(IJPAMR) Vol. 2 No

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VOL. 2 NO. 2 MARCH 2014

INTERNATIONAL JOURNAL OF PUBLIC ADMINISTRATION AND MANAGEMENT RESEARCH

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ISSN 2350-2231 (Online) ISSN 2346-7215 (Print)

RESEARCH CENTRE FORMANAGEMENT AND SOCIAL STUDIES

ISSN 2346-7215 (Print)ISSN 2350-2231 (Online)

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print)

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Research Centre for Management and Social Studies

Website: www.rcmss.com Language: English Frequency: Quarterly

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Research Centre for Management and Social Studies, Nigeria About the Journal International Journal of Public Administration and Management (IJPAMR) is a peer- reviewed quarterly and research-driven journal that provides intellectual platform for the dissemination of critical, empirical and regular papers in public administration, management and social sciences. Through papers published, the journal hopes to accelerate development and governance in both developed and developing countries. Book reviews, reports, articles, etc., are welcome. Submission of Manuscripts: Submission of manuscript(s) is electronically by attachment via the email: [email protected] or [email protected]. Manuscript should not be published elsewhere or under consideration for publication. Preparation of Manuscript: The maximum length of intended articles for publication in the journal is 8000 words. A short abstract of 150-250 words with 4-5 keywords should precede the introduction. Contributors are to submit a separate cover page containing their contact details. Corresponding authors of papers submitted should be indicated. Upon acceptance of paper, author would be required to sign a copyright transfer form. Authors will receive a copy of the volume containing their articles. All diagrams, tables, and figures should appear as an appendix at the end of the paper. Reference: We accept American Psychological Association (APA) and a double or triple in text citation (Johnson, 2010 or Johnson, 2010:10). Editorial Contacts Research Centre for Management and Social Studies, P. O. Box 3332 (General Post Office), Calabar, Cross River State, Nigeria. [email protected] Managing Editor Department of Public Administration, Faculty of Social Sciences, University of Calabar, Calabar, Cross River State, Nigeria Email: [email protected]


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Editorial Board Editor- in- Chief Dr. Dileep Kumar M. - University of Utara, Malaysia Associate Editors Dr. Arif Anjum - M.S.G. Arts, Science & Commerce College, India Dr. Charles Adora - Kogi State University, Nigeria Dr. Mohammad A. Bhatti - University of Utara, Malaysia Upu C. T. - Institute of Public Speaking and Rural Development, Nigeria Dr. Theophilus Tshukudu - University of Botswana, Botswana Dr. Itai Beeri - University of Haifa, Israel Dr. Cristina-Georgiana Voicu - Apollonia University of Iasi, Romania Grace E. Michael Agba - Research Centre for Management and Social Studies, Nigeria Dr. Josephine Eluan Lloyd- Federal Univerisity Otuoke, Nigeria Dr. Rajesh Timane, Dhanwate National College, Nagpur, India Managing Editor Michael Sunday Agba - University of Calabar, Nigeria Editorial and Advisory Board (International) Dr. V.S. More - University of Pune, India Dr. A. M. Ogaboh Agba - University of Calabar, Nigeria Engineer A. Yusufu - University of Cape Town, South Africa Dr. Fen-ling Chen - National Taipei University, Taiwan Dr. Pacha. Malyadri - Govt. Degree College (Osmania University), India Dr. Stan C. Weeber - McNeese State University, United States Dr. Lee Pugalis Northumbria University, United Kingdom KittisakJermsittiparsert (PhD Candidate) - Rangsit University, Thailand Moses Kibe Kihibo (PhD Student- Mount Kenya University, Kenya

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CALL FOR PAPERS: Papers are invited for publication in the following International Journals: International Journal of Public Administration and Management Research (IJPAMR)

Editor in Chief :Dr. Dileep Kumar M., Malaysia ISSN :2350-2231(Online) 2346-7215(Print) Publisher

: Research Center For Management and Social Studies

Frequency :4 Issue per Year Email :[email protected]

International Journal of Peace and Conflict Studies (IJPCS)

Editor in Chief

: Dr. A. M. Ogaboh Agba, Nigeria

ISSN : 2346-7258(Print) 2354-1598 (Online) Publisher : Research Center For Management and Social Studies

Frequency : 2 Issue per Year Email : [email protected]

International Journal of Democratic and Development Studies (IJDDS)

Editor in Chief : Dr. Stan C. Weeber, USA ISSN : 2350-224X(Online) 2346-7223(Print) Publisher : Research Center For Management and Social Studies Frequency : 3 Issue per Year Email : [email protected]

Journal of Good Governance and Sustainable Development in Africa (JGGSDA)

Editor in Chief : Dr. Lee Pugalis, United Kingdom ISSN : 2346-724X(Print) 2354-158X (Online) Publisher : Research Center For Management and Social Studies Frequency : 4 Issue per Year Email : [email protected]

International Journal of Capacity Building in Education and Management (IJCBEM)

Editor in Chief : Dr. Mohammad A. Bhatti, Malaysia ISSN : 2350-2312(Online) 2346-7231(Print) Publisher : Research Center For Management and Social Studies Frequency : 3 Issue per Year Email : [email protected]


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Table of Contents

S/N Article Title/Author(s) Page 1. Towards Sustainable Economic Development and Security in Nigeria: The

Public Sector Audit Perspective Inekwe, Murumba

1-10

2. Bureaucracy: A Tool for Scuttling Application of Innovative Ideas in the Nigerian Public Service Chuks P. Maduabum

11-21

3. The Impact of Taxation on Revenue Generation in Nigeria: A Study of Federal Capital Territory and Selected States Afuberoh, Dennis & Okoye Emmanuel

22-47

4. Decentralization, Local Governance and Public Goods Delivery in Nigeria IseOlorunkanmi O. Joseph

48-55

5. Implications of Unemployment on Nigeria’s Sustainable Development Danjos Denis Dalhatu & Ali S. Yusufu Bagaji

56-65

6. Effects of Microfinance Banks on the Rural Dwellers in Kogi State, Nigeria Alani, G. O. & Sani, John

66-79

7. Effects of Human Resource Training and Development on Productivity in Nigerian Hospitality Industry Audu Joel Samson & Gungul, Timothy

80-87

8. An Assessment of the Privatization of Benue Cement Company Plc, Gboko, Benue State Nigeria: 1986- 2011 Orokpo, Ogbole F.E. & Ejeh Adoyi Willliams

88-97

9. Poverty Alleviation Strategies and Governance in Nigeria Alfa Patrick Innocent; Otaida Eikojonwa & Audu Enojo

98-105

10. Comparative Analysis of NPAs of Old Private Sector Banks and New Private Sector Banks in India Jyoti Ainapur

106-115

11. Social Network and Human Capital as Determinants of Entrepreneurial

Opportunity Recognition in Nigeria ADERIBIGBE, John Kolawole; ABU, Salawu Hassan & OLUWAFEMI, Odunayo

Oluwasanmi

116-128

12. Perspectives on Stress and its Management for Individual Well-being and Organisational Productivity Ali S. Yusufu Bagaji & Erasmus Okhidemeh

129-147

13. Performance of Public Enterprises in Nigeria and the Privatization Option Agabi Paul Tsunabavyon & Orokpo, Ogbole F.E

148-155

14. Applicability of Porter’s Five Forces Model in Internationalization - A New Dimension of Analysing the Industry Structure. Ms. G. Jayanthi & Dr. R Amudha

156-169

15. Structural Adjustment Programme and its Negative Effect on Education in Nigeria: A philosophical Reconceptualization Michael Ukah

170-186

16. Developing Office Management Techniques in Nigeria: Perspective, Profile and Prospects Eneche J. B. Pius & Audu Joel Samson

187-192

17. Re-positioning Commercial Banks to enhance the productive capacities of Small and Medium – Scale Enterprises (SMEs) for Economic Growth of Developing Nations: A Focus on Nigeria Omika Mohammed

193-198


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18. The Verity of Urbanization and Public Health System in Nigeria Attah Amana Philip

199-208

19. Performance Improvement through Non-systematic Training Premises ABDUL, Haruna & EDINO, Ojonimi Ferdinand

209-218

20. The Effects of Corporate Governance on the Performance of Commercial Banks in Nigeria Okoi Innocent Obeten, Stephen Ocheni & Sani John

219-234

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Inekwe Murumba, 2014, 2(2):1-10

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Towards Sustainable Economic Development and Security in Nigeria: The Public Sector Audit Perspective

Inekwe Murumba1

1Dept. of Accountancy, Federal Polytechnic Idah, Kogi State, Nigeria. Email: [email protected]. GSM: +234 8057221755

Manuscript ID: RCMSS/IJPAMR/14001

Abstract It is unarguable that Nigeria has not been able to achieve sustainable development and national security despite its enormous resources. It is against this backdrop that this paper examines the issue of sustainable development and national security in Nigeria from the perspective of public sector audit with particular reference to external audit. The paper draws from secondary data and extensive literature. It was revealed that statutory provisions on public sector audit in Nigeria are inadequate, some are inactive, and the practice as demonstrated by the operators leaves much to be desired. It is, therefore, recommended that the Audit Bill before the National Assembly should be passed into law without further delay, operators that violate statutory provisions on time frame for submission of accounting and audit reports and other aspects of audit statues should be duly and appropriately punished. Audit report should be well publicized, and relevant institutions such as the presidency, legislature, judiciary, the media, professional accountancy bodies, masses, etc must support the supreme audit institutions to stem the tide of corruption if Nigeria is to make any sustainable progress. Keywords: Public Sector, Public Sector Audit, Sustainable Development, National Security, Supreme Audit Institutions and Pillar of National Integrity.

Introduction Nigerian vision 2020 which is critical to sustainable development has been described as a dream in several forums. This paper believes that the vision is achievable with sound financial management of the nation’s abundant resources. However, in the recent past and for every government in Nigeria, the cry has always been the lack of accountability on the part of the public servant and political leaders. In spite of the numerous laws and relevant institutions, there has been an increase in the number of reported cases of all kinds of misappropriation of public funds and properties. Evidences abound that public funds are misappropriated and/or not well utilized. Brazen thefts of public fund are usual headlines of the country’s dailies. Examples are, the police pension scandal, a fraud of over ₦40 billion (Daily Independent, 2013), pension scam of ₦5.6 billion involving Oyo State Head of Service (Uwujaren, 2013), $1.6 million bullet proof BMW car in the Aviation Ministry (Alechenu, Ameh, Adetayo & Ogundele, 2013), just to mention a few. It was as a result of these developments that Inekwe (2012) contended that Nigeria governments cannot be said to have effectively and efficiently utilize its resources and report to the populace how well the resources have been used. In the same vein, Efe (2006) lamented that a country with abundant human and material resources became the honey pot of predators in government – civil and military alike. A report by KPMG rated Nigeria as the most fraudulent country in Africa (ThisDay, 2013). The Firm put the cost of fraud during the first half of 2012 at ₦225 billion ($1.5 billion). It is unarguable that sustainable development and security cannot be guaranteed under this situation. The question then is: why has auditing, an institutionalized control system put in place to ensure prudent use of public funds seems to have failed in achieving its objectives? The situation has reached the extent that the masses have lost faith in the



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established control system and are beginning to seek spiritual solutions. This is evidenced by prayer against bribery and corruption, prayer for Nigeria in distress, prayer for peace and progress, etc by some religious denomination in the country. The objective of this paper is, therefore, to identify and assess the factors responsible for ineffective auditing in Nigeria public sector which to a large extent is responsible for the country’s inability to achieve sustainable development.

Conceptual Issues The Concept of Public Sector and Public sector Audit Public sector can be defined “as that sector of the economy established and operated by the government or its agencies, distinguishable from the private sector, and organized on behalf of the whole citizens” (Ani & Ubaka, 2000, p.11). This presupposes that the public sector in Nigeria consists of the Federal, State, Local governments, and all government ministries, departments, parastatals, agencies, public enterprises, etc. According to Okoye and Ani (2004), there is widely held opinion by financial experts that the public sector in Nigeria controls about 70% of the asset base of this country. Public sector auditing may be internal or external. Internal audit which is usually undertaken by the staff of the organization being audited is outside the scope of this paper. External audit the main focus of this paper is generally defined as an independent examination of the financial statement of the organization by an appointed auditor with a view to expressing an opinion in pursuant of that appointment as to whether the statements give a true and fair view and comply with the relevant statutes. An embracing definition of Audit by Okolo (2001:5) states that:

An audit is a conscientious and objective examination of, and inquiry into, any Statement of Account relating to money or money’s worth, the underlying documents and the physical assets where possible, as will enable the auditor to form an opinion as to whether or not the Statement of Account presents a true and fair view of whatever it purports to represent, and to report accordingly.

However, a definition peculiar to public sector offered by the Canadian Comprehensive Auditing Foundation (as cited in Jacques, 2008) was that public sector audit is “… the independent, objective assessment of the fairness of management's representations on performance or the assessment of management's systems and practices, against criteria, reported to a governing body or others with similar responsibilities.”(The Role of Audit in the Public Sector Section, Para.3) External audit is an audit by an outside accounting firm or Supreme Audit Institutions (SAI) such as Auditor General of the Federation or State, and the Auditor General for Local Governments. It is usually undertaken by a professional accounting firm or SAI on an annual basis, to check the organization’s financial statements. The results are usually disclosed publicly, usually in annual reports or published financial statements (Wilkins, 2012). The Concept of Sustainable Development and Security The World Commission on Environment and Development also known as the Brundtland Report (as cited in The World Bank Group, 2001, para. 1), defined sustainable development “as development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. In alignment with this definition Odiba (2007) maintained that the 3Ps of sustainable development are:

- People


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- Prosperity

- Posterity From the foregoing, our past experiences show that the present and future needs of the Nigerian masses have long been compromised and are presently being compromised. It is clear from the above that there cannot be sustainable development without security. A review of the concept of national security clearly shows this relationship. For instance, Aliyu (2012:8) states that:

we may consider National security not only as the physical protection and defense of our citizens and our territorial integrity, of which it is a part, but also the promotion of the economic well being and prosperity of Nigerians in a safe and secure environment that promotes the attainment of our national interests and those of our foreign partners.

In the same vein, Osisioma (2011) maintained that security translate into the ability of government to protect lives and property, provide food and employment, reduced level of poverty, and raise the quality of life of the ordinary Nigerian. This means that proper utilization of the nation’s resources will engender sustainable economic development and by extension the security of the populace is assured.

Concept of National Integrity System This paper is built on this concept. The concept sees auditing as one of the key “pillars” of integrity and by extension an important tool in curbing corruption. The concept as put forward by Langseth et al. (as cited in Kenneth & Rick, 1998) identified eight interdependent institutions which together support the notion of “national integrity” much the same way pillars might support the roof of a house. Pushing the analogy further, if any one of these “integrity pillars” weakens an increased load is thrown onto the others. If several weaken, their load will tilt, so that the round ball of “sustainable development rolls off”. This is depicts below:

Sustan *Anti- Corruption agencies; Ombudsman; Auditor General. Source: Kenneth & Rick, 1998 The above model for ensuring sustainable development is the same structure that exists in Nigeria. Can one then say that sustainable development have eluded Nigeria because a number of these pillars of integrity are weak? Even though this might be the case, this paper

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specifically focuses on the watchdog agencies aspect which to a large extent depends on the other pillars to be effective and efficient.

Statutory Basis of Public Sector Audit Recognizing the importance of auditing in the public sector, there are a number of statues relating to auditing, accountability and transparency in Nigeria. For instance, Section 85 of the 1999 Constitution provided for the post of Auditor General of the Federation. In order to ensure the independence of the auditor General, Section 86 provided that he shall be appointed by the president on the recommendation of the Federal civil service commission subject to the confirmation of the senate. Section 87 further provided that a person holding the office of the Auditor-General for the Federation shall not be removed from office before such retiring age as prescribed by law except he is removed by the president acting on an address supported by two-third majority of the senate praying that he is so removed for inability to discharge the functions of his office (whether arising from infirmity of mind or body or any other cause) or for misconduct. Similar provisions for the appointment of State Auditor- General existed in Section 125,126 and 127 respectively. On its responsibility, Section 85(2) provided that the public accounts of the federation shall be audited and reported on by the Auditor-General, who shall submit his reports to the National Assembly, and for that purpose, the Auditor General or any person authorized by him in that behalf shall have access to all the books, records, returns and other documents relating to those account. According to subsection 3 of this section, the provision of Section 85(2) does not empower the Auditor- General to audit the accounts of or appoint auditors for government statutory corporations, commissions, authorities, agencies, including all persons and bodies established by an Act of the National Assembly, but the Auditor-General shall: (a) provide such bodies with i. a list of auditors qualified to be appointed by them as external auditors and from which the bodies shall appoint their external auditors, and ii. guidelines on the level of fees to be paid to external auditors; and (b) comment on their accounts and auditor’s report thereon. Section 85(4), however, provided that the Auditor-General shall have power to conduct periodic checks of all government statutory corporations, commissions, authorities agencies, including all persons and bodies established by an Act of the National Assembly. Also Section 108 of 2009 Financial Regulations in addition to confirming the Auditor-General as responsible for audit of public account of the federation gave the purpose of the audit when it stated that the Auditor-General shall examine and ascertain in such manner as he may deem fit the account relating to public funds and property and shall ascertain whether in his opinion: a) the accounts have been properly kept; b) all public monies have been fully accounted for, and the rules and procedures applied are sufficient to secure an effective check on the assessment, collection and proper allocation of revenue; c) monies have been expended for the purposes for which they were appropriated and the expenditure has been made as authorized; d) essential records are maintained and the rules and procedures applied are sufficient to safe-guard and control public property and funds. Another important institution in public Sector audit is the Public Account Committee (PAC). It is a Committee of the National Assembly or State House of Assembly.


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It is founded on the Public Accounts Committee Act No.8 of 1987. According to Oshisami (2004) PAC is the legacy which the British parliamentary system of government gave to Nigeria and which in spite changes in the Legislative system over the years has itself not changed. He further stated that it is one of the measures taken to give Parliament better control over the expenditure of public funds. This may explain why the Section 82(5) provided that the Auditor-General shall within ninety days of the receipt of the Accountant-General’s financial statement, submit his reports to each House of the National Assembly and each House shall cause the reports to be considered by the Committee of the House of the National Assembly responsible for public accounts. Johnson (1992) has it that the three main role of PAC are, to: i. provide a forum, in which the Accounting Officers are called upon to explain in public, matters on which their departments had been queried by the Auditor-General; ii. inform the National Assembly and the general public of defects in financial administration, and the explanation of Accounting Officers when confronted with them; iii. serve as a vital link between the Auditor-General and the National Assembly. There is also the Audit Alarm Committee, which is the creation of the Civil Service (Re-organization) Decree 1988. It gave the Auditor-General of the Federation or State or for Local Government the power to sanction any officer and to alert the President or Governor of any audit alarms of significant importance, and any serious prepayment audit query for which the Accounting Officer of the Ministry is liable or responsible.

The Importance of Audit in the Public Sector External audit is very important in public sector administration just as it is in the private sector, if not much more. The need for external audit in the private sector is based on the fact that Shareholders (Principal) need to be assured that the account given by the Management (Agent) is accurate and correct. This principal agent relationship does exist in the public sector. The elected people (agents) need to account to the people (Principal) how well the resources entrusted into their hand are used. It is the audit institutions that “police” the people entrusted with the custody and use of public fund to ensure that resources are judiciously used. That explain why Audit and Review constitute the fourth phase in government’s financial management cycle. It is an external control function because it is expected to be independent of the executive and to serve as an outwardly imposed system of check on the decisions and actions of government (Oshisami, 2004). Kenneth and Rick (1998) equally emphasize this point when they stated that, among public institutions, the Supreme Audit Institutions (SAI) play a critical role, as they help promote sound financial management and thus accountable and transparent government. They further maintained that audit can help curb corruption and act as a potent deterrent to waste and abuse of public funds by, for example, helping restrain any tendency to divert public resources for private gain. Having come to terms with the roles audit has played in the Chinese economy; Liu (n.d) contended that:

Auditing is an indispensable component of national governance and an important check and balance in execution of power by institutions in accordance with the law; by its nature auditing serves as the immune system ensuring healthy economic and social development (para. 2)

Rafiu and Oyedokun (2007) also lend their voice on the importance of audit in the public sector when they stressed that a proper audit has a distinct role in promoting accountability and ensuring the best use of public money by providing credibility to the information



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reported by or obtained from management through objectively acquiring and evaluating supporting evidence. The foregoing shows the indispensability of public sector audit in the prudent management of the public sector. However, there are a number of happenings in Nigeria public sector that evidence that the country’s Supreme Audit institutions are weak and/or lack the political will in support of these institutions. For instance, Nigeria Extractive Industries Transparency Initiative (NEITI) (2013) has it that it was until 2005 that the first financial, process and physical audits of the petroleum industry covering the period 1999 – 2004 was commissioned by NEITI. The audit that was conducted by a UK audit firm revealed a difference between revenues paid by oil companies and those received by government agencies between 1999 and 2004 to the tune of $300 million which was later revised by the auditors to $6 million. From the foregoing, it may be argued that the issues of oil subsidy and the associated consequences of the public protest, including the Farouk/Otedola $620,000 bribe saga would have been civilly handled by a proper audit. Daily Independent (2013) mini catalogue on missing billions as revealed by BBC website on October 25, 2012 in the wake of oil subsidy protest and the attendant financial probe further confirms this. These include:

- Statement by Oby Ezekwesili in August that $400 billion is estimated amount of Nigeria oil revenue stolen or misspent since independent in 1960.

- Parliamentary report in April said $6.8 billion was to fuel subsidy scam over the last two years.

- Leaked Petroleum Revenue Special Task Force report in October that $29 billion is lost by the treasury in the last decade on apparent gas price fixing scam.

Also, astonishing and revealing was the fact that Nigeria Telecommunication (NITEL), then a government parastatal, never had any statutory audit until it was forced to do so as a requirement for privatization when it declared a loss of ₦19 billion in 2003 (Achua, 2009). Nwogwugwu (as cited in Achua, 2009) captured this sorry and worrisome state thus:

The truth of the matter is that NITEL, and its managers had no way of knowing if it was operating profitably or not. Prior to 2003, the company’s accounts had not been audited for over a decade, nor had it paid an iota of dividend to its owner, the Federal Government of Nigeria, for ages. As a statutory corporation belonging to the Federal Government, NITEL, is in fact obliged to audit its accounts annually and make them public. (p.5)

The recent judgment in the Ibori $15 million bribe money brings to the fore the importance of audit and the cost of its neglect. According to the judge, Justice Gabriel Kolawole:

Delta State government has failed to establish that $15 million was Corruptly removed by Ibori between the period of May 2007 to 2009, or that an independent audit or inquiry carried out by the State has record to show that the said sum of $15 million belonging to the State was corruptly removed or is missing between the said period (Ireport-NG.com, 2013, para. 6).

The dusts from the above have not really settled when another revelation came up. Okaforadi (2013) has it that revelations from the Senate indicates that both the Central Bank of Nigeria (CBN) and the Nigerian National Petroleum Corporation (NNPC) have not accounted for a whopping sum of ₦500 billion subsidy funds out of the ₦800 billion realized from the Subsidy Reinvestment and Empowerment Programme (SURE-P) in twenty-one month period. The question that is begging for an answer from the foregoing is:


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who is to be blamed for these developments? Is it the laws or institutions or the operators (which is tagged the Nigerian Factor most often). Challenges of Public Sector Audit in Nigeria There are a number of challenges facing the public sector audit institutions in Nigeria, which to a large extent are responsible for the country not reaping the full benefit of an audit in the Nigerian public sector. The challenges include the following among others: Auditor’s Independence: Without independence audit is a mirage. Although the constitution has provisions that are supposed to guarantee the independence of the auditor, the Auditor General in Nigeria cannot be said to be truly independent. That may be why Dikki (2003) asserts that, in Nigeria, the government has a lot of influence on public sector and that auditor’s independence is illusory. Adekeye (as cited in Inekwe, 2012) has it that Vincent Azie, the then acting Auditor-General of the Federation was hastily retired for disclosing in his audit report that Obasanjo Ministers allegedly stole more than ₦23 billion from the public coffers. Even the institutions that are responsible for financial crimes are not immuned from this problem. For instance, in the case involving the purchase of bullet proof car by the Minister of Aviation, the setting up of three-man Committee while the EFCC and ICPC are there to do the job undermine the independence of these bodies. Abiodun (as cited in Inekwe, 2012) aptly capture the predicaments of Nigerian public sector auditors as revealed by Kogi State Auditor-General for Local government thus;

Part of my constraints are poor funding, poor response of the council Chairman to auditing and threat to life of my staff … For instance, somebody you are going to audit is the one to pay your transport and every other thing: my resident auditors obtain imprest from them. How do you expect them to turn around and give negative reports on the chairman (p. 120).

Financial Autonomy: The audit institutions are to be financial independent if their integrity is to be assured. Making the emolument of the Auditor-General a direct charge on the Consolidated Revenue Fund (CRF) is not enough. The office of the Auditor-General should be granted first line charge on the CRF. As senator Attai Aidoko observed:

…the office of the Auditor- General of the Federation which is established in the constitution occupies a rented space in Abuja F.C.T., while the Accountant-General’s which is not mentioned in the Nigerian Constitution occupies an edifice. …he concluded that there appears to be an attempt to frustrate the efforts of the Auditor- General (Senate News, 2013, line 23-27).

Belated Financial Statement: It is generally observed that most tier of government do no prepare their financial statement as at when due. This to a large extent is responsible for belated audit report while, in some cases, audit is not carried out at all. For instance, it was earlier reported in this paper that, for a decade, NITEL as a public corporation was not audited. In a study of ethical issues in the work of Accountant-General with reference to Kano State, Ahmed (2003) revealed that, from May 29, 1999 to 2003, Kano State Government (KSG) has not produced and published it annual reports and accounts for the general public to see and make assessment. As at May 2009 the Accountant-General of the Federation has not submitted his report for 2007 and 2008 financial year to the Auditor-General talk more of the submission to the PAC. This tends to justify the assertion of Zarman (as cited in Dikki, 2003), that:

the economic implication of audit in Nigeria is a disgrace. Government accounts are never prepared on time and the auditor seems to be on



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holiday as there is nothing to audit. The result is those frauds which have taken place during those periods passed unpublished and unreported. (p.238)

Ineffective Public Account Committee: The Public Accounts Committee seems to be consistently inactive notwithstanding the fact that Auditor-General report may be delayed. For example, Achua (2009) has it that as at July 2008 the Auditor-General of the Federation has sent 2002 to 2006 financial year report to the National Assembly but the PAC was yet to issued report on any as at May 2009. This tends to confirm the observation of Oshisami (2004) that the audit report seems to hammer on the same issues from one year to another year. Recognizing this problem, Auditors-General in the country in 2012 recommended that it should be made mandatory for the account committees at the Federal and State levels to complete the consideration of the Auditors-General reports within three months of receiving them (Nwogu, 2012). Inactive Audit Alarm Committee: This Committee was established to strengthen accountability in the public sector. However, since inception nothing much have been heard about this Committee (Inekwe, 2012). The reasons may be that those that are to raise the alarm are afraid to do so or may not be aware of the existence of the provision in law. Inability to implement its Report: The Auditor- General report is usually submitted to the Legislature who through its PAC produces its own report. That is why the Auditor- General is helpless most times and merely cry out sometimes. For instance, The Auditor- General laments the fact that a number of Nigeria embassies abroad have not remitted money collected for visa fees into the country treasury as at 2008 (Nairaland Forum, 2013). Apart from this, from regime to regime they have raised the issue of excess expenditure without proper and adequate authorization, indifference to audit queries by Ministries/Departments, late submission of accounts for audit by the Treasury, etc, without a visible solution. Inadequate Personnel: To successfully carry out its assignment, the Public sector audit institutions need to be equipped with the right staff in terms of number, professionalism, and integrity. A close look at our systems today shows that it falls short of these best practice requirements. Inability to Properly Carryout Value-for Money Audi t: Despite the provision in Section 109 of the 2009 Financial Regulation giving the Auditor-General the power to, in addition to Financial Audit and Appropriation Audit, do Value- for-Money Audit not much have been seen in this direction. It is unarguable that cases of overvalued contract, payment for contracts not executed, overpricing of purchases, employment of more staff than the required need of the organization, outrageous emoluments that are not in tandem with responsibilities, retention of redundant staff, etc transverse the length and breadth of this country. This is major the bane of Nigeria’s underdevelopment. Corruption: Corruption is one of the major challenges of public sector audit. The populaces are constantly asking why audit reports of most public institutions are always clean audit despite flagellant show of wastage, misappropriation and fraud. Conclusion and Recommendations This paper has shown that public sector audit is a key determinant of sustainable development and national security because, without an effective and efficient utilization of scarce resources, there can be no sustainable development and sustainable development engender, to a large extent national security. Recognizing the importance of public sector and the impact of the sector on the private sector, statutory provisions are made for public


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sector audit. However, the analysis in this paper indicates that the supreme audit institutions in Nigeria fall short of expectation both in terms of the enabling instruments and its operators. In order to reap the full benefits of public sector audit it is recommended as follows: The National Assembly should pass the Audit Bill that has been before it without further delay. This will to a large extent guarantee the independence of the Auditor General office. This will equally enable the Auditor General office to employ the required staff for its assignments. The State Houses of Assembly should do likewise. The National Assembly and State Houses of Assembly Public Account Committee should live up to their responsibility by sitting and issuing their report as at when due. To this end, there should be statutory provisions for sanctioning Accountant-General and Auditor General that fail to meet the statutory requirements for submission of a report. Value-for-Money Audit should be made one of the cornerstones of public sector control measures. A distinct Value-for- Audit report should be required bi-annually or annually for government MDGs. However, to be able a carryout an effective value-for-money audit, there must be in existence relevant professional from diverse fields. The Audit Alarm Committee system needs to be reviewed to make it functional because it a whistle blowing instrument. Whistle blowing is well known all over the World as an instrument of ensuring accountability. Unfortunately, Nigeria lacks whistle blowing Act. Public Accounts, Auditor’s report and PAC’s report should be well disseminated to the populace. Although, it is unarguable that the Freedom of Information (FOI) Act is a strong instrument in achieving financial transparency and accountability, Nigerians are yet to see the benefits of Nigeria’s FOI Act 2011. Considering the importance of the audit report, there should be a law making non publication of these reports an offence punishable under the Audit Act. For this purpose, there should be a dedicated website, in addition to other media., The violators of statutory accounting and audit provisions should be duly and appropriately punished and relevant institutions such as the presidency, the legislature, judiciary, media, the masses, etc, must support the supreme audit institutions as a veritable tool to stem the tide of corruption in this country. Once that is guaranteed sustainable development and security is assured. References Achua, J. K. (2009). Reinventing government accounting for accountability assurance in Nigeria. Nigeria Research Journal of Accounting, 1 (1), 1-16. Ahmed H. S. (2003). Review of ethical concept in relation to the work of state Accountant – General: A case of Kano State. In Dandago K.I. and Tanko, A. I. (Ed) Background issues to Ethics in Accounting: Proceedings of First National Conference and Ethical

issues in Accounting, Department of Accounting Bayero University Kano. Aliyu, M.B. (2012, September). The search for national security in Nigeria: Challenges and prospects. A paper presented at a public lecture organized by the Obafemi Awolowo Institute of government and public policy, Muson- Lagos. Alechenu, J., Ameh, J., Adetayo, O. & Ogundele, K. (2013). $1.6 million BMW EFCC, ICPC

scared to probe Oduah. Retrieved from http://saharareporters.com FGN (1999). Constitution of the Federal Republic of Nigeria, 1999. Daily Independent (2013, November 5). Pension scam scandal (1). Retrieved from http://dailyindependentnig.com Dikki, A. C. (2003). The application of christian principles in the practice of auditing in

Nigeria. In Dandago K.I. and Tanko, A. I. (Ed) Background issues to Ethics in Accounting: Proceedings of First National Conference and Ethical issues in Accounting, Department of Accounting, Bayero University Kano.



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Efe, O. (2006). Issues on the public sector reforms. Daily Champion. Retrieved from http://allafrica.com/stories/200608160697.html Financial Regulation, 2009. Inekwe, M. (2012.) Financial accountability and transparency in Nigeria public sector: Any hope in the freedom of information act? International Journal of Accounting and Management Studies, 4(1), 118 – 123. Ireports (2013). Delta loses bid to claim $15bn Ibori bribe money ---- as court orders forfeiture to F G. Retrieved from ireports-ng.com Jacques, L. (2008). How audit can contribute to better governance. Retrieved from

http://www.ccaf-fcvi.com Johnson, I.E. (1992). Public Sector Accounting and Financial Control. Surulere: Financial

Training Kenneth, M. B. & Rick, S. (1998) Pillars of integrity: The importance of supreme audit institutions in curbing corruption. Retrieved August from http://info.worldbank.org/etools/docs/library/18120/pillars.pdf Liu, J.( n.d ). The important role of audit in promoting national governance in China. Retrieved from www.cnao.gov.cn/main/articleshow_ArtID_1155.htm Nairaland Forum (2013). Nigerian embassies steal visa fees says Auditor- General. Retrieved from www.nairaland.com/383921 Nigeria Extractive Industries Transparency Initiatives (2013). Agencies report progress on audit remediation. Retrieved from neiti.org.ng/index.php? Nwogu, S. (2012). Auditor – General identify challenges of financial auditing. Retrieved from www.punchng.com Odiba, D (2007).Corruption and sustainable development in Nigeria. In Agwuama, H.O et al. (Ed) Contemporary Issues and the Challenges of Sustainable Development: The Nigerian Experience. A Book of Reading. Lagos: Sam Artrade Okaforadi, I. (2013). NNPC, CBN ₦500 bn SURE-P Scandal. Retrieved from http://peoplesdaily.com Okolo, J.U.T (2001). The Concept and Practice of Auditing. Ibadan: Evans Brothers. Okoye, E.I & Ani, W. U, (2004). Annals of Government and Public Sector Accounting. Nimo:

Rex Charles and Patrick. Oshisami, K (2004). Government Accounting and Financial Control. Ibadan: Spectrum Books. Osisioma, B.C. (2011) Towards a credible election in 2011: The role of professional accountants in a fragile democracy. The Certified National Accountants, 19 (1,) 5-16. Rafiu O.S. & Oyedekun A (2007) Auditing and accountability mechanism in the public sector. Retrieved from scialert.net/fulltext/?doi=ijaef.2007.45.54 Senate News (2013) Senate weigh in on the autonomy of the Auditor General and the plight of tenants in the FCT. Retrieved from www.nassnig/nass/news.php? The World Bank Group (2001). What is sustainable development? Retrieved from

http://www.worldbank.org ThisDay (2013, October 29). KPMG: Nigeria, most fraudulent country in Africa. Retrieved from www.thisdaylive.com Uwujaren, W. (2013). EFCC press release: EFCC arraigns former Oyo state head of service, others for ₦5.6bn pension scam. Retrieved from http://saharareporters.com

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Chuks P. Maduabum, 2014, 2(2):11-21

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Bureaucracy: A Tool for Scuttling Application of Innovative Ideas in the Nigerian Public Service

Chuks P. Maduabum, Ph.D1

1 Professor of Public Administration and Dean, School of Management Sciences, National Open University of Nigeria (NOUN), 14-16 Ahmadu Bello Way, Victoria Island, Lagos, Nigeria. Email: [email protected]


Abstract It could be argued that Bureaucracy and Innovation are inextricably linked in that organizations that are desirous of survival and growth particularly in a turbulent environment requires the application of both concepts. For instance, whereas bureaucracy introduces specialization, structure, rules and regulations, predictability, rationality and partial democracy amongst others, innovation brings about positive changes that quite often assist in surmounting impediments in the quest for growth. In practice however, reverse sometimes appears to be the case. In the Nigerian Public Service, for instance, superior officers employ the same bureaucracy as a means of scuttling the application of innovative ideas especially where such ideas emanate from their subordinates. Thus perceived, this article proposes a provision of opportunities for superior and subordinate officers to be similarly exposed to sources of acquisition of innovative ideas as a means of gaining the support of superior officers during the application of such ideas. In addition, opportunities could be created for innovators to occupy leadership positions where they will possess the authority to diffuse such ideas down the line. Keywords: Bureaucracy, Innovative Idea, Application, Public Service

Introduction Perhaps a convenient point to approach our subject of discourse is an examination of the views of Hicks and Gullet (1982:127):

Imagine human organizations without structure, without stability, and without order. Chaos prevails. To overcome what otherwise would be utter confusion – to give his organizations (and thus also in large measure himself) structure, stability, and order, man has created bureaucracy.

Although developed essentially by sociologists who, by and large, took a relative scholarly, detached, descriptive point of view, organizations based on bureaucracy have been in existence for thousands of years. For example, fully developed and large bureaucracies existed in ancient Egypt, China and the Roman Empire. In fact, among the few heritages of colonialism in the developing world is the bureaucratically structured public service which, presumably, is designed to promote administrative efficiency; that is, precision, speed, unambiguity, minimal friction and the reduction of costs. The bureaucratic or formal organization model was therefore, for many generations, the dominant model in public administration. While other perspectives have since emerged, the model continued to occupy an important place in the field. Against the foregoing backdrop, the Article is arranged as follows:

(i) Conceptual Clarifications from where significant parameters for subsequent analysis will emerge;

(ii) The inherent negativisms of Bureaucracy; (iii) The Nigerian Experience; and

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Bureaucracy: A Tool for Scuttling Application of Innovative Ideas in the Nigerian Public Service

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(iv) Treatment variables. Conceptual Clarification Several attempts have been made at defining this concept of bureaucracy. A few of these will suffice:

(i) A label and an epithet, bureaucracy denotes an integrated hierarchy of specialized offices defined by systematic rules – an impersonal routinized structure wherein legimatized authority rests in the office and not in the person of the incumbent (Arthur Davis, 1949:144-145);

(ii) An institutionalized strategy for the achievement of administrative objectives by the concerted efforts of many officials (Peter Blau, 1976:76);

(iii) A type of organization designed to accomplish large-scale administrative tasks by co-ordinating the work of a large number of persons in a systematic manner (Robert Appleby, 1981:76);

(iv) A compact formulation composed of a highly established hierarchy of authority, superimposed upon a highly elaborated division of labour (Victor Thompson, 1961:18);

(v) Bureaucracy exists everywhere, in the civil and public services as well as in large organized private sector. Derived from the French word bureau, meaning ‘a writing table or desk’, the bureaucrat is the clerk or official that sits behind the desk or writing table. It was indeed coined in the 19th century by the French encyclopaedists as a term of contempt (P.N.C. Okigbo, 1986:7).

(vi) The most rationally efficient form of organization (Max Weber, 1947: 333-334)

The common denominator among these definitions could be found in the views of Hicks and Gullet earlier cited. And that is, an ordered system which aids efficient and effective accomplishment of tasks in large organizations. It is however to Max Weber that we must credit the conceptualization of what could be termed as the most modern perception of bureaucracy. According to him, “the fully developed bureaucratic mechanism compares with another organization exactly as does the machine with non-mechanical modes of production. Precision, speed, unambiguity, knowledge of the files, continuity, discretion, unity, strict subordination, reduction of friction and of materials and personal costs – these are raised to the optimum point in the strictly bureaucratic administration…”. Continuing, he states that bureaucracy and bureaucratic practices are functionally necessary for the operation of a large administrative apparatus, where things are done in the way they should and where structure and hierarchy are similarly indispensable to the efficient performance of work in a large-scale organization. He insists that bureaucracy is the only concept that guarantees efficiency and effectiveness to organizations, especially government organizations. Accordingly, this occurs because experts, as found within the bureaucracy, are the best qualified to make technically correct decisions and because disciplined performance, governed by abstract roles and co-ordinated by the authority hierarchy, fosters a rational and consistent pursuit of organizational goals, (Blau and Scott, 1963:33). Max Weber sums up his views in his now famous model of bureaucracy from where we identify the normative quality of bureaucracy.


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It is instructive therefore to note that bureaucracy, at least, the Weberian model is a normative model. It is not a product of nature rather; it is a man-made, invented, conceptual model of organizations. As a normative model, it does not primarily describe particular organizations that exist. The emphasis is more on describing an ideal (normative) pattern of organization that conforms to and implements certain assumptions and values. As Weber wrote, “In its conceptual purity, the mental construct (bureaucracy) cannot be found anywhere in reality. It is utopian”. Generally speaking, Weber’s model ensures precision, speed, unambiguity, objectivity, continuity, unity and strict subordination. It provides several powerful functions, often seen as advantages in organizations. These include specialization, structure, predictability, rationality and partial democracy, which we shall take seriatim for analysis. Another concept that is germane to this article is innovation. The inevitability of innovation is informed by a dire need for organizations to survive and grow. As a concept, it entails the introduction of new ideas that would enhance achievement of organizational purposes thereby ensuring growth in the organization. This perception appears to agree with the definition provided by the New Oxford Dictionary of English, (1998:942), thus: “Making changes to something established by introducing something new”. The foregoing definition is provided on the assumption that to innovate, we must build on the existing practices. The definition is further modified by Sullivan (2008:5) as stated hereunder;

Innovation is the process of making changes, large and small, radical and increment, to products, processes, and services that result in the introduction of something new for the organization that adds value to customers and contributes to the knowledge store of the organization.

He further posits that applying innovation entails adding some key words to the foregoing definition thus; Applying innovation is the application of practical tools and techniques that make changes… The view expressed by Drucker (1988) is equally instructive. According to him, innovation can be viewed as a purposeful and focused effort to achieve change in an organization’s economic or social potential. There are however some other interrelated concepts that are sometimes either perceived as synonyms of innovation or share the same purpose. For purposes of clarity, we shall attempt the definition of such concepts and establish relationships of each of them to the concept of innovation. One of such concepts is invention. This term is often used in the context of innovation. Again, we pay a visit to the New Oxford Dictionary of English (1988:960) and it has this to say: “Invention is creating something new that has never existed before”. This definition, although relates to innovation in that something new is brought about but, differs from the definition of innovation as provided by the same dictionary. Whereas the dictionary attempts to see innovation as introducing something new on an existing or established procedure, invention on the other hand, appears more radical in that what is being introduced has never existed before. Some authorities thus, classify invention as radical and innovation as incremental. Radical in that it starts on a new slate by introducing something new that has never existed before. Incremental in that something new is being introduced through modifying an existing technique or technology. Innovation is equally associated with growth just like we explained earlier that, it is only through innovation that an organization can grow, particularly, in a turbulent environment


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characterised by ever changing policies of government, and stiff competition from sister organizations. Growth occurs in a number of ways, such as better service, quality and shorter lead time in non-profit organizations and cost reduction, cost avoidance and increased turnover in profit-oriented organizations. Another interrelated concept is creativity which Rosenfeld and Serves (1991) regard as a key building block of innovation. It is a mental process that results in the production of novel ideas and concepts that are appropriate, useful and actionable. Accordingly, Wallas, (1926) identifies four distinct phases in creativity viz: preparation, incubation, illumination and verification. To this is added by Kao, (1989), structuring and finalizing the idea in a form that can be readily communicated to others. Creativity entails a level of originality and novelty that is essential for innovation. Although it is a fundamental part of innovation, both terms are not synonymous. Innovation encourages the further processing of the output of the creative process (the idea) so as to allow the exploitation of its potential value through development. Creativity brings about new ideas which correspondingly lead to the introduction of new things. To that extent, both terms are interrelated. In terms of Change, we view innovation as resulting in change but we cannot equate it to change. For change to qualify as innovation, it must have some degree of desirability and intentionality (West and Farr, 1990:11). However, we do know that change can have a positive or negative impact on the organization, whereas innovation, by definition, must be positive because, it must add value to the customer. We can therefore posit that all innovations can be viewed as changes, but not all changes can be viewed as innovations. Wither, Initiative? Recently developed proactivity concept such as personal initiative and voice behaviour may be crucial for the translation of creative ideas into successfully implemented innovations (Frese, 2000). Personal initiative (Frese and Fay, 2001:133) comprises a range of self-started, proactive and persistent behaviours such as going substantially beyond the prescribed contents of one’s job (qualitative initiative), spending additional energy at work (quantitative initiative),and demonstrating perseverance in the face of obstacles (overcoming barriers). To this extent, initiative may predict innovation. In a similar term, initiative may moderate the relationship between creativity and innovation such that ideas are more likely to be implemented if initiative is high (Frese 2000:424). Initiative may equally modify relations between innovation and outcomes (Bae and Frese, 2003:49). What of Proactivity? - Proaction involves creating change, not merely anticipating it. It does not just involve the important attributes of flexibility on the adaptability towards an uncertain future. To be proactive is to take the initiative in improving business. At the other extreme, behaviour that is not proactive includes sitting-back, letting others try to make things happen, and passively hoping that externally imposed change “Works out okay” (Bateman and Crant, 1999:63). Proactive behaviour generally has a positive influence on how people are perceived by others. Proactivity entails forward looking, constantly peering into the future to identify opportunities and threats and providing solutions to anticipated problems. Generally speaking, organisations benefit from the proactive behaviour of their members. Our conclusion however, is to the extent that proactivity involves both change, and introduction of new ideas or strategies of operations, it is equally related to innovation.


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Bureaucracy and Innovation Application of innovative ideas, we aver, is inevitable for an organization that is desirous of survival and growth. And bureaucracy is a means of achieving that purpose. However, there is the tendency for senior officers to capitalize on the ills of bureaucracy to torpedo the implementation of innovation ideas particularly, where such ideas emanate from subordinate officers. This tendency seems to be in place having regards to extent literature on the subject, particularly that in organization theory which dealt with bureaucracy. In it, Hicks and Gullet (1976: 144-152) X-rayed the ills of bureaucracy as they affect formal organizations as possible causes of inability of superior officers to appreciate contributions made by their subordinates especially where such contributions are seen as innovative and hence do not strictly accord with role-expectations of the subordinates. According to the authors, “Formal organizations may have built into their designs the seeds for many non-productive, dysfunctional, energy-consuming activities at all levels which tend to result in organizational rigidity, organizational defensiveness, and intergroup conflict, as well as less effective decision making process”. Rigidity as highlighted by Hicks and Gullet appears to be one of the most dysfunctional elements of bureaucracy. Here, it is seen as non-adaptive and thus is in conflict with the basic adaptability laws of nature. It leads to strict adherence to regulations which in the author’s words produces ‘timidity’, conservatism’ and ‘technicism’. In an earlier work, Downs (1967: 100) explained that superior officers resort to being rigid in a bureaucratic set up for fear of losing power, prestige and their income. This is because, they occupy positions in which decision making is inevitable because decisions can prove to be wrong, unpopular or both. Superior officers in such bureaucratic organizations therefore, tend to be avoiders who try to escape responsibility for making decisions. However, since it is inevitable that they make decisions, they resort to rigidly applying the rules of procedure promulgated by higher authorities. Many superior officers generally eschew even the slightest deviation from written procedures unless they obtain approval from higher authority. This attitude of rigidity and its attendant problems which include delays in obtaining official rulings for unusual situations leads to stereotyped conditions which Downs refers to as ‘bureaucratic mentality’ and ‘red tape’. The rigidity in roles occasioned by strict adherence to rules and regulations often creates a situation where officers perform their jobs without any emotional attachment, particularly, where subordinates come up with official problems. This is another ill of bureaucratic organizations highlighted by Hicks and Gullet and referred to by Thompson (1975: 3-23) as ‘impersonality’ in the performance of official responsibilities. Infact, Thompson in his earlier book –"Modern Organisation (1961:152-177), referred to the ills of the bureaucratic organisation as 'Bureau pathology', a disease of bureaucracy which he further suggested are those dysfunctions which are produced by "bureaupathic behaviour'. However, the central themes of his later book "Without Sympathy or Enthusiasm”, is the impersonality of modern complex bureaucratic organisation and the search for objectivity at the administrative level in the process of decision making. In that book, Thompson explained the cause of a personal promise made to an individual which was not fulfilled. The question that emerged therefrom is whether institutions could make and honour personal promises made on their behalf by the employees. This stimulated the most widely distributed and deeply held sociological


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theory of bureaucracy, the notion that bureaucrats invent the means of administration with more value than they do the ends - the "inversion of means and ends" or the "displacement of goals". Administration has therefore been defined as the triumph of technique over purpose or objectives. Here, therefore, is the critical dilemma of an individual who has a personal problem to be resolved by bureaucratic organisation, yet the organisation is lost in a complex maze of rules and regulations that prescribe processes and procedures for arriving at a particular decision, albeit, without sympathy or empathy, just because the bureaucratic organisation is constantly striving to maintain objectivity and impersonality in its quest for rational decision making. In summing up the above arguments, Hicks and Gullet posit that bureaucracy has many unintended consequences or dysfunctions. They further describe bureaucracy as a "machine model" that is non adaptive and impersonal. Its rigidity, they opine, leads to its failure to account adequately for many important human characteristics. They contend that it offers numerous opportunities for members to displace objectives and to work for personal or subunit goals which may not contribute adequately to the achievement of overall objectives of the organization. In their views. innovative ideas are seen by bureaucratic officials as disturbances to an otherwise ordered situation. Such ideas are therefore never seen as a necessary life - giving elements to an evolving, adaptive organization. The Nigerian Experience The dysfunctional characteristics of bureaucracy vis-a-vis implementation of innovative ideas clearly manifest in the Nigerian situation. The Public Service Review Commission thus, observed that the Nigerian Public services are' characterised by a spirit of animosity and jealousy rather than of cooperation and team work. This spirit of animosity, it further observed, exists between peers as well as between superiors and subordinates. In fact, the animosity and jealousy become very high when a subordinate is perceived by his superior officer as being innovative and may supersede him. In order to forestall the implementation of innovative ideas that emanate from subordinates the superior officers resort to strict adherence to rules and regulations which they often argue are at variance with the innovation being contemplated. In obvious reference to this state of affairs, the Commission in paragraph 40 of its main report noted that:

Our examination of the Ministry reveals that the majority of their staff take a narrow view of their responsibilities. There is a tendency to concentrate on rules, regulations and procedures. These rules are not sufficiently positive, nor are they devised to meet the new task and the development needs of government. They reflect more concern over rights and perquisites than obligations; more concern over security and job protection than innovation, creativeness and productivity. Personnel officers act as watchdogs of the rules and their application.

