THE IMPACT OF INCOME DISTRIBUTION ANALYSIS IN NIGERIA

THE IMPACT OF INCOME DISTRIBUTION ANALYSIS IN NIGERIA

 

 

 

ABSTRACT

 

Reducing poverty and inequality in the developing world continues to be a major public policy challenge, and one that is complicated by the lack of a generalized comprehensive strategy for dealing with it. Putting the combat against poverty to the forefront as the main objective of the development process has raised the issue of the linkage between inequality and poverty. There is now a growing agreement that booth the rate and the distributional impact of income are important in fighting poverty. This paper analyzes the trend in income distribution in Nigeria and examines the issue of inequality in expenditure among households as well as urban-rural difference in consumption among households and further examines geopolitical zone inequality in Nigeria. That is, the decomposition analysis was divided into two categories. The first category is concerned with the decomposition of households‘ expenditure. This underscores the contributions of these components to overall inequality and may help in the design of effective economic and social policies to reduce inequality and poverty in Nigeria. The second category of decomposition analysis dealt with the breakdown of expenditure into population sub-groups (This approach starts with the division of a sample into discrete categories; for instance, rural and urban residents, gender, age group, education level of household heads, household size, occupation, states and geopolitical zones), and then follows with the estimation of the level of inequality using Gini coefficient while the Lorenz curve is used to measure changes in the income distribution. The analysis builds on a survey of 19158 households in Nigeria, which was conducted by the Nigeria living Standard Survey (NLSS) 2004 of the National Bureau of Statistics.

The results of our analysis indicate that factors such as age, gender, and education level of the household head are important factors in explaining inequality profile in the country. We however found that inequality exists in the rural and urban areas but more of the rural areas

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Mar 19

A Decade of Nigeria’s Economic Diplomacy: Issues and Challenges

Introduction

During most of the twentieth century, two world wars, the cold war, the rivalry of two super powers, the ideologization of international affairs and military confrontation, made diplomacy a subsidiary instrument of power politics and ideology. The end of the cold war radically changed the international political scene and today we are facing the shift of the ‘civilizational’ paradigm, which affects not only the major units of world polities – the States – but which also brings new actors into the forefront of international relations. The process of globalization, which strengthens the ”oneness” of the world is, at the same time, accompanied by the fragmentation and localization by the growing gap between rich and poor nations. All  these transformations bring new challenges for diplomacy on a global level. Thus while there are many facets of globalization, the economic aspects of it have been critical in the quest for the achievement of national development, and also the preservation of  individual nation’s sovereignty.

The challenge facing nations in the emergent era of globalization is how best to integrate into the World System, in such a manner that would not only preserve their sovereignty but also

enhance their development. Consequently, the major political factor influencing diplomacy is the relative decline of the role of the national governments. Today governments are facing stern competition from other actors. Private sector, religious groups, immigrants, media and other entities of the civil society are demanding from the government that their interests be taken into consideration and that they have a say in making and implementing foreign policy.

Economic diplomacy is gradually taking over the traditional politics-oriented diplomacy. With the phenomenal growth of transnational economic interactions, the world market has expanded dramatically, dramatically increased trade levels, ever-tightening economic interdependence between countries and the growing impact of international economics on domestic economics and so also has the number of economic actors. Governments everywhere are primarily concerned with maintaining the competitiveness of their economies. Accordingly, private economic decisions are now largely controlling political choices of the governments.

Nigeria, as an actor in the international arena, has interests that extend beyond its borders and typically, it must possess the means to pursue and protect them. This paper focuses on major economic factors that influenced the course of the Obasanjo administration’s foreign policy since 1999 and investigates the extent to which the administration forged international economic policies that protected and expanded Nigeria’s position in the international community.

Nigeria since independence has played a constructive role on the international stage befitting her status as the largest black nation in the world. Being a prominent member of the international community, Nigeria has continued to play an active role in global governance in different international organizations and bodies and remains a major military and economic force in the West African sub- region. With its large reserves of human and natural resources, Nigeria has the potential to build a prosperous economy, reduce poverty significantly, and provide the health, education, and infrastructure services its population needs.

