DONOR ASSISTANCE AND PRIVATE SECTOR DEVELOPMENT IN NIGERIA: EVIDENCE FROM UNITED NATIONS DEVELOPMENT PROGRAMME

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1 DONOR ASSISTANCE AND PRIVATE SECTOR DEVELOPMENT IN NIGERIA: EVIDENCE FROM UNITED NATIONS DEVELOPMENT PROGRAMME Yusuf Abdullahi and Idris Ahmed Department of Business Administration, Ahmadu Bello University, Zaria Abstract The study attempts to examine and underscore the impact of donor assistance on public sector development in Nigeria from Data was collected mainly through the administration of questionnaires, the responses of which were presented and analysed using tables, simple percentage and standard deviation. The hypothesis was also tested by ascertaining the standard deviation of the distribution of data. Based on the presentation and analysis of data, the researcher came up with some major findings, prominent among which is that private sector development promotes efficient economic growth and development and it constitutes a source of wealth by enabling people to get jobs, employment and improve their income as well as access and opportunities. The researcher therefore, majorly recommends, thatprivate sector development as one of the UNDP s programmes in Nigeria to be implemented by assessing and efficient use of economy driven donor assisted programme to enhance economic growth. Keywords: Development, private sector, donor, assistance Introduction Nigeria is a country with potentially vast wealth; despite this, two third ( 2 / 3) of its population still face poverty. Private Sector Development (PSD) is known worldwide to constitute not only a critical factor in broadening the base of the economy, but also an element in strengthening Gross Domestic Product (GDP), employment and earnings as well as international competitiveness. The challenge for Private Sector Development (PSD) has therefore, become Nigeria s engine of growth within the National Economic Empowerment and Development Strategy (NEEDS) and 7 Point Agenda as recently refined into Vision Although, the environment for economic development seems to improve gradually with an average growth rate of 5 8% since 2007, tremendous challenges regarding institutional weakness, governance, lack of finance and adequate information, gender disparity in terms of participation remains. Yet, commitments to combat poverty and engineer suitable growth through Private Sector Development (PSD), especially since the Millennium Development Goals (MDGs) as 1

2 inaugurated in 2000 has been one of the Nigerian policy choice initiatives. Many local and international donors are aware of this policy choice and are supporting Nigeria through capacity building, improving business environment and product value chain development among others to promote growth and poverty reduction. The United Nations Development Programme (UNDP) aptly recognises that achieving the MDGs depend on creating jobs, supporting the growth of small businesses and promoting inclusive market. But to what extent has the UNDP influenced positive outcome in Nigeria. The UNDP is committed to scaling up Private Sector Development (PSD) in achieving sustainable development and poverty reduction in Nigeria. Key elements in mainstreaming various strategies include promoting employment, intensive growth, capacity building, and development of value chains in market sector and overall improvement of business environment. However, it remains to ascertain the extent to which such initiatives have positively made some pay off to the economic growth in Nigeria. The study intends to examine in quantitative and qualitative terms how such partnership with Nigeria s private sector has contributed to growth and poverty reduction. Therefore, the overall target of UNDP in terms of Private Sector Development (PSD) is required, including piece meal assessments of its effort in the period under examination. How many people have been trained or empowered to commence small businesses of their own, within UNDP s institutional framework for private sector development in Nigeria? The Central Bank of Nigeria (CBN) strategy for growth underscores private sector development, as key element and recognises investment in small and medium enterprises (SMEs), microfinance institutions; capacity building, investors forum and credit guarantee schemes as component objectives to attain the desired growth. Opportunities for SMEs generate from liberalised business environment, where access and awareness are available. But, capacity building and skills improvement are required for sustainable enterprises, including access to finance. Investment forum enables participants to meet regularly to exchange business ideas, opportunities for job training and access to information. To what extent is the UNDP responsive to these challenges? What was the situation prior to the year 2000 and what positive impact has the UNDP from ; what are the things that UNDP did not do efficiently to improve the welfare of Nigerians within the ambit of private sector development? These are the challenges which the study is designed to address. Having hypothesized that Donor assistance has no impact on private 2

