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THE IMPACT OF NATIONAL POVERTY ERADICATION PROGRAMME (NAPEP) ON ECONOMIC DEVELOPMENT OF NIGERIA

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The concept of poverty and material deprivation is a critical one in contemporary social discussions. Social Sciences’ literature is replete with attempt by Economists and other Social Scientists to conceptualize the phenomenon. Poverty has economic, social and political ramifications. The poor are materially deprived, socially alienated and politically excommunicated. Basically, Poverty has been conceptualized in the following ways:
a. Lack of access to basic needs/goods and
b. Lack of or impaired access to productive resources.
Poverty as lack of access to basic needs/goods is essentially economic or consumption oriented. Thus the poor are conceived as those individuals or households in a particular society, incapable of purchasing a specified basket of basic goods and services. Basic goods as used here include; food, shelter, water, health care, access to productive resources including education, working skill and tools, political and civil rights to participate in decisions concerning socio-economic conditions (Ajakaiye and Adeyeye 2001 in Gbosi, 2004). It is generally agreed that in conceptualizing poverty, low income or low consumption is its symptom.
The level of poverty in Nigeria since the implementation of SAP in the 1980s has tremendously increased (UNDP Nigeria, 1998; FOS, 1999; World Bank, 1999).
The poverty profile in Nigeria showed that the incidence of poverty increased from 28.1% in 1980 to 43.6% in 1985 but declined to 42.7% in 1992 and rose again to 65.6% in 1996 (FOS 1999). Since 1990 the country has been classified as a poor nation. The UNDP Human Development Indices (HDI) for 2001 ranked Nigeria the 142nd with HDI of 0.40 among the poorest countries.
From 1980-1996, the population of poor Nigerians increased four folds in absolute terms. The percentage of the core poor increased from 62% in 1980 to 93% in 1996 whereas the moderately poor only rose from 28.9% in 1992 to 36.3% in 1996 (FOS, 1999). The analysis of the depth and severity of poverty in Nigeria showed that rural areas were the most affected. Several reasons accounted for the situation viz;
a. the large concentration of the populace in the rural areas,
b. many years of neglect of the rural areas in terms of infrastructural development and lack of information on the way government is being run.
The CBN/World Bank study on poverty Assessment and Alleviation in Nigeria (1999) attested to the fact that the living and environmental conditions of those living in the rural areas have worsened. Urban poverty is also on the increase in the country. This has been attributed to the under provision of facilities and amenities which are already inadequate to match the growing demand of the urban populace as well as the rural-urban movement which has caused serious pressure on the existing infrastructural facilities.
Concern about this problems as well as efforts made to eradicate or at least reduce it cannot be said to be new. While major reductions in poverty level have been made in developed countries, developing countries, Nigeria inclusive, have been battling with poverty, from one poverty alleviation programme to another eradication programme, but all to no avail.
The concern over increasing poverty levels in Nigeria and the need for its eradication as a means of improving the standard of living of the people has led to the conceptualization and implementation of various targeted or non-targeted poverty eradication and alleviation-programmes. Both the Nigerian government and donor agencies have been active in efforts in analyzing and finding solutions to the increase of poverty level. Government programmes and agencies designed to impact on poverty include:
a. The Directorate of Food, Roads and Rural Infrastructure (D.F.F.R.I).
b. The National Directorate of Employment (NDE)
c. The establishment of the Peoples Bank of Nigeria in 1989.
d. The Better Life Programme (BLP)
e. The Family Support Programme (FSP)
f. The Agricultural Development Programme (ADP)
g. National Agricultural Land Development Authority (NALDA).
h. The Nomadic and Adult Education Programme established in 1986.
And most recently, with the return of democracy on May 29, 1999 the Federal Government embarked on poverty reduction programme specifically, the government put up the National Poverty Eradication Programme (NAPEP) in the year 2000 which took off in 2001. It was aimed at eradicating absolute poverty and it consist of four schemes namely;
a. Youth Empowerment Scheme, Rural Infrastructures and Development Scheme
b. Social Welfare Services Scheme
c. Rural Resources Development and
d. Conservation Scheme.
To implement thus programmes, the government placed emphasis on complementation, collaboration and coordination between the various tiers of government on the one hand and between government, Donor/Agencies, non-governmental organizations and local communities on the other. A multi-agency implementation structure with coordination, monitoring and evaluating organ was introduced in order to ensure cost effective delivery target with optimal social benefit. Particularly this programme, NAPEP is being implemented in Nigeria till date. The questions arising from the implementation of NAPEP include:
a. Is poverty eradicating programe appropriate for Nigeria?
b. How has government’s concept of NAPEP affected its success?
c. How has NAPEP’s activities impacted on poverty reduction as a boost to economic development?
In spite of all the laudable efforts at addressing poverty, the problem still persist in Nigeria.
1.2 STATEMENT OF THE PROBLEMS
Today, poverty is widely addressed as a global problem. Poverty affects over four billion people. It is important to know that most of the poor people live in the developing worlds of Africa, Asia and Latin America (Gbosi 2004). On the average 45-50 percent of sub-Saharan Africans live below the poverty line. And in Nigeria about 43% of the population was living below the poverty line of N305 a year in 1985 prices, (World Bank, 1996). This figure has been purging upwards to over 60% in recent time.
Poverty is indeed a global problem. To this effect the United Nations declared 1996 the international year of eradication of poverty and 1997-2006 a decade of poverty eradication. In pursuance of this target, government in both developed and developing countries became increasingly aware of the poverty problem and several development efforts to alleviate poverty therefore have been embarked upon world-wide. There is a high incidence of poverty in Nigeria today. Especially, the incidence of poverty is very high among the unemployed, the uneducated women and rural dwellers (Gbosi 2004). In 1980, the poverty level was only 28.1% but by 1996 it had jumped to 66.6%. Having been mindful of the implications to the economy, the government needs to make concerted efforts in order to reduce poverty in the country. This is because a high incidence of poverty is not good for the health of a developing country like Nigeria. A review of the economic history of Nigeria shows that successive governments have expressed concern of the need to alleviate poverty in the country.
Unfortunately, the issues of poverty eradication has proved to be the most difficult challenge facing the less developed Countries ( Nigeria inclusive) where majority of the people live in absolute poverty. However, the government has continued to respond in order to ameliorate the worsening conditions of the poor by shifting public expenditure toward poverty eradication. Different poverty eradication programmes and projects to cushion the effects of poverty have been initiated over the years. This was received with high hopes. Poverty eradication was seen as a means through which the government could revamp the battered economy and rebuild self-esteem in majority of Nigerians. Consequently, on assumption of office in 1999, President Obasanjo indicated that the poverty situation in which over 60% of Nigerians live below the poverty line requires concerted efforts to prevent it from becoming worse. In this vein, the government in addition to previous efforts (aimed at poverty eradication) introduced a number of programmes and measures aimed at tackling poverty. These include:
a. The launching of the National Economic Empowerment and Development Strategy NEEDS, which has poverty reduction as one of the four primary goals (NEEDS documents, 2004).
b. The Launching of the Universal Basic Education (UBE) programme,
c. The poverty alleviation programme (PAP)
d. The constitution of the Ahmed Joda Panel in 1999 and the
e. Ango Abdullahi Committee in 2000 (Obadan, 2001). The immediate concern of the Panel or Committee was the streamlining and rationalization of existing poverty alleviation institutions and the co-coordination, implementation and monitoring of relevant schemes.
These resulted in the introduction (in early 2001) of the National Poverty Eradication Programme (NAPEP) in Nigeria. Data has it that over N25billion from 2001 till date have been received by NAPEP for the fight against poverty in Nigeria. Unfortunately poverty level seems to be unresponsive to these windfall of resources addressed for the fight. In spite of this huge resources devoted to NAPEP, deterioration in fiscal discipline, corruption and inconsistent policies which had undermined past efforts still makes poverty eradication in Nigeria a paradox. The rate of unemployment has continued to rise and the poverty situation has exacerbated.
In a reaction to an allegation of mismanagement of funds meant for the war against poverty in Nigeria, by the Nigeria senate, NAPEP said that it has generated funds from other sources and expended N21.725 billion on the programme from 2001 to 2008. The National Coordinator of the programme and Special Assistant to the President Dr. Magnus Kpakol explained that since inception in 2001. The programme has received N11.8 Billion as budgetary allocation, N4billion for procurement of Keke NAPEP, N10billion from State Governments and commercial banks for multi- partnership programme and N8.2 billion from the Millennium Development Goal (MDG). This totals N34billion. However, the NAPEP boss explained that about N21.7billion has been spent so far. (Daily Champion, Wednesday February 18, 2009 pg7). In a motion titled "Dismal Performance of the National Poverty Eradication Programme" Senator Kure observed that poverty have continued to be on the increase with about 70% of the Nation’s population currently living below poverty level. He lamented that since its establishment in 2001, the agency have not efficiently impacted on the lives of Nigerians despite huge resource committed through budgetary allocations and Millennium Development Goal ( MDG) fund.
As a mater of fact, the need arises to take a careful look at the issues of poverty in Nigeria, coming against the background of continuing efforts on the part of the government to address it, if close to N30billon has been gathered for poverty eradication in 8years and these resources are utilized efficiently, there should have been significant improvements in the living standard of the generality of the people and the poverty level should ordinarily be reduced.
However, in order not to pre-empt the outcome of this study, this is aimed at finding out how the activities of NAPEP has impacted negatively or positively on Economic Development and the generality of the lives of Nigerians from 2001 till date.
1.3 OBJECTIVE OF THE STUDY.
Broadly, the objective of this study is to examine the impact of the National Poverty Eradication Programme (NAPEP) on the Economic Development of Nigeria. Though this study uses Ohaukwu Local Government Area of Ebonyi State as a case study, the conclusions derived shall be used to generalize on its impact on the whole country. The specific objectives include:
a. To access whether National Poverty Eradication Programme (NAPEP) has achieved its objectives of poverty eradication in Nigeria.
b. To identify areas of deficiencies, problems and failures, and proffer some policy recommendations based on the findings of this study.
1.4 HYPOTHESIS OF THE STUDY
H0: National Poverty Eradication Eradication Programme (NAPEP) has not impacted positively on the economic development of Nigeria.
H1: National Poverty Eradication Eradication Programme (NAPEP) has impacted positively on the economic development of Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
To the masses this research work intends to publicise the activities and programmes of NAPEP, and how it has affected the well being of Nigerians.
To the Government and Policy-makers, it identifies and reveals the successes and failures, challenges and prospects of NAPEP and affords them the opportunity of designing and implementing a holistic approach, procedures and strategies and better ways of tackling this hydra- headed menace called, poverty.
Also to the students and fellow researchers, it reveals the operations and the impact of NAPEP on the people. While it serves as an addition to the stock of knowledge, it also serves as a basis for further research.
1.6 SCOPE OF THE STUDY
This study covers the impact of National Poverty Eradication Programmes (NAPEP) on Economic Development in Nigeria; A case study of Ohaukwu Local Government Area of Ebonyi State. The period of study covers from 2001-2009.

1.7 LIMITATIONS OF THE STUDY
Being a programme that has lasted for just nine (9) years, I had difficulties in assessing materials done in this area. Also combining this research work with my classroom work was very demanding.
Financial constraints to a large extent also affected the way this work may have be carried out.
Finally the secondary data used in this work cannot be qualitatively guaranteed by me as they were compiled by different bodies. With regards to the primary data, some respondents may not return their questionnaires while some may be damaged in the process.
1.8 DEFINITIONS OF CONCEPTS
a. Poverty: It could be defined as a situation where ones income is too low to allow the purchase of goods and service that will satisfy its basic need and when it has no financial resources kept in the form of accumulated or acquired wealth.
b. Poverty Line: It is defined as the money cost of a given person at a given time and place of a reference level of welfare. The people who do not maintain this level is called the poor and those who do are not.
c. Poverty level: It is used to denote those living below the poverty line.
d. Respondents: These are people whom the research questionnaires were given to for responses.
1.9 ORGANIZATION OF THE STUDY:
The study is divided into five chapters:
Chapter one, contains introduction which is subdivided into:
I. background of the study
II. statement of the study
III. objective of the study
IV. hypothesis of the study
V. significance of the study
VI. scope of the study
VII. limitations of the study
VIII. definitions of concepts and
IX. Organizations of the study.
Chapter two contains literature review subdivided into theoretical and empirical literature. Chapter three discusses the research methodology, chapter four dwells on data analysis, interpretation of results and chapter five talks about summary of findings, conclusions and policy recommendations.