However, by the early 1980s with the downturn in the country’s economy, Nigeria began to experience problems in the international arena. The decline in oil revenue, caused by the collapse of oil prices, brought about a major socio-economic crisis in Nigeria that impacted negatively on her external image. Not only did the country default in the servicing of her external debts, but the resulting debt arrears constituted a problem in the country’s bilateral and multilateral relationships. This contributed significantly to Nigeria’s loss of respect in the international financial community and, worse, hampered foreign investment. Also, as the economy worsened, the funding of social and economic infrastructure suffered a decline whilst unemployment increased and the quality of life declined.

Successive leaders were unable to arrest the crisis in the economy and establish a basis for sustainable growth, and they failed also to grapple with the problem of creating a basis for democracy  and a stable polity. Nigeria remained an under-developed country with very weak physical infrastructure and an outrageously low human development index. Nigeria is currently among the poorest and least developed countries in the world. This situation further deteriorated the economy which was dependent, disarticulated and peripherally integrated into the world economy.

The concept of economic diplomacy was first introduced into the nation’s foreign policy by the Ibrahim Babangida administration. Although the Babangida regime was given a lethal blow to Nigeria’s image abroad and its foreign policy in particular, for the first time, Nigeria tied her economic and political interests to the country’s foreign policy. Economic diplomacy in the 1990’s involved negotiating trade concessions, attracting foreign investors, and rescheduling debt repayment to Western creditors. The aim was to ‚make foreign policy serve the country’s goal of economic development‛ The effect of this was that the regime was able to ‚<accomplish the much needed but near impossible debt-rescheduling, <revitalize a prostrate economy,

<achieved a higher visibility for Nigeria in  international organizations, and succeeded in projecting the nation’s image as the primus inter pares on the continent of Africa‛ (Fawole 2003). In a globalized world where growing interdependence underlines economic issues, economic diplomacy emerged as the most efficient instrument of foreign policy.

The Babangida administration further sought to address Nigeria’s galaxies of economic challenges by adopting several economic policies like Structural Adjustment Programme.

However, the introduction of the Structural Adjustment Programme as one of the means actualizing the goals of its economic brought untold economic hardships, political unrest in the country. The lack of growth in the domestic economy evidently had a profound effect on all sectors of national life.

The Obasanjo administration also employed the instrument of economic diplomacy, with attendant political and economic reforms. Thus, the present democratic administration has also employed the instrument of economic diplomacy, with attendant political and economic reforms.

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Nov 04

An Examination Of IPSAS Adoption And Implementation In Nigeria

An Examination Of IPSAS Adoption And Implementation In Nigeria A Study Of Selected Ministries In Bayelsa State

CHAPTER ONE/INTRODUCTION

1.1 Background to the Study

International Public Sector Accounting standards (IPSAS) is the hub of global revolution in government accounting, in response to calls for greater government financial accountability and transparency (Heald, 2003). IPSAS refers to the recommendations made by the IPSAS Board under the auspices of the International Federation of Accountants. The International Public Sector accounting Standard Board (IPSASB) develops accounting standards for public sector entities referred to as International Public Sector Accounting Standards (IPSAS). The IPSASB is among the four independent standard – setting board of international Federation of Accountants (IFAC). The International Public Sector Accounting Standards govern the accounting by public sector entities, with the exception of Government Business Enterprise. The public sector comprises entities or organizations that implement public policy through the provision of services and the redistribution of income and wealth with both activities supported mainly by compulsory tax or levies on other sectors. This comprises government and all publicly owned, controlled and or publicly funded agencies, enterprises and other entities of government that deliver public programmes, goods or services (Kara, 2012).

Public sector accounting is a system or a process which gathers, records, classifies and summarizes as reports the financial events existing in the public or government sector as financial statements and interprets as required by accountability and financial transparency to provide information to information users associated to public institution. It is interested in the receipt, custody; disbursement and rendering of stewardship of public fund entrusted (Institute of Chartered Accountants – Ghana, 2010).

Over the years, countries of the world have defined and set standards of financial reporting in their individual territories. However, globalization has brought about ever increasing collaboration, international trade and commerce among the countries of the world, hence, there is great need for increased uniformity in standards guiding financial statements so that such statements would remain comprehensible and convene the same information to users across the world (Kara, 2012). It is observed that Nigeria Public Sector have often time intensified effort to ensure that the available financial reporting system should not be deficient and proper attention paid to variances from plans thereby indicating the need for financial reports to be available on time as well as meet the reliability test when produced. But unfortunately not much has been achieved through these efforts. Many countries of the world have adopted IPSAS and have standards in preparing their financial statements in line with the standards.