In a similar vein, Balogun (1983:8-9) identified resistance to innovative ideas as one of the factors that differentiate the Nigeria public sector from its private sector counterpart in situations where public administration is linked with the public sector while business administration is linked with the private sector. According to the author, the tendency to resist innovative ideas is higher in public management. It ought to have been 'killed' with the


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transformations which public sector management in Nigeria had undergone over time. Other factors identified by Balogun which are inextricably linked with ‘resistance to innovative ideas are survival, maintenance of status quo, risk avoidance, mistake avoidance, self - protecting, fear of trouble, fear of the unknown, retroactive (fire fighting). Another evidence of stifling innovative ideas particularly where such ideas emanate from subordinates in the Nigerian Public Service is provided by the Study Team on the Structure. Staffing, and' Operation's of the Nigerian Federal Civil Service headed by Professor 'Dotun Philips. In its report, the study Team observed that the decision-making process and implementation mechanics of the Civil Service have been highly criticized by both Government and Public as bureaucratic, slow, rigid, and secretive and not development - oriented. A major cause of the aforementioned problems, according to the report, is the inability of senior officers to take decisions unless a clearance is obtained from the top - most senior officer in whom all authority is vested. The Study Team feels that the tendency is for trivial issues to go through a long chain of officers before a decision is taken. This situation, it continued, leads not only to time - wasting, but also kills the initiative and discretion of intermediate officers leading to frustration and lack of confidence in the ability of officers to take decisions. In such circumstance, therefore, innovative ideas emanating from subordinates are not accepted by a superior officer who feels that he is incompetent to implement such ideas and similarly feels reluctant to pass such suggestions to the point where a decision could be taken. Even when such suggestions are so passed, they never see ‘the light of the day' because, they are 'killed' somewhere along the line. The Study Team therefore suggested a short - circuiting of this long process of decision taking by limiting policy formulation to the Management and Directorate levels (i.e. Grade levels 13 to 17). This, it is hoped, would break what amounts to 'bureaucratic bottlenecks' in decision taking and encourage introduction of innovative ideas in the service. In his empirical study Mmobuosi (1983:37) interviewed six newly trained personnel in the Federal Civil Service of Nigeria, and the Following are their replies:

1. “They say I am revolutionary. They want gradual process. I can’t force them. I can only recommend”.

2. “I consulted a colleague …. and he replied, just do your work as they want and you are O.k.”

3. “My colleague who was an expert in the field of the ideas I brought would not act because he said he was unfairly treated.”

4. “I felt like asking (of what was being done with my recommendations) but I don’t want to be seen to be applying pressure on him … There is a limit to which one can go.”

5. “I wish I had tried to make people see how we could work better. Not that I would have succeeded but maybe I would have.”

6. “Well, when I returned to my organization, I did write a report …. Frankly speaking, I cannot tell you, I have no idea whether the report was useful. Nobody asked my opinion …. Well I did not think it was wise for me to pressurize him or to press him or to teach him what to do about my report… I kept quiet.”

The point of emphasis from the foregoing is that New Ideas Management principles are not applied in the public service probably because they infringe upon rules and regulations. This has thus led to the inability of superior officers to appreciate the contributions made by their


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innovative subordinates. This, however, has certain implications: The enthusiasm of the innovative subordinates will be dampened: the innovative subordinates are likely to withdraw, thus leading to loss of productivity in the service; and the innovators can be frustrated out of the service. What was highlighted in the literature was further confirmed by a recent study. The revelation from the study is that superior officers actually resist innovative ideas being suggested by their subordinates. The following seem to be reasons for such resistance: The fear that the innovative subordinates might supersede them; Envy at personal level; and Fear of infringing on the rules and regulations etc. Resistance to innovative management practices, when and where initiated by subordinates tends to stimulate two types of adjustment behavior in the latter group. The usual adjustment strategy is for the innovative subordinate to reverse to the status quo ante’ either on a permanent basis or temporarily until he has status and authority enough to install his ideas. A more unusual strategy which Fleishmen et al (1955), Sykes (1962: 227-243) and Bobbitt et al (1978:302) had, however, observed is recourse to the exit option whereby the stalled staffer withdraws his membership of and services to the organization. Sykes in his study of 1962 had reported that 19 of the 97 participants in a training programme he studied left their organizations within one year in reaction to resistances to innovations they had initiated or were attempting to initiate. Where disengagement occurs, the loss to ogranisation is higher and irreconcilable as the probability of future gains from the skills being lost reduces to zero level. Strategies for Ameliorating the Situation The study earlier referred to further revealed that superior officers cooperate with their trained subordinates in introducing and implementing innovative ideas acquired from training only if such superior officers were similarly exposed. This phenomenon could be explained using the Linking – pin model adopted by Stiefel (1974: 13) from an earlier work by Likert (1961). Stiefel thus uses this model to advocate a strategy that would ensure the successful application of knowledge, skills, attitudes and innovative ideas acquired from training courses back on the job. The strategy he advocated can take either of two forms: (i) for intact work group members to be trained together: or (ii) for linking – pin group members to attend the same course. He contends that where these are done, the likely result is a commonality of attitudes and behaviors. Thus, everyone will cooperate with an attempt to implement ideas emanating from such exposure, since they have similar experience. The superior officer may even use his leadership position to ensure that other organizational members particularly in his department similarly support and cooperate with their peers in implementing the innovative ideas. In this circumstance, a more plausible conclusion with respect to leadership support for innovation in the Nigerian public service is that such support is more likely to be given where the superior had similar exposure. The more widespread such superiors are in the Service, the greater is the chance for new ideas in Management practices to be accepted and allowed to take root. One way of ensuring systems improvement at a more specific level seems to be (i) the expansion of opportunities so that more staffers can benefit, and (ii] the creation of opportunities for the innovator to rise to leadership position as a condition for diffusing and sustaining innovative management behaviour in the Nigerian Public Service.


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This article equally persists that the challenge is not to be frustrated by the resistance to the introduction of innovative ideas either by superior officers, or subordinates. To gain the much needed leadership support therefore, patience, perseverance, persuasion and above all, tact are the key words in introducing innovative ideas. Tactfulness and persuasive tendencies in convincing superior officers about the relevance and positive contributions of innovative ideas have been found to work for many. On the contrary, assuming an egoistic posture in marketing ideas to superior officers jeopardizes the acceptance of such ideas, no matter how noble or useful to the organization. In view of this, it is desirable to capitalize on the 'Factor of Criticality’ in bringing about innovation in organizations. What this means is that, instead of attempting to effect innovation in the entire organization, one could look for critical areas or leverage points within the system where the positive effect of innovation can easily be felt. This could be in one's section. division or department. The positive result may be all that one needs to convince his reactive bosses, apathetic pears and uncompromising subordinates. Conclusion Innovation, innovative ideas and applicability of such ideas, we aver, guarantee survival and growth of organizations. Thus perceived, organizations that are desirous of such growth, invest heavily on Research and Development as well as training activities which have been identified as fast sources of innovation and acquisition of innovative ideas. In this article however, we undertook an exploration of the subject of discourse for purposes of identifying significant parameters for analysis of the situation in organizations today. The article thus explored studies including that carried out by this author to identify the norms at an individual level within the organization. Findings from such studies reveal that sources of innovative ideas at that level are Research and Development activities and more commonly, exposure to training activities in whatever form. And the belief is that acquisition of such innovative ideas is the panacea for systems improvement. However, it appears that innovators meet with stiff resistance particularly from superior officers who were not similarly opportuned. To ameliorate such a situation therefore, this article canvasses leadership support for the introduction of innovative ideas by ensuring that (i) superior officers are similarly exposed to sources of acquisition of innovative ideas as their subordinates; and (ii) creating opportunities for innovators to occupy leadership positions. In such circumstances, they would assist in diffusing such ideas down the line.

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Bell, M., and Albu, M. (1999) “Knowledge Systems and Technological Dynamism in Industrial Clusters in Developing Countries” World Development 27 (9)

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Bobbit (JR.) R. H., Doktor R.H and McNaul, J.P., (1978) Organisational Behaviour: Understanding and Prediction (New Jersey: Prentice-Hall Inc.

Boettinger, H.M., (1971) The Impact of Change (London: British Institute of Management) Collier, P., (1998) “The Role of the State in Economic Development: Cross –Regional Experiences”.

Journal of African Economics 7(0) Downs, A., (1967) Inside Bureaucracy (Boston : Little, Brown and Company) Drucker, P. F., (2002) “The Discipline of Innovation”, Harvard Business Review, 82 (August) Elster, J., (1983) Explaining Technical Change : a Case Study in the Philosophy of Science(Cambrige) Federal Republic of Nigeria (1974) Main Report of the Public Service Review Commission (Lagos:

Federal Ministry of Information) Federal Republic of Nigeria (1985) “The Nigeria Federal Civil Service in the Mid 80’s and Beyond”,

Report of the Study Team on the Structure, Staffing and Operations of the Federal Civil Service” (Lagos: Federal Ministry of Information)

Fleishman, F., Harris, F., and Burtt, H.E., (1955) Leadership and Supervision in Industry (Columbus : Burean of Educational Research, The Ohio state University)

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Fease, M., and Fay, d. (2001) “Personal Initiative: An Active Performance Concept for Work in the 21st Century,” in Staw, B. M., and Sutton, R. M.(eds.) Research in Organisational Behaviour (Amsterdam: Elsevier Science)

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Latour, B., (1987) “Mind, Culture and Activity”, Science in Action, Vol.3 Iss. 4. Likert, R., (1961) New Patterns of Management (New York: McGraw-Hill) Maduabum, C. P., (1985) “ The Responsibility of Superior Officers towards the Utilization of Trained

Personnel in the Nigerian civil Service, ASCON Journal of Management, Vol.4, No. 2, October Maduabum, C. P., (1999) Capacity Building and Utilization in Nigeria (Lagos: Teitlords Publishers) Maduabum, C. P., (2000) “ The Challenges of Change in the Reform Process in Nigeria”, ASCON Journal

of Management. Vol. 29 Nos 1-2 Maduabum C. P. And Gayya, C. U. (2004) Introduction to Organizational Behaviour (Lagos: Concept Publications) Marshelkar, R. A., (2005) “Nation Building through Science and Technology; A Developing World

Perspective.” 10th Zuckermann Lecture, Innovation Strategy Today I (I) Meggison, D., and Peddler, M., (1976) “Developing Structures and Technology for Learning community,” Journal of European Industrial Training, Vol. 5 Mmobuosi, I. B., (1983).The Problem of Re-entrant in the Transfer of Learning to the Public Science

Organizations in Nigeria. An unpublished Ph.D Thesis. University of Glosgow


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Robert, F., (1992) “Perception in Perspective: Changing Perspection of Genius and Expertise in American Invention,” in Weber, I. R., and Perkins, D. N., (Eds) Inventive Minds: Creativity in Technology (Oxford: Oxford University Press)

Rodrick, D. (2004) “Industrial Policy for the Twenty-First Century”, UNIDO, Geneva Schein, E., (1965) Organistional Psychology (Englewood Cliffs: Prentice Hall) Stiefel, R. J., (1974) “Learning Transfer in Management Training”, Journal of European Industrial

Training Vol.3, No.I. Sykes, A. J., (1962) “The Effects of a Supervisory Training Course in Changing Supervisors Perceptions

and Expectations of the Role of Management” , Human Relations (15). Taylor, C. W., (1972), ‘Can Organisation be Creative Too?” in Taylor, C.W., (Ed.) Climate for Creativity

(New York: Pergamon). Thompson, V. A., (1961) Modern Organization (New York: Knopf). Thompson, V.A (1975) Without Sympathy or Enthusiasm: The Problem of Administrative Comparison

(Alabama: The University of Alabama Press). Wallas (1926), The Art of Thought (London: Cape). West, M. A., and Farr, J. L., (1990) Innovation and Creativity at Work: Psychological and

Organizational Strategies (Chichester: John Wiley). Weiss et al (1980) “The Supervisor’s Role in Learning Transfer,” Journal of European Industrial

Training” , Vol. 4. World Intellectual Property Organization (WIPO) (2005) “Intellectual Property and Traditional

Knowledge.” Booklet No.2 http://www.wipo.int/tk/en/publications/tk_ip.pdf//tkkey

About the Author Professor Chuks P. Maduabum is a Professor of Public Administration and Dean, School of Management Sciences (SMS), The National Open University of Nigeria (NOUN) Lagos, Nigeria. Prior to joining the services of NOUN in 2010, Professor Maduabum worked from 1981 to year 2010 at the Administrative Staff College of Nigeria (ASCON) rising to the position of Director of Studies and Head, Department of Public Administration and Management Studies – a position he held for ten years. He is currently an Adjunct Professor in the Department of Political Science, University of Lagos. For three years (2008 – 2010), Professor Maduabum served as a member of an Expert Group that prepared conference papers for the annual conference of Ministers of Public Services in Africa. In addition, he was a Consultant to the Federal Government of Nigeria on the Millennium Development Goals (MDGs). He was for six (6) years the Editor, ASCON Journal of Management and currently the Editor-In-Chief, NOUN Journal of Management and International Development.

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March., 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Afuberoh, Dennis. and Okoye Emmanuel, 2014, 2(2):22-47

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The Impact of Taxation on Revenue Generation in Nigeria: A Study of Federal Capital Territory and Selected States

Afuberoh, Dennis1 & Okoye Emmanuel, PhD2

1Dept. of Accountancy, Faculty of Management Sciences, Kogi State University, Anyigba Nigeria. Email:[email protected] GSM: +234 7035139673 2Professor of Accounting, Dept. of Accountancy, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria


Abstract The study was aimed at finding out the impact of taxation on revenue generation in Nigeria, with reference to FCT and some selected states in the country. Attempt is also made in the study ( through the means of secondary data) at highlighting the concept and nature of taxation, objectives of taxation, features in Nigerian tax system, taxation as a tool for wealth creation and employment, classification of taxes, Nigeria’s major taxes and other issues that relate to taxation. In achieving the objective of the study, the researcher adopted also primary sources of data to present and analyze the information for the study. The testing of the hypotheses of the study was done using regression analysis computed with the aid of SPSS version 17.0. The research discovered among others that, taxation has a significant contribution to revenue generation and taxation has a significant contribution on Gross Domestic Product (GDP). The research recommends among others that Well Equipped Data Base (WEDB) on all tax payers should be established by the Federal, State and Local Governments with the aim of identifying all possible sources of income of tax payers for tax purpose, the tax collection processes must be free from corruption. In addition, the Federal Government, States and Local Governments should urgently fully modernize and automate all its tax system, improve tax payers’ convenience in the assessment and payment process whilst at the same time entrenching effective and modern human resources management practice in the tax authorities. Key words: Taxation, Revenue Generation, Gross Domestic Product, Tax System and Tax Administration. Introduction The serious decline in price of oil in recent years has led to a decrease in the funds available for distribution to the Federal and State Governments. The need for state and local governments to generate adequate revenue from internal sources has therefore become a matter of extreme urgency and importance. This need underscores the eagerness on the part of state and local governments and even the federal government to look for new sources of revenue or to become aggressive and innovative in the mode of collecting revenue from existing sources. Aguolu (2004), states that though taxation may not be the most important source of revenue to the government in terms of the magnitude of revenue derivable from taxation, however, taxation is the most important source of revenue to the government, from the point of view of certainty, and consistency of taxation. Aguolu (2004) further mentioned that taxation is the most important source of revenue to the government. Owing to the inherent power of the government to impose taxes, the government is assured at all times of its tax revenue no matter the circumstances. This study focuses on identifying the means taxation has been utilized to promote fiscal redistribution of income, identify problems that militate against the use of taxation as revenue generation in Federal Capital Territory (FCT) and in some

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March., 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) The Impact of Taxation on Revenue Generation in Nigeria: A study of Federal Capital Territory and Selected States

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selected states in Nigeria and to identify the use of taxation to promote economic growth and development in FCT and in some selected states in Nigeria. Lastly, the study is aimed at making recommendations that will assist to increase the revenue generation through taxation in the FCT and in some selected states in Nigeria. Statement of the Problem Over the years, revenue derived from taxes has been very low and no physical development actually took place, hence the impact on the poor is not being felt. Inadequate tax personnel, fraudulent activities of tax collectors and lack of understanding of the importance to pay tax by tax payers are some of the problems of this study. The issues mentioned above will therefore constitute the problem to be addressed by this research work. Based on this, the following three research questions are formulated to guide the study: (i) What extent has taxation contributed to revenue generation in Nigeria? (ii) What extent has taxation contributed to the steady growth in Gross

Domestic Product in Nigeria? (iii) In what ways can Nigeria revolutionalised her tax system in order to

boost revenue generation through this source? Hypotheses of the Study The following hypotheses were designed for the study: H01: Taxation has not contributed significantly on revenue generation in Nigeria. H02: Taxation has not contributed significantly to the steady growth in Gross Domestic Product in Nigeria. Scope of the Study Tax revenue generated by the Federal Government of Nigeria and tax revenue generated by some selected states were obtained in order to assess the impact of taxation on revenue generation by the Federal Government of Nigeria and by some selected states in Nigeria from 2002-2011. It is worthy to note that in this study one state was selected from each of the six geo-political zones in the country North Central Zone, South Southern Zone, South Western Zone, North Western Zone, South Eastern Zone and Federal Capital Territory. Federal Capital Territory was chosen to replace one state from North Eastern Zone because the required data which was to be obtained from Taraba State could not be obtained due to the unco-operative attitude of the Chairman, Board of Internal Revenue, Jalingo, Taraba State. Gross Domestic Product of Nigeria covering the period 2002-2011 was obtained to evaluate the extent that taxation has contributed to the steady growth in Gross Domestic Product in Nigeria.


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Limitation of the Study The major shortcoming encountered while undertaking this study was the unco-operative attitude of the Chairman, Board of Internal Revenue, Jalingo Taraba State to release the data of internally generated revenue in the state to the researcher. The resultant effect of this attitude compelled the researcher to choose Abuja FCT to replace Taraba State (North Eastern Zone). Literature Review Concept and Nature of Taxation Taxation is seen as a burden which every citizen must bear to sustain his or her government because the government has certain functions to perform for the benefits of those it governs. A précised definition of taxation by Farayola (1987) is that taxation is one of the sources of income for government, such income as used to finance or run public utilities and perform other social responsibilities. Ochiogu (1994) defines tax as a levy imposed by the government against the income, profit or wealth of the individuals and corporate organizations. According to Adams (2001) taxation is the most important source of revenue for modern governments, typically accounting for ninety percent or more of their income. Taxation is seen by Aguolu (2004), as a compulsory levy by the government through its agencies on the income, consumption and capital of its subjects. These levies are made on personal income, such as salaries, business profits, interests, dividends, discounts and royalties. It is also levied against company’s profits petroleum profits, capital gains and capital transfer. Whereas, Ojo (2008) stresses that, taxation is a concept and the science of imposing tax on citizens. According to him, tax is itself a compulsory levy which is required to be paid by every citizen. It is generally considered as a civic duty. The imposition of taxation is expected to yield income which should be utilized in the provision of amenities, both social and security and creates conditions for the economic well being of the society. Okon (1997) states that income tax can be regarded as a tool of fiscal policy used by government all over the world to influence positively or negatively particular type of economic activities in order to achieve desired objectives. The primary economic goals of developing countries are to increase the rate of economic growth and hence per capita income, which leads to a higher standard of living. Progressive tax rate can be employed to achieve equitable distribution of resources. Government can also increase or decrease the rates of tax, increase or decrease the rate of capital allowances (given in lieu of depreciation) to encourage or discourage certain industries (e.g. in the area of agriculture, manufacturing or construction) or may give tax holidays to pioneer companies. Income tax therefore can be used as an agent of social change if employed as a creative force in economic planning and development.


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Theoretical Framework Taxation is a product of theorists. The contributions of some of the theorists are as follows:- The first theory that this study looks at is Prof. Arthur Laffer theory on taxation, popularly known as the “Laffer Curve.” It is a theoretical representation of the relationship between government revenue raised by taxation and all possible rates of taxation. This theory is demonstrated with a curve (i.e Laffer Curve which is constructed by through experiment). Source: Laffer Curve (2004, www.heritage.org) It considered the amount of tax revenue raised at the extreme tax rates of 0% and 100%. The theory concludes that a 100% tax rate raises no revenue in the same way that a 0% tax rate raises no revenue. This is because at 100% rate, there is no longer incentive for a rational tax payer to earn any income, thus, the revenue raised will be 100% of nothing. It therefore follows that there must exist at least one rate in between where tax revenue would be a maximum. Laffer attributes the concept to Ibn Khaldun and Keynes J.M. One potential result of this theory is that increasing tax rate beyond a certain point will become counter productive for raising further tax revenue because of diminishing returns (Laffer, 2004). The second theory that helps to shape taxation is Ibn Khaldrun theory on taxation. This theory was explained in term of two different effects that is the arithmetic effect and the economic effect which the tax rates have on revenues. The two effects have opposite results on revenue in case the rates are increased or decreased.

100

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According to the arithmetic effect, if tax rates are lowered, tax revenues will be lowered by the amount of the decrease in the rate. The reverse is true for an increase in tax rates. The economic effect however recognized the positive impact that lower tax rate have on work, output and employment and thereby the tax rate base used in providing incentives to increase these activities whereas raising tax rates here the opposite economic effect is used by penalizing participation in the taxed activities. At a very high tax rate, negative economic effect dominates positive arithmetic effect, thereby, the tax revenue declines (Islahi, 2006). Functions of a Good Tax Administration A tax administration is the whole organizational set-up for the management of the tax system.The tax administrative set-up is a department of government and of course works under regulations prescribed by tax legislation. Tax administration is the process of assessing and collecting taxes from tax individuals and companies by authorities in such a way that correct amount is collected efficiently and effectively with minimum tax avoidance or tax evasion. The broad objectives of a tax system is to guarantee the long-run fiscal soundness of the policies and programmes of government while the purpose of tax administration is to fully implement the tax system, that is, to ensure that tax payers comply with the provisions of tax laws and that the funds derived from tax sources are paid into the government purse. Certain aspects of the tax system are pre-conditions for a successful tax administration. First the tax laws should be simple, clear and understandable both to those who must apply them and those who are subject to them. To quote Adam (1910), the tax which each individual is bound to pay ought to be certain and not arbitrary. The form of payment, the manner of payment, the quantity to be paid ought all to be clear and plain to the contributor and every other person. The scope of tax should also be clear. It should be certain that the tax can and will be enforced, for a tax that is easily evaded causes resentment among the honest taxpayers and often decline in taxpayers’ morality. Secondly, the taxes should be fair, that is the burden should be spread as fair as possible, with regard to the tax payer’s ability to pay and in light of his family circumstances, obligations and wealth. The taxes should also be equitable as between one tax payer and another; they should be of universal (general) application, and imposed without distinction of persons between citizens in similar circumstances. Thirdly, the taxes should be easy, economical and convenient to administer that is the cost of collecting to the tax authority and the cost of compliance to the tax payer should be as low as possible and should be consistent with effective enforcement which means that the purpose and manner of payment of the taxes should be related to the habits of the community. Hence the colonialists were careful enough to introduce taxes as closely connected as possible to what their native laws had been paying to their chiefs in those areas where such was the practice (Orewa, 1979).


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The role of the tax administrator in this matter is a crucial one. Balls (1965) has pointed out that subject to the direction of the government and the will of the legislature, the purpose of the tax administrator is, to devise taxes in conformity with the principles that will raise revenues sufficient to meet the needs of government to establish the basis of assessment and a procedure for collection that are as simple, effective and economical as possible, and to develop auditing and other procedures. The function of a tax administrator also includes ensuring full compliance and effective enforcement of tax matters by tax payers. It is important to note that however good principles of a tax system may be, the success of tax administration depends essentially on the ability of the tax administrators to utilize the principles. The problem of personnel then becomes central to tax administration. Hence it has been argued according to Surrey (1965) that the problems of tax administration in underdeveloped countries are basically problems of personnel; there is usually poor pay, lack of training, inefficiency and understaffing. The Principles of Taxation Adam (1910) maintained in his book “The Wealth of Nations” gave the most important set of principles, which are also known as the “cannon of taxation” which are still accepted generally by tax administrators all over the world. The principles of taxation are outlined below: (A) Equity/Equality of Sacrifices: Adam Smith maintained in these principles that each tax payer should contribute to the support of government also referred to as “state” as nearly as possible in proportion to his ability to pay. For example 10 to 20 percent of all income above a certain figure, since there are some citizens whose incomes were so low that they were obviously to pay any taxes. Similarly, Musgrave and Peacock (1984) conceived the principles of equity as equal proportion of taxation on every income that is; in principle everyone should pay the same proportion of his income as tax. This means proportional taxation or some percentage on all incomes and therefore rejected progressive taxation i.e (higher tax rates on higher incomes). It also means equal taxation of earned and investment incomes, existing private wealth and capital are exempted, taxation is limited to income only. In the same view, Prest and Barr (1985) said, equal amount per head should be levied. It is obviously much easier to run a system under which everybody pays say ten pounds per head than one which the amount due varies according to economic circumstance. (B) The Principle of Certainty: This principle asserts that the taxpayer should know how much tax he has to pay, and when it is to be paid. Such information should be adequately accurate and


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clearly stated by the tax regulations. Thus, neither the amount nor the time of payment should be the subject of arbitrary decisions by the tax officials. (C)The Principle of Convenience: Taxes should be collected at a time convenient for the taxpayers. For example, the Pay as You Earn income tax on salaries and wages deducted weekly or monthly as the case may be as income is received, is a good example of the principle of convenience. Convenience as a principle of taxation has to do with the enforcement of tax and administration. Eckeston (1983) has said that a good tax should not impose taxes that are impossible to enforce even when people comply to tax laws voluntary, the government should verify the tax payments, if not the tax becomes an invitation to break the law. Adam (1910) has pointed out that every tax ought to be levied at the time or in the manner in which it is likely to be convenient for the contributor to pay it. Using this principle as an example, one can argue that the convenient time for payment of tax for West African farmers is during the harvest time. (D) The Principle of Economy: The principle emphasizes that the cost of assessing and collecting a tax should be small in relation to the revenue so collected i.e. economy should be the yardstick so that the cost of collecting tax should not be excessive. For example, if the expenses incurred in the course of collecting a tax exceed even 50 percent of the yield, then such taxes do not conform to the principle of economy. Objectives of Taxation Although the tax structure in the various developing countries differs widely, the objectives of taxation in these countries are virtually the same. Unfortunately however, the objectives of the tax system and the relationship between these objectives are hardly clearly stated (Cutt, 1969). This does not only makes tax administration difficult but also give room for tax evasion with the attendant effects on economic development. Cutt (1969) therefore, states that a brief discussion on the objectives of taxation as outlined below would be a gainful exercise. (A). Rising of Revenue: The classical function of a tax system is the raising of the revenue required to meet government expenditure. This income is required to meet the expenditure which are either the provision of goods and services which members of the public cannot provide such as defense, law and order to the provision of goods and services which the federal and state governments feel are better provided by itself such as health services and education. (B) Wealth Redistribution: In modern times, great emphasis has come to be placed on the objective of redistribution of wealth. This has two quite distinct forms. The first is the doctrine that taxation should be based on ability to pay and is summarized by the saying that “the greatest burdens should be borne by the broadest backs.” The second form


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presupposes that the present distribution is unjust and concludes that this should therefore be undone. This second principle sees confiscation as a legitimate objective of taxation. (C) Economic Price Stability: It has been said that the most fundamental reason a government has for taxing its citizens is to provide a reasonable degree of price stability within the nation (Summerfield, et al, 1980). Most spending by the public and private sectors without taxes generates high demand, which is inflationary. In such a situation, the basic function of taxation is to reduce private expenditure in order to allow government to spend without causing inflation. Thus, taxation is basically a deflationary measure. On the other hand, when aggregate demand is lower than the deserved level, government has two options which are to increase government spending with increasing taxes or to reduce taxes while leaving government spending stable. (D)Economic Growth and Development: The overall control or management of the economy rests on the central government and taxation plays an important role in this direction. In addition to maintaining reasonable price stability, governments are determined to promote the near-full employment of all the resources of the country (including human resources i.e. labour) and ensure a satisfactory rate of economic growth. Economic growth and development programmes are geared towards raising the standard of living of the masses of a country through the improvement of their economic and social conditions. Taxation in one way discourages, postpones or reduces consumption and encourages saving for private investments. This is only possible when the basic necessities of life including security, law and order, education and communication are provided by government, hence, the national development plans of developing countries are considered to be important. This objective will be of great assistance to Nigeria where there is mass unemployment of labour force and economic resources. According to Soyode and Kajola (2006) the responsibilities or objectives of government using taxation are as follows:- (a) Revenue Generation: The primary objective of a modern tax system is generation of revenue to help the government to finance ever-increasing public sector expenditure. (b) Provision of Merit Goods: An important objective of tax system is the promotion of social, economic and good governance through provision of merit goods. Examples of merit goods are health and education. These must not be left entirely to private hands though, private participation should be encouraged. Private enterprises will push the cost of providing education and health services beyond the reach of common people if left entirely in their hands.


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(c)Provision of Public Goods: Revenue generated from tax can be used to provide commonly consumed goods and services for which an individual cannot be levied the cost of the goods or a service consumed is one of the functions of government. Examples of public goods include:- (i) Internal security through maintenance of law and order by police and other

security agencies. (ii) External security through defense against external aggression by Army,

Navy and Air Forces, and (iii) Provision of street lights and roads. (c) Discouraging consumption of demerit goods: Tax can be used to discourage consumption of demerit or harmful goods like alcohol and cigarette. This is done to reduce external costs to the society. These external costs include health risks and pollution. (d) Redistribution of Income and Wealth:- Tax system is a means of ensuring the redistribution of income and wealth in order to reduce poverty and promote social welfare. For example, taxation can be used as economic regulator for promotion of economic stability and sustainable growth through fiscal policy. Government also has responsibility for fighting inflation, unemployment and creating a sound infrastructure for business. A tax system is one of the means of achieving this. (e) Harmonization of Economic Objective:- Harmonization of diverse trade or

economic objectives of different countries is one of the modern objectives of tax systems. For example, tax system can be used to achieve the philosophy of the single market in ECOWAS or Africa so as to provide for the free movement of goods/services capital and people between members states.

Features of the Nigerian Tax System Somorin (2011) stated the features of the Nigerian tax system as follows:- (i) Simplicity, certainty and clarity : Tax payers should understand and trust

the tax system and this can only be achieved if Nigerian tax policy keeps all taxes simple, creates certainty through considerable restrictions certainty through considerable restrictions on the need for discretionary judgments and produces clarity by educating the public on the application of relevant tax laws. It is therefore imperative that the Nigerian tax system should be simple (easy to understand by all), certain (its laws and administration must be consistent) and clear (stakeholders must understand the basis of its imposition).

(ii) Low Cost of Administration:- A key feature of a good tax system is that the cost of administration must be relatively low when compared to the benefits derived from its imposition. There must therefore be a proper cost- benefit analysis before the imposition


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of any taxes and the entire machinery of Tax Administration in Nigeria should be efficient and cost effective.

(iii) Fairness:- Nigeria’s tax system should be fair and as such observe the objective of horizontal and vertical equity. Horizontal equity ensures equal treatment of equal individuals. The Nigerian tax system should therefore seek to avoid discrimination against economically similar entities. Vertical equity on the other hand addresses the issue of fairness among different income of fairness among different income categories. In this regard, the Nigerian tax system shall recognize the ability to pay principle, in that individuals should be taxed according to their ability to bear the tax burden.

(iv) Flexibility:- Taxes in Nigeria should be flexible enough to respond to charging circumstances. Prevailing circumstances should also be considered before the introduction of new taxes or the review of existing ones.

(v) Economic Efficiency:- The Nigerian tax system shall at all times strive to minimize the negative impact of taxes on economic efficiency by ensuring that the marginal tax rates do not distort marginal propensity to save and invest.

Utilization of Taxation as an Instrument of Fiscal Policy Keynes (1936) believed that governments could counteract the problem of instability in the economy caused by cycles of high unemployment, severe fluctuations in prices (inflation or deflation) and uneven economic growth through the use of taxation as an instrument of fiscal policy to promote full employment, price level stability, and a steady rate of economic growth. In the Keynesian scheme, tax systems is a primary tool of fiscal policy used, rather than trying to design a neutral tax system, governments deliberately use taxes to move the economy in the desired direction. Taxation as a tool for Wealth Creation and Employment Somorin (2011) stated that taxation is recognized as a very important tool for National Development and growth in most societies. One of the major indices by which development and growth can be measured in any society is the amount of wealth, which is created by economic activities undertaken in that society. Furthermore, she stressed that one of the means of creation of wealth for citizens is through meaningful employment, so that citizens are able to earn income to cater for their needs and also contribute taxes to the Government as part of their contribution to National Development. Somorin (2011) stated that taxation can play a vital and pivotal role in the creation of wealth and employment in the Nigerian economy in the following ways:-


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(i) Stimulating growth in the economy, by increased trade and economic activities: In this regard, tax revenues should be used to provide basis infrastructure such as power, roads, transportation and other infrastructure which would facilitate trade and other economic activities.

(ii) Stimulating domestic and foreign investment: It is necessary to mention that where the tax system creates a competitive edge for investments in the economy, local investments would be retained in the country while also attracting foreign investments. Increased investment would generate employment and provide wealth in the hands of individuals.

(iii) Revenue generated from taxes can also be applied directly to identify sectors of the Nigerian economy to stimulate such sectors: Somorin (2011) emphasized that for this statement to apply, the sectors must be those which have potential for creating employment, developing the economy and creating wealth for the greater benefit of citizens and government of this country.

(iv) Revenue earned from taxes can be used to develop effective regulatory systems, strengthen financial and economic structures and address market imperfections and other distortions in the economic sector: Taxes realized from specific sectors of the economy can be channeled back to those sectors to encourage their continued growth and development.

(iv) Redistribution of income, whereby tax revenue realized from high income earners is used to provide public infrastructure and utilities to the lowest income earners.

The Role of Taxation on Economic and Social Development Sustainability Adeyemi (2012) stated that in achieving sustainable development in the social and economic sectors of a country, the government must consider the trade-off involved in attracting foreign direct investment (FDI) in terms of giving incentives and the impact of these on the country’s sustainable development. Tax is a fiscal instrument used to encourage or discourage specific production or consumption behaviours that affect the economic, environmental or social sustainability. Taxation has the following impacts on the sustainability of economic development: (i) Tax system provides a fiscal platform that encourages foreign direct

investment (FDI) and also fosters bilateral, regional and international trade relations among countries: The tax policies of a nation determine whether foreign direct investment would be attracted or not. If investors are brought into a country, it means that the investors will bring their stable and free capital, their technology, efficiency and contribution to nation’s capital accumulation and job/wealth creation.

(ii) Taxation fosters a fair relationship between development and developing countries so as to ensure that developing countries get a fair allocation of tax base and tax room in emerging trade relations: Consequently, the developed


33


countries would not take undue advantage of the development needs in developing countries as a reason not to work out the international tax regime and mechanism against the third world countries.

(iii) Taxation helps developing countries in formulating effective policies and collection system that foster the funding of sustainability:

Effective and well-functioning tax system and administration are and essential foundation blocks for financing sustainable development.

Therefore, if there is no adequate tax structure or tax collection system in place, it limits the ability of implementing any policy meant to enhance sustainable development goals and this may make developing countries to keep relying on foreign support which are usually attached with strings. Government Revenue Generation Olotu (2012) mentioned that today, taxation is already sowing seed of transformation in many states of the federation of Nigeria. She pointed that only lost month, Tell Magazine carried a cover story titled, “the new cash cow”. In that write up the magazine reveals how “more and more states across the country are now turning to taxation to shore up their revenue to finance critical infrastructural projects”. (Tell Magazine, April 30, 2012). She pointed examples of Governor Okorocha (Imo State), Governor Oshiomole (Edo State), Governor Fashola (Lagos State) and Governor Amaechi (Rivers State) were among the list of states where tax revenues are being harnessed to transform their various jurisdiction. Further more, Olotu (2012) mentioned that these states have seen their tax revenues tripled and quadrupled in recent times and this has enabled the implantation of numerous life and community transforming projects and programmes leading to an increasingly more satisfied populace. Olotu (2012) cited monthly revenue increase from N275 million per month to over N1.6 billion per month, as is the case in Edo State. She attributed the cause mainly due to increase in tax revenue. Abiola and Asiweh (2012) also highlighted the contribution of Lagos State to government revenue generation in Nigeria. They stated that Lagos State is among a few states in Nigeria that have left a land mark in terms of independence and use internally generated revenue. Syndelle (2009) observed that in 2007, Lagos state achieved a gross domestic product of N3.68 trillion an equivalent of $29.028 billion making it the biggest contributor to the federal government.

Nigeria’s Major Taxes In order to avoid multiple collections of taxes from the same taxpayer, at least in theory, taxes of each tier of government in Nigeria have been clearly defined by the Joint Tax Board (JTB) as follows: (a) Federal Taxes: Federal Taxes includes:


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(i) Companies Income Tax. (ii) Custom and Excise Duties. (iii) Value Added Tax. (iv) Education Tax (v) Personal Income Tax in respect of:- (1) Armed Forces, Police, etc. (2) Non resident individuals and companies. (3) Staff of Nigeria Foreign Service. (4) Individuals resident in the Federal capital Territory. (b) State Taxes: (i) Personal Income Tax. (ii) Road Taxes (iii) Pools betting and lotteries. (iv) Business premises registration (v) Development Levy. (vi) Naming of street registration in state capitals (vii) Right of occupancy on land owned by state (viii) Market taxes on state financed taxes. (c) Local Government Taxes: (i) Shops and Kiosks rates. (ii) Tenement rates. (iii) On and off liquor license fee. (iv) Slaughter slab fees (v) Marriage, Birth and death Registration Fees (Rural Areas). (vi) Right of Occupancy on land in rural areas. (vii) Market Taxes and Levies. (viii) Motor Park Levies (ix) Domestic Annual License Fees. (x) Bicycle, Truck, Canoe, Wheelbarrow, and Cart Fees. (xi) Cattle tax payable by cattle farmers only. (xii) Merriment and Road Closure Levy. (xiii) Radio and Television License Fees (other than radio and television

transmitter) (xiv) Vehicle Radio License (Local Government Registration of the vehicle). (xv) Wrong Parking Charges (xvi) Public Convenience and Refuse Disposal, Customary burial ground permit

fees. (xvii) Religious Place Establishments Permit Fees (xviii) Signboard and Advertisement Permit Fees. Problems of Tax Administration in Nigeria According to Soyode and Kajola (2006), the problems of tax administration in Nigeria are as follows:


35


(1) Tax Evasion: Tax evasion is a deliberate and willful practice of not disclosing full taxable income so as to pay less tax. In other words, it is a contravention of tax laws whereby a taxable person neglects to pay the tax due or reduces tax liability by making fraudulent or untrue claims on the income tax form. Tax is evaded through different methods some of which include the following:

Refusing to register with the relevant tax authority. Failure to furnish a return, statement or information or keep records required. Making an incorrect return by omitting or understating an income liable to

tax refusing or neglecting to pay tax. Overstating of expenses so as to reduce taxable profit or income, which will

also lead to payment of less tax than otherwise have been paid. A taxpayer hides away totally without making any tax return at all. Entering into artificial transactions.

(2) Tax Avoidance: Tax avoidance has been defined as the arrangement of tax payers’ affairs using the tax shelters in the tax law, and avoiding tax traps in the tax laws, so as to pay less tax than he or she would otherwise pay. That is, a person pays less tax than he ought to pay by taking advantage of loopholes in a tax levy. Tax can be avoided in various ways:

Incorporating the tax payer’s sole proprietor or partnership into a limited liability company.

The ability to claim allowances and reliefs that are available in tax laws in other to reduce the amount of income or profit to be charged to tax.

Minimizing the incidence of high taxation by the acquisition of a business concern which has sustained heavy loss so as to set off the loss against future profits.

Minimizing tax liability by investing in capital asset (for instance through the new form of corporate financing by equipment leasing), and thus sheltering some of the tax payers income from taxation through capital allowance claims.

Sheltering part of the company’s taxable income from income tax by capitalizing profit through the issue of bonus shares to the existing members at the (deductible) expenses to the company.

Creation of a trust settlement for the benefit of children or other relation in order to manipulate the martinet tax rate such that a high income bracket tax payer reduces his tax liability.

Converting what would ordinarily accrue to the tax payer (employee) as income into capital gain (i.e Compensation for loss of office) the advantage of the employer and employee.

Manipulation of charitable organizations whose affairs are controlled and dominated by its founders thus taking advantage of income tax exemption.


36


Buying and article manufactured in Nigeria thereby avoiding import duty on imported articles.

Avoiding the consumption of the articles with indirect taxes incorporated in their prices e.g. tobacco.

Other Problems Militating against Effective Tax Administration in Nigeria (1) Problems of Assessment There are two major aspects to these: (1) Identification the person to be assessed:

His address and his place of resident so that notices can be served to him. Due to the poor rate of voluntary compliance, and the very low degree of honesty, most taxable persons hide from tax authorities, and if possible would give fake addresses to conceal their identity. Persons who are aware of the whereabouts of other taxpayers evading tax would not volunteer any information to the Tax Authorities. Our postal system and services are so inadequate and inefficient that even letters with proper addresses are not delivered let alone those with no proper addresses. Many businessmen and women do their business without any registration or any fixed addresses. It is therefore difficult to track down such persons for tax purposes. There is also the fact that a lot businesses involving money, are still carried out in this country without reducing anything in writing, what is in writing may not accurately reflect what has transpired, either for fraudulent reasons or for tax purposes.

(2) Identifying Income for Tax Purpose The ascertainment of world income tax purpose most of the time proved difficult. World income embraces all sources of income, including employment income, income from business, profession or vocation interest, rents, dividends etc. earned in or brought into Nigeria. Taxpayers often flout notices to file return of income forms and either they fail to render any returns at all or even when they do, they render virtually useless returns, in the pretext that they are illiterate or do not know what to do. People engage in artificial transactions to conceal or dodge the burden of tax and conceal income yielding transactions e.g. people build houses in other people’s name, may be in the name of people who are otherwise non-existent or are so insignificant in the society that they are not likely to be called at any time to pay tax, let alone to be asked to account for house(s) they are supposed to own.

(3) Personnel Problem and Low Image of Tax Officials Lack of experienced personnel to man the various relevant tax authorities hinders the effective tax administration in Nigeria. In some states, the Board of Internal Revenue is poorly staffed both in terms of quality and quantity of


37


staff. The image of a tax man is that of a corrupt person. They are seen in the eyes of the public as not only corrupt but also lacking in personal integrity.

(4) Inadequate Penalties for Tax Defaulters Low penalties, sometimes ridiculous for tax defaulters do not serve as deterrent for others. They are also not strict enough to encourage compliance.

(5) Attitudinal Problem Most people do not know that it is part of their civic duties or responsibilities to pay tax and except a few enlightened individuals, corporate organizations and salaried employees whose income are subjected to tax, some adult Nigerians do not eagerly and regularly pay tax.

(6) Cumbersome Process of Payment The procedure for paying certain taxes are too cumbersome and do not encourage prompt payment of tax by payers. In some instances they go Scot free by bribing tax officials.

Methodology The research design for the study is survey research. Both primary and secondary sources of data collection were used. Questionnaire was used to obtain information as a primary source while textbooks, journals and internet constituted secondary sources of data collection. The questionnaire was designed showing closed-ended questions- strongly agreed, agreed, strongly disagreed and disagreed responses. The questionnaire was administered to the employees of Federal Inland Revenue Service (FIRS) Abuja FCT, State Board of Internal Revenue, Kogi State, State Board of Internal Revenue, Delta State, State Board of Internal Revenue, Ebonyi State, State Board of Internal Revenue Abuja FCT, State, State Board of Internal Revenue, Niger State and sample of tax payers from the selected six geo-political zones in the country. The total population for this study comprises ten thousand, one hundred and twenty six (10,126) employees as analyzed in table 1 below: Table 1: Distribution of the Population S/NO POPULATION OF THE STUDY TOTAL NUMBER OF STAFF

1 Federal Inland Revenue Service, Abuja FCT 6,120 2 S.B.I.R Kogi State 389 3 S.B.I.R Delta State 1,043 4 S.B.I.R Ondo State 850 5 S.B.I.R Ebonyi State 304 6 B.I.R Abuja FCT 850 7 S.B.I.R Niger State 450 8 Total sample of tax payers from the selected six

geo-political zones 120

TOTAL 10,126 Source: Field Survey, 2012.


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Sample size and Sampling Techniques A sample size of 400 respondents determined through the aid of Yamane and Yaro (1967) formula was used in the study Table 2: Distribution of Sample among selected Units in the Population S/No Population of the Study Number of Staff Questionnaires

administered 1. 2 3 4 5 6 7 8

Federal Inland Revenue Service Abuja FCT S.B.I.R Kogi State S.B.I.R Delta State S.B.I.R Ondo State S.B.I.R Ebonyi State B.I.R Abuja FCT S.B.I.R Niger State

Sub-Total Total sample of the tax payers from the selected six geo-political zones

6,120 389

1,043 850 304 850 450

10,006

120

240 16 42 34 12 34 18 396

4

Total 10,126 400 Source: Field Survey, 2012. Based on the large population, the researcher adopted non-probability sampling technique using judgmental or purposive sampling method. Technique of Data Analysis The technique of data analysis used in the study was regression analysis. The computation was done using SPSS 17.0. Data Presentation, Analysis and Findings Table 3: Data on internally generated revenue by the six geo-political zones and taxes collected by Federal Inland Revenue Service, Abuja F.C.T

Year

Internally Generated Revenue by the six geo-political zones

Taxes collected by FIRS Abuja-FCT

2002 10,537,957,474.30 433,900,000,000 2003 10,538,584,051,28 703,100,000,000 2004 11,710,080,086.39 1,194,813,959,540.91 2005 12,747,879,997.24 1,741,477,131,459.72 2006 12,593,946,335.18 1,863,192,970,401.11 2007 14,528,892,955.99 1,841,107,016,067.39 2008 18,683,167,755.38 2,972,107,003,382.44 2009 21,656,584,918.49 2,196,474,879,708.54 2010 24,848,520,006.00 2,839,384,502,583.87 2011 27,868,818,842.60 3,449,394,505,683.97 Total 165,714,432,422.85 19,234,951,968,827.95

Source: State Board of Internal

Revenue located in Kogi State,

Delta State, Ondo State, Niger State, Ebonyi State and Abuja

FCT.

Source: Federal Inland Revenue Service, Abuja, FCT


39


Tale 3 above, shows that the data relating to internally generated revenue by the six geo-political zones from 2002 – 2011 and data on taxes collected by Federal Inland Revenue Service, Abuja FCT from 2002 – 2011. TABLE 4: Data on taxes collected by Federal Inland Revenue Service, Abuja DCT and Gross Domestic Product

Year Taxes Collected by Federal Inland Revenue Services, Abuja-FCT

Gross Domestic Product (Million)

2002 433,900,000,000 6,912,381.25 2003 703,100,000,000 8,487,031.57 2004 1,194,813,959,540.91 11,411,066.91 2005 1,741,477,131,459.72 14,572,239.12 2006 1,863,192,970,401.11 18,564,594.73 2007 1,841,107,016,067.39 20,657,317.67 2008 2,972,107,003,382.44 24,296,329.29 2009 2,196,474,879,708.54 24,794,238.66 2010 2,839,384,502,583.87 29,205,782.96 2011 3,449,394,505,683.97 31,305,882.98 Total 19,234,951,968,827.95 190,206,865.14

Source: Federal Inland Revenue Source: National Service, Abuja- FCT Bureau of Statistics Table 4 above shows that the data relating to taxes collected by Federal Inland Revenue Service, Abuja FCT and Gross Domestic Product from 2002 – 2011. Question 1: Do you agree that the use of taxes has assisted in the development of the country? TABLE 5: RESPONSES FROM QUESTION 1

Respondents

Responses Tax Authorities Percentage Tax Payers Percentage Strongly Agreed 200 51 2 50 Agreed 140 35 1 25 Strongly Disagreed

40 10 1 25

Disagreed 16 4 0 0 Total 396 100 4 100 Source: Field Survey (2012) From the table 5 above, both tax authorities and tax payers strongly agreed that the use of taxes has assisted in the development of the country. This is seen from the number of respondents that strongly agreed which are 200(51%) and 2(50%) for both tax authorities and tax payers. Question 2: Do you agree that taxes are one of the major tools for revenue generation by the Federal, State and Local Governments? Table 6: Responses from Question Two

Respondents

Responses Tax Authorities Percentage Tax Payers Percentage Strongly Agreed 140 35 2 50 Agreed 120 30 1 25 Strongly Disagreed 70 18 1 25


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Disagreed 66 17 0 0 Total 396 100 4 100 Source: Field Survey (2012)

From table 6 above, both tax authorities and tax payers strongly agreed that taxes are one of the major tools for revenue generation by the Federal, State and Local Governments. This is seen from the number of respondents that strongly agreed which are 140(35%) and 2(50%) for both tax authorities and tax payers. Question 3: Has Taxation impacted on revenue generation in Nigeria? Table 7: Responses from Question Three

Respondents


45 11 1 25

Disagreed 41 10 0 0 Total 396 100 4 100 Source: Field Survey (2012) From table 7 above, both tax authorities and tax payers strongly agreed that taxation has impacted on revenue generation in Nigeria. This is seen from the number of respondents that strongly agreed which are 180 (46%) and 2(50%) for both tax authorities and tax payers. Question 4: Has the publicity made in the print and electronic media on the importance of taxes payment impacted positively on revenue generation in Nigeria? Table 8: Responses from Question Four

Respondents


210 53 2 50

Disagreed 160 40 1 25 Total 396 100 4 100 Source: Field Survey (2012) From table 8 above, both tax authorities and tax payers strongly disagreed that Publicity made in the print and electronic media on the importance of taxes payment have not impacted positively on revenue generation in Nigeria. This is seen from the number of respondents that strongly disagreed which are 210(53%) and 2(50%) for both tax authorities and tax payers. Question 5: Do you agree that if aggressive and innovative modes of collecting revenue from existing Federal, State and Local Governments internal sources are put in place the revenue generated by these governments would increase? Table 8: Responses from Question Five


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Respondents

Responses Tax Authorities Percentage Tax Payers Percentage Strongly Agreed 50 13 1 50 Agreed 36 9 0 25 Strongly Disagreed 180 45 2 25 Disagreed 130 33 1 0 Total 396 100 4 100 Source: Field Survey (2012)

From table 8 above, both tax authorities and tax payers strongly disagreed that if aggressive and innovative modes of collecting revenue from existing Federal, State and Local Governments internally sources are put in place, the revenue generated by these governments would not increase. This is seen from the number of respondents that strongly disagreed which are 180(45%) and 2(50%) for both tax authorities and tax payers. Test of Hypothesis 1: H0: Taxation has not contributed significantly on revenue generation in Nigeria. Decision rule:- Since the p-value 0.001 is less than 0.05 (see Appendix A) we reject H0 and conclude that taxation has a significant contribution on revenue generation at 0.05 significant level. Test of hypotheses 2 H0: Taxation has not contributed significantly to the steady growth in Gross Domestic Products in Nigeria. Decision rule: Since the p-value 0.000 is less than 0.05 (see appendix B) we reject H0 and conclude that taxation has a significant contribution on Gross Domestic Product at 0.05 significant level. Summary of Findings This study revealed the following findings: (i) That from the regression analysis, taxation has a significant contribution on

revenue generation in Nigeria. (ii) That from the regression analysis, taxation has a significant contribution on

Gross Domestic Product of Nigeria. (iii) That taxation is the most important source of revenue to the governments in

Nigeria from the point of view of certainty and consistency of taxation. (iv) That taxation is regarded as a tool of fiscal policy used by government all

over the world to influence positively or negatively particular type of economic activities in order to achieve desired government objectives such as to increase the rate of economic growth and hence per capital income which leads to a higher standard of living.