3 sector development in Nigeria, the researcher endeavoured to proffer answers to the following questions which guidedthe work: i. Can private sector development make any impact to economic growth and poverty reduction? ii. What are federal government s (CBN) policy strategies to promote private sector development in Nigeria? iii. Are capacity building, micro finance, skill acquisition and specific job training; participation and access or gender equality strategies are actually promoting private sector development? This study is intended or designed to evaluate and ascertain the degree of impact of donor s assistance on private sector development in Nigeria with particular reference to the United Nations Development programme from It is believed that donors have made fair contributions in poverty reduction and sustainable development in Nigeria in various ways. For example, donors are actively supporting education, health, capacity building to public institutions for accountable and transparent governance. Others include support to human rights, democracy and transparent electoral process in Nigeria. However, this study is limited to private sector development and the role or positive response of the United Nations Development programme in creating space for private sector development in Nigeria, rather than other sectors where other donors are providing support to Nigeria. Furthermore, the scope is periodical to cover only The choice for the period emanates from the fact that the United Nations Development has been actively involved in Nigeria prior to 2004, when the MDGs were inaugurated and when the global impact was formed to promote private sector development. Literature review The purpose of this study is to review relevant literatures on donor assistance with respect to Private Sector Development (PSD) and how such assistance has impacted on the promotion of sustainable enterprise development and overall economic growth of Nigeria. Private Sector Development (PSD) for the promotion of sustainable enterprise and economic growth. Therefore, its overall impact with particular reference to the case of United Nations Development Programme (UNDP) in Nigeria would be reviewed and key issues regarding its programmes, strategies and processes. In Cambodia, the financing of the economy by traditional banks was insufficient to cover the financial needs of very small businesses, 3

4 which nonetheless make up the fabric of Cambodia economy. Most micro businesses must turn to micro finance institutions for financing. One of the largest Cambodian micro finance institutions is AMRET. It has more than 22,000 clients and an extensive network in rural and semi-rural areas. In 2008, it made credit (loans) worth a total of 41 million Euro (FDA, 2008). In 2008, PROPARCO invested 1.4m Euro in AMRET to help it meet its current challenges. PROPARCO also granted AMRET a 4 million Dollar loan to finance its growth and extended its services to more clients. In , it was estimated that AMRET has created up to 20,000 jobs, of which, women hold 83%. In all, the Afghanistan and Cambodia economies are growing at improved rates of 5% and 6% respectively. The third point is investment in infrastructure. Enterprises development, sustainability and human development critically depends on the quality of physical infrastructure, such as good road networks and transportation system, schools and hospitals, including access to water and energy, service providers and machinery suppliers. Ngozi Iweala and Osafo Kwaakko (2007) observed that an expanded and sustained investment in infrastructure is one measure that will significantly impact on private sector development and investment in Nigeria. They noted that decades of under investment in physical infrastructure resulted in the deterioration of public infrastructure, insisting that the poor existing domestic infrastructure has imposed a large transaction cost on the ease of doing business in Nigeria. It is somewhat complex to admit that Donor assistance to developing countries has made significant impact on private sector development. This is because there is little or no accurate data available for the measurement of donor, input to private sector development. Again, the initiative is new in the priorities of development assistance as a whole (NPC, ). However, it cannot be dismissed that donors are investing tax payer s money from abroad in the private sector development in developing countries. Firstly, it is important to discuss the effects of the OECD in private sector development. Secondly, agency and institutional mechanisms must also be discussed in the light of specific interest and how aid should be delivered (OECD & Africa, 2009). Besides, the CBN has in 2010 considered and approved the sum of N500 billion debenture stock to be issued by the Bank of Industry (BOI) with effect from May, Government realises the fragile business environment as a result of poor infrastructure and energy supply. Therefore, it has earmarked N300 billion to be applied to power project. Also, N200 billion has been 4

5 offered as re-financing as a way of restructuring bank s loan to the manufacturing sector (NPC, 2010). Ellis A and Blackden M. et al (2007) writes that culture and traditional norms can create or uncreate entrepreneurial behaviour among a people. As United Nations Development Programme (2009) report posited, the role of United Nation Development Programme in economic growth is to ensure that the poor are not excluded from decisions and policies of governments. What policies and decisions? Policies and decisions refer to the physical and regulatory environment. Is government policy for example, disposed to mainstreaming gender in small and medium enterprises (SMEs) and microfinance initiatives? Research methodology The research design is in accordance to the methodological approaches to be adopted in the study. These include: data collection method, population and sample size, data analysis method, justification of method used, development and administration of research instruments as well as questionnaire and interview. These procedures obtain from social inquiry, and shall inform the methodology to be adopted in the study. The sources of data and other relevant information for the study was be based on two well-known criteria in social science inquiry - the primary and secondary data sources. The primary data sources was involve the administration of questionnaire and personal interview to the supervisory officials on projects (private sector development) at the UNDP, Nigeria. Of course, this is based on the belief that such project supervisors are bound to have first-hand information and knowledge of private sector development. Also, the administration of questionnaire was carried out at the headquarters of UNDP Nigeria located at the UN house. The second means of data collection is through the secondary technique. It has involved the review and synthesis of relevant information on private sector development. In other words, it involves the review of documented empirical evidence on private sector development issues and challenges. Such review was involved for the most part, relevant journals on donor assistance with respect to private sector development. Certainly, the review of relevant literature was more of reporting and historical analysis of past initiatives or activities on private sector development. Although, this can be open to subjectivity, however, the review was done in such a way that meanings assigned to concepts used utilising the writing of competent authorities on private sector development. Notwithstanding, the problems associated with such a historical reporting, the reliability 5

