CAUSES EFFECTS AND REMEDIES OF ECONOMIC DEGENERATION IN A DEVELOPING COUNTRY (NIGERIAN PERSPECTIVE)

ABSTRACT

This  study was designed to  appraise the causes, effects and remedies of economic degeneration in a developing economy; analyzing Nigerian situation.  Today, our economy is going down the drain, but the truthful and actual situation, is that for over a decade now, Nigerian economy has been under severe stress. To address this above problem, this work aims at taking a good look at the factors that contribute to this degeneration of our economy, with a view on how to elicit actions towards eradicating them. Data collected for this work was through the use of questionnaires, survey and historical research method. Further extensive literature survey was also carried out to expose all the possible areas of hypothesis. A total population figure of 106 million (based on 1991 census figure) was used.  Out of this, a randomly selected sample size of 311 respondents was computed through the use of Yarmane’s and Kumar’s model. Data analysis was done using tables and percentages, while acceptance and rejection of hypothesis used in this study was based on tests conducted using statistical test of z-test. The details of results, indicated that political instability impinges adversely on the economy through divestment, lack of new foreign investment and that corruption is a major impediment to our development goals. Recommendations offered in line with the findings of this study are thus: that corruption in all its ramifications and manifestations, should be discouraged in the strongest term: Legacy of lasting and enduring democracy should be bequested. Conclusively, the unhealthy state of Nigerian economy today is as a result of bad governance occasioned by poor quality of leadership or absence of it.

CHAPTER ONE INTRODUCTION

1.1.   BACKGROUND OF THE STUDY

Nigeria at independence joined the committee of nations with hope for a better tomorrow. she was able to feed herself and had a view of becoming independent.   She had lofty ideas of leading the African Continent to the promised land of economic emancipation.

She believed that these were easily attainable goals due to her richly endowed economic and human resources, good climate and stable socio-political conditions.

Today, due to political and economic disequilibrium, she is yet to attain these hopes. The actual and truthful situation is that for over a decade now, the Nigerian economy has been under severe stress. She seems to be going deeper and deeper down the drain. The consensus is that it has never been this bad for Nigeria.

The price of any conceivable item from Garri and Bread and Razor blade and Yam not to mention petrol and complex industrial products have been soaring in geometric proportions over the years.

The economy is truly in dire difficulty Factors such as stagflation, taxation, economic and political instability, foreign exchange ratio policy, outrageous cost of capital, subterranean cum subversive competition and market forces have compounded and complicated the situation even more.

Due to the adverse economic conditions prevailing in the country, many businesses have closed. For example, Leventis Plc at Enugu and banks declared distressed at an alarming rate by the Central Bank of Nigeria (CBN). All these has contributed in no small measure to the submerging of many businesses.  Many of these that are still afloat are experiencing economic degeneration.

Thus, it is based on this background that the researcher wants to research on the causes, effects and remedies   of Economic Degeneration in a stagflated developing Economy like Nigeria.

This economic degeneration is much more pronounced in the industrial sector but not to say that it is not existing in the Agricultural Sector, perhaps other sectors and sub-sectors of the economy.  This has contributed to low industrial output occasioned by low capacity utilization and socio political

factors.  In Agricultural sector, this is observable in the diminishing quantity and quality of both staple food items and cash crops. Economic Degeneration in Nigerian Industries and Society

Nigerian Automobile industry epitomizes this concept aptly. None of Nigeria’s Automobile companies in these industries namely Leyland, Steyr, Fiat, Volkswagen of Nigeria (PAN) and ANNAMCO  is  anywhere  near  it’s  installed  capacity, notwithstanding that the market prices of their products have gone up astronomically, four out of the six, so far have closed their shops (Steyr, Leyland, Fiat, VOWN).

The  degeneration is not limited to the Automobile industry alone.   The iron and steel industry, banking industry, cement, paper   machine tools etc and the civil service experience this degeneration too.

The spirit of the people have been so affected that only very few   cares. This must not be allowed to go on otherwise, the adverse multiplier effects can ruin this nation irredeemably.

This non-chalancy, deterioration and decay is much.  Decay

is much amplified in the public sector than the private

sector.  Equipments  that cost millions are left under the rain to deteriorate. Public infrastructures are left in a sorry state of disrepair for intenable reasons.   These developments are what formed the background of this research.

1.2    STATEMENT OF PROBLEM

There is a little doubt that manufacturers in Nigeria have since the early 1980’s been endangered.  This then leads us to this question. What has happened to Nigerian’s glorious vision as an industrial power?

Nigeria in the 1970’s has a popular vision of Nigeria as an industrial power, but today, manufacturing in Nigeria has become a victim of its very potential. Ingredients necessary for the attainment of that vision, ranging from infrastructure to hygienic economic policies and their implementation, either failed to materialize or gradually disappeared.  (Business Concord 1997:p

12).

Production has almost ground to a halt because of non- availability of foreign exchange with snow-balling effects on machinery, spare parts and some raw materials. The public sector which traditionally provide   most of the jobs has contracted, creating in the process a large and growing army

of the unemployed. Thus, we have another question. In what state is our social services sector?