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(v) That taxation is being used to achieve many objectives such as raising of revenue required to meet government expenditure, wealth redistribution, economic price stability, and economic growth and development.

Conclusion In this study, effort has been made to analyze taxation as a tool for revenue generation in Nigeria in the three tiers of government namely: Federal, State and Local Governments for structural and economic developments. In this study, issues relating to taxation as a tool for wealth creation and employments, the role of taxation in wealth creation and employment, the role of taxation on economic and social development sustainability and government revenue generation were considered. This study also considered the two major categories of tax which are direct and indirect taxes, and the study focused on the various types of taxes collected by the Federal, state and Local Governments. Furthermore, the study considered other problems militating against effective tax administration in Nigeria such as identification of the person to be assessed, identifying income for tax purpose, personnel problem and low image of tax officials in the eyes of the public, attitudinal problem and cumbersome process of payment. Finally, the study concludes that taxation has significantly impacted on revenue generation in Nigeria. Recommendations The following recommendations are made: (a) There is an urgent need for all state governments to clearly state the basic

objectives of its tax system and the relationship between these objectives. This will assist to give the tax administrators a sense of direction and make

the tax payer see clearly the reasons he/she should pay his/her tax as at when due.

(b) The tax collection mechanism used by tax officials must be free from corruption and embezzlement. If this is not done the revenue collected many not reach the desired point.

(c) The Federal Government, state governments and local governments should urgently fully modernize and automate all its tax system, improve tax payer convenience in the assessment and payment process whilst at the same time entrenching effective and modern human resource management practices in the tax authorities.

(d) Judicious use of tax payers money should be made and be seen to have been properly utilized. This will encourage tax payers to continue to pay taxes.

(e) Effort should be made by the Federal State and Local Government to diversify the main revenue source from oil to other sectors of the economy such as agriculture, extractive industries in order to attract direct and indirect taxes.


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(f) The Federal, State and Local Governments should ensure that all collected revenue from either Pay As You Earn, with holding taxes, value added tax etc are paid promptly into designated bank accounts and failure to do so within the stipulated period of time should attract strict penalties to the tax official.

References Adams, C. (2001) For Good and Evil; The impact of Taxes on the Course of Civilization, U. S. A;

Madison Publishers. Adams, S. (1910) The Wealth of Nations; London; Everyman’s Library Ltd. Adefila, J.J. (2008) Research Methodology in Behavioural Sciences, Kaduna, Nigeria; Apani Publications. Aguolu,O. (2004) Taxation and Tax Management in Nigeria, 3rd Edition, Enugu; Meridan Associates. Babalola, J.B (1999) Statistics with Applications (In Behavioural Sciences, Business and

Engineering) (Revised Edition), Ilorin, Evidence (Nig) Ventures Publisher. Balls,O. (1965) The Problems of Tax Administration. In Latin America, Baltimore; John Hopkins Press. Cutt, J.(1969) Taxation and Economic Development in India, Fredrick A. Praeger Inc. New York. Eckeston, H. (1983) Public Finance 4th Edition, New Jersey; Prentice Hall Inc. Englewood. Farayola, G.O. (1987) Guide to Nigerian Taxation, Ikeja, All Group Nigeria Limited Publishers. Keynes, J.M (1936) The General Theory of Employment, Interest and Money; New York, Harcourt, Brace. Musgrave, R.A and Peacock, A.I (1984) Classics in the Theory of Public Finance, New York; Macmillan. Ochiogu. A.C.(1994) Nigeria Taxation For Students, Enugu; A.C Ochiogu Publishers. Okon, E. (1997) Company Income Tax In Nigeria (unpublished Monograph) University of Port

Harcourt Orewa ,G.O (1979) Taxation in West and Mid- Western Nigeria 2nd

Edition, Institute of Social and Economic Research, Ibadan, Nigeria. Osuala, E.C (2005) Introduction to Research Methodology The Millennium Edition, Enugu, Nigeria,

Cheston Agency Ltd. Prest, A. R. and Barr. H. (1985) Personal Income Taxation; Public Finance Theory and Practice, 5th

Edition, London; E.L.B.S. Sommefeld, R.M.(1980) An Introduction to Taxation, Harcourt Brace, Jovanovich. Soyode, L. and Kajola, S.O (2006) Taxation Principals and Practice in Nigeria, Ibadan, Nigeria; Solicon Publishers. Surrey, S.S (1965) Tax Administration In Under Developing Countries, Baltimore; John Hopkins

Press. Yamane and Yaro (1967) Statistics: An Introductory Analysis, 2nd Edition, New York; Harper and

Row. Journal publications: Abiola, James and Asiweh, M. (2012) Impact of tax Administration on Government Revenue in a developing economy. A case study of Nigeria. International Journal of Business and Social Science, volume 3 No 8 (special issue- April). Philips, A.O.(1973) “A Note on the Determinants of Income Tax Evasion”, Nigerian Journal of

Public Affairs. Volume 1 No 1


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Conference papers:- Adeyemi, K.S (2012). Sustainable Development strategies for poverty Alleviation the Tax

perspective. Paper delivered at the annual tax conference of the chartered institute of taxation of Nigeria, Nicon Luxury Hotel, Abuja, 10th May.

Olotu, G.E. (2012) Welcome Address speech by the chairman, chartered institute of taxation of Nigeria, 14th Annual Tax Conference, 10th May. Omorogiuwa, P.A (1981) Tax Administration in Nigeria, Paper presented at the first National symposium on taxation, Lagos. October. Somorin, T.(2011) National Tax policy, issues, challenges and prospects. Paper Presented at the

MPTP workshop, Abuja, 19th October. Internet materials: Syndelle, S. (2009) Taxes- “Accountability and Revenue in Nigeria”. Nigeria Curiosity: Com Available from: http://www.nigeriancuriosity.com. /2009/11/taxes- accountability- revenue- in-Nigeria. html. Accessed 10/4/2010. Islahi, A.A (2006) Ibn Khaldrun’s Theory of Taxation and its Relevance Today, Islamic Research and Training Institute Spain. www.muslimheritage.com/default.cfm Laffer, A. (2004), The Laffer Curve, Past Present and Future From Heritage Foundation June 9, 2011. www.heritage.org.

APPENDIX A

Regression Analysis of Revenue Generated on Taxes Collected

Descriptive Statistics

Mean Std. Deviation N

Revenue 1.6571E10 6.30257E9 10

Taxes 1.9235E12 9.78892E11 10

The table depicts the mean and the standard deviation of revenue and taxes

Correlations

Revenue Taxes

Pearson Correlation Revenue 1.000 .890

Taxes .890 1.000

Sig. (1-tailed) Revenue . .000

Taxes .000 .

N Revenue 10 10

Taxes 10 10


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The correlation between revenue and taxes is 0.89, meaning that revenue and taxes are strongly, and linearly correlated. R Square is 0.792 meaning that 89.0% of the total variation in revenue could be explained by the taxes collected

ANOVA b

Model Sum of Squares Df Mean Square F P-value

1 Regression 2.832E20 1 2.832E20 30.481 .001a

Residual 7.432E19 8 9.290E18

Total 3.575E20 9

a. Predictors: (Constant), Taxes

b. Dependent Variable: Revenue

HYPOTHESIS TO BE TESTED H0 : Taxation has no significant contribution on the Revenue Generated Vs H1: Taxation has a significant contribution on the Revenue Generated DECISION RULE Accept H0 if the P-value is greater than 0.05, reject H0 if otherwise. CONCLUSION Since the P-value ( 0.001) is less than 0.05 we reject H0, we therefore accept H1 and conclude that Taxation has a significant contribution on the Revenue Generated at 0.05 significance leve

Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

T Sig.

Correlations

B Std. Error Beta Zero-order Partial Part

1 (Constant) 5.549E9 2.217E9 2.503 .037

Taxes .006 .001 .890 5.521 .001 .890 .890 .890

a. Dependent Variable: Revenue

Model Summary

Model R R

Square Adjusted R

Square Std. Error of the Estimate

Change Statistics

R Square Change

F Change df1 df2

Sig. F Change

1 .890a .792 .766 3.04800E9 .792 30.481 1 8 .001



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The simple linear regression model is given below Yrevenue = 5.549E9 +0.006taxes We deduced from the model that; revenue generated increase by 0.006 unit for every 1 unit increase in taxes collected.

APPENDIX B Regression Analysis of GDP on Taxes collected

Descriptive Statistics

Mean Std. Deviation N

GDP 1.9021E7 8.52434E6 10

Taxes 1.9235E12 9.78892E11 10

The table depict the mean and the standard deviation of GDP and taxes The correlation between GDP and taxes is 0.963, meaning that revenue and taxes are strongly, and linearly correlated

Model Summary

Model R R

Square Adjusted R

Square Std. Error of the Estimate

Change Statistics

R Square Change

F Change df1 df2

Sig. F Change

1 .963a .927 .918 2.43653E6 .927 102.159 1 8 .000

a. Predictors: (Constant), Taxes R Square is 0.927 meaning that 92.7% of the total variation in GDP could be explained by the taxes collected

Correlations

GDP Taxes

Pearson Correlation GDP 1.000 .963

Taxes .963 1.000

Sig. (1-tailed) GDP . .000

Taxes .000 .

N GDP 10 10

Taxes 10 10


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ANOVA b

Model Sum of Squares df Mean Square F P-value

1 Regression 6.065E14 1 6.065E14 102.159 .000a

Residual 4.749E13 8 5.937E12

Total 6.540E14 9


b. Dependent Variable: GDP HYPOTHESIS TO BE TESTED H0 : Taxation has no significant contribution on the GDP Vs H1: Taxation has a significant contribution on the GDP DECISION RULE Accept H0 if the P-value is greater than 0.05, reject H0 if otherwise. CONCLUSION Since the P-value ( 0.000) is less than 0.05 we reject H0, we therefore accept H1 and conclude that Taxation has a significant contribution on the GDP at 0.05 significance level.

Coefficientsa

Model

Unstandardized Coefficients

Standardized Coefficients

T Sig.

Correlations

B Std. Error Beta Zero-order Partial Part

1 (Constant) 2.890E6 1.772E6 1.631 .142

Taxes 8.386E-6 .000 .963 10.107 .000 .963 .963 .963

a. Dependent Variable: GDP

The simple linear regression model is given below YGDP = 2.890E6 +8.386E-6taxes We deduced from the model that; GDP increase by 8.386E-6 unit for every 1 unit increase in taxes collected.

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March., 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print)

IseOlorunkanmi O. Joseph, 2014, 2(2):48-55

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Decentralization, Local Governance and Public Goods Delivery in Nigeria

IseOlorunkanmi O. Joseph1

1Dept. of Political Science and International Relations, Landmark University, Omu-Aran, P.M.B 1001, Omu-Aran Kwara State, Nigeria. Email: [email protected]. GSM: +234 8037124720

Manuscript ID: RCMSS/IJPAMR/14008 Abstract Political decentralization as a strategy to bring development to the local areas underpins the creation of local government administration in Nigeria. Thus, the principal task is to promote efficient provision and supply of public goods. But the crisis of development at the local government level which is attributable to the failure of extant local government administration system has raised the imperative of paradigmatic rethinking towards local governance. Unlike local government administrative system currently in place with its narrow and restrictive arena, local governance is all-encompassing i.e. involving informal institutions, networks, community organizations, neighbourhood associations etc. With service delivery, flexibility and participation advantage, this paper examines local governance operation in some selected areas-security, water supply; healthcare etc. and thus argues that local governance offers a potential solution to this endemic problem of development failure at the local level. Identifying patron-clientelism, corruption and political unaccountability as militating factors against efficient local government administration, this paper concludes that local government autonomy will guarantee the success of local governance in service delivery. Key words: Local Governance, Local Government, Public Goods, Corruption.

Introduction In recent years, decentralization as a strategy for effective local development has become an important aspect of discourses on issues relating to democratization, democracy and local participation. This has attracted more attention to the idea of strengthening or reforming the local government system, particularly in Nigeria. Ideally, local government is premised on the idea that it is the level of government that is better placed to effectively formulate and implement development policies and programmes that can effectively solve local problems. However, this idea seems defeated by the inadequacies and challenges facing the local government system in Nigeria.

Conceptual Issues Decentralization Decentralization is defined in many ways depending on the degree of delegation and autonomy transferred to the local actors. Olowu (1988) defines decentralization “As the transfer of administrative and/or decision making (political) power to lower organizational units. A second distinction that is made is between bureaucratic decentralization and political decentralization or devolution. The former encompasses the transfer of administrative responsibilities to field administrative units of the federal government, whereas the latter refers to the transfer of substantial decision-making powers and responsibilities to corporate units outside the framework of the central government such units include local governments, statutory corporations, cooperatives and even organized private sector.



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Decentralization according to Okojie (2009) is a process of transitioning from a governance structure in which power is concentrated at the central or national level to one in which authority to make decisions and implement them is shifted to lower level governments or agencies. It consists of a transfer of public functions from higher tiers to lower tiers of governance. There are various reasons given by scholars for decentralization. Olowu and Wunsch (1990) argues that decentralization makes government more responsive while Trebout (1956) cited in Raymond and Roberta posit decentralization leads to greater variety in the provision of public goods, which are tailored to better suit local population. Jutting et al 2005 sees decentralization resulting in democratic institutions in which the poor can effectively participate, and lobby for their interests. Decentralization therefore is a downward vertical shift of governance from national to local level.

Local Government Local government is generally referred to as the third tier of government. According to Anwar Shah and Sana Shah (2006) it refers to specific institutions or entities created by national institutions(Brazil, Denmark, France, India ,Japan, Nigeria),by state constitutions(Australia, the United States),State legislation(Canada, Pakistan),or by executive order(China)to deliver a range of specified services to a relatively small geographically delineated area. These functions of the local government fall under the efficiency-services school classification given by Ola (1984), which states that principal focus of local government should be the provision of services. It is on the basis of the performance success or failure that the local government is been assessed. The proximity of the Local government to the grassroots makes it especially suited to provide certain functions far more efficiently and in a more cost effective manner than the much more remote government at the higher level (Abutudu,2011).

Local Governance Local governance can be taken to mean the replacement of the view of local government; with its attendant structures and procedures by a plethora if not a plurality of providers (Caroline and Andrew, 1998). To Anwar Shah and Sana Shah (2006), local governance is a broader concept, which in summary means the formulation and execution of collective action at the local level. Its broadness encompasses the direct and indirect roles of formal institutions of local government and government hierarchies, as well as the roles of informal norms, network, community organizations, and neighbourhood associations in pursuing collective action. Local governance defines the framework for citizen-citizen and citizen-state interactions, collective decision making, and delivery of local public services. According to Kauzya local governance does not make reference to local government or local populations alone. It refers to a situation where whatever governance actor (an international NGO, a central government institution, a local government agency, or a private sector enterprise) does is planned, implemented, maintained, evaluated, and controlled with the needs, priorities, interests, participation, and well-being of the local population as the central and guiding consideration. When it comes to local governance there are many stakeholders and players. They are in the Public sector, in the private sector, in civil society, among donors and development partners, at local community, national, regional and international levels. Public Goods



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Public goods like the concept of the public interest, is a normative and elusive which is ambiguous and difficult to define. There are various definitions of public goods given by scholars. The concept of public goods was developed in the economics by Samuelson in 1954. Samuelson’s definition shaped the direction of the debate on what constitute public goods. He defined public goods as one “which we all enjoy in common in the sense that each individual’s consumption of such a good leads to no subtraction from any other individual’s consumption of that good”. Olson (1965) can be given primary credit for the introduction of the concept into political science and sociology. Successively, there has been a proliferation of public goods analyses in all areas of political science, comparative politics and development economics. Generally speaking, public goods have two defining characteristics: non-excludability and non-rivalry. Non-excludability of public goods connotes that it is impossible to prevent anyone from consuming the good. By non-rivalry, a person’s consumption of the good does not hinder or diminish another person’s benefit from consuming such good. Public goods are social outputs (or value realizations) that people in a community wish to obtain for the common good, such as a livable environment, clean water, good education, health care, security, and so on. A concept of the public good helps our understanding and our actions in policymaking and policy implementation, by acknowledging what is important to the people and the action to be taken to realize this (Jung, S.J, 1997). Local government in Nigeria like elsewhere around the world has been undergoing a process of change. Much of this process is the result of external changes over which individual local governments have had little influence. Like around the world, according to Caroline Andrew and Michael Goldsmith (1998) where increasing economic interdependence; the process of globalization; changing technologies; has had tremendous effects on local government system. Some other external change in local government administration would be the consequence of changes taking place within the nation-state: the privatization of state services; restructuring the local government system; changing intergovernmental relations. Some changes could be political or social. Political in the partisan sense, as when political control changes in a local government, while others might be social: widening social segregation in cities; growth in drug related crime, increasing corrupt practices, for example. And some will be generated from within local governments themselves, be they processes or delayering, privatization, and contracting out of services; attempts at improving customer care and citizen relationships ( Caroline Andrew and Michael Goldsmith, 1998) . The changing nature of the modern state and of the society it serves has had inevitable consequences for elected governments. Among the appropriate questions that we need to ask at this point is how efficient are locally elected governments for the delivery of local public goods? What is the impact of intergovernmental fiscal relations on local public goods delivery? These questions are particularly of increasing importance as many developing countries are beginning to decentralize responsibility for local public services to local institutions. Nigeria is one of the few countries in the developing world to have significantly decentralized both resources and responsibilities for the purpose of delivering public goods. In the social-economic and political milieu in which these changes are taking place where the local government is also operating, has places pressure on the local government. Therefore the local government faces the scathing criticism of development failure that has led to what Caroline and Andrew refers to as the ‘crisis



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of legitimacy’, in which there is gap between promise and performance. This crisis of legitimacy of the local government has generated polemical debates about the continued relevance of this third tier of government in Nigeria. These problems of the local government in Nigeria arose from certain constitutional contradictions. For example Section 7(1) of the 1999 constitution states that “the system of local government by democratically elected local government councils is under this constitution guaranteed; and accordingly, the government of every state shall subject to section 8 of this constitution, ensure their existence under a Law which provides for the establishment, structure, composition, finance and functions of such councils”. Yet, section 7 (6a) submits that “the National Assembly shall make provisions for statutory allocation of public revenue to Local Government councils in the federation. The contradiction is extended further by section 7 (6b) which states that “the House of Assembly of a state shall make provisions for statutory allocation of public revenue to local government councils within the state”. The constitution in section 162 (6) established the State Joint Local Government Account for the purpose of payment of “all allocations to the Local Government councils of the State from the Federal account and from the Government of the State”. In Section 162(7) it directs State Government to pay to Local Government councils its total revenue on the terms prescribed by the National Assembly. At the same time it gives the same power and functions to the State House of Assembly in section 162(8) Further, section 8 (subsections 5 and 6) saddles the National Assembly with some functions before creation of a local government can become legal. The implication of all these identified contradictions and ambiguities is that it becomes difficult to practically locate constitutionally the locus of power on local government creation. These contradictions in the 1999 constitution have become ready-made tools in the hands of some state Governors to control, subjugate and cripple the operations of the Local Government system in Nigeria. What are therefore the implications of this crisis of legitimacy for the local government in Nigeria? This crisis of legitimacy have brought again to the fore the relevance of the local government system. The debates have centered on these perspectives (1) those who agitate for the scrapping of the local government. For example Lema Jubril (2003) cited the rising cost of governance as reason for the agitation, while Ochereome Nnanna (2013) lent his voice to this agitation insisting that the present local government system is antithetical and not beneficial to the communities of the South East Political Zone of Nigeria which he described as republican in outlook, which the present local government system has failed in meeting the needs of the people.(2) retaining but reforming the local government system and granting of full autonomy to the local government (3)transforming from local government to local governance. The pertinent question now is how will the present local government system responds to the mounting challenges confronting it and meeting the demands of providing and delivering basic public goods to the people? In this era of persistent global economic problems and adjustments, and the globalized nature and consequences of natural disasters many national governments the world over including Nigeria are been forced by circumstances to fail in their delivery of certain activities or even reduce the services they provide. As central governments shrinks from the performance of these duties so also the local governments. For the local government, there are many reasons why this should happen: reduction in financial allocation to the local government, undemocratic revenue sharing process, and excessive politicization of service provision. With this prevailing decline in governance capacity and consequent decline in the delivery of social services, community people are using their organizational



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capability to evolve strategies of meeting their own basic needs. Since there has been increasing realization that government appears unable to deliver and maintain social services for the people on a sustainable basis, people in various communities of the country, especially at the local level, have been organizing themselves into town/village unions and community development associations with the intent of delivering social services to their communities(Popoola,2011).These individual community efforts at developing rural areas and in providing certain public goods and services have been hampered by certain factors. Among these is shortage of adequate funds to carry out projects. Apart from insufficient funds, such initiatives usually lack official government approval and are therefore seen as competing with the local government in service provision. The acceptable solution and option lies in the adaptive ability of the local government system to change its modes of service delivery, device acceptable means to curb the ever-rising cost of administration and of service provision. This therefore demands a shift from local government to local governance.

From Local Government to Local Governance Fundamental changes are taking place in the structures and patterns of governance. One of the major changes today is the increasing recognition of the changing role of local governments in development. Underlying these changes is a realization that participation is a key to good local governance. Assessing these changes, Corrigan, Hayes and Joyce (1999), observed that the role of local governments has changed in the following areas over the recent years: the way in which local government influences local issues; the issue of democracy for local government; the delivery of services by local government. Though local governance is not fully operational in the real sense of the concept in Nigeria, what we have are flashes of cooperation between the local governments and some private actors in provision of public goods. Local governance is multi-stakeholder approach to local development. It involves the public sector, the private sector, civil society, local and international donors and development partners, the local community, state and national governments.

Local Governance and Public Goods Delivery: Case Studies Local Governance in Niger State The Jama’a Forum in Niger State provided a classic example of local governance. Initiated in 2008 by Governor Babangida Aliyu who saw the need to have a “communal round-table” discussion because of the disconnect that existed between the government and the governed. The Jama’a Forum is usually held in public squares and sometimes in the palaces of Emirs or district heads. The main purpose of Forum is to painstakingly arrive at project agenda through conflict and compromise, and to make the people have a sense of ownership of the projects. It also enforces democratic accountability on the part of government, but also bridges the gap between the government and the governed. It ensures that the elected give up some of its powers by narrowing the vertical gap. Here each ward dialogues and identifies a project it wants to execute (Road, Bridge, Market, Health Centre, School, Water scheme, Mosque, Church, Cemetery, etc.), while the state government provide the funding ranging from N500, 000 to N1, 000, 000. As a way of promoting accountability, no ward gets additional allocation until it has



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accounted for the previous allocation and so certified by the monitoring and evaluation department of the directorate (Albert and Danjibo, 2011).

Local Governance in Anambra State Public goods service delivery is efficient and the prospects for sustainable community development greater where there is an indigenous capacity to organize and implement small-scale development projects occasioned by strong links between the local community and the local government. In Anambra state there is the present of these two important factors. The republican nature of the people demands the creations of groups/associations for effective local administration. These associations have organized and in many cases financed a variety of development projects on a collective and self-help basis in order to improve on the living standard of the people. Such executed projects include boreholes and wells, classrooms and entire schools, health clinics and hospitals, meeting halls, roads etc. A World Bank Report in 2001 noticed the collaboration between the state government, local government, the communities and the various associations in Anambra State. This collaboration is seen in the creation of an agency the Commission for Special Duties and Community Development which administers a program called the Joint Action on Development or JAD. The primary focus of JAD is on rural infrastructure, especially electricity, water and roads. It is based on two simple principles: (1) that the members of local communities know their needs best and (2) that community development requires local ownership and thus a partnership of efforts by the residents of the local community matched by state and local government authorities. Under JAD, communities submit proposals to the Commission for technical and financial assistance, but only on the condition that they will raise 30 percent of the project’s cost within the community, and be matched by an additional 30 percent from the LGA. Anambra State, via JAD, then matches these contributions with 40 percent plus technical services. The state appropriated N420 million ($3.36 million) for 2001, and seeks donor assistance to augment this amount (Barkan,J.D; et al,2001). In term of security which is a fundamental public goods service delivery expected from all government, the high rate of insecurity in Nigeria and the inability of the Police Force to contain the ever-increasing criminal activities, various local government in Nigeria embraced local community policing initiative. This they do by engaging the services of local hunters and other local security outfits. They are stationed at interval along major roads where robbery frequently takes place. Effective local community policing has had a positive impact on the security of the communities involved by reducing neighbourhood crime, helping to reduce fear of crime on the high ways. Also the various communities arranged for local vigilantes to guard their areas. Apart from the local government-community cooperation, various local governments had partnered with the Police Force especially with the provision of vehicles for effective patrol.

Prospects and Challenges Local governance offers a better improvement in local area development. Local governance will help overcome many problems that render the existing local government administration ineffective. There is also the challenge of misplacement of project priority by the local government. Many of the policies and programmes initiated and implemented by the local government fails to impact positively on the basic needs of the people. This is because they are



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mostly initiated without consultation with the people. Siting of projects in areas or communities is done based on political party affiliation and supports and not on the need of the people. Jointly financed projects by the state and local governments are usually at behest of the state government. This type of state government directed programmes will now with local governance have the inputs of the benefitting communities. Again it not only adequate for projects to be conceived and implemented in an area, one prominent challenge is that the people usually don’t take ownership of the project located in their domains. But with local governance, communities take ownership of such projects, protecting them from vandalism and theft. The extant local government lack accountability. Despite being shortchanged by the state government as a result of the Joint Allocation framework, the magnitude of corruption at the local government is largely due to lack of political accountability. This will be solved when there is plethora of stakeholders interested in the development of the local area. The degree of negative external influence and control of local government affairs by the higher levels of government which is disgusting will be checked when there are multiple stakeholders at the local level. There are instances when the state chief executive in wild display of power has unconstitutionally dissolves the entire elected council’s officers .Such actions subverts democratic process and undermines constitutional authority at the grassroots level. The fear of the state executive constrained the local government administrators to dance to the whims and caprices of higher tiers of government. Local government will become stronger as in serves as a facilitator of network forms of local governance. This will erase the fear of irrelevance of local government institution and it been supplanted by local governance structures as it retain a significant proportion of financial and other resources in the local government. The above prospects notwithstanding, there are challenges envisaged in the new partnership for development. The first challenge is the transformation in local government from being the central player in the development and execution of policy and delivery of public goods to being what Cochrane (1993) refers to as the 'strategic enabler’. This strategic enabling in local government amount to the truncation of its direct policy formulation functions towards a supportive or service role, which will reducing the power of the local government functionaries. The second challenge relates to the nature of local democratic processes .This borders on the undemocratic transfer of powers and policy making and implementation functions to some unelected group. This also brings to mind the insidious role of godfathers in Nigerian politics. Thirdly, the joint account framework that has been hijacked by the state will likely hinder the success of the local governance. Impactful programmes will be hampered by lack of financial resources from the local government which expected to provide the larger percentage of the resources.

Concluding Remarks The challenges identified notwithstanding, local governance offers a better alternative to the current local government modus operandi. It is suggested that the granting of complete autonomy to local government working in active collaboration with other players in local governance, there will be accelerated development of local level. Local governance is not a replacement of local government structures and functionaries but rather a strengthening of its



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functionaries with plethora of players in order to effectively deliver public goods to the people. It is pertinent to state here that with the increasing shrinking of federal government involvement in the provision of public goods, it is therefore appropriate that other players are brought in since the local government alone cannot satisfy the demands of local populace. References Abutudu, M (2011). The Challenges and Opportunities for Improving the Local Government System in

Nigeria. Paper Prepared for Presentation at the Third Biennial National Conference on Community Development in Nigeria Held at Grand Hotel, Asaba, November, 20-24, 2011.

Albert ,O.I and Danjibo N (2011). Community participation in conflict prevention and peace building in multi-religious settings. Available at www.communitylifeproject.org

Anwar Shah 2006 (ed.). Local Governance in Developing Countries: Public Sector Governance and Accountability Series. The World Bank Herndon, VA, USA as Panacea for Service Delivery International Journal of Business and Social Science Vol. 2 No. 16

Barkan,J.D; Gboyega, A; Stevens, M.(2001). State and Local Governance in Nigeria Public Sector and Capacity Building Program Africa Region: The World Bank Cambridge, MA: Harvard University Press

Caroline Andrew and Michael Goldsmith (1998). From Local Government to Local Governance and Beyond. International Political Science Review Vol.19,No 2 Sage Publications Ltd available at www.jstor.org/stable/1601318

Corrigan, P, Mike, H., and Paul J. (1999). Managing in the New Local Government, London: Kogan Page Ltd.

Femi, P. (2011). Governance Crisis in Nigeria: An Empirical Analysis of Co-Production Guang-Xu Wang (2011). A Debate on Transforming Local Governance in the UK: Is Partnership a

Better Way? Journal of Politics and Law Vol.4, No.1 www.ccsenet.org/jpl Jung,S.J.,(1997). Dialectic between the Private realm and the Public realm: Renewing the Debate on the

Public Good Administrative Theory and Praxis http://www.jstor.org/stable/25611216. Accessed: 04/07/2013 05:20

Kauzya, J (2002). Local Governance Capacity Building for Full Range Participation: Concepts, Frameworks and Experiences in African Countries

Lema Jubril (2013). Scrap 36 States, LGs to cut cost www.punchng.com assessed on 51/7/2013 Ochereome Nnanna (2013). Constitution Amendment (1):Don’t Strengthen LGAs, scrap them

www.vanguardngr.com . Accessed on15/7/2013 Ola, R. F.(1984) “Local Administration in Nigeria. London: Kegan Paul International Olson, M. (1965) The Logic of Collective Action: Public Goods and the Theory of Groups. Rob Imrie and Mike Raco (1999) How New Is the New Local Governance? Lessons from the United

Kingdom. Transactions of the Institute of British Geographers, New Series, Vol. 24, No. 1 (1999), pp. 45-63 www.jstor.org/stable/623340 .Accessed: 14/07/2013

Samuelson, P. A (1954). "The pure theory of public expenditure." Rev. of Economics and Statistics 36 (November): 387-389


Danjos Denis Dalhatu & Ali S. Yusufu Bagaji, 2014, 2(2):56-65

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Implications of Unemployment on Nigeria’s Sustainable Development

Danjos Denis Dalhatu (Ph.D)1 & Ali S. Yusufu Bagaji (Ph.D)2

1Dept. of Public Administration, Ahmadu Bello University, Zaria, Nigeria. Email: [email protected] 2Dept. of Public Administration, Kogi State University, Anyigba, Kogi State, Nigeria. Email: [email protected]


Abstract The thrust of this article is to examine the implications of unemployment on Nigeria’s sustainable development. The justification for the study is because of the consequences of unemployment on the socio-economic development of the country. Based on secondary data, the article revealed that unemployment in Nigeria is partly responsible for the rising increase of poverty, disruption of oil production through pipeline vandalization, emergence of deadly groups such as Boko Haram, Niger Delta Boys, Ombatse, armed robbers, kidnappers and waste of human and material resources that have caused setback in the sustainable development of Nigeria. It is against this background the article recommended that government has to play a prominent role if unemployment is to be reduced to the barest minimum by intensifying efforts to create more vocational skills acquisition centres, effective government collaboration with the private sector to create more jobs by putting in place a conducive atmosphere for investments, absolute and robust agricultural reforms to attract the unemployed to farming among other measures. These among other measures it is believed will put Nigeria on the right track to sustainable development. Key Words: Unemployment, Implication, Sustainable Development, Skills Acquisition and

Entrepreneurship.

Introduction Nigeria is a country that is endowed with enormous resources, both human and material. These resources are scattered across the six geo-political zones which are: North-West; North-East; North-Central; South-West, South-East and South-South. Presently, Nigeria is 53 years old, but the citizens are struggling to survive due to economic hardships or difficulties. It is believed by many that Nigeria as a country in the West African sub-region is blessed with huge resources. However, it is the least in terms of comfortable standard of living. This cannot be unconnected with the level of unemployment the Youth of Nigeria are faced with. Unemployment has assumed a high proportion and it is also seen as one of the causes of poverty in the country. This monster has been on the increase or is getting worse on daily basis as the numbers of graduates are increasing annually.

Premium Times Mobile (2013) noted that, “the rate of unemployment among Nigerians (started to get) worse when President Goodluck Ebele Jonathan assumed office” in 2010. According to the report, unemployment rate in Nigeria as of 2010 was 21.1%. This figure, within the shortest time possible increased to 23.9% in 2011 even with the government poverty alleviation programmes such as National Poverty Eradication Programme (NAPEP), National Directorate of Employment (NDE) and Subsidy Re-Investment and Employment Programme (SURE-P) to mention but a few.



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The rate of unemployment is alarming and scaring, because of the disastrous consequences that accompany it. The rise in the level of unemployment is an indication that the measures adopted by President Goodluck Jonathan are not yielding the desired objectives. For instance, according to the National Commission Population report (2012), there were 51.18 million Nigerians unemployed in the economy in 2011. This is a large population that could constitute a threat to the Nigeria’s economy, and thus requires adequate government attention. Statement of the Problem Nigeria is the largest Black African country in the world. The country is equally rich in human and material resources. Unfortunately, it has the largest population of people that are unemployed in the world. Unemployment in Nigeria after 53 years of political independence is said to be the highest, this has made life difficult especially among the youth with enormous consequences. This fact has been acknowledged by President Goodluck Jonathan when he said “The population of our young people is high. If we are unable to provide jobs for these young people, the country could face serious problems” (Daily Trust, 2013:10). This clearly shows how disastrous unemployment is in a country because it has been on the increase since 2006. According to National Bureau of statistics as quoted by Olaiya, (2013:28), “unemployment rates were 12.3% in 2006, 12.7% in 2007, 14.9% in 2008, 19.7% in 2009, 21.1% in 2010 and 23.9 in 2011”. There is no doubt some of the social problems we are having in Nigeria today cannot be unconnected with the high level of unemployment. Such problems are conflict, kidnappings, armed robbery, prostitution, drug addiction, and drunkenness to mention but a few. These problems have negative impact on the sustainable development of Nigeria directly or indirectly. Conflicts have resulted to destruction of lives and public properties. This has been worsened by the rapid population growth of Nigeria of 3.2% annually as observed by National Bureau of statistics. These problems have made Nigeria to be unsafe for investment. Objectives and Methodology of the Study The major objectives of this study are to assess the impact of unemployment on the sustainable development of Nigeria. Other specific objectives are, to:

i. discuss the types of unemployment in Nigeria. ii. find out the causes of unemployment in Nigeria. iii. examine the implications of unemployment to Nigeria’s sustainable development.

To achieve the above mentioned objectives, the data for this study were collected from the secondary sources, viz; text books, journals, newspapers and internet. Therefore, content analysis was used as method for the data analysis. These sources were able to reveal all the information needed to conduct the study such as the types of unemployment, causes of unemployment, and implications that greatly helped to draw conclusions and make recommendations.



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Exploration of the Concepts i. Unemployment Unemployment is a concept that has been subjected to many definitions depending on how the various authors tend to view it. According to Oxford Advanced Learners Dictionary of Current English (1980:941) unemployment refers to “state of being unemployed; Amount of unused labour”. That is, unemployment refers to labour that is not engaged or that is not put into use for productive purpose. Unemployment is also defined as “the percentage of the labour force that is without job” (Index Mundi, 2013). Unemployment in other words, is the total percentage of people who want to work but the work is not available. It refers to the number of people who have acquired the required knowledge and skills and are willing to work but the work is not available for them to do. These people are products of many institutions within and outside Nigeria. In the view of Olaiya (2013:23), any population of joblessness people can be said to be unemployment which has rendered many young men and women redundant.

Beveridge (1931) one of the earliest authors in the subject matter quoted in Ojo (1998:216) defined unemployment as “the idleness of the man who depends on employment for a livelihood and cannot get the type of employment for which he is suited when he wants the kind of employment and he is fit for it. Thus, unemployment is a condition where a man has the ability to work for him to earn a living, but the job is not available for him. Such people may be those who have completed primary, secondary or tertiary education who are roaming on the streets searching for what to do for a living. ii. Sustainable Development According to United Nations (1987) cited in Amos (2010:6), sustainable development is, “a pattern of resource use that aims at addressing human needs while preserving the environment so that these needs can be met not only in the present but also for generation to come”. Hence, sustainable development is a kind of development that takes care of the basic needs of the present generation without compromising the interest of the next generation whether economic, political or social. Similarly, World Commission on Environment (1987) cited in Oyeshola (2008:161) defined sustainable development as, “development that meets the needs of the present without compromising the ability of the future generation to meet their own needs”. Indeed, the two definitions are similar in the sense that man’s basic needs are virtually the same and revolve around economic, social, political and environmental needs. These needs are very crucial in the survival of mankind not only in the present generation but also the next generation. These needs entail food, housing, clothing, health, education industrial and agricultural development, preservation and protection of the environment to enable people to live a comfortable life. Quality living is the essence of life which we struggle for on daily basis. Types of Unemployment There are many types or categorization of unemployment in Nigeria. For instance, Ojo (1998:224-227) in his book “Human Resource Management: Theory and Practice” discussed five types of unemployment that have cut across many countries in the world particularly the developing countries as follows:



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Structural Unemployment: This is the type of unemployment whereby the qualifications of a person is not adequate to meet responsibilities of his job or assignment. Structural unemployment comes as a result of certain factors such as: the technological displacement, lack of proper skills in the composition of demand, residency in depressed areas, changes in the structure of wages in relation to the pattern of demand and competition of imports with domestic goods among others. The contribution of these factors to structural unemployment cannot be overemphasized. For instance, the introduction of technology such as computers has displaced many people in many organizations, especially banks and this has resulted in structural unemployment. Frictional Unemployment: Ojo, (1998:225) also discussed frictional unemployment as the continuous flow of people from one job to another (in and out of employment). It is a situation where a person is out of one job and in search of another job. The time the person is staying without job is frictional unemployment which may be long or short. The major cause of frictional unemployment is normal labour turnover. For instance, new graduates spend some period or time searching for the right job that leads to frictional unemployment. Changing employment is not particularly easy especially where the level of unemployment is high such as Nigeria where the labour market is saturated. Cyclical Unemployment: This is the type of unemployment that is caused by changes in business conditions or during recessions and depressions. In other word, cyclical unemployment occurs due to disequilibrium that leads to insufficient aggregate demand to purchase full-employment output in a country. It is against this background that cyclical unemployment is called, “demand deficient” unemployment. During recession and depression many employees usually lose their jobs. Seasonal Unemployment: This kind of unemployment is based on the dictate of the season. Seasonal unemployment comes and goes with the seasons of the year that dictates the demand of certain jobs. Seasonal unemployment usually concentrates in a particular season of the year which cease at another season. For example, the demand for agricultural labour increases during the rainy season- planting, cultivation and harvesting. In addition, road construction is always out of place in the rainy season, albeit it depends on the terrain of the areas. Therefore, some workers are relieved of their work during the prevailing season. Residual Unemployment: This type of unemployment occurs to people who are physically or mentally disabled that makes them to have low level of productivity, if at all any opportunity is open to them. Most people with certain mental and physical disability experience residual unemployment because of their very low standard of efficiency or performance. This includes blind, deaf and physically impaired people.



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Causes of Unemployment in Nigeria Unemployment in Nigeria cannot be unconnected with the following factors:

• Inability of government and the private sector to create jobs for the people coupled with the zeal of all educated people or graduates interest in white collar jobs (Terzungwe, 2013:41). Attempts made by the government to introduce programmes meant to reduce poverty and create employment opportunities have not yielded the desired result. Programmes such as National Directorate of Employment (NDE) and National Poverty Eradication Programme (NAPEP). These programmes have not generated adequate employment opportunities. A report observed that unemployment among Nigerians became worse at the time President Goodluck Jonathan assumed office. Indeed, the report showed that unemployment rate in Nigeria in 2010 was 21.1 percent, a figure that increased to 23.9 percent in 2011 (National Planning Commission (2013). Dr. Christopher Kolade the Chairman of Subsidy Re-investment and Employment Programme (SURE-P) noted that the rising rate of unemployment in the country is no fewer than 40 million Nigerians without jobs (National Bureau of Statistics, 2013).

• Rapid population growth: It is obvious that rapid population growth has played a significant role in the increase of unemployment level in Nigeria. Nwokwu, (2013), observed that Nigerian population based on 2006 census was 140,431,790 with annual growth rate of 3.2 percent. With this growth rate, the population could be over 180m in the year 2020. This to a larger extent has affected the increase of the labour force directly. It is against this background that Nigeria is said to be the most populous country in Africa. The rapid increase in population is not commensurate with the increase of job opportunities. The population of the country is annually on the increase that if nothing tangible is not done, could be disastrous. Currently, Nigeria’s population is estimated at 167 million. With this rate of population growth, more than 150,000 bachelor degree and Higher National Diploma graduates are produced annually with no jobs for them to do (Isaiah, 2013).

• Terzungwe, (2013:41) also noted that lack of government encouragement for vocational and technical education as well as entrepreneurial development have contributed to unemployment in Nigeria.

• Vocational, technical and entrepreneur education are powerful tools that could empower the youth to be self-employed. Unfortunately, the vocational and technical schools we have in different parts of the country are not well equipped to instill students with the required skills. This cut across secondary and tertiary institutions. It is based on this our graduates are said to be unemployable because they lack vocational and entrepreneurial education that can make them self-reliance.

• Rapidly growing urban labour force as a result of rural-urban migration. Rural-Urban migration arises due to the need for white collar jobs, lack of social amenities in the rural areas and the high level of underemployment due to seasonal employment (Nwokwu, 2013). The inability of the government to provide infrastructural facilities in the rural areas such as good roads, electricity and recreational centres have forced youths to migrate to the urban areas. This has made farming to be the occupation of the elderly which of course is detrimental to food production in the country. This has been



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worsened by lack of access to agricultural facilities for them to engage in meaningful farming.

• There is also the rapid explosion of educational institutions that directly increases the supply of manpower in the labour market. In the 1960s there were only three Universities in Nigeria located in the three regions namely Ahmadu Bello University in Zaria, University of Ibadan, Ibadan and Nnamdi Azikiwe University, Nsukka. As at today, there are over 97 Universities made up of Federal, state and private scattered in different parts of Nigeria, aside secondary schools, Colleges of Education, Polytechnics and monotechnics. The funny aspect of most of these educational institutions particularly Universities is that they are producing unskilled graduates that are unemployable. It is against this back Olaiya, (2013:30) noted that “out of 4,000,000 youth that graduated from secondary and tertiary institutions annually, less than 20% can find white collar jobs”. Only few of these graduates have skills that could enable them to be on their own or to be employable.

• The collapse of ‘used to be viable’ manufacturing or industrial sector has equally contributed to the high level of unemployment Nigeria is currently going through. Many industries in Kano, Kaduna and other cities in the country are nowhere to be found which rendered many people unemployed particularly the textile industries in Kano and Kaduna. It has been observed that, “there are over 800 collapsed industries in Nigeria and over 37 factories have closed shops in 2009 especially in Kano and Kaduna (Nwokwu, 2013). It has to be noted that these collapsed industries are scattered across the country. It is unfortunate that a country blessed with fertile land suitable for cotton cultivation has allowed her textile industries to collapse. These were textiles in Kaduna and Kano that had thousands of employees.

• Neglect of agricultural activities such as farming has equally contributed to no small measure to Nigeria’s unemployment. Farming in the 1960s and early 1970s was the major occupation that many Nigerians were engaged in particularly the youth. But with discovery of oil in the early 1970’s farming was relegated to the background. Agriculture in Nigeria has not been given the recognition it deserves if it is to make significant contribution to sustainable development of Nigeria in terms of jobs creation and providing food in abundance to Nigerians. It is on this note, Senator Victor Egba observed that, “Agriculture has a lot of potentials that cannot only transform the national economy but also tremendously impact the personal lives of the farmers, including the youth (Daily Trust, 2013:30). Hence, poor agricultural policies meant to encourage youth to engage in farming have seriously contributed to the decay of agriculture in Nigeria that has made youth not to have encouragement to take farming as a reliable occupation.

• Corruption that has cut across all the levels or strata of government is not left behind in creating unemployment in Nigeria. This is obvious in the diversion of funds meant to generate employment opportunities, injustice to farmers among others. It is imperative to note that corruption to a larger extent deters investment because of the fact that it is



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disincentive to potential investors, aside distorting public expenditure and increase of overheads for running government business. Some of these monies diverted through corruption are not kept in Nigeria but in foreign banks abroad. Thus, it is not invested within to generate employment opportunities. According to ILO (2009) in Dalhatu, (2012:94) Nigeria has lost almost a trillion naira to corruption in the last decade alone and this is money that could have been used to provide infrastructure and generate employment opportunities. Infact, a lot of oil revenue have been diverted into the personal pockets of top government officials. For instance, the N500 billion missing in the account of Sure-P meant to improve the living standard of Nigerians including creation of jobs for the unemployed (SURE-P Chairman in AIT news 8.00pm 24th Nov. 2013).

Implications of Unemployment on Nigeria’s Sustainable Development It is pertinent at this juncture to highlight some of the implications of unemployment on Nigeria’s sustainable development. This is because unemployment has left much to be desired as far as sustainable development in Nigeria is concerned. One of the obvious implications of unemployment in Nigeria is poverty that is fundamental to Millennium Development Goals (MDGs). Poverty has become an order of the day in Nigeria because of the high level of unemployment among the youth. Poverty is a serious problem that has a lot of implications for lives of individual’s families and nations. Most of the unemployed youth cannot meet the basic needs of their lives that cannot guarantee Nigeria’s sustainable development. Saanu (2013) observed that:

Many Nigerians cannot meet the basic needs of life because they have no jobs. Graduates are being churned out yearly in various institutions with dimmed prospect of getting jobs. The few jobs available are not based on merit or competence, rather on favoritism.

The implication of unemployment on Nigeria’s sustainable development therefore cannot be overemphasized because unemployed people cannot afford their basic things of livelihood. For example in the course of the disruption of oil production because of pipeline vandalism and associated crimes by Movement for the Emancipation of Niger Delta (MEND-2012) fighting for resource control, Nigeria lost $15.8 billion revenue that would have added impetus to Nigeria’s sustainable development. Production could not continue because the pipelines were vandalized or destroyed aside the number of people that died while struggling to siphon oil from broken pipes. (Dalhatu, 2012:89).

Unemployment is a waste of human resource in view of the national resources put in training the unemployed. These resources could have been used in other areas of development particularly the provision of infrastructure. No wonder, Ojo (1998:232) observed that, “the returns to the various types of investment in human resources are unnecessarily minimized by unemployment”. Absence of social security in Nigeria also deprives the unemployed a share in the national income that makes the life of the unemployed miserable. Utilization of labour after investing a lot of resources on training is a colossal lost to the country. Unemployment is a condition where the available labour force is not used or utilized for the country to derive the benefit in national development. Therefore, in Nigeria as a whole, “the productive capacity of a significant portion of the labour force is unutilized” (Ubochi, 2013). It is imperative to note that



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the essence of manpower training is to be able to make effective use of it so as to add value to the development of the country. Anything less than this is absolutely a waste of resources.

Emergence of “area boys” or political thugs in so many parts of the country who are used as agents of harassment and intimidation of political opponents in places like Lagos, Gombe, Aba, Warri, Onitsha, Rivers to mention, but a few. It is pertinent to state that the emergence of these “area boys” cannot be unconnected with the high level of unemployment being experienced in the country. The unemployed are ready to be employed for any kind of assignment as long as they are paid for it, because the unemployed also have needs which need to be met. This attitude is detrimental to the survival of the country because it is one of the major social problems affecting the growth and development of this country in terms of sustainable development which of course we are yearning for (Saanu, 2013). No young man who has acquired Western education without a job would remain himself without engaging in one thing or the other for him to survive. What he does matters a lot to the development of the country positively or negatively.

Emergence of insurgency groups such as Boko Haram, Niger Delta boys, Ombatse Cults to mention but a few. These deadly organizations came into existence as a result of unemployment the country is going through. These terrorist groups have not only destroyed properties but also lives in places where they are operating such as Borno, Yobe, Adamawa, Kano, Kaduna, Nasarawa, Rivers, Bayelsa, Delta, and Edo among others. Vanguard Newspaper (2013) noted that, “violence linked to Boko Haram insurgency has left some 3,600 people dead, including killings by the Security Forces”. Niger Delta boys have also vandalized many oil pipelines resulting to the loss of $15.8 billion, aside from the people killed and kidnapped for ransom (Dalhatu, 2012:89). Ombatse Cult has also committed similarly killings particularly the security men killed in Nasarawa state that was described as barbaric or man inhumanity to men, aside the civilians killed. There is no doubt that this negative attitude has directly affected the socio-economic development of the country. It is unfortunate a man has become a wolf to his fellow human being which has direct bearing on Nigeria’s sustainable development. People that are contributing to the development of the country are killed like ants. Government has also deployed a lot of funds to take care of the various attacks that should have been used in other areas for development. Conclusion and Recommendations Unemployment is a serious problem in Nigeria and it is unfortunate that the country is being threatened by unemployment whose impact on Nigeria’s sustainable development cannot be overemphasized. The social vices that have characterized the nation such as armed robbery, trafficking, kidnapping, terrorism, prostitution among others cannot be unconnected with unemployment crisis, the rate at which is alarming today. Until adequate measures are taking, the future of Nigeria’s development will be a mirage. These problems are tied to poverty caused by unemployment that is inimical to sustainable development. It is against this background that the following recommendations are put forward as measures for curbing the challenges of unemployment in Nigeria.



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• Government should intensify efforts to create more vocational skills acquisition centres across the country to enable our young men and women to acquire skills for them to be self-employed and also employ others. Skills acquisition is a strong instrument for empowerment of youth in areas like tailoring, carpentry, automobile mechanic, ICT, metal work, to mention but a few.

• Government should collaborate with the private sector to create more jobs through investment and re-investment. There are many companies or industries that have been shut for more than 20 years and no meaningful attempts are made by the government to revamp them. For instance, the textile industries in Kaduna, Kano and other parts of the country have remained shut to date.

• Government should put more efforts in the area of agriculture to generate employment opportunities because it has a lot of potentials and if proper investment is made, can go a long way to transform the economy, aside transforming the people engage in it. Thus, all the required support for the unemployed to engage in agricultural business should be made available to them like credit facilities, form inputs at subsidized prices and accessible land for cultivations. New farming technology should be used to attract youth into farming because the old methods are not encouraging.