Developing countries like Nigeria, a leading African Nation with the population of over 170million people foremost member of organization of Petroleum Exporting Countries (OPEC) with a public sector dominated economy, has identified the need to consider the value proposition of IPSAS and implement same in order to remain relevant regardless of their political and economic system are urged by international organizations to adopt IPSAS as it would help the international organizations to provide them the financial assistance that they need (Chan,2008). Adopting IPSAS by developing countries would also help in reducing the corrupt practices that is paramount in developing countries. Due to the significance of IPSAS, Nigeria government have been making serious effort so that the public entities in Nigeria fully adopts the IPSAS which according to the earlier arrangement was suppose to be effective from January,2013 for the cash basis and January 2015 for the accrual basis. Unfortunately this was not possible due to some inherent challenges which the country has to overcome. Some of these challenges are lack of professionals in the public sector to carry out the process, inadequate information and communication facilities, amendment of Nigeria constitution so as to make provision of the accounting standard that should be used in preparing financial statements. The adoption date is now January 2014 for the cash basis and January 2016 for the accrual basis. One of the reason that makes high quality public sector reporting necessary in many countries is that government issued financial instruments are a very important part of their financial markets, there exist various crisis in many developing countries especially in Africa, with government debt level sitting at very precarious levels and it is no news that government finances need to be managed properly in any nation. Achieving these requires high quality information on which to base decisions. Timely, clear and open annual financial statements play a significant role in the accountability of government to their citizens and their elected representatives. These financial statements are prepared on a cash basis or some variations of an accrual basis of accounting. However, most of these financial statements are not prepared on consistent and comparable basis in developing countries. The benefits of achieving consistent and comparable financial information across jurisdictions are very important and a set of IPSAS have been established by the IPSASB to assist in that endeavour (Stephen, Mercy & Andy, 2012).

1.2 Statement Of The Problems

The slow implementation of IPSAS since it was adopted in Nigeria in 2010 may imply nonconformity with the trend in globalisation. It also portrays noncompliance with IFAC public sector reform strategy as it relates to IPSAS. IPSAS reform is about transparency and accountability in the management of public resources. This problem of slow implementation can cause the nation to be less attractive to foreign direct investment because of poor transparency in the affairs of government, lack of comparison of financial reports of home and foreign operations due to different reporting format. Donor agencies and other funding agencies may not be attracted to Nigeria since it is slow in complying with the new public management reforms as established by the IFAC which is the global umbrella body of accountancy, to the detriment of a nation with poor transparency perception index. Transparency International (2016) corruption perception index ranks Nigeria 136th out of 176 countries surveyed. Also United Nations economic commission for Africa (2015) finds that there are illicit monies with some Nigerians.

 

Some factors have been identified by scholars to have contributed to the slow implementation of IPSAS. These factors have been identified to include cultural, expertise, political-buy- in and accountability. For instance, the literature has identified political buy-in of top government at the different levels of governance as an issue of concern in the implementation of IPSASs (Atuilik, Adafula, and Asare, 2016; Tikk, 2010 and Tickell, 2010). Ijeoma and Oghoghomeh (2014), Aboagye (nd). Nurunnabi (2012) joined the debate on the implementation of IPSASs and argue that there is the problem of Sociological factors. Omolehinwa and Naiyeju (2015) and Hamisi (2012) identifies the cost of implementation as a problem. Accountability is a factor affecting the implementation of IPSAS (Alshujairi, (2014).

 

Poor governance characterized by corruption, embezzlement, wastage of government resources, lack of transparency and accountability in government business transactions ravaged the Nigerian public sector for many decades. The financial reporting system was based on local laws thus the constitution of the Federal Republic of Nigeria and the Financial Regulations. The financial reports produced during the period never achieved the government objectives of measuring performance and exhibiting accountability, transparency and comparability in management of government funds at all levels. Reforms introduced by the government in 2003 came as a result of the world-wide pressure to introduce private sector style of management to the public sector otherwise known as New Public Management (NPM). The zeal to reform the government financial reporting system really came on board in 2009 when a gap analysis was conducted to identify the differences between the IPSAS cash basis accounting and the existing reporting practice. Several differences discovered prompted the setting up of a sub-committee by the Federation Accounts Allocation Committee to work out the roadmap for the adoption of IPSAS in the 3 ties of government thus federal, states and local governments. Nigeria has adopted IPSAS cash and accrual bases of accounting. Cash basis is assumed to have started in January 2014 and accrual basis to start in January 2016. A lot of people still doubt whether the practice of accrual accounting in the Nigerian public sector will ensure accountability, transparency and improvement in our reporting system

