NATIONAL DEVELOPMENT AND FOREIGN AID

MANAGEMENT SYSTEM IN NIGERIA

Eleonu, Chidi Charles, PhD

School of Humanities & Social Sciences

Rivers State College of Arts and Science
PMB 5936 Port Harcourt
Rivers State Nigeria
08024575036

cchidi@gmail.com

ABSTRACT

Since independence, succeeding Nigerian governments have continued to receive foreign aid. Today,
America, France, and other industrialized states of the world contribute some of their wealth and skills
as foreign aid to Nigeria. Aid is in the form of financial grants, materials, labour, or expertise to
realize development objectives. It is significant now to examine the management of aid toward the
realization of aid motives, and to identify the implications of foreign aid to overall national
development in Nigeria. However, there are reasons of corruption, bad political leadership, etc. which
affect aid management system and slow national development.

INTRODUCTION

How foreign aid affects the economic development of developing countries like Nigeria has drawn the
attention of many scholars over time. Some scholars in international political economy and economic
history maintain the impression that underdeveloped nations cannot achieve economic development
and industrialization without foreign capital and skills. Foreign aid is believed to result in economic
development, political stability, and improved standard of living, increase in balance of payments and
foreign exchange. Foreign aid is the official development assistance which in turn is a subset of the
official development finance, and normally targeted to help the poorest countries (World Bank, 1998).
Foreign aid is public bilateral and multilateral development assistance in forms of bilateral grants,
loans, technical assistance and multilateral flows. Foreign aid is financial and material development
assistance to needy nations by advanced nations. Todaro (1977) observes that the concept of aid is
complex and confusing especially as it covers a variety of resource transfers. There are four main
types of aid programmes including Military aid, technical assistance, grants, commodity import
programmes and development loans. Aid, also known as international aid, overseas aid, or foreign aid,
is a voluntary transfer of resources from one country to another, given with the objective of benefiting
the recipient country and may be given as a signal of diplomatic approval. National development

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involves total grassroots transformation of socio-economic, political, cultural and technological
institutions and structure of society.

National development indicates widespread improvement in the existential living conditions of

the people. It includes the ability of people to increase their skills, creativity, capability to manage and
manipulate their environments for increased productivity and qualitative life. National development
integrates the communities as an integral part of the overall development process. Development
programs and policies are often directed towards community or rural transformation as a major step to
total national development, Todaro, (1982). This thinking and belief means a neglect of the rural
communities may weigh down any development aspirations of central government, and act as a major
'brake'. It becomes imperative that the rural low-income segment of the society must be lifted up if
society as a whole is to undergo true economic transformation.

The theoretical framework of analysis adopted in this research is the political economy
approach. Political economy see the society as made up of antagonistic economic interests. It explains
that economic positions determine social life, values and thought, observing that identical economic
interest combine to form social classes whereby political machinery is controlled. Ihonvbere (1990),
writing on Nigeria as Africa’s great power: constraints and prospect for the 1990s reasoned that
political economy is an appropriate approach to the study of foreign policy. According to Amale
(2002), the existing international studies literature, especially as it concerns foreign policy ignores the
plight of underdeveloped countries such as Nigeria. He pointed out the appropriateness of the political
economy approach such as providing the framework for understanding some of the theoretical
problems in use by scholars.

Political economy has a multi-disciplinary approach. It takes care of the overlapping character of
economics and politics as well as the class cleavages which facilitate an understanding of state policies
on the domestic and foreign scenes. Political economy also helps in the understanding of the nature of
unequal relationship between the advanced and less developed states from a historical perspective.
However the flexibility that the political economy approach requires may not come easily since it
requires unhinging from existing popular international studies literature that most scholars and
practitioners of foreign policy are used to.

