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Molokwu Ubaka Cosmas: Conditionalities Attached to ODA Negatively Impact the Socioeconomic Developme

Molokwu Ubaka Cosmas

After completing his PhD at Ebonyi State University, Dr. Molokwu Ubaka Cosmas has taught at various universities, most recently as Higher Technical Officer at the University of Nigeria. His recent research has focused on the socio-economic impact of foreign investment in developing countries, with recent publications including "Official Development Assistance and the Third World’s Debt Crisis: Implications for Nigeria Educational, 1980-2015" and "Nigeria-Cameroon Economic Relations and the Lake Chad Basin Commission, 1964-2015".

On September 28, the offshore USD/RMB exchange rate surpassed 7.2, the lowest value of the RMB since records began available in 2011. Rapid currency depreciation exposes significant dangers of currency devaluation, capital outflows, and inability to pay off foreign obligations for emerging market nations. In response to these issues, the Center conducted an exclusive interview with Dr. Molokwu Ubaka Cosmas on the impact of Official Development Assistance (ODA) on the socio-economic development of developing countries in the context of currency devaluation, seeking his views on which conditions of ODA affect the socio-economic development of developing countries through which paths, and how can developing countries make better use of ODA development and take measures to avoid its negative impact.

ODA and pertinent conditions

Official Development Assistance (ODA) popularly referred to as foreign aid, development aid, or aid, consists of resource transfer, in the form of grants and loans at concessional terms by official agencies of the members of the Development Assistance Committee (DAC), multilateral institutions, and Non-Development Assistance Committee countries. It is assumed that ODA would aid the development of the recipient countries. However, conditionalities attached to it make it harmful to the socio-economic development of the recipient countries.

Some of the conditions attached to ODA include: wage freeze, retrenchment of staff, subsidy removal, reduction of government spending on social and welfare expenditure, refusal of technical support from other nations except the donor nation, purchase of spare parts from donor nation alone, privatization and commercialization of public enterprise, trade liberalization, devaluation of the national currency, etc.

ODA conditionalities negatively impact socio-economic development

These conditions have had severe negative impacts not only on the educational sector but on the overall socio-economic development of developing economies, particularly, those in sub-Saharan Africa. For instance, the withdrawal or reduction of government expenditure in certain sectors of the economy such as education, health and agriculture; retrenchment of staff, removal of subsidies, and wage freeze etc., further heightened the socio-economic hardship of the citizens.

The devaluation of the national currency has not been too helpful for a raw-material-export- and manufactured-import dependent-economy like Nigeria. Since most countries in sub-Saharan Africa are raw material-export-dependent economies and the devaluation of their national currency impacts their economy negatively.

The privatization policy has also seen the commonwealth of the nations concentrated in the hand of a few multinational companies, who are agent of capitalist imperialism and their local collaborators. One implication of this is that the few rich get richer and the majority of the citizens get poorer. The commercialization of public enterprises has also seen millions of poor citizens unable to access goods and services in their country.

Impact of ODA Conditionalities on Education: Observations from Nigeria

1. Inadequate Funding

There are a lot of challenges facing Nigeria and making it difficult for good quality education that is empowering and capable of bringing about sustainable development to be provided. The first and perhaps the greatest challenge facing education is inadequate funding by federal, states and local governments, this is so because funding has been in response to conditionalities imposed by international financial institutions (IFIs) that served as aid agencies. Statistics show that the federal government budget for the education sector was 8.5% in 1980, it declined to1.94% in 1985, 2.95% and 4.6% in 1990 and 1992 respectively. In 1996 the allocation increased to about 10.8% and decline to 7.0% in 2001.

In spite of the cut in the spending in the educational sector as indicated above, there were indications of an increase in the enrolment of pupils and students in schools during the same time budget for the sector was reduced. Today, there are about 48, 242 primary schools with a population of about 16, 796, 078 pupils in public schools and 1, 965, 517 in private schools. Nigeria has 7, 104 secondary schools with 4, 448, 989 students.