• Government should give more emphasis to entrepreneurial and vocational education that is meant to expose our young men and women to self-reliance. Therefore, the review of curricula in our educational institutions is imperative, so as to be in line with the present demand to empower our youth with skills and make them more employable in the labour market or to be self-reliance.

• Government should diversify the economy in a manner that is not oil based. The four refineries should also be revitalized to perform in full capacity so as to generate more employment opportunities. Other areas such as solid minerals and agriculture are potential areas that need to be explored not only to generate employment but also to contribute to sustainable development of Nigeria.

• Government should give a lot of emphasis to the study of science and technical education by making adequate funding and granting of robust scholarship. Science and technology is the key for any meaningful development and can guarantee self-employment. Therefore, the study of science and technology should be encouraged in its entire ramification.

• Government should give more priority to the provision of infrastructure in the rural areas such as good roads, electricity, water, schools and small scale industries. This will go along way to make the youth to reside in the rural areas and resort to farming. This is because; experience has shown that absence of social infrastructure encourages rural-urban drift.

References Amos, A.J. (2010). ‘Corruption and the Challenges of Sustainable Development in Nigeria’. KASU

Journal of Social Sciences, vol. 2 No. 1 Journal of Faculty of Social and Management Sciences. Kaduna State University, Kaduna.

Daily Trust (2013). ‘Jonathan: Unemployment Can Cause Us Serious Problems’. October, 18th.



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Daily Trust, (2013) ‘Senator Urges Youth to Embrace Agriculture’. September 12th. Dalhatu D.D. (2012). Cause and Effects of Conflict on Nigeria’s Development. Multi-Disciplinary

Journal of Research and Development Perspective. Vol. 1 No. 1 June, Official Publication of the University of Calabar-Nigeria.

Dalhatu, D.D. (2012). ‘The Effects of Corruption in the Socio-Economic and Political Development of Nigeria in 21st Century’. African Journal of Stability and Development Department of Political Science, Afe-Babalola University, Ado-Ekiti.

Index Mundi (2013). ‘Nigeria unemployment rate’. Retrieved 20th Nov. from www.index-mundi.com>factbook>countries>Nigeria>Economy.

Isaiah, S. (2013). ‘Nigeria 80% Graduate Unemployment’. Leadership Newspaper. Nig. 23rd Retrieved Sept. from Leadership.ng/news/230913/Nigerians.

National Bureau of Statistics (2013). ‘Nigeria’s High Rate of Unemployment’. Retrieved November, 22nd from www.thisdaylive.com>Home>NEWS.

National Population Commission, (2013). Unemployment in Nigeria Worsened Under Jonathan Government. Premium Times. 11th October.

Nwokwu, M. (2013). ‘The Effects of Youth Unemployment and Its Implications on Socio-Economic Stability of Nigerian Democracy’. Retrieved November, 21st from www.crimspace.com/profiles/blogs/th

Ojo, F. (1998). Human Resource Management: Theory and Practice. Lagos: Panaf Publishing Inc. Olaiya, S.A. (2013). ‘Towards Vision 20:2020: Need for Attitudinal Change Emphasis on Youth

Unemployment’. African Journal of Stability And Development. Afe Babalola University, Ado-Ekiti.

Oxford Advanced Learner’s Dictionary of Current English, (1980). Oxford: Oxford University. Oyeshola, O.P. (2008). Sustainable Development: Issues and Challenges for Nigeria. Ibadan: Daily

Graphic Nig. Ltd. Premium Times Mobile (2013). Unemployment in Nigeria Worsened under Jonathan Govt. Mobile

Website Powered by Mob. Saanu, G.D. (2013). Unemployment in Nigeria. Nigerian Tribune August, 1st Retrieved November 21st

from www.tribune.com.ng/news2013/indexP. Tergungwe, S. (2013). Surviving Unemployment. Daily Trust, 11th October. Ubochi, T. (2013). Unemployment in Nigeria. Retrieved November, 21st from

nigeriaworld.com/11/092813.html. Vanguard Newspaper (2013) Gunmen killed 42 in Yobe School Attack, June 6th. World Bank (2013) Nigeria’s High Rate of Unemployment. Retrieved November 21st from

www.thidaylive.com>Home/NEWS.


Alani, G. O. & Sani, John, 2014, 2(2):66-79

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Effects of Microfinance Banks on the Rural Dwellers in Kogi State, Nigeria

Alani, G. O.1 & Sani, John2 1Dept. of Accountancy, Federal Polytechnic, Idah, Kogi State, Nigeria. Email: [email protected] 2Dept. of Accountancy, Federal Polytechnic, Idah, Kogi State, Nigeria Email: [email protected]


Abstract The study assesses the effects of microfinance banks in Kogi State on rural dwellers in Kogi state. A survey research method was adopted. A sample of five microfinance banks was selected using judgmental sampling method. Data were generated through questionnaire, interview and of course, the internet. Z – Test statistical tool was used to test the formulated hypotheses. The study reveals that the establishment of microfinance banks has significant impact on the life of the rural dwellers in Kogi State by mobilizing savings for financial intermediation and providing employment opportunities. The implication is that Microfinance banks have the potential of improving the economic potentials of the active poor in the rural communities, thereby increasing their productive output. The study recommends that the Central Bank of Nigeria should reduce their prime rate charged in order to enable microfinance financial institutions reduce their interest rates. Also rural dwellers should be trained on how to establish, manage, sustain and expand their business outfits to making the services of microfinance worthwhile. Key words: Microfinance, intermediation, employment, active-poor, timely-service

Introduction It is now common knowledge according to Egbe (2000) that the 1980s witnessed a rapid growth of commercial banking activities in many Nigerian rural communities where banking habits, culture, commitment and community development was poor if not non-existent. It is instructive to note that during this period, community funds among rural dwellers were hardly gathered for financial intermediation in order to stimulate domestic economic activities. Suffice it to say that in rural communities, the rural business class hardly seeks formal institutional credits to improve their economic base.It would be observed that, despite the presumed developments in the Nigerian economy, the country is still largely being regarded as a developing country (Onyema, 2006). Before the emergence of formal microfinance institutions, informal microfinance activities flourished all over the country. Traditionally, microfinance in Nigeria entails traditional informal practices such as local money lending, rotating credit and savings practices, credit from friends and relatives, government owned institutional arrangements, poverty reduction programmes etc (Lemo, 2006). The Central Bank of Nigeria Survey in 2001 indicated that the operations of formal microfinance institutions in Nigeria are relatively new, as most of them never registered after 1981. Before now, commercial banks traditionally lend to medium and large enterprises which are judged to be credit-worthy. They avoided doing business with the poor and their micro enterprises because the associated costs and risks are considered relatively high (Anyanwu, 2004). Today, many rural communities in Nigeria have one or more of this microfinance bank, and they have had far more reaching implications for the entire socio-economic development of rural communities in Nigeria. It is worthwhile to note that lack of funds often caused the collapse of small businesses and the extinction of ingenious ideas before they could be translated into reality. It is now widely believed that following government’s policies on rural development, rural investment will be given a boost via microfinance banking as all efforts of our hardworking, but under-privileged masses would come to an end without this veritable institution. However, the idea behind microfinance



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banking is to encourage banking habits through among dwellers and their commitment to modern financial institutions within the rural environment. Thus, microfinance banking is supposed to be the machineries for financial and economic emancipation as its growth is connected with the community in which it serves. The latent capacity of the poor for entrepreneurial advancement would be significantly enhanced through the provision of microfinance services to enable them engage in economic activities and be more self reliant, increase employment opportunities, enhance household income and create wealth in the rural areas (Iweala, 2005). Statement of the Problem The size of the un-served market by the existing financial institutions is large. A study carried out by Enhancing Financial Innovation and Access (EFInA) in August, 2010 revealed that 39.2 million representing 46.3 per cent of the adults in Nigeria, was excluded from financial services. Out of the 53.7 per cent that had access, 36.3 per cent derive their financial services from the formal financial institutions, while 17.4 per cent exclusively patronized the informal sector. Also, the results of the survey revealed that Nigeria was lagging behind South Africa, Botswana and Kenya with 26 per cent, 33 per cent and 32.7 per cent in financial exclusion rate respectively. This is alluded to the fact that 79 per cent of the total population in Nigeria is unbanked out of which 86 per cent are rural dwellers. Also in 2005, the aggregate microcredit facilities in Nigeria accounted for about 0.2 per cent of Gross Domestic Product (GDP) and less than one per cent of total credit to the economy. This revealed the existence of a wide gap in the provision of financial services to a large number of the economically active poor and low income households in the rural communities. The effect of not addressing this situation appropriately would further accentuate poverty and slow down growth and development in this area. The Central Bank microfinance policy of 2005 stated that the establishment of microfinance banks has become imperative. While the above problems are observable, the effects of microfinance banks on rural dwellers in Kogi state remain an empirical one. The main problems addressed in this study are: have microfinance banks mobilized savings for intermediation in Kogi state? Have microfinance banks provided timely and affordable banking services to the economically active poor in Kogi state? And have microfinance banks provided employment opportunities to the rural dwellers in Kogi state? Objectives of the Study The main objective of the study is to critically assess the effects of microfinance bank in Kogi State on the rural dwellers. The specific objectives are as follows, to:

1. determine whether microfinance banks have mobilised savings for intermediation and rural transformation;

2. find out whether the microfinance banks are providing timely and affordable banking services to the economically active poor in Kogi state.

3. determine whether microfinance banks provide employment opportunities to the rural dwellers in Kogi State.

Research Questions In order to provide answers to the stated objectives the following questions must be provided answers.

1. To what extent have microfinance banks mobilized savings for intermediation and rural transformation?



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2. To what extent has microfinance banks provided timely and affordable banking services to the economically active poor in Kogi state?

3. To what extent have microfinance banks provided employment opportunities to the rural dwellers in Kogi State?

Formulation of Hypotheses In order to arrive at reasonable conclusion and provide reliable answers to the already stated research questions, the following hypotheses are formulate and tested. These are stated in their null form as follows:

Ho1: Microfinance banks in Kogi State have not mobilized savings for intermediation and rural transformation. Ho2: Microfinance banks are not providing timely and affordable services to the economically active poor in Kogi State. Ho3: Microfinance banks do not provided employment opportunities to the rural dwellers in Kogi State.

Significance of the Study This study would be a useful tool for the Central Bank of Nigeria and Nigerian Economic Planners in Nigeria especially as it affects rural areas. Also, it is envisaged that the result of this study would help to create an awareness of the importance of microfinance banks to the rural dwellers and the policy makers in fine-tuning appropriate credit policy for the rural dwellers in Nigeria. This would enable the nation to adopt strategies which will help in the strengthening of the economy of the rural dwellers. Finally, the findings of the study would provide data base for further research work. Scope of the Study This study is on the effects of microfinance banks on the rural dwellers in Kogi State of Nigeria and covers particularly the Kogi east senatorial district and covers a period of 2003 to 2012. Conceptual Framework and Literature Review Microfinance is the supply of loans, savings and other basic financial services to the poor. The owners of micro and small enterprises require a diverse range of financial instruments to meet working capital requirement, build assets stabilize consumption and shield themselves against risks (Ehigiamusoe, 2005). Financial services to meet these needs of the poor include working capital loans; consumer credits savings products pension plans insurance schemes and money transfer facilities. In practice, microfinance is much more than the disbursement, management and collection of bits of loans. The peculiar nature and the broader view of microfinance is aptly brought out by Ehigiamusoe (2005) when he stressed that microfinance refers to flexible process and structures by which financial services are delivered to owners of micro enterprises owners. It recognises the inability of the poor to provide tangible collateral securities and promotes collateral substitution. Disbursement and repayment are structured to suit the credit needs and cash flow patterns of small businesses (Aderibigbe, 2001). Kimotha, (2005) used narrower definition of microfinance which is just the provision of very small loans (micro credit) to the poor to help them engage in new productive business activities or to grow/expand existing ones. Thus the narrower definition of microfinance equates it with micro credit. The current view of microfinance, however, includes a broader range of services mainly credit, savings opportunities, insurance and money transfer, which the poor



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who lack access to traditional formal financial institutions needed have to achieve meaningful improvement in their business activities. Primarily, microfinance seeks to create access to credit for the poor who ordinarily are locked out of financial services in the formal financial market for reason of their poverty that places limitation on them for proper utilization and complete repayment of borrowed amounts at a high commercial interest rate (Kpakol, 2005). Three features distinguish microfinance from other formal financial products. These according to Ogbunka (2003), are; the smallness of the loans advanced or savings collected, the absence of asset based collateral; and simplicity of operations. Microfinance institution (MFI) has come to be defined in the words of Iganiga (2007), as any institution that provides credit and other financial services to the low income entrepreneurs who are traditionally not served by the conventional/financial institutions.

An Overview of Microfinance Activities in Nigeria The practice of microfinance in Nigeria is culturally rooted and dates back to several centuries. The traditional microfinance institutions provide access to credit for the rural and urban low-income earners. They are mainly of the informal Self-Help Groups (SHGs) or Rotating Savings and Credit Associations (ROSCAs) types. Other providers of microfinance services include savings collectors and co-operative societies. The informal financial institutions generally have limited outreach due primarily to paucity of loan able funds. In order to enhance the flow of financial services to Nigerian rural areas, Government has, in the past, initiated a series of publicly-financed micro/rural credit programmes and policies targeted at the poor. Notable among such programmes were the Rural Banking Programme, sectoral allocation of credits, a concessionary interest rate, and the Agricultural Credit Guarantee Scheme (ACGS). Other institutional arrangements were the establishment of the Nigerian Agricultural and Co-operative Bank Limited (NACB), the National Directorate of Employment (NDE), the Nigerian Agricultural Insurance Corporation (NAIC), the Peoples Bank of Nigeria (PBN), the Community Banks (CBs), and the Family Economic Advancement Programme (FEAP). In 2000, Government merged the NACB with the PBN and FEAP to form the Nigerian Agricultural Cooperative and Rural Development Bank Limited (NACRDB) to enhance the provision of finance to the agricultural sector. It also created the National Poverty Eradication Programme (NAPEP) with the mandate of providing financial services to alleviate poverty. Microfinance services, particularly, those sponsored by government, have adopted the traditional supply-led, subsidized credit approach mainly directed to the agricultural sector and non-farm activities, such as trading, tailoring, weaving, blacksmithing, agro-processing and transportation. Although the services have resulted in an increased level of credit disbursement and gains in agricultural production and other activities, the effects were short-lived, due to the unsustainable nature of the programmes. Since the 1980s, Non-Governmental Organizations (NGOs) have emerged in Nigeria to champion the cause of the micro and rural entrepreneurs, with a shift from the supply-led approach to a demand driven strategy. The number of NGOs involved in microfinance activities has increased significantly in recent times due largely to the inability of the formal financial sector to provide the services needed by the low income groups and the poor, and the declining support from development partners amongst others. The NGOs are charity, capital lending and credit-only membership based institutions. They are generally registered under the Trusteeship Act as the sole package or part of their charity and social programmes of poverty alleviation. The NGOs



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obtain their funds from grants, fees, interest on loans and contributions from their members. However, they have limited outreach due, largely, to unsustainable sources of funds. The Microfinance Policy In Nigeria, Soludo (2007) opined that the formal financial system provides services to about 35 % of the economically active population. The under banked population is often served by the informal financial sector, through NGO-MFIs, money lenders, friends, relatives and credit unions. The non-regulation of the activities of some of these institutions has serious implications for the CBN monetary policy. A microfinance policy which recognizes the existing informal institutions and brings them within the supervisory purview of the CBN would not only enhance monetary stability, but also expand the financial infrastructure of the country to meet the financial requirements of the micro, small and medium enterprises (MSMEs). It was only with the launch of the CBN Microfinance Policy Guidelines in 2005 that such a policy could be said to have taken off in Nigeria. Features of this new policy include: licensing of Microfinance Banks (MFBs), promoting the establishment of NGO-based microfinance institutions, promoting the participation of government in microfinance industry by encouraging states and local government to devote, at least, one percent of their annual budgets to micro credit initiatives administered through MFB. Others are; promoting the establishment of institution that support the development and growth of microfinance service providers and clients, strengthening of the regulatory and supervisory framework for MFBs, promoting sound microfinance practice by advocating professionalism, transparency and good governance in microfinance institution, increasing the minimum capital base of community bank, broadening the scope of activities of microfinance institution, and collaborating with donors, and coordinating and monitoring donor assistance in microfinance in line with the provision of the microfinance policy. The Goals of Microfinance Banks The microfinance policy (MFP) (2010), states that the establishment of microfinance banks has become imperative to serve the following purposes: (i) Provide diversified, affordable and dependable financial services to the active poor, in a timely and competitive manner, that would enable them to undertake and develop long-term, sustainable entrepreneurial activities; (ii) Mobilize savings for intermediation; (iii) Create employment opportunities and increase the productivity of the active poor in the country, thereby increasing their individual household income and uplifting their standard of living; (iv) Enhance organized, systematic and focused participation of the poor in the socio-economic development and resource allocation process; (v) Provide veritable avenues for the administration of the micro credit programmes of government and high net worth individuals on a non-recourse case basis. In particular, this policy ensures that state governments shall dedicate an amount of not less than 1% of their annual budgets for the on-lending activities of microfinance banks in favour of their residents; and (vi) Render payment services, such as salaries, gratuities, and pensions for various tiers of government. Empirical Studies on the Impact of Microfinance Banks Opue, Anagbogu, & Udousoro, (2011), in their study of the role of microfinance banks in social economic development of rural communities used long linear model to investigate whether microfinance banks actually impacts on small scale businesses in the rural communities. The model developed for the study explains how credit supply, credit policy, microfinance operations resulted to socio economic growth. Mustapha (2009) asserted that Microfinance banks have played a great role especially in promoting entrepreneurial activities in rural areas; they are however faced with the problems of high operating costs.



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Yahaya , Osemene, & Abdulraheem, (2011), in their study on effectiveness of microfinance on poverty alleviation in Kwara State, using t- test and analysis of variance (ANOVA) revealed that microfinance played significant role in the economy, as it helped in reducing poverty by providing financial services to the economic active poor, in generating employment opportunities and also provide loans to grow small scale businesses. Olusanya and Oyebo (2012), investigated the impact of microfinance on standard of living of hair dresser in Oshodi, Isolo local Government of Lagos state using spearman correlation coefficient analysis as an estimation technique and discovered that there is a significant relationship between microfinance banks’ efforts and standard of living of hairdressers in Oshodi, Isolo local Government area of Lagos state, and the implication of this is that due to the existence and help of microfinance bank, poverty was significantly reduced among the hairdressers in Oshodi. Onafowokan (2011), researched on the impact of informal microfinance on rural enterprises using cross tabulation analysis, Pearson product moment correlation, chi square test and independent sample t-test. The results showed that members who had access to loan improved their businesses significantly through expansion of business facilities, addition of new product lines and hiring of more workers more than those without loan. Kudi, Odugbo, Banta, & Hassan, (2009), carried out their study on the impact of the UNDP Micro-finance Programme on the poverty status of farmers in selected local Government in Kaduna State. The data collected were analysed using descriptive statistics, independent t-test and Cobb-Douglas production function model. The result of their analyses showed that the average income of participating farmers in the study was higher than those of non-participating farmers. The study also established that participating in the UNDP microfinance programme had a positive impact on the income and profit level of the farmers. Rweyemamu, Kimaro, & Urassa (2010), studied the effects of micro-finance services in agricultural sector development with particular reference to semi-formal financial institutions in Tanzania. The study using descriptive and regression analyses revealed that despite the fact that rural micro-finance institutions in Tanzania are rather new and operate in a difficult environment, they are playing very important roles in the agriculture sector development. However, the analysis further showed that micro-finance services are inadequate and do not solve all the agricultural sector problems due to transaction costs and high interest rates that are significant determinants of the demand for credit and this made the farmers to borrow less. Research Methodology The researchers used survey research design in this study. Under this method, group of items are critically studied by collecting and analyzing data from few members considered being representative of the entire group. Since the researchers cannot study the entire population, this method is considered mostly appropriate (Tatikonda, 2010). The population of the study comprises of all the Microfinance banks in Kogi State. The names of the banks are as presented below:

Table i Names Location

1. Confluence Microfinance Bank Lokoja 2. Gains Microfinance Bank Dekina 3. Kogi Microfinance Bank Lokoja 4. Akwengwu Microfinance Bank Okenne



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5. Ohon Microfinance Bank Ayegunle Gbede, Ijumu L. G. A. 6. Okengwe Microfinance Bank Okengwe, Okenne 7. Progress Link Microfinance Bank Isanlu, Yagba West 8. Unyogba Microfinance Bank Ejule Ofu L. G. A.

9. Amuro Microfinance Bank Mopa Muro L. G. A

10. Mopa Microfinance Bank Odole Mopa

11. Gbede Microfinance Bank Ayetoro-Gbede

12. Kabba Microfinance Bank Kabba

13. Ovidi Microfinance Bank Okenne

14. Idah Microfinance Bank Idah 15. Iyamoye Microfinance Bank Iyamoye, Ijumu L. G. A.

16. Ajeko Microfinance Bank Iyale, Dekina L.G. A.

17. Ibiraidu Microfinance Bank Abocho, Dekina L. G. A.

18. Egbe Microfinance Bank Egbe 19. Ihima Microfinance Bank Ihima 20. Solid Base Microfinance Bank Kabba

21. Odu Microfinance Bank Odu, Odekina. L. G. A.

Source: NDIC list of Microfinance Banks in Nigeria (2009)

Sample Size The researchers judgmentally selected five Microfinance banks at the Eastern senatorial district of Kogi State. The five microfinance banks selected are adequate to make a valid representation of the population of the study. This is because the mode of operation of all the Microfinance banks is virtually the same.

Table ii: Distribution of Customers by Bank Name of Banks No. of Customers No. of Staff Idah MFB 1002 25 Gains MFB 833 13 Ajeko MFB 621 25 Unyongba MFB 1010 20 Odu MFB 971 57 Total 4437 120 Source: Field Survey 2011

The elements in the population are the customers of the banks and staff in the various selected banks in Kogi East for the study. The total is 4557. The sample Size determination was carried out using Yaro Yarmene

n = Yaro (1967) formula and

Kumar (1967) formula nh =

n =

n = 368 Where, N = population size, n = sample size, e = error estimate (5%) and h = group number. The table 3 below represents the sample size using the above formula. Table 3: Sample Size by Banks

Name of Banks No of Customers No of Bank Staff

Total Population (N)

Sample Size (n)

Idah MFB 1002 25 1027 82



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Gains MFB 833 13 846 68 Ajeko MFB 621 25 646 52 Uyongba 1010 20 1030 83 Odu MFB 971 57 1028 83 Total 4437 120 4557 368 Source: Field Survey 2011

Method of Data Collection Questionnaire was used in getting data from the respondent. A five point likert scale was used to extract data. The respondents were made to indicate in the questionnaire the extent they agree or disagree to the stated problem. A weighting was given to each point in the scale as follows: Strongly Agree (SA) = 5 points Agree (A) = 4 points Undecided (U) = 3 points Strongly Disagree (SD) = 2 points Disagree = 1 point Method of Data Analysis Data Collected for this study were analyzed using Z-test. This method is applicable if one wants to test whether the means of two populations differ. The researchers wish to know whether the responses differ from the selected population mean. A mean score of three (3) and above is regarded as an accepted mean score, while a mean score of 2.99 will be rejected. Data Presentation and Analysis This section deals with the presentation and analysis of data collected via questionnaires administered. Data were analyzed using mean and standard deviation. Z-score was used to test the hypothesis. The test was based on 5% level of significance. Decision Rule If Z cal. value > Z table value, reject Ho and if otherwise, accept Ho. Presentation of Data The questionnaire presented in the Appendix was administered to 368 bank customers and bank staff respectively but proper responses could only be collected from 240 customers and 46 bank staff. Accordingly, our sample size for analysis purpose is 286 people, divided into bank staff and the bank customers. Below is the table for the responses to the questions in the questionnaire Table iv: Distribution of Customers and Staff by Bank

Branch No. of Customers

No. of Distributed

No. Returned

No. of staff

No. of questionnaires distributed

No. returned

Idah 1002 72 56 25 10 8 FPI 833 60 52 13 8 7 Ajaka 621 42 34 25 10 8 Ugwolawo 1010 72 50 20 11 8 Ejule 971 61 48 57 22 15 Total 4437 307 240 120 61 46

Source: Field Survey 2011



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Table v: Analysis of Questionnaires The table showing responses to whether Microfinance banks in Kogi State have mobilized savings for intermediation and rural development.

Source: Field Survey 2011 Note: Figures in parenthesis represent raw frequencies multiplied by the assigned weight while the

others are the raw frequencies. Table vi The table showing the responses to whether Microfinance banks are providing timely and affordable services to the economically active poor in Kogi State.

S/N Methods

S A 5

A 4

U 3

D 2

S D 1

Total

1. Savings made with the MFBs have not resulted to much economic value among the rural dwellers

28 (140)

34 (136)

7 (21)

85 (170)

132 (132)

286 (599)

2. MFBs have not improved the saving habit among the rural dwellers.

26 (130)

31 (124)

5 (15)

74 (148)

150 (150)

286 (567)

3. MFBs have not been able to use the savings collected to support rural development in Kogi state

39 (195)

47 (188)

16 (48)

117 (234)

67 (67)

286 (730)

4. The people in the community do not have enough money to save with the microfinance banks

16 (80)

16 (64)

9 (27)

109 (218)

136 (136)

286 (525)

5. The interest granted on saving investment by MFBs is poor compared with other financial institutions

28 (140)

25 (100)

18 (54)

95 (190)

120 (120)

286 (604)

6. MFBs does not encourage savings through daily contributions by the rural dwellers in order to enhance intermediation

27 (135)

35 (140)

11 (33)

125 (250)

88 (88)

286 (646)

Methods

S A 5

A 4

U 3

D 2

S D 1

Total

1. Microfinance banks delay at releasing funds to the active poor in Kogi state

28 (140)

34 (136)

7 (21)

85 (130)

132 (132)

286 (559)

2. MFBs conditions for granting loan and credit facilities to the rural dwellers in Kogi State are too stringent

26 (130)

31 (124)

5 (15)

74 (148)

150 (150)

286 (567)

3. MFBs services and operational designs do not support rural development in Kogi state

39 (195)

48 (192)

16 (48)

116 (232)

67 (67)

286 (734)

4. The people in the community are not ready to bank with the microfinance banks because of poor service delivery

16 (80)

16 (64)

9 (27)

109 (218)

136 (136)

286 (525)

5. The interest charged and commission on turnover (COT) of microfinance banks are too high for rural economic development

28 (140)

24 (96)

18 (54)

96 (192)

120 (120)

286 (602)

6. There is no significant relationship between the microfinance bank services and the economy of the active poor in

38 (190)

40 (160)

5 (15)

70 (140)

133 (133)

286 (618)



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Source: field survey 2011 Table vii The table showing the responses to whether Microfinance banks have provided employment opportunities to the rural dwellers in Kogi State.

Source: field survey 2011 Hypothesis Testing Three hypotheses were formulated and tested for the purpose of providing answers to the already stated objectives. The hypotheses stated in their null form. Decision Criterion: Where the z- calculated value is greater than the z- critical tabulated value, we accept the alternative hypothesis and reject the null hypothesis. If otherwise, we reject the the alternate hypothesis and accept the null hypothesis. Hypothesis one Ho1: Microfinance banks in Kogi State have not mobilized savings for intermediation and rural development. The respondents’ data to questions from table v are collated for the test of the hypothesis above.

Means of population (u): = 858

Mean of sample (): n

x∑ = = 612

Kogi State

Methods

S A 5

A 4

U 3

D 2

S D 1

Total

1. Microfinance banks do not create more job opportunities for the active poor in Kogi state

28 (140)

34 (136)

7 (21)

85 (170)

132 (132)

286 (599)

2. The loan and credit facilities policy of MFBs do not focus on employment

26 (130)

31 (124)

5 (15)

74 (148)

150 (150)

286 (567) (1045)

3. MFBs have not been able to provide loans and credit facilities in order to provide employment opportunities to the active poor in the community.

39 (195)

47 (188)

16 (48)

116 (232)

68 (68)

286 (731)

4. The loan and credit facilities granted by MFBs are not directed towards economic productivity in order to provide employment

16 (80)

16 (64)

9 (27)

109 (218)

136 (136)

286 (525)

5. MFBs services delivery and performances have not enhanced development of small and medium scale enterprises in Kogi state

52 (260)

29 (116)

14 (42)

107 (214)

84 (84)

286 (726)



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Standard Deviation (б): =

= 63.951

z-test statistic = σ

UX −

= 612- 858 = -246

=

= 3.85

Decision Since z-test calculated of 3.85 > 1.96 z-table value at 5% level of significance, we reject the null hypothesis, which states Microfinance banks in Kogi state have not mobilized savings for intermediation and rural development and conclude that microfinance banks mobilized savings for intermediation and rural transformation. Hypothesis two Ho2: Microfinance banks are not providing timely and affordable services to the economically active poor in Kogi State. The respondents’ data to questions from table vi are used for the test of hypothesis two above.



x∑ = = 601


= 66.677


UX −

= 601- 858 = -257

= = 3.85

Decision Since z-test calculated of 3.85 > 1.96 z-table value at 5% level of significance, we reject the null hypothesis, which states Microfinance banks are not providing timely and affordable services to the economically active poor in Kogi and conclude that microfinance banks are providing timely and affordable services to the economically active poor in the state. Hypothesis three Ho3: Microfinance banks have not provided employment opportunities to the rural dwellers in Kogi State. The respondents’ data from table vii are used for the test of hypothesis three above.




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x∑ = = 628


= 84.124


UX −

= 628- 858 = -230

= = 2.73

Decision Since z-test calculated of 2.73 > 1.96 z-table value at 5% level of significance, we reject the null hypothesis, which states Microfinance banks have not provided employment opportunities to the rural dwellers in Kogi State and conclude that microfinance banks provided employment opportunities to rural dwellers in Kogi state. Summary and Discussion of Findings In the course of this study, the following findings were made:

(i) The microfinance banks have been able to mobilize savings for intermediation and rural development.

(ii) Microfinance banks are providing timely and affordable services to the economically active poor in Kogi State.

(iii)Microfinance banks have been able to provide employment opportunities to the rural dwellers in Kogi State.

In the course of the study the the researchers discovered that the microfinance banks in Kogi State have been able to mobilize savings for intermediation and the development of the rural areas in Kogi state. It was also observed that Microfinance banks are providing timely saving and affordable services to the economically active poor in Kogi State. It can be deduced from this that Microfinance banks serve as a source of supply of loans, savings and other financial services to the poor. It is the practice of delivering those services in a sustainable manner so that the economically active poor in Kogi State have access to financial services in order to assist them build sustainable microenterprise. The result of the findings further revealed that Microfinance banks in Kogi State have been able to provide employment opportunities to rural dwellers in the state. The implication of this is that employment generation and entrepreneurship development in rural areas of Kogi State have been enhanced through the support of the microfinance banks. This therefore led to the average improvement in the living condition of the people. Kudi etal (2009), in addition, Yahaya etal and Onafowokan (2011), Ousanya & Oyebo (2012), all in their various studies asserted that Microfinance banks have played a great role especially in promoting entrepreneurial activities in rural areas; they are however faced with the problem of high operating costs. However, Opue etal revealed that micro-finance bank operations (roles) has no significant effect on credit demanded by small scale business enterprises; and that the roles of microfinance banks have no significant effect on the socio-economic development of rural communities in Cross River State. They further



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emphasised that irrespective of the roles and operations of microfinance banks, the total income of the small scale business enterprises in the rural communities remains unchanged. This is because most of the microfinance banks tend to concentrate their operations in urban and semi-urban towns instead of the rural areas where the poorest of the poor are concentrated.

Conclusion Rural transformation is all about seeking to bring about improvement in the living condition of the people in the community. The aim of microfinance is not only to extend credits to beneficiaries but to promote entrepreneurial activities and boost rural financial markets that will provide sustainable access to financial services by creating a relationship between those with financial resources and those who need them. It is in this light that Central Bank of Nigeria provides an appropriate policy and regulatory framework for the bank operations for the microfinance sector to gain both public and donor confidence.

Policy implications and Recommendations Based on the findings of the research, the following recommendations are made: 1. Government should help in creating a national database on citizens or inhabitants. 2. Additional Microfinance banks should be set up in the localities. 3. There should be more co-operations and collaborations between the financial institutions and rural dwellers. 4. The Prime rate charged by the Central Bank of Nigeria should be minimised to allow the other financial institutions to also reduce their interest rates. 5. Rural dwellers should be trained on how to establish, manage, sustain and expand their business outfits.

References Aderibigbe , J. O. (2001); “The role of the Federal sector in poverty reduction”, Central Bank of

Nigeria, Bullion, Vol. 39(4). Anyanwu, C. M. (2004); “Microfinance Institutions in Nigeria: Policy, Practice and Potentials” Paper

presented at the G24 Workshop on “Constraints to Growth in Sub-Saharan Africa”, November, p. 4, Pretoria: South Africa.

Egbe, O. O. (2000); “Influence of Rural Banking on Community Development in Idah Local Government Area of Kogi State”. Unpublished Research Project, Department of Business Management, the Federal Polytechnic, Idah: Nigeria.

Ehigiamusoe, G. (2005); Tested Institutional practices for effective Microfinance Service Delivery, Proceedings of Seminar on Microfinance Policy, Regulatory and Supervisory Framework for Nigeria. Organized by Central Bank of Nigeria, Abuja,(February 2005).

Iganiga B. O. (2007); “An Evaluation Microfinance Policies And Institutions In Nigeria”. Union Digest, Vol.11 Nos 1&2, June.

Kimotha M. (2005); “National Microfinance Policy Framework and Expected Impact on the Microfinance Market in Nigeria”, Proceedings of Seminar on Microfinance Policy, Regulatory and Supervisory Framework for Nigeria. Organized by Central Bank of Nigeria, Abuja, (February 2005).

Kpakol, M. (2005); “The Role of Microfinance in Poverty Eradication.” Proceedings of Seminar on Microfinance Policy, Regulatory and Supervisory Framework for Nigeria. Organized by Central Bank of Nigeria, Abuja,(February 2005).

Kudi, T.M. Odugbo , S. B, Banta A. L. & Hassan M. B. (2009); “ Impact of UNDP Microfinance Programme on Poverty Alleviation Among Farmers in Selected Local Government Areas of Kaduna State, Nigeria” International Journal of Sociology and Anthropology Vol. 1(6) 0ctober,

www.academicjournals.org/ijsa (Retrieved on 20th Feb. 2013)



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Lemo, T. (2006); “Transforming the Nigerian Economy through Microfinance Initiative”, National Workshop on Empowerment through Microfinance, organised by National Directorate of Employment at Lokoja, Nigeria. (June 2006) P. 1.

Ogbunka, U.M. (2003); “The Future of Community Banks in Nigeria: Emerging Challenges”, CBN Bullion, Vol.30 (3).

Okonjo-Iweala, N. (2005); “The Role of Government in Microfinance Development in Nigeria”, Proceedings of Seminar on Microfinance Policy Regulatory Supervisory Framework for Nigeria. Organized by Central Bank of Nigeria, Abuja, (February 2005).

Olusanya, S. O. & Oyebo, A. O. (2012); “ Impact of Microfinance Bank on Standard of Living of Hairdresser in Oshodi-Isolo Local Government of Lagos State”. Journal of Humanities and Social Science Volume 1, (4) (Sep.-Oct). www.iosrjournals.org (Retrieved on 24th Feb. 2013)

Onyema, M. E. (2006); “Transformation of the Nigerian Economy through the Microfinance Initiatives: Operators and Entrepreneurs Perspectives”, Abuja: Nigeria. Pp. 1-5.

Onafowokan, O. (2011); “Impact of Informal Microfinance on Rural Enterprises” JORIND (9).1 June. www.ajol.info/journals/jorind (Retrieved on 20th Feb. 2013)

Opue, J. A, Anagbogu, G. E. & Udousoro, A. U. (2011); “The Role of Microfinance Banks in the Socio-Economic Development of Rural Communities in Cross River State” Global Journal Of Applied Sciences, Management And Social Sciences. Vol.1 www.gojamss.com (Retrieved on 20th Feb. 2013)

Rweyemamu, D.C. Kimaro, M.P. & Urassa O.M. (2010); “Assessing Micro- Finance Services in Agricultural Sector Development: A Case Study of Semi-Formal Financial Institutions in Tanzania” Economic and Social Research Foundation, Vol.1

Soludo, C.C. (2007); “Financial System Strategy 2020 (FSS 2020) As the Post-Consolidation Response”, Lecture delivered at the Seminar organized by Faculty of Management Sciences, Nnamdi Azikiwe University, Awka, November.

Teki, S. (2011); “Role Of Public Administration and Microfinance in Alleviating the Poverty Thorough Participation and Empowerment of People - Case Studies from India”, Journal of public administration and policy research Vol. 3(1) January. www.academicjournals.org/jpapr (Retrieved on 24th Feb. 2013)

Yahaya, K. A, Osemene, O. F. & Abdulraheem, A. (2011); “Effectiveness of Microfinance Banks in Alleviating Poverty in Kwara State Nigeria” Global Journal of Management and Business Research Vol. 11. 4 (1)

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Audu Joel Samson & Gungul, Timothy, 2014, 2(2):80-87

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Effects of Human Resource Training and Development on Productivity in Nigerian Hospitality Industry

Audu Joel Samson1 & Gungul, Timothy2 1Dept. of Registry Dept., Federal Polytechnic, Idah, Kogi State, Nigeria. Email: [email protected]. GSM: +2348054836107 2Dept. of Tourism, Federal Polytechnic, Idah, Kogi State, Nigeria GSM:+2348062937546

Manuscript ID: RCMSS/IJPAMR/14011 Abstract The need for high productivity to address the socio-economic challenges has been the target of nations globally. Meeting this target needs competent human capital that would utilize available resources maximally. This research titled “Effects of Human Resource Training and Development on Productivity in Nigerian Hospitality Industry” is written to critically ascertain the extent to which training and development has improved productivity in the hospitality industry. The researchers elicit data from both secondary sources and primary sources like questionnaire, interview and observation. The population of the study was 482 from which a sample size of 98 was selected. The methods of data analysis used are simple percentage and other statistical method. The paper concludes that the hospitality industry in Nigeria could be improved through training and development of human resources. Thus, the paper recommends that hospitality industry should prioritize training and development of their employees by injecting more funds into such human resource programmes so as to ensure improved productivity. Key words: Training, Development, Human Resource, Hospitality Industries, Productivity. Introduction The objectives of every organisation, whether manufacturing or service rendering organizations, require a fundamental pulling of human, material and financial resources to accomplish the desired organizational output. However, all other resources cannot be properly articulated for the actualization of the desired goal without the support of human resources therefore, Likert cited in (Ezeani, 2006) states that: all activities of any establishment are initiated and determined by the persons who make that institution. Plants, offices, computers, automated equipments, will be unproductive except with human effort. The development of any organization depends largely on its human resources. Therefore, management is conceptualized as the process of achieving the goals of the organization by utilizing people and other resources, (Everald and Shilt, 1979 cited in Uyi ,2002).

Recruitment of employees into the organization is carried out not only to hire the right calibre of employees but to fill the vacant positions. But, the employees even though they are made to pass through the rigorous processes so that the organizational culture, norms and objectives could be internalized to ensure that organizational productivity is maximized, Jerling (1996) opined that training and development of employees is an important management tool used to maximize the potential capabilities of the employees to yield maximum output. Nwachukwu (2006) also posits that training of employees could aid businesses to meet the ever increasing challenges and high competitiveness for productivity.

Since training and development include all attempts to increase productivity by increasing an employee’s ability to perform better, its importance need not to be under-rated as cost of training employees is obviously an investment to the organization. Though, hospitality industry is a broad category of field within the service industry that includes lodging, restaurant,



81


event planning, transportation etc. The researchers shall focus on hotel as an aspect of the industry. Training of employees in the hospitality industry would enhance better service delivery and improved productivity.

Statement of the problem Training and development of employees are essential activities needed by all organizations considering the ever demanding technological improvement, innovation, and technical advancement by hospitality industry. Therefore, there is every need to address these challenges by recruiting and training the employees to improve high productivity. However, the hospitality industry have been the constraint due to lack of interest to fund training project, employees inefficiency to cope with training need and lack of personnel to carry out such training.

It is, therefore, pertinent to address these limitations in order to meet up with the desired target of having efficient and skillful employees that will be productive and accomplished the desired goal in the hospitality industry.

Objectives of the study This research is specifically designed to assess the impact of training and development of human resource in the hospitality industry. Generally, the research will also:

i. Ascertain the extent to which training and development of human resource have improved productivity.

ii. Evaluate the relationship between human resource training, development and productivity.

iii. Make recommendations that will improve sound manpower competitive ability.

Research Proposition Training and development of employees is pivotal to the development of the hospitality industry in Nigeria.

Scope of the study Though, the concept of training and development is so broad and significant to the continuous survival of any organization. The hospitality industry is service oriented and constantly required customers satisfaction, the researchers shall limit the study to some selected hotels in Idah Local Area of Kogi State, Nigeria.

Hypotheses Ho: Hospitality industry does not contribute to the socio-economic development of Nigeria. Hi: Hospitality industry does contribute to the socio-economic development of Nigeria. Ho: Human resource training and development do not improve productivity in the

hospitality industry. Hi: Human resource training and development do improve productivity in the hospitality industry.


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Conceptual Clarification Human resources mean the employees of an organization. It has been proved by various scholars as the most vital aspect of management; manpower could be used interchangeably as human resources, human capital, personnel, employees etc. Ejete-Iroh, Chukwuemeka and Jasper (2010) opined that human resources are the most important assets of every organization as policies and programmes of the organizations are solely integrated and articulated by them towards achieving the desired organizational goals. Training is simply a systematic process of changing the behaviour, knowledge and or motivation of employees in a direction to increase their effectiveness and organizational goal achievement (Ajibua and Ayeni 2001). Nwachukwu (2006) sees training as an organizational effort aimed at helping an employee to acquire basic skills that would help in performing assigned tasks. Onoja (2002) collaborated with Wanzere and Ward (2000) that a development is a process aimed at influencing the knowledge as well as attitude of staff in order to enable them perform optimally on their jobs. Training and development is a holistic mechanism designed to influence the employees towards goal achievement, Mali (1978) cited in Nwachukwu (2006) sees productivity as a measure of how well resources are brought together in organizations and harnessed for maximum efficiency. Ogbunbamowo (2000) and Ohinmorin (2003) see productivity as the relationship between output generated by the production of service and input provided to increase this output. The hospitality industry is a several billion industry globally that mostly depends on the available of leisure time and disposable income. A hospitality unit such as restaurant, hotel, amusement etc carries out facility maintenance, direct operations, bartenders and their effective functioning depends mostly on management, marketing and human resources. Therefore, it is pertinent to say that human resource training and development is a core aspect of guaranteeing organizational survival and better customer satisfaction.

Theories Relating to Training and Development Although, training is mostly designed for non-managers, it generally covers short-term technical and mechanical skills intended to improve the performance of both managerial and non-managerial personnel alike. In the past, it was wrongly assumed that training was meant for non-managerial staff only but, since the advent of information technology and knowledge economy characterized by technological changes and attendant re-engineering of organizational structures and rationalization of employment, training has come to take a wider meaning as any other level of employee may need one kind of training or another in the course of his career and work life (Yalokwu, 2006). Training is defined as a short-term process utilizing a systematic and organized procedure by which non-managerial personnel learn technical knowledge and skills for a definite purpose (Skinnetz, 1969).The term development in this context refers broadly to the nature and direction of change induced in employees as a result of educational and training programmes. Development is managerial in nature and is a career focused. According to the National Industrial Conference Board (1961) cited in Yalokwu (2006), management development is all those activities and programs, which when recognized and controlled have a substantial influence in changing the capacity of the individual to perform his present assignment better and in so doing are likely to increase his potential for future management assignment (http://www.researchgate.net/publication/256116900).



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In that respect, training and development seems to be a continuous phenomenon, training emphasizing technical and manual skills at one extreme and development emphasizing philosophical and creative skills at the other extreme. Consequently, the hospitality industry will be able to meet its competitive challenges through the instrumentality of training and development of human resources.

Need for Training and Development in Hospitality Industry It is important that all employees be inducted into training and development programmes in order to improve their job related knowledge, skills and performance. The need for training and development in hospitality industry as noted by Yalokwu (2006), Sentoo (1997) and Ezeani (2006) are given thus: i. Increased productivity: Adequate human resource training and development

increases skill, which improves the quality as well as quantity of output, this result to increase in the level of performance.

ii. Improvement in employee morale: Training and development improves needed skills, which builds up confidence and satisfaction. This in turn develops enthusiasm and pride, which are indicative of high morale.

iii. Availability of skilled workforce for future personnel needs of organization: Good training and development programmes develop employees and prepare them for future managerial and executive responsibilities positions. Accordingly, when the need arises for personnel changes, the internal sources can be utilized more effectively (http://www.yourarticlelibrary.com/management).

iv. Improvement in health and safety: Proper training and development programme can help prevent industrial accidents and create a safer work environment, since experience and knowledgeable workers are less prone to accidents.

v. Reduced supervision: Trained employees supervised themselves, they are responsible and expect more freedom and autonomy and less supervision. This, therefore, promotes the spirit of participation and teamwork in hospitality industry.

vi. Personal growth: Training and development programmes give the participants a wider awareness, a sense of self-satisfaction and fulfillment, an enlightened perspective and value system that support personal growth.

vii. Organizational stability: Training and development programmes can foster the initiative and creativity of employees, which increase the sense of inquisitiveness and improved skills as it prevents manpower obsolescence. There is no greater organizational asset than that of trained and motivated employees (http://www.yourarticlelibrary.com/management).

Research Methodology The study was conducted in Idah Local Government Area of Kogi State Nigeria. The researchers, however, focused on employees of some selected hotels. Questionnaires were administered to the respondents while some were also interviewed. The variables used for the questionnaire include personal data and research questions. The variable is expected to explore the salient aspect that relates to training and development in the hospitality industry. A total


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number of 98 questionnaires were distributed, but only 82 were returned giving response rate of 84%. Study Area Idah Local Government Area is on the Eastern Bank of the River Niger, the Middle Belt Region of Nigeria. The Local Government Area was created in 1976 and has a landmass of 39.79 square kilometers. It has a population of 79,815. More so, Idah Local Government Area is the traditional headquarter of the Igala Kingdom and the seat of the Atta Igala. It landmass formerly extended to Ibaji, Igalamela/Odolu and Ofu Local Government Areas until these areas were cut off due to the creation of new Local Government Areas in Nigeria. Research Design The research adopted the social survey techniques for the study. The design involves collecting data through questionnaire. This method is flexible and affordable and it also give the respondents high level of courage owing to the fact that they could respond objectivity to the questionnaire without any undue influence either on the part of the management of their organization or of the researchers. Therefore, the researchers adopted 99% confidence level for the study. Table I: Respondents Highest Educational Qualification

Variable Frequency Percentage (%) Cumulative percentage (%) Primary 09 10.98 10.98 Secondary 22 26.83 37.72 ND/NCE 43 52.44 90.16 HND/B.SC 6 07.32 97.48 Others 2 02.44 100.0 Total 82 100.0

Source: Field Research (2014) Most of the respondents had ND/NCE respectively with a total of 43 (52.44%) as shown in table 1 above, 22 (26.83%) had Secondary education, 9 (10.98%) had primary education, 6 (7.32%) had HND/B.Sc respectively while 2 (2.44%) had other educational qualification. Table II: Respondents Religion

Variable Frequency Percentage (%) Cumulative Percentage (%) Christianity 41 50.00 50.00 Islam 39 47.56 97.56 Others 02 02.44 100.0 Total 82 100.0

Source: Field Research (2014) Most of the respondents are Christians with a total of 41 (50%), while 39 (47.56%) are Muslims and 2 (2.44%) are of other religious practices. Table III: Respondents Marital Status

Variable Frequency Percentage (%) Cumulative Percentage (%) Single 53 64.63 64.63 Married 27 32.93 97.56 Divorced 0 0 97.56 Widowed 02 02.44 100.0 Total 82 100.0

Source: Field Research (2014)



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Most of the respondents are single with a total of 53 (64.63%), while 27 (32.93%) are married, none of the respondent were divorced and 2 (2.44%) are widowed. Table IV: Respondents length of service.

Variable Frequency Percentage (%) Cumulative Percentage (%) 1 – 5 years 30 36.59 36.59 6 – 10 years 41 50.00 86.59 11 – 15 years 07 08.54 95.13 Above 15 years 04 04.88 100.0 Total 82 100.0

Source: Field Research (2014)

Most of the respondents have been working between 6 – 10 years with a total of 41 (50%), while 30 (36.59%) between 1 – 5 years, 7 (8.54%) between 11 – 15 years and 4 (4.88%) above 15 years.

Table V: Data Presentation and Analysis S/No Variable Number of Respondents (N) No. of

Respts. Total score

Mean(x) Decision

SA A U D SD 5 4 3 2 1 1 Hospitality industry does not

contribute to the socio-economic development of Nigeria.

10 12 11 19 30 82 199 2.43 Rejected

2 Training and development will not improve productivity in the hospitality industry.

15 10 9 25 23 82 215 2.62 Rejected

3 Employees will be motivated if they are sent for training and development programme.

39 23 10 6 4 82 333 4.06 Accepted

4 The hospitality industry needs to upgrade their facilities for higher productivity.

28 34 8 7 5 82 319 3.89 Accepted

5 There is need to improve the reward package of the employees.

35 20 12 9 6 82 315 3.84 Accepted

Source: Field Research (2014) Decision Criterion: The five point Likert scale was used for the analysis. The “agree and disagree” response patterns were employed, and weights were assigned to responses as shown in table V above. The decision rule was to accept any element with mean score of 3.5 above, and reject those with less than 3.5.

Discussion of Result From table V above, item 3, 4 and 5 were accepted since they have mean value of 3.5 above, while item 1 and 2 were rejected because they have mean value below 3.5. Therefore, the researchers present the following findings: i. Hospitality industry contributes to the socio-economic development of Nigeria. ii. Training and development will improve productivity in the hospitality industry.


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iii. Employees will be motivated if they are sent for training and development programme. iv. The hospitality industry needs to upgrade their facilities for higher productivity. v. There is the need to enhance the reward package of the employees.

Suggestion for further studies Though, the researchers have been able to articulate the salient role of training and development to the hospitality industry. Emphasis was laid to a particular sector (hotels); further research could be carried out in other areas to create a balance in the research concept.