CHAPTER TWO
2.0 LITERATURE REVIEW
This chapter focuses on the explanation and descriptions of the literature of related authors that are relevant to the research work, it also examines the impact of National Poverty Eradication Programme on Nigeria’s Economic Development.
The problem of poverty in Africa is one that has over the years engaged the attention of the international community, governmental and non- governmental organizations including western and African scholars indeed. The issues of poverty and poverty reduction have been a focus of numerous researchers’ discussion, its debates and implementations of the various programmes. In discussing any issue that relates to poverty, one must cast back his mind to the days of the early scholars who contributed immensely on the topic (poverty and poverty alleviation).
According to Anikpo (1995), poverty is the history process of individuals or groups being forcefully eliminated from control of the decision-making machinery that determines the production and distribution of resources in a society. He further explains that poverty manifest in various forms such as hunger, lack of food, good drinking water, clothes, shelter, good health, poor education and distribution of resources coupled with monopoly of the machinery of decision-making through coercive state apparatus. Men must engage in production if they must survive in the production process, individuals and groups undertake complementary tasks In order to achieve common objectives. Anikpo explains that during production, (however, different people occupy different positions in the organizational structure that emerges) the differences that emerge tend to reflect at the initial stages, objective physiological realities such as age, sex, and size. They create also at this stage differences of non-antagonistic nature not only on the industrial input in the production process, but also in the respective shares acquired from whatever is produced. However, in the course of time owing to increasing differences in the accumulation and appropriation of resources, the positional differences begin to reflect a new set of material reality predicted on who has acquired and controlling more of the dominant instrument and objects used in the production process. The significant aspect of these material or economic differences is that they inevitably acquire social and political dimension, interlining first of all their material holding conferred on their high status which in terms confers power expressed in making decisions that affects the society on economic development.
Aliyu (1998) defines poverty as the condition in which a person is enabled to meat minimum basic requirements of food, health, housing, education and clothing. He estimated that the sum of N3,920 would be required per month by an adult individual in Nigeria and that if a family’s income (the total funds available for expenditure by a household needed for feeding and providing other services) required in the household is below a certain standard value then the family is said to be in a state of poverty.
The attempts made at defining poverty as captured above could be referred to as more outline of the features or characterization of poverty. In buttressing the difficulties encountered in getting at a common and generally accepted definition of poverty, Aboyede (1997) posits that there seems to be a general agreement that poverty is a difficult concept to handle and that it is easily recognized than defined.
Even attempts made to categorize some specific areas at which poverty could be viewed are fought with lack of agreement. For instance, the Organization for Economic Cooperation and Development’s (OECD) guidelines on poverty eradication (2000) stressed that an adequate concept of poverty should include all the most important areas in which people of either gender are deprived as incapacitated in different societies and local context. It should encompass the casual links between the care dimensions of poverty as the central importance of the gender and environmentally sustainable development. It failed to define poverty but listed its core dimension. A definition of poverty should endeavour to include economic, human, political, socio- cultural and protective capabilities.
Poverty can be viewed from permanent or transience dimension. This dimension differentiates poverty based on time or deviation on one hand and distributives as to widespread, individual or concentrated on the other hand.
Aliyu (2003) asserted that several types of poverty may be distinguished depending on such factors as, time or duration (long, short terms or cyclical). Poverty may be widespread throughout a population, but the occurrence itself is limited to direction and distribution (widespread, concentrated individuals). It can also involve relatively permanent insufficiency of means of securing basic needs. The condition may be to describe the average level of life in a large group in concentrated or relatively large groups in an otherwise prosperous society.
Moreso, the concept of poverty is relational, i.e. we cannot talk about poor except in the context of the rich. Poverty and wealth exist in parallel relationships, in which one means nothing without the other. The two categories auger simultaneously in history through the same processes and relationships associated with the production and distribution of material resources in human society.
2.1 THEORETICAL FRAMEWORK:
The essence of the theoretical framework is to review some already propounded theories concerning poverty reduction and economic development. There are many relative theories of poverty as considered below:-
POVERTY AS INEQUALITY: Some scholars argued that some people have less than others. The inequality of five fingers in a human hand is often used as an analogy to define poor and the rich. It could be machineries to interpret the symmetrical arrangement of the human fingers as an analogy to the antagonistic and symmetrical relationship between the poor and the rich.
THE DIVINE THEORY: The theory seems to be a design accredited to God’s nature. That some people are naturally stronger, more talented is an inevitable natural which no one can do anything about. They profess that the poor are suppose to accept their fate with humility while the rich are entitled to their wealth and only help the poor through arms giving and other charitable acts.
CUITURE OF POVERTY: Lewis (1961) the concept, they become apathetic, violent and lack self-country, which rein forces with position. In 1972, Thomas and Anderson explained culture of poverty as pathological trained in capability by which the poor are usably to acquire the values of competitive society.
SUBJECTIVE POVERTY: This refers to whether or not individuals or groups feel they are poor. Subjective poverty is closely related to relative poverty since those who are defined as poor in terms of the standard; the day will probably see and feel them to be poor. People act in terms of the way they perceive and define themselves.
RELATIVE POVERTY: This is measured in terms of judgment by members of a particular society of what is considered a reasonable and acceptable standard of living and style of life according to the corrections of life according to the corrections of the day. The concept of relative poverty also poses problems for the comparison of the poor in the same society over time and between societies. For example; a relative concept of poverty prevents a comparison of the poor in present day England and third world countries in Africa, Asia and South America.
EQUILIBRIUM OF POVERTY: The concept of poverty depicts a situation in which the poverty of a county denies its people the means of improvements.
POVERTY LINE: This is a measure of standard of living, which separates the poor from the rich. Measures, which include, income, expenditure status as well as intangible criteria such as freedom, the right to vote, gender equality etc.
SHAPES AND DIMENSION OF POVERTY: Poverty, inter alia, is related to location, urban, rural, north or south and the level of household. Poverty reflects regional and structural variations across rural and urban areas, gender differentiations and geographical settings. The impact is uniform and varies only in levels. It has indirect and direct effects on people. A direct effect can be seen in the virtual collapse of basic infrastructure like, access to water and sanitation, nutrition, health, and education and services. Perhaps due to poverty complexity, like corrosive effect on humility, many journals, article and books have tacked the issues of poverty from the direct effect angles. Poverty destroys aspiration, hope and happiness. Indirectly, it affects positive relations with subordinates, self-esteem and sense of personal competence. It also destroys ones dispositions to participating in community affairs, inter- personal trust and self-satisfaction.
To understand their concept we may draw homely an example of how the poor do not have enough to eat, being under fed his health may be poor, being physically poor, his working capability is low, which means that he is poor and will not have enough to eat. In brief, a man is poor because he is poor. The concept of poverty is very dear; many scholars see poverty, particularly, which has been a major obstacle impending the development of Nigeria.
Galbraith (1958) classified modern poverty into two categories, namely; case poverty and insular poverty.
CASE POVERTY: Is the kind of poverty seen in every community rural and urban. It manifests in poor family with junks filled yard and dirty children playing in dirty environment. Other signposts peculiar to the individual afflicted by poverty are mental deficiency, bad health, inability to adapt to the discipline of modern economic life, excessive procreation or perhaps combination of several of those handicaps. These conditions hinder those individuals from participation in the general well-being.
INSULAR POVERTY: This kind of poverty manifests itself as an island. In this imaginary inland, everybody is poor. Galbraith (1958) noted that is not easy to explain insular poverty individually in adequacy because the environment in which the people found themselves may have made them poor or have frustrated them.
EMPLOYMENT SITUATION CONSTRAINTS THEORY OF POVERTY:
The profounder of the theory was Liebow (1967). He argued that, the poor are constrained by the fact of their situation, by low income, unemployment and the like, to act the way they do. He further argued that, the poor would readily change their behaviour in response to new set of circumstances if one of the constraints of poverty were removed. He also argued that one is probably more fruitful to think lower class family reacting in various ways to the fact of their position and to relative isolation rather than the imperatives of lower class culture.
The poor people share the values of a society as a whole. The only difference is that they are unable to translate many of theses values into reality and once the constraints of poverty are removed, the poor will have no difficulties adopting mainstream behavioural patterns and seizing available opportunities.
DIMENSIONS OF POVERTY: Given the above definitions, it is appropriate to note that poverty assumes political, social, and economic dimensions. The social dimension of poverty includes lack of access to health care etc. The political dimension of poverty exist where civil right are divided and political power rest in the hands of few people. While the economic dimension of poverty is broader than lack of finance, it includes lack of employment opportunity and even distribution of resources to the factors beyond their control.
The World Bank study of Nigeria’s poverty shows that there are differences between regions in the concentration of poor and the rich in the society. According to the study, poverty varies from the North to the south as earlier mentioned above, with more concentration of the poor in the North, agro–climate zone (World Bank, August 1996). However, generally, people of low-incomes live in the rural agricultural and non-industrial society.
Federal office of statistics (FOS), now Federal Bureau of Statistics (FBS) in 1998 emphaiszed the level of poverty by the aggregate low quality of life of Nigerians as follows:-
1 Only 40% of the population has access to good and potable drinking water
2 About 85% of Nigeria’s population live in the rural areas
3 Most Nigerians consume less than one third of the minimum requirement of protein and vitamins
4 Above 75% of Nigerians have no access to primary health care
5 Most people in Nigeria especially rural people have families without jobs
6 The Gross National Product (GNP) per capital for Nigeria by 1996 was only 260 compared to 390 for Ghana and 400 for Zambia and also for Indonesia.
Poor household differs from non-poor in several ways: non-poor households spend four times as many as poor household spent. While the poor spent proportionately more of their expenditure on food, the non-poor spend 316 to 415 times as much for food. However, the incidence of poverty is higher in larger households and poor households have an average of three children while non-poor ones have fever than two. Among the poor, lack of education is an overwhelming characteristic, about three quarters of those with secondary education are included was among extreme poor. Employment status is another indicator of poverty reduced substantially. The percentage of extreme poor among agriculturalist reduced from 28% in 1992 to 16.4% in 1998 while for service works’ families, it is increased from 4% to 10.7% (Federal Office of Statistics, 1998).
Globalization and World Trade Order (WTO) liberalization policy have contributed to the growth and increase of poverty rate in Nigeria. This was noted as a modern way of colonialism worsening the poverty situation of the third world countries. Some individuals have suggested that Nigeria should boycott the World Trade Organization’s (WTO) agreement because the treaty leads to dumping of foreign goods in the country. It also leads to the closure of our local goods industries. Others argued that the quality of Nigeria’s goods would not complete effectively in the global market (Vanguard 5, 2002, and Guardian April 2, 2002). The nation’s oil and import dependent nature leads to unemployment and increment in the poverty level of the people.
Discrimination, race and poverty are closely related. They affect people’s ability to secure employment and earn a living.
Report shows that HIV/AIDS also contribute to the poverty prevalence of many Africa countries. For instance the United Nations HIV/AIDS Report (1999) shows that Nigeria had 5.8% HIV prevalence rate and ranked Fourth Worst Affected country in 1999 based on the number of HIV infections. This is because most of the going ladies in Nigeria were forced by the economic condition to engage in prostitution, just to earn a living.
Furthermore, most of the existing industrial capacity in the country stands still as factories operate at about 40% to 50% of their production capacities. The consequences are that essential materials needed become scarce, increases in the price of good and services and mass retrenchment of workers becomes glaring.
Most eligible Nigerians are tax avoiders, evaders and defaulters. As such funds accruing from taxations are inadequate to cushion the effect of poverty in Nigeria. Also, mismanagement from politicians and top government functionaries discourages taxpayers from performing their civic responsibilities and increases the poverty level. This mismanagement includes illegal and frequent transfer of money abroad, over-invoicing of imports, family allocation of resource, embezzlement, inflation of contracts etc.
DEVELOPMENT: In the ordinary parlance development means growth change or planned growth, such as social, political and economic development or in a hyphenated word socio-political economic development.
Riggs (1976) defined development as a process of increasing autonomy (discretion) of the social system, made possible using levels of diffraction. Tinbergan (1958) in his discretion on the design of development suggested that the development policy should include the following:
1 The creation of the general condition of development
2 Awareness of development potentialities and advantages
3 Basic government instrument
4 Measure to facilitate and stimulate private activity
5 Development of policy under varying circumstances
Before now, the concept of development has been as a measure of per capital income growth. Now growth could be sectoral or even peripheral. In a wider sense, development should consist of higher production, better distribution and greater social justice. The basic purpose of development should be to harness and mobilize human development. It could be achieved through helping the poor, the marginalized and the Nigerian population by providing them with enhanced opportunities and access to resources for their productive self employment, income generation and better life while strengthening the asset base and livelihood of the economically challenged population. By implication, we build the target communities into active and economically self sufficient units.
Ayodele (1996) conceives development as a continuous process of generating and allocating resources and economic satisfaction effectively.
Finally, in applying this approach in the evaluation of the role of national poverty eradication programme (NAPEP) on economic development, this study looks at the programmes of the agencies over the years and their impact on the socio-political and economic development of our country, Nigeria, using Ohaukwu Local government area as a case study. It is our view that careful study of the role of (NAPEP) will help us ascertain whether the programme has been fruitful or a waste of our scarce resources.
2.2 NAPEP’s REVEW
NAPEP Today is one of the officially published Journals that feature out the functions of NAPEP from the National level. Poverty amidst plenty is the world’s greatest challenge and it is expected to be fought with passion. Poverty is said to manifests when the following occur:
1 Inadequate access to employment opportunities
2 Inadequate physical assets such as Land and Capital
3 Minimal access by the underprivileged to credit, even on a small scale
4 Low endowment of human capital, natural resources and technological know-how
Available data on Nigeria Poverty profile shows that the incidence of poverty rose from 28.1% in 1980 to 46.3% in 1985, but dropped slightly to 42.7% in 1992 it rose persistently to 65.6% in 1996. Based on her low Gross National Product (GNP) per capita, Nigeria has since 1990 been classified as a poor nation. Hence, the need for the government to tackle the poverty issue headlong. In 1999, the federal Government Observed that poverty was on the increase in Nigeria despite the large number of ongoing efforts and programmes to fight poverty.
Although past regimes in Nigeria has attempted to tackle poverty through the creation of institutions and agencies such as Nigeria Agricultural Cooperative Bank (NACB), Peoples Bank, Family Economic Advancement Prgrammes (FEAP), River Basin Authorities, Operation Feed the Nation, Rural Banking, Universal Basic Education (UBE), Directorate of food, Roads, and Rural Infrastructure (DFRRI), National Directorate of Employment (NDE) etc.
GOVERNMENT IDENTIFIED THE FOLLOWING CHALLENGES:
1 Poor coordination of activities
2 Dwindling resoles flow
3 Failure to build in sustainability mechanisms
4 Lack of complimentary efforts from beneficiaries
5 Poor coordination leading to low accountability and avoidable disharmonization of policies
6 Lack of well articulated policy for poverty eradication
7 Lack of sustainability of programmes and projects
8 Absence of achievable target setting etc
Following a review of the problems, the federal Government established the need to:
I. Streamline and rationalise the functions of core poverty alleviation institutions and agencies
II. Reduce their overlapping functions
III. Ensure effective performance
IV. Improve coordination of poverty eradication activities and improve collaboration with State Governments, Local Governments, and International Donor Agencies.
The aforementioned, therefore, provided the grounds for the establishment of the National Poverty Eradication Programme (NAPEP) by the federal government in January 2001, representing a commitment by government to tackle the poverty issue in the Nigeria.
FUNCTIONS OF NAPEP
1. To coordinate all poverty eradication efforts in the federation
2. To monitor all poverty eradication activities of the federal government
3. To maintain a comprehensive and detailed databank on all activities aimed at carry out an assessment of all efforts meant to eradicate poverty in Nigeria and suggest the necessary reviews and policies required to enhance effectiveness.
4. To directly intervene in key sectors of critical needs periodically by implementing scaled key priority projects.
NAPEP maintains four (4) Departments as follows:
i. Administration and Supplies
ii. Monitoring and Evaluation
iii. Research and Programme Development
iv. Finance and Accounts
NAPEP realized that as the agency of the federal Government for coordinating and monitoring all poverty eradication activities nation wide, it could no longer involve itself strictly with intervention activities but would need to become the repository of all knowledge and strategies for fighting poverty in the country. Therefore, in the spirit of Mr. President’s reforms, NAPEP reformed itself. In the words of the National Coordinator, NAPEP became “smarter and “more nimble”, NAPEP’s role of coordination and monitoring was therefore put at the center of its activities. This enabled it to utilize its human and financial resources to document more comprehensive, measure their impact, identify gaps and recommend more proactive and intelligent agency to support socio- economic development to the masses. The activities of NAPEP are run through four departments, vis:
RESEARCH MONITORING AND EVALUATION (RM & E) DEPARTMENT
Formally called the Monitoring & Management Information Systems (MMIS) department, the RM & E is responsible for data collection on poverty eradication programmes of all Government Ministries, Departments and Agencies, NGOs and the private sector. Under the reforms, its scope of operations has been expanded and deepened to include the following;
1 Monitoring and Evaluation of aspects of our development policy strategy, NEEDS and nudges as they relate to poverty to ensure compliance with policy direction and identify areas of triplication.
2 Monitor and evaluate collaborations between government agencies, development agencies, NGOS and the private sector in poverty eradication activities.
3 Conduct continuous education and impact assessment of NAPEP’S catalytic intervention programmes.
4 Build a comprehensive databank of poverty related activities programmes and infrastructure in the country.
5 Provide the National Poverty Eradication Council (NAPEC) and NAPEP’s Management with regular reports on all poverty related activities, programmes and initiatives.
A database of all government agencies, poverty eradication programmes and infrastructure facilities across the country was established. NAPEP’S Management Information System capability is acknowledged as one of the best among several government agencies by a survey carried out by consultants commissioned by the UNDP.
The RM & E Department also provide NAPEP headquarters with comprehensive IT support. It has set up an organization wide local area Network (LAN) and Internet connectivity for all offices in the headquarters. They’re intuitive and have increased organizational efficiency and staff motivation as staff are more informed and share information more efficiently to further its monitoring and coordinating function. NAPEP is collaborating with the World Bank to train its staff in a new method for enhancing Community Driven Development (CDD) using Participation Monitoring and Evaluation (PME). The PME processing to involve communities in their development process by giving them a voice and empowering them to assess social services provided to them and to participate in their improvement. NAPEP is the first government agency in Nigeria to implement a PME exercise. The first PME was conducted on NAPEP’S farmers in Jos, Plateau State. The PME exercise would be conducted on other NAPEP programmers as well as poverty eradication programmers of other government agencies, development agencies, NGOs and also provide both quantitative and qualitative data with which to measure individual and community satisfaction with the economic development activities, identify gaps and possible remedies for filling them.
2.3 EMPIRICAL LITERATURE
The focus of this section is to examine different empirical literatures written on the relationship between Poverty Eradication Programmes (NAPEP) on the Economic Development of Nigeria. It is more appropriate to define poverty and development in such a way as to enable a proper understanding of the concept (Poverty Eradication). This research therefore, shall agree with the definition of Repink (1994) which stated that poverty could be expressed as the inability to satisfy basic needs of human life due to lack of income or poverty or lack of opportunity to generate income or poverty and lack of means to change it.
In this context, poverty reduction or alleviation means the creation of general condition, which allows man to live in dignity.
On the concept of development, according to Anyebe (2001), development is used to refer to the total transformation of a system. Development implies a progression from a lower and often undesirable state to a preferred one. Similarly, he further viewed development in terms of attacking widespread of absolute poverty, reducing inequalities achieved within the context of growing economy. Poverty eradication in Nigeria consist of series of purposive acts and measures designed nationally or internationally at the other levels to address the poverty which is centered on the provision of basic needs by the government. It focuses on the basic requirements for permanent reduction of poverty through the provision of basic needs such as health services, education, water supply, food nutrition requirements and housing inter alia.
However, it was later realized that poverty reduction is best addressed based on the peculiarities of the situation under consideration. For instance, some schools of thought felt that poverty from many developing countries is a structural impediment to growth leading to low growth rates and lack of resources for the people. Emphasis in such cases should therefore be removing the impeding structural bottlenecks to growth and embark on strategies that benefit the poor.
The Federal Government in January, 2001 established National poverty eradication programmes (NAPEP) as a continent to tackle the issues of poverty in the country.
These programmes were the NAPEP’S programmes in Ohaukwu Local Government Area. These programmes are not published but recorded in a documentary.