It is noteworthy that aid-induced Structural Adjustment Programme (SAP), led to drastic reductions in spending on education in spite of the increment in enrolment as indicated above. The result was unpaid teacher salaries, degradation and over-stretching of education facilities at all levels and strikes in universities and schools. The end result is a decline in the quality of Nigerian education and literacy rates in the country.

In spite of the decreasing allocation to the educational sector, as shown above, the government has continued to allocate a tremendous amount of funds to service its debt, for example, in the year 2000, $1.9billion was used for debt servicing translating to about four times federal government allocation to education and about twelve times the allocation to health while in the year 2001 debt service payment was about $2.13billion which amount to six times the federal government allocation to education and seventeen times allocation to the health sector. With the decline in the allocation to the educational sector, it is undoubtedly that this huge external debt servicing constitutes a major impediment to the revitalization of the shattered educational sector.

2. Limited Accessibility and Infrastructural Decay

Secondly, there is the problem of access which has attracted a lot of attention, particularly in recent years. UNICEF in its 'state of the world's children reports for 1999' pointed out that about four million Nigerian children have no access to basic education, and that majority of those that are 'lucky' to enter schools are given sub-standard education. A study also shows that out of 1.2 million people who apply to study in Nigerian universities, only about 250,000 are able to secure admission because of limited space, leaving about a million young persons' outside of tertiary education.

Similarly, there is the problem of poor infrastructure and a lack of teaching and learning materials. A huge number of primary, post-primary and tertiary school buildings and facilities are dilapidated and unfriendly to students. The environment of teaching and learning is not conducive. These are reflections of the poor state of education infrastructure in the country. This problem of accessibility and infrastructural decay is traceable to poor funding. This poor funding has been in response to the conditionalities imposed by international financial institutions that also serve as aid agencies. All these have had negative impact on the development of the educational sector in Nigeria.

The late and early 1990s witnessed the dawn of a new era; an era in which brain-drain from Nigerian universities to the western universities became the order of the day. A lot of scholars both indigenous and foreign intellectuals left the country for better condition of services elsewhere, this mass exodus of intellectuals was as a result of currency devaluation, staff rationalization, staff retrenchment, wage freeze, reduction of government expenditure on social and welfare of her people among other conditions (which must be met before aid is given to Nigeria). The academia which is the nucleus of any nation’s development was severely challenged in every aspect. This mass exodus of intellectuals in conjunction with the issues highlighted above impacted negatively on the quality of education and human capital development of the nation.

Human capital is an important factor for the wealth of a nation due to its influence on the overall production of the country. Technological progress can provide more efficient production-methods like machines and computers, but skilled labour is necessary to manage and develop them as well as to improve the quality and productivity of the existing labour. The formation of Nigeria's human capital is therefore of great importance in the coming years if Nigeria wants to be competitive in the future. However, Nigeria is having a problem with its human capital. The Human Development Index (HDI) provides a measure of human capital development in three dimensions: income, health, and education. The latest value of HDI shows that Nigeria is ranked 156 among 187 countries. The value places Nigeria in the bottom, meaning that Nigeria is considered to have low level of human development. Even though human capital is only one factor of many that drives development and associated economic growth, it is a very important factor for the development process for a developing country like Nigeria. The productive capacity of a country is related to the level of human capital, explaining why human capital formation must be considered of great importance in the future. This poor rating of Nigeria’s human development is linked to the crisis she had in the educational sector which was triggered and sustained by Nigerian leaders that have been striving to meet the conditions attached to aid received.

Impact on agriculture: observations from Nigeria

Agriculture remains the mainstay of the economy since it is the largest sector in terms of its share in employment. In an effort to diversify her oil base economy, Nigeria is placing much emphasis on financing other sectors most especially the agricultural sector, since agriculture has the potential to stimulate economic growth through the provision of raw materials, food, jobs and increased financial stability.