This study therefore is concerned with the general problems of foreign aid in the development
process of Nigeria - that is, the developmental changes resulting from aid. The focus of this study is to
bring to the fore how foreign aid has enhanced national development in Nigeria over the period from
1970 to 2010. The reasons for the inability of Nigerian governments at all levels to manage aid funds
and materials are made clearer with political economy approach. This is because individuals involved

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in foreign aid management tend to satisfy their personal interests first. The paper is structured into
sections: introduction, background, review of literature, and conclusion. It is believed that the much
desired national development will be achieved when uprightness replaces corruption in Nigeria.

Background of Study
The United States assists Nigeria's economic development since 1954. By 1974, the United States had
provided Nigeria with approximately $360 million in assistance. This included grants for technical
assistance, development assistance, relief and rehabilitation, and food aid. Historically, aid existed in
ancient times. More recently in the nineteenth century, some private aid flowed from the Western
countries to the rest of the world. It was at the end of World War Two, in the contexts of European
reconstruction, decolonization, and cold war rivalry for influence in the third world that aid became a
major activity today. The British were the first to formulate aid policies designed primarily to foster
long- range economic gains through the Colonial Development and Welfare programmes. Colonialism
in the 1930s sought to diversify the economies of their colonies and prepare them for both political
and economic reasons.
Aid may be "given" in the form of financial grants or loans, or in the form of materials, labour,
or expertise. Aid may be given by individuals, private organizations, or governments. Standards
delimiting exactly the kinds of transfers that count as aid vary. The most widely used measure of aid,
"Official Development Assistance" (ODA) is such a figure compiled by the Development Assistance
Committee of the Organization for Economic Co-operation and Development. The United Nations, the
World Bank, and many others use the DAC’s ODA figure as their main aid figure because it is easily
available and consistently calculated over time and between countries. The DAC consists of 22 of the
wealthiest Western industrialized countries plus the E.U.; it is a forum in which they coordinate their
aid policies.

TYPE S OF FOREIGN AID GRANT

The European Commission issues grants which countries need not worry about paying back.
PROJECT AID
Aid is given for a specific purpose e.g. building materials for a new school.
PROGRAMME AID
Aid is given for a specific sector e.g. funding of the education sector of a country.
BUDGET SUPPORT
This is a form of Programme Aid that is directly channeled into the financial system of the recipient
country.

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SECTOR-WIDE APPROACHES (SWAPS)
This is a combination of Project aid and Programme aid/Budget Support e.g. support for the education
sector in a country will include both funding of education projects like school buildings and providing
funds to maintain them like school books.
FOOD AID
Food is given to countries in urgent need of food supplies, especially if they have just experienced a
natural disaster. Food aid can be provided by importing food from the donor, buying food locally, or
providing cash.
UNTIED AID
The country receiving the aid can spend the money as they choose.

AERC: POLICY JOURNAL TIED AID

This aid must be used to purchase products from the country that donated it or a specified group of
countries.

TECHNICAL ASSISTANCE

Experts and educated personnel such as doctors are moved into developing countries to assist with a
programme of development. It can be both programme and project aid.

BILATERAL VS. MULTILATERAL

Bilateral aid is given by one country directly to another. Multilateral aid is given through the
intermediary of an international organization such as the World Bank which pools donations from
several countries' governments and then distributes them to the recipients.

HUMANITARIAN AID

Humanitarian aid or emergency aid is rapid assistance given to people in immediate distress by
individuals, organizations, or governments to relieve suffering during and after man-made
emergencies like wars, natural disasters, or conflict, rather than removing the root causes of poverty or
vulnerability. The ICRC has been given a special role by the Geneva Conventions with respect to the
visiting and monitoring of prisoners of war. The United Nations Office for the Coordination of
Humanitarian Affairs (OCHA) is mandated to coordinate the international humanitarian response to a
natural disaster or complex emergency acting on the basis of the United Nations General Assembly
Resolution 46/182.

DEVELOPMENT AID:

Development aid is given by developed countries to support development in general which can be
economic development or social development. It aims at alleviating poverty in the long term, rather

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than alleviating suffering in the short term.