I. YOUTH EMPOWERMENT SCHEME (YES)
Youth Empowerment Scheme (YES) basically aims at economic empowerment of youths including male and female, it consists of Capacity Acquisition Programmes (CAP), Mandatory Attachment Programme (MAP) and Credit Delivery Programme (CDP).
a. CAPACITY ACQUISITION PROGRAMMES (CAP)
This programme is designed to enable participants, not withstanding their different levels of formal education, acquire skills, vocational capabilities and performance enhancing attributes on their chosen areas of engagement. These programmes include training apprenticeship, investment inducement seminars. The concept of CAP is to recruit, retrain, and redeploy the creative capacity of youths so that they can play more productive and self fulfilling roles in the emerging economic dispensation government, take responsibility for the upkeep of participant while in training. In Ohaukwu L.G.A. between 2002 to 2003, one hundred and ninety one (191) participants were trained with a monthy allowance of three thousand five hundred naira (N3,500). The same for the trainers, the participant were also settled with relevant tools and machineries to continue in their various chosen trades / vocations.

b. MANDATORY ATTACHMENT PROGRAMME (MAP)
The Mandatory Attachment Programme (MAP) is an intervention initiative under the Youth Empowerment Scheme (YES) designed to attach graduates who have completed their mandatory National Youth Service and yet to secure full time employment. Even after having undergone NAPEP’s Capacity building/ training courses to organizations to provide them with the job training and expose them to skills in their fields of specialization, Federal Government through NAPEP pay the gradates the sum of ten thousand naira (10,000) only monthly. This payment only lasted between 2002 to 2003 in Ohaukwu Local Government Area and twenty one (21) graduates participated.
II. FARMERS EMPOWERMENT PROGRAMME – 2005
This programme is specifically targeted at groups in involving women and youths. It is designed to improve the lives and well being of farmers by creating opportunities for them to have access to Loans, farmlands and other faming implements. NAPEP also partners with ADP (Agricultural Development Project) to provide technical knowledge to the farmers. The programme is also aimed at accelerating the attainment of the MDGs (Millemiun Development Goals) In Ohaukwu Local Government Area, especially Izhia Land, nineteen different farmers cooperative societies were selected and three million, nine hundred and sixty thousand naira (N 3,960,000) only was shared amongst them, to go into different kings of farming like pottering, Piggering, Rabbitting etc.
III. MULTI – PARTNER MULTI FINANCE (MPMF SCHEME)
Under this scheme NAPEP partners with States, Local Governments, Commercial Banks, Micro Finance Institutions and others make available large pool of funds for lending to the poor. In this way, NAPEP is stimulating grass roots activities and mass participation in the economic development process through savings and access to funds for the poor people across the country. In Ohaukwu Local Government Area, from 2008-2009, about, thirty (30) Individuals (Women/ Youths) have benefited in form of soft loans, which are usually channeled through a Micro Finance Banks.
IV. PROMISE KEEPER PROGRAMME (PKP)
The Promise Keeper Programme (PKP) is a NAPEP Micro credit based intervention scheme undertaken in close collaboration with faith based Organizations (FBOS). It is aimed at assisting the poor to access a larger pool of funds for economic empowerment in line with the National Economic Empowerment and development strategy (NEEDS) of the federal Government. PKP enables poor members of religious bodies like churches to access micro credit from the pool of funds so created, to undertake viable economic activities. Under this programme, NAPEP Provides matching funds (MF) for a certain sum set aside by FBO's for economic advancement of indigent members in their respective fields. In Ohaukwu Local Government Area, five (5) Churches benefited with the sum of five hundred thousand naira (500,000) only for each church in October, 2006. They are expected to pay back after two (2) years.
V. VILLAGE ECONOMIC DEVELOPMENT SOLUTION (VEDS)
Village Economic Development Solutions or Village Solution is a Local Community-driven Development Programme where villages are guided in their community economic development efforts that involve modernizing their villages and promoting income generating activities through village solutions. Villages are encouraged to see community development and poverty eradication as a joint responsibility to which every member of the village is a stakeholder and can be an active participant into a cruelly bottom- up approach to Communities development where villages organize themselves into community development groups, with the government providing technical expertise and an enabling environment. The goals of the enabling environment, the goal of the scheme is Economic transformation and modernization, through human and physical development to raise village income, outputs and employment levels with the aim to eliminate extreme poverty and reduce its intergenerational transfer, including Curbing rural-urban migration, develop local skills, identifying and harnessing, existing resources in the village for sustainable rural development.
How it works: Community/Village identifies an economic project as an anchor activity or validates a cooperatives’ application to start an anchor economic project in the community. In Ohuaukwu Local Government Area, Five villages benefited from the programme viz:
a. vizigbedu village — Oshiariji Cooperative Society
b. Ejilewe Village — Trinity Cooperative Society
c. Omuatanu Village — Umuezeokaha Multipurpose Cooperative Society
d. Obinwanne Effium — Multipurpose Cooperative Society.
VI. CONDITIONAL CASH TRANSFER (CCT)
Conditional cash transfer (CCT) otherwise known as COPE "in Care of the People” was developed by NAPEP and targeted at individuals or households who have children of school age to enable them take care of their needs in school and also utilize base public health facilities, poor female headed households, poor aged headed households, physically challenged persons and households, headed by special groups (victims of Vesicle Vagina Festula (VVF), and People living with HIV and AIDS (PLWHAS).
COPE’S FORMULA FOR FUNDS DISBURSEMENT
COPE = BIG + PRAI
Where BIG = Basic income Guarantee and
PRAI = Poverty Reduction Acceleration Investments.
The BIG is monthly guaranteed income given to the heads of participating households. The amount received by each household will depend on the number of qualified children in the households:-
NO OF CHILDREN AMOUNT OF BIG
One Child N 1,500
2-3 Children N 3,00
4 Children and above N 5,000.
The PRAI is a guaranteed investment grant given to the head of the households towards the end of the programme to start a business of his or her own or invest in a profitable business ventures that will yield sufficient income to sustain the households after the completion of twelve months (12) of receiving the basic income guarantied (BIG). The PRAI represents a compulsory saving component of the programme with a monthly savings of N7,000. Participating heads of households will receive a total of N84,000 as investment funds.
In Ohaukwu Local Government Area, the following villages were selected Five (5) households from each village as beneficiaries.
1. IZHIA - Amovu, Umugbo, Amike
2. NGBO - Ndiagu - Elega, Otuokpeyi, Adabum-ebenyi, Ndiagu Alake
3. Effium - Ibenda, Agugwu and Onueror.
The programme started May, 2008 and ended in May, 2009.
Conditional cash transfer programme in Ohaukwu Local Government Area gulped N7,200,000 for the (BIG) Basic income Guarantee, while N4,200,000 is been spent on PRAI (poverty Reduction Acceleration Investment).
2.4 REVIEW OF RELATED LITERATURE
Successive government came up with various eradication programmes. About twenty four poverty eradication initiatives and programmes to combat the dreaded monster of poverty and unemployment have been set up by federal government from 1970 to date. Prominent among them was National Accelerated Food Production Programmes (NAEFPP) introduced by the general Gowon’s administration in 1973 because of the shortages of food stuff, after the civil war. The objective of this programme was to ensure self-sufficiency and self-reliance in food production by the agricultural sector.
Another, notable programme was the Operation Feed the Nation (OFN) introduced in March 1976. The obasanjo’s regime with a view to accelerating agricultural production embarked on removing possible constraints to increased food production and the provision of infrastructure and other inputs. The programme was accompanied by three other complementary institutions or project designed to make it function effectively. These institutions or projects include the Nigeria Agricultural and Cooperative Bank (NACB), Agriculture Development Project (ADP) in each of the States of the Federation and River Basin Development Authority (RBDA). ADP however, was a World Bank assisted project.
During the second republic in early 1980”s the administration of Alhaji Shehu Shagari dropped the operation feed the nation (OFN) and substituted it with three complementary institutions of the former programmes. The new name gradually disappeared into oblivion with the second coming of the military administration in 1983.
The Military administration of Ibrahim Babangida in 1985 created National Directorate of employment (NDE) Comprising of the following programmes:
i. Small scale Industries
ii. Graduate Employment
iii. Special Public work vocational skills development.
iv. Agriculture
The same administration also established the Directorate of Food, Roads and Rural Infrastructure (DFRRI) in 1986 to Improve the quality of life and standard of living of the majority of people in rural areas, by substantially improving the quality value and nutrition’s balance of the people’s intake and improving rural housing, health conditions and creating greater opportunities for employment and human development which have direct bearing on National Development.
The wife of General Babangida, Mrs. Maryam Babangida introduced also the Better Life Programme. Better Life Progamme was aimed at improving the lives of rural women. The programme has the following aims among others:
i. To raise the social consciousness of women about their rights as well as their social, political and economic responsibilities
ii. Encourage institutionalized recreations, mobilize specific objectives including leadership role in all spheres of life.
iii. Educate women on simple hygiene and the importance of childcare and to improve and enrich family lives. At the federal level, the first lady Mrs. Babangida, headed on the other hand and sought to improve the social and economic well being of the family came up with eight focus programme as follows:
a. Women development
b. Agriculture
c. Child welfare and youth development
d. Shelter
e. Distribution and income generation
f. Disability
This programme was supposed to serve as a model for other African Countries in their efforts to addressing the problems of poverty; the same administration in 1994 established the Petroleum Trust Fund (PTF).
Furthermore, in turns of positive achievement, virtually the programmes made modest contributions to the alleviation of poverty to some extent. The defunct People’s Bank granted loans without collaterals to beneficiaries, which commercial banks would not dare.
Likewise, the National Directorate of Employment (NDE) had provided beneficiaries with vocational training skills backed with loans by way of giving equipment and tools for various technical works and to traders.
Family economic advancement programme was able to empower people especially women at both rural and urban communities through capacity building by way of macro-credit loans.
Development cannot be achieved unless people are in charge of their development process. In acceptance of full responsibility by communities in partnership with government agencies for their own development is central to any poverty alleviation programme and its sustainability have cited. Development programmes as poverty reduction efforts of government implemented in Nigeria, among others include:

1. Rural Electrification schemes
2. Rural Banking Schemes
3. Agricultural Development Programmes and River Basin Development
4. Urban and rural water scheme
5. Credit schemes to small scale holders through specialized institutions
6. Transport scheme
7. Health Scheme Such as sanitary scheme, immunizations scheme etc
8. Operation Feed the Nation
9. Universal Primary Education scheme
10. Low cost Housing Scheme etc
These programmes provided very crucial service to the people and some of the programmes were quite successful in achieving their objectives while some are still being implemented. However, these programmes were in conception designed not only for poverty eradication but also as development programmes.






CHAPTER THREE
3.0 RESEARCH METHODOLOGY
This chapter is aimed at discussing the methods involved in carrying out this empirical study. These include, study location, estimation procedure and sources of data.
3.1 STUDY LOCATION
Ebonyi State is one of the States created in Nigeria in 1996 by the late Nigerian head of State, Gen. Sani Abacha. Ohaukwu local government area is one of the old thirteen local government areas in the State and is very close to the capital territory, Abakaliaki. The local government system became a third tier of government with the main essence of serving as an agent of rural and economic empowerment and development. Economic development and poverty eradication are interwoven. No meaningful development occurs in the terrain swollen with hungry people whose primary business remains how to fill their empty bellies. Any study conducted on how to eradicate this malaise using any organized programme based in these rural areas is worth our while studying. Against this background, the motivation of this work is gathered.
3.2 POPULATION OF THE STUDY:
Ohaukwu local government area has an estimated population of one hundred and ninety five thousand, five hundred and fifty five (195,555) people (NPC, 2009) with a sample size of one hundred people—male and female. This sample size cuts across the social strata of the local government, varying only in age, marital status, educational qualification, employment status e.t.c. A total number of a hundred (100) questionnaires were designed and issued to the respondents in Ohaukwu local government area. Those that were randomly selected to respond to the questionnaires will represent the entire population of the local government area and the country in macrocosm. Though a hundred questionnaires were issued out, ninety nine (99) were returned while one was lost in transit.
3.3 ESTIMATION PROCEDURES:
Tables, percentages, and Chi-Square were used for easy presentation and analysis of data. The formula employed for the calculation of the chi-square results is presented as follows: X2 = ∑(O-E2)/E
X2 = denotes chi-square symbol
∑ = summation
O = observed frequency
E = expected frequency
ρ = Significance level, 0.05
v = degrees of freedom, 3
The above formula was used to run the chi-square analysis and to evaluate the working hypothesis.
DECISION RULE: Reject the null hypothesis (H0) if calculated chi-square X2c is greater than the tabulated chi-square X2t, given the chosen significant level and degrees of freedom, otherwise accept the null hypothesis.
3.4 SOURCES OF DATA:
Basically, the data used in this work are primary data collected through the use of questionnaires and a few secondary data from related publications, bulletins, journals, and other reliable government agencies.













CHAPTER FOUR
4.0 PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS
The chapter is aimed at the presentation, analysis, and interpretation of results collected from the various respondents through the use of questionnaires administered in Ohaukwu local government area of Ebonyi State. These questionnaires as collected and processed are presented by the researcher, and the test of hypothesis conducted.
As earlier noted, out of the hundred (100) questionnaires issued, ninety nine (99) was returned but one (1) lost in transit. Tabulated below is the presentation and analysis of responses from the duly completed and returned questionnaires.
Table 4.1a; Sex distribution of respondents
Variables FREQUENCY Percentage %
Male 65 66
Female 34 34
Total 99 100

The table above shows that, out of the ninety nine (99) questionnaires returned, sixty five (65) respondents are males representing sixty six percent (66%) while females stood at thirty four (34) representing thirty four percent (34%) of the entire population. This concludes that there are more males in this local government than females.


Table 4.1b; Age distribution of respondents
NOTE: Invalid = 2
Variables (years) FREQUENCY Percentage %
Below 18 years 5 5
18-40 years 69 71
41-60 years 20 21
Above 60 years 3 3
Total 97 100

The result presented above shows that seventy one percent (71%) and twenty one percent (21%) of the respondents are within this age limit; 18-40 years and 41-60 years respectively and the minimal number of people who represented the entire people of Ohaukwu LGA fell within those above 60 years and below 18 years with 3% and 5% respectively.
Table 4.1c; Marital Status of respondents
Variables FREQUENCY Percentage %
Single 47 47.5
Married 52 52.5
Divorced 0 0
Widowed 0 0
Total 99 100

The above table reveals that the majority of the respondents are married persons—the percentage stood at fifty two and half percent (52.5%) while the singles stood at fourty seven (47%). Funnily enough, in this field survey, there are no divorced or widowed persons randomly selected as a respondent from this local government.
Table 4.1d; Educational Qualification of respondents
NOTE: Invalid = 2
Variables FREQUENCY Percentage %
Primary 1 1
Post Primary 26 27
NCE/Diploma 27 28
Degree and Above 38 39
Adult Education 4 4s
No formal Education 1 1
Total 97 100

It can be deduced from the table above that thirty nine percent (39%) of the respondents have degrees and post degrees, twenty eight percent (28%) are NCE/Diploma holders, twenty seven percent (27%) are post primary certificate holders. Adult education, primary and no formal education stood at 4%, 1%, and 1% respectively, giving a conclusion that degree and post degree holders still represent a small percentage of the entire population represented by the respondents.
Table 4.1e; Employment status of respondents
NOTE: Invalid = 12
Variables FREQUENCY Percentage %
Employed 58 67
Unemployed 29 33
Total 87 100

The above table shows that sixty seven percent (67%) of the respondents are employed while thirty three percent (33%) remain unemployed. Thus, majority of the population are employed, though the unemployment level is still high.
Table 4.1f; Awareness status of National Poverty Eradication Programme (NAPEP)
NOTE: Invalid =1
Variables FREQUENCY Percentage %
Yes 78 80
No 20 20
Total 98 100

The table above shows that about seventy eight percent (78%) of the respondents are aware of NAPEP and her programmes while twenty percent (20%) are unaware of NAPEP and her programmes.
Table 4.1g; Existence status of National Poverty Eradication Programme (NAPEP)
Variables Frequency Percentage %
Yes 9 9
No 90 91
Total 99 100

It can be concluded from the table above that 91% of the populations of Ohaukwu people disagree to the existence of NAPEP and its programmes in the council while a little number representing 9% speak in the affirmative about the existence of NAPEP and her programmes in the council








Table 4.1h; Implementation status of National Poverty Eradication Programme (NAPEP)

Variables Frequency Percentage
Youth Empowerment Scheme (YES) 13 6
Capacity Acquisition Programme (CAP) 3 1
Community Enlightenment and Sensitization Scheme (COMESS) 42 20
Social Welfare Service Scheme (SOWESS) 12 6
Rural Infrastructural Development Scheme (RIDS) 11 5
Mandatory Attachment Programme (MAP) 0 0
Multipartner Micro-finance (MP-MF) Scheme 3 1
Village Economic Development Solution (VEDS) 4 2
Capacity Widening Activity (CWA) 6 3
Conditional cash Transfer (CCT) 1 1
Farmers Empowerment Programme (FEP) 22 11
General Micro Credit 5 2
Keke NAPEP Implementation 1 1
Rehabilitation of Vesico Vagina Fistula Patients 16 8
PARTNERSHIPS;
Multi-Partner Matching Funds (MP-MF) 3 1
Promise Keeper Programme (PKP) 5 2
Give Back Programme 1 1
Collaborations on Micro Credit Delivery 8 4
Establishment of Resource Centers 12 6
The NAPEP/Glomobile Collaboration 2 1
COLLABORATION WITH INTERNATIONAL DEVELOPMENT AGENCIES (IDAs);
Establishment of Community Development Centers 15 7
Community Based Poverty Reduction Project 24 12
Total 209 100
The results from the table above show that Community Enlightenment and Sensitization Scheme (COMESS) is the most implemented scheme amongst the litany of NAPEP’s programme in the. It recorded the highest percent of twenty percent (20%) followed by Community Based Poverty Reduction Projects which gathered twelve percent (12%) and Farmers Empowerment Programme FEP, standing at seven percent (11%).
Table 4.1i; Has NAPEP helped in improving the standard of living of people in your local government?
NOTE: Invalid = 9
Variables FREQUENCY Percentage %
Yes 58 64
No 32 36
Total 90 100

The above result shows that NAPEP has helped in improving the standard of living of the people. Sixty four percent (64%) of the respondents concur to this fact while thirty six disagree (36%).
Table 4.1j; Beneficiaries of National Poverty Eradication Programme (NAPEP)
NOTE: Invalid = 3
Variables Frequency Percentage %
Yes 20 21
No 76 79
Total 96 100
It can also be concluded from the table above that seventy nine percent (79%) of the populace have not benefited from the activities of NAPEP in the council.