Our social service sector, has equally nosedived. Aside from

the regular frustrations with power and water supplies not to mention the consulting clinics which our hospitals have turned into, potholes and garbages have now taken over most of our streets.

Individuals, families, industries are seriously feeling the impact of economic degeneration in Nigeria.  The economy has been in dire straits and in worse shape than at any other period in our past colonial history.

Nigeria today is passing through a very difficult period of economic  stranglehold  occasioned  by  social  political,  moral, ethical, cultural, educational problems.

These multiplex problems, informed the decision of the researcher to research, with a view to finding solutions to these complex problems.

1.3    OBJECTIVES OF THE STUDY

Over a decade now, the Nigerian economy has defied economic postulations adduced by expert in IMF, IBRD, Nigerian Economists etc.

Some have suggested increased fiscal measures, others, reduction in Fiscal manipulations , increased monetary policies etc.   At various points in and time over the past 12 years.  We have followed one measure after another, yet our economy defied all these and is still running heedlessly into the woods.  Perhaps we still have hope in the upcoming civilian rule.

Considering that most aspects of our economy is going through the degeneration phase, the objectives of these research therefore are thus:

1.To take a very hard look at the various factors that contribute to the falling down of our economy, since it is believed that highlighting them will definitely elicit reactions towards eradicating them.

2.To   identify  these   factors   causing   instability  and  lack   of investment in the economy.

3.To delve into the analysis of the causes, effects and remedies of economic degeneration in a stagflated developing economy with a view of proffering informed suggestions on ways of successfully combating this hydra-headed problem.

1.4    HYPOTHESES

1.     Ho:In Nigeria, corruption is not a major impediment to development goals.

H1:In Nigeria, corruption is a major impediment to development goals.

2.      Ho:Economic degeneration in Nigeria was not engendered by incessant military coups and political instability.

H1:Economic degeneration in Nigeria was engendered by incessant military coups and political instability;

3.      Ho:The unhealthy state of Nigerian economy today is not as a result of governance occasioned by poor quality of leadership or absence of it.

H1:The unhealthy state of Nigeria economy today is as a result of governance occasioned by poor quality of leadership or absence of it.

4.Ho:Low productivity sequel of low capacity utilization or absence of it is not a precursor of economic degeneration,

H1:Low productivity sequel of low capacity utilization or absence   of   it,   is   a   precursor   of   economic degeneration.

1.5.   THE SIGNIFICANCE OF THE STUDY

Great level of corruption, inappropriate and very low quality selection of leaders, moral decadence warped societal values, inordinate ambitions, inappropriate manpower-selection and utilization, high interest rate, massive devaluation and continuing depreciation of the naira low/non

utilization of installed capacity of manufacturing plant, lack of investible funds occasioned by low capital formation, political instability, high cost of living, very high unemployment rate and inappropriate policies and programmes are too bad for any economy.

The researcher is gearing towards resolving these things.  It is  also  hoped  that  the  adoption  and  implementation  of  this research and recommendations of this research will no doubt help in revitalising our economy.

1.6    LIMITATION AND SCOPE OF THE STUDY

This  research  will  deal  with  the  causes,  effects  and remedies of economic degeneration in a stagflated economy. The period to be covered will be from 1983 to date.  This research is going to make use of mainly historical data and questionnaires.  it will also limit its research to industrial

sector of the economy. Primary data will be gathered from Enugu, Awka, Lagos, Port Harcourt. The population of this research can not be covered by the researcher due to poor funding, hence the population to be covered will be a statistically selected sample

size.

The availability of correct and up-to-date data is not easy, when    available, one still encounter-wholly    unnecessary bottleneck due to socio-cultural background, bureaucracy and subterranean motives.   This constituted an impediment to this research.

Exorbitant transportation costs, high level of risk of travelling by road and geographical spread of the data base, constitute limitations in themselves.

1.7    DEFINITION OF TERMS

!   Devaluation

Bringing  down  or  reducing  the  exchange  rates  of  a country’s currencies as expressed in the currencies of the trading partners of the rest of them is what is known as devaluation of a national currency. This act of bringing down or reducing is usually  performed by the monetary authorities or by the government.

!   Deregulation

Thus simply means allowing market forces to take a prime place in the economy by removing restrictions hitherto imposed by either  the government or regulators of the economy like the monetary authorities.

!   Economic Degeneration

This means economic loss of production form from higher production level to a lower production level or absence of production.  This is caused by endogenous and exogenous variables other than a firm’s inability to sell it’s products or price depression. It is quite distinct

from deflation, a more generally encountered word in economics and finance that connotes price depression and fall in business due to inability of firms to dispose their product. Degeneration can denote reduction in level of business performance brought about by many factors including price decrease or depression.

!   Paradox

Statement  that seems to  say something opposite to  common sense or the truth but which may contain a truth.

!   Stagflation

This is a paradox phenomenon where the economy experience stagnation as well as inflation.  It is a problem of economic degeneration evidenced by decline in productivity, sectorial inflation and deflation unemployment and multiple of boom and doom in some sectors. According to Samuelson (1987 p.  7).  Stagflation  in    the  same  vein,  is  the  “stag”  plus inflation, taking `stag’ from stagnation and “flation” from inflation.

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