 1.3 Aims and Objectives of the Study

  1. To examine whether IPSAS adoption will improve accountability of financial reporting in the Nigerian Public Sector
  2. To analyze whether IPSAS adoption necessary for financial reporting transparency in the Nigerian Public Sector
  3. To investigate whether IPSAS adoption will communicate value relevance to beneficiaries of financial reporting in the Nigerian Public Sector
  4. To examine whether IPSAS adoption will enhance comparability of financial information among public entities in Nigerian Public Sector
  5. To analyze IPSAS adoption will engender overall full representation of financial reporting in the Nigerian Public Sector
  6. To analyze whether introduction of IPSAS will improve the overall quality of financial reporting in the Nigerian Public Sector

1.4 Research Question

  1. Do you think IPSAS adoption will improve accountability of financial reporting in the Nigerian Public Sector?
  2. Is IPSAS adoption necessary for financial reporting transparency in the Nigerian Public Sector?
  3. Do you think IPSAS adoption will communicate value relevance to beneficiaries of financial reporting in the Nigerian Public Sector?
  4. Do you think IPSAS adoption will enhance comparability of financial information among public entities in Nigerian Public Sector?
  5. Do you think IPSAS adoption will engender overall full representation of financial reporting in the Nigerian Public Sector?
  6. Do you think the introduction of IPSAS will improve the overall quality of financial reporting in the Nigerian Public Sector?

1.5 Significance of the Study

The significance of this study lies on the fact that the result will assist to build government confidence in the action taken to adopt IPSAS accrual basis of accounting thereby encouraging the preparers of public financial report to support the implementation of IPSAS.

It is also significant in the sense that  the government will be encouraged by its outcome to do everything possible to ensure that adequate preparation is made . Moreover, this study is significant in the sense that it will help to build literature on the assessment of the ability of IPSAS accrual accounting implementation in Nigeria to achieve transparency, accountability and comparability of financial reporting by government.

 

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Jun 07

FISCAL POLICY AND INDUSTRIAL SECTOR PERFORMANCE IN NIGERIA

FISCAL POLICY AND INDUSTRIAL SECTOR PERFORMANCE IN NIGERIA

CHAPTER ONE/INTRODUCTION

1.1 Background of the Study

The need to achieve improved balance of payments position, balanced industrial development, high  employment level, increased     productivity, equitable income distribution, high revenue sources, price stability and economic growth has necessitated the development of various macroeconomic policies. Macroeconomic policies suggest the combination of government fiscal and monetary policies. It incorporates all policy frameworks geared at achieving a sound, stable and vibrant economy. Fiscal policy as a tool for macroeconomic management has been defined as a purposeful use of government revenue (majorly from taxes) and expenditure to manipulate the level of economic activities in a country (Akpapan, 1994). It can also be conceived as part of government policy relating to rising of revenue through taxation and other means and choosing on the level and pattern of expenditure for the purpose of manipulating economic activities or achieving some needed macroeconomic goals.

 

The implementation of fiscal policy is essentially routed through government’s budget. Budget as a fiscal policy tool could be conceived as a structure that balances the changes in government revenue against expenditure over a period of time. It is a comprehensive financial plan, setting forth the expected route for achieving the financial and operational goals of a country (Meigs & Meigs, 2004).

The intent of fiscal policy is to stimulate economic and social development by pursuing a policy stance that ensures a sense of balance between taxation, expenditure and borrowing that is consistent with sustainable growth. Macroeconomic policies (fiscal and monetary) are indispensable tools that can be used to lessen short-run fluctuations in output and employment (Oke, 2013). They have been recognized in policy debates by both developed and developing economies as potent apparatus in the hands of policy markers for handling macroeconomic issues like high unemployment, inadequate national savings, excessive budget deficits, and large public debt burdens.

The role of fiscal policy on the output and capacity utilization of the industry sector cannot be overemphasized. Fiscal policy drives the market for the manufacturing sector through the purposeful manipulation of government revenue and expenditure. When government is pursuing an expansionary policy, it reduces taxation and increases expenditure and the purchasing power  of the economic units which in turns expands the market for manufactured products. This in turn sends a signal to the manufacturers to increase their productive capacity to take opportunity of the increase market demand. The reverse holds when a contractionary policy is being pursued. Fiscal policy also provides the legal, social and economic framework required for a profitable operation.