Table 4.1k; Programmes of NAPEP beneficiaries benefited from
Variables Frequency Percentage %
Youth Empowerment Scheme (YES) 4 5
Capacity Acquisition Programme (CAP) 3 4
Community Enlightenment and Sensitization Scheme (COMESS) 3 4
Social Welfare Service Scheme (SOWESS) 8 10
Rural Infrastructural Development Scheme (RIDS) 5 6
Mandatory Attachment Programme (MAP) 0 0
Multipartner Micro-finance (MP-MF) Scheme 2 2
Village Economic Development Solution (VEDS) 4 5
Capacity Widening Activity (CWA) 1 1
Conditional cash Transfer (CCT) 1 1
Farmers Empowerment Programme (FEP) 4 5
General Micro Credit 3 4
Keke NAPEP Implementation 1 1
Rehabilitation of Vesico Vagina Fistula Patients 1 1
PARTNERSHIPS
Multi-Partner Matching Funds (MP-MF) 3 4
Promise Keeper Programme (PKP) 3 4
Give Back Programme 1 1
Collaborations on Micro Credit Delivery 9 11
Establishment of Resource Centers 5 6
The NAPEP/Glomobile Collaboration 2 2
COLLABORATION WITH INTERNATIONAL DEVELOPMENT AGENCIES (IDAs)
Establishment of Community Development Centers 9 11
Community Based Poverty Reduction Project 11 13
Total 83 100

The table above, goes ahead to specify that only Community Based Poverty Reduction Projects recorded the highest but discouraging percentage (13%) of beneficiaries.
Table 4.1l; Satisfaction status of the activities of National Poverty Eradication Programme (NAPEP)
NOTE: Invalid = 9
Variables FREQUENCY Percentage %
Yes 27 30
No 63 70
Total 90 100

The table shows that about seventy percent (70%) of populace are dissatisfied with the activities of NAPEP.
Table 4.1m; does NAPEP boost economic development?
NOTE: Invalid = 8
Variables
FREQUENCY Percentage %
Yes 65 71
No 26 29
Total 91 100

Seventy one percent (71%) of the populace as shown in the above table agree that NAPEP boosts economic development
Table 4.1n; NAPEP encounters problems in terms of projects execution
NOTE: Invalid =12.
Variables
FREQUENCY Percentage %
Yes 51 59
No 36 41
Total 87 100
The table above shows that fifty nine percent (59%) of the respondents—the majority—believe that NAPEP encounters problems in the course of project execution in the council while fourty one percent (42%) disagree.
Table 4.1o; what is your general assessment on the activities of NAPEP on economic development?
NOTE: Invalid = 3.
Variables FREQUENCY Percentage % Degrees
Excellent 8 8.3 30
Good 27 28.1 101
Fairly good 33 34.4 124
Poor 28 29.2 105
Total 96 100 360


On the general assessment of the activities of NAPEP on economic development, thirty four percent (34%) of the populace agree that she has performed fairly good leaving twenty nine percent (29.2%) insisting that it has been poor.



4.2 INTERPRETATION OF RESULTS
Using the data extracted from the tables above to test the validity of the working hypothesis, we present thus:
Table 4.1p
Variables Yes No Rows
Table4.1i 58 32 90
Table 4.1j 20 76 96
Table 4.1m 65 26 91
Table 4.1n 51 36 87
Total 194 170 364

Comparing the tabulated chi-square contingency table and the calculated chi-square to determine the goodness of the fit, we compute as follows:
X2 = ∑(0-E2)/E, given 5% significant level.
Degrees of freedom = (C-1)(R-1) where
C = Column
R = Row
ρ = significance level = 0.05
v = the degrees of freedom = (2-1) (4-1)
= (1) (3)
Therefore, degrees of freedom v = 3
To calculate the values of the expected frequencies, we state the formula below: We use the data generated from the table above to form a two by four matrix and use the matrix model stated below for finding the adjunct of the matrix where a1-n are expected frequencies of a1 to an. And tables 4.1i, 4.1j, 4.1m, 4.1n are observed frequencies respectively.
a11 a12
a21 a22
a31 a32
a41 a42
Where a = RT X CT
N
RT = Row Total
CT = Column Total
N = Grand total
a11 = 90 x 194 = 17460 = 50
364 364

a12 = 90 x 170 = 15300 = 42
364 364

a21 = 96 x 194 = 18624 = 51.2
364 364

a22 = 96 x 170 = 16320 = 44.8
364 364

a31 = 91 x 194 = 17654 = 48.5
364 364

a32 = 91 x 170 = 15470 = 42.5
364 364
a41 = 87 x 194 = 16878 = 46.4
364 364

a42 = 87 x 170 = 14790 = 40.6
364 364

Table 4.1q, Computation of the chi-square value
Observed frequency (O) Expected frequency (E) (O-E) (O-E)2 (O-E)2/E
58 50 8 64 1.28
32 42 10 100 2.38
20 51.2 -31.2 973.44 19.01
76 44.8 31.2 973.44 21.73
65 48.5 16.5 272.25 5.61
26 42.5 -16.5 272.25 6.41
51 46.4 4.6 21.16 0.46
36 40.6 -4.6 21.16 0.52
Total ∑(O-E2)/E = 57.4

v = 3, ρ = 0.05, X2c = 57.4, X2t = 7.81,
4.3 EVALUATION OF WORKING HYPOTHESIS
The researcher uses chi-square to evaluate the hypothesis that National Poverty Eradication Programme (NAPEP) has no impact on economic development. From table 4.1q above, we reject the null hypothesis, since calculated chi-square X2c = 57.4 is greater than tabulated chi-square X2t = 7.81. Therefore we accept the alternative hypothesis, stating that National Poverty Eradication Programme NAPEP has significant impact on economic development of Nigeria.
CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, CONCLUSION AND POLICY RECOMMENDATION
There are divergent views about the impact of National Poverty Eradication Programme NAPEP and other poverty eradication programmes on the economic development of Nigeria. As usual, in all scholarly issues based on facts and figures, it’s rare to find a concept that generates total acceptability. If such acceptability is unchallenged, it is just a matter of time—this is the beauty of research.
On the issue of NAPEP, and its impact on the economic development of Nigeria, some are of the view that there has been no significant impact that these programmes have had on the economic development of Nigeria—the negative school. While some argue that NAPEP and other poverty eradication programmes have impacted significantly on the economic development of Nigeria, though not without hurdles. This is classified as the positive school.
5.1 SUMMARY OF FINDINGS
In the course of the research, these problems were identified as problems that militated against the success of previous programmes on poverty eradication, and unfortunately enough, these same problems are currently challenging the perfect implementation of NAPEP in Ohaukwu local government area of Ebonyi State used as a case study to proxy the Nigerian economy. These challenges include:
- Insincerity on the part of contractors
- Inadequate sensitization: Most rural dwellers are not even aware of existing NAPEP programmes: Poor relationship with the communities and poor awareness resulting in poor participation by the rural dwellers. In some cases, NAPEP facilitators are unable to comprehensively define the project.
- The exact and core poor are most times skipped.
- Poor coordination
- Implementation: These programmes are most perfectly implemented on radios, when it comes to real implementation, it is poorly executed and records partiality in project execution.
- False propaganda about the implementation of the programme: The political class hijacks the programmes and the funds meant for it, then go on air and propagate how successful the programme has been. And because of poor supervision and monitoring, the falsehood is undiscovered until the whole programmes collapse.
- Nepotism, corruption, poor fund management, embezzlement of funds by those in charge of project implementation. In most cases, discrimination arises, and funds for the programme are disbursed to close pals and relatives under the guise of project execution.
- Funding: Over reliance on funding from foreign partners have done all poverty eradication programmes — NAPEP inclusive, more harm than good. Funding from abroad should be seen as a supplement and not a complement. Most of these programmes were grounded because the foreign donors never cooperated as used to before.
- The counterpart-funding-nature of the programmes creates in itself, inherent tendencies of failure. This is because, in a situation where the communities or individuals are unable to pay their counterpart funds, the programme will be under-funded and may not be executed. Even when parties involved cooperate financially, the financing may be inadequate, as a result of poor project design.
- Few persons who are able to pay their individual counterpart funds, mobilize themselves, and divert the programmes for their personal and selfish interests.
- Resources are disbursed using the wrong channels.
- Selfishness and antagonistic minds by some facilitators
- Inadequate and untrained personnel resulting to improper guidance.
- Improper evaluation of past programmes
- Inadequate supervision of projects
- Inadequate and poor infrastructure
- The programme empowered the rich while the poor got poorer
- Outward looking development plans
- Lack of goodwill from the rural people whom these programmes are meant to benefit — bad cooperation from the communities, for instance, some communities refused providing lands for citing of projects and also activities of vandals and miscreants among them.
- Inaccessible roads to the hinterlands.
- Crude agricultural practices.
- Inadequate raw materials.
- unmotivated NAPEP staffs — permanent or adhoc, through non or late payments of staff salaries and emoluments
- Personal ideologies and clash of motives: Individual facilitators have different motives from that of the policy designers resulting to a clash which adversely affects the overall outcome of the programme.
- Rift among NAPEP officials which endanger the success of the whole programme.
- Language barrier posed by illiteracy dominant in the rural areas.
- political instability and discontinuity of programmes
- Over-politicizing of NAPEP programmes.
- Lack of political will by both the government and project executors
- Little or no efforts shown by the government in prosecuting those who sabotaged its previous programme.
Notwithstanding the above enumerated problems challenging the success of poverty eradication programmes — NAPEP inclusive, NAPEP still recorded success through the implementation of these various programmes:
Youth Empowerment Scheme (YES)
Capacity Acquisition Programme (CAP)
Community Enlightenment and Sensitization Scheme (COMESS)
Social Welfare Service Scheme (SOWESS)
Rural Infrastructural Development Scheme (RIDS)
Multipartner Micro-finance (MP-MF) Scheme
Village Economic Development Solution (VEDS)
Capacity Widening Activity (CWA)
Conditional cash Transfer (CCT)
Farmers Empowerment Programme (FEP)
General Micro Credit
Keke NAPEP Implementation
Rehabilitation of Vesico Vagina Fistula Patients
On Partnerships, the following programmes were implemented:
Multi-Partner Matching Funds (MP-MF)
Promise Keeper Programme (PKP)
Give Back Programme
Collaborations on Micro Credit Delivery
Establishment of Resource Centers
The NAPEP/Glomobile Collaboration
On collaboration with International Development Agencies (IDAs), the under listed programmes were implemented:
Establishment of Community Development Centers and
Community Based Poverty Reduction Projects.
It was also gathered from the research that the Mandatory Attachment Programme (MAP) has received no attention in the form of implementation in this local government area.
5.2 CONCLUSION
After evaluating the working hypothesis from the raw data gathered through questionnaires, we conclude as follows:
a. While the awareness level of NAPEP and her programmes are quite okay, the implementation level remains very minimal.

b. NAPEP has helped in improving the standard of living of Nigerians in the rural areas.
c. Just very few persons are beneficiaries from the activities of NAPEP.
d. A lot of people are dissatisfied with the manner and way NAPEP conducts her poverty eradication programmes.
e. A lot of people believe that the operations of NAPEP could boost economic development in Nigeria.
f. From my rating structure, 34% believe that the general assessment of the activities of NAPEP on economic development is fairly good; twenty nine percent (29%) believe that it has been generally poor; twenty eight percent (28%) believe that it has been generally good; and finally, the remaining eight percent (8%) believe that it has been generally excellent.
g. NAPEP, just like previous poverty eradication programmes in Nigeria, has encountered a lot of avoidable problems in the course of policy designing and implementation. This is to show that these problems are not inherent. These problems could be avoided if the recommendations proffered by the researcher are adhered judiciously to.
h. Notwithstanding the problems encountered by previous poverty eradication programmes in Nigeria, and problems currently battling with the perfect implementation of National Poverty Eradication Programme (NAPEP), the latter still has impacted significantly on the economic development of Nigeria.
i. Consequently, this work gives credence to the empirical evidence of the positive school—those who agree that NAPEP has significant impact on the economic development of Nigeria.
5.3 POLICY RECOMMENDATIONS
These recommendations have been proposed as measures if taken could ensure the effectiveness of National Poverty Eradication Programme NAPEP, and other poverty eradication programmes to be designed in the future. It is sub-classified into the roles these under listed actors would play to ensure a perfect implementation of NAPEP and other poverty reduction programmes:
THE GOVERNMENT:
- Adequate funding: If possible, all funds ear-marked for any programme should be made complete before embarking on such programmes, this is aimed at reducing the rate of abandoned programmes on the bases of inadequate funding.
- Good governance which will create reliability and cooperation from all parties involved.
- Political stability and continuity of programmes.
- Improved infrastructure.
- The government should adopt punitive measures and show its willingness and readiness to punish those specialized in the act of sabotaging governments’ efforts at addressing the problems of poverty in the country. These will serve as deterrents to intending sabotages.
- Inward looking development programmes — Grassroots participation: Most of these development plans are plans that were designed, and tested in foreign countries. That these development plans were successful in such countries are not adequate reasons and evidence that it would succeed in Nigeria. The economic situations prevalent in such countries are typically different from ours, the terrain, differs, and everything concerning such countries. Even when there are historical similarities between Nigeria and such countries—these are simply not adequate reasons. Admittedly, such plans can serve as a guide but must be properly studied. The government should look-in when designing programmes, not just poverty eradication programmes. Extensive consultations with all stakeholders, the Federal government and her agencies, the State government and her agencies, the local government and her agencies, and the communities most especially. The act of designing programmes meant for rural dwellers in Abuja or outside (without inputs from the communities) and bringing in Facilitators from outside the communities, in my own opinion does not augur well for rural-based development programmes. Exclusion of the communities in policy drafting and making, and the execution process gives the communities the notion that these programmes were just foisted on them, not minding that the programmes are meant for their benefits. But including all stakeholders, the communities inclusive, in all the processes (though, must be properly supervised by facilitators from the programme designers), would give them the notion that these programmes are truly theirs and the needed cooperation would be secured.
PROJECT PLANNERS AND FACILITATORS:
- Proper evaluation of past programmes and why it either succeeded or failed could aid in ensuring the success of subsequent programmes.
- Proper management of such funds as contained in the programme plan.
- Disbursing resources through the right channels as planned
- Sincerity in project execution
- Uniformity in project execution.
- Proper supervision of projects to enhance its perfect execution—because this is not effective, few opportune individuals use the programme to enrich themselves at the expense of the core poor whom these programmmes are designed for.
- Orientation and enlightenment: Project personnel should be well educated and equipped with the necessary materials needed to achieve the desired results in project execution. By these the project would be properly defined and understood by these personnel.
- The masses that these programmes are designed for should be properly oriented with the functionality and benefits of the programme.
- Project executors and facilitators should possess qualities of truthfulness, honesty, trustworthiness in project execution.
- Good human relations among project facilitators.
- Adopting efficient and effective means of communication and awareness—most communities do not have access to electronic and print media and even when available cannot be utilized optimally for their benefits, because they are uneducated. Therefore, other means of communication, like enlightening them in their local languages and the use of local announcers could do some magic.
THE COMMUNITY
- The community should take the ownership of these programmes and provide a conducive environment for its execution in the interest of all.


