IMPACT OF FOREIGN AID ON SOCIO-ECONOMIC DEVELOPMENT IN NIGERIA
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL
IMPACT OF FOREIGN AID ON SOCIO-ECONOMIC DEVELOPMENT IN NIGERIA
PART ONE: INTRODUCTION
Background of The Study
Foreign aid’s influence in developing countries’ progress has been the subject of heated discussion. Foreign aid is an important subject because it has the potential to reduce poverty in developing countries. Previous empirical studies on foreign aid and economic growth have yielded conflicting results.
Addison, Mavrotas, and McGillivray (2005), for example, find evidence for a positive influence of foreign help on growth; Abegaz (2005) finds evidence for a negative impact of foreign aid on growth; while AFDB (2005)
and AFDB (2004) find evidence that aid has no impact on growth. Although Adelman (2000) determined that foreign aid has favourable impacts, this result only applies to economies if it is accompanied with sound fiscal, monetary, and trade policy.
Foreign aid’s primary purpose in encouraging economic growth is to supplement domestic sources of finance such as savings, hence increasing investment and capital stock. According to Adelman (2000), there are several mechanisms through which aid can contribute to economic growth:
(a) aid increases investment in physical and human capital;
(b) aid increases capacity to import capital goods or technology;
(c) aid has no indirect effects that reduce investment or savings rates; and aid is associated with technology transfer that increases capital productivity and promotes endogenous technical change. According to Addison, Mavrotas, and McGillivray (2005), four major alternative views on aid effectiveness have been proposed:
(i) aid has decreasing returns, (ii) aid effectiveness is influenced by external and climatic conditions, (iii) aid effectiveness is influenced by political conditions, and (iv) aid effectiveness is dependent on institutional quality.
It is worth noting that assistance flows to developing nations have increased significantly in recent years, while other forms of flows, such as foreign direct investment and other private flows, have decreased.
According to the Organisation for Economic Cooperation and Development (OECD), for example, foreign direct investment and other private flows are declining, and remittances are predicted to fall dramatically in 2009. Food and oil price increases in the last two years have taken a heavy toll on the budgets of many developing countries.
Many countries do not have adequate economic resources to deal with the current financial crisis. According to the OECD, overall net Official Development Assistance (ODA) from members of the OECD’s Development Assistance Committee (DAC) increased by 10.2% in real terms to US$119.8 billion in 2008, and is forecast to reach US$130 billion by 2010.
Africa is the beneficiary of the most international aid. For example, net bilateral ODA from DAC contributors to Africa totaled US$26 billion in 2008, with Sub-Saharan Africa receiving US$22.5 billion. Excluding volatile debt relief awards, bilateral aid to Africa and Sub-Saharan Africa increased in real terms by 10.6% and 10%, respectively.
Given the importance of foreign aid to developing-country economies, it is critical to comprehend its contribution to economic growth in developing countries. As a result, this study examines the effects of foreign aid on Nigeria’s economic growth.
Statement of the Problem
Is help beneficial to economic growth? As massive infusions of aid to developing nations have been advised in recent years as a means of overcoming poverty traps and boosting development, interest in this subject has grown (ActionAid, 2005). Significant efforts have been made to mobilise resources for increased help (for example, through an International Financing Facility).
Some argue, on the other hand, that help has traditionally been inefficient in supporting growth (ActionAid, 2005), and that big increases in aid are hence undesirable.
An intermediate position has been that additional help stimulates growth in certain circumstances, such as when countries have sound macroeconomic policies (Abegaz, 2005).
Despite a significant body of literature on help and growth, “the debate about aid effectiveness is one where little is “decided”” (Rajan, 2005:54). Empirical evidence has been presented to support the argument that aid stimulates economic growth unconditionally or in specific macroeconomic situations (Abegaz, 2005). In this context, the study tries to assess the influence of foreign aid on Nigeria’s economic progress.
Research Questions
What kind of foreign assistance does Nigeria receive?
Is there any meaningful benefit to Nigeria from foreign aid?
What are the obstacles and prospects for Nigeria’s economic progress as a result of foreign aid?
How can these issues be addressed?
Objectives of The Study
The study’s major goals are to investigate the impact of foreign aid on Nigeria’s economic progress. However, the precise aims include the following:
To investigate the nature of Nigeria’s foreign aid.
To determine whether Nigeria has benefited significantly from foreign help.
To assess the problems and opportunities for foreign aid in Nigeria’s economic development.
To propose answers to the highlighted foreign aid impediments to Nigeria’s economic development.
Scope of The Study
Given the importance of foreign aid to developing-country economies, it is critical to comprehend its contribution to economic growth in developing countries. This study examines the effects of foreign aid on Nigeria’s economic growth.
This examination will look at the nature, benefits, constraints, and prospects of foreign aid on the Nigerian economy. The study will accomplish so by focusing on the years 1999-2010.
The Significance of the Research
Foreign aid’s influence in developing countries’ progress has been the subject of heated discussion. Foreign aid is an important topic because it has the potential to reduce poverty in developing countries. Previous empirical studies on foreign aid and economic growth have yielded conflicting results.
As a result, the study will be significant because it will emphasise the nature, impact, challenges, and prospects of foreign aid in Nigeria. This is consistent with the fact that the findings will give policymakers with insight and data, as well as serve as a reference point for any future research. Above importantly, the research will add to the current body of knowledge.
The Research Methodology
Because of the nature of the research, the study will use the historical method. This strategy entails a critical but systematic examination of secondary data gleaned from textbooks, journals, seminar papers, and internet printouts, among other sources.
Data will also be acquired from official national and international sources, including the Federal Government of Nigeria, the Central Bank of Nigeria (CBN), and the World Bank, among others.
Limitations of the Research
There can be no effort without restrictions. As a result, the researcher was hampered during the course of the study by variables such as insufficient funding. This was owing to the country’s difficult economic circumstances.
The second problem is insufficient time, which is related to the first because the researcher had to balance academic work with other economic endeavours. However, the researcher made explicit attempts to restrict the impact of these circumstances on the content validity of the research work.
Definition of Terms
Because there are so many concepts within the social science discipline, it is necessary to operationally define specific terms in the context of their use in research work.
As a result, the following terms will be defined.
Foreign aid is the transfer of real resources from one government or public institution in the richer countries to governments in the third world’s least developed countries (LDCs).
Globalisation is described as the process of intensifying economic, political, social, and cultural ties across international boundaries in the context of its usage.
Sovereignty simply refers to a state’s ability to make choices and implement policies without interference from within or without.
Economic sovereignty is a nation-state’s ability to decide the objectives, aims, targets, and direction of its economic policies, as well as its growth pattern, without external intervention.
Need help with a related project topic or New topic? Send Us Your Topic
DOWNLOAD THE COMPLETE PROJECT MATERIAL