of economic importance to miners. According to Jayanta (2007), mining ores are metalliferous minerals or

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aggregate of metalliferous minerals. The life circle of mining begins with the exploration and ends with post-mining use. Ores recovered by mining include metals, coal, gemstones, limestone, chalk, gravel, rock salt and clay. These are formed by natural occurring chemical compounds usually in crystalline form through abiogenetic process of dead matters (Berry et al, 2004). In a wider perspective, the term mining includes also extraction of such non-renewable mineral resources which are petroleum, natural gas and water (MMSD, 2016). Ezeaku (2011), described mining as an activity as well as occupation concerned with the extraction of minerals.Mining of stones and metals has been a human activity since the pre-historic era (Medivitt 1965 and Maton et al, 2016). Modern mining processes for economic development involve prospecting and exploration for ore bodies, exploitation and analysis for profit potentials of processed minerals excavated from the land to assess the desired materials and final reclamation to close the mined holes (Ali, 2003). Many techniques are employed in mining, but the two common types are surface mining and sub-surface (underground) mining. Surface mining is done by removing (stripping) surface vegetation and if necessary layers of bedrock in order to reach buried ore deposits underground. Other techniques are include open-pit mining, which is the recovery of materials from an open-pit in the ground. Accordingly, most placer deposits because they are shallowly buried are mined by surface methods. Quarrying is another technique of mining which is identical to open-pit mining, except that it refers to the crushing of rocks (stones), sand and clay. Strip mining which consists of removing surface layers off to reveal ore/seams underneath and mountaintop removal, usually is associated with coal mining that involves taking the top of a mountain off to reach ore deposits at earth depth (Aigbedion, 2007)..In Nigeria, solid minerals’ mining is largely undertaken by artisanal and small-scale miners who constitute important components of the country’s solid minerals exploitation in every state. The concept artisanal mining and small-scale is broadly referred to as mining activities carried out local artisans using low technology practised by individuals, families, groups or communities often informal and illegal (Ingram, 2011). An artisanal miner is in effect a subsistence miner that is self-employed panning for mineral resources like gold, diamond, gemstone, columbite or other precious metals and stones (Okoli and Uhembeh, 2015). The fact that solid mineral deposits are found everywhere in the country remains a major attraction for informal and unconventional mining activities (MMSD, 2016) Also, quarrying as a process of extracting stones, rocks, riprap, sand, gravel or slate from the ground, as well as construction aggregates like sand and gravel, marble granite and sandstone. These constitute predominant mining activities in Nasarawa State by both artisanals and small-scale miners found all over the State (Yaro and Ebuga, 2013).

2.1. 3 Concept of Economic DevelopmentDevelopment connotes an endless advancement in the living standard of the people’s ways of lives. According to Belshaw and Livingstone (2003), economic development encompasses progress in providing livelihood on sustainable basis, access to education

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and basic health-care for majority of the population to increase life expectancy and reduction in poverty rate. The concept of economic development becomes clearer with the understanding of the concept of economic growth, which means increase in the country’s real output per capita. As Maduaka (2014) observed, economic growth and economic development are complementary, because each one makes the other, by alternating processes that occur sequentially. While economic growth leads to increase in output which expands the economy, economic development is a structural change in technology or social system which leads to distribution of income and wealth (Malizia and Fesser, 2002). As (Kelikume, 2016) observed, the concept of economic development encompasses economic growth accompanied by changes in output distribution of goods and economic structures. Economic growth as a conveyer belt of economic development is concerned with improvements in the quality of life, risk mitigation, dynamics of innovation and entrepreneurship (Romer, 2012). In a minerals abundant country, it is expected that economic development translates into enhanced quality of life and improved welfare status of the citizens if minerals are properly exploited for optimum benefits (Babalola, 2016). That explains why minerals endowed countries are regarded to have potentials to contribute significantly to economic development, by creating direct economic benefits in form of income, employment opportunities and indirect benefits that come in form of local or international purchase of mining ouputs (David, Noah and Agbalajobi, 2016). As observed by Kareem (2014), economic development involves labour employment which is one of the most important economic and social issues in Nigeria, especially in a sector that is dominated by informal activities like the solid minerals sector. As a result, means of utilization of labour employment in this sector attracts smaller attention than the flow, that is, how the rate of unemployment is moving. It is not easy to measure the rate of unemployment because of the conceptual problems of defining who is employed, unemployed or under-employed. Employment according to the National Bureau of Statistics (NBS, 2012) refers to the number of people who work either for pay or kind, work on their own, or are unpaid family workers.Earlier Iyoha (1978) observed that employment generation is a significant drive of the growth of GDP in Nigeria. A large proportion of these people who are found in solid minerals sector are artisanals, or small-scale miners that are either hired or under self-employment with very low income (Jodie and Ogunrinola, 2011; Okoli and Uhembeh, 2015). Because solid minerals sector appears to be informal, individuals and organized groups are motivated to go into its operations for self-survival purposes, owing to the downturn in the economy. As money-spinning potential sector, solid minerals sector has the capacity to significantly impact on employment generation, job creation and can generate $25.3 billion (about N5trillion) annually (Fayemi, 2016 and Babalola 2016). The Federal Government in its Recovery Economic Growth Plan for 2012-2020 made projections according to the Ministry of Mines and Steel Development (2016), which portends that solid minerals GDP will grow from N103 billion from 2015 to N141 billion in 2020 at an average annual growth rate of 8.54%, facilitating the production of coal to power plant, producing geological maps of the entire country by 2020 on the

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scale of 1:100,000. Also, government aims to integrate artisanal miners into the formal sector, by encouraging and promoting mineral processing and value addition industries that engender backward and forward linkages for effective economic performance.

2,2 Theoretical Review 2.2,1 Staple Theory Staple theory is an explanation linking natural resources with domestic economy sometimes referred to "staple thesis". Staple theory is propounded by two Canadian economists; Innis and Mackintosh in 1923 (Robin, 1991). This is based on the proposition that the impact of commodity product contribution like mineral rent or agriculture on the host economies is mixed. According to this thesis, rent from successive mining activities has played a role in the growth and development of such developed advanced countries as the USA, Canada Britain, Swedeen and Australia. Governments of such have a number of ways of distributing benefits locally. Specifically, Reynolds (1979) notes that profit from copper funded development in 17th century in Sweden and similarly like gold in Australia and South Africa. Proponents of this thesis further point out that Britain's commercial and industrial expansion and growth are partly attributed to the rents earned from exploitation of solid minerals from the colonies. The basis of the staple theory is that host economies need to enunciate policies that will enable them to harness the mining rents for the development of their economies. A key method is a more deliberate sharing of fiscal revenues among different levels of government and other stakeholders. It is noted that in Peru, the mining law provides for a fixed percentage of the mineral revenues collected by central government is to be paid to regional authorities. However, due to `fiscal difficulties' the central government has delayed the transfer of funds (David et al, 2016). There is therefore, the need for Nigeria to aggressively establish laws for the distribution of funds beyond the national level for the holistic development of minerals producing regions especially host communities that bear the brunt of mining devastation.2.2.2 Neo-Classical Theory Neoclassical theory of economic development here is an approach focused on the natural resources. utilisation. Proponents of the neoclassical postulations include von- Mises (1940) who presented a rudimentary exposition of Zimmermann’s (1933) mind-centred approach distinct from other neo-classical theories developed by Gray (1913), Hotelling (1931) and Jevons, (1965, 1966), on minerals exploitation. They emphasized the need for exhaustible nature of exploitation of mineral resources. The theory identified the fixity and depletionism view of minerals exploitation as incompatible with entrepreneurship. This also agrees with Solow (1974), neoclassical position that all factors of production including mineral resources are subject to diminishing returns unless there are exogenous factors like change in technological innovations. As Krzak (2012) observed, the basic premise of the neoclassical trend was the assumption of rationality in human actions. Rationalization of the behaviour of a single member of the social system, expressed in maximizing its own satisfaction with meeting

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individual needs, was thought to foster an increase in overall social satisfaction. A review of this analysis in today’s situation shows how unrealistic this assumption was. The egoistic approach of an individual leads consequently to a series of unfavourable overall changes. For instance, excessive and irrational utilization of nonrenewable resources result at times in degradation of the surrounding environment such as deforestation, desertification, pollution of water and food, reduced productivity of agricultural activities (Bradley, 2007). Overexploitation of common resources renders their proper management difficult; uncritical faith in the self-healing power of a perfectly-functioning market and free relocation of resources can be impaired.

2.3 Empirical Review

The impact of natural resources like solid minerals sector on economic development is based on perspectives ranging from structural, institutional or benefits earned from the contribution of minerals output to economic development. This review of empirical literature in this study is divided into foreign and Nigerian studies. Globally, one of the celebrated studies on the impact of solid minerals on economic development is the study done by Roderick (2001), on solid minerals mining and economic sustainability of local communities in Colorado State, USA between 1980 and 2000. The study employs mainly qualitative analysis using variables like access to education especially by black and coloured communities, health-care, efficient social and regulatory system, income disparity and the challenges of mining and economic development. The study revealed that the accrued benefits of exploited solid mineral resources such as education attainment, health-care, efficient and social institutions and how human-physical capital could be sustained in spite of inevitable decline associated with ore mineral exploitation in the area that resulting in mineral resource depletion. The study concludes that through appropriate responses to the challenges of economic development, and if appropriate measures are put in place, solid minerals exploitation could be beneficial to economic development of the communities of Colorado State. The study recommends that despite the inevitable declines as the ore runs out, mineral wealth lives on with the people in other forms such as in educated and healthy people, efficient and fair social institutions and man-made physical capital; in which minerals exploitation can be said to be a curse, if the challenges are not met Wright and Czelusta (2004), carried out a study on mineral resources and economic development of Latin American countries employing cross country regression to measure the impact of contributions of different minerals such as copper, gold, silver, lead, cobalt, zinc and coal on average annual growth rate using time series micro economic variables from 1978 to 2001. The study revealed that successful resource base development is not a matter of geological endowment but also requires large scale investment in exploration, transportation, geological knowledge of technological extraction, processing and utilization. It concludes that insecure ownership of mineral has adverse effect on production and exploration and not just the resource abundance. The study recommended that resource abundance without a matching level of

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technological advancement would not optimally maximize the economic benefits of solid minerals exploitation.Hlavova (2015) conducted a research study on the impact of mineral resources on economic growth of 48 Sub-Saharan countries between 1995 and 2013 that depend on mineral resources employing cross-sectional regression analysis. The study examines the relationship between the shares of mineral resources in total exports to economic growth of Sub-Saharan African countries rich in mineral resources. Paradoxically these countries are among the very poor in the region despite their rich endowment in mineral resources. The study employs correlation and regression analyses. The research is divided into two parts. The first part contains aggregated data for all countries and examines the relationship between two indices and how the share of mineral resources in exports affects economic growth. The second part divides the countries into groups according to their dependence on mineral resources as measured by the contributions of their total exports. The first group of 13 countries depended on raw minerals for exports, which shows 40% contributions of mineral resources to exports, while the second group of 35 countries depended on 60% contributions on mineral resources exports. The result revealed that the correlation in the regression is not statistically significant. In the other group of 35 countries, only a weak interdependence between indicators is revealed. Based on the result, the study concludes by not accepting economic diversification as a solution to sluggish economic growth rate of the sample countries. But, recommends an inclusive growth approach by using funds from mineral resources to develop other sectors of the economy.