REFERENCES:
A Statistical Analysis of 1996/1997 National Consumer Survey; FOS (1997).
Ahiyo A. (2002), Re-Structuring of Poverty Alleviation Activities of the
Federal of Nigeria; National Poverty Eradication Programme, Abuja.
Anikpo M. (1995), Poverty and Democracy Process: The New Face of Mass
Poverty in Nigeria. Portharcourt University Press.
Anyebe, A. A. (2001): Readings in development at Administration. S. Salam Press,
Zaria.
Augustine Gbosi and Philip C. Omoke (2004), The Nigerian Economy and Current
Problems. Pack Publishers, Abakaliki, Ebonyi state.
Ayodele, A. et al (2003), The Nigerian Economic Concepts and Techniques.
General International Labour Organizations.
Federal Office of Statistics (1996), Socio-Economic profile of Nigeria 1996. FOS
Lagos.
Federal Office of Statistics (1997), Poverty Profile for Nigeria, 1980-1996.
Federal Ministry for Economic Cooperation and Development (1992), with Report
on German Government Development Policy, Bonn.
IMF Financial Statistical Year Book, 1996.
NAPEP Today (2007), National Poverty Eradication Programme, Nigeria.
NAPEP Updates in Ohaukwu LGA, Ebonyi State (2009), Unpublished material.
Naraya, D et al (2000), Voice of the Poor Crying out for Change. World Bank,
New York.
Naraya, D and Pestesan P (2002); Voice of the Poor: from many land. World Bank,
New York.
National Poverty Eradication Council (2000).
Nigeria Poverty Reduction Plan, (2001-2004); A Report of Inter-Ministerial Group
of Officials Coordinated by the Economic Policy Coordinating Committee. Abuja.
National Population Commission; Projected Population Abuja, (1999-2002).
National Poverty Eradication Programme (2001); A Blueprint for the Schemes, Revised Edition.
Obadan Mike (1997); Analytical Framework for Poverty Reduction; Issues of
Economic Growth Verses Other Strategies in Poverty Alleviation in Nigeria, A selected paper for the Annual Conference of Nigerian Economic Society (NES), 1997.
Organization for Economic Cooperation and Development (2001): Guidelines on
Poverty Reduction Statement, Development Assistance Committee (DAC).



Repink Hans-Peter (1994): Poverty Relief and Social Integration as Task of
International Cooperation; Conceptual Consideration of the Republic of Germany in Sing Joset (Ed) for Democracy and Social Justice, Konrad Adenaurer Foundation for International Cooperation, Germany.
UNB-ECA (1999); Economic Report on Africa: The Challenge of Poverty
Reduction and Sustainable Economic Commissioon for Africa, United Nations Addis Ababa, Ethiopia UNDP, (1990 & 1993). Human Development Reports for 1990 & 1993, Oxford University Press, New York.
UNDP Development Report (2000), New York and Oxford: Oxford University
Press for the UNDP.
United Nations Development Report (2001), Nigerian Human Development Report
2000/2001 Millennium edition UNDP Lagos.








APPENDIX
QUESTIONNAIRE’S INTRODUCTORY LETTER
Economics Department
Ebonyi State University
Abakaliki
P.M.B. 053
10th June, 2009.
Dear Respondent,
I am a final year student of the above school, currently conducting a research on this topic; “The Impact of National Poverty Eradication Programme (NAPEP) on Economic Development” in which your local government has been selected as a case study, as a partial fulfillment of the requirement for the award of a Bachelor of Science (B.Sc) degree in Economics.
Attached is a questionnaire humbly seeking for your response on the subject matter. I assure you that the responses given shall be given utmost confidentiality for this research purpose only.
Your objective response to these questions is highly appreciated.
Thanks for your anticipated cooperation.
Yours faithfully,

Ogene Amarachi




PART 1
PERSONAL DATA
Please tick as appropriate and fill in the space provided in the questionnaire.
1. Gender
a. Male
b. Female
2. Age
a. Below 18 years
b. 18-40 years
c. 41-60 years
d. Above 60 years
3. Marital Status
a. Single
b. Married
c. Divorced
d. Widowed
4. Level of Education
a. Primary
b. Post Primary
c. NCE/Diploma
d. Degree and Above
e. Adult Education
f. No formal Education
5. Employment Status
a. Employed
b. Unemployed














PART 2
VIEW OF THE RESPONDENTS ON NAPEP AND OTHER POVERTY REDUCTION PROGRAMMES
Please read each statement carefully. Tick the column you think is appropriate and fill in the blank spaces.
1. Are you aware of National Poverty Eradication Programme (NAPEP)?
a. Yes
b. No
2. Does National Poverty Eradication Programme (NAPEP) exist in your community or local government?
a. Yes
b. No
3. If yes, which of these programmes are being implemented by NAPEP in your local government?
a. Youth Empowerment Scheme (YES)
b. Capacity Acquisition Programme (CAP)
c. Community Enlightenment and Sensitization Scheme
(COMESS)
d. Social Welfare Service Scheme (SOWESS)
e. Rural Infrastructural Development Scheme (RIDS)
f. Mandatory Attachment Programme (MAP)
g. Multipartner Micro-finance (MP-MF) Scheme
h. Village Economic Development Solution (VEDS)
i. Capacity Widening Activity (CWA)
j. Conditional cash Transfer (CCT)
k. Farmers Empowerment Programme (FEP)
l. General Micro Credit
m. Keke NAPEP Implementation
n. Rehabilitation of Vesico Vagina Fistula Patients
PARTNERSHIPS;
o. Multi-Partner Matching Funds (MP-MF)
p. Promise Keeper Programme (PKP)
q. Give Back Programme
r. Collaborations on Micro Credit Delivery
s. Establishment of Resource Centers
t. The NAPEP/Glomobile Collaboration
COLLABORATION WITH INTERNATIONAL DEVELOPMENT AGENCIES (IDAs);
u. Establishment of Community Development Centers
v. Community Based Poverty Reduction Project
4. Has NAPEP helped in improving the standard of living of people in your local government?
a. Yes
b. No
5. Are you among the beneficiaries of National Poverty Eradication Programme (NAPEP)?
a. Yes
b. No
6. If yes, which of the programmes have you benefited from?
a. Youth Empowerment Scheme (YES)
b. Capacity Acquisition Programme (CAP)
c. Community Enlightenment and Sensitization Scheme
(COMESS)
d. Social Welfare Service Scheme (SOWESS)
e. Rural Infrastructural Development Scheme (RIDS)
f. Mandatory Attachment Programme (MAP)
g. Multipartner Micro-finance (MP-MF) Scheme
h. Village Economic Development Solution (VEDS)
i. Capacity Widening Activity (CWA)
j. Conditional cash Transfer (CCT)
k. Farmers Empowerment Programme (FEP)
l. General Micro Credit
m. Keke NAPEP Implementation
n. Rehabilitation of Vesico Vagina Fistula Patients
PARTNERSHIPS
o. Multi-Partner Matching Funds (MP-MF)
p. Promise Keeper Programme (PKP)
q. Give Back Programme
r. Collaborations on Micro Credit Delivery
s. Establishment of Resource Centers
t. The NAPEP/Glomobile Collaboration
COLLABORATION WITH INTERNATIONAL DEVELOPMENT AGENCIES (IDAs)
u. Establishment of Community Development Centers
v. Community Based Poverty Reduction Project
7. Are you satisfied with the activities of National Poverty Eradication Programme (NAPEP)?
a. Yes
b. No

8. Does NAPEP boost economic development?
a. Yes
b. No
9. What do you think are the problems faced by the previous programmes on poverty reduction in your local government?
-------------------------------------------------------------------------------------------- Does NAPEP encounter any problem in your local government in terms of projects execution?
a. Yes
b. No
10. If yes, what kind of problems does she encounter?
-------------------------------------------------------------------------------------------- What do you think are the possible solutions to the problems?
-------------------------------------------------------------------------------------------- What is your general assessment on the activities of NAPEP on economic development?
a. Excellent
b. Good
c. fairly good
d. poor

BUDGET DEFICIT AND MACROECONOMIC PERFORMANCE OF NIGERIA, 1970-2006

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The relationship between budget deficits and macroeconomic variables (such as growth, interest rates, trade deficit, exchange rate, among others) represents one of the most widely debated topics among economists and policy makers in both developed and developing countries (Saleh, 2003). This relationship can either be negative, positive or a no positive or negative relationship. The differences on the nature of the relationship between budget deficits and these macroeconomic variables as found in economic literatures could be explained by the methodology, the country and the nature of the data used by the different researchers. Most of the studies regress a selected macroeconomic variable on the deficit or the deficit on the macroeconomic variables.
Among the studies that support a negative relationship between budget deficits and macroeconomic variables include: Premchard (1984). He asserts that budget deficit implies an increase in the supply of government bonds. In order to improve the attractiveness of these bonds the government offers them at a lower price, which leads to higher interest rates. The increase in interest rates discourages the issue of private bonds, private investment, and private spending. In turn, this contributes to the financial crowding out of the private sector. Also, these literatures {e.g. Metzler (1951); Patinkin (1965); Friedman (1968); Sargent and Wallace (1981); Dywer (1982); Miller (1983), among others} have argued that government deficit spending is a primary cause of inflation. Some of these studies, such as Sargent and Wallace (1981), have supported the proposition that the Central Bank will be obliged to monetize the deficit either now or later periods. Such monetization results in an increase in the money supply and the rate of inflation, at least in the long run period
While other literatures that argue a positive relationship between budget deficits and macroeconomic variables include; Aschauer (1989); Heng (1997); among others}. They argued that higher investment may raise the marginal productivity of private capital and thereby crowd-in private investment. Some of these studies, such as Aschauer (1989), argue that public capital, infrastructure capital such as highways, water systems, sewers, and airports, is likely to bear a complimentary relationship with private capital. For examples, in a Mundell-Fleming framework, Fleming (1962); Mundell (1963); it is argued that an increase in the budget deficit would induce upward pressure on interest rates, causing capital inflows and an appreciation of the exchange rate that will increase the current account deficit.
However, some literatures that believe that budget deficits have no positive or negative relationship with macroeconomic variables include; Barro (1989). In his model known as the ‘Ricardian Equivalence Hypothesis’ (REH), he states that shifts between taxes and budget deficits do not matter for the real interest rate, the quantity of investment, or the current account balance. He argues that the value of the new debt (deficits) is simply perceived as the present value of the future tax liabilities. This means that the government deficits are not viewed as net wealth, and as a result, money demand would not be affected. Consequently, interest rates, and other macroeconomic variables remain unchanged as well.
However, other literatures {e.g. Allen (1977); Penati (1983); Bisignano and Hoover (1982); Branson (1985); Hakkio (1996); Stoker (1999); among others} has concentrated on the relationship between the budget deficit and the exchange rate. Some of these studies, such as Bisignano amd Hoover (1982), argue that deficits may appreciate or depreciate the exchange rate, depending on the relative importance of wealth effects and relative asset substitution effects.
Finally, to the best of my knowledge, no literature exists in Nigeria on the relationship between budget deficits and macroeconomic variables. This research work is meant to fill the gap and also find out whether the Nigerian economy agrees with any of these schools of thought, given the methodology implored and the data. The debate continues.

1.2 STATEMENT OF THE PROBLEM
It is important to note that budget deficits have many implications for the macro economy. However, this will depend on the level of employment. However, in a situation of full employment is; excessive deficits will bring about macroeconomic imbalances. Generally, large and persistent fiscal deficits usually contribute to macroeconomic instability. Overall, it will adversely affect output growth and raise inflationary pressures in the economy. This is because it increases the reserve base of commercial and merchant banks, thereby creating excess liquidity in the financial system. Furthermore, deficits bring about a reduction of loanable funds that are available to the private sector. Specifically, it will crowd out private investment in the real sector, private savings, result to low growth and intensive inflationary pressures, current account deficits, real exchange rate appreciation, and external debt crisis if he debt is unsustainable. However, in a situation of less than full employment, budget deficits could contribute to growth as a result of the ideal capacities that are being employed in the economy. If the deficits are channeled into investment in productive activities such as capital goods, training or new technology, the economy might grow faster than the burden of the debt. This is because the investment will lead to long-term growth. Therefore, deficits could lead to the achievement of macroeconomic stability and growth. This condition holds, if the size of the overall deficit is about 3 percent of the Gross Domestic product (GDP), Gbosi, 2004.
Available evidence shows that over the years under review (1970-2006), Nigeria’s fiscal operations have resulted in persistent overall deficit. It recorded thirty yearsof deficits . Deficits are meant to accerlerate economic activities during depression through induced aggregate demand.
Despite the fact that Nigeria has been operating deficits for these periods and also found itself in a situation of less than full employment, her economy has been in distress, the opposite view of the essence of deficits occur. There were obvious fall in the standard of living of the citizens, decline in the growth of the economy, persistent unfavouarable balance of payment, increased public debt; local and foreign, continued depletion of the foreign reserve, little or no savings, decline in exports, increased inflationary pressure, continous dependence on external economies etc.
All these are indicators of negative growth, its impact on these macroeconomic variables has been unfavourable, one then asks if budget deficits no longer stimulate economic growth. Do we believe the Keynesian economists that it crowds-in private investments through its impact on macroeconomic variables or the neoclassical economists that it crowds-out private investment through its impact on interest rate and other variables, or even the Ricardian economists that it has no positive or negative impact on aggregate demand? Which side to belong is what this research work is meant to address.
1.3 OBJECTIVE OF THE STUDY
The objective is to find the long-run relationship between government budget deficit and some macroeconomic variables like exchange rate, interest rate, GDP, and inflation rate.
1.4 HYPOTHESIS OF THE STUDY
H0: Budget deficits have no significant impact on the macroeconomic performance of Nigeria.
H1: Budget deficits exert significant impact on the macroeconomic performance of Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
To the policy makers, it will give them an overview on the nature of the relationship between budget deficits and the macroeconomic variables, which will enable them in the formulation of policies that will help achieve the development objectives of the economy with minimal conflicts. The predictions will help them in determining the stance of monetary policy as well as fiscal policy. They may take a cue from these studies; and necessarily keep themselves watchful of the changes in the macroeconomic fundamentals.
To the government, it will enable them to review economic conditions for the past year against its policies within the same period and equally afford them the opportunity to introduce fiscal and monetary policy changes for the coming financial year.
To the students and fellow researchers, this study will serve as a resource material and an addition to the existing stock of knowledge as regards to the relationship. It will equally serve as a base upon which further research can be continued from.
1.6 SCOPE OF THE STUDY
This study covers the budget deficits as it relates with few selected macroeconomic variables in Nigeria. These selected macroeconomic variables include: exchange rate, interest rate, inflation rate, and GDP. The period of study covers from 1970-2006.
1.7 LIMITATIONS OF THE STUDY
As at the time of this study, I had difficulties in assessing related works done in Nigeria in this area of interest. Though, I speculate that other scholars may have written on this area, but to the best of my knowledge and within the limits of my assessment, no work exists in this area. Therefore, 95% of the literatures, empirical and theoretical are foreign. Also, combining this research work with my classroom work was limiting the time devoted to the work. I also had financial constraints and most importantly, the data and quality cannot be guaranteed by me as it is a secondary time-series data from CBN.
1.8 DEFINITIONS OF CONCEPTS
Debt stock disturbances: This includes the disturbances resulting from the deficits.
Deficit financing is defined as a situation in which government spending is in excess of her expenditure over time.
Closed economy: It is an economy with no international trade
Portfolio crowding out: This happens when excessive budget deficit retards or reduces investments.
Stationarity: A series is said to be (weakly or covariance) stationary if the mean and autocovariances of the series do not depend on time. Any series that is not stationary is said to be nonstationary.
1.9 ORGANIZATION OF THE STUDY
This empirical study is divided into five chapters and, each of which is further sub-divided. The first chapter is introduction. These include: the introduction, background of the study, statement of the problem, objective of the study, hypothesis of the study, significance of the study, scope of the study, limitations of the study, definitions of concepts, and organization of the study.
In the second chapter, relevant theoretical and empirical literatures are reviewed.
Chapter three is the methodology. The researcher’s model is stated. The sources of the data and their description, the estimation procedure are all stated.
Chapter four shows the presentation, analysis and interpretation of results.
The fifth chapter is the concluding part of the work, under which the researcher states the summary of findings, policy recommendation and conclusion.















