INTRODUCTION
BACKGROUND OF THE STUDY
One of the development
challenges facing Nigeria
today is how to reduce the high poverty level prevailing among her population.
At the centre of the challenge is how the country will sustainably feed her
over 140million people. However, observers’ opinions differ about the efficacy
of foreign aid in fast tracking the process. It is noted that a prominent
argument for foreign aid is that it tends to promote reduction of poverty. The importance
of the development challenge of poverty reduction and hunger is aptly demonstrated
as the number one goal of the eight Millennium Development Goals (MDGs).
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· PRESENTATION OF REGRESSION RESULTS AND ANALYSIS GOTTEN FROM THE IMPACT OF FOREIGN AID ON POVERTY IN NIGERIA
· RESEARCH METHODOLOGY OF THE IMPACT OF FOREIGN AID ON POVERTY IN NIGERIA - AFRICA
· RESEARCH METHODOLOGY OF THE IMPACT OF FOREIGN AID ON POVERTY IN NIGERIA - AFRICA
· EMPIRICAL LITERATURE OF IMPACT OF FOREIGN AID ON POVERTY IN NIGERIA
· THEORETICAL LITERATURE REVIEW OF THE IMPACT OF FOREIGN AID ON POVERTY IN NIGERIA
· IMPACT OF FOREIGN AID ON POVERTY IN NIGERIA
Poverty is the condition of having insufficient resources or income to meet the basic needs of life. It could be seem from the multidimensional aspect, involving not only lack of income, but also ill-health, illiteracy, lack of access to basic social services and little opportunity to participate in the processes that influence people’s lives. According to the Encyclopaedia Americana (cited in Ijaiya and Mobolaji, 2004) poverty is viewed from the perspectives of moneylessness and powerlessness. Moneylessness means insufficiency of cash and chronic inadequacy of resources of all types to satisfy basic human needs such as nutrition, warmth, rest and body care. Powerlessness on the other hand means lack of opportunities and choices to govern oneself. It describes a set of people who lack the opportunities and choices and whose lives seem to be governed by forces and persons outside their control.
The definition of poverty
distinguishes two types of poverty: the absolute and relative poverty. One can
sometimes make the distinction between the poor and the non-poor against
absolute standard of welfare (e.g. amount of income, life expectancy and
housing conditions). The relative measure of poverty identifies the poor by
relating their position to that of other individuals in their environment or
another. The extreme poor, also referred to as “hard-core poor”, are more
likely to be underweight; have higher mortality rates; prone to disease and
illness; less likely to have assets and have series fluctuations in their
employment status (Sowa, 2003).
Two
factors are responsible for poverty according to Yahie (1993) these include:
(a)
Structural factors
that are more permanent and dependent upon a host of exogenous factors such as
limited resources, lack of skills, locational disadvantage and other factors
that are inherent in the socio-political set-up.
(b)
Transitional
factors that are mainly due to structural adjustment programs and changes in
domestic economic policies that may result in price changes and increased
unemployment.
Generally, there are two schools of
thought as regards the impact of foreign aid on poverty. The first school of
though believes that foreign aid would help augment the efforts of the
government on the standard of living of its people and also aid economic
growth. While the other school of thought believe that foreign aid to
developing countries harms their economy, since the aids are most of the time
not properly utilized, and at times out rightly looted.
Foreign
Direct Investment (FDI) is an integral part of an open and effective
international economic system and a major catalyst to development. Developing
countries, emerging economies and countries in transition have come
increasingly to see FDI as a source of economic development and modernization,
income growth and employment. FDI triggers technology spill-overs, assist human
capital formation, contributes to international trade integration, help create
a more competitive business environment and enhances enterprise development.
All these contribute to higher economic growth which is the most potent for
alleviating poverty in developing countries. Moreover, beyond the strictly
economic benefits, FDI may help improving environmental and social conditions
in the host country by transferring technologies and leading to more socially
responsible cooperate policies.