Conclusion From empirical evidence and feedback from the respondents, the paper has revealed the significant role of training and development in hospitality industry vis-à-vis the socio-economic impact of the hospitality industry to the nation. If the intellectual capabilities of the employees are harnessed and conducive working environment created, there will be improved service delivery and better customer satisfaction in the hospitality industry.

Recommendations Though, it has been established that training and development programme play a significant role in the hospitality industry, nevertheless, the paper recommends that: 1. Work ethics and service delivery should be given utmost priority in the hospitality

industry so as to internalize such culture in the employees. 2. Training and development programme should be allowed to flourish through adequate

funding of the programme and every employee should be given equal opportunity to benefit.

3. The human resource departments of the hospitality industry should draw out an articulated training and development policy so as to be able to avoid the risk of losing its employee to other sectors after being sent on training.

4. The employees in the hospitality industry should be adequately motivated through adequate, fair and commensurate reward system in line with their acquired skills.

5. Periodic review of the programme should be carried out to ascertain the extent to which the programme have been successful with view to reviewing it where and when necessary.

6. The infrastructural facilities in the hospitality industry should be upgraded so as to provide conducive work atmosphere for employees and customers towards greater productivity in the industry.

References Ajibua, F.A., Ayeni, F.A. (2001): Elements of Public Administration. Ilorin: SMS Printing and

Publishing Company. Effect of Manpower Training and Development on Job ... (n.d.). Retrieved from

http://www.researchgate.net/publication/256116900_Effect_of_Manpower_Training_and_Development_on_Job_Performance_in_National_Centre_for_Agricultural_Mechanization_Ilorin_Nigeria_br

Ejete-Iroh, C.J. (2010): The Impact of Training and Development Policy on Job Satisfaction. Pankshin: College Publishers.

Ezeani, E.O. (2006): Fundamentals of Public Administration, Enugu: Saap Publishers.



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Jerling, K. (1996): Education, Training and Development in Organization. Cape-Town: Kagiso. Media.wiki.com/ugd.set up my hotel.com Nwachukwu, C.C. (2006): Management Theory and Practice, Onitsha: Africana FEP Publishers. Ogunbamowo, E. (2000): The Management of Motivation and Remuneration, Ile-Ife: University Press. Ohinmorin, A. (2003): The Principles of Industrial Psychology, Benin City: Aka and Brothers Press. Onoja, I. R. (2002): Principles of Management, Soar Serve: Idah. Sentoo, N.R. (1997): An Investigation of the self-assessed training needs of Managers at the University of

the North Durban: N Sentoo. Skinnetz, J. (1969): Human Resource Management: Still Marching on or marching out? A Critical Text,

London: Routledge. Uyi, E.O. (2002): The Japanese Labour Management Miracle, Lessons for Managers and Practitioners of

Industrial Relations in Nigeria, International Journal for Development, Vol.4 (2). Wanzere, Z., Ward, K. (2000): Re-thinking Staff Development in Kenya: Agenda for the 21st Century.

The International Journal of Educational Management. Yalokwu, P.O. (2006): Fundamentals of Management, 2nd Edition Lagos: Akangbe Commercial

Enterprise. 4 Sequential Steps for Staffing of an Organization for ... (n.d.). Retrieved from

http://www.yourarticlelibrary.com/management/4-sequential-steps-for-staffing-of-an-organization-for-managerial-or-non-managerial-positions/3444/_br

Appendix

ORGANIZATIONAL CHART OF A TYPICAL HOTEL

BOARD OF DIRECTORS GENERAL MANAGER RESIDENT MANAGER

Human Resource Director

Chief Engineer

Financial Controller Security Director

Food and Beverage Director Director Sales and Marketing

Rooms Division Manager

Purchasing Manager

Asst. Controller

Asst. Security Director

Exec. Chef

Asst. F & B Direc.

Exec. Steward

Catering Director

Sales Director Executive House Keeper

Front Office Manager

Guest Relaxation Manager

Food/ Beverage Controller

Auditor Sous Chef

Restaurant Manager

Asst. Steward

Catering Sales

Manager

Public Relations Director

Asst. Executive

House Keeper

Asst. Front Office

Manager

Guest Relations Executive

Store Room Manager

Credit Manager

Banquet Chef

Room Service Manager

Banquet Manager

Convention Service

Manager

Reservation Manager

Accounts Manager

Pastry Chef

Asst. Banquet Manager

Chef Operator

Account Payable Manager

Night Manager

Pay Master Service Manager

Head Cashier

Source: media.wiki.com/ugd. set up my hotel.com.


Orokpo, Ogbole F.E & Ejeh Adoyi Willliams , 2014, 2(2):88-97

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An Assessment of the Privatization of Benue Cement Company Plc, Gboko, Benue State Nigeria: 1986- 2011

Orokpo, Ogbole F.E 1 & Ejeh Adoyi Willliams

2

1Dept. of Department of Public Administration, Federal Polytechnic, Idah, Kogi State, Nigeria. Email: [email protected] 2Dept. of Department of Public Administration, Federal Polytechnic Kaura-Namoda, Zamfara State Nigeria. Email: [email protected]


Abstract The performance of public enterprises has been a contentious issue in Nigeria since their establishment in the early 1960’s owing to the growing focus of governments on the promotion of rapid social development. Despite the hugh financial resources expended on these enterprises, they continue to witness losses due to absence of profitability, massive looting and gross inefficiency etc. hence, the inability to achieve objectives for which they were established. It was against this backdrop that various policies were introduced by the government to further reposition these enterprises since government could no longer continue to underwrite their losses. It is the assertion of this paper that public enterprise has not performed against the background of the objectives for which they were established. Using the Benue Cement Company PLC, Gboko as a case in point, the paper x-rayed the maladies of public enterprises and proffered some suggestions which if followed could resuscitate these public enterprises and position them for effective service delivery amidst the privatization conundrum . Keywords: Commercialization, Privatization, Public Enterprises parastatal, Benue Cement Company

Introduction Since independence in 1960 (and especially during the 1970s), Nigeria, like most developing countries, developed a particularly large parastatal sector. The parastatals sector is composed of such economic activities as banking and insurance; oil prospecting, exploration, refining and marketing; cement, paper and steel mills; hotels and tourism; sugar estates; etc. A survey undertaken by the Technical Committee on Privatisation and Commercialisation (TCPC) shows that there are nearly 600 public enterprises at the federal (national) level alone, and an estimated 900 at the state (regional) and local government levels. The estimated 1,500 public enterprises in Nigeria account for between 30 and 40 per cent of fixed capital investments and the same proportion of formal sector employment. Table 1 gives the summary of the Federal Government's investments as of 30 November, 1990. These investments were valued at over N.36 billion at their historical book values. The returns from these investments had never exceeded two per cent per annum, which is less than 25 per cent of the annual subventions from the government to the public enterprise sector. Nigeria was no exception in terms of the belief that the state and public enterprises have a role to play in the country’s development efforts. The government in conjunction with the private sector mostly foreign was directly involved in areas ranging from the production of food stuffs to assembling cars. The oil boom of the 1970s enabled the government to venture into ownership and control of economic activities. The Nigerian enterprises Promotion Decree of 1972 set the basis for the government’s extensive participation in the ownership and management of banking, insurance, and industry. The public sector played a dominant role in the economy accounting for most half of the GDP and two third of modern sector employment in the 1970s. By 1980, there were about 70

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) An Assessment of the Privatization of Benue Cement Company Plc, Gboko, Benue State Nigeria: 1986- 2011

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non-commercial federal parastatals. There were also large numbers at the state level (Onwioduokiti, 1999:51). While the boom in the world market for oil and petroleum products lasted, no one complained about the wastes and inefficiencies of the public enterprise sector in Nigeria. In fact, a lot more public enterprises of questionable commercial financial viability were established. It was the fall in the world market for oil, and the economic recessions which began in the early 1980s that seriously focused attention on the problems of public enterprises. Public enterprises in developing countries (Nigeria inclusive) have been attacked for being economically inefficient and wasteful of resources. Public enterprises made significant demands on government resources as well as domestic and foreign credit with nothing to show in terms of profitability and efficiency but rather operating on a deficit and a massive drain on government resources through transfer and subsidies. From the foregoing, therefore, the Nigerian Government realigned herself with the global trend and as such privatized most of her public enterprises that gulped billions of naira without yielding positive results. Consequently, Benue Cement Company Plc, a Federal government cement outfit in the State was affected in the second round of privatization scheduled to commerce in 1999. The company which boomed in its hay days dwindled from better to worse and over the years it has failed to meet its economic objectives. With the privatization and eventual return to profitability, the paper seeks to x-ray the factors that were responsible for the abysmal performance of public enterprises and the import of there privatization.

Public Enterprises: A conceptualization Explanation Public enterprises refer to the control of income or revenue generating activities or social service structures by the state. The Encyclopedia Britannica defines public enterprises as an organization operating on commercial principles, wholly or partly owned and controlled by a public authority. Public enterprises are public organizations acting in the capacity of an entrepreneur, and are categorized as statutory corporations which provide services in public utility; development and finance; and state owned companies the private sector companies, and mixed economy laws that regulate the private sector companies, and mixed economy enterprises in which government operates joint commercial venture with private enterprises. According to Bohn (1980), the concept of public enterprises would legally result from the synthesis of the essential characteristics of the public and the enterprises dimensions of public enterprises. The connotation of public dimension of public enterprises includes public purpose, public ownership, public control, public management and public accountability. The public purpose implies that the rationale for the creation of public enterprise is the desire to attain not only commercial and business goals but also broader developmental goals and a range of socio-economic objectives. Public enterprises owe their origin and development in Nigeria to the activities of the British colonialist. According to Girgi (1991) the British colonial government established government departments for the provision of essential infrastructural support needed for the rapid growth of the national economy and general development of the society such as the railways, electricity, water works, ports, post and telecommunications etc. The private sector could not provide these facilities for reasons such as lack of capital technical expertise and low profitability of these ventures. The decade following World War II witnessed an enormous expansion of government intervention in national economies, particularly in the 1960s and 1970s when



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the public sector was seen as a major contributor to economic growth and socio-political stability (Henming and Mansoor, 1988:31). The interventionist development policies of the period resulted in the creation of staggering number of public enterprises. The framework for massive establishment and consequent proliferation of public enterprises in Nigeria however was the third National Development Plan and consequently the constitution of the Federal Republic of Nigeria. Significantly, by the period of the third national development plan the oil sector had developed into a boom and sustainable resources became available in Nigeria. Government revenue, private income and foreign exchange were on the rise, Nigeria at this time recorded impressive figures in terms of material advancement and more public enterprises were established to offer social services to the people. With sustainable income, huge foreign exchange and private incomes, Nigeria intensified her quest for the creation of even more states to bring the government nearer to the people. In line with the foregoing, Beune State was created on 3rd February, 1976. The effect of this was the establishment of more public enterprises including Benue Cement Plc to satisfy the yearning of the State (Sambe, 2000:13).

The Philosophy and Justification of Public Enterprises There are many reasons for the creation of public enterprises. Development countries for instance, have created public enterprises out of the urgent need for infrastructural investment and partly because of the unwillingness incapacity of private entrepreneurs and investors to initiate and bring to fruition projects that are regarded as essential constituents of national development programmes (Encyclopedia Britannica). Although most countries with colonial history inherited public enterprise from the imperialist, it is evident that the maintenance and expansion of these public sector organizations are due largely to a philosophical justification that is connected with the condition of their underdevelopment. Ejiofor (1982) asserts that parastatals in the developing nations are established for a mixture of economic, political and social motives. These include the provision of goods and services at quicker and cheaper rates response to perceived need and pursuit of economic independence. Another philosophical argument by welfare economies in favour of state intervention is to “correct market failure”. Mitchel and Simmons (1994:6) describe market failure as “the failure of real worlds market to achieve the standards of the imaginary market”. The imaginary market here is presumed to be perfect market in which all opportunities for mutually advantageous exchange are being exploited (Matchel Simmons, 1994:6). The market failure are seen in situations where public goods are undersupplied; there are exorbitant and ambiguous social costs of private actions, unprotected consumers, and unfair wealth and income distribution. According to Hughes (1998:113) reasons for government intervention in enterprise include:

• To ensure adequate support of goods and services • Improving competition • Reducing social cost such as environmental externalities and • Protecting national sovereignty.

The following have formed a common justification for the establishment of public enterprises in underdeveloped economy like Nigeria:

• There is no indigenous private sector that can undertake certain infrastructural utility like ports and habours, railways and road construction.


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• Public enterprises are expected to generate revenue that will add to available national capital for financial development projects and welfare programmes.

• State control of key profitable enterprises enables the state to pursue the objectives of preventing the concentration of wealth or the means of production and exchange in the hands of a few individuals or of a group.

• Public enterprises are a means of organizing certain critical activities essential to individual survival and economic stability like central banking, broadcasting, iron and steel, international air transportation, shipping and petrol chemicals.

• Public enterprises are conceived as entrustments which government can use in providing employment opportunities.

From the foregoing, so many reasons have been adduced for the emergence of public enterprises. However, Laleye (2002) has outlined the following reasons:

• The desire to use the public enterprises as an instrument of effective plan implementation in a context where it appears futile to devise a development plan for the private sector.

• The need to secure economic independence. • The urgent desire to assure government control over “strategic” sectors of the

economy (e.g. central banking, broadcasting, iron and steel, roads shipping) • The need to separate some activities from the civil services and allow more

autonomy in their running. • The perceived need to provide employment for the citizens in contexts where the

private sector offers very limited employment opportunities. • The need to ensure state control of key profitable enterprises with a view to

generating revenues that will add to available programmes and projects • The desire so some socialist-oriented regimes to use state control of key profitable

enterprises to pursue the objective of preventing the concentration of wealth or of the means of production and exchange in the hands of few individuals or of a group (i.e promoting equitable distribution of wealth).

In summary, Ahmed & Rufai (2003) justified the emergence of public enterprises in Nigeria thus; successive Nigerian governments sought to discharge their social responsibilities to their people and invested huge sums of money to correct market failure in infrastructure and utilities sector, control the commending heights of the economy, supplement what was perceived to be a weak private sector, complement the need for capital which was deemed to be in short supply and provide general employment opportunities. Most students of the political economy of third world countries especially in Nigeria will probably agree with the foregoing justifications for the establishment of public enterprises. However, it is important to assert that the justifications are not only difficulty to translate into practice but they contain serious contradictions. For instance, emphasis on the provision of employment may seriously hinder the achievement of the goals of the enterprises, however defined. Thus, incompetent and uncommitted board members see their respective enterprises as avenues for employing unqualified party loyalists. Above all, practically, every board member exploits his position to build up an economic base (through contracts and middlemen activities) at the expense of the public. This means that the objective of public wealth creation and income redistribution through the instrumentality of public enterprises has been aborted in the Nigerian context.



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Many reasons have been adduced as the justification for creating public enterprises. Following are six important ones:

• The first of these, especially in the context of developing countries such as Nigeria, is the development emphasis. In many developing countries, the resources available to the private sector are not adequate for the provision of certain goods and services. For example, the investments required in the construction of a hydroelectricity-generating plant or a water scheme for a large urban center is quite enormous and the returns on such investments will take a very long time to realize.

• Secondly, political considerations influence governmental involvement in the provision of certain social and economic services. In many African countries, development is closely associated with the provision of social services; consequently, the performance of the government, in many of these countries, is evaluated on the basis of its ability to provide different types of public services in areas where such services do not exist.

• The third reason for governmental intervention in the provision and management of goods and services in many parts of the world is the fact that no person should be permanently deprived of the access to such facilities because of lack of finances or by reason of geographical location.

• A fourth reason relates to the need to protect the consumer, which may not be of interest to the private sector. For example, government intervenes in the provision of education in many countries to protect children, who are not capable of making important decisions for themselves, by making education up to a certain age compulsory and free.

• The fifth reason for governmental intervention in the provision of certain goods and services relates to the indivisibility that characterizes such services. Some facilities, such as bridges, tunnels, roads, streetlights, and waste disposal facilities, cannot be divided or partially provided. Either streetlights are provided for the benefit of everybody in the community or they are not. Facilities of this type must therefore be provided publicly and financed through taxation.

• The sixth reason for governmental intervention is the consciousness of the national security. Certain facilities, like the National Ports Authority and the police, are too vital to be left at the mercy of private citizens. (Nwoye, 2005).

Historical Background and objectives of Benue Cement Company PLC Benue Cement Company Plc is one of the 7th indigenous cement companies operating in Nigeria. The history of the company dates back to the early 1960s when traces of limestone deposits were discovered in Mbayion District of Gboko in Benue State. This discovery was by the geographical survey, Department of the federal Ministry of Mine and Power. Having made the arrangement for the feasibility study shortly after the discovery, by 1972 the federal government invited dementia holding of Zurich, in Switzerland to undertake confirmative study for the construction of the cement plant at Tse-Kucha, Mbayion in Gboko Local Government of Benue State. On the 16th July 1975, Benue Cement Company was incorporated in Nigeria as a limited company and a profit oriented organization with the Cementia holding of Zurich being responsible or the design and construction of the factory and also as management partners. By August 1980 the first production line came to stream and Lion brand Portland cement was introduced into the market.


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The modern dry process two line cement plant on a rich belt of high grade limestone deposits of Tse-Kucha 72 kilometers along the Makurdi-Gboko high way was officially commissioned on the 16th February, 1981 with a rated capacity of 900,000 tones per annum. Lion Brand Portland Cement is distributed virtually all over the country with concentration in the Middle Belt, Northern and Eastern states, which must of necessity be catered for by the only viable cement complex within their economic reach. It is satisfying to note that about 40% of this homemade product was used in the construction work at Abuja. Nigeria’s federal capital and technically Lion Brand Portland Cement fully satisfies the Nigerian Industries Standard (NUS) II which conforms with universally accepted British Standard (BS) 12 specifications. Benue Cement Company Plc today has liaison offices at Abuja Enugu, Jos, Kaduna, Lagos and Makurdi with depots at Adikpo, Gboko, Makurdi, Onitsha, Otukpo, Tse-Kucha, Vandeikya and Lafia with process, which continues to be recorded in production reports. The company started a production of 50,000 tonnes in 1980; cumulative production from 1980 to 1999 is 9.44 million tones of high equality Portland Cement representing average production of 496,842 tones per year and an average capacity utilization 55.2%. The highest production level was achieved in 1985 (year before the advent of SAP during which over 905 of the rated capacity of 900,000 tones was achieved. The financial performance of the company too was that of profitability and steady growth of shareholders fund until 1993 when decline started. Benue Cement Company was at a point owned by over 35,000 shareholders spread across the country but the federal government remains the dominant shareholders until the final privatization. Benue Cement Company Plc, West Africa’s largest single cement plant and an NIS Gold Award winner was incorporated on 16th July 1975 with the primary objectives of the production and sale of the ordinary Portland cement (OPC) known by the trade name of Lion Brand Portland Cement. Every other activity is ancillary (BCC Hand Book).

Performance of Benue Cement Company PLC as a Public Enterprise and its Privatization Benue cement company (BCC) operations recorded a very impressive performance which was that of steady growth and enhancement of shareholders’ funds as profits rose steadily from 1986 up to 1997. Its fortunes however started to dwindle with the age of the plant and equipment and also due to harsh macro-economic environment and rough economic terrain characterized by erratic electricity power supply, acute shortage of petroleum products, poor state of infrastructure, low purchasing power and by extension Very weak economic activity. The serious disruption in the supply of production inputs greatly affected industrial capacity utilization nationwide as claimed by the company. Though the company managed to stay afloat, there was a general decline in reduction, dispatches and turnover, accordingly the company’s turnover fell from N2.3 billion in 1996 to 1.96 billion in 1997 while profit after tax was N72 million. Benue cement Company Plc was heavily indebted to banks and other trade creditors to the tune of over N5.68 billion as at the year 2003. This poor performance and financial quagmire prompted the company to enter into negotiation with consortium of Banks for a waiver of accrued interests owned the consortium. The consortium agreed to write back N102, 166,00 million representing interests charged



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between October to December 2000 and also waive 50% of accrued interests as at 30th September 2000 which was tentatively put at N170,122,000 million.

ANNUAL TURNOVER OF BCC 1986-2006 Year Naira 1986 91,810 million 1987 101.285 million 1988 136,135 million 1989 201,120 million 1990 282,188 million 1991 315,046 million 1992 493,370 million 1993 731,370 million 1994 1,122, 557 billion 1995 1,574,203 billion 1996 2,306,300 billion 1997 1,963,465 billion 1998 1,963,465 billion 1999 1,412,654 billion 2000 791,464 million 2001 1,115,172 billion 2002 583,009 million 2003 390,996 million 2004 - 2005 4,1005,101 billion 2006 6,029,209 billion

Source: BCC Annual Report & Accounts (1986-2006)

Annual Turnover of Dangote Cement 2007- 2011 Year Naira 2007 34, 595,913billion 2008 61, 906, 088 billion 2009 129,797,087 billion 2010 202,565,699 billion 2011 235, 704,876 billion

Source: Dangote Cement Annual Report & Accounts (2007-2011) From the year 2006 the annual report and accounts of Benue Cement Company PLC, Gboko were incorporated into the Dangote Cement with a single balance sheet for all the Cement units in Nigeria, thus not reflecting the peculiar turnover for either of the company. From the report and account above as from 2006 when Dangote took over, there was a significant change in the profitability of the company. As earlier alluded to, Benue Cement Company was in good health until from 1997 when its financial position declined to the level that it could hardly meet its obligations to customers, shareholders and staff. This resulted in staff lay-offs among other thing and by 2002, the company had virtually closed down. The major causes of the collapse have been attributed to both external and internal factors with the overall tight fiscal and monetary policies of the Federal Government, which had a telling effect on the performance of the company as public enterprises. Other factors that affected the performance of BCC as public enterprises include the following according to the Annual Report & Accounts (1997).

• Inadequate Power Supply: the power supply in Benue State is grossly inadequate for sustained operations of the Company which resorted to using three (3) Nos. mini government plants, four (4) Nos. EMD Engines and NEPA as its sources of power supply. With some of these machines gutted by fire in 1995, NEPA became the main source of the company’s power supply leading to increase in electricity consumption and attendant high bills running in millions per months. Most times, the poor financial position of the Company caused delay in the settlement of bills,


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thereby leading to disconnection. These disconnections sometimes lasted for weeks delaying production.

• Acute shortage of petroleum products such as the Automobile Gas oil (AGO) low power fuel oil (LPFO) and premium motor spirit (PMS) in the market adversely affected the Company’s production system. This scarcity gave rise to the high cost of the products above their normal prices. The resultant effect of this shortage was low capacity utilization with production level reduced tremendously.

• Instability of Board: Frequent changes on the Board including the Chief Executive brought about lack of continuity in the leadership of the company. This high turnover of officers lead to eroded confidence of Banks, suppliers, distributors and other customers cum shareholders.

By 1998, the economic environment of BCC got worse Gross Domestic Product (GDP) dropped by 0.8% from its 1997 level while capacity utilization also fell from 34.32% to 31.30%. This harsh economic environment eroded the consumer purchasing power. Aggregate unsold inventory at the end of the year was put at 5.768 billion compared with N3.645 billions in 1997. Inflation short up from 8.3% in 1997 to 10% while the maximum rate stood at between 30% and 38% against the target zero borrowing requirements. Meanwhile, conditions for importation of Cement continued to be favourable to importers as the duty on them was as low as 105 compared to 40% on industrial space parts (Annual Report and Account 1998). Besides all the fore going, the company witnessed a downturn in its fortunes necessitating plant shut down, lower production, staff rationalizations and skyrocketing prices of Cement. With the shoddy performance, privatization was therefore perceived and recommended as a panacea to all the company’s ills and failure for economic efficiency, effectiveness and productivity. According to Agbese (2000), the Company operated under very strenuous circumstances caused by acute liquidity problems, a weak plant, incessant power cuts from the public supply, fuel shortages and difficulty in obtaining needed vital essential parts. Consequently, it recorded a turnover of only N719.5 million as against N943.28 million in 1999. By and large, an assessment of public enterprises with the twin criteria of services delivery and returns on investment has shown quite clearly that they have not lived up to expectation of all. The actual performances of many of these public enterprises in Nigeria have left much to be desired including Benue Cement Company. Many of them were not responsive to the changing requirements of a growing and dynamic economy they did not possess the necessary tools for translating into reality the hope of successful commercial operations. Consequent upon the foregoing was government decision which included privatization, outright sale or liquidation as the way out for the problems of public enterprises. The second round of privatization programme of the Federal Government effectively took off in 1999. General Abdulsalami Abubakar launched this round and also put its legal framework in place following the promulgation of the public enterprises decree no 28 of 1999. This decree provides for a re-organized institutional framework to include the establishment of the National Council on privatization (NCP) and re-establishment of the Bureau of public Enterprises (BPE) as the main organs for the execution of the privatization and commercialization programme. It is this decree that provided for the full privatization of 25 public enterprises including Benue Cement Company Plc. Upon full privatizations, the Federal Government share-holding would become zero percent while strategic core-investors are expected to have a maximum of 40 percent.



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Following this decision, experienced and strategic core investors like the Cementia Lar fage reputably the world largest cement producer, who already own 10 percent share in BCC, Blue circle another cement company and Dangote industries Limited put in their bid and were invited. They came contending with one another over the federal government majority share on the company. Consequently, the federal government majority shares in the company were sold to the Dangote Industries Limited in April, 2000 amidst controversies. With Dangote Industries declared as the core investor, there was a sporadic response by the people of Benue State accusing Dangote Industries Limited which is an indigenous company of lack of managerial skills and technical capacity to handle the company. Legal proceedings were even instituted against the National Council on Privatization seeking to restrain it from selling the shares to Dangote Industries Limited. Moreover, there were complaints of lack of transparency in the entire transactions which were shrouded in secrecy and that the majority of the investing public were ignorant of the sale of the shares. All these are however now history as Dangote Industries Limited has since assumed the management of the company with an acclaimed success stories. By 2006, the annual turnover of the company skyrocketed to a whopping sum of 6,029,209 billion indicating that the hay days of the company are back with huge profit margin. According to Manuaka (2007: 18), “Benue Cement Company, BCC, Gboko is going through a major expansion and upgrading. After several years of decay and a string of financial losses, BCC came back alive, following the emergence of DIL as the core investor in the manufacturing Company. A new production line that is being put in place to complement the refurbished one is expected to increase the production capacity of the plant from the current 400, 000 tonnes to three million tonnes. Already, the stock market is reacting sharply to the expansion project. Investors in the stock are reaping huge returns. From a mere N5.00 at the end of the first quarter of 2006, the market prices of the stock appreciated to about N55.00 in the third week of April 2007”. According to the 2011 Annual Report and Account, Dangote has successfully revived the Gboko Cement Plant (GCP – formerly BCC) in Benue State with refurbished production facilities to manufacture 3 million tons / annum of high quality cement. From the foregoing, privatization has to be viewed not as an end in itself but as a means to get government interested in fostering a new division of labour between the public and the private sectors in order to increase the efficiency and contribution to development of both sectors.

Concluding Remarks The discourse is about the abysmal performance of public enterprises with Benue Cement Company as a unit of analysis whose main objectives was to produce, market and attain the rated capacity of 900,000 tonnes through effective and efficient application and harmonization of men, money, machine and materials. From the discussion so far, it shows clearly that the company was not able to achieve this set objective rather a big decline in production and turnover reports hence its privatization for better performance. Benue Cement Company Plc was privatized because of its sustained losses over the years hence privatization was seen as a solution to the numerous problems of the company. The privatization of Benue Cement Company Plc has helped to revitalize the company from its comatose state. From the foregoing, privatization of Benue Cement Company Plc and other enterprises in the country could be harnessed to the benefit of the State and the entire


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Nation. By and large, the fundamental solution to Nigeria public enterprises problems is not just privatization but most importantly a change in our value system, attitude and beliefs. From the foregoing, the government of Nigeria has for a long time realized the need for economic reform and is privatizing public enterprises in an effort to improve their efficiency and lesson the financial burden they often represent for government. The fact is that the performance of public enterprises are far from satisfactory and the major problem have been related to managerial inefficiency among others and the only way out is privatization. However, for effective public enterprise performance and the privatization to be successful, desired results achieved and sustained, it become expedient for government to become more transparent in the sale of most of these enterprises and put the masses at the centre of the policy in other not to further aggravate the suffering of the masses who always bears the brunt of these capitalist driven policies.

References Akinbade, J. A. (2004). Public Enterprises and Privatization in Nigeria. Yaba, Lagos: Macak Books Ltd. Anya, A. O. (2004). Comments on Privatization in Nigeria. The Hague, Netherlands: A paper

presented at the Nigerian Economic Summit. Ayodele, S. (1999) “Issues in the Privatization of Public Enterprises in Nigeria” Bullion Magazine

Published by the Central Bank of Nigeria (July/Sept. 1999 Edition). Agbese, D. (2000). ‘Chairman’s Statement” in BCC 2000 Annual Report and Accounts. Bala, J. J. (2004). “The Nigeria privatization Programme: An Overview” Paper Presented to the State

Committee on Sale of Government owned Companies. Yar Adua Centre, Abuja August. 10. Benue Cement Company Plc HandBook. Benue Cement Company Plc Annual Report & Accounts 1986- 2000. Dangote Cement 2007 - 2011 Annual Report and Accounts. Ebie, C. O. (1986). “Restructuring the Nigerian Economy: The Place of Privatization”. Lagos:

Bullion No. 10 Vol. 2. Hayatuden, M. (1990). “The Macro-Economic Implication of Privatizations and

Commercialization”. A Paper presented at a Conference on Privatization/Commercialization Programme in Nigeria, November 6-8.

Heald D. (1985), Will the Privatization of Public enterprise solve the problem of control? Public Administration, Vol. 63.

Hughes, E. O. (1998). The General Theory of Empowerment, Interest and Money. San Diego, Harcourt and Brace Jovanvich Publishers, 3rd Edition.

Ikhinwin, E. (1999). Opportunities and Threats in Privatization. The Guardian Wednesday, 13, October.

Laleye, M. (2002). “Public Enterprises” in L. Adamolekun (ed) Public Administration in Africa, Main issues and Selected Country Studies. Ibadan: Spectrum books Limited.

Mauaka, T. (2007) ‘An Empire Without Frontiers’ in TELL May, 2007. Nwoye, M.I (2005), Privatization of Public Enterprises in Nigeria: The Views and Counter views.

Journals of Political Theory and Research on Globalization, Development and Gender Issues Obadan, M. I. (2000). Privatization of Public Enterprises in Nigeria: Issues and Conditions for

Success in the Second Round. NCEMA. Ohashi, S. & Obi, A. (2003) Public Administration in Nigeria. A Development Apporach. Onisha:

Book Point Ltd. Onwioduokiti, E. (1999). “Privatization in Nigeria: Options for the Next Millennium”. Bullion Magazine,

Published by Central Bank of Nigeria July/Sept. 1999 Edition. TELL Magazine May, 2007: DANGOTE: The Face of A New Nigeria.


Poverty Alleviation Strategies and Governance in Nigeria

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Alfa Patrick Innocent1; Otaida Eikojonwa2 & Audu Enojo3

1 Dept. of Social Science & Humanities, The Federal Polytechnic, Idah, Kogi State, Nigeria Email: [email protected]. GSM: +2348032404485 2Dept. of Political Science, Kogi State university, Anyigba, Kogi State, Nigeria Email: [email protected]. GSM: +234-7039610430 3Department of Public Administration, The Federal Polytechnic, Idah ,Kogi State, Nigeria Email: [email protected]. GSM:+234-8036110809

Manuscript ID: RCMSS/IJPAMR/14014 Abstract The paper takes a look at poverty as a global phenomenon but admits that the intensity and scale vary from one society to another. It asserts that there is widespread poverty in Nigeria despite its great endowments. The paper notes that successive regimes in Nigeria have been introducing different programmes to alleviate poverty. It established a link between poverty alleviation programmes (strategies) and governance and blamed the failure of such programmes on absence of good governance. The paper uses secondary data and adopted the elite theory to explain why poverty alleviation programmes fail in Nigeria bearing in mind some of the past programmes. Viable recommendations are made in the paper to ensure the success of future programmes of government. Key words: Poverty, Alleviation, Governance, Good Governance, Nigeria. Introduction The high level of poverty in Nigeria, which has attained an endemic nature, is becoming worrisome. Poverty has made Nigeria to attain an unenviable status as one of the poorest countries in the world, such that no government (no matter the level), organization, community, clan or family can survive effectively without introducing one kind of poverty reduction strategy or the other. This problem is essentially not that of programme and strategies so adapted in poverty reduction efforts. Nigeria has not been known to lack in such efforts; yet she is still ranked among the world’s 25 poorest nations (World Bank, 2002; http://article.sapub.org/10.5923.j.economics.20120202.02.html_br). Political instability and absence of good governance witnessed by Nigeria over time subjected the various poverty alleviation initiatives to fickleness. As a new regime comes on board, it signals a death knell to the past policies irrespective of the successes recorded. Indeed, there is no gain saying the fact that the formulation and implementation of poverty alleviation programmes are part of the important processes of democratic governance in modern nation-state with a desire for socio-economic development and crave the provision of the most needed dividends of democratic governance towards enhancing poverty reduction and national security. Nigeria is a state known to have formulated, articulated policies aimed at providing solutions to her numerous problem and development challenges. In fact, the fate of many policy programmes have been that of poor, callous, haphazard implementation and abandonment majorly as a result of perennial political instability as well as bad governance. Poverty is a global phenomenon which affects continents, nations, and people differently. It afflicts people in various depth and levels at different times and phases of existence. There is no nation that is absolutely free from poverty. The main difference is the intensity and prevalence of this malaise. Nations in sub-Saharan Africa, South Asia and Latin America are currently with the highest level of poverty and consequently with the lowest level of socio-economic development, violence, and unrest and generally unacceptable low standard of living.


Alfa Patrick Innocent; Otaida Eikojonwa & Audu Enojo, 2014, 2(2):98-105

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The Central Bank of Nigeria (1999:1) views poverty as: A state where an individual is not able to cater adequately for his or her basic NEEDS of foods, clothing and shelter; is unable to meet social and economic obligations, lacks gainful employment, skills, assets and self-esteem; and has limited access to social and economic infrastructure such as education, health, portable water, sanitation and consequently has limited chance of advancing his or her welfare to the limit of his or her capabilities.

Nigeria ranked among the 25th poorest countries in the world. The country gained its independence with poverty level of barely 15% of it population in 1960 and is today struggling to bring it down from about 70% of its current teeming population of about 73%. This is concentrated in the rural areas where illiteracy prevalence is high, potable water and health facilities are rarely available, road and electricity infrastructures are either unavailable or ill-managed (http://www.stclements.edu/grad/gradoyem.pdf_br). No Nigerian Government, be it military or civilian has come without introducing and leaving behind one form of poverty alleviation or reduction programme meant to reduce the level of poverty, give hope and succour to the poor and, or more towards some sort of wealth creation. Strategies, policies and plans have been articulated; programmes and projects have been formulated and executed over the years. For instance, at independence in 1960, poverty eradication efforts in Nigeria centered on education, while Operation Feed the Nation (OFN), the Green Revolution, War Against Indiscipline (WAI), People’s Bank of Nigeria (PBN), Community Banks, Directorate of Food Roads and Rural Infrastructure (DIFFRI), Nigerian Agricultural Land Development Authority (NALDA), Family Economic Advancement Programme (FEAP), Better Life for Rural Women, Family Support Programme (FSP) and National Poverty Eradication Programme (NAPEP) were put in place during the period under review. Though, successive governments have tried to address the issue of poverty as captured above, the effect of the strategies and programmes has been that of mixed feelings (http://www.stclements.edu/grad/gradoyem.pdf_br). Conceptual Clarification Poverty Poverty, like most concepts is not easily amenable to a straightforward definition. It has been defined by various authors in different ways. To Marshal (1998:516), poverty is defined as “a state in which resources, usually material but sometimes cultural are lacking and could be delineated into two broad categories of “absolute and relative” terms. Absolute poverty refers to “a state in which an individual lacks the resources necessary for subsistence” while the relative definitions refers to the individual’s or groups’ lack of resources when compared with that of other members of the society” (Agbiokoro, 2010). Poverty can also be defined as a condition in which an individual or a group of individuals or community are unable to meet their basic material needs such as foods, potable water, clothing, shelter, basic health care, education, lack of participation in the prevailing social standard of living, dignity and having limited chance of advancing their welfare just to the limit of their capabilities. Governance and Poverty Reduction Countries that failed to realize their poverty alleviation goals have invariably suffered yawning deficit of good governance. This is the most single deadly obstacle to sustainable



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poverty reduction and all round development (Diamond, 2004). The question of leadership or the absence of committed leaders capable of initiating programmes for socio- political and economic development is the fundamental problem facing Nigeria today. According to Dike (1999), there are many complaints about waste and inefficiency in performing public services in Nigeria. For Nigeria’s sorry socio-economic situation to improve, the nation needs honest and God-fearing men to be in charge of her affairs. For development to take place in any society there must be serious transformation in the quality of governance. For every poorly governed country, corruption must be present throughout the system of government. Public infrastructure decay or are never built because the resources at the state’s disposal are diverted to private ends. The leaders that came to power in Nigeria after independence came without any ideology of their own. The colonial masters too did not leave them with any. They came to power without any agenda for development for the people. They were only handed political independence without economic independence. This political independence, they saw as a do or die affair. For one to control the economy, one must have political power. This power, they use arbitrarily for their own selfish ends to the detriment of the people they are supposed to be serving. There is absence of political will, the people are not empowered and there is complete breakdown of trust between the leaders and the people. The leaders have completely abandoned the people. It is not easy to eradicate poverty in any society no matter the amount of resources available in that country but as Marshal (1998) observes, “there is no moral justification for extreme poverty to exist side by side with great wealth”. It is the opinion of many people that the problem with Nigeria is in the area of policy instability, policy implementation and corruption. All these can be solved through good purposive leadership exercised through good governance which Nigeria is in dare need for all round development to take place. Link between Poverty and Good Governance There is great concern for good governance in the international community as a result of stagnant economic development, under-development and persistent poverty in most countries in transition and developing world. The general thinking now is that, governance is a pre-condition to achieving sustainable human development and that it must be the people along with their government that have to rise to the challenge of reform (Akpa, 2004). Nigeria has all the resource endowments to overcome poverty, but it is ironically being ravaged by chronic and devastating poverty due to bad governance. It is reported that over 70 percent of Nigerians are living below poverty line, life expectancy at birth is 51 years, over 40 percent of the population lacks access to potable drinking water and only about 40 percent of the population are literate (El Rufai, 2001). According to Diamond (2004:222), “the deepest root cause of poverty is not lack of resources or international isolation. Rather, it is a lack of good governance – the instability or unwillingness to apply public resources effectively to generate public goods”. Public goods include physical structures such as roads, bridges, ports, sanitation, potable water, electricity, public transport, telecommunication; social, economic and political infrastructure – schools, clinics, markets, courts, vaccination programmes, improved agricultural techniques, a neutral and capable state of bureaucracy. All of the above are products of good governance. As mentioned earlier, good governance consist of the following: capacity of the state to function in the service of the public goods, transparency, accountability, rule of law, mechanism of participation and dialogue to enable the public provide input to the policy



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process, policy design and implementation. If good governance is conceptualized in this way, it promotes development and by implication reduces the poverty level of the people. Practitioners and scholars of development have provided empirical evidence to show the harmful effect of lack of good governance on the issue of poverty (UNDP, 2009; World Bank, 2002). Good governance is an indispensable imperative for the management of a country’s resources. It is still a far-cry in Africa because corruption, lack of accountability, lack of transparency, etc have been a thorn in the flesh of development. In the absence of good governance, no nation can effectively design and implement sustainable development policies. This has been a serious challenge for development in Nigeria. Government Reaction to Poverty In response to the pervasiveness of poverty in the country, the Nigeria government for over four decades have introduced several programmes, some of which were sector specific and others non-sector specific, with poverty reduction as its centre-piece. Additionally, several poverty reduction approaches have also according to Ogwumike (2005) been utilized in attempt to grapple with the beleaguered poverty situation of the country’s citizens. Some of these bordered on economic growth approach, the basic needs approach, the development approach and the targeted group approach and a whole lot of others. The implementation of some of these approaches stated above were collapsed into objectives demonstrated in the first and fourth national development plans of 1962-1967 and 1981 – 1985 respectively. Other poverty reduction programmes of the pre-SAP era were the River Basin Development Authorities (RBDA), the Agricultural Development Programmes (ADP), the Agricultural Credit Guarantee Scheme (ACGS), the Rural Electrification Scheme (RES), the Operation Feed the Nation (OFN) set up in 1977 and the Green Revolution of 1980. After the pre-SAP era, there were other poverty reduction programmes instituted by the national government of Nigeria as the Directorate for Food, Roads and Rural Infrastructures (DFRRI), the National Directorate for Employment (NDE), the Better Life Programme (BLP), the People’s Bank of Nigeria (PBN), the Community banks (CB), the family Economic Advancement Programme (FEAP), etc. In spite of these litanies of programmes of poverty reduction in Nigeria, it has been observed that the incidence of poverty in Nigeria is exacerbating instead of pruning down. An Overview of Some Past Poverty Alleviation Programmes Poverty alleviation, however, encapsulates the efforts of government, non-governmental organization and other agencies, directed towards improving the conditions of the poor. This is defined as the creation of general conditions which allow man to live in dignity, where people are free to take their own decisions in life, where the poor gets increasingly empowered enough to participate in social, political and economic decision making. The central feature of poverty alleviation is empowerment. Empowerment is a multi-dimensional process. It embraces the total transformation of the economic, social, psychological, political and legal circumstances of the powerless. While poverty refers to a situation of lack of essential things that make life worth living, poverty alleviation involves a situation of redeeming the unpleasant situation or making it possible to get those essential things. The overall goal of poverty alleviation is empowerment. Past governments have engaged in glorifying poverty alleviation but failed to deliver. The earliest poverty alleviation programmes were the 1972 Gen. Yakub Gowon’s National Accelerated Food Production programme and the Nigeria’s Agricultural and Co-operative Bank, entirely



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devoted to funding agriculture. The NAFPP turned to be a colossal waste and nothing was achieved. There was much publicized Operation Feed the Nation in 1976 by the then military head of state, General Olusegun Obasanjo, which expended much money and effort in getting ill-prepared university undergraduates to go to the rural areas to teach the peasant farmers how to farm (http://www.nigeriansinamerica.com/articles/2414/1/Poverty-Relief-More-Programs-More-Pains/Page1.html_br). In 1979, Shehu Shagari’s Green Revolution programme had the twin objectives of curtailing food importation while boosting crop and fibre production. The overall objective was big (mechanized) farming. When the programme ended in 1983, 2 billion naira tax payers’ money was wasted. Buhari’s government introduced the GO Back to Land Programme with variations such as the former, Rivers State Governor, Fidelis Oyakhilome’s School to Land Programme and his Lagos State counterpart, Gbolahan Mudashiru’s Graduate Farming Scheme. Initially, the Oyakhilome’s scheme worked in Rivers, made headline news in some newspaper. But like everything in Nigeria, it fizzled out and died. There is the belief that one of the major reasons for the failure of all these agricultural and poverty reduction programmes was that, they were based on “faulty philosophy”. In 1986, Gen. Babangida established the Directorate of Food, Roads and Rural Infrastructure (DFRRI), for rural development. This was meant to provide feeder roads, electricity and potable water and toilet facilities for rural dwellers (http://www.nigeriansinamerica.com/articles/2414/1/Poverty-Relief-More-Programs-More-Pains/Page1.html_br). The National Directorate for Employment was set up by Decree number 24 of October 19, 1986 established this Directorate, which commenced operations in January, 1987 with the primary role of promoting skill acquisition, self-employment and labour intensive work schemes. It also collects and maintains a data bank on unemployment and vacancies in the country. It has been concerning itself with designing of employment programmes such as school leaver apprentice scheme, entrepreneurs training programmes for graduates, labour-based work programmes and resettlement of trained beneficiaries. The NDE has trained more than 2 million unemployed Nigerians, provided business training for not less than 400,000 people, vocational training in up to 90 different trades, and assistance to more than 40,000 unemployed to set up their own businesses. The Directorate has organized labour-based groups through which 160,000 people benefited. The NDE suffers from inadequate funding from the Federal Government. It predicament is worsened by the fact that it has over stretched itself by engaging in skills acquisition, granting of loans, procuring and selling agricultural inputs such as fertilizers. It has succeeded in recovering less than 10% of its loans. In 1993, Abacha and his wife set up the Family Support Programme and the Family Economic Advancement Programme. The Nigerian poor again, were taking for a ride. “FSP gulped over N10 billion of tax payers money are a time her husband Abacha was retrenching hapless civil servants nationwide”(Tell Magazine, 3/8/98). Theoretical Framework The study adopts the elite theory as a theoretical explanation to understand the link between poverty alleviation strategies and governance in Nigeria. The elite theory of poverty posits that the structure of political power in a society determines the extent and distribution of poverty among the population. In this case, the ruling elite, constituted by the few, establishes and legitimizes an exploitative property system, through which it determines the allocation of opportunities, income and wealth, relying on the use of elite power, including the use of oppressive state agents such as the police and armed forces. Poverty is a socio-



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economic phenomenon whereby the resources available to society are used to satisfy the wants of the few while the many do not have their basic needs. So people are poor because certain political, economic and social structures have been imposed on them to be poor and not that they are lazy or choose to be poor. The essential theme of the elitist theory is that there is in every society a minority of the population which takes the major decisions in the society. As those decisions have political implications, the elite exercise considerable political influence. The important advocates of this theory are Vilfredo Pareto, Geatano Mosca, Robert Michels, James Burnham, Joseph Schumpeter, Raymond Aron, Giovani Sartori, and Karl Mannheim (Mahajan 2008: 820, Parry 1969:39). The elite approach to politics comes in when there is a conscious effort and practice to exercise exclusive decision making as a prerogative of social position or class. Elitism is discriminatory, pre-emptive, and saviours of a divine right to say what politics ought to be, claim the political office and tend to disregard mass opinion and competence. The elite claim and retain power by perpetuation until circumstances eject them from power (Mbah 2006: 283). Taking a look at the various poverty alleviation programmes in Nigeria since independence, they have left much to be desired because the elites who have been in charge of the governance of the country enunciate and implement policies that are not realistic. The masses and the poor for whom the programmes are meant are not adequately consulted and are not given the opportunity to take active part in issues that affect them. In Nigeria, only a negligible clique who finds their ways into positions of authority put policies in place for the people. More so, given that the country was under military rule for a long time, policies were just foisted on the people. As such, the poverty alleviation programmes remain fundamentally defective either in policy conception or their implementation. The consequence is widespread poverty in Nigeria while the negligible cabal amasses the wealth of the country for selfish interest.

Summary There is no doubt of course that poverty is a global phenomenon and no nation, country or society can be absolutely immune to poverty. However, it varies in scale and intensity from one society to another. This is as a result of a legion of factors and variables which include good governance, bad governance, political instability, political will or otherwise to eradicate poverty or absence of proactive measures to reduce poverty among others. Even though no universal definition of poverty exists, the bottom line of the views of scholars indicate that poverty depict a situation whereby an individual or a group or community lack the capacity to meet their basic materials needs like food, potable water, clothing, shelter, basic healthcare, education, improved living condition among other necessities. It is also instructive to note that all regimes in Nigeria since independence, be it civilian or military have embarked on one programme or the other with purported intention to reduce the extent of poverty among the citizenry. Some of such programmes include National Accelerated Food Production Programme, the Nigeria Agricultural and Cooperative Bank, operation feed the Nation, Green Revolution, Back to Land, Directorate of food, Roads and Rural infrastructure, Better Life for Rural Women, Family Support Programme and the National Poverty Eradication Programme e t c. Some of the factors that have caused and exacerbated poverty in Nigeria include corruption, the Structural Adjustment Programme inequitable distribution of oil revenue, primordial cleavages, demographic, pressures, unemployment, globalization, politics and



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power play by elite leaders and rulers to mention a few. The quest by Nigeria to eradicate poverty compelled her to formulate the NEEDS strategies for poverty reduction. Described as Nigeria’s home grown poverty reduction strategy, the NEEDS derive from the country’s long – term goals of poverty reduction, wealth creation, employment generation and value orientation. The federal government also initiated the National Poverty Alleviation Programme (NAPEP) on return to democratic rule in 1999. It was aimed at eradicating absolute poverty and it consists of youth and conservation schemes. Broadly speaking, as lofty as all poverty alleviation programmes may appear, they have not been able to fundamentally mitigate widespread poverty in Nigeria as indicated by the alarming revelations by various domestic and international agencies such as the National Bureau of Statistics and the World Bank. Given the fact that leadership is the key to the development of societies and all economic problems are believed to have political solutions, the study established a link between the pervasive poverty and failure of poverty alleviation programmes in Nigeria and absence of good governance. Good governance encapsulates the capacity of the state to function in the provision of public goods, transparency, accountability, rule of law, mechanism of participation and negotiation to ensure the public takes active part in policy process, design and implementation.

Recommendations The following recommendations are proposed as measures that could ensure the effectiveness of poverty Alleviation or Eradication Programme in Nigeria and by implication reduce the scourge of poverty that ravage the Nigerian populace.

(1) Good governance which will create reliability and cooperation for all parties involved.

(2) Adequate funding: if possible, all funds ear-marked for any programme should be made completely available before the commencement of the project.

(3) Committed efforts should by made by all stakeholders to guarantee political stability and continuity of programmes.

(4) There should be a fundamental infrastructural development. (5) Initiation of in-ward looking development programmes that are in line with the

yearnings and aspirations of the people and the target population should be actively involved.

(6) Government should adopt punitive measures and show its willingness and readiness to punish those who sabotage its efforts.

If the above recommendations are embraced by the government and other stakeholders, the war against poverty would be won and poverty alleviation programmes in Nigeria would, to a great extent, achieve their desired objectives.

Conclusion There is no gainsaying that the level of poverty in Nigeria is at a disturbing frequency. The gap between the rich and the poor is widening at a geometric proportion. Nigerians are suffering in the midst of plenty. As a country endowed with abundant human and material resources, it has failed to harness her potentials to take its right place among the committee of nations. The various poverty alleviation programmes enunciated and implemented by successive governments could be said to be akin to mere window dressing as their impact on the target population have left much to be desired. In spite of the fact that various reasons could be advanced for failure of the poverty alleviation programmes in Nigeria, the lack of good governance in the country is principally responsible for this failure and by extension the alarming level of poverty in Nigeria.



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References Agbiokoro, T. C. (2010), The Impact of National Poverty Eradication Programme (NEPAP) on

Economic Development of Nigeria. Akpa, A. (2004), Ënsuring Good Governance, Accountability and Transparency in the Local

Governments through Effective Legislative Council”. A paper presented at the Orientation Seminar organized for the Top Local Government officials in Conjunction with the Ministry for Local Government and Chieftaincy Affairs at banquet hall of Benue Hotels, Makurdi.