FOREIGN AID RECEIVED BY NIGERIA: 1970 - 2010

Foreign aid has been great in Health Assistance. In 1983, the United States Agency for
International Development, USAID, began providing assistance to the Nigerian Federal and State
Ministries of Health to develop and implement programs in family planning and child survival. In
1992, HIV/AIDS prevention and control program was added to existing health activities. In 2002, the
World Bank released US$90.3 million to Nigeria to support the 5-year HIV/AIDS Programme
Development Project. Elizabeth Docteur and Howard Oxley (2003) revealed the main donors as
PEPFAR, the Global Fund and the World Bank. In May 2007, it was announced that the World Bank
were to allocate a further US$50 million for the programme. In 2008, PEPFAR provided
approximately US$448 million to Nigeria for HIV/AIDS prevention, treatment and care, the third
highest amount out of PEPFAR 15 focus countries. By the end of 2008, the Global Fund had disbursed
US$95 million in funds for Nigeria to expand treatment, prevention, and prevention of mother-to-child
transmission programmes to fund the expansion of antiretroviral treatment.

It was reported on March 21, 2006 that Nigeria is the last polio-endemic country in Africa with
the world’s highest number of reported cases in 2005. In response to this case, Japan donated $16
million to help prevent childhood diseases in four African nations including Nigeria (Newsline August
4, 2006], The Government of Japan announced a nearly $16 million donation to UNICEF to help
reduce child mortality and achieve Millennium Development Goals in four African countries:
Ethiopia, Ghana, Nigeria and Sudan. Again, Japan donated more than $8.04 to UNICEF million for
child survival programmes in Nigeria on 23 June 2008. The grant is for polio. On 12 March 2007 in
Benin, Nigeria, UNICEF used local radio producers as the latest weapon in the battle against the
spread of avian influenza in Nigeria. Global Task Force aims to provide all children with safe water
and sanitation. On 22 January 2007, Cherie Blair met youth delegates from India and Nigeria at
UNICEF headquarters to help start a global initiative to ensure that children everywhere have access
to safe water and sanitation. On 5 December 2005, UNICEF Deputy Executive Director, Rima Salah,
joined a panel of representatives from governments, civil society and other UN agencies in Abuja,
Nigeria, ahead of the 14th International Conference on HIV/AIDS and Sexually Transmitted
Infections in Africa (ICASA). The group called for programmes which help prevent transmission of
HIV between mother and child to be made more accessible. On 9 September 2005, the European
Commission donated 33.3 million about $41.4 million to the UNICEF water and sanitation project in
Nigeria. This project will help provide safe drinking water for 2.1 million people across 1,400 rural
communities in Nigeria. On 3 August 2004, a UNICEF team re-launched polio immunization in Kano,

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Nigeria. After a one-year ban on immunization, the first drops of the vital polio vaccine were
administered to a child during a launch ceremony in Takai, 80 km from Kano city.

Social welfare was another area of aid. The ‘Nigerian Tribune', January 28, 1994 reports
that projects valued at N5 billion aimed at improving the welfare of the poor are being executed by the
Federal government of Nigeria in conjunction with the EEC in Niger State. The projects include
sinking of 450 boreholes, construction of basic health centres and training of small scale industrialists.
The primary objective of the project is to make life more meaningful and improvement of the
standard of living of the rural areas. The European Economic Commission (EEC) is also behind the
Cross River National Park, the CNP is funded with assistance from EEC and KFW; a German
Development Agency. The Decree No. 36 of 1991, created the CEMP to conserve and preserve the
plants and animal resources in the Parks. Under industrialization, the Vanguard, February 7, 1994 also
revealed that the Rivers State Government owned RisonPalm Limited, launched N550m Oil Palm
Project in Yenagoa.

