Heller and
Cupta (2002) express worry about the call by international community that to
enable developing countries to achieve the MDG’s by 2015, there should be
increase in foreign aid to 0.7 percent of industrialized countries GNP from
0.24 percent of GNP. Nevertheless they argue that large increase in aid flows
could pose a number of challenges for the poorest countries as such, to ensure
that enhanced official development assistance (ODA) is sued to fight against
global poverty, they argue that donors need to examine closely the different
possible approaches it deciding how to allocate aid both among countries and
among complementary global poverty reduction programmes.
Tchani (2005) argued that making
significant progress towards achieving the MDG’s remains a major focus of the
international community, and larger and more effective flows
would be a
critical component in reaching the MDG’s. This suggests that controversy exists
on the objectives of aid, most notably the urgency of reducing poverty.
However, for both donors and macroeconomic policy makers in the aid receiving
countries these objectives raise a number of critical questions on the
macroeconomic management of aid.
The impact of foreign aid on poverty
in Nigeria
seems to be a litmus test to determine whether after so many years of self-rule
with inflow aid, the various social unrest, hunger, diseases and sickness
prevalent in the country are indicators of ineffective foreign aid. Abiola and
Olofin (2008) noted that the major characteristic of foreign aid to Nigeria is that
it is not paid into the federal account. This is unlike other countries notably
Ghana,
where all foreign aid is paid into a consolidated fund and disbursed centrally.
They argue that this makes aid not to be part of government revenue, with no
direct impact on government expenditure and thus not used to address national
need. Furthermore, they noted that all three levels of government in Nigeria are
allowed to receive foreign aid and donors determine the areas where they like
to intervene without recognition of the national need. Thus the maximization of
benefit from foreign aid suffers.
Howell and Pearce (2000) pointed out
that apart from the question of neutrality, which services to mask the distribution
of power, there is also the large question of the morality of interventionism.
Is donor support to civil society another manifestation of neo-colonialism in
the Post-Cold War era aimed at controlling the nature of political regimes and
extending global markets? Do donors have the right, let alone the capacity, to
shape other civil societies? By projecting their own visions and understanding
of civil society, do they not undermine the ability of local organizations to
set their own priorities and agendas, to vocalize their own imaginations of
social and political change?
Benjamin (1997) stated that aid
appears to have established as a property the importance of influencing
domestic policy in the recipient countries. This was reaffirmed by Shah (2010)
that one of the root causes of poverty lies in the powerful nations that have
formulated most of the trade and aid policies today, which are more to do with
maintaining dependency on industrialized nations, providing sources of cheap labour
and cheaper goods for populations back home and increasing personal wealth, and
maintaining power over others in various ways such as the so-called lending and
development schemes called structural adjustment, which has done little to help
poorer nations progress.
Njehu (2008) also pointed out that
money being doled out to Africa to fight
HIV/AIDS is also a form of tied aid. She said Washington is insisting that the continent’s
governments purchase anti-AIDS drugs from the United States instead of buying
cheaper generic products from South
Africa, India or Brazil. As a result, she said, US
brand name drugs are costing up to 15,000 dollars a year compared with 350
dollars annually for generics. Deen (2004), further noted that almost half of
all foreign aid can be considered “phantom aid” which does not help fight
poverty, and is based on a broader definition of foreign aid that allows double
counting and other problems to occur. Furthermore, some 50% of all technical
assistance is said to be wasted because of inappropriate usage on expensive
consultants, their living expenses and training.
In determining the synergy between
official development assistance (ODA) and investment in Africa,
the OECD distinguishes between “meso” level interventions – those dealing with
the regulatory framework, infrastructure and government – and “micro” level
interventions – such as investment promotion and facilitation and the
development of local businesses. While improvements to the “meso” enabling environment
help, in themselves they are not enough to maximise the investment potential in
developing countries. Strategies are consequently also required to promote
appropriate “micro” or supply-side responses to increase the capacity of local
firms to take up the opportunities that arise from an improved investment
climate and greater international linkages (OECD, 2004b).
Sewel (2005) emphasized that the power
imbalance between providers and users of ODA remain great, and users remain in
a weak bargaining position over conditions and uses. Furthermore, the burden
for weak governments of managing multiple donors remains high. Just as the
multiplicity of donors means there is no way to determine when a country is
getting too little ODA, and when it is getting too much. When is a reforming
country committed to ending poverty getting to little aid to support reforms?
And when is too much ODA diluting incentives to reform? He went further to note
that a number of studies of aid and growth show that there can be diminishing
returns from increase aid.
With the record of corruption within
impoverished countries people will question giving them money. That can be
handled by giving them the industry directly, not the money. To build a
balanced economy, provide consumer buying power, and develop arteries of
commerce that will absorb the production of these industries, contractors and labour
in those countries should be used. Legitimacy and security of contracts is the
basis of any sound economy. Engineers know what those costs should be and, if
cost overruns start coming in, the contractor who has proven incapable should
be replaced- just as any good contract would require… when provided the
industry, as opposed to the money to build industry, those people will have
physical capital. The only profits to be made then are in production; there is
no development money to intercept and send to a Swiss bank account (Smith,
2002).
William Easterly (2006) criticised
foreign aid for not having achieved much, despite its grand promises. He
laments that a tragedy of the world’s poor has been that the West spend $2.3
trillion of foreign aid over the last 5 decades and still has not managed to
get twelve per cent medicines to children to prevent half of all malaria death.
The west spends $2.3 trillion and still not managed to get $3 to each new
mother to prevent five million deaths. Moreso, the expressed disgust that a
global society has evolved a highly inefficient way to get entertainment to
rich adults and children while it can’t get twelve percent medicines to dying
poor children