An assessment of poverty reduction strategies in Nigeria ... (n.d.). Retrieved from http://www.stclements.edu/grad/gradoyem.pdf_br

Central Bank of Nigeria (1999) Strategies for Improving Poverty Alleviation Programme in Nigeria, Publication of the Central Bank of Nigeria.

Central Bank of Nigeria (1999), Nigeria’s Development Prospects: Poverty Assessment and Alleviation Study.

Diamond, I. (2004), Building a System of Comprehensive Accountability to Control Corruption. Nigeria’s Struggle for Democracy and Good Governance. Adigun, A. Abaje et al, Ibadan University Press.

Dike, V. E. (1999), Leadership, Democracy and the Directions for the Future. USA Lighting Press. El-Rufai, N. A. (2001), “Poverty Alleviation through Economic Democratization,” in Business

Times, June 18-24, 2001. Mahajan, V. D (2008), Political Theory. New Delhi: Rajendra Ravindra Marshal, A. (1998), Principle of Economics: 8th Edition, London: Macmillan. Mbah, C. C. (2006), Political Theory and Methodology, Nigeria: Rex Charles & Patrick Ltd., Narayan, D. et al (2000), Voices of the Poor; can Anyone Hear Us? World Bank, New York. Ogwumike, F.O (2005), “NEEDS and Challenges to Poverty Reduction in Nigeria”, CBN Economic

& Financial Review Vol.3a, No.4. Poverty Relief: More Programs , More Pains - Nigerians In America. (n.d.). Retrieved from

http://www.nigeriansinamerica.com/articles/2414/1/Poverty-Relief-More-Programs-More-Pains/Page1.html_br

Tell Magazines, 3rd August 1998 The Trends of Relationship Between Poverty and Economic ... (n.d.). Retrieved from

http://article.sapub.org/10.5923.j.economics.20120202.02.html_br World Bank (2002)

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March., 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Comparative Analysis of NPAs of Old Private Sector Banks and New Private Sector Banks in India

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Comparative Analysis of NPAs of Old Private Sector Banks and New Private Sector Banks in India

Jyoti Ainapur 1

1 ASST. PROF. GNDEC BIDAR , KARNATAKA STATE (INDIA) Email: [email protected]

Manuscript ID: RCMSS/IJPAMR/14015 Abstract India is a dominating economy in Banking sector, the asset quality of the banking system has important implications for the stability of the overall financial system. Private sector banks are split into two groups by financial regulators in India they are Old Private Sector Banks (OPBs) and New Private Sector Banks (NPBs). The private banks existed prior to the nationalization in 1969 kept their independence these Banks are closely held by certain communities. With the introduction of economic and financial sector reforms new private sector banks have come up. Private Banks holds around 19% of market share in banking sector in India. The main objective of banks is to lend loans and advances and this is the source of cash inflows in the form of interest on advances to the banks such loans are lent by using deposits from public and government share. If the advances turn to NPAs it is pathetic situation for the banks to control. The paper is an attempt to study and the comparative analysis of OPBs and NPBs in managing NPAs and its various causes and strategies used to minimize the NPAs. Introduction A well organized and efficient banking system is a pre-requisite for economic growth. Banks play an important role in the functioning of organized money market in order to meet the banking needs of various sections. NPA refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be non-performing assets (NPA). Non-performing assets are problematic for financial institutions since they depend on interest payments for income. With a view to moving towards international best practices and to ensure greater transparency, it had been decided to adopt the ‘90 days’ overdue’ norm for identification of NPA, from the year ending March 31, 2004. Accordingly, with effect from March 31, 2004, a non-performing asset (NPA) is a loan or an advance where;

Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan,

The account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdrafts /Cash Credit (OD/CC),

The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

Interest and/or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and

Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.

• Non submission of Stock Statements for 3 Continuous Quarters in case of Cash Credit Facility.

• No active transactions in the account (Cash Credit/Over Draft/EPC/PCFC) for more than 90 days.

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March., 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Jyoti Ainapur, 2014, 2(2):106-115

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Classification of Assets Banks are required to classify Non-Performing Assets further into the following three categories based on the period for which the asset has remained non-performing and the realisability of the dues: Sub-standard assets: A sub standard asset is one which has been classified as NPA for a period not exceeding 12 months. Doubtful Assets: a doubtful asset is one which has remained NPA for a period exceeding 12 months. Loss assets: where loss has been identified by the bank, internal or external auditor or central bank inspectors. But the amount has not been written off, wholly or partly. Sub-standard asset is the asset in which bank have to maintain 15% of its reserves. All those assets which are considered as non-performing for period of more than 12 months are called as Doubtful Assets. All those assets which cannot be recovered are called as Loss Assets.

Causes for NPAs The quality of the loan and the quality of the asset Borrowing integrity Intention of the borrower and the bank management Lapses in supervision and follow-up of loans Laxity in assessment and political interference Managerial incompetence’s and lack of professionalism Absence of will to recover loans

Impact of NPAs on Banking Operation The presence of large NPAs affects a banks profit in a number of ways.

NPAs reduce interest incomes Creation of reserve and provisions (To act as cushions against loan losses) at the

expenses of profit. The current profits of the banks are eroded because of providing doubtful debts and

writing it off as bad debts and it limits recycling of funds. The capital adequacy ration is disturbed and cost on capital will go up. The economic value addition (EVA) by banks gets upset because EVA is equal to

the net operating profit minus cost of capital.

Literature Review Meenakshi Rajeev, H P Mahesh (2010) studied banking sector reforms and NPAs in Indian commercial banks to examine the trends of NPAs in India from various dimensions and to explain how immediate recognition and self monitoring has been able to reduce it to a great extent. The study analyzed the different aspects of NPAs like NPA in India comparative to other countries, NPAs of Indian banks as per the different sectors and recovery of NPAs through various channels. It was found that NPAs in the contributory factor for crisis in the economy and root cause of the recent global financial crisis. It was observed that NPAs in priority sector is still higher than that of non priority sector due to socio economic objective of bank. Sandeep and Parul Mital (2012) analyzed the comparative position of Non-Performing Assets of selected public and private sector banks in India to find their efficiency through comparative study. Data has been collected from various secondary sources for period of 10 years and analyzed with descriptive statistics and ANOVA. All the


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banks are making polices trying for the containment of NPAs for improving their asset quality and profitability. PNB and HDFC banks are found superior in management of NPAs comparative to SBI and ICICI and private sector banks are much comfortable and efficient comparative to public banks. A. S. Ramasastri and N. K.Unnikrishnan (2005) said that, NPAs are largely fallout of banks' activities with regard to advances, both at the management and implementation levels (including overall controls by the top management), the credit appraisal system monitoring of end-usage of funds. It also depends on the overall economic environment, the business cycle and the legal environment for recovery of defaulted loans. Since the overall environment is more or less same for all banks, non-performing loans of individual banks are mainly a result of management controls and systems put in place by many recovery procedures. They concluded that higher than average credit expansion can further strengthen banks if there is a good credit appraisal systems strict recovery procedures should be checked by top management. Statement of the Problem A well-built banking sector is significant for a prosperous economy. The crash of the banking sector may have an unfavorable blow on other sectors. A banker shall be very cautious in lending, because banker is not lending money out of his own capital. A major portion of the money lent comes from the deposits received from the public and government share. Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a non-performing asset. The research gaps during observation of various studies on Non- performing assets is to know the level of NPAs in OPBs and NPBs. A comparative study of OPBs and NPBs is undertaken to know the reasons for assets becoming NPAs and its effect on banks.

Objectives To know the main causes for NPAs Compare the NPAs of OPBs and NPBs To study the reduction strategies To offer suggestions based on findings of the study

Scope of the Study The present study of Non Performing Assets is confined and restricted to the OPBs and NPBs and data analyzed since 2002 to 2013. Data Collection Data is gathered from secondary sources such as RBI bulletins, research papers, IBEF, websites etc. Tools of Data Analysis The data collected from the secondary sources relating to NPAs of OPBs and NPBs are analyzed and interpretations were made.


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LIST OF OLD AND NEW PRIVATE SECTOR BANKS IN INDAI S.No Name of the Bank (Old) S.No Name of the Bank (New) 01 Catholic Syrian Bank Ltd 01 Axis Bank Ltd 02 City Union Bank Ltd 02 Development Credit Bank Ltd 03 Dhanalakshmi Bank Ltd 03 HDFC Bank Ltd 04 Federal Bank Ltd 04 ICICI Bank Ltd 05 ING Vysya Bank Ltd 05 Indus Ind Bank Ltd 06 Jammu & Kashmir Bank Ltd 06 Kotak Mahindra Bank Ltd 07 Karnataka Bank Ltd 07 Yes Bank Ltd 08 Karur Vysya Bank Ltd 09 Lakshmi Vilas Bank Ltd 10 Nainital Bank Ltd 11 Ratnakar Bank Ltd 12 South India Bank Ltd 13 Tamilnad Mercantile Bank Ltd

Data Analysis Gross NPA ratio = Gross NPAs / Gross Advances

GROSS NPA RATIO OF OPBs AND NPBs

(in percent)

YEAR GNPA (OPSBs) GNPA (NPSBs) Mar-02 11.1 8.9 Mar-03 8.9 10.0 Mar-04 7.6 5.0 Mar-05 6.0 2.9 Mar-06 4.4 1.7 Mar-07 3.1 1.9 Mar-08 2.3 2.5 Mar-09 2.4 3.1 Mar-10 2.3 2.9 Mar-11 2.0 2.3 Mar-12 1.8 1.9 Mar-13 1.9 1.8

Note: Gross NPA as a % of Gross Advances Source: RBI Bulletin


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Gross NPA Ratio of OPBs & NPBs

0

2

46

8

10

12

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Years

% o

f Gro

ss N

PA

GNPA (OPBs)

GNPA (NPBs)

Analysis and Interpretation The above graph shows that in the year 2002 GNPA of OPBs was more compare to NPBs and it reversed in the year 2003. The introduction of prudential norms resulted in a significant rise in GNPA levels of banks. Thereafter the ratio progressively declined during the period by introduction of prudential norms for asset quality and other regulatory initiatives in the 1990s which encouraged improved risk management in banks contributing to improvement in asset quality .As interest rates were falling bank garnered substantial treasury profits which were utilized for writing off of NPAs accounts. The overall NPAs of both the banks are reducing because of good performance of the economy, rise in credit growth, abundant liquidity conditions, increased restructuring etc.

By comparing GNPA of both the banks it was found that initially in the year 2002 to 2007 NPBs are having less GNPS compare to OPBs and thereafter there is no much difference it indicates that OPBs is controlling its assets. By analyses it was found that NPBs are sound in managing their advances compare to OPBs and from 2008 to 2013 both the banks are more or less in the same ratio.

Net NPA ratio= Gross NPAs - Provisions / Gross Advances - Provisions

NET NPA RATIO OF OPBs AND NPBs

(in percent)

YEAR NNPA (OPBs) NNPA (NPBs)

Mar-02 7.1 5.0 Mar-03 5.4 4.7 Mar-04 3.8 2.4 Mar-05 2.7 1.5 Mar-06 1.7 0.8 Mar-07 1.0 1.0 Mar-08 0.7 1.2 Mar-09 0.9 1.4


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Mar-10 0.8 1.1 Mar-11 0.6 0.6 Mar-12 0.6 0.4 Mar-13 0.8 0.5

Source: RBI Bulletin

Net NPA Ratio of OPBs & NPBs

012345678

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Year

% o

f N

et N

PA

s

NNPA (OPBs)

NNPA (NPBs)

Analysis and interpretation The above graph depicts that NNPAs of NPBs is less compare to OPBs from 2002 to 2007 and in 2007 both are equal and thereafter no much difference is noticed .This is because of introduction of prudential norms. Slippage Ratio: Fresh accretion to NPAs during the year to standard advances at the beginning of the year.

SLIPPAGE RATIO OF OPBs AND NPBs

YEAR Slippage (OPBs)

Slippage ratio (NPBs)

Mar-02 4.9 20.5 Mar-03 3.8 3.9 Mar-04 3.2 3.7 Mar-05 2.2 3.4 Mar-06 1.8 1.7 Mar-07 1.8 2.0 Mar-08 1.4 2.1 Mar-09 1.9 3.0 Mar-10 2.2 2.0 Mar-11 1.7 1.3 Mar-12 1.5 1.1 Mar-13 1.8 1.2



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Slippage Ratio of OPBs & NPBs

0

5

10

15

20

25

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Years

% o

f S

lip

pag

e R

atio

Slippage (OPBs)

Slippage rato (NPBs)

Analysis and interpretation The above graph depicts that slippage ratio was more in NPBs compared to OPBs in the year 2002 this indicates that the fresh accretion to NPAs during the year to standard advances at the beginning of the year were more. Thereafter both are in the same proportion. Net slippage Ratio: Slippage ratio net of recoveries

Net Slippage ratio of OPBs & NPBs YEAR Slippage ratio (OPBs) Slippage ratio (NPBs) Mar-02 3.4 19.6 Mar-03 2.2 2.7 Mar-04 1.4 -0.3 Mar-05 0.5 1.7 Mar-06 0.1 0.7 Mar-07 0.5 1.5 Mar-08 0.5 1.8 Mar-09 1.0 2.4 Mar-10 1.1 1.5 Mar-11 0.7 0.6 Mar-12 0.6 0.5 Mar-13 0.8 0.6



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Net Slippage Ratio of OPBs & NPBs

-5

0

5

10

15

20

25

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Years

% o

f N

et S

lip

pag

e R

atio

Slippage ratio (OPBs)

Slippage rato (NPBs)

Analysis and interpretation The above graph depicts that Net Slippage ratio was more in NPBs compared to OPBs in the year 2002 this. This indicates that recoveries where less in that year and thereafter it is decreased and in 2004 it was negative and again it increased in the next consecutive years compared to OBPs.

SHARE IN GROSS ADVANCES OF OPBs & NPBs IN BANKING SECTOR(ALL BANKS) Year ALL BANKS OPBs NPBs Gross Adv Gross Adv % to Gross Gross Adv % to Gross (Rs. In cr.) (Rs. In cr.) Advances (Rs. In cr.) Advances Mar-02 680,925 41,738 6.1 79,201 11.6 Mar-03 780,492 48,611 6.2 99,887 12.8 Mar-04 902,026 57,908 6.4 119,511 13.3 Mar-05 1,188,674 70,412 5.9 155,577 13.1

Mar-06 1,550,826 85,154 5.5 232,536 15 Mar-07 2,013,357 94,872 4.7 325,273 16.2 Mar-08 2,508,239 113,404 4.5 412,441 16.4 Mar-09 3,038,025 130,334 4.3 454,713 15 Mar-10 3,545,534 156,392 4.4 487,713 13.8 Mar-11 4,358,191 187,296 4.3 624,484 14.3 Mar-12 5,159,649 232,918 4.5 748,500 14.5 Mar-13 5,989,182 273,120 4.6 886,023 14.8


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Gross Advances of OPBs & NPBs compared with All Banks

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Years

Gro

ss A

dva

nce

s (R

s. i

n.c

r.)

ALL BANKS Gross Adv(Rs. In cr.)

OPBs Gross Adv (Rs. Incr.)

NPBs Gross Adv (Rs. Incr.)

NPAS REDUCTION STRATERGIES Debt Recovery Tribunals (DRTs) Narasimhan Committee Report I (1991) recommended the setting up of Special Tribunals to reduce the time required for settling cases. Accepting the recommendations, Debt recovery Tribunals (DRTs) were established. There are 22 DRTs and 5 Debt Recovery Appellate Tribunals. This is insufficient to solve the problem all over the country (India). Securitization Act 2002 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 is popularly known as Securitization Act. This act enables the banks to issue notices to defaulters who have to pay the debts within 60 days. Once the notice is issued the borrower cannot sell or dispose the assets without the consent of the lender. The Securitization Act further empowers the banks to take over the possession of the assets and management of the company. The lenders can recover the dues by selling the assets or changing the management of the firm. The Act also enables the establishment of Asset Reconstruction Companies for acquiring NPA. According to the provisions of the Act, Asset Reconstruction Company of India Ltd. with eight shareholders and an initial capital of Rs. 10 corers has been set up. The eight shareholders are HDFC, HDFC Bank, IDBI, IDBI Bank, SBI, ICICI, Federal Bank and South Indian Bank. Lok Adalats Lok Adalats have been found suitable for the recovery of small loans. According to RBI guidelines issued in 2001, they cover NPA up to Rs. 5 lakhs, both suit filed and non-suit filed are covered. Lok Adalats avoid the legal process. The Public Sector Banks had recovered Rs. 40 Corers by September 2001. Compromise Settlement Compromise Settlement Scheme provides a simple mechanism for recovery of NPA. Compromise Settlement Scheme is applied to advances below Rs. 10 Corers.


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It covers suit filed cases and cases pending with courts and DRTs (Debt Recovery Tribunals). Cases of Willful default. Recovery Tribunals are other ways for the recovery of dues. It has been observed that Banks these days are highly resorting to SARFAESI Act for the management of NPA. If the delinquencies are due to reasons beyond the control of borrower which are namely draughts, floods, or other natural calamities, the banker should suitably restructure the loans taking into account the genuine difficulty of the bank. Conclusion The efficiency of banks is not always reflected only by the size of its balance but also the level of return on its assets. The NPAs do not generate interest incomes for bank but at the same time banks are required to provide provisions for NPAs from their current profits. By studying and analyzing the NPAs of OPBs and NPBs it can be concluded that NPBs are having less NPAs compare to OPBs and by introduction of prudential norms for asset management in banking sector leads to decrease of NPAs of OPBs .Banks can efficiently manage their NPAs if they follow the rules strictly . Sanctioning the advances with out biases the NPAs will be eradicated and Banking sector will boom and through this India’s GDP will rise and economy will grow.

References Meenakshi Rajeev and H P Mahesh (2012) banking sector reforms and NPA: a study of Indian

commercial banks, working paper 252, institute for social change and economic change, Bangalore, ISBN 978-81-7791-108-4.

Dr. Vibha Jain: Non-Performing Assets in commercial Banks: Regal Publication, New Delhi,1st Edition 2007p p78-79

Vallabh, G., Mishra, S. and Bhatia, A. (2007), “Non-Performing Assets of Indian 3) Public, Private and Foreign Sector Banks: An Empirical Assessment”, ICFAI Journal of Bank Management, Vol. 6, No. 3, pp. 7-28, August 2007.

Sandeep Aggarwal, Parul Mittal (2012) Non-Performing Assets: Comparative Position of Public and Private Sector Banks in India”, International Journal of Business and Management Tomorrow Vol. 2 No.1,pp 1-7-

Gourav Vallabh, Anoop Bhatia, and Saurabh Mishra (May 2004), “Non Performing Assets of Indian Public, Private and Foreign Sector Banks: An empirical assessment” Icfai Journal of Bank Management, Vol. 6, No. 3, pp. 7-28, August 2007

Srinivas KT ‘ A Study on Non-Performing Assets of Commercial Banks in India.’ ISSN-2320-0073, International Monthly Referred Journal of Research in Management & Technology Volume II, December ‘13

Zohoor Ahmed; Dr. M. Jagadesshwararan ‘Comparative Study on NPA Management of Nationalized Banks’, International Journal of Marketing, Financial Services and Management Research Vol2.No.8, August (2013)

Kajal Choudary and Monika Sharma ‘ Performance of Indian Public Sector Banks and Private Sector Banks ; A comparative Study., International Journal of Innovation, Management & Technology, Vol.s, No.3 June 2011

C.S. Balasubramanianm ‘Non Performing Assets And Profitability of Commercial Banks in India; Assessment And Emerging Issues ‘, National Monthly Referred Journal of Research in Commerce and Management Volume No.1, Issue-No.7

G.V Bhavani Prasad D.Veena ‘NPA Reduction Strategies For Commercial Banks In India UMBS Vol.1 issue 3, Sept, 2011

Samir; Deepa Kamra ‘ A Comparative Analysis of Non-Performing Assets (NPAs) of Selected Commercial Banks in India’, International Journal of Management 68 Vol.3,No.1,June 2013

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March., 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) ADERIBIGBE, John Kolawole; ABU, Salawu Hassan & OLUWAFEMI, Odunayo Oluwasanmi, 2014, 2(2):116-128

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Social Network and Human Capital as Determinants of Entrepreneurial Opportunity Recognition in Nigeria

ADERIBIGBE, John Kolawole1; ABU, Salawu Hassan2 & OLUWAFEMI, Odunayo Oluwasanmi3

1 Department of Psychology, Nigeria Police Academy, Wudil, P.M.B 3474, Kano State, Nigeria Email: [email protected]

2Department of Psychology, Nigeria Police Academy, Wudil, P.M.B 3474, Kano State, Nigeria Email: [email protected] 3 Department of Psychology, Nigeria Police Academy, Wudil, P.M.B 3474, Kano State, Nigeria

Email: [email protected]


Abstract

The study investigated social network and human capital as determinants of entrepreneurial opportunity

recognition in Nigeria. Triangulation method of data collection was adopted while ex-post facto research

design was conducted in the study. Hence, purposive and convenience sampling techniques were adopted

in sampling four hundred and forty three (443) male and female participants participated in the study. The

independent variables are social network and human capital while the dependent variable is

entrepreneurial opportunity recognition. A hypothesis was stated and tested. Hence results showed that,

there was a joint prediction entrepreneurial opportunity recognition by social network and human capital

factors of age, gender, experience and education F (5, 443) = 7.053; R2 = 0.139; p <.05). Similarly, it

revealed that age (β = 0.101; t=2.165; p < .05); education (β = 0.113; t=3.287; p < .05); experience (β =

0.094; t=2.151; p < .05) and social network (β = 0.088; t=1.811; p < .05) independently predicted

entrepreneurial opportunity recognition. However, results showed that gender did not independently

predict entrepreneurial opportunity recognition (β = -0.032; t= -0.438; p > .05). It was concluded that

social network and human capital are among the significant predictors of individuals’ entrepreneurial

opportunity recognition. Hence, recommendation was made that trainers, educators, government and

individuals should be more liberal and combine their personal efforts in their bid to identify successful

areas of business opportunities.

Key words: Social network, Human capital, Entrepreneurship, Opportunity recognition

Introduction Opportunity recognition has been acknowledged to be a key issue of the entrepreneurial process

(Ozgen & Baron, 2007) because it represents the first critical step to the venture creation

(Christensen & Peterson, 1990). The decision to found a new venture often arises from a

person’s belief that he or she has recognized an opportunity with profit potential, suggesting that

variance in the tendency of people to start businesses can be explained by differences between

them in their tendency to recognize entrepreneurial opportunities (Gaglio and Katz, 2001;

Baron, 2007). Hence, an entrepreneurial opportunity consists of a set of ideas, beliefs and



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actions that enable the creation of future goods and services in the absence of current markets

for them (Venkataraman, 1997). Because opportunity recognition is a process, the personal

characteristics of a person of human capital and his social connections may influence it, perhaps

by facilitating access to information useful in the opportunity recognition process. Therefore,

this study investigates social network and human capital as determinants of entrepreneurial

opportunity recognition in Nigeria.

Social network is a network of social relations among entrepreneurs and the significant

others in the social environment such as friends, family members, business associates, political

or prominent figures, mentors and the likes who can in one way or the other influence the

functions of a person. For instance, a Significant other can facilitate a person’s access to

financial supports, relevant information for the practice of entrepreneurship and government

regulation policies, goodwill, social connections, knowledge and other business resources.

Significant others could also be seen as a source of referral for an entrepreneur or individual to

various targeted areas of possible opportunity for economic value. So, social networking with

these people could serve as a source of valuable information or business knowledge for

entrepreneurs to recognize business opportunities.

On the other hand, human capital is a composite variable which consists of age, gender,

education and experience. Education for instance, could serves as an instrument of acquiring

knowledge. Knowledge however, is gained through a formal or an informal means of learning.

Individuals who have certain types of existing knowledge have a better likelihood to use such

knowledge than those who do not have such knowledge (Ardichvili, Cardozo & Ray, 2003).

However, individuals may become more knowledgeable at a particular task through experience.

They may become increasingly efficient and learn to focus attention primarily on the key

dimensions that are likely to contribute most variance to the outcome of decisions. This further

explains that, experience in a particular market may provide information for discovery of more

of new business opportunities in the market environments. Therefore, education and experience

could facilitate the integration and accumulation of knowledge-base for entrepreneurial

opportunity recognition process.

Statement of the Problem Though, opportunity recognition is often considered to be the first critical step in the

entrepreneurial process, but limited empirical research has been conducted on factors that

enhance a person’s ability to identify or recognize a profitable business and venture into it.

Some previous studies have demographic factors such as age, gender, socio-economic status,

parental influence as contributing factors to opportunity recognition (Vinogradov & Isaksen,


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2008; Knotts, Jones & Brown, 2008; Singh, Knox & Crump, 2008; Raduam, Naresh & Lim

2006; Mueller & Dato-on, 2008). Hence, those studies focused only on situational factors,

which could account for the acknowledged high failure rate of business ventures in some parts

of the world most especially countries such as Nigeria were the phenomenon of

entrepreneurship is lately given scientific investigation. This therefore calls for a more empirical

study that investigates the phenomenon of entrepreneurial opportunity recognition from the

perspectives social network and human capital. In view of the above, this study would like to provide answers to the following research

questions:

• Would human capital (i.e. age, gender, experience and education) significantly predict

entrepreneurial opportunity recognition? • Could social network significantly influence entrepreneurial opportunity recognition? • Would there be a significant joint and independent influence of social network and human

capital on entrepreneurial opportunity recognition? Purpose of the Study The general objective of the study was to investigate the joint prediction of entrepreneurial

opportunity recognition by human capital and social network.

The specific objectives on the other hand were:

• To examine the independent prediction of entrepreneurial opportunity recognition by the human

capital factors of age, gender, experience and education. • To investigate the independent prediction of entrepreneurial opportunity recognition by social

network. Relevance of Study Small and Medium Enterprises (SMEs) are important to the development of Nigeria’s economy

and unemployment issue. It is a bed rock of innovation and creativity; serves as a multiple

source of economic growth; help in distributing social influence and power, thus serve as a

means of distributing social-economic and political power among local business operators

against multinationals that are dominating the political and economic power; keep large

organizations on their toes thereby providing alternative for consumers; and provide direct

employment for the people. Therefore, entrepreneurship should be the main focus of Nigeria.

Nevertheless, entrepreneurial opportunity recognition is very relevant to the improvement of

national economy as it positively affects the standard of living of citizens and promotes the

image of the nation.

In view of the above, findings of this study will contribute immensely to the

understanding and practice of entrepreneurship by creating a significant milestone in



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exploitation of resources for economic value. Similarly, findings of this study will specifically

stimulate individuals’ knowledge and understanding of the importance of the relevant identified

personal and contextual factors; thereby add to the literature of entrepreneurship.

Review of Literature In their various research Choo & Trotman, (1991); & Weber, (1980) suggest that as individuals

become more knowledgeable at a particular task through experience, they become increasingly

efficient; they learn to focus attention primarily on the key dimensions, the ones that contribute

most variance to the outcome of decisions. Hills, Hansen & Hultman, (2005) findings also

show that experience in a particular marketplace provides information and possibly ability to

manage such.

Similarly, Hills, Shrader, & Lumpkin, (1999) in a related study, found that entrepreneurs

who used social network sources to get information on new venture ideas identified

significantly more opportunities than those who did not use social network sources. The study

reports further that social network contacts allow individuals to gather information from a wide

range of individuals, leading them to gather and evaluate many new ideas.

Arenius & De Clercq, (2005) in their study of network-based approach on opportunity

recognition, reports that human capital plays an important role in stimulating business

ownership to access information, which is necessary to discover opportunities in the market

place. Buttressing the finding of Arenius & De Clercq, Ardichvili, Cardozo & Ray, (2003) stress

those individuals who have certain types of existing knowledge have a better likelihood to use

such knowledge than those who do not have such knowledge.

Shepherd & DeTienne, (2001) in their study of discovery of opportunity reports that

Knowledge and experience play an important role in identifying opportunities. Also stressed

that, to identify an idea and recognize an opportunity in a specific field, one must be

knowledgeable about the domain and have a solid understanding of the knowledge base. Singh,

(2000) further found that social networking plays an important role in opportunity recognition,

and reported that entrepreneurs' social ties influence their recognition of entrepreneurial

opportunities and entrepreneurial pursuits.

According to Cohen & Levinthal, (1990), & Burt (1992), individuals’ education may

facilitate access to knowledge which may enhance knowledge management. Similarly, Gimeno,

Folta, Cooper, & Woo, (1997) argue that prior knowledge gain from education facilitates the

integration and accumulation of new knowledge. Bandura, (1978), in his findings stresses that,

highly educated individuals have more self-confidence to possess the capabilities to come up

with good ideas for new venture creation than lowly educated individuals.


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Evans & Leighton, (1990); Jo & Lee, (1996); & Shane, (2003) in the various studies,

emphasized the importance of human capital as a source of entrepreneurial knowledge, with

education and professional experiences facilitating entry into entrepreneurship and shaping

entrepreneurial ventures. Hence, Jo & Lee (1996) report that professional knowledge through

previous work experience has a positive effect on entrepreneurial growth. However, Magnusson

& Endler, (1977) opine that the interaction between individuals’ characteristics and situational

conditions predict entrepreneurial behavior better than any of the aforementioned factors alone.

According to Baron, (2004) prior knowledge, experience, passion and social networks

are seen as enablers of either the recognizing or discovery of opportunity. However, Gartner &

Shaver, (2004) reported in a study of 1,686 owner/managers Participants that opportunities are

external and stable where the opportunity would exist for a sufficiently long period of time to

allow discovery by the entrepreneur. Statement of Hypotheses Based on the literature reviewed, this study hypothesized that;

• Social network and human capital will jointly and independently predict entrepreneurial opportunity recognition.

Operational Definition of Terms Entrepreneurship: This simply refers to the innovative scheme that provides business

opportunity creation for individuals regardless of the resources currently controlled. Entrepreneur: This is defined as an individual innovator or developer who recognizes and

seizes business opportunities into workable or marketable ideas, and offers the converted ideas

to people inform of goods and services for profit.

Entrepreneurial Opportunity Recognition: This is defined as an individual’s perception of

the possibility to create a new business or improving on the position of an existing, resulting in

a new profit potential. The construct was measured using a five-item scale of entrepreneurial

opportunity recognition designed with 5-Likert response format by Shane, Nicolaou, Cherkars

& Spector (2009). High score on the scale indicates a high level of business opportunity

recognition, while low score indicates low a level of business opportunity recognition.

Social Network: This is simply defined as a network of relationships among entrepreneurs and

significant others in the society. The construct was measured using a 12-item validated social

network scale, designed with a “Yes and No” response format by Gaag & Snijders, (2004).

High score on the scale indicates a social network, while low score indicates low a level of

business opportunity recognition.

Human Capital: This is a composite variable that is made up of four factors; education,

entrepreneurial experience, gender and age.

Age: This refers to the chronological number of years of an individual counting from birth till



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the time of this present study. Participants were asked to mention their ages. Education: This explains the highest academic qualification of Participants. Participants were

asked to indicate their highest educational qualifications. Entrepreneurial Experience: This simply refers to a covert psychological factor that is evident

in individuals’ entrepreneurial skills. It was measured as a discrete variable. Participants were

simply asked of their years of experience. Gender: The simply tells whether a Participant is male or female and participants were asked to

indicate. Methodology Data Collection Triangulation method of data collection was adopted for the study. The method was adopted

with a view to explore at least one other means of data collection in addition to questionnaire.

Hence, an in-depth interview was also conducted, so as to overcome the weakness or intrinsic

biases and problems that come from using only questionnaire. Moreover, ex-post facto research

design was adopted in this study, because there was no active manipulation performed upon any

of the variables involved. The independent variables are social network and human capital while

the dependent variable is entrepreneurial opportunity recognition. Participants of the Study Research participants were of two categories namely Executive Master Students and

Entrepreneurs categories. There were two hundred and seventy-nine (279) (66.7%) male and

one hundred and thirty-nine (139) (33.3%) female Executive Master of Business Administration

(MBA) Students; sixteen (16) (64%) male and nine (9) (36%) female Entrepreneurs. Their

average age was thirty-three (33) years; their average year in business was five (5) years. Of 418

MBA Students, 41% were single, 57% were married. 56% had HND/BSc/BA/Bed, 43% had

M.Sc/MA/MEd. 84% established their business by themselves, 16% inherited the business; Of

the 25 Entrepreneurs, 12% had first school leaving certificate, 16% had senior secondary school

education, 8% had OND/NCE, 56% had HND/B.SC/BA/B.Ed, 8% had M.Sc/M.Ed. 72%

established the business themselves, 28% inherited the business.

Instrumentation A list of structured interview questions, a high sound quality recording tape, three (3) empty

recording cassettes of ninety-minute (90-minute) duration each, a packet of Tudor battery,

jotters, biros, pencils, a list of names of stores and workshops of participants, with two research


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assistants and validated questionnaire forms made up the research materials used in the study

gather relevant data from Participants. The in-depth interview questions were generated having reviewed thoroughly, literature

on entrepreneurial opportunity recognition. Twenty-five (25) questions were initially generated

and subjected to validations. Five (5) Psychologists in the Department of Psychology,

University of Ibadan were given the twenty-five (25) questions for expert judgment on

suitability of the questions and content validity. Based on the judgments of the Psychologists, 11

structured questions were eventually arrived at, which formed the interview questions.

The questionnaire form on the other hand, is made up of three validated scales of

measurement that were used to measure social network, human capital and entrepreneurial

opportunity recognition; and a structured open ended scale that tapped information on

educational qualification, years of business experience, sex, age and marital status of

participants. The questionnaire was therefore divided into three different sections namely;

Section A, B and C. Detailed description of the features of the questionnaire form is given as

followed;

Socio-Demographic Information This section of the questionnaire tapped relevant demographic information of the Participants.

The information comprised of educational qualification, sex, age and marital status.

Social Network This section is made up of 12- item scale that measures social network. The scale was designed

and validated with a “yes and no” response format by Gaag & Snijders, (2004). The scoring

procedure for the scale indicates that, high score on the scale represents high social network,

while low score represents low social network. Authors of the scale report an alpha coefficient

of 0.85, while the present study reports Cronbach’s alpha of 0.84.

Entrepreneurial Opportunity Recognition Entrepreneurial opportunity recognition was measured with a validated scale of entrepreneurial

opportunity recognition that was designed with 5-Likert response format by Shane, Nicolaou,

Cherkars & Spector (2009). The scoring procedure for the scale indicates that high score on the

scale represents high entrepreneurial opportunity recognition, while low score represents low

entrepreneurial opportunity recognition. Authors of the scale report Cronbach’s alpha of .72,

while the Researcher of this study reports Cronbach’s alpha of .61. Procedure for Data Collection Researchers sought formal consent of authorities of three universities in the South-West region



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of Nigeria namely Obafemi Awolowo University (O.A.U), University of Lagos (UNILAG) and

Lagos Business School (L.B.S) through an official letter from the Head of Department of

Psychology, University of Ibadan, to involve the Executive Master of Business Administration

Students of the Universities as participants in the study. Participants were asked to signify their

interest in participating in the study a consent form attached with the questionnaire form. They

were told that by participating in the study, they are contributing to the knowledge base of

entrepreneurship and the national economy respectively. Therefore, participation was voluntary

based and participant could withdraw if so wish.

For the interview session, participants were formally approached in their various

workshops and market places within Ibadan Metropolis, with an official letter and a consent

form to seek their voluntary participation. They were asked questions from the list of structured

interview questions and told be sincere with their responses, hence anybody who feels no longer

interested could withdraw at any point and that the material and information supplied are

research and will be treated confidentially. So participants’ responses were recorded and

translated for analysis.

Statistical Analysis Having screened the data collected with questionnaire and interview, inference and descriptive

statistics were performed respectively. The hypothesis stated was tested with multiple regression

analysis while demographics and interview data were run with descriptive statistics of mean,

frequency and percentage.

Results: Hypothesis which stated social network and human capital will jointly and

independently predict entrepreneurial opportunity recognition was tested using multiple

regression analysis. Result is presented in summary table below. Summary Table of Multiple Regression Analysis Showing the Independent and Joint Predictions of

Entrepreneurial Opportunity Recognition by Human Capital and Social Network

VARIABLES R R2 Β T F P

Gender

0.402 0 .139

-0.032

-0.438

7.053

>.05

Age

0.101

2.165

<.05

Education

0.113

3.287

<.05

Experience

0.094

2.151

<.05

Social Network

0.088

1.811

<.05


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The results in the table above shows that gender, age, education, experience and social network

jointly predict entrepreneurial opportunity recognition F (5, 443) = 7.053; R2 = 0.139; p <.05).

Similarly, it reveals that age (β = 0.101; t=2.165; p < .05); education (β = 0.113; t=3.287; p <

.05); experience (β = 0.094; t=2.151; p < .05) and social network (β = 0.088; t=1.811; p < .05)

independently predict entrepreneurial opportunity recognition. However, gender did not

independently predict entrepreneurial opportunity recognition (β = -0.032; t= -0.438; p > .05).

Hence, the hypothesis which stated that social network and human capital will jointly and

independently predict entrepreneurial opportunity recognition was to a large extent confirmed.

Discussion This study was conducted to investigate social network and human capital as determinants of

entrepreneurial opportunity recognition in Nigeria. Hypothesis was stated that social network

and human capital will jointly and independently predict entrepreneurial opportunity

recognition. It was tested and confirmed. Results showed that gender, age, education,

experience and social network jointly predicted entrepreneurial opportunity recognition.

Similarly, results revealed that age, education, experience and social network independently

predicted entrepreneurial opportunity recognition, as 83% of the interviewed participants

reported high level of social network, 89% reported human capital while 95% reported both

social network and human capital as the secret of their success in entrepreneurial activities.

However, it further showed that gender did not predict entrepreneurial opportunity recognition.

The above results are supported by the previous findings of Choo & Trotman, (1991); &

Weber, (1980). In their various researches, they reported that as individuals become more

knowledgeable at a particular task through experience, they become increasingly efficient; they

learn to focus attention primarily on the key dimensions, the ones that contribute most variance

to the outcome of decisions.

Similarly, Hills, Shrader, & Lumpkin, (1999) in a related study, found that entrepreneurs

who used social network sources to get information on new venture ideas identified

significantly more opportunities than those who did not use social network sources. The study

reports further that social network contacts allow individuals to gather information from a wide

range of individuals, leading them to gather and evaluate many new ideas.

Arenius & De Clercq, (2005) in their study of network-based approach on opportunity

recognition, reports that human capital plays an important role in stimulating business

ownership to access information, which is necessary to discover opportunities in the market

place. Buttressing the finding of Arenius & De Clercq, Ardichvili, Cardozo & Ray, (2003) stress

those individuals who have certain types of existing knowledge have a better likelihood to use

such knowledge than those who do not have such knowledge.

Shepherd & DeTienne, (2001) in their study of discovery of opportunity reports that



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Knowledge and experience play an important role in identifying opportunities. Also stressed

that, to identify an idea and recognize an opportunity in a specific field, one must be

knowledgeable about the domain and have a solid understanding of the knowledge base. Singh,

(2000) further found that social networking plays an important role in opportunity recognition,

and reported that entrepreneurs' social ties influence their recognition of entrepreneurial

opportunities and entrepreneurial pursuits.

Evans & Leighton, (1990); Jo & Lee, (1996); & Shane, (2003) in the various studies,

emphasized the importance of human capital as a source of entrepreneurial knowledge, with

education and professional experiences facilitating entry into entrepreneurship and shaping

entrepreneurial ventures. Hence, Jo & Lee (1996) report that professional knowledge through

previous work experience has a positive effect on entrepreneurial growth. However, Magnusson

& Endler, (1977) opine that the interaction between individuals’ characteristics and situational

conditions predict entrepreneurial behavior better than any of the aforementioned factors alone.

Conclusion

This study examined social network and human capital as determinants of entrepreneurial

opportunity recognition in Nigeria. In the light of the above, hypothesis was stated and tested

respectively based on literature reviewed and data collected. Hence, the following conclusions

were drawn from the findings of the study: 1 Social network and human capital are significant joint predictors of Nigerians’

entrepreneurial opportunity recognition.

2 Social network is a significant independent predictor of Nigerians’ entrepreneurial

opportunity recognition.

3 Age is a significant independent predictor of Nigerians’ entrepreneurial opportunity

recognition.

4 Education is a significant independent predictor of Nigerians’ entrepreneurial opportunity

recognition.

5 Experience is a significant independent predictor of Nigerians’ entrepreneurial opportunity

recognition.

6 Gender is not a significant independent predictor of Nigerians’ entrepreneurial opportunity

recognition.

Implications The study found social network and human capital as significant joint and independent

predictors of entrepreneurial opportunity recognition. The finding has implications for the


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lecturers, career counselors, trainers, parents and government to give adequate considerations to

personality factors of individuals and some situational variables in the process of teaching,

career counseling, training and planning entrepreneurship programmes for individuals such that,

will address and arouse the potentials of people to assume the responsibility of helping

themselves, and help them in creating enabling environment that promotes economic value for

their benefit and the society at large.

Moreover, findings of this study required all stakeholders to acquire and improve their

professional knowledge of entrepreneurship through class room learning, seminar, workshop,

lectures, training and also, subject themselves to enduring practical learning and apprentice

programme under more experienced and knowledgeable entrepreneurs who will not only teach

but also show them the rudiments of entrepreneurship.

Recommendations Based on the confirmation of the joint and independent predictions of entrepreneurial

opportunity recognition by social network and human capital, this study recommends that

stakeholders most especially, lecturers, career counselors, trainers, parents, mentors and

government to give adequate considerations to both situational and personality factors of

individuals in the process of teaching, counseling, training and planning entrepreneurship

programmes for individuals regardless of age and gender. In addition, all stakeholders should

acquire and improve their professional knowledge of entrepreneurship through class room

learning, seminar, workshop, lectures, training and also, subject themselves to enduring

practical learning and apprenticeship programme.

Finally, individuals are admonished to think outside the box, most especially, the

youths, and discover their natural endowments in terms of potentials, see ways of converting

them to goods and services through innovation and creativity, which provides for the needs of

people in exchange for money. By so doing, they will add values to lives, enrich themselves and

most importantly impact positively to the growth of the national economy.

Limitation of Study

There are numbers of factors that have limited the generalization of results of this study:

• There was no active control over extraneous variables and this implies that the changes

observed on the dependent variables could have been caused by factors not controlled in

the study.

• Only social network and human capital were considered in this study as independent variables, some other variables could also explain entrepreneurial opportunity

recognition.

• Time set for data collection was very short. This makes the sample size limited.



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International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Ali S. Yusufu Bagaji, & Erasmus Okhidemeh, 2014, 2(2):129-147

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Perspectives on Stress and its Management for Individual Well-being and Organisational Productivity

Ali S. Yusufu Bagaji, Ph.D1 & Erasmus Okhidemeh2,

1&2 Dept. of Public Administration, Kogi State University, Anyigba, Kogi State, Nigeria

Manuscript ID: RCMSS/IJPAMR/14017 Abstract All organisations are established with the aim of achieving certain goals and objectives. For these goals and objectives to be achieved, workers are employed and charged with responsibilities geared towards the achievement of goals. For organisations to be effective and efficient, the goals and objectives must be achieved within a stipulated time frame, and this brings about target for every department as well as the individual employees in the organisations. This is to keep them in their feet to be up and doing and to contribute their best in assisting the organisation to achieve its goals and objectives but this sometimes mount pressure on the employees and there by resulting to stress, when the pressure persists for too long for the individual to bear. The behaviour and the activities of the employees at the work-place can make or mar the performance of the organisation. In essence, the general health status of an individual in the organisation can be adversely affected by stress and this can in turn affect the performance of the worker towards the actualization of the organisational goals. It is in This View that this article explores stress and it’s Management for Individual well-being and Organisational productivity. Keywords: Stress, Stressor, Karoshi, Management, Organisation, Productivity, Well-being, Work Environment Introduction Stress is a global epidemic which cut across all classes and facets of life. Stress exists among the educated, the illiterate, the poor, the rich, the unemployed and the employed, blue collar jobs(skilled labour, semi skilled and unskilled labour) white collar jobs (professionals and non-professionals). According to International Monetary Fund and the United Nations International Labour Organisation (ILO) “Work related stress is a global epidemic, people are afraid for their jobs and quick to assume the worst”. According to the report published by the Mental Health Foundation of London in 2011,

84% of workers feels more stressed at work today than five years ago, 65% of office workers have experienced office rage. 45% of staff regularly loses their temper at work due to stress; up to 65% of all absence from work is caused by stress.

The experience of work and life stress is certainly not new. Our cave-dwelling ancestors faced stress every time they left their caves in search of their daily bread and encounter their enemies, the Saber tooth tigers and other wild animals. The tigers and other wild animals of yesteryears are gone, but they have been replaced by other predators such as work overload, a nagging boss, time deadlines, downsizing, computer problems, marital disharmony, mergers, uncertainty, poorly design jobs, financial crisis and accelerating rates of change. These works and non-work predators interact and create stress for individuals on the job or at work place. Stress amongst workers has been a source of problem in Organisations. Stress is an unavoidable phenomenon in the life of any worker in an organisation.

The epidemic nature of stress has made the issue of stress an interesting topic of research and discussion among management scholars and social scientists. The effects of stress on workers have been devastating considering the silent and gradual killing nature of stress. A Japanese Health Ministry Report (2002) stated that Karoshi (stress from overwork) is second to Cancer. Stress has to a large extent adversely affected workers and the Organisation in which they work. Stress was first discussed by Hans Selye (1936), the

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Perspectives on Stress and its Management for Individual Well-being and Organisational Productivity

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Canadian Physician who is regarded as the father of stress in the context of endocrinology, but not presented in a general available source until much later in 1950. The central idea in Selye’s concept of stress was that despite the obvious detailed differences between different illness and responses to noxious events, there was a considerable degree of commonality in the somatic reactions to these events. He referred to this as the General Adaptation Syndrome (GAS) and argued that these reactions were responsible for the adaptive bodily responsible to threat. Selye categorizes stress into two categories which are the positive stress known as ‘eustres’ which is stress resulting from the reception or achievement of good things such as marriage, promotion, recognition and winning a lottery that places one in possession of much money and stress will result from the process of deciding what to do with the money. Negative stress known as distress is what is commonly referred to as stress. This include among others, excessive pressure, unreasonable demand on our time, and bad news. The above examples buttress the fact that stress can either be a good or a bad stress. If both categories of stress are not properly managed, it could result to negative effects.

The term stress was used to denote both the causes and experienced effects of these pressure. In his research work, Selye (1950) pointed out that stress has its root in medicine, and the laboratory investigation reveals that tissues damaged is non-specific response to virtually all noxious stimuli: The nature and reaction of stress was first described in 1936, as a “Syndrome produced by various noxious agents” and subsequently become known as the General Adaptation Syndrome (G.A.S) (Selye, 1990). The General Adaptation Syndrome is divided into 3 (three) stages which includes:

i. Alarm Reactions Stage: According to Selye (1990), this is the first stage on the body’s nature to stress. During this stage there is an immediate reaction to noxious agents like rapid heart beat, increased temperature, loss of muscle tone, increased blood pressure and followed by a rebound reaction in which the adrenal context is enlarged and corticoid hormones are secreted by the adrenal. If the stress is sufficiently strong at this stage, it may result to death.

ii. Resistance Stage: This is the second stage in the body’s reaction to stress. This stage ensures that continued exposure to the stress is compactable with the adaptation. The length of resistance period depends on the innate adaptability of the body system and the intensity of the stress.

iii. Exhaustion Stage: This is the final stage of the body’s reactions to stress prolong exposure to stressor leads to exhaustion, thus when the resistance rises above normal, exhaustion will ensue. And because of its great practical importance, the triphasic nature of G.A.S has first implication that the body’s adaptation energy finites. Hence these stages are analogous to the three stages of a man’s life (childhood, adulthood and senility ending in death).

International Stress Management Association (ISMA) defined stress as “an adverse response to what an individual perceives as too much pressure”. Gibson et al (1988) defined stress as “a person’s adaptive response to stimulus that places excessive psychological and physical demands on that person”.

Stress is the body’s response to excessive pressure or demands placed upon it. A little stress is a good thing, too much can have devastating consequences for our health and relationships. Every one need a certain amount of stress to live well, it is what gets you out of bed in the morning and gives you the vitality and zest to do things. Without stress we would have no motivation for many of life chores. Stress becomes a problem-distress when there is too much or too little. Lack of stress means the body is under stimulated, leaving you feeling bored and isolated. In an effort to find stimulation many people do things that


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are harmful to themselves (drugs taking, committing crimes) while too much stress can result in range of health problems including headache, stomach upset, high blood pressure, stroke or heart disease. It can also cause feelings of distrust, anger, anxiety and fear which in turn can destroy relationship at home and at work. The existence of stress and its effect is undisputable and unavoidable and as such, stress has to be properly managed to curb or minimise its effect on the organisation and the employees. Hence, this article is a contextual perspective on what stress is all about, causes, effect, theory and management for the individual well-being and organisational productivity. Operational Definition of Terms The following terms are defined as they are used in this article. Corticoid: This is the cortex in the brain. It is the centre for stress response. It perceives and interprets stressors. Employees: Are the people or workers employed to carry out specific duties or task within the organisation for the purpose of achieving the aims and objectives of the organisations. The employees render services which are paid for either in the form of salary or wages. Epidemic: A large number of same cases of a particular disease or something bad such as crime or stress happening at the same time or increasing in frequency of occurrence in a particular community but in this case the entire world (global epidemic). Karoshi: Karoshi is a Japanese word referring to stress from overwork which the Japanese health ministry referred to as the second leading cause of death among workers. Motivation: Represents the forces within a person that affect his or her directions, Intensity and persistence of voluntary behaviour. It is the driving force that causes or propels one to act in a particular way. Organisation: Organized body or system set up for the purpose of achieving certain objectives through the interaction of people. Organisation is a structured process established on which people interact for the actualization of specific aims and objectives of the organisation. Organisational Goal: This refers to the aims, objectives and desires for which an organisation is set-up or established which upon its existence it strives to achieve. Performance: The act or process of executing or carrying out a task or functions. Stress: Is an adaptive response moderated by individual differences that are a consequence of any actions, situation or event that places special demands on a person. Stress can be seen as feelings tense, anxious, or worried as a result of uncertainty, work overload, striving to meet up with time and target, in the work place.

Stress: What it means, Types and Determinant Stress is a global issue, it is wrecking so much havoc on the general health of workers, organisation and homes in our societies and communities today, stress is unavoidable it can come from the easiest and most common things we do on a daily basis.