In Nigeria, a study carried out by Akongwale, Ayodele and Udefuna (2013), on the analysis and role of solid minerals on economic diversification for the growth of Nigeria, employed both quantitative multiple regression and qualitative (descriptive) analyses between 1980 and 2012. The study adopted GDP as proxy for economic growth. The study revealed that exploitation of solid minerals could help in reducing poverty rate, as it has the capacity to create jobs, given its forward linkages by providing inputs to other sectors of the economy like industries and agriculture, by creating economic input-output integration. The study concluded that linkages created are expected to increase tax base of the government with its attendant multiplier effects to enhance revenue and income generation as well as employment opportunities. The study recommended diversification of the Nigerian economy from the dependency on oil to the exploitation of solid mineral resources. Furthermore, that there is the need to create enabling environment for private sector investment in the solid minerals sector.In addition, a qualitative study on solid mineral resources as alternative source of revenue for the Nigerian economy was carried out by Danmola and Abba (2013). The study analysed development in the solid minerals sector and why its production declined. It revealed that there is high potentiality in the solid minerals sector as a viable alternative to petroleum and gas sector, which production in Nigeria is unpredictable and generates crisis in the region, making it an unreliable source of foreign revenue earner for the country. To harness the enormous solid mineral resource potentials in Nigeria,

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the study concludes by calling for involvement of good policy, legislation and regulation to curb corruption, stability, consistency and practicability, to make realizable this dream of an alternative source of revenue generation that will create jobs and divest from oil. To effectively develop solid minerals sector, the study recommends full private partnership with the federal, state and local government or the local communities in the solid mineral exploitation which would help to curb instances of crisis in the sector.Adeniyi, Adelake and Olabode (2013), in the study on analysis of legal regime for exploring solid minerals for economic growth in Nigeria, employed mainly qualitative analysis. The study revealed that the exploitation of solid minerals remains crucial to economic development in Nigeria, through wealth creation and poverty alleviation. The study concludes that if Nigerian government adopts the best practices and mechanisms that have been used in different countries to formalize and regulate mining exploration and exploitation, the country will attain sustainable economic development from the benefits derivable from solid minerals exploitation. The study recommends strengthening of the existing legal and regulatory framework, effective supervision to do away with sharp practices prevalent in the sector for proper development.Also, Nwane (2014), carried out a quantitative study that investigated the relationship between diversification of non-oil export products and economic growth of Nigeria from 1981 to 2013. The study examined the significant role of non-oil export on real economic growth which the previous studies might have ignored and aggregate non-oil exports product data used by them has bias conclusions. In arriving at the objectives of the study, Ordinary Least Squares (OLS) technique involving error correction mechanism (ECM), co-integration, over-parametisation and parsimonious were adopted. Johnsen Co-integration Test reveals that the variables are co-integrated which confirms the existence of long-run equilibrium relationship between the variables. This suggests that all the variables tend to move together in the long-run. This study reveals that there is significant relationship between diversification of non-oil export and economic growth in Nigeria during the period. It is evident in the study that non-oil exports reduced their contributions to economic growth. This is because agriculture and manufacturing components of non-oil exports have positive and significant relationships with economic growth, while solid minerals component has negative and insignificant relationship with economic growth in Nigeria. The study concludes that government should enforce non-oil policies towards resuscitating the failing non-oil industry. It recommends that government should strengthen the legislative and supervisory framework of the non-oil products and diversify the economy to ensure maximum contributions from the sub-sectors for optimum development. However, the submission of negative and insignificant relationship of solid minerals component of non-oil sector to economic growth might be attributed to the models, suggested to be parsimonious and over-parameterised that were adopted. Studies have shown that too parsimonious and over-parameterised models likely lead to erroneous conclusions (Poleto, Paulino, Molenberg and Singer, 2011). Again, a study by Maduaka (2014), on solid minerals sector in Nigerian economy from 1980 to 2012 analyses the long-run relationship and the impact of solid minerals mining

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on economic development of Nigeria. Gross domestic product is used as proxy for economic growth. The study uses time series data with variables like real exchange rate, real gross domestic product, solid mineral output and gross capital formation to uncover the impact of solid mineral on economic development of the country. The result revealed a possible long-run relationship between solid minerals sector, capital accumulation and real exchange rate based on co-integration test. The estimated statistics of normalized level coefficient showed anticipated long-run beneath the unregulated model with un-restricted long-run equation. The study concludes that solid minerals sector is positively responsive to real GDP which shows a feed-back relationship between solid minerals output and real GDP. It recommends private- sector led approach in the exploitation of solid minerals sector for optimum development of the economy.On diversification of the Nigerian economy to non-oil sectors including solid minerals as a panacea to enhance economic growth Esu and Udonwa (2015), employed time-series data spanning from 1980 to 2011 using error correction mechanism (ECM).The variables to estimate and determine the relationships were gross domestic product (GDP) as the regressand, while the regressors were stock of capital, labour stock, non-oil trade, oil trade, non-oil foreign direct investment, trade openness and inflation. The result showed that if Nigerian economy is properly diversified it could tap largely the potentials of the non-sectors for short-run and long-run gains. The study concluded that if conscious efforts are made in investment in industrial and technology in the non-oil sectors, especially solid minerals in which every state has comparative cost advantage, the country would rapidly grow to be among the developed countries in a short time because of its economic potentialities. It recommended diversification of the economy but with caution as not to repeat the mistake in the sector which grew the economy without economic development.

Another study on Nigeria by Olafin and Odeleye (2016), using time series between 1996 and 2014, examined the impact of disaggregate solid minerals and government effectiveness on poverty levl in Nigeria. The study employs a multi-linear regression model, using poverty as dependent variable with contributions from total solid minerals, coal, metaore, quartz and others plus government effectiveness as independent variables. Both dynamic ordinary least square (DOLS) and fully modified ordinary least squares (FMOLS) are used to analyse the impact of different solid mineral types and government effectiveness on poverty level in the country. The findings of the study revealed that solid minerals exploitation is capable of increasing economic growth, reducing poverty, unemployment and thereby promoting the welfare of the people. This corroborates with findings of most Nigerian authors on the similar study, on impact of solid minerals exploitation on the Nigerian economy. The result revealed statistically significant relationships, between th study variables and concludes that that disaggregated solid minerals investment is capable of reducing poverty in Nigeria, while improved government effectiveness can promote economic growth to achieve poverty reduction. The study recommends diversification of the Nigerian economy towards solid minerals

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sector and posits that improvement in government effectiveness could be important variable that can be used to achieve poverty education in Nigeria.Again, an empirical analysis of the contribution of mining sector to economic development in Nigeria is carried out by David, Noah and Agbalajobi (2016), from 1960 to 2012. The study employs Error Correction Model (ECM) model to examine short-run and long-run effect of mining sector’s contribution to economic growth and development of Nigeria. The study harnessed time series data to evaluate the impact of specific key sectors like crude petroleum and gas, solid minerals, manufacturing and agriculture on economic development proxied by per capita income. Economic development models are estimated in the long run and short run equilibrium through Ordinary Least Squares (OLS), and Fully Modified Ordinary (FMOLS) techniques respectively. Equally highlighted in the study are the problems militating against the mining sector in Nigeria and strategies for the transformation of the economy: Empirical result in the long run revealed that the values of solid minerals, manufacturing and agricultural outputs aee statistically significant at least at five percent significance level, but the value of crude petroleum and gas is statistically insignificant in long and short run equlibrium. The short run effect reveals that only agriculture exerts statistically significance at least at ten percent to per capita income in Nigeria for the period of study. The study concludes that Nigeria needs to urgently develop its monumental economic potentials, in the solid minerals sector by diversifying to add value to its output that can be used for job and wealth creation for rapid economic growth and development. The study like other previous studies recommends economic diversification towards solid minerals exploitation in Nigeria.

3.0 Methodology3.1 Theoretical FrameworkA theoretical explanation linking mining to the domestic economy is the "staple thesis" popularly referred to as staple theory, propounded by two Canadian economists; Innis and Mackintosh in 1923 (Robin, 1991). The theory is based on the proposition that the impact of commodity product like mineral rent on the host economies is mixed. According to the theory, rent from successive mining activities has played a role in the growth of such developed advanced countries as the USA, Canada and AustraliaStudies have shown that mining sector has been viewed as one of the key drivers of economic growth and development (Evans, 1975; Reynolds, 1979; Roderick, 2001; Bridge, 2008; Akongwale et al, 2013). These literatures uphold the sector theory earlier opined by (Evans, 1939) that over time the relative share of production in each major sector will change in the region. In this study, the economy is divided into three aggregated sectors: primary (agriculture, forestry, and fisheries), secondary (manufacturing, mining) and tertiary (trade and services). Due to the income elasticity of demand for primary, secondary, and tertiary products, the region becomes specialized in primary, then secondary, and tertiary products. This study follows the footpath of these literatures with modification by determining the short and long run equilibrium in economic development through the impact of the key sectors in the economy. The key

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sectors are identified as crude petroleum and gas, solid mineral, manufacturing and agriculture. The study harnessed time series data to evaluate the impact of the specified key sectors; crude petroleum and gas, solid mineral, manufacturing and agriculture on the economic development proxied by per capita income. The scope of the study includes 1960 –2016, which are fifty six observations for each of the indicators.

3.2 Model SpecificationThe model specification in this paper is based on David et al (2016) study that the impact of solid mineral sector on economic development in Nigeria can be determined in the short and long run equilibriums. It is on this proposition that the model for this study, Error Correction Model (ECM) is applied based on the assumptions that: crude petroleum and gas, solid mineral, manufacturing and agriculture determine economic development in Nigeria. Proper exploitation and utilization will determine the output of mining and production in all the sectors and there will be no wastage of resources. The paper therefore postulates the relationship between per capita income and mining activities as;PI = f(PNG, SM, MF, AGR) (1)The equation (1) shows the functional relationship between the Per Capita Income (PI), Value of Crude Petroleum and Gas (PNG), Value of Solid Mineral (SM), Value of Manufacturing (MF) and Value of Agriculture (AGR).Stating the model linearly;PIt = Ψ0 + Ψ1PNGt + Ψ2SMt + Ψ3MFt + Ψ4AGRt+ μt (2)And, the relationships that exist between the regressand (Per capita Income) and the regressors (Value of Crude Petroleum and Gas, Value of Solid Mineral, Value of Manufacturing and Value of Agriculture) are measured at present period. And, Ψ0 = intercept, Ψ1– Ψ4 = partial slopes and μt = unobserved components and Ψ1 –Ψ4 are expected to be positive based on the a priori expectationThat is,

The Classical Least Squares (CLS) techniques are employed to estimate the parameters of the model in which the assumptions of classical least squares technique are adhered to strictly. The study’s data are time series, stationarity test is inevitable. Therefore, the sationarity test follows the Augmented Dickey-Fuller (ADF) unit root test. The ADF models for the research variables are;ΔPIt = β11 + β12t + δ1PIt-1 + Σβ13ΔPI + Ԑ1t (3)ΔPNGt = β21 + β22t + δ2PNGt-1 + Σβ2 ΔPNGt-i + Ԑ2t (4)ΔSMt = β31 + β32t + δ3SMt-1 + Σβ33ΔSMt-i + Ԑ3t (5)ΔMFt = β41 + β42t + δ4MFt-1 + Σβ43ΔMFt-i + Ԑ4t (6)ΔAGRt = β51 + β52t + δ5AGRt-1 + Σβ53ΔAGRt-i + Ԑ5t (7)These equations are to validate the stationarity of the time series data use for this study, but if the data are not stationarity at level, there will be a need to transform the data by order of integration. Thus, cointegration test will validate the short run equilibrium of

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the data. The long run equation is stated as equations (2), that is, PI =Ψ0 + Ψ 1PNGt + Ψ 2SMt + Ψ 3MFt + Ψ 4AGRt + μtTransforming this model will yield introduction of first difference (Δ) and lag of error term by one period to measure the rate of adjustment in the equilibrium of the model. The lag of error term by one period is the error correction mechanism (ECM) that measures the rate of adjustment of the variables from long run to short run. The ECM was used by Engle and Granger to correct disequilibrium for this study to tie the short run behavior of economic growth to its long run. Stating the short run model for economic development,PIt = Ψ0 + Ψ1PNGt + Ψ2SMt + Ψ3MFt + Ψ4AGRt + μtμt = PIt - Ψ0 - Ψ1PNGt - Ψ2SMt - Ψ3MFt - Ψ4 AGRt + Ψ5t (8)Taking lag of error term;μt t-1 = PIt-1 - Ψ0 - Ψ1PNGt-1 - Ψ2SMt-1 - Ψ3MFt-1 - Ψ4 AGRt-1 (9)Transforming (3.2) to a Cointegration and Error Correction Mechanism;ΔPIt = Ψ0 + Ψ1ΔPNGt + Ψ2ΔSMt + Ψ3MFt + Ψ4 ΔAGR t+ (PIt-1 - Ψ0 - Ψ1PNGt-1-Ψ2SMt-1- Ψ3MFt-1 - Ψ4 AGR t-1) + θ1t (10)Since; μt t-1 = PIt-1 - Ψ0 - Ψ1PNGt-1 - Ψ 2SMt-1 - Ψ3MFt-1 - Ψ4 AGRt-1Therefore,ΔPIt = Ψ0 + Ψ1ΔPNGt + Ψ2ΔSMt + Ψ3MFt + Ψ4 ΔAGR t+ λμt t-1+ θ1t (11)And, equation (11) is the Cointegration and Error Correction Mechanism, λ is the parameter employed to assess the time of adjustment of equilibrium. Table 1: Summary of DatasetVariab Indicator Variable Definition Unit of Source of DataLe Measure

Ment

Per capita income

GDP per capita as a proxy for Thousand World Bank

PIt Economic Development In Dollar Indicators, 2016PNGt Value of Crude Contribution of Crude Million inCentral Bank of

Petroleum andPetroleum and Gas to the Naira

Nigeria Statistical

GasGDP as a proxy for Mining Bulletin, 2017operation of Oil and Gas

SMt Value of SolidContribution of Solid Mineral Million inCentral Bank of

Mineralto the GDP as a proxy for Naira

Nigeria Statistical

Mining operation of coal, iron Bulletin, 2017ore and Quarrying

MFt Value of Contribution of Million inCentral Bank of

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ManufacturingManufacturing to the GDP as Naira

Nigeria Statistical

a proxy for Mining operation Bulletin, 2017of Lime stone, cement etc.

AGRt Value ofContribution of Agriculture to Million inCentral Bank of

Agriculture the GDP as a proxy for NairaNigeria Statistical

Mining operation of Forestry, Bulletin, 2017cropping etc.