6 and validity should not be open to any form of scepticism. In order to measure or obtain reliability and validity, the population sample is located at the headquarters of the United Nations Development Programme (UNDP). This size is pegged at sixty (60) people (respondents). This size was obtained by using probability samples. The research instruments to be used for collecting data is questionnaire, the questions in the questionnaire are mostly closeended, in which case, respondents are accorded opportunity to make choice among the options available. Of the 60 questionnaires to be administered, at least fifty (50) are sure to be returned which represents 83.3%, while 10 representing 16.6% are left to chance of uncertainty, such as inappropriate completion, failure to retrieve the questionnaire, etc. According to Babbie (1983), hypothesis is an assumption which can be tested or verified about a phenomenon. Data presentation and analysis As has already been indicated in this study, the questionnaire was administered in development partners office such as the UNDP, DFID, and of course the chief host of the agencies The National Planning Commission. A total of 70 questionnaires were administered and 56 were actually retrieved, but 6 were poorly completed and therefore, could not be included in the analysis. Accordingly, 50 questionnaires representing 71.4% were presented for analysis, while 20 representing 28.5% were excluded from the analysis. This part deals with questions that are purely technical in nature. Therefore, they are very relevant to the study and responses will be presented in tables, where relevant to clearly show percentage responses as well as frequency to variables. Table 1: Capacity building and UNDP s support to private sector Capacity building is a key aspect of UNDP s support to private sector development Strongly Agree 9 18 Strongly Disagree 3 6 Agree No opinion 3 6 Source: Field Survey, 2014 The distribution of data in the table shows an overwhelming support by respondents that capacity building is a key aspect of 6

7 UNDP s involvement in private sector development in Nigeria. While 18% strongly agree, a preponderance of 70% ordinarily agreed. Although, the refusal ratio which is 6% is low, it is most probable that they are not thoroughly aware of UNDP s development intervention components. That could also be likened to the 6% of no opinion that was also recorded. However, the total support of affirmation that the UNDP does support private sector development is 44 (88%). Table 2: Donor assistance impact on private sector development Donor assistance has impact on private sector development in Nigeria Strongly Agree Strongly Disagree 3 6 Agree No opinion 0 0 Source: Field Survey, 2014 From the table, the distribution of data indicates 30% support to donor intervention having impact on public sector development. Although, the percentage was 30%, yet it presents a strong base for decision making. More than ever, the role of development partners in reform policies in Nigeria in particular and Africa in general is an experience that cannot be ignored in reviewing growth strategies and interventions for economic development. In accordance with its country programme, action plan for Nigeria ( ), the UNDP is focused on proper growth through public sector development programme by growing non-oil resource base and promoting inclusive market. Therefore, UNDP s approach to public sector development programme is to increase productivity, employment, income, reduce poverty and close gender gaps and other disparities. 7

8 Table 3: Micro finance as a key factor in private sector development Micro finance is a key factor in private sector development Strongly Agree Strongly Disagree 0 0 Agree No opinion 0 0 Source: Field Survey, 2014 Responses to variables in the table indicate an excellent support that private sector development could not possibly thrive in the absence of micro finance. About 80% expressed very strong opinion about that. Also, 20% ordinarily agreed, buttressing above position. In Nigeria, one of the biggest challenges to private sector development is absence of finance. One point is to build human resource capacity and another is to have access to finance (Center for Entrepreneurial Department, 2008). Table 4: Market access and private sector development in Nigeria Market access can aid private sector development in Nigeria Strongly Agree Strongly Disagree 0 0 Agree 2 4 No opinion 0 0 Source: Field Survey, 2014 Market access implies capacity for products or services to enjoy patronage in local and international markets. In domestic/international markets where foreign goods complete to outclass local goods and services, market access becomes limited. Rather, access can boost higher demand, improvement of brands through value chain processes, including expansion in industrialisation and technology. Technological capability enables quality goods to be produced and compete favourably in all markets. 8

9 Test of hypothesis Table 5: Private sector development is part of intervention of donor assistance programmes Strongly Agree Strongly Disagree 3 6 Agree Disagree 1 2 Source: Field Survey, 2011 Standard deviation Table 6: Private sector development is one of the UNDP s programmes in Nigeria Yes No 2 4 No opinion 3 6 Source: Field Survey, 2011 Table 7: Capacity building is a key aspect of UNDP s support to private sector development Strongly Agree 9 18 Strongly Disagree 3 6 Agree No opinion 3 6 Source: Field Survey,

10 Table 8: Micro finance is a component of public sector development in Nigeria Strongly Agree Strongly Disagree 0 0 Agree No opinion 5 10 Source: Field Survey,