CHAPTER TWO
LITERATURE REVIEW
The purpose of this section is to review the theoretical framework and other literatures concerning budget deficit and macroeconomic performance. These macroeconomic variables include exchange rate, inflation, money supply, trade deficits, GDP, interest rates, savings and investment etc.
2.1.0 THEORITICAL FRAMEWORK
BUDGET DEFICITS, CROWDING IN AND CROWDING OUT EFFECTS
SCHOOLS OF THOUGHT
In analyzing the literatures on the relationship between budget deficits and macroeconomic performance, one finds three distinct schools of thought. These are the neoclassical, Keynesian, and Ricardian schools, each providing different paradigms. Bernhein (1989) provides a brief summary of the three paradigms.
2.1.1 THE NEOCLASSICAL SCHOOL
The neoclassical school proposes an adverse relationship between budget deficits and macroeconomic variables. They argue that budget deficits lead to higher interest rates, discourages the issue of private bonds, private investments, and private spending, increases inflation level, and cause a similar increase in the current account deficits and finally slows the growth rate of the economy through resources crowding out.
The Neoclassical school considers individuals planning their consumption over their entire cycle. By shifting taxes to future generations, budget deficits increase current consumption. By assuming full employment of resources the neoclassical school argues that increased consumption implies a decrease in savings. Interest rate must rise to bring equilibrium in the Capital markets. Higher interest rates, in turn, result in a decline in private investment, domestic production and an increase in the aggregate price level. Furthermore, Yellen (1989) argues that in standard Neoclassical Macroeconomic models, if resources are fully employed, so that output is fixed, higher current consumption implies an equal and offsetting reduction in other forms of spending. Thus, investment and/or net exports must be “fully crowding out”. It is worth noting that it is important to distinguish between “financial” crowding out and “resource” crowding out which occurs when the government competes with the private sector on purchasing certain resources (skilled labour, raw materials and so on). When the government sector expands, the private sector will contract because of the increase in prices on these resources due to an excess demand by the government, hence this leads to a fall in investment and consumption by the private sector. Thus the government sector’s expansion crowds out the private sector. It is worth noting here as well that resource crowding out is an important issue to take into account especially in developing countries where resources are scarce even sometimes to the private sector, so any excess demand for these resources by the government will severely impinge on private sector productivity.
2.1.2 THE KEYNESIAN SCHOOL
The Keynesian economists propose a positive relationship between budget deficits and macroeconomic variables. They argue that usually budget deficits result in an increase in domestic production, increases aggregate demand, increases savings and private investment at any given level of interest rate. The Keynesian absorptive theory suggests that an increase in the budget deficits would induce domestic absorption and thus, import expansion, causing current account deficit. In the Mundell-Fleming framework, an increase in the budget deficit would induce an upward pressure on interest rate, causing capital inflows and an appreciation of the exchange rate that will increase the current account balance.
The Keynesians provide a counter argument to the crowd-out effect by making reference to the expansionary effects of budget deficits. They argue that usually budget deficits result in an increase in domestic production, which makes private investors more optimistic about the future course of the economy resulting in them investing more. This is known as the “crowding-in” effect. It is worth noting here that the traditional Keynesian view differs from the standard neoclassical paradigm in two fundamental ways. First, it permits the possibility that some economic resources are unemployed. Second, it presupposes the existence of a large number of liquidity-constrained individuals. This second assumption guarantees that aggregate consumption is very sensitive to changes in disposable income. Many traditional Keynesians argue that deficits need not crowd out private investment. Eisner (1989) suggests that increased aggregate demand enhances the profitability of private investments and leads to a higher level of investment at any given rate of interest. Hence deficits may stimulate aggregate savings and investment, despite the fact that they raise interest rates. He concludes that “evidence is thus that deficits have not crowded-out investment. There has rather been crowding-in”. Heng (1997) utilized an overlapping-generations (OLG) model to provide a theoretical framework to analyze the “crowding-in” issue of private capital by public capital. He shows that public capital crowds-in private capital through two channels, namely, via its impact on the marginal productivity of labour and savings, and via (gross) complementarity/substitutability between public and private capital.
2.1.3 THE RICARDIAN SCHOOL
Finally, there is another contrary approach advanced by Barro (1989) known as the Ricardian Equivalence Hypothesis (REH). Ricardian equivalence, or the Barro-Ricardo equivalence proposition, is an economic theory which suggests that government budget deficits do not affect the total level of demand in an economy. It was initialy proposed by the 19th century economist David Ricardo. In simple terms, the theory can be described as follows. Governments may either finance their spending by taxing current taxpayers, or they may borrow money. However, they must eventually repay this borrowing by raising taxes above what they would otherwise have been in future. The choice is therefore between "tax now" and "tax later". Suppose that the government finances some extra spending through deficits - i.e. tax later. Ricardo argued that although taxpayers would have more money now, they would realize that they would have to pay higher tax in future and therefore save the extra money in order to pay the future tax. The extra saving by consumers would exactly offset the extra spending by government, so overall demand would remain unchanged. More recently, economists such as Robert Barro have developed more sophisticated variations on the same idea, particularly using the theory of rational expectations. Ricardian Equivalence suggests that government attempts to influence demand using fiscal policy will prove fruitless. He argues that an increase in budget deficits, due to an increase in government spending, must be paid for either now or later, with total present value of receipts fixed by the total present value of spending. Thus, a cut in today’s taxes must be matched by an increase in future taxes, leaving real interest rates, and thus private investment, and the current account balance, exchange rate and domestic production unchanged. Therefore, budget deficits do not crowd-in nor crowd out macroeconomic variables i.e. no positive or negative relationship exists.
2.2 EMPIRICAL LITERATURE
Dwyer (1982) studied the relationship between budget deficits and macroeconomic performance of US using vector autoregressive model (VAR) for the period 1952-1978. He found no evidence that larger government deficits increase prices, spending, interest rates, or the money stock. Karras (1994) studied the relationship between budget deficits and macroeconomic variables in a Cross-sectional study involving 32 countries for the period 1950-1980, using OLS and GLS. He found out that Deficits do not lead to inflation, they are negatively correlated with the rate of growth of real output and increased deficits appear to retard investment. Al-Khedir (1996) studied the relationship between budget deficits and macroeconomic performance of the G-7 countries for the period 1964-1993 using VAR. He found out that budget deficits led to higher short-term interest rates in the 7 countries. However, the deficits did not manifest any impact on the long-term interest rates. The trade balance was worsened by the budget deficit and economic growth improved in all 7 countries.
Guess and Koford (1984) used the Granger Causality test to find the causal relationship between budget deficits and inflation, GNP and private investment using annual data for seventeen OECD countries for the period 1949 to 1981. They concluded that budget deficits do not cause changes in these variables.
Barro (1990; 1991) studied the effects of tax financed government expenditure on investment and output in a cross-sectional study of 98 countries over the period 1960-85. He found that the ratio of real government consumption to real GDP (gc/y) had a negative association with growth and investment. The argument was that government consumption had no direct effect on private productivity, but lowered savings and growth through the distorting effects from taxation or government-expenditure programs. It is worth noting that the rearcher measured the ratio of real public gross investment to GDP (gi/y). This public investment corresponds to a stock of public capital kg, which generates a flow of services that he views as comparable to the productive services g. Hence, this empirical measure identifies g with “infrastructure services”, such as transportation, water, electric power, and so on (although hospitals and schools are also components of public capital). In addition, the assumptions in this study are: (a) g/y is constant over time for a single country
(b) the public and private capital has the same depreciation rates.
According to the theory the relationship of the growth rate y to gi /i depends on how the government behaves. If governments optimize (go close to the point of maximal growth), y and gi /i would indicate cross-sectional correlation. On the other hand, the association would be positive (or negative) if governments typically choose too little or too much productive public services. This study, by dividing tax-financed government expenditure into spending on unproductive services and (e.g., consumption, subsidizing food) and spending on productive services (e.g., building infrastructure etc,), found that the spending on services affects growth negatively, while spending on productive services affects growth positively.
2.2.1 BUDGET DEFICITS (BD) {N million}
In 1970, budget deficit was -455.1, i.e. -8.8% of GDP. But in 1971, Nigeria recorded a surplus of 171.6, i.e. 2.6% of GDP. Therefore the deficits grew at the rate of -138%. In 1972, however, a deficit of -58.8 resulted and subsequently at a growth rate of -134%. But in 1973, a surplus of 166.1 resulted at a growth rate of -382%. In 1974 also, the fiscal operation resulted in another surplus of 1796.4 at a growth rate of 982%. But in 1975, the deficit of -427.9 re-occurred at a growth rate of -124%. In 1976 also, the budget deficit increased to -1090.8 at a growth rate of 155%. In 1977 however, the deficit was reduced to -781.4 at a growth rate of -28%. But in 1978, budget deficit soared to -2821.9 at a growth rate of 261%. In 1979, a surplus of 1461.7 occurred at a growth rate of -152%. In 1980, a deficit of -1975.2 was recorded at a growth rate of -235%. In 1981, the deficit increased to -3902.1 at a growth rate of 98%. In 1982, the deficit further increased to -6104.1 at a growth rate of 56%. In 1983, the deficit reduced to -3364.5 at a growth rate of -45%. In 1984, it further reduced to -2660.4 at a growth rate of -21%. But in 1985, it increased to -3039.7 at a growth rate of 14%. In 1986, it further increased to -8254.3 at a growth rate of 172%. In 1987, it reduced to -5889.7 at a growth rate of -29%. In 1988, it increased again to -12160.9 at a growth rate of 107%. In 1989, it further rose to -15134.7 at a growth rate of 25%. In 1990, budget deficit steadily increased to -22116.1 at a growth rate of 46%. In 1991, it further increased to -35755.2 at a growth rate of 62%. In 1992, it rose to -39632.5 at a growth rate of 11%. In 1993, it had risen to -107735.5 and a growth rate of 173%. Its percentage to the GDP (9.5%) was the highest in this period, 1993. And in 1994, the deficit was decreased to -70271.6 at a growth rate of -35%. However, in 1995, a surplus of 1000 resulted, therefore the growth rate was -101% and in 1996 too, the surplus was increased to 32049.4 at a growth rate was 3105%. These surpluses occurred because of the guided deregulation policy of the federal government, and afterwards, the deficits continued. In 1997, the deficit was increased to -5000 at a growth rate of -116%. In 1998, it rose sharply to -133389.3 at a growth rate of 2568%. In 1999, the deficit rose continuously to -285104.7 at a growth rate of 114%. In 2000, the deficit was reduced to -103777.3 at a growth rate of -64%. But in 2001, the deficit was increased to -221048.9 at a growth rate of 113%. In 2002, the deficit was further increased to -301401.6 at a growth rate of 36%. But in 2003, the deficit was reduced to -202724.7 at a growth rate of -33%. In 2004, the deficit was further reduced to -172601.3 at a growth rate of -15%. In 2005, the deficit was further decreased to -161406.3 at a growth rate of -7%. And finally, in 2006, the deficit further decreased to -101397 and a growth rate of -37% was realized. See table 2.1 below. BUDGET DEFICIT AND ITS GROWTH RATES
YEARS BD GRBD BD%GDP
1970 -455.1 -8.7457
1971 171.6 -137.71 2.611594
1972 -58.8 -134.27 -0.815726
1973 166.1 -382.48 1.511278
1974 1796.4 981.52 9.817305
1975 -427.9 -123.82 -1.984804
1976 -1090.8 154.92 -3.99597
1977 -781.4 -28.365 -2.386151
1978 -2821.9 261.13 -7.82045
1979 1461.7 -151.8 3.387423
1980 -1975.2 -235.13 -3.884473
1981 -3902.1 97.555 -3.800002
1982 -6104.1 56.431 -5.547679
1983 -3364.5 -44.881 -2.824531
1984 -2660.4 -20.927 -2.127047
1985 -3039.7 14.257 -2.100341
1986 -8254.3 171.55 -5.747163
1987 -5889.7 -28.647 -2.9008
1988 -12160.9 106.48 -4.418961
1989 -15134.7 24.454 -3.748413
1990 -22116.1 46.128 -4.446776
1991 -35755.2 61.67 -6.226069
1992 -39532.5 10.564 -4.345405
1993 -107735.5 172.52 -9.515747
1994 -70270.6 -34.775 -4.822536
1995 1000 -101.42 0.033423
1996 32049.4 3104.9 0.774924
1997 -5000 -115.6 -0.116273
1998 -133389.3 2567.8 -3.252582
1999 -285104.7 113.74 -5.939723
2000 -103777.3 -63.6 -1.514947
2001 -221048.9 113 -3.133076
2002 -301401.6 36.351 -3.774888
2003 -202724.7 -32.739 -1.999975
2004 -172601.3 -14.859 -1.478561
2005 -161406.3 -6.486 -4.430515
2006 -101397.5 -37.179 -2.187106


2.2.2 GROSS DOMESTIC PRODUCT (GDP) {N million}
In 1970, GDP was 5203.7. In 1971, GDP increased to 6570.7; therefore GDP grew at of 26%. In 1972, GDP further increased to 7208.3 at a growth rate of 9.7%. In 1973, GDP increased sharply to 10990.7 at a growth rate of 53%. In 1974, GDP increased steadily to 18298.3 at a growth rate of 67%. In 1975 also, it increased to 21558.8 at a growth rate of 17.8%. In 1976, it increased further to 27297.5 at a growth rate of 27%. In 1977, it equally increased to 32747.3 at a growth rate of 20%. In 1978, it increased slightly to 36083.6 at a growth rate of 10%. In 1979, it moved to 43150.8 at a growth rate of 20%. In 1980, it still increased to 50848.6 at a growth rate of 18%. In 1981, GDP increased to 102686.6 at a growth rate of 102%. In 1982, it moved slightly upwards to 110029.8 recording a growth rate of 7%. In 1983, it increased to 119117.1 at a growth rate of 8%. In 1984, it increased slightly to 125071.8 at a growth rate of 5% and in 1985; GDP was 144724.1 recording a growth rate of 16%. But, in 1986, GDP decreased to 143623.9 thereby recording a negative growth of -0.76%. In 1987, it increased to 203037.1 at a growth rate of 41%. In 1988, it further increased to 275198.2 at a growth rate of 36%. In 1989, it increased steadily to 403762.9 at a growth rate of 47%. Also, in 1990, it moved upwards to 497351.3 at a growth rate of 23%. In 1991, it increased to 574282.1 at a growth rate of 16%. By 1992, it had risen to 909754.2 at a growth rate of 58%. In 1993, GDP rose to 1132181 at a growth rate of 25%. In 1994, it increased to 1457130 at a growth rate of 29%. In 1995, it soared to 2991942 at a growth rate of 105%. In 1996, it further increased to 4135814 at a growth rate of 38%. In 1997, it increased slightly to 4300209 at a growth rate of 4%. But in 1998, GDP decreased to 4101028 and therefore recorded a negative growth of -5%. In 1999, it increased to 4799966 at a growth rate of 17%. In 2000, it further increased to 6850229 at a growth rate of 43%. In 2001, it increased slightly to 7055331 at a growth rate of 3%. In 2002, it increased again to 7984385 at a growth rate of 13%. In 2003, it increased steadily to 10136364 at a growth rate of 27%. In 2004, it moved upwards to 11673602 at a growth rate of 15%. But, in 2005, GDP decreased to 3643060 and therefore recorded a negative growth of -69%. And finally, in 2006, it increased to 4636149 at a growth rate of 27%.
GDP in the pre-SAP period (1970-1985) were very impressive because of the oil boom but declined in the 1980s during the glut in the oil market. However, negative growths of -0.76, -4.63, and -68.79 were recorded in 1986, 1998 and 2005 respectively but GDP recorded its highest rate of 105% in 1995 in the guided deregulation era. From then till now, GDP have been fluctuating up and down. See table 2.2 below


GDP AND ITS GROWTH RATES FROM 1970-2006
YEARS GDP
1970 5203.7
1971 6570.7
1972 7208.3
1973 10990.7
1974 18298.3
1975 21558.8
1976 27297.5
1977 32747.3
1978 36083.6
1979 43150.8
1980 50848.6
1981 102686.8
1982 110029.8
1983 119117.1
1984 125074.8
1985 144724.1
1986 143623.9
1987 203037.1
1988 275198.2
1989 403762.9
1990 497351.3
1991 574282.1
1992 909754.2
1993 1132181
1994 1457130
1995 2991942
1996 4135814
1997 4300209
1998 4101028
1999 4799966
2000 6850229
2001 7055331
2002 7984385
2003 10136364
2004 11673602
2005 3643060
2006 4636149
GRGDP

26.27
9.70
52.47
66.49
17.82
26.62
19.96
10.19
19.59
17.84
101.95
7.15
8.26
5.00
15.71
-0.76
41.37
35.54
46.72
23.18
15.47
58.42
24.45
28.70
105.33
38.23
3.97
-4.63
17.04
42.71
2.99
13.17
26.95
15.17
-68.79
27.26