Source: Central Bank of Nigeria, Statistical Bulletin, 2916

3.2 Hypothesis Statement:H0 = Solid Minerals sector has no significant impact on economic development in Nigeria.

4.0 Presentation of Data and Analysis of Results4. 1 Data AnalysisTable 2: Unit Root Test

Variable Augmented Dickey Fuller (ADF) IntegrationOrder

LEVEL FIRST DIFFERENCE

With Drift and Trend With Drift and Trend I(d)

PI -0.108210 -3.080248*** I(1)( 0.9143) ( 0.0036)

PNG -2.154026** -3.798723*** I(1)(0.0369) (0.0005)

SM -1.328215 -3.938344*** I(1)(0.1911) (0.0003)

MF -1.126575 -3.217164*** I(1)(0.2662) (0.0025)

AGR 0.128676 -3.278669*** I(1)(0.8982) (0.0021)

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Source: Authors’ Computation, 2019

Note: ***, ** and * indicated at least significance at 1%, 5% and 10% level.The unit root test is conducted through the Augmented-Dickey Fuller (ADF) approach as shown in Table 2 in which the empirical study discovered that the time series data of per capita income, value of solid mineral, value of manufacturing and value of agricultural products in Nigeria are not stationary at level but value of crude petroleum and gas in Nigeria is stationary at level but at 5 percent MacKinnon significance level. These suggest a further diagnosis of the data series and the study find out that per capita income, value of crude petroleum and gas, value of solid mineral, value of manufacturing and value of agricultural products in Nigeria are stationary at first difference at 1 MacKinnon percent significance level. In order to be certain of the order of integration of the data series, there is a need for Johansen Cointegrating tests.

Table 3: Cointegration Test

Johansen Cointegrating Tests

Eigen Values 0.647309 0.541618 0.390933 0.316434 0.149514

Hypothesis r=0 r=1 r =2 r=3 r=4

Max-Eigen Test

53.15030* 39.78265* 25.28714* 19.40202* 8.259286*

(0.0004) (0.0031) (0.0364) (0.0231) (0.0041)

95% critical value 37.16359 30.81507 24.25202 17.14769 3.841466

Trace Test 145.8814*

(0.0000)

92.73109*

(0.0000)

52.94844*

(0.0003)

27.66130*

(0.0019)

8.259286*

(0.0041)

Source: Authors’ Computation, 2019Notes: VAR include one lag on each variables and a constant term. The estimated period is 1960-2016. None of the deterministic variable is restricted to the co-integration space and maximum Eigenvalue and Trace test statistics are adjusted for degrees of freedom. The critical values are taken from MacKinnon-Haug-Michelis (1999). The * indicates rejection of likelihood ratio tests at 5% significant level.

Johansen procedure is used to identify the long-run equilibrium in economic development amongst the cointegrating equations. Table 3 reports the estimates of Johansen procedure and standard statistics. In determining the number of cointegrating equations, the study used degrees of freedom adjusted version of the maximum-

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eigenvalue and trace statistics, since the existence of small samples with too many variables or lag Johansen procedure tends to overestimate the number of cointegrating equations. The Trace test statistics strongly rejects the null hypothesis of no cointegration in favour of five cointegration relationships while Max-Eigen test statistic rejects the null hypothesis of no cointegration in support of five cointegrating equations.

Table 4: Economic Development Estimates for Long-run Equilibrium RelationshipDependent Variable: PI

Variable Coefficient t – ratiop - value Decision

Constant 400.5934 10.93375 0.0000 -

PNG -0.000315 -0.271060 0.7875 Accept H0

(Statistically Insignificant)

SM0.292721*** 4.606716 0.0000 Reject H0

(Statistically Significant)

MF -0.029299** -2.397377 0.0205 Reject H0

(Statistically Significant)

AGR0.007212*** 9.547492 0.0000 Reject H0

(Statistically Significant)

R2 = 0.920165 F = 228.7952*** (0.000000) DW = 0.823766Source: Authors’ Computation, 2019.Note: ***, ** and * indicated at least significance at 1%, 5% and 10% level

4.2 Discussion of the ResultsEconomic Development models in the study are estimated in the long run and short run equilibrium through Ordinary Least Squares (OLS) technique. The results in Tables 4 and 5 show that economic development (per capita income) in the long run and short run is positively related with Value of Solid Mineral and Value of Agriculture over the scope of the study, 1960 – 2016 in Nigeria. However, Per Capita Income is inversely related to Value of Crude Petroleum and Gas in the both long and short run equilibrium. While, Per Capita Income is inversely related to Value of manufacturing in the long run

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equilibrium but directly related to Value of Manufacturing in the short run equilibrium. The Error Correction Mechanism (ECM) is inversely related to Per Capita Income in Nigeria which follows the a priori expectation.The implication of the above results to economic development is that whether in short run or long run, solid minerals sector like agriculture has the potentials of stimulating the economy by creating jobs that can lead to increase in per income capita. Increase in per income capita can lead to access to improved health-care, modern housing, quality education and all the indices enhance the living standard of the people in a particular endowed with mineral resources. The empirical result in the long run equilibrium shows that Value of Solid Mineral, Value of Manufacturing and Value of Agriculture are statistically significant at least at 5 percent significance level but Value of Crude Petroleum and Gas is statistically insignificant in the long and short run equilibrium. The short run effect reveals that it is only Value of Agriculture that is statistically significant at 10 percent increase of per capita income the period under investigation in Nigeria The variation causation effect of the exact components (Value of Crude Petroleum and Gas, Value of Solid Mineral, Value of Manufacturing and Value of Agriculture) on economic development (Per Capita Income) in Nigeria are ascertained at 92.12 % and 22.43%, both at the long run and short run respectively, while the inexact components (error term) are responsible for 4.98% and 72.57% variations in economic development respectively in Nigeria. These indicate that it is only in the long run that Value of Crude Petroleum and Gas, Value of Solid Mineral, Value of Manufacturing and Value of Agriculture caused more variations to economic development (per capita income) in Nigeria but not as immediate. The overall significance of the model is carried out through analysis of variance (ANOVA) in the long run equilibrium i.e. F test. The result shows that the F values is 228.7952 which is significant at 1% (i.e. 0.00000 < 0.01) with degree of freedom V1 = K – 1 = 5 – 1 = 4 and V2 = N – K = 53 – 5 = 48. This is used to evaluate the research hypothesis statements that H0 = Solid Minerals sector does not significantly impact on economic development in Nigeria. 5. CONCLUSION AND RECOMMENDATIONS

They study concludes that solid minerals sector has potentials to impact significantly to the economic development of Nigeria. Exploitation of solid minerals can create significant economic benefits which include the direct benefits that come in the form of income and employment, as well as the indirect benefits that come in the form of local or international purchase of mining inputs. Therefore, results from this empirical analysis provide strong evidence indicating that the value of solid minerals and other specified sectors (value of agriculture, value of crude petroleum and gas and value of manufacturing) have significance impact on economic development in Nigeria. Specifically, the results also suggest that economic development (per capita income) in the long run and short run are positively associated with value of solid mineral and value of agriculture over the scope of the study period. But, per capita income is

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inversely related to value of crude petroleum and gas in the both long and short run equilibrium, the reason for this maybe as a result of the fact that the petroleum sector is largely operated by the expatriates while it employs few Nigerians. This study therefore provides evidence in support of increasing public and private resources allocated to mining development in Nigeria. Government should come out with stable policy guidelines that will create enabling environment for the indigenous private sector businesses to invest more in the solid minerals sector; to ensure transparency, accountability and monitoring for compliance with mining laws and regulations so that the sector can be used to create jobs and wealth for the country and as well as diversify the Nigerian economy.

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IMPACT OF HUMAN CAPITAL DEVELOPMENT ON UNEMPLOYMENT IN NIGERIA

BY

1Aigbedion I. Marvelous, 2 Ogwuchi David, 3Zubair A. Zulaihatu

1, 2Department of Economics, Bingham University, Karu3Federal Ministry of Education

ABSTRACT

The study focuses on the impact of human capital development on Unemployment rate in Nigeria. Time series data were used and the sourced from Central bank of Nigeria’s statistical bulletins and Annual Report of National Bureau of Statistics of Nigeria. The Autoregressive Distributed Lagged (ARDL) and Error Correction Model (ECM) was used to establish the short-run and long run causal relations between unemployment rate and Human Capital Development in Nigeria. The result shown that there is strong relationship between Unemployment Rate and human capital development in Nigeria. The Autoregressive Distributed Lagged (ARDL) - Bounds test shows that there is co-integration among the economics variables under review. The Autoregressive Distributed Lagged (ARDL) and the Error Correction Models show that human capital development has a negative impact on unemployment rate in Nigeria. Therefore, the study recommends that government should adopt mechanism to make sure financial and other resources in those sectors are properly utilized to increase the efficiency of the sectors and thereby reducing the level of unemployment and control population rate in Nigeria through efficient primary health care and family planning in order reduce the level of unemployment in Nigeria. Finally, Government should adopt efficient and effective monitoring in the civil service commission in Nigeria in order to reduce unemployment in Nigeria.

Keywords: Human Capital, Unemployment, Health, Education

Introduction

It has been stressed globally that the differences in the level of socio-economic

development (employment, standard of living, education and health care delivery) across

nations is attributed not so much to natural resources, endowments and the stock of

physical capital but to the quality and quantity of human resources which is the offshoot

of human capital development (Marimuthu, Arokiasamy & Ismail, 2009). Capital and

natural resources are passive factors of production that are capable of reducing the effect

of poverty and unemployment in the economy; human beings are the active agents who

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accumulate capital, exploit natural resources, build social, economic, and political

organizations, and carry forward national development (Sarah, Adam, Ben & Yelwa,

2015).

Clearly, a country which is unable to develop the skills and knowledge of its people and

to utilize them effectively in the national economic development will be unable to

develop anything else or improve the quality and quantity of human resources (Erhurua,

2007). Also, if this happened the economy will not be able to reduce the level

unemployment which is a product of job creation and economic growth. Therefore,

investment in human capital development plays an important role in increasing

competitiveness, improving quality of life of the population and in generating

employment opportunity for sustainable economic growth.

Furthermore, Ogujiuba & Adeniyi, 2004 stressed that investment in human capital

development has positive effect on economic growth and that increase in the human

capital development will leads to reduction inefficiency of individuals, increase

productivity of citizens in the production process therefore, reducing the level of

unemployment in the country. They concluded that human capital development is one of

the best instruments for reducing unemployment in a labor-intensive economy like

Nigeria.

Thus, public spending on social service such as education and health care that are critical

to human capital development is generally needed in developing countries like Nigeria.

However, in Nigeria though the country’s budgetary allocation to education is still lower

than the United Nation Education, Scientific and Cultural Organization (UNESCO)

recommendation of 26% of the national budget which is to be spent on education by

member countries, over the last three decades various governments in Nigeria has

engaged in deliberate policies to increase the investment of human capital development

that is, in the area of education and health care services in order to improve the quality

of manpower available for the achievement of the macroeconomic goals especially in

the reduction of poverty and unemployment in Nigeria.

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Despite, government effort to increase the investment of human capital development for

the achievement of the sustainable reduction in unemployment level in Nigeria,

unemployment level in Nigeria has remain high given the average of unemployment rate

in Nigeria as 12 percent between 2006 and 2016 by the National Bureau of Statistics.

Therefore, the main objective of this study is to empirically examine the impact of

human capital development on unemployment in Nigeria from 1986 to 2016.

LITERATURE REVIEWConceptual Issues

The concept of human capital formation refers to a conscious and continuous process of

acquiring requisite knowledge, education, skills and experiences that are crucial for the

rapid economic growth of a country (Aigbedion, 2015). Aigbedion, Anyanwu & Wafure

(2016) defined human capital investment in economic terms as the accumulation of

human capital and its effective investment in the development of an economy.

According to Oyinlola & Adeyemi (2014) human capital development refers to the

acquired and useful abilities of all the inhabitants or members of the society. Audu, Igwe

& Onoh (2013) asserted that human capital development consists of conscious efforts to

amplify human knowledge, improve skills, productivity and inspire resourcefulness of

individuals. Paul, Wada, Audu & Omisore (2013) believes that human capital

development is the process that relates to training, education and other professional

initiatives/interventions in order to increase the levels of knowledge, skills, abilities,

values, and social assets of an employee which will lead to the employee’s satisfaction

and better performance, and eventually improved economic growth. The defining

projection of the human capital can portrays in different scenario, but the most projected

scenario of the human capital can be said that, the abilities and skill of the masses are

called human capital (Lawanson & Marimathu, 2009).

On the other hand Muhammed (2011), described unemployment as the state of

wordlessness experienced by persons who are members of the labour force who

perceived themselves and are perceived by others as capable of work and it is also

defined as number of people willing to work but they are not able to find any (Jaiyeoba,

2015). Unemployed people can be categorized into those who have never worked after

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graduation from the university and those who and those who have lost their jobs thereby

seeking re-entry into labour market. From the above views of scholars government

spending, public spending and government expenditure mean the same and government

expenditure is a macroeconomic tool used by the government to achieve macroeconomic

goals in the economy while unemployment is one of the macroeconomic problems in the

economy and this unemployment rate is the degree or the total number of willing and

capable labour which are not engaged in any productivity process in the economic.

