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The Role of Financial Institution in the Rural and Economic Development of Nigeria

The Role of Financial Institution in the Rural and Economic Development of Nigeria (A Study of Nigeria Agricultural and Co-Operative Bank Oko)

EFFECTS OF OIL ON NATIONAL DEVELOPMENT

The advert of petrol-dollars has brought about a huge windfall that unfortunately, was not channeled to build a productive base. A lot went on expensive infrastructure, while elephant project, and importation of luxury goods and huge appetite for consumer produce.

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This ultimately fuelled corruption in the bureaucracy, creating a subculture that emphasized connection to state office and with access to oil money, people look upon wealth as “Manna” from heaven. In no small way, this equally contributed to military rule political instability and the eventual collapse of the second republic with severe implication to the health of the economy. This oil economy worsened the economic structure in severe ways.

  1. It deepened the problem of dependency, in that agriculture was neglected and virtually destroyed.

Therefore, by the late 1970, we became a net importer of food, meat, rice etc. and our agriculture sub-sector lost its focus. It is generally forgotten that 30 years ago Nigeria was the world’s most important producer of palm kernel and palm oil, the second most important producer of cocoa, the fifth rubber exporter and a major exporters cotton, tides and skills, timber, tin and columbite.

  1. When Nigeria’s export rose phenomenally, there was no corresponding diversification. Therefore, when the oil market collapsed, the Nigerian economy collapsed with it. The depletion of foreign exchange was so massive that we could not enter into any credit or contractual obligation beyond 30 days. Problems started and for the first time, the nation had to go to the I.M.F for support to sustain the economy. The misadventure of the 70s brought in the Breton wood institutions and hence the debt trap that has hung on our neck ever since;
  2. Part of what contributed to the collapse of oil was discovery of oil Alaska and the North sea. The drop in revenue occurred at a time when the nation’s taste for imported food and other finished goods has been well nurtured to maturity.

The 1981 glut in the international oil market was devastating to Nigeria. Despite this glaring but dwindling oil revenue, the government failed to reduce the nation’s import bill. By the beginning of 1983, the nation’s foreign exchange reserve had crashed from 5.1 billion USD in 1981 to 1.1 billion USD. And more gruesome still, the foreign debt stood at 10.0 billion USD. Today there is confusion between the CBN and Federal Ministry of finance as to what our external debt figure stands, it is however believed to be between 28 and 32 billion USD.

  1. Uncontrolled government expenditure. The reconstruction and development socio infrastructure gave the post war government a cast iron excuse to spend uncontrollably. The attitude of the government bordered on profligacy as Nigerian’s were encouraged to cultivate an appetite for foreign goods. The budgets subsequently attend to this propensity. The nation went on Safari, on a honeymoon that was bankrolled from petrol-dollars by a government that managed a treasury it never dreamt possible. A particular top government functionary was actually quoted to have said that money was not Nigeria’s problems but how to spend it. Accordingly, using the premise of the National Development Plans, government became a heavy spender. The ensuring fiscal indiscipline created room for massive official corruption, leakages and a general tendency by Nigerians to look up to the government to do everything for them. This of course worsened the distortion as the entrepreneurial spirit was killed and replaced with expediency and connection to power. The disbanded National Economic Intelligence Committee (NEIC) reported that in 1998 alone a total of 6.24 billion USD, representing 73.66% of total foreign exchanges earnings was utilized by the public sector at the official exchange rate of N22 to $ 1 of this amount USD 880. 62 million was spent on public sector estacodes and BTA (Oba Olashore, Joy of service, an Autobiography 1998, p.140) with such a statistics, it is easier to discern the reason for the low level of capacity utilization and why the economy was driven to the jungle. A corollary to this was the casino mentality that was foisted on us. Rather than having an innovative and productive class, people were more interested in government contracts and import licenses to import goods that were sometimes sold to the highest bidder.
  2. Absence of linkage of the oil sector. Nigeria exported most of the oil she produced, yet there are very little linkages with the rest of the economy. The danger of this manifested and became very bad in the 90s when we started exporting crude oil and imported refined oil. But since the oil industry lacked the necessary linkages, with other sector. The oil sector failed to act as the engine of growth. If anything at all, what it did was to fetch money into private pockets. It is not surprising therefore that our oil fostered the phenomenon of growth without development. In the light of the above, the increasing conflict in many African states including Nigeria have arisen among other factors from struggles over access to energy resource, commenting on the damage of oil to the Nigerian political system (Shaxson,2005:28) aptly notes:
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Oil has undoubtedly intensified the competition for power between groups which has resulted in numerous forced changes of government. Since independence in 1960…More recently, the competition has become ever more fragmented in the producing areas in the Niger Delta, with groups such as Mujahid Dokubo Asari’s Niger Delta peoples volunteer force militia stealing oil from pipelines and using the proceeds to buy arms.