Usman (1998) highlighted reasons for
the slow economic progress in Nigeria to include monocultural economy, high
population growth rate, import dependency, political instability etc. based on
the above scenario, it is discovered that there exist a gap between the
domestically available supply of savings, foreign exchange, government revenue
and skills and the planned level of the resources necessary to achieve
development targets that leads to poverty alleviation in Nigeria. This gap
necessitates the need for external resources to augment domestic resources in
the country. These external resources can be in the form of foreign aid and or
grant, short tern credit, state loans and private investment. But it is in the
interest of Nigeria
as a country in getting out of the poverty circle through foreign direct
investment, because FDI provides investment capital, technical skills and
enterprises.
Thus, in a resource rich state like Nigeria, where
politics, public service and social existence is often entangled with business
interest and as such feeds corruption and mismanagement, the contribution of
foreign aid to the improvement of poverty is the country remains an acid test
for aid effectiveness. However the study wishes to answer the following
questions: Does availability of foreign aid
discourages or encourages domestic production of food? Does foreign aid leads
to decrease or increase in poverty level? This study attempts to provide
answers to the above questions using data from Nigeria.
1.2 STATEMENT
OF THE PROBLEM
Nigeria
faces a major development challenge of how to revue the high poverty level
prevailing among her population. Central to this challenge is how the country
can effectively and substantially feed over 140 million people.
The obstacles to promoting effective
poverty reduction in the country are huge. Oil wealth has distorted the economy
and has discouraged growth in other sectors. Competition for a share of oil
wealth dominates politics, feeds corruption and diverts attention away from
improving governance. Moreso, years of military rule has devastated the
delivery of basic service, management of public finances and as such preventing
the development of a social contract between the people and the government.
Worthy of note, is that there are
different types of foreign aid to Nigeria, and yet, a comprehensive
record of very aid received and how it was utilized seems very difficult to
obtain. Thus the measurements of response of both the income and non-income
determinants of poverty also seem difficult. Furthermore, corruption and
capital flight have posed great obstacles to efforts aimed at reducing poverty
via foreign aid and this was note by Lynda Chalker, the former British
Secretary of State for International development when she revealed at the Commonwealth
summit in Abuja, Nigeria on December 3, 2003 that 40 percent of the wealth
created in Africa is invested outside the continent and that foreign aid has
not been spared of this capital flight.
Abiola and Olofin (2008) noted that
studies have examined the importance of foreign aid on food supply in countries
where food crisis is prevalent, notably the low income countries in sub-Saharan
Africa but not much has been done in investigating the relationship between
foreign aid, food supply and poverty reduction in Nigeria.
1.3 OBJECTIVE
OF THE STUDY
The main objective of this work is to test
and find out the impact of Foreign Aid on Poverty Reduction in Nigeria:
i. To
investigate the relationship between foreign aid and poverty in Nigeria.
ii. To
investigate the impact of foreign aid on poverty level in Nigeria.
1.4 STATEMENT
OF HYPOTHESIS
The work will be guided by these
hypotheses
H0: There is no significant impact of foreign aid on
poverty in Nigeria.
H1: There is significant impact of foreign aid on poverty
in Nigeria.
1.5 SIGNIFICANCE
OF STUDY
This work will help to determine the
direction of IMPACT OF FOREIGN AID ON POVERTY IN NIGERIA and thus, validate or
disprove the various schools of through. In addition it would serve as a guide
to further enquiry and other research works.
1.6 LIMITATION
OF THE STUDY
The most debilitating
limitation of this study is the inadequacy of data in that data on study
poverty’s incidence in Nigeria
by the relevant authority was last undated in the social welfare survey carried
out by the federal office of statistics in 2007. Information made available to
the researcher revealed that Mr. President has just requested the national
poverty eradication programmes to collaborate with the federal office of
statistics to conduct an update survey to avail him and all concerned the much
needed current relevant data.
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