Theoretical Framework The theoretical framework of this study is the real business cycle theory on

unemployment. It is argued in this theory (Chatterjee, 1999) that the growth of

productivity of input (labour and capital) which revolutionizes technology is the main

source of employment and unemployment. If the growth of output increases more than

the growth of inputs, then total factor productivity or the residual, has increased. If total

factor productivity is not growing, then firms and the economy become inefficient. It

follows that reallocation of labor (human capital) and capital cannot be achieved and

labor and capital will be used in less profitable opportunities.

There are various causes for the slowdown in total factor productivity. Technology is not

improving in the production of goods and services and workers’ skills (Human Capital

Development) are not being enhanced. New products are not invented and when the

prices of imported materials are increasing. Once total factor productivity is stagnating,

the co-movements in other important variables will slowdown. For example,

consumption expenditures will not increase above the trend, nor will investment

spending. Therefore, the theory argued that increase in human capital development will

enhance productivity and thereby increase the output that will in turn improve the

employment generation and on the other hand if output from the labour is low the level

of unemployment will increase. Functionally, Unemployment (Unem) is a function of

human capital development indicators.

Unem=f (Education , Health∧other Human Capital Indicators)

Empirical Review

Several studies have been carried out to estimate the effect of human capital

development in determining employment and unemployment. Massingham & Leona

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Tam (2015) examined the relationship between human capital, creation and employee

reward in Australia. It was discovered that employee capability and employee

satisfaction had a direct positive relationship with the importance of work activity. It

was also discovered that the ability to create value at work had a direct positive

relationship with employees reward. However, Employee’s commitment had a direct

negative relationship with the importance of work activity. In a similar but different

context, Doppelt (2012) in a theoretical macroeconomic model examined how temporary

job losses lead to life-long earning losses. He noted that Workers must effectively

compensate their employers for the skills that they gain because skills are more valuable

during economic booms. Besides, allowing workers to build up general human capital

affects the wage determination.

He also noted that workers accumulate specific human capital on the job, while suffering

human capital depreciation during unemployment. Using the nexus between human

capital and unemployment, Samiullah (2014) investigated the Impact of determinants of

Human capital such as health, education, population and life expectancy on

unemployment in case of Pakistan over the period 1981-2010. Using. The Johansen co-

integration and Vector Error Correction Modelling (VECM) approach, the results

showed that human capital variables had strong impact in determining the employment

status in Pakistan long run. Similarly, Bashir, Farooq, Nawaz, Bagum, Sandila, &

Arshad (2012) also examined the Pakistan economy by using the data for the period

from between 1972 and 2010. Using the Co-integration test and VECM respectively. It

was discovered that educational expenditure, health expenditure and gross fixed capital

formation are significant features in magnifying employment level in Pakistan.

Therefore, it was suggested that there should be more spending on education to support

enrolment at primary and expert levels by offering scholarships to students. In some

other studies, Chaudhary (2010) examined the wages and employment level for females

by taking health and education as independent variables important determinants of

human capital. Using primary data collected through different field surveys; OLS

method is applied to estimate coefficients. The results suggested that education and

health have positive and significant impact on employment level and determination of

wages for female workers. In another study, Laplagne, Glover & Shomos, (2007)

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carried out a panel analysis by estimating the change in labour force participation rate

due to change in human capital variables such as health and education. Logit model is

used to estimate the coefficient of the explanatory variables.

It was discovered that greater labour force participation was achieved by better health

and education. Similarly, Kennedy and Vance (2009) using time series data to measure

the impact of increase in educational attainment on labour force participation rate and

found the results that as the level of schooling and education increased, the prospects for

labour force participation for such a person also increased. Also, Mete and Schultz

(2002) examined the labour force participation rate due to change in health quality.

Using the Ordinary Least Squares (OLS) approach, a bi-directional relationship was

discovered between health and labour force participation. Thus, an Improvement in

health sector was seen as a possibility for reducing the unemployment rate and vice

versa. Similarly, Pandey (2009) examined the change in labour force participation rate

given a change in health structure of the people in India. Using unemployment as a

dependent variable and health expenditures and number of hospitals are used as

independent variables, the two stage least squares (2SLS) technique of estimation

revealed that negative and significant relationship between unemployment and health

expenditures.

Evans & Koch (2007) estimate the effect of human capital on the unemployment

problem using the standard time dependent model makes the individual unemployment

rate. They conclude that effect of education on becoming employed is positive levels of

education actually tend to increase the average employment duration. They find that the

level of human capital has a negative effect on unemployment. Christelle, Kornelia &

Arjona (2010) examines the relationship between long-term unemployment and

education been run using both a binary logit model and a binary scobit model for time

period 2004-2006 to investigate the impact of education on unemployment.

The outcome suggests that the chances of a person to be remain in long-term

unemployment decreases with increases in her/his educational level. Study also told that

younger workers (20-30) are more beneficial than older workers (50-65) and there is a

decline in returns of education after the age of 40. Conclusion of the all literature is that

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all the past study investigate the impact of human capital on employment rate by

keeping health and education as factors of human capital but this study also consider the

impact of health and education, Enrolment and Number of schools and life expectancy

as factor of human capital to measure the unemployment variations due to human capital

development in Nigeria.

METHODOLOGY

This study used secondary data. The data on education and health expenditures were

sourced from Central bank of Nigeria’s statistical bulletins, data on unemployment rate

were sourced from National Bureau of Statistics Annual reports while data on life

expectancy and Per Capita Income were sourced from World Bank Databank.

Autoregressive Distributed Lagged (ARDL) - Bounds test procedure was used to

examine the co-integration relationship between human capital development and

unemployment in Nigeria. This procedure was developed by Pesaran and Shin (1999)

which was later expanded by Pesaran, Shin and Smith (2001) and the procedure allow

researcher to use variables which are not integrated in the same order. Also, the Error

Correction Model (ECM) was used to establish the short-run and long run causal

relations between Human Capital Development and unemployment in Nigeria.

In order to assess the role of human capital on the unemployment situation in Nigeria,

the study used the theoretical functional relationship between human capital

development and unemployment that was established by Chatterjee, 1999. Specifically,

using non- stationary variables, unemployment (UNEMPR) is regressed against human

capital development indicators. These include Education Expenditure in Nigeria

(EEXP), Health Expenditure in Nigeria (HEXP) as well as some other control variables

like Population Growth Rate in Nigeria (PGR), and Life Expectancy in Nigeria (LEN).

Thus,

UNEMPR=f ( EEXP , HEXP , PGR , LEN )(3.1)

Taking the natural logs of these variables and introducing the expected coefficients (and

intercept equation (4) is re-written as:

UNEMPR=α+β1 EEXP+β2 HEXP+β3 PGR+β4 LEN+µ(3.2)

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With the exception of Population Growth Rate in Nigeria (PGR), an inverse relationship

is specified between all the variables and UNEMPR. For instance an increase in

Education Expenditure in Nigeria (EEXP) and Health Expenditure in Nigeria (HEXP)

are expected to reduce unemployment; hence the specified interrelationship.

The Autoregressive Distributed Lagged (ARDL) model was used in this study because

the variables were integrated in order 1(0) and 1(1) which was established by Pesaran,

Shin and Smith (2001). And the model is specified as follows:

ΔUNEMPR t=α 0+∑g=1

m

α 1i ΔUNEMPR t−i+∑h=1

n

α2 i ΔEEXPt−i+∑i=1

o

α 3i ΔHEXP t−i+∑j=0

p

α 4 i ΔPGRt− j+∑k=0

q

α 5 i ΔLEN t−k+α 6 UNEMPRt−i+α 7 EEXP t−i+α 8 HEXPt−i+α 9 PGR t−i+α 10 LEN t−i+εt (1 )

Where: UNEMPR = Unemployment Rate in Nigeria; EEXP = Education Expenditure in

Nigeria; HEXP= Health Expenditure in Nigeria; PGR= Population Growth Rate and

LEN= life Expectancy in Nigeria. Equation (1) will be used to examine the short-run and

long-run relationship between Human Capital Development and Unemployment in

Nigeria.

While the Error Correction Model (ECM) that will be used in this study is specified as

follows:

ΔUNEMPR t=β0+∑g=1

m

β1i UNEMPRt −i+∑h=1

n

β2 i ΔEEXPt−i+∑i=1

o

β3 i ΔHEXPt−i+∑j=0

p

β4 i ΔPGRt− j+∑k=0

q

β5 i ΔLEN t−k+ βEC M t−1+εt (2 )

The model above is used to adjust the estimation until the ECM turned negative. The

negative sign of coefficient of the error correction term ECM (-1) shows the statistical

significance of the equation in terms of its associated t-value and probability value. The

apriori expectation of the independent variables on the dependent variable is given as: b1

˂ 0, this would mean that there is a positive relationship between the variables. An

increase or decrease in the independent variables will lead to an increase or decrease in

the dependent variable.

DATA PRESENTATION AND ANALYSIS

Data Presentation

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The data for regression for the study are presented in table 4.1 in appendix I, where UNEMPR is the unemployment rate in Nigeria, EEXP is the education expenditure in Nigeria, HEXP is the health expenditure in Nigeria, PGR is the population growth in Nigeria and LEN is the life expectancy in Nigeria.

Descriptive Analysis of Variables

Table 4.2: Descriptive Analysis of VariablesUNEMPR EEXP HEXP PGR LEN

 Mean  6.478387  105647.8  60427.60  2.612581  48.32903 Median  4.500000  57956.64  24522.20  2.620000  46.90000 Maximum  13.20000  390420.0  231800.0  2.710000  52.80000 Minimum  1.800000  225.0100  225.0100  2.520000  46.10000 Std. Dev.  3.923851  130598.5  74236.70  0.071413  2.554759 Skewness  0.582149  1.167084  1.114201 -0.026330  0.665771 Kurtosis  1.721581  2.887224  2.758420  1.418906  1.792953 Jarque-Bera  3.862011  7.053872  6.489508  3.232567  4.172041 Probability  0.145002  0.029395  0.038978  0.198636  0.124180 Sum  200.8300  3275083.  1873256.  80.99000  1498.200 Sum Sq. Dev.  461.8982  5.120000  1.650000  0.152994  195.8039 Observations  31  31  31  31  31Source: Authors Computation from E-views, (2018)

Table 4.2 shows the descriptive analysis of the variables used in the study. From the table the highest value for unemployment rate during the period of study is 13.2 percent this occurred in 2015 as shown in the table of data presentation. Also, peak value for Education Expenditure in Nigeria (EEXP), Health Expenditure in Nigeria (HEXP), Population Growth Rate in Nigeria (PGR) and Life Expectancy (LEN) in Nigeria are 2.71 percent, 52 percent and 3203 dollar respectively. However, the lowest value for unemployment rate during the period of study is 1.8 percent. While, the lowest value for Population Rate (PGR), Life Expectancy (LEX) and Per Capita Income (PCY) are 2.52 percent, 46 percent and 153 dollar respectively. On the average the values of the Unemployment rate is 6.28 percent. Population Rate (PGR), Life Expectancy (LEX) and Per Capita Income (PCY) also have average value of 2.61 percent, 48.3 percent and 968 dollar respectively as indicated by their mean values.

Stationarity Test

Table 4.3: Summary of Unit Root TestVariables 5% level Critical ADF Order of Integration

UNEMPR -2.9677 -5.531672 I (1)

EEXP -2.9558 -5.460092 I (0)

HEXP -2.9762 -3.048811 I (1)

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PGR -2.9677 0.544510 I (0)

LEN -2.9677 -5.956088 I (1)

Source: Author Computation, (2018)

Table 4.3 shows the stationarity test of the variables used in the study and from the table Augmented Dickey-Fuller test results revealed that the Unemployment Rate in Nigeria, Health Expenditure in Nigeria (HEXP) and Life Expectancy (LEN) in Nigeria are stationary at first difference at 5 percent level of significance. While the Education Expenditure in Nigeria (EEXP) and Population Growth Rate in Nigeria (PGR) are stationary at level at 5 percent level of significance.

Causality Test

Table 4.4: The Causality Test Result Null Hypothesis: Obs F-Statistic Prob.  UNEMPR does not Granger Cause EEXP  3.43621 0.0487 HEXP does not Granger Cause UNEMPR  29  4.50051 0.0219 UNEMPR does not Granger Cause HEXP  3.69859 0.0398 HEXP does not Granger Cause EEXP  29  7.18899 0.0036 LEN does not Granger Cause EEXP  29  5.55658 0.0104 LEN does not Granger Cause HEXP  29  8.94781 0.0012 PGR does not Granger Cause LEN  3.40564 0.0499Source: Author Computation (2018)

Table 4.4 above shows Pairwise Granger Causality tests. From the results, all the listed pair of variables have causal relationships among them. That is, there is a causal relationship among the variables given the probability values of the variables at 5 percent level of significance. Therefore, the null hypotheses which stated that there are no causal relationships among variables are rejected.

