By A. OGUNSHEYE
In organising my thoughts on the subject which has been assigned to me, namely, “A Review of National Resources and Economic Development,” I have been mindful of two things. The first is the theme of this conference which is the “Management of National Resources”; the second is the suggestion of the Director-General “that speakers and participants at the conference will think not only in terms of our natural human resources but also in terms of the necessary managerial skills and financial prudence so very essential to make a success of the national attempt to transform the economy and thus raise the standard of living of the average Nigerian.”
In the light of these considerations, I have decided against making this paper a catalogue or an inventory of our natural resources as this would merely duplicate information which is available elsewhere. I thought it might be more profitable to all concerned if I use this opportunity to appraise the arrangements which have been made in the recent past or which are contemplated for harnessing our resources for development. I shall be particularly interested in the validity of the diagnoses underlying the arrangements, the appropriateness of the policies adopted and the effectiveness of the measures for implementing them. For convenience I shall use the “Guidelines for the Third National Development Plan 1975-80” as my point of departure. Although the Guidelines are not yet finalised, they represent the dominant thinking in the highest planning and economic organs in the land (the Joint Planning Board, the National Economic Advisory Board and the Conference of Commissioners responsible for economic development), on the matters which concern us in this session. Where necessary, the Guidelines will be supplemented with references to the “Second National Development Plan 1970-74”, the first planning document to be fashioned by Nigerians for Nigerians.
In view of the wide scope and complexity of the subject of national resources, I cannot possibly do justice to every aspect of it nor am I competent to do so. What I propose to do is to highlight in some detail some of the significant aspects of the strategies for developing our natural, human and financial resources. The treatment will be selective but I hope not arbitrary. Unless an appraisal of the kind intended here is constructive it is likely to be of little value. I shall endeavour to be constructive as the Federal Commissioner for Economic Development and Reconstruction in his Foreword to the Guidelines urges all Nigerians to be.
Improved Procedure for Compiling the National Development Plan
The decision to improve the procedure for drawing up the national development plan by providing executing agencies with a policy framework within which they can “identify and articulate their programmes” is a step in the right direction, It should go a long way to clarify objectives, impart greater coherence to project selection and reduce considerably, if not eliminate, the mis-match between development goals and programmes.
The utility of the new approach will depend on how successfully the detailed analyses which are proferred in the Guidelines go to the heart of the problems facing the various sectors of the economy, and how well-judged the proposed policies and programmes, which are supposed to constitute the hard core of the Third National Development Plan, are likely to be in achieving given objectives. And it is here that those outside government wishing to comment seriously and constructively on these two aspects of the Guidelines find themselves at a disadvantage. For although a development plan is future-oriented, it is usually related to what happened in the past and what is going on in the present. With a progress report available on barely one of the four years of the Second National Development Plan, too little is known about what has been achieved, and more important, what could not be realised and why, to enable one to appraise the Guidelines to the Third National Development Plan with the rigour worthy of the subject.
In more general terms, this is a problem of communication between the government and the public. To improve the situation it is suggested
a) that more detailed information on the progress of the development plan should be included in the budget speeches, possibly in the form of appendices;
b) that all government departments and agencies should resume the practice, which was standard under the colonial administration, of publishing regularly annual reports on their activities.
With reference to objectives, it will be noted that the emphasis in the Guidelines is virtually on sectoral objectives. Nowhere does the overall purpose of development planning of sectoral planning forms a part, receive mention. And yet misconceptions on this score can lead to misdirected effort on the part of government planners and agencies as well as confusion arising from uncertainty all round. In order to provide clearer focus for the Third National Development Plan, we commend the following definition of the three-fold purpose of development planning in a mixed economy such as that of Nigeria:
“1. to help the government to pursue policies which encourage private individuals to make decisions which favour growth to invest more, plant more, use fertilisers, undergo training, change jobs, etc.;
2. to determine priorities for its own expenditures on current and capital account, including investments in government enterprises;
3. to help ensure that adequate finance is mobilised for private and public investment.”