11 One vital point in this study was to establish that donors expend resources in private sector development in Nigeria. Another was to ascertain that UNDP is participating in private sector development. Private sector development is part of intervention of donor assistance programmes. Tables 1 and 2 clearly validated in affirmation that private sector development is not only a component of donor s intervention portfolio in Nigeria, the UNDP in particular is actively supporting private sector development. The standard occurred at 18.5 and respectively for both tables 5 and 6, Table 7 showed that up to 22.5 (70%) level of persons agree that capacity building is a key component of UNDP s support to private sector development while only very few respondents disagree. Fundamentally speaking, capacity building is the basis of micro finance initiative for SMEs and private sector development. In Table 8, up to 17.5 level of persons strongly agreed that microfinance is component of UNDP support to Nigeria in its development assistance, while only an insignificant level of 2.5 persons ordinarily agreed but not sure. Discussion of findings Private sector development promotes efficient economic growth and development, and it constitutes a source of wealth by enabling people to get jobs, employment and improve their income as well as access and opportunities. This is because incomes and access created by private sector enterprises lead to more equitable diffusion of the benefits of growth to more people. Access to information is one of the factors that is most likely to support entrants to private sector in accessing trainings, none of the respondents made mention of the role of information in accessing opportunities for training and capacity building as well as credits. The role of information in public sector development is well known. A survey of 450 women across Ghana indicated that access to information and advocacy supports to public sector development helped tremendously in increasing women participation. These were not particularly the case of Nigeria in view of review of literature and responses to the questionnaires. Conclusion Private sector development driven by a strong private sector is the engine of poverty reduction. Businesses 11

12 generate income and create employment by allowing people to support themselves. Private sector development helps eliminate poverty and hunger. Hence, the UNDP is spearheading it as a policy priority to support Nigeria s economic development initiatives. Nigeria is not however, insensitive to the importance of the policy priority as it is establishing and supporting institutions that engender private sector development. In fact, private sector development is a component of National Vision 20:2020 programme in the strategic thrust of sustainable economic growth. However, poor business climate, limited access to legal certainty of land ownership and finance, including adequate information regarding market and value chain development holds private sector bank from rapid development. Perhaps, the most intractable challenges faced by entrepreneurs and entrants to the sector are poor infrastructure, excessive or inadequate regulation, insufficient access to financial services and capacity building. Recommendations Clearly, there is need to underscore appropriate steps that engenders private sector development especially in view of the critical points that came out of the interpretation and analysis of data. These are: i. Availability of information is important in private sector development. Information regarding the programme itself, information validated in affirmation that private sector development is not only a component of donor s intervention portfolio in Nigeria, the UNDP in particular is actively supporting private sector development., regarding the operations of international trade and market are crucial to the degree of participation. The UNDP and other donors should invest in information dissemination, advocacy and awareness on private sector development. ii. Private sector development is one of the UNDP s programmes in Nigeria It is recommended that, it be implemented by assessing and efficient use ofeconomy driven donor assisted programme by the UNDP iii. To achieve private sector development, capacity building is critical for the Donor assisted programmes, in fact an integral part of Donor assistance. 12

13 iv. Micro finance is a component of public sector development in NigeriaFurthermore, micro economic framework and efficient business environment are important components of private sector development. Fiscal policies and exchange rate are determinants of size of entrants into the sector.it is an approach designed to make markets work better for the poor, particularly the so-called bottom billions as entrepreneurs, wage employees and consumers of goods and services with the aim of boosting employment, value added production and incomes References Akinyaima, T. et al (2003), International Development Assistance and Prospects, Tokyo Ammanda, E. L. et al (2007), Gender and Economic Development, NIDC World Bank Babbie, R. (1983), The Study of Social Science Research, UK: Warwick Cornee, C. F. and Kalin, R. L. (1968), Interviewing: A Book of Social Psychology, London: NT Press Ebimaro, S. (2006), Third Party Intervention in Conflict Resolution, Lagos: National Open University of Nigeria Enterprise Development Organisation (2008), Reforming the Business Environment, Regional and Global Lessons for Effective Donor Practices, Bangkok German Technical Cooperation (2008), Steps Towards Sustaining Development, Abuja Ginkel, H. V. et al (2003), Integrating Africa: Perspectives on Regional Integration and Development, Tokyo, UNU Press International Finance Cooperation (2007), Reforming the Regulatory Procedures for Import and Export : New York International Labour Organisation (2007), The Promotion of Sustainable Enterprises : Geneva Khemani, R. S. (2007), Competitive Policy and Promotion of Investment, Washington DC, World Bank Kraemer, S. M. (2007), Energy Security, London: T. J. Press Organisation of Economic Cooperation and Development (2008), Matrix of Factors of Private Sector 13

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