Co-integration Test Results

Table 4.5: ARDL Bounds Test of Co-integrationTest Statistic Value KF-statistic  17.84698 4Critical Value BoundsSignificance I0 Bound I1 Bound10% 2.45 3.525% 2.86 4.012.5% 3.25 4.491% 3.74 5.06Source: Author’s E-views 9.0 Computation (2018)

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The Co-integration test was done using the ARDL Bound test equation in table 4.5 because all the variable were not integrated at order 1(0). Therefore, Pesaran, Shin and Smith (2001) suggested that Bound test can be used to establish the co-integration among the variables. This became necessary to avoid a spurious regression result. Using the ARDL Bound test with critical value from Narayan (2005), the variables were co-integrated at 1 per cent level of significance since the Wald F- statistics is greater than the critical lower and upper bound.

Presentation and Interpretation of Regression Results

Table 4.6: Long run regression resultsVariable Coefficient Std. Error t-Statistics Prob.

EEXP -0.000062 0.000039 -1.598236 0.2083

HEXP -0.000005 0.000084 -0.059362 0.9564

PGR -9.056938 13.448220 -0.673467 0.5489

LEN 3.917058 0.482090 8.125158 0.0039

C -154.055834 50.327584 -3.061062 0.0549

Source: Author’s E-views 9.0 Computation (2018)

From the long-run regression results obtained in Table 4.6 the following interpretation can be inferred; a yearly increase in Life Expectancy Rate in Nigeria (LEN) on the average holding other independent variables constant will lead to 3.92 percent increase in unemployment rate in Nigeria. A yearly increase in the Education Expenditure in Nigeria (EEXP), Health Expenditure in Nigeria (HEXP) and Population Growth in Nigeria on the average holding other independent variables constant will lead to 0.000062, 0.00005 and 9.056938 percent decrease in unemployment rate in Nigeria. This result agreed to the work of Bashir et al (2012) which empirically established that Education Expenditure and Health Expenditure have the impact to reduce unemployment. Finally, based on the probability value, the Life Expectancy Rate in Nigeria (LEN) was statistically significant in explaining the variation in Unemployment rate in Nigeria while the Education Expenditure in Nigeria (EEXP), Health Expenditure in Nigeria (HEXP) and Population Growth in Nigeria were statistically insignificant in explaining the variation in Unemployment rate in Nigeria.

Table 4.7: The Error Correction Model ResultsSelected Model: ARDL(1, 2, 2, 1, 2)

Variable Coefficient Std. Error t-Statistic Prob.   D(EEXP) -0.000036 0.000050 -0.712080 0.0078

D(EEXP(-2)) -0.000016 0.000023 -0.702932 0.0027D(HEXP) -0.000018 0.000072 -0.247448 0.0205

D(HEXP(-3)) -0.000212 0.000099 -2.149223 0.0208D(PGR(-1)) -5.626073 114.020616 -0.049343 0.0937

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D(LEN) 0.712304 6.095630 0.116855 0.0144D(LEN(-1)) -10.683475 2.932817 -3.642734 0.0357

ECM(-1) -3.605332 0.460419 -7.830545 0.0043Source: Output from E-views 9.0 (2018)

From the short-run regression results obtained in Table 4.7 the following interpretation can be inferred; Since the variables were found to be cointegrated implying that they have longrun equilibrium relationship, it is necessary to test for shortrun relationship. From table 4.7, the ECM parameter is negative (-) and significant which is -3.605, this shows that 3.6 percent disequilibrium in the previous period is being corrected to restore equilibrium in the current period.It has been established that the variables are cointegrated and also have short run relationship established from the ECM. All the independent variables were negatively related Unemployment rate in Nigeria except Life Expectancy Rate in Nigeria (LEN) at present period. Finally, all the independent variables were statistically significant in explaining the variation in Unemployment rate in Nigeria while the Population growth rate at lag period was statistically insignificant in explaining the variation in Unemployment rate in Nigeria.

CONCLUSION AND RECOMMENDATIONS In conclusion, the short run result shows that all the independent variables were negatively related Unemployment rate in Nigeria except Life Expectancy Rate in Nigeria (LEN) at present period and also, all the independent variables were statistically significant in explaining the variation in Unemployment rate in Nigeria while the Population growth rate at lag period was statistically insignificant in explaining the variation in Unemployment rate in Nigeria. This implies that at the short run Education Expenditure in Nigeria (EEXP), Health Expenditure in Nigeria (HEXP) and Population Growth in Nigeria have great impact in reducing unemployment rate in Nigeria while Life Expectancy Rate in Nigeria (LEN) can increase the level of unemployment in Nigeria. Based on the findings and research conclusion, the following policies were recommended by study which are:i. Since Education Expenditure in Nigeria (EEXP) and Health Expenditure in

Nigeria (HEXP) can reduce unemployment rate in Nigeria, government should therefore, adopt mechanism to make sure financial and other resources in those sectors are properly utilized to increase the efficiency of the sectors and thereby reducing the level of unemployment in Nigeria.

ii. Government should control population rate in Nigeria through efficient primary health care and family planning in order reduce the level of unemployment in Nigeria.

iii. Government should adopt efficient and effective monitoring in the civil service commission in Nigeria in order to reduce unemployment in Nigeria.

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216

AN APPRAISAL OF NIGERIA’S MEMBERSHIP OF THE WTO AND ITS IMPACT

ON THE TEXTILE INDUSTRY IN NIGERIA

By

Udeoji Ebele Angela, Ph.D.

Department of Political Science

National Open University of Nigeria

91 Cadastral Zone Nnamdi Azikiwe Express Way

Jabi, Abuja.

Abstract:

This study examined the political and economic factors that influenced the Nigerian Membership of the World Trade Organisation (WTO), and its effects on the textiles industry since 1995 till date, and identifies the problems of the industry and their linkages to its membership of the world body with a view to ascertaining whether or not its membership of the Organisation is benefiting maximally. The study used secondary sources of data which were collected from the Federal Office of Statistics, Central Bank of Nigeria, Statistical Bulletin, Annual Reports and in-house magazines. Data was analysed using descriptive statistics. The study showed that 76.2% of textile companies indicated that WTO policy of free trade affected their companies leading to closure of factories. Furthermore, it established the fact that the textile industry in Nigeria already had endemic problems such as poor infrastructure, obsolete equipment, and pricing, which pre-dated its membership of the world body, but the situation worsened after Nigeria became a member of the World Trade Organisation. The study concludes that, though Nigeria’s membership of the World Trade Organisation has had a negative effect on the textile industry, membership of the organization cannot be withdrawn rather there should be reforms in political and economic policy. This will go a long way in creating a friendly investment atmosphere for both international and domestic investors.

Keywords: World Trade Organisation (WTO), Textile Industries, General Agreement on Trade and Tariffs (GATT), Imports, Exports.

Background to the Study

The same factors which led to the creation of a managed international monetary system

after the World War II (IMF) also led to the attempt to subject trade for the first time to a

systematic international control. National protectionism and disintegration of world

trade in the 1930s created a common interest in an open trading order and a realization

that states would have to cooperate to achieve and maintain that order. Several attempts

to establish an International Trade Order (ITO) failed, but the General Agreement on

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Trade and Tariffs (GATT) was put in place. (ITO, 1945-1948) This was drawn up in

1947 to provide a procedural base and to establish guiding principles for the tariff

negotiation being held in Geneva. (Information and Media relations, 2003) This was

meant to be merely a temporary treaty, to serve until the Havana Charter was

implemented, but because that charter was never ratified, by default, it became the

expression of the international consensus on trade.

As time passed, problems began to rear their heads even for the developed countries in

the GATT system. (GATT, Oct 30th 1947) Even the GATT’s institutional structure and

its dispute settlement system were causing concern to the members and so they were

convinced that something had to be done.(Abel and Bruno, 2007) This resulted in the

Uruguay Round, the Marakesh Declaration and the creation of the WTO. (WTO, 1994)

The WTO is a set of rules and at its hearts are the WTO agreements negotiated and

signed by the bulk of the world’s trading nations.The documents provide the legal

ground-rules for international commerce. They are essentially contracts, binding

governments to keep their trade policies within agreed limits. (Gayle O, 1995) Although

negotiated and signed by governments, the goal is to help the producers of goods and

services, exporters and importers conduct their businesses, while allowing governments

to meet social and environmental objectives. Nigeria became a founding member of

WTO by signing the pact in January 1995.

Statement of the problem

The World Trade Organisation (WTO) is the only international body dealing with the

rules and regulations of trade between and among nations and has at its heart the trade

agreement signed and negotiated by world trading nations. These documents provide

the legal ground-rules for international commerce. They are essentially contracts binding

governments of various countries to keep WTO agreement within agreed limits.Nigeria

ratified the WTO treaty and became a founding member of the organization in January

1995. Since then there has been occasional focusing on the economic implications of

this treaty for the Nigeria economy.In the year 2000, the manufacturing sector in Nigeria

raised alarm over the impact of globalization on the Nigeria economy. Its position is that

from the beginning, Nigeria and other African countries were not adequately represented

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at the negotiation that gave birth to the WTO. So the manufacturers in Nigeria keep

calling for a re-negotiation of the WTO pact in order to protect the local industries.

The Chairman of Textiles Industries in Nigeria blames the collapse of that sector on the

country’s membership of the WTO. He says that as a result of the WTO activities which

gave prominence to liberalization, allowing the influx of imported textile materials into

Nigeria with minimum import duties, the industry is in a terribly bad state. A lot of

inferior materials are dumped on the country at cheaper prices than the ones produced in

Nigeria he says. According to him “When Nigeria textile industries were in their full

capacity utilization and production, about ten years ago, over 250,000 workers were

employed, but today because of the problem that the industry finds itself, more than 85%

have lost their jobs.” Indeed, this is devastating not only to the textile manufacturers but

to the Nigerian economy in general.

On a more global level other third world countries have also the same problems as

Nigeria and therefore have formed a group of 77 countries though in actual fact they are

more than 77 in number, to forge a common front to tackle and address the imbalances

in the WTO. Some of the problems facing the third world countries in the WTO are (a)

the lack of anticipated benefits accruing to many developing countries (b) a range of

problems arising from the implementation of their own obligation. (c) lack of

transparency and inadequate participation in decision making process in the WTO.

According to a submission at the WTO in June 2000 by the International Textiles and

clothing Bureau only a few quota restrictions (13 out of 750 by the US; 14 out of 219 by

the EU: 29 out of 295 by Canada) had been eliminated; this raises doubts as to whether

all or most of the quotas will really be removed by 2005 (at the end of the

implementation period) and/or whether other trade measures will be in place to continue

the high protection. (The Guardian October 23 2001 p 11)

Theoretical framework

The theoretical framework on which this study is built is primarily on the

classical/neo classical theories of international trade by Adam Smith, David

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Richardo and Heckscher-Ohlin.The global economy in the 21st century has become

increasingly integrated, with rapid cross-border flows of goods and services dictating

the pulse of business. Developing countries find themselves under ever increasing

pressure to open their doors to foreign direct investment, conform to the fiscal

requirements of lower tariffs. In return, they are supposed to receive the full benefits

embedded in the international capitalist system. By integrating themselves into the

international market place, the developing countries are supposed to benefit from the

international division of labour. Domestic producers become more efficient by

virtue of specializing in sectors in which they enjoy comparative advantage, while

their consumers enjoy access to a wider variety of domestic and imported goods at

cheaper prices.

Now, the WTO is a setting, or a restrictive discursive space, where inter-

governmental meetings occur, experts congregate, expertise is employed, and

decisions are made within a common understanding expressed in a specific, political

economic language. The approved dialogue in the WTO centers on free trade within

an overall neo-liberal conception of economic growth with the belief that everyone

benefits (mainly consumers) from trade and growth. The organization itself says that

it services the interest of all equally in that free trade produces economic growth

which produces higher incomes for everyone. For these reasons analysis in the

paper will focus on issues of international trade through the eyes of the WTO and the

classical/neo-classical theories as propounded by Adam Smith and David Richardo.

The Ricardian model, in its original formulation is based on the labour theory of

value. According to this theory, the cost, and hence the value of a commodity is

determined by the amount of labour that goes into its production. Thus the theory

considers labour to be the only factor of production. Other assumptions of the

Ricardian model include perfect competition and factor mobility domestically,

immobility of factors internationally, and constant unit cost. Constant unit cost arise

from the fact that labour, the only factor of production is assumed to be used in fixed

proportion in the production process, i.e constant quantities are required for the

production of each unit of output. Although labour productivities are in this sense

fixed, these are assumed to differ between different countries for different

commodities which it can produce at lowest relative labour costs i.e in which it has

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comparative advantage. International trade based on the principle of comparative

advantage gives rise to gains and this constitutes the answer to the question ‘why do

countries engage in trade’.

The Ricardian principle of comparative advantage provides a simple but logical

explanation of the participation of countries in international trade. A country will

export a commodity in which it has a comparative advantage and import that in

which it has a comparative disadvantage, comparative advantage/disadvantage being

determined on the basis of relative labour costs. Supplemented by Mills reciprocal

demand, the principal of comparative advantage provides explanations of terms of

trade that is the exchange ratio of the export to import goods.