Of the three, the first is certainly the most important, especially as government has human material of proven worth to work with. Professor Lewis in the book from which the above quotation is taken has paid tribute to the magnificent way in which Nigerian farmers have responded to innovations since the fifties, and other researchers into local industries have remarked that the spirit of enterprise is by no means lacking. Historical evidence, admirably put together by Dr. A. G. Hopkins in his new book, “An Economic History of West Africa”, proves beyond doubt that this is far from being a recent phenomenon. We now know that the pre-colonial economy was complex, efficient and adaptable and that it had reached a relatively advanced stage of commercial capitalism long before the Western world made its impact felt. We also know that the achievement of replacing the slave trade with an export trade in palm oil and groundnuts during the nineteenth century was the handiwork of thousands of small-scale African Producers. During the first half of the colonial period (1900-1930), when the open economy was completed, the expatriate role, though necessary to the expansion which was achieved, merely encouraged a process which was under way before the partition of Africa. In the words of Dr. Hopkins, “Innovations in the key agricultural sector were made by African farmers themselves. Indigenous producers of all ethnic groups, whether in the forest or savanna, whether growing annuals or perennials, whether Muslim or Christian (or neither), proved that they were responsive to monetary incentives, that they were prepared to travel to distant places, that they were willing to experiment with new crops and with novel techniques of farm management, and that they were ready, on occasion, to provide their own social overhead capital (in the shape of roads and bridges), in advance of government action.”
The Macro Framework
While recognising the usefulness of indicating to executing agencies in broad outline the macro-economic framework that is likely to prevail during the next plan period, one or two cautionary notes may be sounded.
The first concerns the projections of the Gross Domestic Product. Given the record of the performance of the economy in recent years, the average compound rates of growth expected between 1975/76 and 1979 /807.8 per cent at constant prices and 9.8 per cent current prices), are not unreasonable. The danger to be avoided is the temptation to think of the rates in question as accomplished. On the contrary, from the point of view of development policy, they should be taken for what they are targets to be aimed at and worked for, The second cautionary note relates to the practice of using the growth rate of the oil industry as a balancing item in arriving at the overall growth rate of the economy. According to the Guidelines, “a major policy input into the projections of the growth rates of the GDP is that the Federal Government would require the oil producing companies in the country to maintain during the plan period, a minimum average rate of growth of crude oil production of 10 percent per annum.” Presumably the authors of the document have at the back of their minds the experience of 1971/72 when the oil industry accounted for nearly half of the estimated growth rate of the GDP. The sectoral breakdown of the aggregate growth rate of 12 per cent in that year was as follows: agriculture 2; oil 5.7; manufacturing 1.2; government 0.2; building and construction 0.7; and other 2.2.
If the intention is to ensure that the target growth rate of 7.8/9.8 per cent per annum is attained by keeping the growth level of crude oil production at 10 per cent, it is unexceptionable. Nor is there any quarrel with the figure of 10 per cent as such. However, a moment’s reflection will suffice to show that to use oil production as a balancing item in this way is to cut complacency as far as the growth rates of the other sectors of the economy are concerned. Indeed, in the specific case under examination, the target growth rate is perfectly possible of achievement even if all the non-oil sectors together stagnate! An extreme example no doubt but it dramatizes the danger inherent in this line of thinking.
The conclusion is clear. While in the short run there is no alternative in using the growth rate of the oil industry to boost the growth rate of the economy as a whole, in the medium and in the long run the healthy growth of the economy can only be sustained by the dynamizm of the non-oil sectors. The policy implication of immediate interest is to give special attention to what can be done to get the slow growing sectors of the Nigerian economy, especially agriculture, moving, with and without the external effects of the oil industry.
Government Savings
By itself, the estimated revenue surplus totalling about N3,950 million which the governments of the Federation are expected to amass during the next plan period does not tell us very much. It depends. To know what value to put on the figure in question, we need to know a number of equally important and relevant statistics such as the percentages of the GDP which the governments are likely to collect in current revenues over the plan period, and the rates at which not only the current revenues but also the current expenditures of the governments are expected to grow yearly. The Guidelines are not of much use on these points but the Central Planning Office has generously made available background technical papers from which the secondary statistics of interest were readily derived.