The policies of aid, however, have negatively affected agricultural production in Nigeria. Food aid stagnates agricultural development because it leads to lower domestic savings, dislocation in the composition of investment, and a rise in capital flight. It kills the emergence of an efficient indigenous entrepreneurial class. This explains why the agricultural sector was abandoned in Nigeria. The abandonment of the agricultural sector from the 1980s and beyond is a major handicap to the economic development of Nigeria. Nigeria is no longer a major exporter of cocoa, groundnuts (peanuts), rubber, and palm oil. Cocoa production, mostly from obsolete varieties and overage trees, is stagnant at around 180,000 tons annually; 25 years ago it was 300,000 tons. An even more dramatic decline in groundnut and palm oil production also has taken place. Once the biggest poultry producer in Africa, corporate poultry output has been slashed from 40 million birds annually to about 18 million.

International agricultural organizations in advanced nations were seriously pushing for food disbursement to the nations of the South, however this gesture is not in the interest of the South. The advanced donor nations especially the United States expand or protects export markets and oppose funding for agricultural assistance to less developed countries. Improved high-yielding seedlings are usually given to Nigerian farmers to produce cash crops such as cocoa, coffee, tobacco and palm oil. These products served as basic raw materials for the industrialized capitalist western world. It should be noted that Nigeria’s cash crops are under-priced in the international market because these farmers are price takers as they do not have the mechanism to dictate the price of their products, this situation has created an unequal trade relationship.

Over the years, small-scale, subsistence and commercial agriculturalists in Nigeria produced cash crops for export to the detriment and neglect of food crop cultivation; this has the tendency to cause food shortage and hunger in the country.

It is imperative to note, however, that foreign aid has contributed its bid to the nation’s agricultural sector, the funds it’s provided, undoubtedly, provide the government with the so much-needed capital to fund the sector. Similarly, aid agencies and donor countries have provided the country with agriculture consultants, experts and agriculture infrastructures such as fertilizers, tractors and agricultural pieces of machinery, improve seedlings, among others.

It is argued, however, that the provision of these improved seedlings and machineries to Nigeria by aid donors has shut the door for Nigeria and Nigerian agricultural scientists from looking inwardly as these aid donors usually used this mean to bring in their own technical expertise, machines, tractors and others. Some of these products are used and refurbished and their spare parts can only be gotten from the donor nation. The bringing of this agricultural equipment and technical expertise has undermined Nigeria's capacity to indigenously develop agricultural machines and expertise, this situation has not only further dependency but the buying of parts from abroad also constitutes a drain on the nation’s foreign reserve.

How Can Third-world Countries Use ODA While Avoiding Debt Crisis

Indiscriminate external borrowing for investments that do not add to the productive capacity of the economy or for the selfish interest of our political leaders should be discouraged. In other words, external borrowing should be used to fund productive ventures that are capable of repaying the loan used in funding it.

Weak institutions, policy inconsistency and corruption are major political economy issues affecting how ODA is used in third-world countries. For official development assistance to be useful and productive in third-world countries, the issue of corruption, policy inconsistency and weak institutions must be tackled.

Aid agencies should live up to their original objectives of providing support to countries in search of means to address economic problems rather than using ODA as a tool for extending their control on third-world countries. The conditionalities that make ODA harmful and create a debt burden on the recipient countries should be removed.

The developing economies seeking official development assistance should be allowed to initiate, formulate and implement socio-economic policies that would bring about poverty reduction and sustainable economic growth and development.

Government should create a conducive environment for both local and foreign investment to thrive. Over the years the uncertain nature of the macroeconomic environments like insurgency, insecurity, bombing, hostage-taking and arm robbery has been on the increase in third-world countries, yet if checked could attract foreign investment inflow. Loss of both foreign and local investment will certainly have a severe impact on the ability of the country to meet its financial needs in the short to medium term.


Contacter:Shi Zihang

Interviewer:Shi Zihang

Translator:Fang Yaoyuan

Proofreader:Fang Yaoyuan

Editor:Wang Yunjie



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