In the modern analysis of principle of comparative advantage, the labour theory of

value underlying Ricardian model has been dropped. The concept of “labour cost”

has consequently been substituted with Harberler’s concept of opportunity

cost.2When resources are efficiently and fully utilized, the production of some

commodity has to be forgone in other that resources can be released to produce more

of another commodity.

Methodology

Data for the study was obtained from secondary sources; the study relied on the

following:

i). Extensive Library Research in order to review current literature on the WTO, the

Third World perspective and the state of commerce and industry in Nigeria,

participating in the subject of textile industry.

(ii) Institutional Publications by Local and External Agencies like WTO

publications, UNIDO report on the state of Textile industry in Nigeria, World Trade

Reviews, National Executive Council Report of the National Union of Textile,

Tailoring, Garments Workers of Nigeria (NUTGTWN) and the monthly publications

of the union on the state of the industry.

(iii) Government Publications and Documents especially at the Federal Level.

Publication of several reports of presidential committees on the Revival of the

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Textile/Garment Industry in Nigeria. Reports prepared by the Federal Ministry of

Industry on the state of affairs in the Textile sector.

(iv) National Dailies and Newsmagazines (whether privately or Government

Owned: with relevant information on day to day activities of the WTO, international

trade and the Textile Industry were studied. This source also contains important

commentaries by notable government official and individuals on the situation of

commerce and industry in Nigeria.

The WTO agreement on textile and clothing

Textiles, like agriculture, are one of the hardest – fought issues in the WTO, as it was in

the former GATT system. It is now going through fundamental change under a 10-year

schedule agreed in the Uruguay Round. The system of import quotas that has dominated

the trade since the early 1960s is being phased out.

From 1974 until the Uruguay Round, the trade was governed by the multlfibre

Arrangement (MFA). This was a framework for bilateral agreement or unilateral actions

that established quotas limiting imports into countries whose domestic industries were

facing serious damage from rapidly increasing imports. The quotas were the most visible

feature. They conflicted with GATT’S general preference for customs tariffs instead of

measures that restrict quantities. They were also exceptions to the GATT principle of

treating all trading partners equally because they specified how much the importing

country was going to accept from individual exporting countries.

Since 1995, the WTO’S Arrangement on Textiles and Clothing (ATC) has taken over

from the Multi fibre Arrangement. By 1 January 2005, the sector is to be fully

integrated into normal GATT rules. In particular, the quotas will come to an end, and

importing countries will no longer be able to discriminate between exporters. The

agreement on textile and clothing itself no longer exist: It’s the only WTO agreement

that has self-destruction built in. It terminated on the 1st of January, 2005.

Integration: Returning Products Gradually to GATT Rules

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Textiles and clothing products are being returned to GATT rules over the 10-year

period. This is happening gradually, in four steps, to allow time for both importers and

exporters to adjust to the new situation. Some of these products were previously under

quotas. Any quotas that were in place on 31st December 1994 were carried over into the

new agreement. For products that had quotas the result of integration into GATT will be

the removal of these quotas24.

The agreement states the percentage of products that have to be brought under GATT

rules at each step. If any of these products came under quotas, then the quotas must be

removed at the same time. The percentages are applied to the importing country’s

textiles and clothing trade levels in 1990. The agreement also says how the quantities of

import permitted under the quotas should grow annually, and that the rate of expansion

should increase at each stage. How fast that expansion should be is set out in a formula

based on the growth rate existed under the old multifibre Arrangement.

The Four steps over 10 years before the agreement expires

The schedule for freeing textiles and garments products from imports quotas (and

returning them to GATT rules), and how fast remaining quotas should expand. The

example is based on the commonly – used 6% annual expansion rate of the old

Multifibre Arrangement. In practice, the rates used under the MFA varied from product

to product.

Step percentages of products percentage of

products

to be brought under GATT to be brought under

GATT

Including removal of any Including removal of

any

quotas quotas

Step 1: 16% 6.96%

1 Jan. 1995 minimum, taking 1990 per year

to 31 Dec. 1997 imports as base

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Step 2:

1 Jan 1998 17% 8.7%

to 31 Dec. 2001 per year

Step 3:

1 Jan 2002 18% 11.05%

to Dec. 2004 per year

Step 4:

1 Jan 2005 49% No quotas left

The actual formula for import growth under quotas is:

by 0.1 x pre-1995 growth rate in the first step;

0.25 x step 1 growth rate in the second step; and

0.27 x step 2 growth rate in the third step.

Products brought under GATT rules each of the first three stages must cover the four

main types of textiles and clothing: tops and yarns; fabrics; made-up textile products;

and clothing. Any other restrictions that did not come under the Multifibre Arrangement

and did not conform to regular WTO agreements by 1996 have to be made to conform or

phased out by 2005.

If further cases of damage to the industry arise during the transition, the agreement

allows additional restrictions to be imposed temporarily under strict conditions. These

“transitional safeguards” are not the same as the safeguard measures normally allowed

because they can be applied on imports from specific exporting countries. But the

importing country has to show that its domestic industry is suffering serious damage or

is threatened with serious damage (Article 6(2). And it has to show that the damage is

the result of two things: increased imports of the product in question from all sources,

and a sharp and substantial increase from the specific exporting country. The safeguard

restriction can be implemented either by mutual agreement following consultations, or

unilaterally. It is subject to review by the Textiles Monitoring Body.

In any system where quotas are set for individual exporting countries, exporters

might try to get around the quotas by shipping product through third countries or making

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false declarations about the product’s country of origin. The agreement includes

provision to cope with these cases (Article 6(4). The agreement envisages special

treatment for certain categories of countries – for example, new market entrants, small

suppliers, and Least Developed Countries (LDCs).

A Textiles Monitoring Body (TMB) which supervises the agreement’s implementation,

consists of a chairman and 10 members acting in their personal capacity (Article 8). It

monitors actions under the agreement to ensure that they are consistent, and it reports to

the Council on Trade in Goods which reviews the operation of the agreement before

each new step of integration process. The Textile Monitoring Body also deals with

disputes under the agreement of textile and clothing. If they remain unresolved, the

dispute can be brought to the WTO’S regular Dispute Settlement Body.

The state of the textile /garment industry in Nigeria

The textile industry generally accounted for a high proportion of manufacturing output,

employment, and value added. It was also one of the foremost contributors to foreign

exchange earnings in addition to its contribution to manpower development and

training, applied technology and industrialization. The industry is linked to the

agricultural sector, chemical and petrochemical industries. It is also strategic in

terms of the nation’s overall industrialization efforts due to its high absorptive

capacity of engineering goods and services. In the mid 1980’s, there were over 175

mills operating efficiently in the country with a fixed investment of over US$4

billion and employing over 200,000 workers. Also, over a million people workers,

farmers, traders and their families depended largely on it for their livelihood.

Today however, this sector had witnessed a sharp decline in activities and has

been at the verge of total collapse. The once flourishing textiles industry went

through crisis largely caused by influx of cheap and inferior fabrics in the local

markets. Since the lifting of ban on import of textile in 1997, over 34 mills have

closed down and many more are on the verge of closure. Capacity utilization in the

remaining ones had dropped below 30% with the attendant loss of over 60,000

jobs27. In addition, there is the problem of maintenance and upgrading of equipment

to higher technological level.

Furthermore, export earnings from this sector have also dropped drastically and the

downward trend became prevalent. According to unofficial statistics supplied by

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NTMA, between 1997 – 2002, the market share of textiles imports increased from

10% to 80% and about 80% of such imports came through land borders and without

any valid documents. The local industry was, therefore, unable to withstand the

competition from such inferior smuggled goods as they were sold at cheaper rates.

Development in the garment industry was not only hampered by the unavailability of

locally produced and exported fabrics but also through difficulties in custom

procedures and the reluctance of the banks to engage in credit financing. Although

importation of second hand clothes is prohibited, it is still a common smuggled item.

Salient Features of the Nigerian Textile and Garment Industry

The Nigerian textile industry is the second largest in terms of volume of productivity

in Sub Saharan Africa, after South Africa. The basic raw materials are cotton (70%)

and man-made fibres (30%), which are sourced locally. In terms of labour, the

industry currently employs about 66,000 workers as at August, 2002, therefore it can

be seen that the input to the industry are locally sourced in full production, the

industry has capacity to employ more labour (Nigerians) and the industry would

have more capacity to utilize more labour and locally available raw materials. The

contribution of the organized garment industry within the economy of Nigeria is

insignificant. Yet, if adequately encouraged, this sub-sector has the potentials to

employ more labour, utilize locally made raw materials and contribute significantly

to the Gross Domestic Product (GDP). The major products of the sector are: Fiber:

Polyester Staple Fiber, Yarn: Cotton Yarn, Polyester Filament Yarn, Fabric: Grey

Cloth, African Prints, Wax Prints, Home furnishings, Dyed and printed Fabric.

Garment & Made Ups: Shirts.

Formal exports of textiles and garments are estimated at USD 15 million per annum,

comprising yarn and fabrics exported to European Union (EU) and Economic

Community of West African States (ECOWAS) countries. However there is large

‘informal’ export to neighboring countries estimated to be about US$150 million per

annum29. While the availability of local raw materials is an advantage, the industry

faces several disadvantages vis-à-vis other textile producing countries, of which the

cost of production is higher due to,

High interest rate, high cost of dyes, chemicals and parts; and high cost of

infrastructural facilities (viz: energy, water, freight etc).

226

Total numbers of companies and important mills…

KADUNA KANO LAGOS

Arewa

Chellco

African Afprint Ijoratex

Angel Alkem Mayfair

KTL Dangote Atlantic Nichemax

Nortex/Finetex Gaskiya Arceee Nitol

SRC Holborn Bhojral Ntm

Supertex Integrated Century Nwpc

UNT plc Kayfad Coats Reliance

Unitex Nigerian Spnrs& Dyers Costyn Royal spin

Terrytex Daltex Speco mill

Universal Diamond spinner Spintex

United Spinner Enpee Sunflag

Elite Swantex

OTHERS First spinners Stallion

GCM Globe spin Texlon

Asaba Haffar Textile specialty

Horizon Honking Woolen & synth

Zamfara Iti

Zaria industries

A critique of Nigeria’s membership of the WTO

That external trade policy is an important instrument of forming a new economic

relations among nations and has become a major determinant of economic growth

227

cannot be overemphasized. Trade issues are at the center stage of contemporary world

politics and international relations. It defies all ideological orientation or bias of any

country. A country either trades or perishes. A free trading world has been proved to

contribute more to the growth of the world economy than a restricted economy. What

countries are struggling for is to have their own share of the increasing world trade and

to prevent any measure that would stop the growth of the world trade by encouraging

trade without discrimination which is the cardinal point of WTO.

However, if past reports on the debate in the House of Representatives as

to whether or not Nigeria should continue her membership is to be reckoned with, it

clearly shows that debaters have little understanding of the functions of the multilateral

trading system. For instance, the newspapers reported that “most of the law makers

believe that the WTO tenets kill local industries while encouraging imperialism”. Much

more worrisome is the statements credited to the chairman house committee on

industries that “local industries are not finding it easy because of our participation in the

WTO”. He further noted that majority of the countries manufacturing companies

especially the textile and foot wear industries, have closed down as a result of the global

trade liberalisation. He mentioned that local industries cannot compete favourably

despite the country’s membership of the organization. For these reasons, it was

proposed in the house that there should be a ban placed on importation of items like

fruits juice, toilet tissues, matches, tooth pick, textiles etc. But sorry, under the WTO,

you don’t ban overnight. Infact the provisions of the WTO have other means of

achieving exactly the same result in a more predictable manner as a ban would achieve.

These are the things Nigeria should make deliberate efforts to know by doing some

serious homework on the study of WTO agreement.

If most members of the house committee on industries are of the view that the

WTO is the cause of poor industrial performance in the country, then they need some

education and information. Let us again re-visit this issue briefly issue. The

organization is the only multilateral body dealing with the rules of trade between

nations. The goal is to assist producers of goods and services, exporters and importers

conduct their business in a co-ordinated manner. The organizations main purpose is to

help trade flow as freely as possible. To achieve this, the organization, administers set

trade rules called Agreements to which member countries sign to. The organization

ensures that individuals, companies and governments know about what the trade rules

228

are, around the world and guarantees that there will be no sudden changes of polices

among member countries without the WTO being notified, thus making the system

predictable to all stakeholders. So, no amount of blame, accusations or counter

accusations will revive the Nigerian ailing economy until the country does the right

thing by creating a friendly investment environment. Let us not forget that investment

seeks out friendly environment.

Another problem in Nigeria is that most people often confuse the WTO as being

the same as GATT (The General Agreement on Trade and Tarriffs) it is not, because the

GATT dealt with trade on goods, and it still does with modifications to fit into the WTO.