2.2.3 INTEREST RATES (INT) i.e. MINIMUM REDISCOUNT RATES (%)
In 1970, 1971, 1972, 1973 and 1974 interest rate remained stable at 4.5%, therefore the growth rates were zero. In 1975, interest rate decreased to 4% and therefore recorded a negative growth of -11%. In 1976, interest rate further decreased to 3.5% at a growth rate of -12.5%. But in 1977, it increased to 4%, therefore, the growth rate rose by 14%. In 1978, interest rate further increased to 5%, and the growth rate also rose to 28%. In 1979, interest rate remained stable at 5% and so a zero growth was recorded. In 1980, interest rate rose to 6% recording a 20% growth rate. In 1981, the rate was still 5% thereby recording no growth. In 1982, interest rate rose to 8% recording a 33% growth rate. In 1983, it remained 8% recording zero growth. But in 1984, it increased to 10% at a growth of 25%. In 1985 and 1986, it remained 10% thereby recording zero growth. In 1987, interest rate soared to 13% recording a 28% growth rate and in 1988, the rate remained stable, therefore interest rate grew by zero percent. In 1989, it was 18.5% recording a growth rate of 45% and in 1990 the rate remained unchanged. But in 1991, interest rate decreased to 14.5% recording a negative growth rate of -22%. In 1992, it rose to 17.5% at a growth rate of 21%. In 1993, interest rate soared to 26% recording a 49% growth rate. This is the highest rate ever recorded within this review period. But in 1994, interest rate decreased to 13.5% recording a negative growth of -48%. In 1995, 1996 and 1997, the rate remained the same, therefore no growth was recorded. In 1998, interest rate increased to 14.31% recording a growth rate of 6%. In 1999, it increased to 18% on a growth rate of 26%. But in 2000, the rate decreased to 13.5% recording a negative growth rate of -25%. However, in 2001, interest rate increased to 14.31% recording a growth of 6%. In 2002, interest rate further increased to 19% recording a growth rate of 33%. But in 2003, interest rate decreased to 15.75% recording a negative growth of -17%. In 2004, it further decreased to 15% on a negative growth rate of -5%. In 2005, it decreased further to 13% resulting to a negative growth of -13.3%. Finally, in 2006, interest rate further decreased to 12.25% recording a negative growth of -6%.
From 1970-1986 (before SAP) were periods of highly regulated interest rates regime. As a result of the high regulatory policy of credit operations in the country, interest rates were pegged at the different rates. However, from 1986-1998 were the periods of deregulation. Interest rates were also deregulated and allowed to float and consequently, interest rate soared consistently, though, in a stable manner of at least, a two-year term.
See table 2.3 below




INTEREST RATES AND ITS GROWTH RATES FROM 1970-2006.
YEARS INT GRINT
1970 4.5
1971 4.5 0
1972 4.5 0
1973 4.5 0
1974 4.5 0
1975 4 -11.1
1976 3.5 -12.5
1977 4 14.29
1978 5 25
1979 5 0
1980 6 20
1981 6 0
1982 8 33.33
1983 8 0
1984 10 25
1985 10 0
1986 10 0
1987 12.75 27.5
1988 12.75 0
1989 18.5 45.1
1990 18.5 0
1991 14.5 -21.6
1992 17.5 20.69
1993 26 48.57
1994 13.5 -48.1
1995 13.5 0
1996 13.5 0
1997 13.5 0
1998 14.31 6
1999 18 25.79
2000 13.5 -25
2001 14.31 6
2002 19 32.77
2003 15.75 -17.1
2004 15 -4.76
2005 13 -13.3
2006 12.25 -5.77




2.2.4 EXCHANGE RATES (NOMINAL EXCHANGE RATES, NEC)
In 1970, the nominal exchange rate of the naira with the dollar was 0.7143. In 1971, it appreciated to 0.6955 recording a negative growth of -3%. In 1972, it further appreciated to 0.6579 given a growth rate of -5%. In 1973, it was stabilized at 0.6579 therefore a growth rate of 0% was recorded. In 1974, the exchange rate further appreciated to 0.6299 resulting to a growth rate of -4%. In 1975, it appreciated to 0.6159 resulting to a growth rate of -2%. But in 1976, exchange rate depreciated to 0.6265 recording a growth rate of 2%. In 1977, it further depreciated to 0.6466 resulting to a growth rate of 3%. But in 1978, it appreciated to 0.606 given a growth rate of -6%. In 1979, it further appreciated to 0.5957 given a growth rate of -2%. In 1980, exchange rate further appreciated to 0.5464 resulting to a -8% growth rate. But in 1981, exchange rate depreciated to 0.61 giving a growth rate of 12%. In 1982, it further depreciated to 0.6729 resulting to a growth rate of 10%. In 1983, exchange rate depreciated to 0.7241 giving a growth rate of 8%. In 1984, it depreciated steadily to 0.7649 giving a growth rate of 7%. In 1985, the exchange rate worsened to 0.8938 recording a growth rate of 17%. In 1986, the naira exchanged with the dollar for more than one naira for the first time in Nigeria. It depreciated to 2.0206 resulting to a growth rate of 126%. In 1987, it depreciated again to 4.0179 giving a growth rate of 99%. In 1988, it further depreciated to 4.5367 giving a growth rate of 13%. In 1989, it depreciated to 7.3916 and consequently a growth rate of 63% resulted. In 1990, the exchange rate was 8.0378 at a growth rate of 9%. In 1991, it depreciated consistently to 9.9095 at a growth rate of 23%. In 1992, the exchange rate depreciated to 17.2984 which amounted to a 75% growth rate. In 1993, it further depreciated to 22.0511 giving a growth rate of 28%. However, from 1994-1998, the exchange rate was fixed at 21.8861, therefore in 1994, the growth rate was -0.7% and from 1995-1998, the growth rate remained zero. In 1999, the exchange rate depreciated immensely to 92.7 recording a growth of 324%. In 2000, it further depreciated to 102.1 giving a growth rate of 10%. In 2001, the exchange rate was 111.9 giving a growth rate of 10%. In 2002, it further depreciated to 121 resulting to a growth rate of 8%. In 2003, the exchange rate was 129.4 giving a growth rate of 7%. In 2004, it further depreciated to 133.5 resulting to a growth rate of 3%. In 2005, the exchange rate appreciated to 131.7 giving a growth rate of -1.4%. And finally, in 2006, it further appreciated to 128.7 resulting to a growth rate of -2.3%.
Between the periods, 1970-1985 (pre-SAP period), the nominal exchange rates of the naira with the US dollar were less than one dollar. This was largely connected with the agricultural advantage and then lately, the windfall of income from the sales of oil in the world market. Consequent upon the deregulation of the exchange rate from 1986-1993, the naira was allowed to float independently in the foreign exchange market, and the value of the naira continued to depreciate. Because of the sharp depreciation of the naira, in 1994 the policy was reversed and the naira was pegged again at N21.8861 to US$1 from 1994-1998. On return to the market exchange rate system in 1999, the exchange rates continued to depreciate till date. See table 2.4 below. EXCHANGE RATES AND ITS GROWTH RATES
YEARS NEC GRNEC
1970 0.714
1971 0.696 -2.63195
1972 0.658 -5.40618
1973 0.658 0
1974 0.63 -4.25597
1975 0.616 -2.22258
1976 0.627 1.721059
1977 0.647 3.2083
1978 0.606 -6.279
1979 0.596 -1.69967
1980 0.546 -8.27598
1981 0.61 11.63982
1982 0.673 10.31148
1983 0.724 7.608857
1984 0.765 5.634581
1985 0.894 16.85188
1986 2.021 126.0685
1987 4.018 98.84688
1988 4.537 12.91222
1989 7.392 62.929
1990 8.038 8.742356
1991 9.91 23.28622
1992 17.3 74.5638
1993 22.05 27.4748
1994 21.89 -0.74826
1995 21.89 0
1996 21.89 0
1997 21.89 0
1998 21.89 0
1999 92.69 323.5263
2000 102.1 10.15369
2001 111.9 9.635259
2002 121 8.063814
2003 129.4 6.932534
2004 133.5 3.203473
2005 131.7 -1.37715
2006 128.7 -2.28639


2.2.5 INFLATION RATES (%)
In 1970, inflation rate was 13.8%. In 1971, it increased to 16% giving a growth rate of 16%. In 1972, the inflation rate decreased drastically to 3.2% resulting to a growth rate of -80%. In 1973, it increased to 5.4% giving a growth rate of 69%. In 1974, inflation rose to 13.4% giving a growth rate of 148%. In 1975, inflation soared to 33.9% giving a growth rate of 153%. In 1976, inflation reduced to 21.2% giving a growth rate of -38%. In 1977, it further reduced to 15.4% resulting to a growth rate of -27%. In 1978, inflation rose to 16.6%, giving a growth rate of 8%. In 1979, it reduced to 11.8% giving a growth rate of -29%. In 1980, it further reduced to 9.9% resulting to a growth rate of -16%. But, in 1981, inflation increased to 20.9 giving a growth rate of 111%. In 1982, it decreased to 7.7 giving a growth rate of -63%. But, in 1983, it rose to 23.2% resulting to a growth rate of 201%. In 1984, it further increased to 39.6 giving a growth rate of 71%. In 1985, it reduced sharply to 5.5 giving a growth rate of -86%. In 1986, it further reduced to 5.4 resulting to a growth rate of -2%. In 1987, inflation rose to 10.2 on a growth rate of 89%. In 1988, it further increased to 38.3 on a growth rate of 276%. In 1989, it increased steadily to 40.9 giving a growth rate of 7%. But in 1990, it reduced to 7.5% giving a growth rate of -82%. But in 1991, it increased to 13% on a growth rate of 73%. In 1992, it further increased to 44.5% giving rise to a growth rate of 242%. In 1993, it steadily increased to 57.2 resulting to a growth rate of 29%. In 1994, inflation rate reduced slightly to 57% giving a growth rate of -0.35%. But in 1995, inflation soared to 72.8; this was the highest rate of inflation ever recorded in the country. This amounted to a growth rate of 28%. In 1996, it reduced sharply to 29.3, giving a growth rate of -60%. In 1997, it further decreased to 8.5% giving a growth of -71%. But in 1998, it increased to 10%, at a growth rate of 18%. However, in 1999, it decreased to 6.6% giving a growth of -34%. But in 2000, it increased to 6.9% giving a growth rate of 5%. In 2001, it further increased to 18.9% resulting to a growth rate of 174%. In 2002, it decreased to 12.9% giving a growth rate of -32%. But in 2003, it increased to 14% giving rise to a growth rate of 9%. In 2004, it further increased to 17.9% resulting to a growth rate of 28%. But in 2005, it decreased to 8.2% giving a growth rate of -54%. And finally, in 2006, inflation rate increased to 15.03% resulting to a growth rate of 83%.
Several factors responsible for the rising inflation rates in the 1970s include: Port congestion in the earlier period up to 1974, inadequate response of domestic production to aggregate demand for consumer goods such as food items, clothing, communication facilities, escalation in government expenditures prompted by a large increase in government revenues derived from the boom in the petroleum industry in 1973-1974. Inflation rates soared in the 1980s because of the drought recorded in Northern Nigeria. Also, other factors responsible for the rising inflation rates in the 1980s and 1990s include: global economic crisis, inconsistencies in macroeconomic policies, fiscal deficits, and sharp depreciations of the exchange rates. The 72.8% rate of inflation recorded in 1995 was as a result of the guided deregulation policy of the then military government. This was the highest rate of inflation ever recorded in the history of Nigeria. See table 2.5 below;
IINFLATION AND ITS GROWTH RATES
YEARS INF GRINF
1970 13.8
1971 16 15.942
1972 3.2 -80
1973 5.4 68.75
1974 13.4 148.15
1975 33.9 152.99
1976 21.2 -37.46
1977 15.4 -27.36
1978 16.6 7.7922
1979 11.8 -28.92
1980 9.9 -16.1
1981 20.9 111.11
1982 7.7 -63.16
1983 23.2 201.3
1984 39.6 70.69
1985 5.5 -86.11
1986 5.4 -1.818
1987 10.2 88.889
1988 38.3 275.49
1989 40.9 6.7885
1990 7.5 -81.66
1991 13 73.333
1992 44.5 242.31
1993 57.2 28.539
1994 57 -0.35
1995 72.8 27.719
1996 29.3 -59.75
1997 8.5 -70.99
1998 10 17.647
1999 6.6 -34
2000 6.9 4.5455
2001 18.9 173.91
2002 12.9 -31.75
2003 14 8.5271
2004 17.9 27.857
2005 8.2 -54.19
2006 15.03 83.293
The data utilized in this work is a secondary data. It is a time series data on GDP at current factor prices, interest rates, nominal exchange rates and inflation rates. The data was collected over the period 1970-2006 from the Central Bank of Nigeria’ s Statistical Bulletin, Vol 17, and December 2006.
However, the growth rates of the different data were computed by the researcher.


Table 1 SUMMARY OF SELECTED STUDIES OF BUDGET DEFICITS AND MACROECONNOMIC VARIABLES
STUDY
Budget deficits and macroeconomic variables PERIOD COUNTRY METHODOLOGY MAJOR FINDINGS
Dwyer (1982) 1952-1978 US VAR No evidence found that larger government deficits increase prices, spending, interest rates, or the money stock.
Guess and Koford (1984) 1949-1981 OECD (17) Granger causality test Budget deficits do not cause changes in inflation, GNP, and private investment.
Karras (1994) 1950-1980 Cross-sectional (32) OLS, GLS Deficits do not lead to inflation, deficits are negatively correlated with the rate of growth of real output and increased deficits appear to retard investment.
Al-Khedir (1996) 1964-1993 G-7 VAR Budget deficits led to higher short-term interest rates in the 7 countries. It did not manifest any impact on the long-term interest rates. The trade balance was worsened by the budget deficit and economic growth improved in all 7 countries.
CHAPTER THREE
3.0 RESEARCH METHODOLODY
Since we are interested in finding out whether a long-run relationship exists between budget deficits and macroeconomic variables. We undertake Cointegration and Error Correction Model as the research methodology, and then proceed to causality tests.
3.1 MODEL SPECIFICATION
The researcher has included the following four macroeconomic variables as regressors to estimate the relationship between budget deficits and economic performance of Nigeria. The estimation equation is stated as follows:
BD = F(GDP, INT, NEC, INF).................................... Eqn (i)
Where
BD= Budget deficits defined as federal government retained revenue minus total expenditure
F= Functional notation
GDP: Gross Domestic Product at Current Market Prices
INT= Interest rates i.e. Minimum Rediscount rates
NEC= Nominal Exchange rates
INF: Inflation rates and
3.3 ESTIMATION PROCEDURE:
Having stated above that the researcher uses Cointegration and error correction model as the econometric technique, he also uses the Econometric view (E-view 3.1) software in running this regression because of its wide acceptance in the economic world. The various tests that ought to be carried out in this study include:
(1) Unit Root tests: To test for a unit root in the series, we employ the Augmented Dickey-Fuller tests (ADF test) to test for the stationarity of our data at level and at differences. The model for the test is stated below.
yt = µ + pyt-1 + εt ................................................... (iii)
Where µ and p are parameters and εt is assumed to be white noise, y is a stationary series if -1< p < 1. If p =1, y is a nonstationary series; if the process is started at some point, the variance of y increases steadily with time and goes to infinity. If the absolute value of p is greater than one, the series is explosive. Therefore, the hypothesis of a stationary series can be evaluated by testing whether the absolute value of p is strictly less than one. The simple unit root test described above is valid because the series is an AR(1) process. If the series is correlated at higher order lags, the assumption of white noise disturbances is violated. The DF tests take the unit root as the null hypothesis H0: p =1. Since explosive series do not make much economic sense, this null hypothesis is tested against the one-sided alternative H1 : p <1. The null hypothesis of a unit root is rejected against the one-sided alternative if the t-statistic is less than the critical value.
(2) Cointegration tests: To investigate the existence of a long run relationship between budget deficits and other variables, we explore existence of a long run relationship among the variables in our model. If the variables that we are using in the study are found to be cointegrated, it will provide statistical evidence for the existence of a long run relationship. We employ the maximum-likelihood test procedure established by Johansen (1991) and Juselius (1990).
yt = A1yt-1+…+ Apyt-p + ß xt + εt ................................ (iv)
Where yt is a k-vector of non-stationary I(1) variables, xt is a d vector of deterministic variables, and εt is a vector of innovations. Granger’s representation theorem asserts that if the coefficient matrix П has reduced rank rH*1 (Γ): Пyt-1 + ß xt = α(β1 yt-1+ P0) ......................... (v)
(3) Granger causality test: Correlation does not necessarily imply causation in any meaningful sense of that word. The Granger (1969) approach to the question of whether x causes y is to see how much of the current y can be explained by past values of y and then to see whether adding lagged values of x can improve the explanation. Y is said to be Granger-caused by x if x helps in the prediction of y. It is important to note that the statement “x Granger causes y” does not imply that y is the effect or the result of x. Reviews runs bivariate regressions of the form:
yt = α0 + α1 yt-1 + … + αC yt-c β1xt-1 +…+ βc xt-c ......... (vi)
xt = α0 + α1 xt-1 + … + αC xt-c β1 yt-1 +…+ βc yt-c ....... (vii)
for all possible pairs of (x,y) series in the group. The reported F-statistics are the Wald statistics for the joint hypothesis β1 = … = βc = 0. For each equation, the null hypothesis is therefore that x does not Granger-cause y in the first regression and that y does not Granger-cause x in the second regression.
If budget deficits share a long run relationship with other macroeconomic variables that we are studying, the next step is to examine causality, since if two or more variables are cointegrated; there is causality in at least one direction (Engel and Granger 1987). We then proceed to determine whether deficits Granger-cause GDP and other variables individually and vice versa.
(4) ERROR CORRECTION MODEL: The error correction result shows the speed of the adjustment of the variables to their long-run equilibrium. The Error correction model coefficient is meant to tie the short run disequilibrium of the error term to its long run value. The relationship is estimated using the model below:
ΔBDt = β0 + ∑β1i ΔGDPt-1 + ∑β2i ΔINT t-1 + ∑β3i ΔNEC t-1 + ∑β4i ΔINF t-1 +λECM(-1) + εt ........(viii)
where α1……… α4 are parameters of the independent variables.
λ is the error correction coefficient, µ and ε are the random disturbance term and Δ is the first difference operator. Equation (viii) is a dynamic error-correction model (ECM) of the short-run behaviour of budget deficit, where nk (k=1 to 4) measures the response of budget deficit to changes in the independent variables.