The picture which emerges is a mixed one. The first finding is that over the plan period the governments of the Federation will be collecting a good 25 per cent of the GDP in current revenue. This is a very laudable goal indeed. That it is not moonshine can be seen from the fact that the figure had already been attained in 1971/72 (having jumped from about 19 per cent in 1970/71.), and the level will virtually be maintained right until 1979/80. Very few developing countries, and not many developed countries either, can match this performance.
The second finding is a disturbing one. As projected, the current expenditure of all the governments put together will grow at a faster rate than their current revenue. While current expenditure will grow at a compound rate of 12.3 per cent over the plan period, current revenue will grow at the rate of 10.1 per cent. More disturbing still, we find that this is the continuation of a trend which began in 1971/72. At that rate current expenditures will be doubling every six years.
If we break down current expenditure into those of the Federal Government on the one hand and those of the state governments on the other, what do we find? That the Federal Government will account for the disturbing build up in current expenditure. While her current expenditure will grow at a compound rate of 14.2 per cent over the plan period, those of the state governments will grow at 8 per cent.
What has all this got to do with the revenue surpluses? Obviously the overriding objective in financing the next plan must be to make the revenue surpluses as large as possible. Since the revenue surplus in any year is the difference between current revenue and current expenditure, the best way of achieving this is to keep current revenue as high as possible and current expenditure as low as possible. But the governments are already collecting 25 per cent of the GDP in current revenue and that is high enough. The only course open for increasing the revenue surplus therefore is to keep firm control on the rate at which current expenditure grows from year to year.
Given that current revenue as projected will grow at a compound rate of 10.1 per cent per year over the next plan period, and taking account of the relative magnitudes of current revenue and current expenditure, it is suggested that current expenditure should grow proportionately at no more than 7 per cent per annum. This should result in bigger revenue surpluses. It is further suggested that the excess over the surpluses as projected should be passed to a special development reserve fund.
There is a related point. All the indications are that due largely to increased receipts from the oil sector, current revenue as projected under the present Plan will be surpassed many-fold. In 1971/72 alone for example, recurrent revenue collected was N1,436 million a good N640 million over and above the Plan figure. The surplus in that year was fourteen times what was planned for. In the circumstances, it will be unnecessary to resort to domestic borrowing from the private sector to finance the public capital expenditure programme. The private sector will need all the resources it can generate to finance the expansion of existing activities, and to start new ones. This is more so in the case of the indigenous sector to which new opportunities are now open, It is therefore suggested that domestic borrowing should cease forthwith.
Revenue Allocation
According to the Guidelines, finance is not likely to constitute a serious bottleneck to development efforts in the next Plan period . While this may be true enough of the economy as a whole, it will not be true of the State Governments; it has certainly not been true of them under the current Plan. All but two of the States could not raise enough funds to finance their capital programmes in 1970/71 and the deficits on current and capital accounts of all of them rose from N42 million in that year to an estimated N365.6 million in 1972/73. Federal grants and the proceeds of internal and external loans raised by the Federal Government have seen them through so far.
Two reasons have been adduced to explain the situation, the decline in the world prices of primary commodities like cocoa and palm produce on which the state governments depend for revenue, and optimistic projections of State resources in the Plan. There is a third. According to Dr. Adedotun Phillips, “one of the consequences of the recent changes in revenue raising and allocation is the tendency for revenue shares to shift in favour of the Federal Government… These changes have led to a decline in the share of federally raised revenues allocated to the States.’” State shares of Federal statutory allocations between 1968 and 1972 were as follows: 1968/69, 35.3%; 1969/70, 41.2%; 1970/71, 35.2%; 1971/72, 26.5%.
In the light of the foregoing, it will be readily agreed that “the problem of state resources is one that requires national attention”. It should no longer be dealt with on an adhoc basis. Beginning with the Third Plan, it is suggested that revenue allocation and national development planning should be integrated. It is further suggested that a greater share of federally raised revenues should be passed on to the States.