Therefore, one can say that the WTO is the modified GATT plus new Agreement on

Trade in Services (GATS). Agreement on Trade Related Investment Measures (TRIMS)

Agreement on Trade Related Intellectual Property Rights (TRIPS) and the Agreement

dealing with how the WTO itself should be run as an organisation. While the old GATT

was ad-hoc and provisional without ratification, the WTO and its agreements are

permanent and has a sound legal basis as the Agreement ratified by members. In

addition, the WTO has “members” but GATT only had “contracting parties”. GATT’s

agreements were limited to goods only while WTO’s agreement covers all aspects of

goods, services, investments and intellectual property rights. (Krishnan P. R etal, 2013)

The most important thing, however, is the fact that the WTO has a dispute settlement

system that is to enforce its rules and sanction any erring member while GATT existed

only on persuasion for compliance among contracting parties. In all, there are 60

different Agreements in the WTO written in legal jargons covering some 26,000 pages.

(WTO legal texts)

Central to the WTO Agreement is the principle of negotiation which is based on

simple logic of give and take. With WTO, you don’t get what you think you deserve,

you get what you negotiate period. The poor capacity of the country in multilateral trade

negotiation is not an excuse to blame WTO. It is a challenge that the country must

address. For any country to maximize the benefits of WTO trade agreement and

minimize its costs, such a country must be prepared to participate effectively in its

negotiation process. The world celebrated the formal entry of China into WTO in 2001

being a product of 15 years of serious negotiation based on a careful study of what she

stands to gain and lose. The marathon negotiation came to an end on September 11,

2001 with a high hope that China’s admission into the WTO will boost world trade.

229

China did not sign the agreement blindly like Nigeria did and most other African

countries. What however, is more instructive is that if China, one of the most,

prosperous and protected economy in the world now accepts the principle of opening up

her economy to world trade by joining the WTO as the 142 member in 2001, there is no

wisdom whatsoever in the position that our law makers keeps harping on “a full out

from the WTO.

Conclusion

The WTO and its predecessor the GATT have evolved trade principles (such as

non- discrimination, MFN and national treatment) that were derived in the context of

trade in goods. It is by no means assured or agreed that the application for the same

principles to areas outside of trade would lead to positive outcomes. Indeed, the

incorporation of non-trade issues into the WTO system could distort the work of the

WTO itself and the multilateral trading system.

Therefore, a fundamental rethinking of the mandate and scope of the WTO is

required.

Firstly, issues that are not trade issues should not be introduced in the WTO as subjects

for rules. This rule should apply at least until the question of the appropriateness and

criteria of proposed issues are dealt with satisfactorily in a systematic manner.

Secondly, a review should be made of the issues that are currently in the WTO to

determine whether the WTO is indeed the appropriate venue for them. Prominent trade

economists such as Prof. JagdishBhagwati and Prof. T.N Srinivasan have concluded that

it was a mistake to have incorporated intellectual property as an issue in the Uruguay

Round and in the WTO. There should be a serious consideration, starting with the

mandated review process, of transferring the TRIPS Agreement from the WTO to a

more suitable forum.

Within its traditional ambit of trade in goods, the WTO should reorient its

primary operational objectives and principles towards development. The imbalances in

the agreements relating to goods should be ironed out, with the “rebalancing” designed

to meet the development needs of developing countries and to be more in line with the

realities of the liberalization and development processes.

230

With these changes, the WTO could better play its role in the designing and

maintenance of fair rules for trade, and thus contribute towards a balanced, predictable

international trading system which is designed to produce and promote development.

The WTO, reformed along the lines above, should then be seen as a key component of

the international trading system, coexisting with, complementing and cooperating with

other organizations, and together the WTO and these other organizations would operate

within the framework of the trading system.

Other critical trade issues should be dealt with by other organizations, which should be

given the mandate, support and resources to carry out their tasks effectively.

These other issues should include: (i) assisting developing countries to build their

capacity for production, marketing, distribution and trade; (ii) the need for monitoring

and stabilizing commodity-producing developing countries; (iii) addressing the

restrictive business and trade practices of transactional corporations that hamper the

ability of smaller firms to engage in production and trade; (iv) addressing the restrictive

business and trade practices o transnational corporations that hamper the ability of

smaller firms to engage in production and trade; (v) addressing the problems of low

commodity prices and developing countries terms of trade. These issues can be dealt

with by various UN bodies, especially a revitalized UNCTAD.

The Doha Conference and its preparatory process has also raised again the issue

of transparency and the limited ability of developing countries to participate in decision-

making in the WTO. Although the developing countries prepared themselves well and

played as active role in making their views known at the WTO meetings and

consultations in Geneva, their views were not reflected properly (and in some areas not

at all ) in the several drafts of the Ministerial Declaration that were produced in Geneva

and subsequently at Doha. Although the contents of the last Geneva draft were heavily

disputed by many developing countries, it was nevertheless transmitted without change

and in a form that did not incorporate the various diverging views and options, thus

placing the dissenting developing countries at a grave disadvantage.

The biases in the process in favour of developed countries, and the disadvantage at

which developing countries have been placed in the negotiations, have exasperation and

frustration among the delegations of several developing countries, as well as among

many non-governmental organizations and social movements which witnessed the

events and the processes.

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Although promises have been made many times (notably at the Singpore Ministerial

Conference and after the Seattle Ministerial Conference), by the developed countries and

by the management of the WTO Secretariat, to do away with untransparent and selective

processes such as the exclusive “Green Room” meetings, and to ensure greater

participation of developing country Members, the unsatisfactory procedures and

methods used before and at Doha have made clear that the situation is even less

satisfactory than ever and thus that there is an imperative for reform in the decision-

making processes and procedures of the WTO. Until this is undertaken, it is unlikely that

the developing countries efforts to improve their position and promote their interests in

the WTO and in the multilateral trading system will bear fruit.

Finally, what can a country like Nigeria do to maximize the benefits and minimize the

cost of WTO? First, let me warn that the treat of a pull-out would not solve the problem.

It is too late as the country cannot afford the effects of being isolated. In any case,

Nigerians taste and preference for foreign goods make it unlikely for the country to

tinker with such an idea.

Moreso, the size of Nigeria’s market cannot be ignored by the world community.

What we must do is to accept the challenge and be willing to participate effectively in

the negotiation. The executive and legislature must recognize and accept that

globalization is being driven by a force that has its own life whose process appears too

difficult to halt by any individual country. A deliberate effort must therefore be made to

integrate the Nigerian economy into the world economy by using the rules and

procedure of WTO to the country’s full advantage. It is brain work which Nigeria is not

lacking. It may interest the policy makers to know that a Nigerian is serving as a

member of a six-man special Board of Advisers to the Director General of WTO. The

Nigerian is representing the African continent on the board on merit. I doubt, if the

government bothers to find out who the Nigerian is and what he can do to facilitate the

country’s interest. Again, four Nigerians were among a panel of African scholars that

prepared the policy briefs which were considered at the just concluded African Ministers

of Trade conference held in Abuja which was to articulate Africa’s position in the WTO,

among other things.

Some specific actions that require urgent executive and legislative attention are:

1. The need for the country to conduct studies in order to enhance adequate

understanding of the scope and depth of the issues being negotiated; for

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instance, as part of preparation for the 3rd WTO ministerial conference in

Seattle in 2000. India studied her economy, vis-à-vis her interest in WTO,

sector-by-sector, commodity by commodity, to adopt a position. Nigeria

should not do less;

2. The country should assemble qualified personnel with requisite knowledge of

matters of international trade and international trade law to back up Geneva-

based negotiators. For instance, US has over 126 experts. EU 118 experts

and Japan 96 expert, giving informed and analysed opinions concerning their

country’s negotiating interests to the professional diplomats who are versed

in trade negotiation:5

3. Geneva –based negotiators should be closely connected to their capital-based

principles for timely and specific negotiation instructions; and

4. Setting up of an executive agency for planning, implementating, monitoring

and coordinating trade policies at home and as well as monitoring and

analyzing trade policies of their key trading partners to be able to detect if the

country’s interest is injured.

Finally, the organized private sector, through the Manufacturers Association of

Nigeria (MAN), the Nigerian Chamber of Commerce, Industry, Mines and

Agriculture NACCIMA etc should wake up from their slumber and lobby the

government to participate actively in the process of WTO. The private sector is the

primary beneficiary in terms of market access opportunities, and should engage in

studies to determine how best their interest can be promoted. For instance, it is the

private sector that will be the first to know if their trading interest is violated or not,

but by agreement on Dispute Settlement Procedure, individual companies cannot

seek redress all by itself. It is only the government of a country that has a standing.

This is why it is important for the private sector to work closely with the government

if they are to take full advantage.

In conclusion, let me state categorically three important benefits the country is

likely to enjoy, among others, for being a member: It would lead to reform in

domestic economic policy with a view of making it more investment-friendly and

predictable for both national and international investors, thus encouraging the inflow

of the elusive foreign investments. Secondly, it would create opportunities for

greater market access for domestic producers if the private sector can understand the

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game strategy. Thirdly there are many technical assistance and support in the area of

capacity building for sound economic management that WTO offers if a country

demands for it. We have to take note that the modern world no longer gives aid but

trades. The world trades in everything. Nigeria cannot but be ready to trade.

References

Bossche, Peter van den (2005). "The Origins of the WTO". The Law and Policy of the World Trade Organization: Text, Cases and Materials. Cambridge University Press. ISBN 0-521-82290-4.

Buffie, E. 2001 “Trade Policy in Developing Countries” Cambridge

University Press.

Das, B. 2002 The WTO Work Porgramme: Paper presented at a

forumorganised by Third World Network in Geneva.

D’ Anier C.C. 1998,The WTO Multilateral Trade Agenda and the

South Centre.

Daniel, S. and Ulph, A, 2002 Environment and Trade: The

Implications of imperfect Information and Political Economy. In World

trade Review (Vol. 1 Num 2 Cambridge University Press.

p. 2 42.

Dean, J. 2000 Trade and Environment: A survey of the

Literature. World Bank Discussion paper 159.

Edwards, S. and Roberts, A 1973 The World Bank Since

Brettonwoods. Washington DC. Brookling Institution p. 23.

Frank, I. 1981 Trade Policy Issues for the Developing countries

in the 1980s. World Bank Staff Working Papers 478 August.

Havrylysihyn, O. 1980 Trade Among Developing Countries. World

Bank Staff Working Paper 489 August.

Howse, R. and Vank Bork, p. 1998. The World Trading System:

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A critical Perspective on the world Economy.

Volume 1 Historical and Conceptual Fundations

Volume 11 Dispute settlement in the World Trading

System.

Volume 111 Administratered protection.

Volume 1v The Uruyuay Round and Beyond

John, S. and Abiola, V. 2003 Standard and Global Trade: a voice

for Africa.Jack, ac. Plas, Dlton R.The International Relations Dictionary

Fourth Edition. Western Michigan University 1969.

Jackson, John H. (1994). "Managing the Trading System: The World Trade Organization and the Post-Uruguay Round GATT Agenda". In Peter B. Kenen. Managing the World Economy: Fifty Years after Bretton Woods. Institute for International Economics. ISBN 0-88132-212-1.

John, W. Dealing With The North: Developed Countries and the

Global Trading System Chap. 8 pp 236 and 271.

Kenen, Peter B. (1999 – first published 1994). "The Evolution of Trade Policy". The International Economy (Volume I) (in Greek). Translated by Andreas Sokodimos (Third ed.). Athens: Papazisis (in English: Cambridge University Press). ISBN 960-02-1365-8.

Kent, J. 2002 WTO Core Agreements, Non-Trade Issues and

Institutional Integrity. In World Trade Review (Vol. 1 Num. 2).

Khor, M. 2001Globalisation and the South some Critical Issues.

Palmeter, N. David; Mavroidis, Petros C. (2004). "Overview". Dispute Settlement in the World Trade Organization: Practice and Procedure. Cambridge University Press. ISBN 0-521-53003-2

WTO Core Agreements

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LAW AT THE INTERNATIONAL LEVEL: A CONSIDERATION

OF ITS CHARACTERISTICS

BY

Usen Smith, Ph.DDepartment of Political Science

Federal University, Wukari, Taraba StateAbstract

To understand how international rules are created, constructivism informs us that leading ideas have meaningful consequences, and when a favorable climate of opinion crystallizes about the preferred conduct for relations between states, those constructed images influence perceptions about the rules by which the game of nations should be played. Diplomatic negotiations and international law communicate the prevailing international consensus about the rules to govern international relations. For this reason, consistent with constructivist theory, many experts see international law mirroring changes in the most popular constructions of images about the ways in which states are habitually acting or should act toward one another in any particular period of history. This paper looks at how binding the rules are on states and how they characteristically function globally.

Introduction

When you think about law, it is very likely that you construct an image of how law functions within the country in which you are residing. In this constructed image, when a society perceives a particular type of behavior to be harmful, a law is predictably passed to prohibit it. The emergent consensus in many countries that underage drinking and smoking in public places are harmful led, for example, to new laws to regulate and prohibit these practices. So war - one state’s attack, by choice, of another state, without imminent threat and therefore not in self-defense - would seem to likewise be an evil and dangerous practice that the global community would automatically prohibit, right? Actually, no, or at least not until relatively recently in the modern saga of world history.