  • CHALLENGES OF ECONOMIC TRANSFORMATION IN NIGERIA

Before Nigeria can be aspire to any enviable position, she most first tackle a series of questions

  • Energy crises: At 89.5 (1985=100), the aggregate index of energy consumption declined by 76% in 1997 in contrast to an increase of 31.3% in 1996. a total of 28.6 million tones of coal equivalent (+ce) of energy were consumed, representing a decrease of 4.7% as against a rise of 23.1% in 1996. The fall was accounted for by reduced consumption of petroleum products, natural gas and hydropower by 6.8, 3.1 and 2.9 percent respectively.
  • Weak industrial base: The industrial core projects (ICPs) are basic industries established mainly by the government to catalyze industrial growth and development through the production of basic inputs for downstream industries. ICPs comprise of oil refineries and petrochemical plants liquefied natural gas projects, fertilizer steel paper and sugar plants an integrated aluminum smelter, machine tool, marble and cement industries.
  • Economic diversification: Another bane of strong industrial base is our Mono-cultural economy base. The economy must of necessity be diversified and transformed to meet up with the challenges of the 21st Century-Nigeria must build an economy that is self-sufficient at home and economically competitive internationally. The country has to go back to agriculture as the source of raw materials for our industries, for food for our teeming population and as a source of employment.
  • The national question: Equally important to the ability of the Nigeria’s economy in the New Millennium is the resolution of Niger-Delta crises. There is no doubt that this crisis has some significance for resolving the national question as well. The government must facilitate accountability, equity and justice in revenue mobilization and allocation. The responsibilities of the multi-national corporations to the local communities must also be recognized and addressed. The activities of these companies should service the local need and welfare of the communities where they operate.
  • Nigeria’s business class: For Nigeria to meet up to the challenges of globalization, we need the business class to work much harder and take advantage of the new era economic deregulation and political liberalization and contribute meaningfully to a diversified and competitive Nigeria’s economy. (Levis 1979).
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2.7   SUMMARY OF LITERATURE REVIEW

In conclusion, it is important to acknowledge the scholars that relate to the research work on the concept of Mono-economy and National Development.

Basically, the scholars cited on the concept of Mono-economy with one producer, distributor of commodity in the economy.

National development in other hand, Ngwu (1983.720) view national development as the shared aspirations of state who are members of a functional institution.

National development generally encompasses all the sectoral development in other words, it is an organized effort by government geared towards advancement in the economy, polity and society at large. Simply put, national development is the creative for the attainment of basic human needs.

This concept “Mono-economy and national development” also looked on. Agriculture as a Mono-economy, affects the Mono-economy on national development, the effects of Mono-economy in national development and finally.

This chapter still looked at the challenges of economic transformation in Nigeria. This challenge is on the following areas: energy, weak base, economic diversification, the national question, Nigeria’s business class.

2.8     GAP IN LITERATURE

No work seems to have been done to remedy the over dependency on oil in Nigeria, which this work has come to point out.

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