Stress has been defined in various ways by different authors and scholars. Gibson et al (1988) defined stress “as a person’s adaptive response to a stimulus that places excessive psychological and physical demands on that person”. This definition is divided into two basic components, first is the notion of adaptation, which explains the fact that people or workers react or adjust to stressful circumstances in different ways. The second is the role of stimulus or stressor which is anything that induces or causes stress. For stress to result the stressor must place or induces excessive demand on the individuals and what is excessive for a person may be very light or low for another person. That means, what is stressful to one person may not be stressful for another. Stress is like beauty that lies in the eyes of the


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beholder, its all depends on who is involved in the circumstances to tell if the demand is excessive or not or if stress will result or not. The term stress has been defined in different ways virtually all of the definitions can be place into two categories, which is either stress is defined as a stimulus or as a response. A stimulus definition treats stress as some characteristics or event that may result in a disruptive consequence. It is in that respect, an engineering definition of stress borrowed from the physical sciences. In physics stress refers to the external force applied to an object for example a bridge girder. The response is “strain” which is the impact the force has on the girder. In this context the external force on the girder is the waves of the sea or ocean but at the work-place the external force on the workers includes the leadership style of the boss, work over load, uncertainty, time deadlines, computer problems, mergers, financial crisis, poorly designed jobs and others stress the workers at the work place.

In a response definition, stress is seen partially as a response to some stimulus, called a stressor. A stressor is a potentially harmful or threatening external event or situation. Stress is more than simply a response to a stressor, however. In a response definition, stress is the consequence of the interaction between an environmental stimulus (a stressor) and the individual’s response. That is stress is the result of a unique interaction between stimulus conditions in the environment and the individual’s predisposition to respond in a particular way. Based on the response definition, stress was defined by John et al (2005) as “an adaptive response, moderated by individual difference that is a consequence of any action, situation or event that places those special demands on a person”. David, Derald and Stanley (1986) defined stress as “an internal response to an external stimulus or situation”.

Hellriegel, Slocum and Woodman (1989) defined stress as “a consequence of or a general response to an action or situation that places special physical or psychological demand or both on a person”. Stress involves the interaction of a person and that person’s environment, because stressor lies in the environment and they (stressor) creates stress as soon as the person perceives them as representing a demand that may exceed his or her ability to respond. Stress is a condition that strain one’s emotions through processes and physical condition. When it is excessive it can threaten one’s ability to cope with the environment. Stress is the general term applied to the pressure people feels in life. As a result of these pressures employees develops various symptoms of stress that can ruin their job performance.

International Stress Management Association (ISMA) defined stress as “an adverse response to what an individual perceives as too much pressure”. Bechr and Newman (1978) defined job stress as “a condition arising from the interaction of people and their job and characterized by changes within people that forces them to deviate from their normal functions”. When one has a job that is challenging that person should expect to feel some pressure at work, however, when that pressure is excessive and you suffer an adverse reaction to it, then it has become stress.

Bernard (1972) recognized two forms of stress which according to him are psychological stress and physiological stress. The physiological stress deals with the physical factors of stress. They can be categorized as acute or chronic and as external and internal to the individuals. The symptoms are burnout, accident proneness, decreased stamina or insomnia. The psychological form has to do with emotions of an individual. The manifestations of stress are aggression, mental illness, depression, anger, anxiety, hostility, restiveness and others.

Selye (1950) defined stress as the non-specific response of the body to any demand made upon it. The non-specific demand for activity is the essence of stress. In view of its stressor activity, all that counts is the intensity of the demand for readjustment or adapt to


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the stressor either by manipulating the situation to alter the stressor or by accommodating the effects. One major fact about stress is that people differs in the way they response to stressful situations. What is stressful to Mr. A may not be stressful to Mr. B stress to a reasonable extent is in the eye of the beholder and this is what makes it clearly a psychological process. Events are stressful when they are regarded as such and not the other way round.

According to Lazarus 1966, Lazarus and Folkman 1994, stress is an event or group of event causing wear and tear on individuals. It is important or useful to view stress as the response a person makes and to identify stimulus conditions (action, situations events) as stressors as this introduces us to the organisational environment that are potential stress producers. Whether stress is actually felt or experienced by a particular person depends on the person’s unique characteristic. Stress is the result of dealing with issues or something that places special demands on us. Our involvement in something unusual, physically or psychologically threatening or outside our usual set of experience, such as starting a new job assignment, having a flat tire, changing bosses, making a mistake at work, having a performance evaluation meeting with the boss, presenting or defending a seminar paper before Professors as a student. All of these actions or event are potential stressor, potential because not all stressor will always place the same demand on people and what is not stressful today might becomes stressful tomorrow depending on the mind set of the individual and how long the action or event persist. In order for an action, event or situation to result in stress, it must be perceived by the individual to be a source of threat, challenge or harm. If there are no perceived consequences either good or bad there will be no potential for stress. McGruth (1970), Lazarus, (1971) and Kasl (1978) had all individually defined stress as “a (perceived) substantial imbalance between demand and response capacity, under conditions where failure to meet demand has important (perceived) consequences.”

Three key factors determine whether an experience is likely to result in stress. These factors are Importance, Uncertainty and Duration. Importance: This relates to how significant the event is to the individual. For an event to be significant to an individual, the person often think or considers his/her personal benefits and he/she also consider if there are other alternatives for the same benefits that could be easier or better, the lack of alternative and having much benefits or reward attached makes the event or action more important. Education is important because ignorance or illiteracy is not an option and there is much benefit attached to education which is why it could be stressful. Uncertainty: this refers to lack of clarity about what will happen. Not having a fore knowledge of what the future holds for us could be very stressful because most often “not knowing” place more demand on us than does knowing, even if the known result is perceived as negative. Duration: is a significant factor because the longer that special demand is placed on us, the more stressful the situation. A distasteful job assignment that only last a day or two may be mildly upsetting, but if the same assignment where to last for six months, it could be excruciating. Most people can endure short period of strenuous physical activities without tiring, prolong the duration, however and even the most fit among us will become exhausted. The same is true of stressor. Stress of short duration is sometimes referred to as acute stress. It may last a few seconds, hours or even a few days. While long duration stress on the other hand is sometime referred to as chronic stress, it may last for months or years, take for instance the unrelenting, pressure of a job one finds no satisfaction in performing, the constant demand made by an unreasonable boss, or the never ending struggle to advance


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in one’s career. These three factors play a crucial role in determining whether an action or event is stressful or not.

Stress is the reactions of individuals to new or threatening factors in their work environments. Job stress can be either positive or negative. Some new work situations can bring us positive challenges and excitement, while others are very threatening and anxiety arousing.

Generally the source of stress as Selye (1956) pointed out need not be bad. Take for instance; receiving arrears, bonus or winning lottery and then having to decide what the money should be spent on can result to stress. Like wise can gaining recognition, getting a promotion, getting a new job, and similar “good” things. Selye referred to this kind of stress as ‘eustress’ while he referred to the negative stress as ‘distress’, this includes stress resulting from bad news, excessive pressure, unreasonable demand on our time, a nagging boss, poorly designed jobs and others. Individuals can have a variety of reactions to both bad (distress) stress and good (eustress) stress. They can react emotionally by feeling frustrated or anxious happy or excited, bored or depressed, aggressive or hostile, the way they view the world perceptually can also change under stress, and they may experience mental blocs, be hypersensitive to criticism or have trouble concentrating. People can respond to stress behaviourally, they may drink more, eat more, loose their appetites or stop going out socially and become isolated.

People’s bodies also respond to stress physiologically. In fact, the physiological response to stress follows a fairly consistent pattern known as General Adaptation Syndrome which evolved round three (3) stages. The first is the alarm stage, where the body prepares for stress by releasing hormones from the endocrine glands. Heart breath faster, breathing quickens, blood sugar level rises, muscle tense up, pupils dilate and digestion slows. During the second stage which is the resistance stage, the body tries to repair the shock caused by the stress and to return the body to its normal state. However, if the stress continues long enough, the body’s capacity for adaptation becomes exhausted, in the third stage the body’s resistance level progressively weakens. The body is then more susceptible to diseases like ulcers, heart attach, headache, high blood pressure, and fatigue. This aforementioned model by Selye gives us a good look at just how damaging stress is to the body and how serious avoiding constructive coping mechanisms can be. However, Selye’s theory that stress was as a result of changes was challenged by Arnold and Clifford Lazarus. They argued that stress was subjective and that the levels of stress were influenced by the way in which people view their situation (Melucci 2004). It seems both holds their truths, indeed people do deal with stress in different ways and this seems to affect the way in which the body is affected. However, just as Selye suggested the body is adversely affected and drained as a result of unattended stress, that is, if stress is not properly managed. Causes of Stress and Stressors The causes of stress are regarded as stressor (Moorhead and Griffin, 1995). A stressor is any thing (action, event or situation) that induce stress or serve as a source of stress. Stressors can be classified into four categories which are: individual, group, organisational and non-work.

The first three categories of stressors are work-related. The experience of work-related and non-work stresses produces behavioural cognitive and physiological outcomes. The relationship between stress and outcomes (individual and organisational) is not necessarily direct. Similarly, neither is the relationship between stressor and stress. These relationships may be influenced by stress moderators. Individual difference such as age, social support mechanisms and personality are potential moderators. A moderator is a


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valuable attribute that affects the nature of relationship. Stressors are those actions situations or events that place special demands on a person. Since in the right circumstance, virtually any occurrence can place special demands on a person, the list of potential stressors is infinite.

(A) Individual Stressors: Individuals faces or experience stress when they face new or threatening factors in their work environments. While individuals vary in what they experience as stressful, there are some aspects of work that systematically create job stress for employees. One major source of stress or stressor is the job itself, the way the job is designed, the amount of time pressure an individual faces and the amount of expectations others have of a person at work can all lead to stress. The individual stressors include the following individual roles: A role is simply the set of expectations that other people in the organisation have of an individuals in his or her job or expected behaviours associated with a particular position. Role can manifest itself in the form of conflict, overload and ambiguity as source of individual stress in the organisation. (i) Role Conflict: is present whenever an individual’s compliance to one set of expectations about the job is in conflict with compliance to another set of expectations. Kahn et al (1964) defined role conflict as the simultaneous occurrence of two or more set of pressure such that compliance with one would make more difficult or impossible the compliance with the others. Role conflict occurs when different members or subset of the whole set holds different and conflicting expectations for focal persons behaviour. That is, role expectation conflicts with such attributes like the values, traits or moral principles of the other persons. Kahn et al (1964) point out that role conflict is associated with greater level of interpersonal tension, lower level of trust and respect for person exerting the conflicting role pressure and decreased confidence in the organisations. There are two general types of role conflict in organisations. The first type is intersender role conflict: Two different groups have expectation of an individual that are incompatible or inconsistent. The second type is intrasender role conflict: One group has different expectations of an individual that are incompatible. (ii) Role Ambiguity: Is the uncertainty surrounding one’s job definition, this may result from inadequate information or knowledge about the job and the needed skills for the job. The ambiguity may be due to inadequate training, poor communication .The deliberate withholding or distortion of information by co-workers and supervisors and it could as well be as a result of mergers and acquisition of corporations. In any event, the result of role conflict, ambiguity and overload is stress for the individual because they causes anxiety in workers and makes them prone to stress. (iii). Life and career changes: The most pervasive individual stressor of all is the unrelenting pace of change that is part of life today. At no other point in the history of industrialized society have we experienced such rapid change in the world around us like the communication satellites, organ transplants, laser technology, nuclear power plants, intercontinental ballistic missiles, supersonic transportation, artificial hearts, climate change and its effects such as flood that is ravaging so many parts of the world and has rendered many homeless and also ruin their source of livelihood, one can only but imagine the kind of stress they are experiencing at the moment. Life changes may be slow (getting older) or sudden (the death of a close relatives). These changes are having a dramatic effect on people. Medical researchers have verified that especially sudden life changes have a very stressful impact on people. They found a definite relationship between the degree of life


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changes and subsequent health of the person. The more changes, the poorer the subsequent health, these life changes can also directly affect job performance. According to Faye Crosby a psychologist, divorce interferes with work more than any other trauma in a person’s life. She said “during the first three months after a spouse walks out, the other spouse male or female is usually incapable of focusing on work. Despite all these, there are some exceptions because some people who experience a great deal of change show absolutely no subsequent health problems. For some reasons, these people are strong enough to withstand the negative effects of large doses of change while others are not. The difference between those who suffers a subsequent health problem and those that do not suffer health problem after or during life changes lies in the personality characteristic commonly regarded as hardness and the people with the hardness personality trait possess three important characteristics. First they believe that they can control the event they encounter in life or at work. Second, they are extremely committed to the activities in their life or work. Third, they treat changes in their lives as a challenge, and these character help them to cope with changes. Hardness is a personality trait that appears to buffer an individual’s response to stress or offset the negative impact of change. Hardness is a factor that reduces stress by changing the way stressor is perceived. (B) Group and Organisational Stressor: Every time people chooses to come together as group or to form a group within the organisation or even the organisation as a whole an endless list of stressor are always encountered. Few of such are:

(i). Participation: Refers to the extent that a person’s knowledge, opinions and ideas are included in the decision making process. For some people participation is an important part of working in organisation. Groups and organisation that do not encourage or allow participation will be a source of frustration to those who value it. Others will be frustrated by the delays associated with participative decision making while others may view shared decision making as a threat to the traditional right of a manager to have final say. Participation will act as a stressor for these people.

(ii). Intra and Intergroup Relationships: Poor relationship within and between groups can be a source of stress. Poor relationship may includes low trust, lack of cohesion, low supportiveness and lack of interest in listening to and dealing with the problems that confront a group or group member.

(iii). Organisational Politics: High levels of political behaviour in organisations can be a source of stress for many employees. Office politics has constantly been a primary stressor in organisations. Political activities, game playing, power struggles can create friction, heighten dysfunctional competition between individuals and groups, and increase stress.

(iv). Inadequate Career Development Opportunities: Career development opportunity stressors are those aspects of the organisational environment that influences a person perception of the quality of his/her career progress. Career variables may serve as stressor when they become sources of concern, anxiety or frustration. This can happen if an employee is concerned about real or imagined obsolescence, feels that promotion progress is inadequate, or is generally dissatisfied with the match between his career aspirations and current position.

(v). Downsizing: This is primarily associated with the reduction of human resources by layoff, attrition, redeployment, or early retirement. As some organisations strive to reduce cost, a number of employees are either downsized or fear being downsized and this is a potent stressor. It can have negative effects for both individuals and organisation.


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(vi). Working Environment: Working environment refers to the beliefs and value system or the rules and regulations of the organisation that is organisational culture. Scharmarhorn, Hunt and Osborn (1994) defined organisational culture as the system of shared beliefs and values that develop within an organisation and guide the behaviour of members. A number of critical variables may be useful in analyzing the impact of organisational culture on stress level in the organisation. For instance, what does the organisational culture say about openness, expression of feelings, hard work, innovation and manager – subordinates relationship, if the dominant ethos is one of internal competition for resources, reward or where a hire and fire policy operates, the stress level will be high. Also if there is no congruence between the organisational outcome and the individual personality, the level of stress will be high on the part of the individual. Jobs where temperature, noise and other working conditions are dangerous or undesirable can cause anxiety among workers thereby increasing the stress level in the organisation.

(c) Non-work Stressors or Extra Organisational Stressor: Non-work stressors are caused by factors outside the organisation. They are forces outside the organisation which can lead to stress among workers in the organisation. Among such factors are technological changes, family, economic and financial condition, sociological variables and others. (i). Technological Changes: Modern day business organisations are dynamic. The

business environment is in a state of perpetual flux. An important factor in change is technology. Technological change can cause anxiety in workers especially when their skills are threatened by the new technology and such anxiety can lead to stress. Although medical science has increased the life span of people and has eradicated or reduced the threat of man’s diseases, the pace of modern living has increased stress and decreased personality wellness. The latter concept of wellness has been defined as a harmonious and productive balance of physical, mental, and social well being brought about by the acceptance of one’s personal responsibility for development and adhering to a health promotion programme. Because people tends to get caught up in the rush-rush, mobile, urbanized, crowded, on-the-go life style of today, their wellness in general has deteriorated and the potential for stress on the job has increased.

(ii). Economic and Financial Condition: This can be another source of stress in the workplace. This is mostly the case in a period of depression when people’s jobs are threatened. Also, when a person’s financial commitment cannot be met as a result of the economic situation, such a person will be prone to stress. Human beings working in organisations have needs to satisfy, and the reward which they earn in the form of financial remuneration help them to satisfy these needs, when what they get in the organisation cannot meet their needs, they may become prone to stress. In multi-racial society, decision made based on racial variable can make the workers prone to stress. This can happen in a situation where such subjective factors like tribal affiliation, nepotism and favoritism form the basis of reward in the organisation

(iii). Sociological Variables: Sociological variable such as sex, race and class can also become stressors. Sociologists have noted over the years that minorities (Blacks) may have stressors than majority (White). Recently, research has found that women experience more psychological distress than men, but men are more prone to severe physical illness. For professional women, their particular source of stress has been


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identified as discrimination, stereotyping, the marriage/work interface, and social isolation. Also people in the middle and upper classes may have particular common stressor. The same is true of local communities or regions that are having similar stressors from the condition of housing, shopping and convenience of services, neighborliness and degree of noise and air pollution as likely stressors.

(iv). Family Factor: This is a vital extra-organisational stressor. A person’s family has an impact on personality development and can influence the mood and behaviour of people or workers from time to time. A family situation like quarrel, illness or death of a family member can make the worker to have stress in the workplace. In Holmes and Rahe (1967), such family factors like death of spouse, divorce, marital separation from mate, death of close relatives occupies high position in the scale showing that family factors are high predictors of stress in the workplace.

Effect of Stress on Individual Well-Being and Organisational Productivity The effect of stress can be positive or negative just as there are positive (eustress) and negative (distress) stress. Positive stress can result to positive consequences like more enthusiasm, energy, and motivation. This means that stress is not automatically bad for individual employees or their organisational performance. In fact, it is generally recognized that a certain level of stress can even enhance job performance. A recent research suggest that mild stress, such as getting a new supervisor or being involuntarily transferred, may lead employees to new and better ways of doing jobs. Also mild stress may get employees’ “Juices” flowing and lead to increased activity, change and overall better performance. People in certain jobs such as sales or creative fields (newspaper journalist and television broadcasters who work under time pressure), would seem to benefit from mild level of stress. While people in other jobs, such as police officers or physicians, may not benefit from constant mild stress. The negative effects of stress are the major concern for contemporary society in general and for effective human resources management in particular. The three sets of consequences or effect that can result from stress are Individual Consequences, Organisational Consequences and Burnout (Ivancevich and Matteson, 1980). These are discussed below: 1. Individual Consequences Stress has different effect on different individuals and even different effect on the same individual at different times. Individual consequences of stress are those outcomes that mainly affect individuals. The organisation may also suffer on the long run either directly or indirectly, but it is the individual who pays the real price. These categories of individual consequences of stress are behavioural, psychological, and physical or medical (Moorhead and Griffin, 1995). i. Behavioural Effect Behavioural consequences of stress are responses that may harm the stressed person or others. One of such aspect of behaviour is smoking research (Quick and Quick, 1984) clearly document that people who smoke tend to smoke more when they suffer stress. There are other direct behaviours that may accompany stress at the individual level which includes underrating, sleeplessness, accident proneness, violence, appetite disorder, and increase in drinking and drug abuse.

There is some evidence that there is relationship between stress and absenteeism and turnover, for example, workers may experience stress and react by getting drunk and staying home from work the next day with a hangover. They then feel bad about their new drinking habit, and they may feel that they are letting every one down and eventually quit or be fired


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from the job. In the mean time the absenteeism rate climbs, and subsequently the turn over rates increase, both of which are very costly to the organisation in terms of filling in for absent workers and replacing those who have left. Staying away from a job that is causing stress or quitting the job is a “flight” reaction in which the person may stay on the stress producing job and become angry and or aggressive. The behavioural consequences are often not attributed to stress by co-workers and supervisors and therefore generates little sympathy.

ii. Psychological or Emotional Effect Psychological consequences of stress relates to an individual’s mental health and well-being. The emotional effects of stress includes anger, anxiety, depression, lowered self – esteem, poorer intellectual functioning including an inability to concentrate and make decisions, nervousness, irritability, resentment of supervision and job dissatisfaction. When people experience stress at work, as it happens nowadays in Nigeria in particular and the entire world in general, they may become depressed or may find themselves sleeping too much or not enough. Stress may also lead to family problems and sexual disorders, (Quick and Quick, 1984). Considerable attention is being given to the relationship between stress and physical health, especially within the medical community, not much is being given to the impact of stress on mental health. Yet, at least, indirectly if not directly, the psychological consequences result is of much importance to day-to-day job performance than the physical consequences. The psychological consequences of stress have no regard for one’s position in the organisation; the outcome of this stress can affect the leadership style and effectiveness of managers in key positions. iii. Physical or Medical Effect Stress can lead to medical disorders. These medical consequences of stress affect a person’s physical well-being. One illness posed by stress is called “Psychosomatic illness”. Psychosomatic illness is brought on by psychological or emotional distress (Melucci, 2004). It simply refers to illness such as ulcers caused by excessive stress and worry and are connected with the relationship between the mind and the body. Furthermore, psychosomatic illness that is ignored can lead to serious consequences of pre-existing condition or lead to other serious condition such as high blood pressures, stroke and cardiovascular disease. People who are experiencing stress are more likely to have headache, stomach ache, chest pain, heartburn, diarrhea or constipation and skin condition like acne and hives. Though all these diseases or ailments are not only caused or linked to stress, environmental conditions and the person’s general state of health, heredity and medical history can also contribute. However, stress can and does contribute to all these diseases and ailments most often, and as such it is clear that effectively dealing with stress is an extremely important part of our lives since stress often times cannot be avoided. (2). Organisational Consequences Obviously, any of the individual consequences mentioned above can also affect the organisation. However, there are other consequences of stress with even more direct consequences on the organisation. One clear organisational consequences of too much stress is decline in performance, this could be caused by any of the stressors. For operating workers such a decline can translate into poor quality work or drop of productivity (Hockey, 1986). Stress has negative impact on individual’s performance and this translates to affect


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the entire organisation because a fall in the productivity or performance of an individual can reduce ability of the organisation to meet the daily or the day’s target.

Withdrawal Behaviours can also result from stress. It increases turnover and absenteeism and possibly quitting the job. Turnover and absenteeism allows workers to withdraw from the unpleasant environment. Stress has also been associated with industrial sabotage. Workers some time create mechanical failures on the assembly line to give themselves a break from the strain of their work. People who are having difficulty in coping with stress in their jobs are more likely to call in sick or consider leaving the organisation for good.

Stress also impedes effective decision making. When people are experiencing stress, they are more likely to procrastinate and to avoid having to make decisions. They have more trouble concentrating and often forget important pieces of information. They are less likely to seek out new information that could help them make better decisions. As a result, the quality of the decisions they make suffers. This means that when managers are stressed they are likely to make faulty decisions or disruption in working relationship as people becomes irritable and hard to get along with. The manager may start missing deadline, taking longer lunch breaks or ceasing to care about the organisation and the change of attitude of the employee. This means that, job satisfaction, morale and organisational commitment can all suffer, along with motivation to perform at high levels (Moorhead and Griffin, 1995). Wrong decisions made by managers could be of high lost for the organisation, and as such, stress must be properly managed so as to avoid wrong decision making that can cost the organisation a fortune. Theories of Stress The theory of stress holds that it is not a particular abnormality that is inherited, but rather a predisposition to develop illness. Certain environmental forces called stressor may activate the predisposition resulting in a disorder. It is evident that stress is inevitable in organisation. Administrators cannot completely eliminate stress either for themselves or for others. In essence, a certain degree of stress is required for Psychological growth, achievement and development of new skills. In most cases, stress always involves at least some temporary degree of discomfort. It is frequently the occasion for the emergence of creative solution to personal and/or organisation problems, like it’s often said; necessity is the mother of invention. However, prolonged stress can cause apathy, break down in performance and psychological or physical withdrawal from the organisation. The following are some theories on stress: The General Adaptation Syndrome Theory Hans Selye (1950) was of the opinion that when an individual is stressed or faced by threatening life situation, the person goes through a syndrome (sequence of behaviour) to bring the altered body system to its normal state. The stages of the body’s reaction are three (Selye, 1976). The first stage is the alarm reaction stage in which an emergency signal is sent, which the body resists or defends itself against. The second stage is a stage where the bodies resists the stress pressure and regain its normal body balance. The resistance stage may continue for a long time if the stress persists, until the third stage of exhaustion surface. At the exhaustion stage, the persons break down and may be over whelmed by psychosomatic illness manifesting physiological symptoms.

Phenomenological Theory: According to Holmes and Rahe (1977), increased life events will affect a person’s psychological life events; however, the effects are influenced by one’s


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life style and coping mechanism (Nweze, 1984). When faced with negative life events which are caused by situation beyond individual’s control and not caused by the individuals, such a person is expected to be distressed (Beich and Zanta,1981).

Personality Theory According to Friedman and Rosenman (1957), Type A personality is an action, emotion and complex that can be observed in any person who is aggressively involved in a chronic, incessant struggle to achieve more and more in less and less time, and if required to do so, against the opposing efforts of other things or persons. Type “A” employees (manager, staff specialists, file operating employees, salesperson and secretaries) experience considerable stress. They are the people who:

a. Work long hard hours under constant deadlines pressure, and conditions overload, b. Often take work home at night or on weekends and are unable to relax. c. They themselves, set high standards of productivity that they seem driven to maintain. d. Tends to become frustrated by the work situation, to be irritated with the work of others, and to be misunderstood

by superiors. e. Are aggressive, ambitious, competitive and forceful

f. Are impatient, hates to wait and considers waiting a waste of precious time. The Type A person is an aggressive driver who is ambitious, competitive, task- oriented and always on the move pressing to accomplish more goals. The Type B personality is free of the type A characteristic and generally feels no pressing conflict with either time or persons. The Type B person may have considerable drive, want to accomplish things, and work hard, but he/she has a confident style that allows him or her to work at a steady pace and not race against the clock. The Type B persons are relaxed, patient, steady and even- tempered. They are more likely to extend deadline or to accept a lower standard of work from themselves in the short – run. They are likely to let things roll-off their back rather than fight every issue. The Type A personality people are more prone to stress because of their competitiveness, urgency in getting task done and always striving to win in every activities even those meant for fun, they will rather not participate than to lose. While the Type B personality people are less prone to stress berceuse they are relaxed, patient, steady, even tempered and are not always striving or struggling to beat deadline or to win in every activities. Psychological Theory Lazarus (1966) believed that there are three ways to look at stress. One, individual reacts differently to stressful situations. Two the way an individual perceives the situation determines his response. Thirdly, the stress experienced depends on other factors and individuals coping capability.

Management of Stress in the Work Place (Organisation) Stress above certain level can adversely affect an organisation. This is because stress affects the individuals physiologically, psychologically and behaviourally. The quality of work performance can be negatively affected by stress in the organisation. Thus it is important for stress to be managed properly in the organisation in order to avoid the adverse effect. Stress management by individuals and organisation are usually designed to eliminate or control the sources of stress (stressors), and/or make the individual more resistant to stress or better able


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to cope with stress. Basically, there are two major approaches to deal with job stress. First are the individual strategies, which tend to be more reactive in nature. That is, they tend to be ways of coping with stress that has already occurred, though they include few preventive measures. The second general approach is to develop a more proactive set of strategies at the organisational level. The idea behind these organisational strategies is to remove existing or potential stressors and this, like preventive medicine, prevent the outset of stress for individual job holders. Individual Coping Strategies Some specific techniques that individuals can use to eliminate or more effectively manage inevitable, prolonged stress include the following:

1. Relaxation: - Whether a person simply takes it easy once in a while or uses specific relaxation technique such as biofeedback or meditation, the intent purpose is to eliminate the immediate stressful situation or manage a prolonged stressful situation more effectively. Taking it easy may mean curling up with a good book in front of you or watching something lights (not a violent programme or a sport programme) on television. Meditation involves quiet, concentrated inner thought in order to rest the body physically and emotionally. It helps remove persons temporarily from stressful world and reduces their symptoms of stress.

Transcendental meditation (TM) is one of the most popular practices. Transcendental mediators try to meditate for two periods of fifteen to twenty minutes a day. Concentrating on the repetition of a word called a mantra. There are a number of similar practices with other names, such as yoga. They usually have the following common elements: a relatively quiet environment, a comfortable position, a repetitive mental stimulus, passive attitude.

2. Exercise: - people of all ages or sex can engage in regular exercise such as jugging,

playing tennis, golf or riding a bike. People who exercises regularly are less likely to suffer heart attacks than inactive people are. It has also been suggested that people who exercise regularly feel less tension and stress, are more self – confident, because exercise bust or increases self – esteem, and they show greater optimism. People who do not engage in regular exercise, on the other hand, feel more stressed and are more likely to be depressed (Folkins, 1976). The managements of organisations should encourage their workers to engage in regular exercise by providing sporting facilities and promoting sport within and between organisations

3. Cognitive Therapy: - Besides Behavioural self-control techniques, a number of

clinical psychologists have entered the stress file in recent years with cognitive therapy technique. Techniques such as Ellis Rational Emotive Model and Meichenbaum’s Cognitive Behaviour Modification have been successfully used to reduce tension, anxiety and have recently been used as individual strategies for reducing job stress. The basic rationale for these individual approaches to stress management, known collectively as cognitive techniques, is that a person’s response to stressors is mediated by cognitive processes, or thoughts. The underlying assumption of these techniques is that people’s thoughts in the form of expectations, beliefs and assumptions are labels they apply to situations, and labels elicit emotional responses to the situation. Thus, for example, if an individual labels the lost of a promotion a catastrophe, the stress response is to the label, not the


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situation. Cognitive techniques of stress management focus on changing labels or cognitions so that people appraise situations differently. This reappraisal typically centres on removing cognitive distortions such as magnifying (not getting promoted means my career is over, I will never be promoted in any where), and personalization (since I did not get the promotion it is clear, I am a terrible person). All cognitive techniques have a similar objective, which is to help people gain more control over their reactions to stressor by modifying their cognition. This method of stress management has been generally reported to have positive impact on employees, especially employees like nurses, teachers, athletes and or traffic controllers. The positive outcome coupled with the wide range and scope of situations and stressors amenable to such an approach, makes cognitive techniques particularly attractive as an individual stress management strategy.

4 Networking: - Networking in this context entails forming close association with

trusted, empathetic co-workers and colleagues who are good listeners and confidence builders. It involves making friends whom an individual can share problems with and like it is often said problem shared is problem half solved and two good heads are better than one. Friends can bring out the best of an individual by making them laugh during their most difficult moment and laughter is such a huge coping mechanism to stress. Researches in social psychology show that people benefits from social support. Katz and Kahn (1978) have pointed out that supportive relationship with others seems to buffer some of the relationship between the demand of the work role and the consequences for the individual. Networking can be of much help in dealing with stress resulting from interpersonal problem between individuals in the organisation.

5. Time Management Principle: - Time management is an important strategy for

managing stress. Many people manage their time poorly and the end result is stress. An understanding and utilization of basic time management principles can help the individual to better cope with the job demands. Such time management principles includes making daily list of activities to be accomplished, prioritizing activities by their importance and urgency, scheduling activities according to priorities set, and handling the most demanding part of the job or activities during the high part of a person’s cycle when one is most alert and productive. Utilization of time management principles helps to reduce anxiety in the individual and help him organize his job in a coherent and logical manner.

Individual Proactive Strategies There are stress preventive measures or methods that can be applied in handling stress at the individual levels. The preventive measure in this context does not mean that stress can be completely prevented or eradicated since having to wake early in the morning to prepare for work could be stressful to some individuals, but it means that some proactive measures can be taken by the individuals to reduce the occurrence of stress. These measures include the following:

1. Role clarification: One major way an individual can act proactively to prevent stress is by trying to clarify or change the role expectations of others. If employees feel their assignments are unclear, they can ask their supervisors for clarification of


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what is expected. If they feels that they are getting conflicting signals from their managers, they can confront their manager about lose-lose situations they find themselves in. If a job is due in two days and there is no way it can be accomplished even by working twelve hours daily, it is rational to ask for more time or help when the assignment is initially given. Role clarification is a useful proactive measure because stress comes in form of role conflict.

2. Reduced Perfectionism. One of the biggest sources of stress in people’s lives is the attempt to live up to the impossible standards they set for themselves. People expect themselves to perform consistently at high levels, even when they are trying to get too much done in too little time. They expect themselves to be efficient “machines” at work even when they are ill or preoccupied with personal problems. This places too much demand or pressure on them, so a good measure for preventing such stress is to accept less than one’s very best once in a while. Not that people should become lazy or lackadaisical, but rather they should realize that every performance can be stellar, and the world will not stop turning if they are not perfect every time. Employees have fantasies about what a perfect job or perfect manager would be like and they feel ill-used because the manager and the job are not perfect. However their managers have the same stresses they have, and expecting ideal behaviour from them inevitably leads to disappointment. If employees are able to realize that there is no perfect job nor a perfect boss and that learning to live with a little less is not compromising standards, it is dealing with the job more realistically will help them to prevent stress.

Organisational Proactive Strategies The organisational proactive strategies are designed by management to eliminate or control organisational-level stressor in order to prevent or reduce job stress for individual employees. These strategies include:

1. Create a Supportive Organisational Climate: most large organisations today tend to be highly formalized bureaucratic structures with accompanying inflexibility, in personal climate. This can lead to considerable job stress. The proactive strategy would be to make the structure more decentralized and organized, with participative decision making and up-ward communication flows. In theory, these structural and process changes would create a more supportive climate for employees and would prevent or reduce their job stress.

2. Training of Managers and Supervisors: Supervisors and managers should always

be sent on training on human relation and group dynamics. Training in human relation and group dynamics will improve the leadership skill of supervisors and managers and make them adopt instrumental behaviour in their dealing with subordinates. House (1971) note the importance of leadership in affecting the behaviour of workers when he contends that the motivational function of the leader consist of increasing personal pay-off to subordinates for work goal attainment and making the path to these pay-off easier to handle by clarifying it, reducing clock and pitfalls and increasing opportunities for personal satisfaction.

Superiors can create supportive relationship with their subordinates by buffering some of the relationship between the demands of the job and the consequences for the individual, where role ambiguity is unavoidable due to the


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very nature of the job, the Manager can ameliorate the resultant stress by giving attention and guidance to those persons thought to be high in emotionality and low in tolerance for ambiguity. Managers and supervisors can do this when they are trained on basic human relations skill.

3. Plan and Develop Career Paths and Provide Counseling: Traditionally,

organisations have shown only passive interest in the career planning and development of their employees. Individuals are left out to decide their career move and strategies on their own and at most, get paternalistic advice once in a while from a supervisor. The stress is created by not knowing what their next move is or how they are going to make it. The organisation can prevent this stressor from surfacing by acting proactively to make or lay down concrete plans for career development in the organisation and provide counseling so that at every point in time the employees will know their next move to make for their career development. Employees also need counseling from time to time to avoid stress.

4. Enrich the Design of Tasks: Enriching job either by improving job content factors

(such as responsibility recognition and opportunities for achievement, advancement and growth) or improving care job characteristics (such as skill variety, task identity, task significance, autonomy and feedback) may lead to motivational state or experienced meaningfulness, responsibility, and knowledge of result. Presumably, these enriched tasks will eliminate the stressors found in more routine structured jobs. Careful managing of task design may be an effective way to cope with job stress.

5. Job Redesigning: Redesigning jobs to give employees more responsibility, greater

participation in decision making, more meaningful work, more autonomy and increased feedback can reduce stress occurrence in the organisation. Job redesigned gives the employees greater control over job activities and less dependence on others. Good job design can help to match the worker’s skills with the requirement of the job. Behling and Darrow (1984) note that people who perceive a good fit between job requirement and personal skills have a higher tolerance than those who feel les competent as a result of a personal job mismatch and this can create stressor.

A good job design programme can help to reduce role conflict and ambiguity or individual role. Each job should have clear expectation and the necessary information support, so that the job holder with conflicting demand or an ambiguous understanding of what he or she is to do will be clarified on the expectations of his or her job. With the proper clarification of individual’s roles, stress among workers will be minimised.

6. Wellness Programme: These are Health Promotion Programmes which focus on

the employee’s overall physical and mental health. They includes any activity an organisation engaged in that is designed to identify and assist in prevention or correcting specific health problems, health hazard or negative health habits. This includes not only disease identification but life style modification as well. Examples of such programmes are those emphasizing hypertension identification and control, smoking cessation, physical fitness and exercise, nutrition and diet control and stress and personal stress management. Organisations can reduce stress among


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workers by deliberately encouraging wellness programmes. Kreitner (1982) defines personal wellness as a harmonious and productive balance of physical, mental and social well-being brought about by the acceptance of ones responsibility for developing and adhering to a health programme.

Organisations can also help the employees cope with stress through the organisations culture. For examples organisations can imbibe the habit of encouraging taking time off, vacation, periodic social gathering that can help show concern for individuals at all times during time of sorrow as well as time of joy. Incentives should be appropriately used and encouraged by management because, lack of incentives could be stressful especially for willing workers. Summary and Conclusion This article, studies the management of stress at the work-place. Stress can be defined as a person’s adaptive response to a stimulus that places excessive psychological and physical demand on that person. Stress is unavoidable at the work-place since it can occur from the easiest and most common things we do on a daily basis at the work place and yet poses devastating and life threatening effect on workers’ physical and mental well being hence stress must be properly managed at the work place. Causes of stress are simply regarded as stressor. Stressor is anything (action, event or situation) that induce stress by placing special or excess demand on a person. Stressors can be classified into four categories which includes; individual, group, organisational and non-work. This simply means that stressors are found in every aspect of human life.

The effect of stress can be positive or negative just as there is positive (eustress) and negative (distress) stress. The positive stress results to positive consequences like more enthusiasm, energy and motivation. The negative effective of stress are three sets of consequences or effects, which are individual consequences, organisational consequences and burnout. The individual consequences of stress refers to consequences that are directed at the individual though the organisation may suffer on the long run either directly or indirectly but it is the individuals that pays the real price and these outcomes or effects varies from person to person. The individual consequences include behavioural consequences, psychological or emotional effects and medical effects. Organisational consequences of stress includes, decline in performance, poor decision making and withdrawal behaviour which increases turnover and absenteeism.

Stress management by individuals and organisations are usually designed to eliminate or control the sources of stress (stressors), and or make the individuals more resistant to stress or better able to cope with stress. Basically, there are two major approaches to management of stress. First are the individual strategies, which tend to be more reactive in nature. The second general approach is to develop a more proactive set of strategies at the organisational level. The following are some specific techniques that individuals can use to eliminate or more effectively manage prolonged stress include: Relaxation, Regular Exercise and Cognitive Therapy among others.

Organisational strategies are also designed by management to eliminate or control stress at the organisational level. These strategies, includes creation of supportive organisational climate and develop career paths and provide counseling, enrich the design of task, and wellness programme. There are also some negative stress management techniques that some people resolve to in the process of trying to cope with stress, they are: excessive drinking of alcohol, drugs abuse, denying the problem, excessive smoking of cigarettes and angry or violent behaviour. In conclusion, stress must be properly managed so as to curb or reduce the dangerous consequences it poses on the mental and physical well-being of


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workers. Stress and its management is a global issue that must be given serious attention so as to prevent it from taking away the happiness of man at home and at the work place. Similarly, when stress is properly managed in an organisation, productivity or output will increase because turnover and absenteeism will be reduced, workers or employees will be more willing to contribute their best effort because they will be happier, more energized, motivated and healthier. On the basis of the discourses in this article, there is no doubt; stress is a menace to organisations, societies and in our various homes. Thus, organisations societies or the individuals must strive hard to ensure that stress is well handled and kept under control.

References Adelowo, F. (2003): ‘Stress the Silent Killer’. Guardian News Paper, November, 22 (p. 31) Arroba, J and James K. (1987): Pressure at Work a Survival Guide. (London: McGraw – Hill Book

Company Ltd). Awake Magazine, (March 2012): Why are People So Angry? How Can You Make Peace With

Others? (pp. 3-6). Davis, K. and Newstrom, J.W. (1985): Human Behaviour at Work: Organisational Behaviour. (New

York: McGraw – Hill Books Company Ltd). Don, H. John, W.S. and Richard W. (1989): Organisational Behaviour (5th ed.). (New York: West

Publishing Company Ltd). D.S. Macodo, (2002): Statistics for Decision Making (Solution Manual). (Port-Harcourt: Pearl

Publishers). Frank, R. (2003): Coping: The Psychology of What Works in Coping. Snyder, C.R. (ed.). (New

York. Oxford University Press). Fred, L. (1989): Organisational Behaviour and Management, (5th ed.). (London: McGraw – Hill

books company Ltd). Friedman, M. and Rosenman, R.H. (1974): Type Behaviour and Your Heart. (Greenwich CT:

Fewweeth Publication) Hugh, J.A. and Daniel, C.F. (1986): Organisational Behaviour. (International Edition). (New York:

McGraw – Hill Books Company Ltd). John, M.I. Robert, K and Michael, T.M. (2005): Organisational Behaviour and Management (7th

ed.). (New York: McGraw – Hill Books Company Ltd). Lazarus, R.S. (1966): Psychological Stress and the Coping Process. (New York: McGraw – Hill

Books Ltd). Lazarus, R.S. and Folkman, S. (1984): Stress Appraisal and Coping. (New York: York Springer). Melucci, N. (2004): Psychology. (Hauppauge Barron’s Educational Series). Mental Health American (2007): Stress: Coping With Everyday Problems. (New York. MHFA

Publication) The Mental Health Foundation of London, (2011): Boiling Point – Problem Anger and What We Can

Do About It. (England: MHF Publication) Michael, T. and John M.I. (1987): Controlling Work Stress: (San Francisco: Jossey – Bass). Selye, H. (1952): The Story of the Adaptation Syndrome. (Montreal: Acta Inc.). Selye, H. (1974): Stress without Distress. (New York: Lippincott). Shoaf N.I. (1989): ‘Stress When You Reach the Breaking Point’. The Plain Truth, Vol. 54, No 1

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Performance of Public Enterprises in Nigeria and the Privatization Option

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Agabi Paul Tsunabavyon1 & Orokpo, Ogbole F.E 2 1 Department of Public Administration, Federal Polytechnic Bida Niger State, Nigeria. Email: [email protected] 2Dept. of Department of Public Administration, Federal Polytechnic, Idah, Kogi State, Nigeria. Email: [email protected]


Abstract Over the years, Public enterprises have been adjudged to be a critical prerequisite for the development of any nation. All nations that are among the league of developed nations today regarded as world powers, have achieved certain development feats via the establishment of these enterprises. Nigeria was no exception in terms of the belief that the state and public enterprises have a role to play in the country’s development efforts. The government in conjunction with the private sector, mostly foreign, was directly involved in areas ranging from the production of food stuffs to assembling cars. In recent years, privatization of public enterprises has preoccupied policy analysts in the search for solutions to improve the performance of state-owned enterprises. Several developing countries including most African countries have embarked upon extensive privatization programme within the framework of macroeconomic reform and liberation, revising the earlier strategy of using public enterprises as engine of economic development. It is believed that the performance of Nigerian enterprises were compromised in many instances leading to inefficient utilization of resources by public enterprises coupled with heavy dependent on the national treasury for financial operations and their activities characterized by mismanagement of funds and operations, endemic corruption, misuse of monopoly power and bureaucratic suffocation from supervisory ministries and its inability to enhance the social and economic well-being of the people which no doubt placed government under tremendous pressure to initiate various economic reforms with privatization as one of such reform programme as panacea to public enterprises quagmire. It is against this backdrop that the paper attempts to x-ray the performance of public enterprises within the premise of the privatization and recommends among others the need for government to be more transparent and cautious in the exercise so as to avoid exploiting the masses by some few capitalists.

Key words: Commercialization, Capitalization, Flexibilization, Parastatals, Public Enterprises, Privatization.

Introduction Over the last century, the size and scope of government has expanded enormously. The pre-World War II expansion was driven by among other factors, the need to address the heavy toll on economic and social system brought by the great depression. Industrial economics expanded the welfare state and much of the developing world embraced state-dominated development strategies. The result was a tremendous expansion in size of governments worldwide. Nigeria was no exception in terms of the belief that the state and public enterprises have a role to play in the country’s development efforts. The government in conjunction with the private sector, mostly foreign, was directly involved in areas ranging from the production of food stuffs to assembling cars. The oil boom of the 1970s enabled the government to venture into ownership and control of economic activities. The Nigerian enterprises promotion Decree of 1972 set the basis for the government’s extensive participation in the ownership and management of Banking insurance and industry. The public sector played a dominant role in the economy accounting for most half of the GDP and two third of modern sector employment in

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Agabi Paul Tsunabavyon & Orokpo, Ogbole F.E, 2014, 2(2):148-155

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the 1970’s. By 1980, there were about 70 own-commercial federal parastatals. There were also large numbers at the state level (Onwioduokiti, 1999: 51). When the Nigerian economy entered a recessionary phase in the 1980’s, it was argued by policy makers that government or public enterprises must operate according to the profit motive rule. Hence, the structural adjustment programme of the government set in motion a process for privatizing and commercializing public enterprises. In recent years, privatization of public enterprises has preoccupied policy analysts in the search for solutions to improve the performance of state-owned enterprises. Several developing countries including most African countries have embarked upon extensive privatization programme within the framework of macroeconomic reform and liberation, revising the earlier strategy of using public enterprises as engine of economic development. At the beginning of 1990, about a dozen African countries had undertaken so many form of privatization, by 1993 the number had doubled and by the end of 1996 virtually all African countries had divested their public enterprises. Nigeria appears to have a unique case of privatization. As economy has its belly flat on the ground for a long time and therefore needs privatization to serve as a necessary tool for jump-starting if so as to put it back on the path of sustainable growth pre-conditional for the membership of the present global economy. It was estimated that successive Nigerian governments to date have invested over 800 billion naira in state-owned enterprises and annual returns to this huge investment have been well below 10%. The government has continued to subsidize these enterprises despite their dwindling revenue profile in order to enable them sustain and discharge social welfare responsibilities to the country (Obasanjo, 1999). Nigeria earnest talk about a conducive environment for investments if the performance of its transport, telecommunications, energy sectors etc. remain dismal and epileptic. It is also true that the performance of Nigerian enterprises were compromised in many instances by the political leaders who refuse the same resource and freedom of operation which are readily made available to expatriates however, there has been inefficient utilization of resources by public enterprises coupled with heavy dependent on the national treasury for financial operations and their activities characterized by mismanagement of funds and operations, endemic corruption, misuse of monopoly power and bureaucratic suffocation from supervisory ministries and its inability to enhance the social and economic well-being of the people no doubt placed government under tremendous pressure to initiate various economic reforms with privatization as one of such reform programme as panacea to public enterprises quagmire. From the foregoing, it therefore becomes pertinent to critically assess the rationale for privatization particularly in Nigeria with a view that government policy makers, technocrats, students and the public will have a better understanding of privatization programme in Nigeria.

Privatization: Conceptual Issues The vast body of literature dealing with privatization shows a relative lack of interest in precisely defining its content. Privatization has become a generic term often employed to describe a wide range of policy initiatives designed to alter the mix in ownership and management of enterprises away from government in favour of the private sector. It covers a wide continuer of possibilities, from decentralization to market discipline. Privatization is a phenomenon which could be variously interpreted. This is reflected in the various definitions and approaches ascribed to it. Narrowly defined, privatization implies



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permanent transfer of ownership right from a public agency to the private sector. It could also be seen as the sale of government-owned assets, the opening of certain markets to private sector competition and government-private sector joint ventures infrastructure project (Dickson, 2001:1). Privatization can be defined as the systematic transfer of appropriate functions, activities or property from the public to the private sector, where services (production and consumption) can be regulated more efficiently by the market and price mechanism. The end product of privatization is thus a significant change in the relationship between the government and the private sector, with the role or the level of involvement of the state in the economy being reduced, as more of the functions get shifted to the private sector. According to Kay and Thompson (1986) such a reduction in the level of the state involvement will in turn relieve the state not only of the burden of running the enterprises, but also remove the accompanying budgetary obligation (especially where some of the enterprises are making losses). Privatization of public enterprises has become worldwide movement with first developed countries and secondly developing countries selling all kinds of enterprises. By 1992 some 7,000 enterprises had been privatized worldwide, some 2000 in developing countries (World Bank, 1995). A number of countries developed and developing have imbibed privatization programmes as a means of economic turnaround. United Kingdom, Italy, Germany, Spain, France, Japan, Mexico, Argentina, Brazil, Chile, Poland, Kenya etc. and even Nigeria have undertaken one form of privatization or the other. It has been described as an economic miracle mainly because it freed moribund industries from state control and improved their efficiency and productivity. According to Anya (2004), privatization as a tool for economic management came to the front burner when Chile became the first country to turn public assets/businesses to private operations in the early 1970s. Since then, over 140 countries (both developed developing have embraced privatization as a route to economic growth and prosperity. While the details and strategies of the privatization exercise may vary in each of these countries, the ultimate objective is to liberalize the economics through increasing private sector involvement and capacity utilization. A critical aim is to free enterprises from control by rigid and bureaucratic structures and makes the management of such enterprises more flexible in their management and investment strategies. In Venezuela, it is termed capitalization while the Brazilians call it flexibilization. In other countries such as Argentina, United Kingdom and Mexico where it has worked, different tags have been adopted but the aim and purpose have remained the same. Privatization involves the partial or total transfer of ownership of public enterprises to the private sector. Fully privatized public enterprises are those in which the government surrenders its ownership entirely. The partially privatized public enterprises are those that the government considers strategic and wants to keep under its supervision through minority shareholding. There are at least five forms of privatization (Ideye, 2002).

• Public offer of shares: the state-owned shares in the enterprise are offered to the public at large (i.e. replacing government ownership by public ownership).

• Private placement of shares: the state-owned shares in the enterprise are transferred to private individuals

• Debt equity swap: the ownership of a public enterprise is transferred to the private sector in settlement of its debts.

• Liquidation: the breakup and / or sale of the public enterprises assets.


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• Deferred public offers: for example, the shares of the public enterprise are offered to its employees, etc.

Conceptually, privatization is regarded as a complementary measure for promoting effective competition between public and private firms in a manner that would be beneficial to both consumers and the economy in the medium to long term. It is an important element for promoting economic efficiency by curbing the monopoly of government over the ownership and control of public enterprises. Despite the different interpretations of the concept of privatization, the basic fact still remains that, transformation or shift takes place in the decision-making entity from public to private.