International law has been conceived by and written mostly by realists, who place the privileges of the powerful as their primary concern and have historically advocated that war should be an acceptable practice to protect a dominant state’s position in the global hierarchy. As William Bishop (1902) wrote, international law is not violated “when a state resorts to war for any reason it felt proper.” This view then echoed the opinion of Henry Wheaton (1846), that “every state has a right to force.” If murder and killing have been condemned in the precepts of your religion and prohibited by the laws of your country, you may be shocked to learn that the military drive for power has been legal in most historical phases of international law.

The Characteristics of International Law

In 1984, the United States announced that it would unilaterally withdraw from the jurisdiction of the International Court of Justice, or the World Court. This move followed Nicaragua’s accusation that the U.S. Central Intelligence Agency (CIA) had

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illegally attempted to “overthrow and destabilize” the elected Sandinista government. Nicaragua charged that the United States had illegally mined its ports and supplied money, military assistance, and training to the rebel contra forces. The United States denied the tribunal’s authority. In so doing, however, it was not acting without precedent; others had done so previously. Nonetheless, by thumbing its nose at the court and the rule of law it represents, had the United States, as some claimed, become an “international outlaw”? Or, as others asserted, had it acted within its rights? The World Court supported the former view. In 1984, the court ruled against the United States as follows:

The right to sovereignty and to political independence possessed by the Republic of Nicaragua, like any other state of the region or of the world, should be fully respected and should not in any way be jeopardized by any military and paramilitary activities which are prohibited by the principles of international law, in particular the principle that states should refrain in their international relations from the threat or the use of force against the territorial integrity or the political independence of any state, and the principle concerning the duty not to intervene in matters within the domestic jurisdiction of a state (New York Times, May ii, 1984, p. 8). Yet this ruling had little effect, is neither the court nor Nicaragua had any means to enforce it.

Many experts - whether they are realists or liberals - skeptically ask whether international law is really law. Radical theory shares this skepticism, holding that “the form of international law consists of the struggle between states’ view of legal right, and the view that prevails will depend on which state happens to be stronger” (Carty 2008, P. 122; Miville 2006). Yet there are many reasons to have confidence in the rule of law. Although international law is imperfect, actors regularly rely on it to redress grievances (see Joyner 2005). Most global activity falls within the realm of private international law - the regulation of the kinds of transnational activities undertaken every day in such areas as commerce, communications, and travel. Although largely invisible to the public, private international law is the location for almost all international legal activities. It is where most transnational disputes are regularly settled and where the record of compliance compares favorably with that achieved in domestic legal systems. In contrast, public international law covers issues of relation between governments and the interactions of governments with intergovernmental organizations (IGOs) and nongovernmental organizations (NGOs) such as multinational corporations. Some believe that we should use the phrase world law to describe the mixture of public and private, domestic and international transactions that public international law seeks to regulate in an increasingly globalized world. However, it is the regulation of government- to-government relations that dominates the headlines in discussion of public international law. This area of activity also receives most of the criticism, for here, failures -when they occur - are conspicuous. As Israeli diplomat Abba Eban cynically quipped, “International law is that law which the wicked do not obey and the righteous do not enforce.” This is especially true with respect to the breakdown of peace and security. When states engage in armed conflict, criticism of public international law’s shortcomings escalates.

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Without a doubt, the inability of public international law to control armed aggression is regarded as its greatest weakness. To cut deeper into the characteristics of contemporary international law, the paper will next look briefly at some of its other salient characteristics.

Core Principles of International Law Today

No principle of international law is more important than state sovereignty. Ever since the 1648 Treaties of Westphalia, states have tried to reserve the right to perform within their territories in any way the government chooses. That norm is the basis for all other legal rules; the key concepts in international law all speak to the rules by which sovereign states say they wish to abide.

Sovereignty means that no authority is legally above the state, except that which the state voluntarily confers on the international organizations it joins. In fact, as conceived by theoreticians schooled in the realist tradition since the seventeenth century, all the rules of international law express codes of conduct that protect a state’s freedom to preserve its sovereign independence.

Nearly every legal doctrine supports and extends the cardinal principle that states are the primary subjects of international law. Although the Universal Declaration of Human Rights in 1948 expanded concern about states’ treatment of individual people, states remain supreme. Accordingly, the vast majority of rules address the rights and duties of states, not people. As Gidon Gottlieb has observed, “Laws are made to protect the state from the individual and not the individual from the state.” For instance, the principle of sovereign equality entitles each state to full respect by other states as well as equal protection by the system’s legal rules. The right of independence also guarantees states’ autonomy in their domestic affairs and external relations, under the logic that the independence of each presumes that of all. Similarly, the doctrine of neutrality permits states to avoid involvement in others’ conflicts and coalitions.

Furthermore, the noninterference principle forms the basis for the nonintervention norm - requiring states to refrain from uninvited activities within in another country’s territory. This sometimes-abused classic rule gives governments the right to exercise jurisdiction over practically all things on, under, or above their bounded territory. (There are exceptions, however, such as diplomatic immunity for states’ ambassadors from the domestic laws of the country where their embassies are located and extraterritoriality, which allows control of embassies on other states’ terrain).

In practice, domestic jurisdiction permits a state to enact and enforce whatever laws it wishes for its own citizens. In fact, international law was so permissive toward the state’s control of its own domestic affairs that, before 1952, “there was no precedent in international law for a nation-state to assume responsibility for the crimes it committed

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against a minority within its jurisdiction” (Wise 1993). A citizen was not protected against the state’s abuse of human rights or crimes against humanity.

Limitations of the International Legal System

Sovereignty and the legal principles derived from it shape and reinforce international anarchy. This means that world politics is reduced to the level of interaction without meaningful regulation or true global governance; international politics is legally dependent on what governments choose to do with one another and the kinds of rules they voluntarily support. Throughout most of modern history, international law as constructed by realists was designed by states to protect the state, and thereby made sovereignty the core principle to ensure states’ freedom to act in terms of their perceived national interests.

Moreover, the great powers alone have the capacity to promote wide acceptance and then enforce the transnational norms of statecraft they favor.

To liberal theoreticians, putting the state ahead of the global community was a serious flaw that undermined international law’s potential effectiveness. Many theorists consider the international legal system institutionally defective due to its dependence on states’ willingness to participate. Because of formal legal institutions (such as those within states) are weak at the global level, critics make the following points.

First, in world politics, no legislative body is capable of making binding laws. Rules are made only when states willingly observe or embrace them in the treaties to which they voluntarily subscribe. There is no systematic method of amending or revoking treaties. Article 38 of the Statute of the International Court of Justice (or World Court) affirms this. Generally accepted as the authoritative definition of the “sources of international law,” it declares that international law derives from (1) custom, (2) international treaties and agreements, (3) national and international court decisions, (4) the writings of legal authorities and specialists, and (5) the “general principles” of law recognized since the Roman Empire as part of “natural law” and “right reason.”

Second, in world politics, no judicial body exists to authoritatively identify and record the rules accepted by states, interpret when and how the rules apply, and identify violations. Instead, states are responsible for performing these tasks themselves. The World Court does not have the power to perform these functions without states’ consent, and the UN cannot speak on judicial matters for the whole global community (even though it has recently defined a new scope for Chapter VII of the UN Charter that claims the right to make quasi-judicial authoritative interpretations of global laws).

Finally, in world politics there is no executive body capable of enforcing the rules. Rule enforcement usually occurs through the unilateral self-help actions of the victims of a transgression or with the assistance of their allies or other interested parties. No centralized enforcement procedures exist, and compliance is voluntary. The whole system rests, therefore, on states’ willingness to abide by the rules to which they consent and on the ability of each to enforce through retaliatory measures violations of the norms of behavior they value.

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Consequently, states themselves - not a higher authority - determine what the rules are, when they apply, and how they should be enforced. This raises the question of greatest concern to liberal advocates of world law: When all are above the law, are any truly ruled by it? It is precisely this problem that prompts reformers to restrict the sovereign freedom of states and expand their common pursuit of shared legal norms in order to advance collective global interests over the interests of individual states.

Beyond the barriers to legal institutions that sovereignty poses, still other weaknesses reduce confidence in international law:

International law lacks universality. An effective legal system must represent the norms shared by those it governs. According to the precept of Roman law, ubi societas, ibi jus (where there is society, there is law), shared community values are a minimal precondition for forming a legal system. Yet the contemporary international order is culturally and ideologically pluralistic and lacks consensus on common values, as evidenced by the “clash of civilizations” (Berger and Huntington 2002) and the rejection by terrorists and others of the Western-based international legal order. The simultaneous operation of often incompatible legal traditions throughout the world undermines the creation of a universal, cosmopolitan culture and legal system (Bozernan 1994).

Under international law, legality and legitimacy do not always go hand in hand. As in any legal system, in world politics what is legal is not necessarily legitimate. While legality is important in determining an action’s legitimacy, other values play a role—such as the propriety of effectively addressing substantial threats. Moreover, the legality of an action does not always assure its wisdom or utility. “The UN Security Council’s decision to deny weapons to victims of ethnic and religious abuse in Yugoslavia in the early 1990s, for example, was legal but arguably illegitimate, whereas NATO’s unauthorized use of force to prevent abuses in Kosovo was illegal but arguably legitimate” (Sofaer 2010, p.ll7).

International law is an instrument of the powerful to oppress the weak. In a voluntary consent system, the rules to which the powerful willingly agree are those that serve their interests. These rules therefore preserve the existing global hierarchy (Goldsmith and Posner 2005). For this reason, some liberal theorists claim that international law has bred the so-called structural violence resulting from the hierarchical global system in which the strong benefit at the expense of the weak (Galtung 1969).

International law is little more than a justification of existing practices. When a particular behavior pattern becomes widespread, it becomes legally obligatory; rules of behavior become rules for behavior (Leopard 2010). Eminent legal scholar Hans Kelsen’s (2007, p.369) contention that “states ought to behave as they have customarily behaved” reflects the positivist legal theory that when a type of behavior occurs frequently, it becomes legal. In fact, positive legal theory stresses that law is socially constructed. States’ customary practices are the most important source from which laws derive in the absence of formal machinery for creating international rules. When the origins of international law are interpreted in this way, the actions of states construct law, not vice versa.

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International law’s ambiguity reduces law to a policy tool for propaganda purposes. The vague, elastic wording of international law makes it easy for states to define and interpret almost any action as legitimate. “The problem here,” observes Samuel S. Kim (1991, p. 111), “is the lack of clarity and coherence [that enables] international law [to be] easily stretched, … to be a flexible fig leaf or a propaganda instrument.” This ambivalence makes it possible for states to exploit international law to get what they can and to justify what they have obtained.

The Abiding Relevance of International Law

Although international law has deficiencies, this should not lead to the conclusion that it is irrelevant or useless. States themselves find international law useful and expend much effort to shape its evolution. States’ actual behavior demonstrates that countries interpret international law as real law and obey it most of the time (Joyner 2005).

The major reason that even the most powerful states usually abide by international legal rules is that they recognize that adherence pays benefits that outweigh the costs of expedient rule violation. International reputations are important. They contribute to a state’s soft power. Those that play the game of international politics by recognized rules receive rewards, whereas states that ignore international law or opportunistically break customary norms pay costs for doing as they please. Other countries will be reluctant to cooperate with them. Violators also must fear retaliation by those victimized, as well as the loss of prestige. For this reason, only the most ambitious or reckless state is apt to flagrantly disregard accepted standards of conduct.

A primary reason why states value international law and affirm their commitment to it is that they need a common understanding of the “rules of the game.” Law helps shape expectations, and rules reduce uncertainty and enhance predictability in international affairs. These communication functions serve every member of the global system. As constructivist theory elucidates, transnational norms historically change in conjunction with each major transformation in world politics - with fundamental changes in prevailing global conditions, such as shifts in the primary foreign policy goals that states are pursuing. According to this constructivist interpretation, throughout history the rules of international statecraft have changed in the aftermath of changes in the customary practices of how states are mostly behaving.

Every breakdown of international law, of course, does not prove the existence of general lawlessness. Conditions of crisis strain all legal systems, and few, when tested severely, can contain all violence. Today, with street crime in cities worldwide at epidemic proportions and ethnic and religious warfare within countries exacting a deadly toll against hundreds of minority groups, states’ domestic legal systems are clearly failing to prevent killing. Powerful organized crime threatens the stability and security of many countries and poses a global threat through transnational activities such as the trafficking of drugs, slaves, weapons, and precious gems. This suggests that even when strong formal institutions for rule enforcement are in place, they do not and cannot guarantee compliance. No legal system can deter all of its members from breaking existing laws.

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Conclusion

Consequently, it is a mistake to expect a legal system to prevent all criminal behavior or to assert that any violation of the law proves the inadequacy of the legal structure. Law is designed to deter crime, but it is unreasonable to expect it to prevent it. Thus, the allegedly “deficient” international legal system may perform its primary task - inhibiting interstate violence - even more effectively than supposedly more-sophisticated domestic systems. Perhaps, then, the usual criteria by which critics assess legal systems are dubious. Should critics be less concerned with structures and institutions and more concerned with performance?

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