The project was funded by the EEC in a funding arrangement under the Lome II convention.
The report also referred to a new Oil Mill project at Elele, Rivers State being constructed with the
European Investment Bank. In the area of Education and Training, the Punch, June 27, 1998 revealed
that fifteen states in Nigeria are being assisted by France in fresh efforts in boosting the speaking of
the French language in Nigeria. The linguistic Adviser in France Embassy in Nigeria at the time, Mr.
Thomas de Douhet and the Niger State former Commissioner of Education, Hajia Mohammed Agwai
disclosed that the project will gulp N4 million. It includes Computers and French text books and
teachers scholarships for training in France and Togo. The Federal government made the study of
French compulsory at the Junior Secondary School levels. From the French and British perspectives,
foreign aid is regarded as a continuing commitment to improvement of former colonial holdings and a
method of maintaining some diplomatic and commercial influence in colonies formerly under their
exclusive control.

Politically in response to the increasingly repressive political situation, USAID established a

Democracy and Governance (DG) program in 1996. This program integrates themes focusing on basic
participatory democracy, human rights and civil rights, women empowerment, accountability, and
transparency with other health activities to reach Nigerians at the grassroots level in 14 of Nigeria's 36
states. The sudden death of General Sani Abacha and the assumption of power by General
Abdulsalami Abubakar in June 1998 marked a turning point in U.S.-Nigerian relations. USAID
provided significant support to the electoral process by providing $4 million in funding for
international election observation, the training of Nigerian election observers and political party
polling agents, as well as voter education activities.
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 Aid was given in the area of bilateral and economic assistance. USAID committed $135
million to bilateral assistance programs for the period of 1986 to 1996 as Nigeria undertook an initially
successful Structural Adjustment Program, but later abandoned it. United States disbursements to
Nigeria continued into the late 1970s, bringing total bilateral economic assistance to about $445
million. As of October 2005, World Bank assistance to Nigeria involved 19 active projects with a total
commitment value of about US$1.87 billion. Since Nigeria joined the World Bank in 1961, the World
Bank has assisted it on 120 projects. In October 2005, the International Monetary Fund approved a
two-year "policy support instrument" (debt relief} designed to promote the growth of the non-oil
sector and to reduce poverty. Net official flows from UN agencies; UNICEF (US dollar) in Nigeria
according to the World Bank, the historical data of the Net official flows from UN agencies; UNICEF
(US dollar) in Nigeria was $43300000.00 in 2008.

Review of Literature
Papanek (1972) finds a positive relation between aid and growth. Fayissa and El-Kaissy (1999) posit
that aid positively affects economic growth in developing countries. Singh (1985) also finds evidence
that foreign aid has positive and strong effects on growth when state intervention is not concluded.
Snyder (1993) shows a positive relation between aid and growth when taking country size into
account. In general, aid is found to have a positive impact on economic growth through several
mechanisms (i) aid increases investment (ii) aid increases the capacity to import capital goods or
technology (iii) aid does not have an adverse impact on investment and savings (iv) aid increases the
capital productivity and promotes endogenous technical change (Morrissey, 2001). Papanek (1973), in
a cross-country regression analysis of 34 countries in the 1950s and 51 countries in thel960s, treating
foreign aid, foreign investment, other flows and domestic savings as explanatory variables, finds that
foreign aid has a substantially greater effect on growth than the other variables. Snyder (1993) taking
country size into account, finds a positive and significant relationship between aid and economic
growth.
On the other hand in a cross-country analysis, it was indicated that higher aid levels erode the
quality of governance indexes, i.e. bureaucracy and the rule of law. It is argued that "aid dependence
can potentially undermine institutional quality, encouraging rent seeking and corruption, fomenting
conflict over control of aid funds, siphoning of scarce talent from bureaucracy, and alleviating
pressures to reform inefficient policies and institutions" (Knack, 2000). Large aid inflows do not
necessarily result in general welfare gains and high expectation of aid may increase rent-seeking and
reduce the expected public goods quality. Moreover, there is no evidence that donors take corruption
seriously into account while providing aid (Svenson, 1998). Gong and Zou (2001) show that foreign
aid depresses domestic saving, mostly channelled into consumption and has no relationship with
investment and growth in developing countries. Pedersen (1996) advices observers not to hastily
7
conclude that aid affects growth positively. Using game theory, he argues that the problems lie in the
built-in incentive of the aid system itself. The aid conditionality is not sufficient and the penalties are
not hard enough when recipient countries deviate from their commitments. This hinders the
motivation of recipient countries and raises the aid dependency, which in turn distorts recipient's
development. However, foreign aid negatively affects the domestic savings rate whereas per capita
income, country's size and exports positively affect it (Singh, 1985). Ouattara (2003) categorizes
foreign aid into project aid, program aid, technical assistance and food aid.