A Forgotten Source of Public Finance: local Government
One erroneous assumption which runs through the Guidelines is that there are only two levels of government which generate and use up financial resources, Federal and State. The important omission is Local Government whose contribution is substantial. In 1962 for example, when current expenditure on education was a little over £29 million, local authorities accounted for £2 million. If it were possible to put a value on self-help which took the form of what is popularly known as community development, local contribution would have been higher. At the same time, relative to their responsibilities in the fields of education, public works, health etc., local government authorities are in an even worse financial plight than the state governments.
And yet the activities of local authorities touch the day-to-day lives of the ordinary man more than those of the Federal and State governments!
It is therefore suggested that recognition should be accorded to local government in the Third Plan, not as an independent level but as a special category within the plans of each state. Their contribution to the development effort should be spelt out and special account should be taken of their needs in arriving at the states’ share of revenues.
Agriculture
While it is true, as stated in paragraph 2, that agriculture will still have to furnish the necessary employment for the bulk of Nigeria’s population in the foreseeable future, the implications for employment policy should be underlined. It has been shown that non-agriculture (mainly services, mining and manufacturing), in Nigeria can provide employment for only 45 per cent of those entering the labour force each year. “Consequently, half of employment policy must consist of persuading 50 to 60 per cent of the young people to take up farming.”
Although the constraints on the growth of Nigeria’s agricultural sector as listed in paragraph 3 are generally true, it would be useful, from the point of view of policy to go further to recognise that the constraints do vary in important respects, from crop to crop, and from one type of agricultural activity to another. The differences in constraints have a bearing on the kinds of campaigns which are appropriate for bringing about increases in output and productivity.
The Guidelines, in common with the Second National Development Plan 1970 — 74, are fuzzy on three major issues of agricultural policy. They are
(a) During the Plan period, what are the most promising investment opportunities in agricultural product processing, marketing and research, and what should the priorities be?
(b) In order to realise the opportunities under (a), how much emphasis should be put on investments in export crops versus investments in domestic crops; on production in peasant small holdings versus estates and plantations; on government versus private investment; and in direct versus indirect investments (in roads, communications, education and research)?
(C) What incentives to investment should be provided in the light of (a) and (b)?
In the field of agricultural production four major categories of agricultural products can be distinguished: export crops, import substitution crops, nutritionally superior foods and staple crops. In terms of the greatest potential, which crops offer the brightest prospects in the immediate future? The experts seem to be agreed that the export crops — cocoa, palm produce and groundnuts — top the list together with one import substitution crop, cotton. Selective investments only are considered advisable in sugar, kenaf, and tobacco, while more intensive research and development is called for in the case of rubber and wheat.
As far as the nutritionally superior foods (milk and milk products, poultry and eggs, and fruits and vegetables), are concerned, the emphasis should be on increasing effective demand for these commodities by raising the purchasing power of the small farmers (who form the bulk of the population), by pushing the production of export and import substitution crops and by reducing the cost of superior foods through the development of better varieties of plants and animal products. With regard to staple crops — yam, cassava, guinea corn and millet— the priority is to invest heavily in biological research to increase the productivity of food production in the late 1970’s.
From the foregoing it is clear that the proposal Contained in the Guidelines for government to go into the direct and large-scale production of kenaf, wheat and dairy foods is pre-mature.
Turning to the second set of major policy issues, a number of pertinent facts and findings should be noted. The first is that all groundnut and cotton, practically all cocoa, and most of oil palm and rubber production is in the hands of smallholders who, in spite of the predominance of illiteracy, have responded positively to changes in production and marketing.
In the words of an informed observer, “it is possible to write hopefully about Nigerian agriculture because the Nigerian farmer has proved him self to be an economic man; willing to plant trees which take several years to bear (cocoa, rubber), willing to invest in fertilisers (groundnuts), and pesticides (cocoa, groundnuts), willing to adopt new varieties (cotton), and willing to upgrade the quality of his produce (palm oil). Hence it is not necessary to base policy essentially on substituting new large-scale institutions (whether plantations or state farms), for the existing millions of farmers. What they need are incentive and access to new knowledge.”