 

The Manufacturing sector could be conceived as any economic unit that processes or creates new commodities through the transformation of raw materials or semi finished goods (Eze & Ogiji, 2013). Adebayo (2010) conceived manufacturing sector as those industries which are involved in the manufacturing and processing of items and which indulge or give free rein in either the creation of new commodities or  in value addition. Manufacturing plays a vigorous role in the economic transformation of any nation, whether developed or developing. In Nigeria, Loto, (2012) refers to manufacturing sector as an avenue for increasing productivity in relation to import replacement and export expansion, creating foreign exchange earning capacity, raising employment and per capita income which causes unrepeatable consumption pattern. It occupies a leading position in promoting productivity, investment, import substitution, export expansion, employment and per capita income at a faster rate than any other sector (Shebeb, 2002). It provides wider and more efficient linkage among different sectors.

1.2       Statement of the Problem

The problem before the study is despite the attempts to grow the Nigerian economy through the various programmes initiated by Government, not much progress has been recorded with the industrial sector contribution to economic growth. Studies have not thoroughly investigated to evaluate performance of the industrial sector on the Nigerian economy, and the few researches conducted have not been current. Many researches were made in countries and regions like

Ethiopia (Wakeford, Gebreeyesus, Ginbo, Yimer, Manzambi, Okereke, Black, & Mulugetta,2017),Sub-Saharan Africa (Rekiso, 2017), developing countries (Szirmai, 2012), South Africa(Morris & Fessehaie, 2014) and China (Yua, Dosia, Grazzic & Lei, 2017), few have beenconducted on the Nigerian economy. The study intends to address this gap and investigate the industrial sector on economic growth in Nigeria by improving the literature and give an up to date analysis on industrial sector and economic growth in Nigeria. Morris and Fessehaie (2014) argued for commodities based industrialization strategy and opined that economies of African countries have always been targeted toward economic growth where exports are encouraged to foster the needed economic growth which will lead to industrialization. This has not been possible and it becomes important to investigate how industrialization can foster economic growth.

1.3       Objectives of the Study

The main objective of this study is to determine the effect of compensation management on employee performance. Specific objectives include;

  1. To examine the ways can industrial output have an effect on economic growth as a result of fiscal policy
  2. To examine an extent is foreign direct investment having an effect on industrial sector output
  3. Examine the long run relationship between industrial indices (industrial output, maximum lending rate & foreign direct investment) and gross domestic product in Nigeria.

1.4       Research Questions

  1. In what ways can industrial output have an effect on economic growth as a result of fiscal policy?
  2. To what extent is foreign direct investment having an effect on industrial sector output?
  3. What are the long run relationship between industrial indices (industrial output, maximum lending rate & foreign direct investment) and gross domestic product in Nigeria?

1.5       Research Hypotheses

Hypothesis I

H0:Industrial output does not contribute to gross domestic product in Nigeria.

Hi:   Industrial output does contribute to gross domestic product in Nigeria.

Hypothesis II

H0:       Foreign Direct Investment has no significant impact on gross domestic product in Nigeria.

 

Hi:       Foreign Direct Investment has significant impact on gross domestic product in Nigeria.

 

Hypothesis III

H0:       There is no long run relationship between the industrial indices (FDI, MLR &IND) and gross domestic product in Nigeria.

 

Hi:      There is long run relationship between the industrial indices (FDI, MLR & IND) and gross domestic product in Nigeria.

1.6       Significance of the Study

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

1.7       Scope of the Study

The study is limited to Fiscal policy and industrial sector performance in Nigeria.

1.8       Limitations of the study

The demanding schedule of respondents made it very difficult getting the respondents to participate in the survey. As a result, retrieving copies of questionnaires in timely fashion was very challenging. Also, the researcher is a student and therefore has limited time as well as resources in covering extensive literature available in conducting this research. Information provided by the researcher may not hold true for all research under this  study but is restricted to the selected respondents used as a study in this research especially in the locality where this study is being conducted. Finally, the researcher is restricted only to the evidence provided by the participants in the research and therefore cannot determine the reliability and accuracy of the information provided. Other limitations include;

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

 

 

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