CHAPTER FOUR
4.0 PRESENTATION, ANALYSIS AND INTERPRETATION OF RESULTS
4.1 UNIT ROOT TESTS:
The results of the Augmented Dickey-Fuller (ADF) unit root tests of stationarity are presented below. The time series of our data was examined by conducting the unit root tests using the Augmented Dickey-Fuller (ADF) test. The result is presented below:
Table 4.1 Unit Root Tests Using Augmented Dickey-Fuller (ADF) methods
Series T-ADF at level T-ADF at First differencing 5% critical values Remarks
BD -2.978418 -5.772770 -3.5468 1 (1)
GDP -2.339864 -4.912598 -3.5468 1 (1)
INT -1.940076 -6.879008 -3.5468 1 (1)
NEC -1.788859 -8.472397 -3.5468 1 (1)
INF -3.418689 -5.742075 -3.5468 1 (1)
NB: Lag length=2.
Also, at level or any differencing where the calculated T-ADF is less than the chosen critical values (5%), the data is stationary.
The results in table 4.1 above shows that all the variables have been found to be non-stationary at level but stationary at first differencing at 5% level of significance, i.e. all the variables are integrated of order one. We therefore, proceed to Cointegration tests between the variables to detect any possible long-run equilibrium between the series.
4.3 COINTEGRATION TESTS
In table 4.2 below, the null hypothesis of no cointegrating vector can be rejected for all the variables used in the study (see table 4.2 below) and the empirical findings reinforce the conclusions about the presence of long-run relationship between budget deficits, GDP, interest rates, nominal exchange rates, and inflation rates.
Table 4.2 Johansen’s Cointegration Test
Sample: 1970 2006
Included observations: 35
Test assumption: Linear deterministic trend in the data
Series: BD GDP INT NEC INF
Lag intervals: 1 to 1
Eigenvalue Likelihood Ratio Critical Value 5% Critical Value 1% Hypothesized No. of CE(s)
0.702319 119.3532 68.52 76.07 None **
0.648908 76.94260 47.21 54.46 At most 1 **
0.550520 40.30785 29.68 35.65 At most 2 **
0.246500 12.31961 15.41 20.04 At most 3
0.066638 2.413692 3.76 6.65 At most 4
*(**) denotes rejection of the hypothesis at 5%(1%) significance level
L.R. test indicates 3 cointegrating equation(s) at 5% significance level
4.4 GRANGER CAUSALITY RESULTS
Table 4.4
Pairwise Granger Causality Tests
Date: 10/17/08 Time: 05:23
Sample: 1970 2006
Lags: 2
Observation: 35

NULL HYPOTHESES: F-VALUE F-TAB Probability DECISION
GDP does not Granger Cause BD 5.11872 2.69 0.01223 REJECT
BD does not Granger Cause GDP 5.78913 2.69 0.00748 REJECT
INT does not Granger Cause BD 0.29396 2.69 0.74743 ACCEPT
BD does not Granger Cause INT 0.51092 2.69 0.60507 ACCEPT
NEC does not Granger Cause BD 4.72584 2.69 0.01644 REJECT
BD does not Granger Cause NEC 50.7232 2.69 2.4E-10 REJECT
INF does not Granger Cause BD 0.74975 2.69 0.48113 ACCEPT
BD does not Granger Cause INF 0.11861 2.69 088857 ACCEPT

NOTE: F (V1, V2) = F (4, 30)
V1 = k-1 i.e. the number of parameters minus one
V2 = n-k i.e. the total number of observations minus the number of parameters
At 5% level of significance, with a 4 and 30 degrees of freedom for V1 and V2 respectively, reject the null hypotheses if the calculated F-values are greater than the tabulated F-values otherwise accept the null hypotheses.
In considering the relationship between BD and GDP, it was found that the calculated F-values for BD and GDP are greater than their tabulated F-values; therefore, we reject the null hypothesis and conclude that there is a bi-directional causality between Budget deficits and GDP, i.e. Budget deficit Granger causes GDP and GDP Granger causes budget deficits.
However, the test for causality between interest rates and budget deficits showed that there exists a non bi-directional causality between the two variables. Therefore, interest rates and budget deficits do not cause each other. Moreover, there exists a bi-directional causality between the nominal exchange rates and budget deficits. Therefore, nominal exchange rate Granger causes budget deficits and budget deficits Granger causes nominal exchange but to a larger extent.
With the same level of significance, it was found that inflation does not Granger cause budget deficits and Budget deficits do not Granger cause inflation. Therefore, there is a non bi-directional causality between the two variables.
We then proceed to the error correction model.


4.5 PRESENTATION OF ERRROR CORRECTION MODEL
Dependent Variable: D(BD)
Method: Least Squares
Date: 11/26/08 Time: 21:24
Sample (adjusted): 1971 2006
Included observations: 36 after adjusting endpoints
Variable Coefficient Std. Error t-Statistic Prob.
C 6267.164 6386.614 0.981297 0.3343
D(GDP) 0.001762 0.004333 0.406653 0.6871
D(INT) -5239.714 2010.750 -2.605851 0.0141
D(NEC) -2899.306 583.8486 -4.965852 0.0000
D(INF) -10.61644 391.0505 -0.027149 0.9785
ECM(-1) -0.921117 0.189006 -4.873481 0.0000
R-squared 0.667202 Mean dependent var -2803.956
Adjusted R-squared 0.611735 S.D. dependent var 58685.42
S.E. of regression 36567.41 Akaike info criterion 24.00271
Sum squared resid 4.01E+10 Schwarz criterion 24.26663
Log likelihood -426.0489 F-statistic 12.02893
Durbin-Watson stat 1.541636 Prob(F-statistic) 0.000002
R2= 0.6672, F Calculated= 12.0289, F Tabulated= 2.69, DW= 1.5416, t0.025 =+1.96 and -1.96.
From the result above, budget deficit quickly adjusts to its long run value in a time speed of 92%. The t-statistic of the ECM coefficient confirms that it is statistically significant. With respect to the Granger Representative Theorem (GRT), negative and statistically significant error correction coefficient are necessary conditions for the relevant variables to be cointegrated.
4.6 EVALUATION OF THE APRIORI TEST:
The result above implies that there is a positive relationship between budget deficits and GDP but a negative influence on interest rate. This is in agreement with the Keynesian view. The implication is that a unit increase in GDP increases the budget deficit by 0.00 1762 units; also a unit increase in budget deficits increases GDP by 0.001762 units, since they share a bi-directional causality. However, it shows a negative relationship between budget deficits, interest rate, inflation and nominal exchange rates. The result implies that a unit increase in interest rate, inflation and nominal exchange rates will decrease the deficits by 5239.7, 2899.3, and 10.6 units respectively. The result, however, opposed the monetarist approach of deficit versus inflation and is in consonance with Dwyer, 1982.
4.7 EVALUATION OF THE STATISTICAL TEST:
The Coefficient of Determination (R2): The R2 of 0.67 shows that the independent variables included in the model explains 67% of the variations in the dependent variable. Therefore the model is a good fit to the relationship.
T-Tests: In the case of deficits, inflation and GDP, we conclude that the relationship is insignificant while budget deficits exert significant influence on interest rate and nominal exchange rate.
4.8 EVALUATION OF THE ECONOMETRIC TESTS:
AUTOCORRELATION TEST
The computed DW is 1.5416, while at 5% level of significance, the dl and du are 1.18 and 1.80 respectively. Since DW lies between dl and du, therefore there is inconclusive evidence of first order serial correlation, either positive or negative.
4.9 EVALUATION OF WORKING HYPOTHESIS
The researcher wishes to use the F-Statistics to test the working hypothesis. This is aimed at finding out if budget deficit exerts significant impact on the whole regression plane. Since F-calculated (12.0289) is greater than F-tabulated (2.69), we reject Ho and conclude that budget deficits exert significant impact on macroeconomic performance of Nigeria.








CHAPTER FIVE
5.0 SUMMARY OF FINDINGS, POLICY RECOMMENDATION AND CONCLUSION
It is an established theory by the Keynesian schools that deficits crowd-in investment through its influence on domestic production. By making reference to the expansionary effects of budget deficits, they argue that usually budget deficits result in an increase in domestic production, which makes private investors more optimistic about the future course of the economy resulting in them investing more and therefore crowding-in investment.
This work examines the long-run relationship between budget deficit and other macroeconomic variables in Nigeria. The results confirm to the above theory but rejects the claim that budget deficits increase interest rate, which is a popular opinion held by both the Keynesian and the Neoclassical schools. In the empirical exercise, we have used the Augmented Dickey-Fuller (ADF) methods for finding out the presence of unit root in all the variables (budget deficit, GDP, interest rate, inflation and nominal exchange rate) used in the study and have found that they are non-stationary at level but stationary at first differencing {i.e. they are 1 (1)}. We have employed Johansen’s Cointegration Test to check cointegration of these variables. We found that the variables in the study are all cointegrated of order one, i.e. there is the presence of long-run relationship between budget deficits, GDP, interest rates, nominal exchange rates, and inflation rates. The Granger Causality results in the presence of cointegrating relationships reveal that there is a bi-directional Granger-causality between Budget deficits and GDP and budget deficit and nominal exchange rate. However, the test for causality showed that there exists no causality between deficits and interest rate and budget deficits and inflation. The error correction model (ECM) coefficient (-0.92) is negative and statistically significant.
From my empirical analysis, budget deficits could crowd-in investment through its reducing effects in interest rate, and thereby contribute to economic growth as long as the percentage to GDP is not greater than 3.7%. Policy makers should control the level of deficits to ensure that it is within this level. Also, a decrease in the level of the deficits could strengthen the exchange rate as it has a negative relationship with it
In conclusion, our studies denote that there is a long-run relationship between budget deficits and macroeconomic variables and budget deficits exert significant impact on macroeconomic performance of Nigeria.




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APPENDIX II
RESULT OF STATIC RELATIONSHIP
OLS
Dependent Variable: BD
Method: Least Squares
Date: 11/26/08 Time: 20:32
Sample: 1970 2006
Included observations: 37
Variable Coefficient Std. Error t-Statistic Prob.
C 22448.30 16686.49 1.345298 0.1880
GDP -0.000574 0.005073 -0.113094 0.9107
INT -4367.580 1665.108 -2.623001 0.0132
NEC -1243.044 338.3250 -3.674111 0.0009
INF 587.2856 488.9656 1.201077 0.2385
R-squared 0.778384 Mean dependent var -53911.83
Adjusted R-squared 0.750682 S.D. dependent var 86721.53
S.E. of regression 43301.58 Akaike info criterion 24.31485
Sum squared resid 6.00E+10 Schwarz criterion 24.53255
Log likelihood -444.8248 F-statistic 28.09848
Durbin-Watson stat 1.455741 Prob(F-statistic) 0.000000




RESULT OF THE DYNAMIC RELATIONSHIP
ECM RESULT
Dependent Variable: D(BD)
Method: Least Squares
Date: 11/26/08 Time: 21:24
Sample (adjusted): 1971 2006
Included observations: 36 after adjusting endpoints
Variable Coefficient Std. Error t-Statistic Prob.
C 6267.164 6386.614 0.981297 0.3343
D(GDP) 0.001762 0.004333 0.406653 0.6871
D(INT) -5239.714 2010.750 -2.605851 0.0141
D(NEC) -2899.306 583.8486 -4.965852 0.0000
D(INF) -10.61644 391.0505 -0.027149 0.9785
ECM(-1) -0.921117 0.189006 -4.873481 0.0000
R-squared 0.667202 Mean dependent var -2803.956
Adjusted R-squared 0.611735 S.D. dependent var 58685.42
S.E. of regression 36567.41 Akaike info criterion 24.00271
Sum squared resid 4.01E+10 Schwarz criterion 24.26663
Log likelihood -426.0489 F-statistic 12.02893
Durbin-Watson stat 1.541636 Prob(F-statistic) 0.000002




UNIT ROOT TESTS
GDP
ADF Test Statistic -4.912598 1% Critical Value* -4.2505
5% Critical Value -3.5468
10% Critical Value -3.2056
*MacKinnon critical values for rejection of hypothesis of a unit root.


INT
ADF Test Statistic -6.879008 1% Critical Value* -4.2505
5% Critical Value -3.5468
10% Critical Value -3.2056
*MacKinnon critical values for rejection of hypothesis of a unit root.

NEC
ADF Test Statistic -3.758548 1% Critical Value* -4.2505
5% Critical Value -3.5468
10% Critical Value -3.2056
*MacKinnon critical values for rejection of hypothesis of a unit root.

INF
ADF Test Statistic -5.742075 1% Critical Value* -4.2505
5% Critical Value -3.5468
10% Critical Value -3.2056
*MacKinnon critical values for rejection of hypothesis of a unit root.

BD
ADF Test Statistic -5.772770 1% Critical Value* -4.2505
5% Critical Value -3.5468
10% Critical Value -3.2056
*MacKinnon critical values for rejection of hypothesis of a unit root.

JOHANSEN’S CO-INTEGRATION TEST
Sample: 1970 2006
Included observations: 35
Test assumption: Linear deterministic trend in the data
Series: BD GDP INT NEC INF
Lag intervals: 1 to 1
Eigenvalue Likelihood Ratio Critical Value 5% Critical Value 1% Hypothesized No. of CE(s)
0.702319 119.3532 68.52 76.07 None **
0.648908 76.94260 47.21 54.46 At most 1 **
0.550520 40.30785 29.68 35.65 At most 2 **
0.246500 12.31961 15.41 20.04 At most 3
0.066638 2.413692 3.76 6.65 At most 4
*(**) denotes rejection of the hypothesis at 5%(1%) significance level
L.R. test indicates 3 co-integrating equation(s) at 5% significance level




YEARS GDP INT NEC INF BD
1970 5203.7 4.5 0.7143 13.8 -455.1
1971 6570.7 4.5 0.6955 16 171.6
1972 7208.3 4.5 0.6579 3.2 -58.8
1973 10990.7 4.5 0.6579 5.4 166.1
1974 18298.3 4.5 0.6299 13.4 1796.4
1975 21558.8 4 0.6159 33.9 -427.9
1976 27297.5 3.5 0.6265 21.2 -1090.8
1977 32747.3 4 0.6466 15.4 -781.4
1978 36083.6 5 0.606 16.6 -2821.9
1979 43150.8 5 0.5957 11.8 1461.7
1980 50848.6 6 0.5464 9.9 -1975.2
1981 102686.8 6 0.61 20.9 -3902.1
1982 110029.8 8 0.6729 7.7 -6104.1
1983 119117.1 8 0.7241 23.2 -3364.5
1984 125074.8 10 0.7649 39.6 -2660.4
1985 144724.1 10 0.8938 5.5 -3039.7
1986 143623.9 10 2.0206 5.4 -8254.3
1987 203037.1 12.75 4.0179 10.2 -5889.7
1988 275198.2 12.75 4.5367 38.3 -12160.9
1989 403762.9 18.5 7.3916 40.9 -15134.7
1990 497351.3 18.5 8.0378 7.5 -22116.1
1991 574282.1 14.5 9.9095 13 -35755.2
1992 909754.2 17.5 17.2984 44.5 -39532.5
1993 1132181 26 22.0511 57.2 -107735.5
1994 1457130 13.5 21.8861 57 -70270.6
1995 2991942 13.5 21.8861 72.8 1000
1996 4135814 13.5 21.8861 29.3 32049.4
1997 4300209 13.5 21.8861 8.5 -5000
1998 4101028 14.31 21.8861 10 -133389.3
1999 4799966 18 92.6934 6.6 -285104.7
2000 6850229 13.5 102.1052 6.9 -103777.3
2001 7055331 14.31 111.9433 18.9 -221048.9
2002 7984385 19 120.9702 12.9 -301401.6
2003 10136364 15.75 129.3565 14 -202724.7
2004 11673602 15 133.5004 17.9 -172601.3
2005 3643060 13 131.6619 8.2 -161406.3
2006 4636149 12.25 128.6516 15.03 -101397.5