Secondly, studies have shown that in terms of economic returns, small- holder production in tree crops gives very satisfactory returns, whereas most plantations in Nigeria give marginal returns under existing conditions.
Thirdly, with few exceptions (mainly involving joint ventures with private investors), direct government investments in plantations, farm settlements and processing of agricultural products and so on have been unsuccessful in obtaining satisfactory returns on the money invested.
Fourthly, in view of the long distances from some areas of agricultural production to the points where the products are consumed or exported overseas and the high cost of marketing and of transportation, it has been suggested “that primary emphasis should continue to be given to the development of infrastructure in Nigeria, especially rail, road and port facilities. Further investments can be made to improve the efficiency of the marketing process, especially through analysis of marketing board operations, the development of market news services, improvements in inspection and grading of agricultural products and the development of a workable credit system to enable farmers to buy the inputs required for efficient output. Investments in the above would pay the federal and state governments much higher returns than direct investments in processing plants, plantations, farm settlements and the like.”
Guidelines Reflect Some of the Findings
It is reassuring to see that, in some respects, the Guidelines reflect some of the above findings. Examples are the proposals for improving the distribution of agricultural chemicals by contracting private companies to undertake the procurement and distribution, for State Governments to allocate special grants for the construction and maintenance of feeder roads for evacuating agricultural produce, for establishing a reliable market and for Government to encourage the formation of co-operative societies for the marketing of staple foodcrops. Unhappily, still too many of the proposals strongly suggest that the lessons of the recent past have not been taken to heart.
A case in point is the establishment of food processing plants which the Federal Government, in partnership with the State Governments, intends to go into. As pointed out earlier, the record of state enterprise in food processing has been one of dismal failure. In contrast, the private sector has been conspicuously successful in this area and should be encouraged to make even greater contribution. Still in the same connection, the proposal for creating agricultural estates needs further clarification. Remembering how many millions of pounds have been poured down the drain in running farm settlement schemes, it would be a pity to reintroduce them in another guise. The bulk of the resources available for agricultural development should be put at the service of the millions of smallholders and not a handful of large-scale farmers.
The establishment of the Nigerian Agricultural Bank is welcome but for maximum impact agricultural credit should be closely linked with the agricultural extension services. For greater effectiveness, the reform of the extension services will, in turn, have to go beyond expansion in numbers and better training as envisaged in the Guidelines. Government ex tension workers need to be more carefully selected especially from the point of view of motivation and capacity for working among rural people. In addition, the responsibilities of the individual extension worker need to be reduced to more reasonable proportions both as to area and the number of crops covered. Further more, the extension worker should be better provided with transport facilities so that the farmers in his district can see more of him. In these and other respects, there is evidence to show that government has a lot to learn from the private sector on how to make agricultural extension services effective.
With respect to the third major issue of agricultural policy, namely, incentives, the proposals contained
1. Arthur Lewis; op. cit.
2,3 C. K. Laurent, Investment in Tree Crops in Nigeria — Small- holder Production, CSNRD-1 8, CSNRD and NISER, Ibadan, 1968: R.G. Saylor, A Study of Obstacles to Investment in Oil Palm and Rubber Plantations, CSNRD-15,1968;C.K. Laurent Agro-Industries in Nigeria, CSNRD-25, 1968; Dupe Olatunbosun, Nigerian Farm Settlements and School Leavers Farms Profitability, Resource Use and Social – Psychological
Considerations, CSN RD-9,
1967.
4. C.k. Laurent, HC. Kriesel, Dupe. Olatunbosun, M. Purvis and R.G. Saylor, Agricultural Investment Strategy in Nigeria, CSNRD-26, 1969.