Why Aid motives are not realized in Nigeria

Reasons for foreign aid failure in Nigeria abound. Corruption, bad political leadership and lack
of good governance are listed as reasons for the failure of the realization of aid motives in Nigeria.
Foreign aid is interpreted as being wasted on corrupt recipient governments despite any good
intentions from donor countries. If corruption is absent, foreign aid can become a very important
means for promoting economic development and will make the contributions of the developed
countries effective. No development will take place unless there is an indigenous innovation which
implies changes in attitudes, institutions, organizations and social relationships. Externally, public
parastatals are set up by government but the management teams are corrupt politicians. Certain corrupt
top government functionaries see their offices merely as an opportunity to get rich quick. In Nigeria,
public wealth is usually regarded as limitless, a national cake from which any individual in position
could cut personal share at will and get away with it. The EEC/World Bank Assisted Risonpalm
Limited oil palm projects in Yenagoa and Elele are now history because the funds were misused.

Bad Political Leadership and Lack of Good Governance affect aid administration in Nigeria.
Aid is not being used to its potentials because of bad governance. Aid cannot be continually poured
into failing states and be expected to produce a turnaround. Plans by United States to commit $150
million in assistance from 1993 to 2000 were interrupted by strains in U.S.-Nigerian relations over
human rights abuses and the failed transition to civil rule. Also for example, the European Investment
Bank (EIB) temporarily suspended disbursement of proceeds to all companies in Nigeria in 1993. In
Nigeria, the Cross River State National Park created in 1991 and funded by the EEC with the
assistance of KFW, a German Development Agency was threatened due to the June 12 1993 crisis.
The British and American allies mobilized the support of the United Nations to impose severe
economic sanctions on Nigeria for returning to military rule. Collier lists four known traps that
contribute to failure of aid implementation. In Nigeria, political crisis makes aid implementation
trapped and aid cannot yield fruitful results.
Aid should not be used to finance military endeavours. It is difficult to "design aid in such a
way that it works even in the environments of poor governance and poor policy that are most at risk of
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conflict.” However, if aid is given at the opportune political moment, it can support turnarounds.
Fiscal Accountability is another reason for aid failure in Nigeria. Fiscal accountability which refers to
the responsibility for public funds is lacking in Nigeria. Government fails to provide basic
infrastructural facilities for its citizens with its limited resources because there is no proper monetary
management and accountability by public servants who are entrusted with the resources. Aid
management agencies require managerial coordination, adequate and effective monetary management
to achieve set aid goals and objectives of government. Aid motives are not achieved in Nigeria
because of lack of accountability. Accountability is the rendition of accounts of resources entrusted to
officers by another person or group of persons (Asechemie, 1995:25). Listed reasons for aid failure in
Nigeria include education and poverty. Lack of education on the part of citizens hinders effective
awareness and consciousness, enlightenment, mobilization and activation as essential ingredients for
aid programmes in Nigeria. No country can hope to place itself on the path of a stable economic
progress, sustainable development and greatness without enhanced access to education. Despite the
resourcefulness of Nigerian people, a significant proportion of the citizens are illiterates. Oruwari
(1996) observed that in 1990, "only about 10% of Nigerian women are literate." Education of the
people on what obtains in the aid implementation processes would serve to open the eyes of the people
on what really exists and what they can expect in national development. Kalagbor (2007], Anikpo
(1995), notes that poverty is a historical process of eliminating people from decision making
machinery. It is manifested in hunger, lack of money, shelter, poor education etc. In Nigeria, it is used
to pervert participation in foreign aid resource management against the populace.
Nigerian governments need to invest aid assistances heavily in education, infrastructure and the
maintenance of a broad array of social services. Such is the case of most Nordic countries: Finland,
Sweden, Denmark and Norway which rank among the relatively least corrupt in the world. In Nigeria,
factors of fraud, embezzlement, lack of control and regular auditing procedures are major constraints
to foreign aid benefits in Nigeria. By and large, the relationship between aid and economic
development remains inconclusive and is worth being studied further. Statistical studies produced
widely differing assessments between aid and economic development, and no firm consensus has
emerged to suggest that foreign aid generally does boost development.