5. R. K. Harrison, A Study of Village-Level Agricultural Extension Workers in the Western State of Nigeria, NISER, Ibadan, 1971.
in the Guidelines are generally on the right lines. The point is well seized that the major incentives for Nigerian agricultural development are those involving prices and income to farmers and subsidies for agricultural inputs. There is one important respect in which much more remains to be done, namely, policies for hastening the transition to large-scale commercial agriculture. Drawing on the experience of other countries like Kenya and the Ivory Coast where immigrant settlers have made a special contribution to the commercialization of agriculture, Professor Sir Arthur Lewis has suggested that foreign investment by plantation companies in Nigeria should be encouraged. “Some of the monies now earmarked for government participation in manufacturing investments should instead be switched into partnerships with private agricultural investment companies.”
Following up another fertile suggestion of Mr. Wilmot’s, if such agricultural schemes were utilised as nucleus plantations or estates around which a number of satellite smallholdings are grouped their demonstration and beneficial effects on peasant agriculture could be enormous! “The nucleus plantation or estate concept,” as explained by Mr. Wilmot, “is a very practical and down-to-earth way in which peasant farmers can be introduced to the best planting materials, guided in the practice of the best farming methods, assured of first class processing facilities, and relieved of all worries about marketing their produce, whether processed or fresh. By the large-scale adoption of this form of agricultural development, farming could become a dignified and worthwhile occupation for educated Nigerians who are becoming increasingly anxious about the scarcity of openings likely to lead to a secure and prosperous career.
Moreover, an avenue would be opened up by which foreign commercial enterprise in the agricultural area could bring its investment and its know-how to Nigeria. Employment would be created for large numbers of Nigerians in an industry which is labour intensive in a thoroughly healthy environment”
Mineral Resources
As the Guidelines have nothing to say on mineral sources, it can be assumed that the policies contained in the Second National Development Plan are to be continued without modification during the next Plan period. And this is understandable. The Second Plan marked a radical break with the past and its main provisions are still being implemented.
Until 1968, Government policy was not to participate directly in prospecting and mining of mineral resources, their commercial exploitation being left to private enterprise. Although it took positive and fruitful steps, both internationally and internally, to improve the fortunes of the tin industry, Government was primarily concerned with providing basic and essential geological information through the Geological Survey, enforcing mining and prospecting laws and training personnel for industry in its Mines School in Jos.
Modest though the main thrust of Government policy was, the achievements were considerable indeed. First, between 1920 when the Geological Survey launched its geological mapping programme and the early sixties, geological maps on the scale of 1 :250,000 covering about forty per cent of the country were produced. Secondly, the Geological Survey gave valuable advice on water supply, especially from underground sources, and between 1928 and 1947 it sank about 2,000 wells. Lastly, with the exception of oil, “nearly all the known mineral deposits of Nigeria (both worked and unworked), have, at some time or the other been mapped, drilled through, analysed or other wise examined and reported upon by the Geological Survey. In fact, most of the credit For large-scale tin mining on the Jos Plateau and the opening up of the coal mines at Enugu must be given to it.”
With the Second National Development Plan, Government embarked on a new policy of participating directly in the exploration and production of mineral resources. This policy has already been implemented in the case of the petroleum industry and a number of offshore oil concessions are being developed in partnership with private companies, the Government having a majority share holding. The National Prospecting and Mining Company envisaged in the Plan has already been established. The other arms of the new policy are to encourage the utilisation of the known and commercially viable minerals, to control and regulate the rate of depletion, to intensify the search for new minerals and to use the proceeds of the oil industry to transform the economy and the country. It should be noted that an Iron and Steel Corporation has already been set up to look into the possibilities of exploiting the known deposits of iron ore and to prospect for more. In addition increased oil revenues are also making a beneficial impact.
There can be no doubt that the new policies on mining are generally in the right direction and the dispatch with which the necessary institutional arrangements have been set up is commendable. Nevertheless it may be useful to draw attention to one or two aspects the implications of which were either not sufficiently emphasised or overlooked. In the first place, the task of mapping the remaining sixty per cent of the country is a stupendous undertaking and even when the present series of maps are completed, more detailed maps for selected areas and for specific purposes will be called for—and all this after the geological mapping programme had virtually ground to a halt between 1960 and 1970 largely as a result of the exodus of expatriate geologists and to some extent because of the civil war. Although modern survey methods will help the problems of finding competent staff for the.