Conclusion
Nigeria received foreign aid in various areas such as industrial, health, education, technical
assistance, economic and bilateral development efforts. Countries give aid primarily because it is in
their political, strategic or economic self-interest to do so. According to Todaro (1977:349), there is no
historical evidence to suggest that over time, donor nations assist others without expecting some
benefits in return. Foreign aid programmes have had a strong economic rationale. Knack (2000),

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Easterly, Levine and Roodman (2003), Gong and Zou (2001), Pedersen (1996), Morrissey (2001) and
many other authors find no evidence that aid affects growth in developing countries. According to
Black Lloyd (1968), most aids are not for humanitarian purposes and Morgenthau (1962) states that
most aids have built-in control advantages which render the economy of recipient countries perpetually
dependent on the donors. Baranson (1974) observed, the amount of aid has been high in developing
areas but its impact on the social and economic development of the recipient countries has been
limited.
There are many criticisms of aid but many factors take into account the effectiveness of aid.
According to Collier, "the middle income countries get aid because they are of much more commercial
and political interest than the tiny markets and powerlessness of the bottom billion.” At the most basic
level, aid is not targeting the most extreme poverty. "United States aid to Colombia, Egypt and
Pakistan is motivated by geo-political interests to tackle extreme poverty on ethical grounds,
recognizing that poor countries may be unable to fulfil the obligations of international human rights
law. Donor countries tend to attach conditions to their aid which reflect their own prejudices for
appropriate social, political and economic policy. Such conditions not only infringe the sovereignty of
the recipient country but also impede the optimum path to poverty reduction. Furthermore, government
agencies become more accountable to international donors than to their own people. This diverts a key
mechanism for stamping out corruption and improving internal standards. Aid is seldom given from
motives of pure altruism; during the conflict between communism and capitalism in the twentieth
century, the champions of those ideologies, the Soviet Union and the United States, each used aid to
influence the internal politics of other nations, and to support their weaker allies. Example was the
Marshall Plan by which the United States sought to pull European nations toward capitalism and away
from communism. In recent decades, aid by organizations such as the International Monetary Fund and
the World Bank has been criticized as being primarily a tool used to open new areas up to global
capitalists.

Implications
Political leadership must monitor foreign aid implementation and lay greater emphasis to
supply of technological knowledge. Assistance should be directed to imparting skill and knowledge in
industry, agriculture and services to the indigenous labour. In industry, provision of an advisory
service for the small- scale operators should form an important area for foreign aid. Any technology
transfer must be that which can readily be understood and adopted with the best view to promoting
economic development. More radical reforms will be necessary if Nigeria is to increase productivity
and experience development globally on the strength of aid implementation strategy. For successful
aid implementation results in Nigeria, there is the need for transparent and accountable management of

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aid materials. Government agencies could help stamp out corruption by publishing details of the fees,
royalties and other payments made to governments in form of aid.

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