Performance of Public Enterprises and the Privatization in Nigeria: An Introspection The Nigerian government for the better part of the first two decades following political independence in 1960’s was visibly involved in the promotion, management and control of commercial and non-commercial enterprises in the economy. The intent was to generate faster economic self-reliance growth and development. The catalyst to the eventual burgeoning presence of public sector in the economy were from two main sources – the sudden and unanticipated increase in revenue occasioned by crude oil export in the early 1970’s and the fostering of de facto state capitalist strategies. The result was that by the early 1980’s Nigeria’s public enterprises sector had become one of the largest in Sub-Saharan Africa. According to Lewis (1990) there were as much as about 275 and more than 600 federal and state owned enterprises, respectively. These contributed about 35% to the Gross Domestic product (GDP) and 500,000 work force representing one third of the public sector employment and almost 22% of total employment in the formal sector of the economy. One major implication of the enlarged public sector presence in the economy was that the mixed economy in Nigeria was substantially tilted in favour of the government. Government thus dominated and contributed enormously in the economic activities of the country. Expectedly, actions and inactions of government impacted seriously on all facets of the economy. This was true both in government’s revenue resources and expenditure patterns. The second implication of the bloated presence of government in the economy was that the numerous enterprises made huge financial and material claims on government resources. The magnitude and extent became so extra ordinary that in 1986, the federal government openly acknowledged that about 40% of non-salary recurrent expenditure and 30% of its capital budget had gone to support investments in public sector enterprises estimated at N23 billion (N8 billion equity and N15 billion in loans). This even excluded the state and local government owned enterprises. One single most important and unfortunate factor in the Nigerian public sector investments was the little returns on investment. According to Zayyad (1992) the federal government by 1985 had invested an estimated N23 billion in public enterprises with annual return on investment less than N500 million. Public enterprises is said to have consumed over $100 billion as at 1995 with control funds of over N1trillion – almost at par with current federal budget and return on investments averaged less than 0.5 percent (Bala, 2003). This dismal performance of public sector enterprises had grievous consequences for public finance, economic growth and development.



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A deepening effort towards salvaging the worsening situation culminated into the 1986 Structural Adjustment Programme (SAP), which aimed at the restoration, in the medium term of healthier path of national economic development. A key course of action of SAP towards realization of policy intention was to reform public enterprises so as to lessen the dominance of unproductive investments in the economy improve their efficiency and intensify the growth potentials of the private sector. To achieve the above desired culminated into the packaging of a public enterprises reform program whose main thrust were divestment of government interest in a number of non-strategic enterprises and commercialization of others. A supportive decree, privatization and commercialization Decree was promulgated in 1988. This decree makes provision for the privatization and commercialization of federal government enterprises and other enterprises in which the federal government has equity interests. This decree gave breath and life to effective public enterprises reforms in Nigeria. Rationale for Privatization Privatization according to cap 369 laws of the Federal Republic of Nigeria (1990) is the relinquishment of all or part of the equity and other interest held by the federal government or its agencies in enterprises whether wholly or partly owned by it. Harvey and Henry (1997) see it to include any initiative that increases the role of the market in areas previously considered the province of the Stat (national or local). These include not only the sale of State assets, but deregulation and contracting out of public services to private providers. Privatization is based on the premise that the private sector is an instrument for realizing protective and allocative efficiency and higher economic growth, while the promotion of efficiency – both economic and social is central to privatization. There are many number of reasons advanced for the privatization of public enterprise. According to Obikenze and Obi (2003) they include:

• Inefficiency of government enterprises: over the years government enterprises have become so inefficient, as epitomized by the epileptic services they render to the public. This is inspite of the fact that the government has and still continues to pump in a lot of money into them. Instead of improving, most of them seem to be retrogressing. Acting as drain pipes on the economy without making any meaningful contribution to our economic development via service delivery, the government decided to transfer them to private hands that have over the years proved to be better managers in order to reduce wastage.

• Economic recessions: The Nigerian economy has been in a very poor state for quite some time now. The level of unemployment is simply unacceptable. The excruciating foreign debt food crisis, poor infrastructure etc. are all evidences of the economic decay which the nation has found itself in. Apparently, the economy can no longer sustain the level of wastages associated with public enterprises. Also as a step to get out of this malaise, a solution has to be found on how to reduce wastes. Privatization is one of such solutions.

• Structural Adjustment: Following the down turn in the Nigerian economy in the early eighties, the government of Alhaji Shehu Shagari stated the Austerity measures which were aimed at bringing about a reduction in government expenditure and imports. These measures did not achieve much before the government was booted out of office by the military which also continued the search for policy measures that will review the economy. In 1986, the Babangida government introduced the World Bank/IMF


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sponsored Structural Adjustment Programme (SAP) incidentally SAP had as one of its policy measures: rationalizing the extent of public sector participation in the economy through a programme of privatization and commercialization of these enterprises (Osagie, 1992).

• Development Fad: Hence the entire world is moving towards capitalism where the economic decisions of what, where and how to produce are left for the market forces, the system frowns at state ownership of the means of production. Nigeria is not left out of this global development fad which seems to have chosen capitalism as the best and quick means of development. Therefore the present privatization programme can be situated within the ambit of international capitalist development.

• Restructuring the Economy: Anyanwu (1993) argues that privatization will help restructure the Nigerian economy, reallocate public fund to efficient users, create a self-sustaining culture, and attract foreign investors, while goods and services will reflect real values. In precise terms, the programme of privatization worldwide has been driven by a number of factors most of which took their root from unabating economic difficulties, failure of state owned enterprises to perform as much or better than private sector (less of comparative advantages) and the imperative need for economic growth and development. Thus, no single factor, after all motivated the desire of many governments to divest from the economy. The case of public sector enterprises inefficiency, which is often cited as a key factor necessitating privatization is but a launch pad.

President Olusegun Obasanjo (1999) stated that: Privatization permits governments to concentrate resources on their core functions and responsibilities while enforcing the “rule of the game’ so that the market can work efficiently with provision of adequate security and basic infrastructure, as well as ensuring access to key services like education, health and environmental provision. The objective is to assist in restructuring the public sector in a manner that will affect a new synergy between learner and more efficient government and a revitalized efficient and service oriented private sector. Privatization as an element of economic reform program is said to have the ultimate goal of improving the economy as a whole. It seeks to achieve this by:

• Freeing government from the bondage of continuous financing of extensive projects, which are best, suited for private investment by the sale.

• Reducing government borrowing while raising revenue. • Encouraging efficiency and effectiveness in resource utilization. • Promoting healthy market competition in a free market environment. • Broadening enterprises share ownership thus engendering capital market development. • Improving returns from investments.

Reform or restructuring of any sort usually elicit skepticism or even opposition from interest groups. It creates uncertainty and confusion in the minds of people as they remain petrified of future expectation. Such economic reforms are often mired in political and social intrigues amongst the elite who often claim to be in the vanguard of protecting the interest of their people. Along the same line of argument, Obadan (2000) summarizes the fears about privatization as follows:



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Fear of job losses, exploitation of consumers through price like and low quality goods and services, concentration of public asserts in the hands of small elite groups and worsening of income and wealth distribution. Fear of subjugation of social objectives monopoly of the privatization process by ethnic and other interest groups with easy access to capital, fear of lack of transparency, and hence corruption and nepotism, in the process, and fear of foreign domination.

For credible privatization programmes to be achieved, the above fears have to be addressed with appropriate policies and regulatory frameworks to accompany the privatization process (Abdullahi, 2006).

Concluding Remarks From the foregoing discussion, there is no doubt that privatization is in general a public enterprises reform activity with many different faces. It is highly driven by diverse, multifaceted and complex economic social and political factors. The question however has shifted from whether to privatize to how to privatize effectively and efficiently. Thus, if properly implemented, privatization can yield substantial benefits in terms of enhanced efficiency, growth and better service delivery. But then, privatization has to be reviewed as one of the processes of economic reform and should be implemented with complementary macroeconomic policies to achieve desired goals. Such policies relates to economic and financial liberation and competition, and appropriate regulatory framework to ensure proper conduct for privatized enterprises. Beside the above, Obadan (2000) suggests conditions essential for successful privatization, and these include: transparency of the privatization process, satisfactory use of privatization proceeds; political commitment; appropriate policy environment; adequate preparation; adequate financial resources; and appropriate instruments in relation to widespread ownership. Suffice to say that privatization is a process, a solution and a means to an end and not an end on itself. Thus if public enterprises were effectively managed under government ownership, we would not be talking about its privatization. But we want to believe that with privatization, the Nigerian attitude towards government owned property (no man’s business or property) would change. Private owners would not be excessively profit motive driven bearing in mind that this can only come about with the effective and efficient use of these goods and services by the public. Though the protagonists and antagonists in the raging controversy on privatization have remained pertinacious that it is rare for a completely new economic policy to move from novelty to global orthodoxy in the space of two decades, the fact remains that there can be no economic growth in the face of unproductive public investments thus, privatization is able to enhance growth to the extent that such is able to contribute to economic growth in the long run.

References Abdullahi, I. B. (2006). “Privatization of Public, Enterprises. The Nigerian Experience” In Sahu, A. al The National Question and some selected topical issues on Nigeria. Ibadan: Vantage Publishers. Akerele, W. O. et al. (1994). Strategies for Privatization of the Nigeria Economy, the Role of the Private

Sector. Ibadan: Nigeria Economic Society Journal. Akinbade, J.A. (2004). Public Enterprises and Privatization in Nigeria. Yaba, Lagos. Macak Books Ltd.


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Anya, A. O. (2004). Comments on Privatization in Nigeria. The Hague Netherlands. A paper presented at the Nigerian economic summit.

Anyanwu, I. et al (1997). The structure of the Nigeria economy 1960 – 1997. Onitsha FOAANEE Educational Publishers Ltd.

Ayodele, S. (1999). “Issues on the Privatization of Public Enterprise in Nigeria” Bulluen Magazine Published by the Central Bank of Nigeria.

Bala, D. D. (2004). “The Nigerian Privatization Programme: An Overview” Paper Presented to the State Committee on Sale of Government Owned Companies. Yar’Adua a Centre, Abuja, August, 10.

Ikhinwin, E. (1999). Opportunities and Threats in Privatization. The Guardian, Wednesday, 13, October. Kay, J. A. & Thompson; J. J. (1986). “Privatization. A Policy in Search of a Rationale”. The Economic

Journal Vol. 96, March. Laleye, M. (2002). “Public Enterprises” In L.A. Damolekun (ed) Public Administration in Africa: Main

Issues and Selected Country Studies. Ibadan. Spectrum Books Limited. NCP (1999). The National Council on Privatization Document. Abuja, July 1999. Obadan, M. I. (2000). Privatization of Public Enterprises in Nigeria: Issues and Conditions for Success in

the Second Round, NCEMA. Obasanjo, O. (1999). “Imperative of Privatization”. Except of Inauguration address of the National

Council on Privatization at Presidential Villa, Abuja. Obikenze, S. Z. & Obi, A. (2003). Public Administration in Nigeria. A Development Apporach. Onitsha:

Book print Ltd. Onwwduokiti, E. (1999). “Privatization in Nigeria: Options for the Next Millennium “Bull Union

Magazine, Published by Central Bank of Nigeria.

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Michael Ukah, 2014, 2(2):170-186

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Structural Adjustment Programme and its Negative Effect on Education in Nigeria: A philosophical Reconceptualization

Michael Ukah, PhD1

1School of General Studies, Michael Okpara Federal University of Agriculture, Umudike, Umuahia, Abia State, Nigeria


Abstract In this paper our attempt is to insist that there is need for a re-conceptualization of our educational system contrary to the one prescribed by World Bank and IMF through Structural Adjustment Programme(SAP). A World Bank and IMF instigated policy has had a toll on our economy and has made nonsense of our educational efforts. It has robbed us of educational freedom, building up of infrastructure, recruitment of competent teachers and the articulation of a worthwhile educational policy that will drive development in our country. Our position is that if we are going to make any progress at all, we have to review all the recommendations suggested by IMF. Our educational system must be tailored to meet our indigenous needs and challenges.

Introduction Education has variously been defined and described by experts. Our interest now is neither in the definitions nor in the descriptions of education, rather we are mostly concerned with the functional implication of the concept of education and how it has been allowed to operate freely. Plato earlier on wrote on education, its importance, and problem, what kind of education will be suitable for us, who are responsible for the education of the youths? Rousseau recommends public education and says that its purpose is to reproduce the national culture from one generation to another, to develop in the students the national character. Genuine freedom for him is only possible, “in subjecting one’s own life to the welfare of the whole, here one finds the only freedom which is genuine. Also, Immanuel Kant sees the elevation of man out of disorderly life of egoistic desire into that of humility as the goal of education.

Interestingly all these people saw education as that which will enlighten one brings one into close contact with his culture and his society and prepare one for the future.

It must be made clear that for Nigerians, they no longer see education as the difference between ignorance and knowledge rather they see it as the difference between a marginal meaningless existence and good life (Sonni 7). It must be pointed out that no meaningful human development (physical, intellectual, psychological and sociological) can take place without freedom. Since education means so much to mankind, then freedom to go into such cognitive intellectual enterprise becomes necessary.

This work then is targeted towards highlighting the various ways our people have been pauperized by denying them their academic freedom. It then makes suggestions on how we can tackle the problem. We shall review part one of a thousand flowers. A Brief Textual Review of Part One of “A Thousand Flowers” The Committee for Academic Freedom (CAFA) was formed in 1990s by some Americans and Africans who were no longer interested or disgusted on the way things were going-on in African universities. They decided to leave because things were no longer normal. In a bid to liberate the universities from these problems, the country adopted the structural Adjustment Programme (SAP), imposed by the World Bank (WB) and International Monetary Fund (IMF). This was geared toward stimulating economic recovery, but then

International Journal of Public Administration and Management Research (IJPAMR), Vol. 2, No 2, March, 2014 Website: http://www.rcmss.com. ISSN: 2350-2231 (Online) ISSN: 2346-7215 (Print) Structural Adjustment Programme and its Negative Effect on Education in Nigeria: A philosophical Reconceptualization.

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little did the country know that it was sitting on a keg of a gun/powder and it was not long before the real crisis started.

Silvia Frederici, the editor of the work under review has this to say in the editor’s introduction:

“All funds to public education were cut, many teachers and other academic staff were retrenched, and wages were frozen. As a result, in a few years, the existence of what had been one of the main conquest of the anti-colonial struggle – the development of an African educational system – was seriously undermined (Silvia Frederic, (ed.) A Thousand Flowers: A social struggle against Structural Adjustment in African Universities, African World Press, Inc; 1992, p x).

CAFA’s formation has three main objectives then: to provide a support structure capable of responding promptly to emergency situations on African campuses; to mobilize teachers’ union and other academic organisations in North America on behalf of African colleagues and students; to reframe the terms of the debate surrounding the crisis of education in Africa (x1).

Human rights violation organisations started as early as 1980s to highlight on the abuses of human right violation on our campuses. The climax of this was the Lima Declaration of 1988 which was drafted by the initiative of the world University service, and the three collections of case studies on Academic in Asia, Africa and Latin America. Prior to this time there was an assumption that the violation of academic freedom was borne by the African states so the objective to be pursued in the Lima Declaration was to move the state out of the universities, to liberalize the process of appointments and curriculum formation and ultimately to establish that academic rights are human rights.

The important fact that needs to be noted is that the ultimate responsibilities for the violations of many academic freedom and rights on the African soil was borne by international financial institutions and more specifically by the policy of “adjustment” adopted by Washington and the European Union in the 1980s, that calls for the (re) colonisation of African educational systems.

Let us now consider the structural adjustment and recolonisation of education in Africa as it was reflected by George Caffentzis. He tries to put forward the philosophy that underpinned the recommendation for African education as articulated by the World Bank (WB). He reported that from the works written by the WB staff, there is a call for drastic reduction of higher education in Africa. It purports that the reduction was geared towards raising higher efficiency and a more egalitarian distribution of educational resources. The evidence provided actually raised more doubt on the veracity of the claim by WB.

Actually the conditions for adopting SAP at the end of the day were more destructive than the claimed gain:

SAP’s conditionalities include the removal of subsidies to students for food and accommodation, a currency devaluation that inflated the cost of educational materials and cuts in government funding of education (p. 5).

The most serious problem of SAP was that it then became difficult for an average family to send their children and wards to school because of their low income. Social spending in Sahara and sub-Sahara Africa fell by 26% between 1980 and 1985, Books and other materials for studies became scarce commodities.

From the foregoing, the critics of WB and IMF are of the opinion that these bodies were responsible for the decline of education in Africa. But the WB has dismissed this criticisms arguing that the real problem was Africa’s post-colonial higher education system, which according to it, was bureaucratically bloated, inefficient and in a egalitarian. The WB


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also accused African universities for being responsible for the under funding of the primary education, it holds that more fund was expended on it than other institutions.

In a nutshell the WB would love us to believe that SAP is a blessing in disguise for African education. It also believes that African government under pressure from SAP would have a golden opportunity to “increase the efficiency of resources use” and to keep in check the demand of urban elite and impose a new education regime egalitarian.

George Caffentzis did not waste time in considering the contradictions and implications of the WB’s new policy of African education. He says that the advocated adjustment of education is bound to have extreme negative consequences from which African education might never recover. He equally pointed out that the World Bank’s picture of African campus life was unrealistic; he rather observes that the classrooms were overcrowded; students were running one meal per day, failing water and electricity supplies, collapsing buildings, libraries without journals or books, lack of educational supplies ranging from chalk to papers, etc – these according to him, was effect of SAP (p.8). As if these were not enough the police or the Army were stationed at strategic places on the campuses to suppress students who would like to organize a protest against the unjust rule.

The WB decries overstaffing but then the interest was more on the attempt to keep the faculty running without the basic equipment. One of the major contributions is seen between WB’s policy and vision. It maintains that for Africa to survive and compete favourably in the 21st century competitive world that it must not only have both literate and in numerate citizens but also highly qualified and trained people, but then SAP’s policy guarantees that this requirement will never be fulfilled, for African education was almost on the verge of extinction.

It is of interest to note that African students and intellectuals have not resigned themselves to the dependent status that WB assigned them in the production of knowledge rather African students and intellectuals now act as test-ground for intellectual and academic excellence. Caffentzis puts it well when he says:

“Not only is the World Bank often the prime mover or cleus absconditus with respect to the repression of academicians and students. It is currently the grandmaster in the reorganization of African Campuses.” Moreover the World Bank, like IMF, operates right in our midst, being financed by U.S tax dollars, and staffed by Academic colleagues. …And we have a responsibility to make our voice heard if we stand convinced that the rationalization of African academic risks destroying millions of Africans and for years to come the possibility of schooling at all levels (CAFA Newsletter No. 3 Jan 1991).

From this long quotation one can immediately see the WB’s hostility to African universities and their students. African students were concerned for saving their heads from the impending extinction or danger that the WB and its allied bodies planned for it.

Silvia Frederici reflected on “the Recolonization of African Education” that the economic and political recolonisation of the African continent by means of IMF/WB – imposed devaluation and structural adjustment programs, cut across every other facet of African life for instance education (p.19). There is this erroneous belief that African academics cannot produce any intellectual work and therefore ought not to be present in world market of ideas. The way and means by which intellectual recolonisation is carried out by these bodies is through “demonetarization” of the continent. This is done by reducing wages to their paper values and this also makes it impossible for the African intellectual workers to survive. Another way of recolonisation was by the destruction of the autonomy of African intellectual production through systematic defunding of African academic


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institutions. This is instrumental to their take over by international agencies, which can thus organize and reshape Africa’s academic life for their own purposes (p.2).

The method of defunding was by cutting off all the subsides to education. And normally WB/IMF imposes it on African countries as conditionalities for new loans or debt payment rescheduling. Such cuts have a lot of effects like (a) The escalation of the cost of education as measured by the cost of student accommodations, feeding, books and transport.

(b) The dramatic deterioration of education infrastructure (c) The forced dependence of African academicians and academic institutions on

foreign agencies and foreign individual donors to provide economic help to “keep things running”.

In fact, it could rightly be said that the control of African academic and intellectual life by first world agencies is directly established through the loans the World Bank is giving to African government for the purposes of education reform. Finally, Silvia is of the opinion that the virtual take over of African education by international agencies and its restructuring into a costly commodity reserved only to the happy few has a triple purpose: to devalue African life and labour, to lower social expectation and more importantly to curtail any independent oppositional thinking.

He complained bitterly that these facts are hardly known to North American academicians but then most Africans are quite aware of them. He then suggested a way out of the mess. According to him, we have to educate ourselves on the situation of African teachers and students and propagate this information. Secondly, we have to refuse to become scab, by refusing to take position in African universities undergoing the ‘rationalization’ process. Thirdly, to expose in every possible circumstance (e.g. in academic conferences) the World Bank’s and IMF’s plan for African education and African future in general. Fourthly, to provide material support for African teachers and students so that they can continue to carry on their activity in conditions of genuine intellectual autonomy (CAFAS) Bulletin No. 34 1991).

In his article “Booker T. Washington in Africa: Between Education and (Re) colonization”, Ousseina Alidou makes a case for an African education. First and foremost, the name Booker T. Washington is employed in a dual sense; it could refer to either the man or his ideas on the question of “black education.” The major interest is on the curriculum that he adopted for the education of black people who were subjugated and enslaved and later to the reactionary effect of Jim Crows law as applied in the context of colonialism and apartheid. His emphasis was more on vocational and industrial education, less attention was given to mere book learning. The name Booker now connotes an “educational philosophy that transcends the person and his place and even his time.” It must be pointed out that the British colonialist never adopted his philosophy in the construction of their own educational policies in Africa. His philosophy of education was not meant for the upliftment of Africa alone but to the whole third world countries.

The black African Nationalists saw his “philosophy of education” as something very close to the idea of philosophy of education that is needed in Africa.

During the colonial era, Booker T. Washington’s educational philosophy appealed to many African Nationalists. Dube from South Africa, Koinange from Kenya and Azikiwe from Nigeria, all looked to it as an educational model that could liberate blacks from the European colonialists who controlled African education and economic resources (26).

In their view, the black Nationalists saw this recreational philosophy as that which can promote self-reliance. And this was exactly what was needed at the point in question. One


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point that needs mentioning at this juncture is that both the British colonialists and southern African settlers felt very comfortable with promoting and implementing Washington philosophy in Africa. This is due to the fact that it did not seek to challenge the status quo and white domination. The colonialists even found it as one of the ways to support their racist educational policy. In summary, it could be said that both the African Nationalists educational agenda and the European colonialist agenda agreed with Washington’s prescription.

A century later, we discover a kind of parallel between Washington’s philosophy and the British colonialists ‘educational policies in Africa. Also, the same is seen in World Bank’s and International Monetary Fund’s (IMF’s) vocational education programs in Africa. The parallel is seen more when one compares the Washington’s industrial philosophy with colonialists’ policy or philosophy of “Capacity Building.” We have already pointed out that Washington’s philosophy of industrial education centres on self reliance. But then with regard to the World Bank’s Africa Capacity Building Initiative (ACBI), George Caffentzis shows and demystifies its meaning and shows its devastating effects on various grounds:

He points out the ambiguity of the term “Capacity” in relation to its products and systems of knowledge: its implicit devaluation of African intellect; the initiative’s promotion of Africa’s dependence on foreign agencies and “donors”; its failure to recognize that the collapse of the African university system is itself a direct consequence of the World Bank and IMF structural adjustment programs (Alidou: 30).

The African Capacity Building Initiative (ACBI) could be seen as an explicit statement used by the World Bank to dominate the development of academic institutions in Africa. Succinctly put, we can say that ACBI does not present an accurate picture of policy debate in Africa. On the contrary it devalues Africans as producers of knowledge; it also denies their ability to autonomously achieve mastery of basic cognitive skill. It equally calls for foreign agencies to take into their hands the restructuring of African education, in violation of any autonomy rights. ACBI thus represents a violation of political intellectual sovereignty, and the right to self determination. The implication of the above stand is that if the promoters of ACBI are allowed to have their ways, Africa will only be the agenda of foreign capital, with no concession made to the right of self determination. The capacity the WB wants to build in Africa tends to preclude “intellectual capacity.”

Alidou examines the collapse of Francophone African Education system. He pointed out that the philosophical foundation of Francophone is the use of French as the major linguistic medium and the means by which French has achieved a cultural and intellectual control and created economic dependence between her and the African countries. The Francophone effect has several consequences for the educational system in Africa. It lacked adaptation to the development needs of Africa. It imposed the old system of education on African schools without considering her peculiarities. It made African countries to be a dumping market for French school manuals and other materials that it has considered inadequate.

Another area where French expressed her imperialist tendency was on sending to Africa some unqualified experts whose mission it was to train African educator. Here there is an inherent contradiction, for there is a Latin adage which says that “Nemo dat quod non habet” - No one can give what he has not. The inexperienced expert will surely give what he has. The implication of this would be the justification of the claim that Africa cannot be involved in any serious cognitive enterprise. And this is because they have gotten only the teaching from the inexperienced experts.


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Alidou pointed out that the sad aspect of the dumping of the unqualified experts was:

…the maintenance of these useless French expatriates is at the expense of the poor African countries which have to pay their salaries according to the scale dictated by the cost of living in France (Aliduo: 37).

It must be noted that the maintenance of these communities of French expatriates in Africa, in the name of technical assistance to education, forces the Francophone African countries to look for loans from agencies such as the World Bank and the International Monetary Fund (IMF) at interest rate that are beyond the repayment capacity of these countries. This unbearable burden has continued to weigh on many Francophone African countries, and it will even continue for generation to come.

Every attempt made by the Francophone Africans to limit the damage of French control over the African educational system was vehemently countered or opposed by the French people. The Francophone African countries were impaired by the Anglophone educational reform; such countries like Tanzania and Nigeria. They opted in the 70s to revise their curriculum according to their developmental needs. The reform undertaken by most Francophone countries resulted into laying off of French expatriates. And this also helped most of the African teachers to be employed. In reaction to this, in the 1980s France decided to cut its supply of educational equipment and materials with the aim of crippling the new educational reform.

The success of the French sabotage efforts in Francophone Africa once more witnessed the return of western experts from France, this time with the complexity of the WB and IMF whose goal was first to invalidate the achievement of the internal reform undertaken by Africans themselves, and then impose their “model” of reform. According to Alidou :

The new educational reform proposed by the World Bank and IMF insist that Africa should promote vocational training because it lacked both intellectual and technological capacity to sustain higher education (Alidou: 35).

In other words, what Africa needs are carpenters and manual skilled workers and not those with cognitive power. In the reform advocated by the Francophone African countries, they opted for the use of or introduction to African languages as a media and subject of instruction and the reshaping of school manual in the way that it will reflect African realities. Later problem arose on what should be the linguistic medium of instructions? The functionalists suggested the use of English language while the Nationalist insisted on the use of African languages. It must be noted that the European languages in which Africans are taught, therefore, are important sources of intellectual control. They aid the World Bank attempt to allow Africans learn only what promote the agenda of international capitalism. Repression of Academic Freedom There is no gainsaying the fact that SAP is today the major threat to academic freedom in Africa. The adoption of SAP meant the adoption of all the management of educational system and other economic lives of the international agencies in Africa. It makes it difficult for the cry of the African teachers and students to be heard in international circles. According to Silvia, SAP has generated so much conflict on university campuses because it is the vehicle for dismantling of Africa’s education system (Silvia 2000:62).

It now constitutes itself into a means by which Africans are denied the right to education, in conformity with a strategy that wants African to participate in the world economy only as providers of cheap labour and nothing more. Silvia denies the fact that the present deterioration of academic freedom in Africa stems from the autocratic nature of the


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African state, the conflictual relationship between state and civil society and from the state control of academic institutions. The above claim is untenable and should be dismissed on the basis of “want of substantial claim. First, it appeals to cultural factors rather than the economic policy, it also fails to know that behind the so called the state the civil society is the reproduction of labour which is the process we have to examine in order to understand why the introduction of economic liberalization in academic has been accompanied by the escalation of repression.

It was the objective of SAP to downsize the African higher education. On the average only 0.8% of the population has access to a tertiary education. The international agencies – the World Bank and International Monetary Fund – try to justify their claim that so much money was already expended on university education at the expense of the primary education. But we have tried to justify in this review “they never” meant will for the Africans. It must rather be pointed out that the rhetoric of efficiency and improvement by which SAP is promoted hides the reality of educational retrenchment and that the proposed alternative financing mechanisms are actually tools for phasing out the unwanted students and academic staff. In a nutshell it could be said that SAP was actually poise to see the demise of higher education in Africa. If this is achieve then the consequence would be obvious- the obliteration of genuine manpower in Africa and the support of the claim that Africa needed only vocational education. From the foregoing one can say that the violation of academic rights carried on in the implementation of SAP are not the only examples of academic right abuses in Africa. Yet in many ways there are the most worrisome. The World Bank being unhappy with the last generation of African intellectuals produced by the African universities decided to launched, the Africa Capacity Building Initiative (ACBI) in 1991. This was to train African policy analyst and development managers. This was not actually received by the African’s and African scholars who already believed that WB has never meant well for the future of African education.

Looking at the WB document on ACBI one notices an implicit belief by it that Africa lacked the cognitive skill to handle her affairs. Again that it needs to be guided and sustained by WB. This recommendation is justified with the claim that no serious socio- economic knowledge is presently being produced in Africa, or can be produced without the sustained intervention, direction and guidance provided by the foreign agencies (Caffentzis 2000: 70). The authors of ACBI confirmed their impression of Africans intellectual deficiency when they wrote that Africa is blessed with a greater number of foreign “technical assistants” – from senior policy analysts, managers and business executive to technician and teachers – than any other region of the world (Caffentzis: 200:74).

The purpose of ACBI was “to build, over the long term, a critical mass of professional policy analysts and economic managers who will be able to better manage the development process, and to ensure the more effective utilization of already trained African analysts and managers. Actually, in itself this project does not violate academic freedom in Africa. But the intended method of its implementation does. It must be recalled that besides disseminating the message of “Capacity Building” the ACBI tends to monopolize the distribution of fund going to African university system from all sources and to block the fund from any sources or institution that does not subscribed to WB plan for African development. The fact of channeling every fund that comes to the African universities through WB does not permit academic freedom. Also not to allow individual and institution autonomy from state control of knowledge production and dissemination to violate academic freedom. Surely a state that premised its funding of a research program on the acceptability of certain state-sponsored conclusions, and forbids any supplementary funding from other sources would be considered a violator of academic freedom. The WB intention in creating ACBI is to do exactly that (Caffentzis, 2000: 80).


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We can succinctly say that the ACBI is an explicit statement that the WB intends to dominate the development of academic institutions in Africa for the foreseeable future. It attempts to justify this domination under the rubric of tracing Africans to be “Capable” but the veracity of this claim is very questionable. Now that becomes the fate of the future of the African university. In answering this, Silvia reviewed the work of Carlsson, titled “The Future of the African University” 1996. He says that the fiscal crisis of the African states has made it less and less capable of providing the necessary financing for the day to day running of the universities; so that, the most important external sources of fund is aid. He proceeded and advised solution on how to put back the universities on course or on their feet. He mentioned three ways of solving this problem: (1) prioritizing (2) regional co-operation, and (3) phasing out the universities as an institution that is perhaps outdated. From our discussion so far we can rightly say that the future of the African universities depends very much on the teachers and students of Africa. The curriculum must be drawn in such a way that the reality of African life is taken into consideration. The negative evaluation of African universities by international bodies like WB and IMF should be corrected. We shall now have a critical look on the concept of SAP and its philosophy. A Re-examination of the Theory and Philosophy of SAP in Nigeria The theoretical basis for adjustment is that distortions are due to deviations from marginal cost pricing either domestically or externally. Structural adjustment has always been popularized by International Monetary Fund (IMF). Consequently, the theory is deeply rooted in the dogma that market forces represent the sine-qua-non for arriving at realistic prices. The philosophy that is behind this is that of capitalism. The need for an adjustment programme arises when an economy experiences an imbalance between aggregate domestic supplies which usually manifests itself in a worsening of a country’s balance of payments position. The adjustment programme is usually supported and/or created by the IMF, there are equally at times when a country maintains that its adjustment programmes had been designed internally or externally, all adjustment programmes by the third world countries mirror exactly what is contained in IMF. According to John Ndebbio (1991:226), the principal elements of an adjustment programme include the following:

(1) adopting measures to stimulate domestic production and broaden the supply base of an economy;

(2) adopting a realistic exchange rate policy (devaluation); (3) rationalization and restructuring of tariffs structure; (4) trade and payment liberalization (5) reduction and curtailment of government expenditure; (6) wage restraints (7) adoption of appropriate price policies (the removal of subsidies); (8) privatization of public sectors enterprises; (9) increase in domestic interest rates and (10) reducing administrative controls through a heavy reliance on market forces

The objective of adjustment entails restoring a sustainable balance between aggregate demand and supply; expanding the production of tradable, and easing balance of payments constraints. The proponents of adjustments before that very element of the package is set in motion in the medium term, an ailing economy would be on the path of sustained non-inflational growth. The above is the claimed aim of structural adjustment programme. The


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theorists of structural adjustment programme has not actually given us the real meaning of the word “structure” we can only infer that the theory of structural adjustment programme either perceived a structure as consisting of economic sectors often modeled as a system of equations. Consequently a problem in one sector creates a bottleneck for other sectors – of course; this view of structure is very unrealistic. A structure no doubt consists of parts and how the parts are related to each other. The main elements of such parts are human beings not abstract objects. It would be better to look at the structure of an economy in terms of ownership and control of the factor of production and the relations of people within the scheme of production. The theory of structural adjustment seems to suggest that privatization of public companies will make the latter efficient and more often the yardstick for efficiency is profit. Efficiency is not synonymous with profit. The theory fails to consider the importance of some of the products of public companies to the citizens of an economy. It must be observed that privatization of public companies deprives millions of people the access to essential basic needs. Care must; therefore be taken on how privatisation is championed. The theory of structural adjustment places undue emphasis on foreign exchange availability if developing countries intend to escape from underdevelopment. It must immediately be pointed out that relying much on foreign exchange will be unhealthy for an economy. Such a motion allows a country’s economic policy to gravitate around the foreign exchange variables and thus perceives the latter as an unavoidable condition for economic development (A. H. Ekpo “Distortion in Economic and method: The Nigerian Scene in Distortions in the Nigerian Economy, Ibadan, Nigeria Economic (1987, p. 9). Now to talk about international competitiveness, we then talk about devaluation or real depreciation of a national currency in order to increase exports and reduce imports. The a-priori assumption is that economic activity following the devaluation will focus more on production of tradeables rather than on goods not traded on international markets (like construction, haircut, etc). The merit and demerits of devaluation in the theory and practice of structural adjustment has been the subject of intense analysis by economic scholars (Linkert & Kindlebeyer 1982, pp. 278 - 300). Ndebbio observes that: The “false” assumption on the question of devaluation is that imbalances which need stabilization often result from the loss of international competitiveness caused by an over-valued exchange rate (Ndebbio, 1991, p. 30).

The theory ignores or assumes away the fact that the prices of exports of developing countries are determined not only outside the borders of such economies but also in foreign currencies. Factors such as corruption, non productiveness within an economy, the degree of dependency, the structure of production, etc, are seen as not too significant. While the theory of devaluation seems attractive, the practice of it has yielded no reasonable successes. The abundant empirical evidence against devaluation suggests that its role be de-emphasized in the theory of structural adjustment (Taylor, 1981:47).

Given this scenario, how can one then explain the issue of growth and income distribution? A priori, the theory of SAP centers on increasing supply through expansion of the endowments of the factors of production. The growth component includes measures and reforms to (a) encourage investment in physical and human capital, (b) encourage the channeling of domestic savings towards investment (Martin 1987.1). The theory of structural adjustment is silent on how income should be distributed. Consequently, the distribution of the welfare loss associated with a typical stabilization programme is skewed against the poor in any country.

In fact, it is in order to question the claim of growth as embodied in the theory of SAP that we look at the measures which limit the volume of domestic credit and the curtailment of public expenditure. The cut on public expenditure affects the supply of basic


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needs such as education, health, rural and urban unemployment, etc. The sum total of these negative effects poses a challenge to the so called economic recovery objective of the theory of SAP (Ndebbio 1991:231). In a study, T. Gylfason (1987) compared the economic performance of thirty two countries implementing various forms of IMF structural adjustment with ten countries that were not implementing SAP for the period 1977-1979. His aim was to ascertain the effects of SAP on economic growth before and after SAP. The countries in his study included: Congo, Ghana, Kenya, Malawi, Sierra Leone, Togo, Zaire, Zambia, Liberia, Senegal and Tanzania. After a statistical careful investigation Glyfason discovered that the growth rate performance of those countries implementing SAP was not significantly better than those not implementing. The role of the state and the class variables in SAP cannot be over emphasized. The theory of structural adjustment seems to superficially down play the role of the state or government in economic activities. Thus, Obadan asserts:

Government itself seems to have realized the limitations of market forces in determining some other economic variables in the economy – for example it cannot allow market forces to determine wages (Obadan, 1987: 37). On the contrary the role of the state is to ensure that the state is to ensure that the economy runs along the lines dictated by market forces. The state does not represent a consensus opinion but reflect the view of the dominant class. It implies that when the state intervenes in economic matter, it is synonymous with the intervention of a class. One of the ill effects of the theory of adjustment is that it has no concrete answers to the retrenched workers except to console them that they will be reabsorbed when the economy recovers, and surely for the economy to recover, it may not be immediately.

What can we say about SAP and self reliance? For most people the panacea for the ailing economy in SAP. One of the ways of re-vamping an ailing economy is through self-reliance although it is not uncommon for country implementing structural adjustment programme to argue that the theory implicitly or explicitly requires a policy of self-reliance. Usually self-reliance is taken to mean reduction in imports; utilizing domestic raw materials for industrial production and encouraging the purchase of domestically produced goods and services. It must be pointed out however that certain elements of SAP run contrary to self-reliance – According to Obadan: SAP encourages direct foreign investment through currency devaluation and expansion of the endowment of the factors of production – these will in no doubt postpone self-reliance (Obadan, 1982, p. 35).

The so-called export promotion policy reinforces the position of the developing countries as permanent exporters of primary products. Although, it is equally true, that the theory would stimulate export but this would only be beneficial if manufactured goods and services are exported. IMF structural adjustment programme is silent on self-reliance. The IMF is more honest in the sense of theory, philosophy and implementation of SAP deepens dependence especially through its financing aspect. As far as the IMF is concerned the SAP countries will experience recovery but not self reliance. For the IMF, the countries embarking on SAP are primary product exporters and/or fuel exporters. Just little the case of Nigeria, they must import the finished goods from the developed industrialized countries of the world. From what we have said it is now true that when countries like Nigeria, Brazil and Ivory Coast talk about self reliance in the context of SAP, we know that its realization is only a dream. One of the things education will do for us is the realization of our dreams through conscious effort in recognizing our problems. The only way out is to start building theories or models which will reflect the experiences of developing countries as well as including in such models a mechanism for change. In doing this, we can learn from the


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experience of countries which have rejected the road to IMF’s imposed structural adjustment. These countries include North Korea, Cuba, China, Ethiopia, Tunisia, Nicaragua, Vietnam, etc.

There must be a break in continuity and a search of a new way or method of understanding the problem of developing countries. It must be observed that the theory of IMF’s SAP imposed policy is rooted in the philosophy of capitalism or capitalist development. We need a theory that will be an antithesis to the theory under view. Educational Freedom In order to attempt and attain a reasonable height in our quest for educational freedom we can make recourse to a Brazilian educational liberator Paul Freire. Our attention will be focused more on the “banking concept of education as propounded by him. In the 2nd chapter of his book The Pedagogy of the Oppressed, He says that education is suffering from narration sickness. And according to him, a careful analysis of the teacher-student relationship at any level, inside and outside the school, reveals its fundamental narrative character (Freire: 45).

This relationship involves a narrating subject (teacher) and a listening audience (student); the content is narrated in the way that it becomes lifeless. In this process education becomes an act of depositing in which the students are the depositories and the teacher is the depositor. Instead of communicating the teacher issues communiqués. In the banking concept, the student will only have the much the teacher expects him to have. The teacher imposes himself on the students, he receives patiently what the teacher wants him to receive, and he memorizes and repeats same to the teacher when he wants him to do that.

This type of education dehumanizes man and makes him a cog in the wheel. In summary Paulo Freire brings out the essentials of the banking concept of education as it mirrors an oppressive society. For instance: (1) The teacher teaches and the students are taught (2) the teacher knows everything while the student knows nothing (3) the teacher thinks and the students are thought about (4) the teacher talks and the students are disciplined (6) the teacher chooses and enforces his choice, and the students comply (7) the teacher acts, and the student have the illusion of acting through the action of the teacher (8) the teacher chooses the programme content, and the students adapt to it (9) the teacher confuses the authority of knowledge with his own professional authority, which he sets in oppression to the freedom of the students (10) the teacher is the subject of the learning process, while the pupil are mere objects (Freire 46-47).

In the place of banking concept, Freire advocated for a problem posing method of education. The role of the problem posing educator is to create together with the student, the condition under which knowledge is at all levels good. Indeed, problem-posing education, breaking the vertical pattern characteristic of banking education, can fulfill its function of enhancing the practice of freedom only if it can overcome the contradiction inherent in the banking concept (Freire: 53). Education as the practice of freedom – as opposed to education as the practice of domination-denies that man is abstract, isolated, independent and unattached to the world; it also denies that the world exist as a reality apart from man. Authentic reflection considers neither abstract man nor the world existing without men, but men in their relations with the world. In these relations consciousness and world are simultaneous.

It must be pointed out that in problem posing method of education men develop their power to perceive reality critically. In a nutshell, we can say that problem posing education is a humanist and liberating praxis, posit as fundamental that men subjected to dominion must fight for their liberation or emancipation. To this end, it enables teachers


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and students to become subject of educational process by overcoming authoritarianism and alienating intellectualism; it also enables men to overcome their false perception of reality.

Now that we are talking about academic freedom and taking our bearing from Paulo Freire’s banking concept of education, let it be known that SAP is one of the main causes of violation of academic rights in Africa and also a sign of the cost African students are prepared to pay in defense of the right to study, which is the very basis of academic freedom.

The struggle for access to knowledge is not easy in Nigeria and the third world or developing countries. This is evident from the students that have died and those that are still struggling to repress every kind of violation of academic freedom. It is equally evident from the slogans of the students who are struggling to extricate themselves from the SAP’s programme. Silvia and George have this to say:

In country after country, demonstration after demonstration, in its slogans, flyers, and position papers, the African student movement had shown a remarkable homogeneity of demands. “No to starving and studying,” “No to tuition fees”, “No to cuts in books and stationary”, No to the elimination of grants and allowances” “No to the structural adjustment, to corrupt leaders, and to the recolonisation of Africa” are slogans that have unified African students in the SAP era to a degree unprecedented since the anti-colonial struggle” (Silvia & George 2000: 115).

Let us take the case of Ghana, on the month of March 6, 1987 when the students demonstrated against the government decision to withdraw food subsidies in the tertiary institution. The measure was adopted as part of planned educational reform, inspired by IMF and World Bank, intended to place higher education on a cost-sharing basis. The demonstration climaxed into a week of mourning, during which students were red wrist-bands. The demonstrators said that their food should be doubled and that education was their “inalienable right”. The president of the student union said that independence is meaningless and will elude them if it is not linked with the right to free education (CAFA Newsletter No. 14, Spring 1998).

Also, in April of the same, Nigerian students demonstrated throughout the country against the fuel increase demanded by the IMF inspired Structural Adjustment Plan. Roots and confrontations with the police spread across most of the nation’s campuses. Inspector General of Police Gambo described the protests as “premeditated and executed in a most professional manner (Silvia & George 2000, 123). In 1989, on January 9, to be precise, students began a strike to protest the non-payment of the grants for several months and the government intention to stop paying them altogether as part of an IMF/WB structural adjustment program in University of Cotonou, Benin. In 1990 in University of Niamey, students boycott classes protesting the education in educational funding mandated by the SAP negotiated by the government with the IMF/WB. During the course of a peaceful demonstration police fired on the demonstrators killing 3 and hundred of others wounded (Ibrahim & Niandou Slouley 1996 p. xii).

There are actually several incidences where the students had to go on strike on protest against the denial of the educational freedom as induced by the IMF/WB inspired structural adjustment programme. Another problem of educational freedom is the one Kevin Harris describes in his work; Education and Knowledge: A new introduction to the philosophy of education (1979). He calls it “education as political manipulation.” He says that although education is the transmission of knowledge, that both the mode, method, and the content of it is being determined by the political class existing in the time. He pointed out that very often the political class will make the content of what is studied or education


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to suit their interest. He says that it is difficult to separate education from the state since the state provides education and even those that is not provided by state are monitored by the state. Education in a class society is a political act having as its basis the protection of the interest of the ruling class, in fact Freire reflecting on this says:

In a class society, the power elite necessarily determine what education will be, and therefore its objectives. The objectives will certainly not be opposed to their interests. As we have already said, it could be supremely naïve to imagine that the elite would in any way promote or accept an education which stimulated the oppressed to discover the raison d’etre of the social structure. The most they would be expected is that the elite might permit talk of such education, and occasional experiment which could be immediately suppressed such the status quo be treated.

From the above quotation one notices how the political class manipulates education and cages it. They make education to serve their purpose. They make education a manipulation of consciousness. And the moment your consciousness is manipulated it tantamount to the manipulation of the whole being of man.

As a re-cap of the high point of this area, we can say that education in a capital liberal democracy does present a way of seeing the world in a distortive, misrepresentative and moreso against the best interest of the educated. Education as a state institution is controlled by the ruling class, the capitalist, to serve their interest, and thus it functions against the best interest of majority of the educated. Education supposed to liberate the mind and make man a free critical lancer or thinker but this function of education is unrealiable because it is state controlled in a capitalist state. There are other uses of education we shall consider especially as it pertains to development. Relation between Education and Development Education has long been recognized as a central element in development. When the developing countries, like Nigeria, Kenya, etc, began their drive for social and economic development nearly three decades ago, education was perceived as a means not only of raising political and social consciousness, but also of increasing the number of skilled workers and raising the level of trained manpower- this is one of the principal works of education. These benefits, together with the visible gains from individual to individual, stimulated an unprecedented growth of the enrolment in primary school and of substantial investment in education at the secondary and university levels. In 1970, the General Assembly of the United Nations resolved that:

As the ultimate purpose of development is to provide increasing opportunities to all people for a better life, it is essential to expand and improve facilities for education, health, institution, housing, and social welfare, and to safeguard the environment (UN Resolution Adopted by the General Assembly, 15th-17th Sept 1970).

This approach to development is aimed at improving the welfare of human beings, primarily in terms of providing goods and service needed to eliminate manifestations of poverty, such as malnutrition, disease illiteracy and squalor. These efforts are not intended however as a social service rather they are the neucleus of the intended overall national development plan. And as we can say education is at the forefront or the vanguard of the movement. This comprehensive approach to development underlies the significance of education in three interrelated ways: as a basic human need. People needed education to acquire a broad sense of knowledge, attitudes, values, and skills on which they can build in later life, even if they do not receive further formal instruction. Such education provides people with the potential to learn, to respond to new opportunities, to adjust to social and


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cultural changes, and to participate in the political, social and cultural activities. As the society develops education becomes developed and education becomes a necessary condition for the ability of the individual to identify with the prevailing culture. Education equally acts as a means of meeting other basic needs. It influences and is in turn influenced by access to other basic needs. It also acts as an activity that sustains and accelerates overall development. It prepares trains skill workers at all level to manage capital, technology, services administration in every sector of the economy. Experience has repeatedly shown that development projects are not well implemented unless investment of capital and transfer of technology are accompanied by adequate human knowledge and skills. It has also been attested that economic returns on investment in education seem, in most cases, to exceed returns on alternative kind of investment, and that developing countries obtain higher returns than developed countries. Education facilitates the advancement of knowledge in pure and applied field. Thus, it does through trained personal, developed methodologies and institutional settings. Again, the ability of the individuals to identify with the changing culture and find constructive role in the society depends to a large extent, on what education can provide by way of self understanding, better knowledge of the choices available to society, and a critical view of the culture. The function of education is further determined by man prevailing factors, the prevailing economic order, political power, and social structure. According to the UN report:

Education is certainly most effective in settings in which several inter-related polices and program fostering social and economic improvement are simultaneously at work (UN, policy paper, Education, NY April, 1980, 14).

Widely diffused educational activities provide and facilitate change in prevailing socio-political conditions by providing the otherwise disadvantaged persons with a degree of social and economic mobility to break through traditional barriers, with the understanding of political right and actions, these persons can be active in organizing forces for change in the community and the nation. Education is not to be considered as a sector of development – parallel for instance, to Agriculture or industry, - but as a pervasive element that must be integrated into all development efforts.

In its 1978 meeting, the General Conference of UNESCO affirmed that “by the very complexity of the problems it helps to solve, education must be conceived in an inter-disciplinary context as a factor of multidimensional development of which man is both the end and the instrument” (UNESCO Records of the General Conference Twentieth Session, Paris, 1978, vol. 1 Resolutions 23).

The concept of education as a pervasion element has several implications. First, education must cover a wide spectrum both in content and in form. The content can range from basic knowledge to an equation research; and from training in living skill to highly sophisticated production skills. The form of education can vary from the most general type of formal schooling to the most specific kind of non formal education. The evolving multi-faceted role of education in the development process underlies the need of every country, for a more flexible, comprehensive network of provisions for education and training. Such network should be diverse enough to respond to the varying needs of learners, yet sufficiently unified to avoid channeling certain groups into dead-end or unnecessarily inferior learning choices. This ideal remains for many countries elusive. In deed, it is only recently that, some of the developing countries, considered it undesirable. Right now conscious efforts are being made to make education more responsive to the needs of the changing societies.


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Having considered the role of education in the development of the society and individual and also having examined how SAP has caged it, what should be the way out? We now make suggestions on how education should be liberated from the danger it found itself.

Suggestions There is the need for African business and foreign investors, whose main objective is to make African workers as cheap as possible on a glutted international labour market, to be checked. As we are struggling to stand on our own and also access to our natural resource efforts must be made to stem further exploitation of our manpower resource. We first of all request that we should not be exploited or even be deprived of any means of survival by the World Bank, the oil companies, and other business venture, as the fierce struggle of the Ogoni in Nigeria has amply demonstrated.

In all honesty we cannot talk about reshaping of African academic future without first of all acknowledging the powerful influence that the international forces exert on it. One can say then without, exaggeration that for African universities to achieve relevance for the majority of African people, it needs a social revolution. Relevance can be achieved when we actually take control of the economy of Africa. Africa must disentangle herself from that global economy that amount in fact to global exploitation by a few international corporations of the wealth of most people on this planet.

African universities must be allowed to fashion out its curriculum and activities so as to take into consideration African realities. It must always be evaluated within the paradigm of an indigenous institution. But presently, what distinguished the situation of African universities is the especially negative evaluation of their function in international business circle, due to the belief that African labour has so far failed to satisfy the requirement of what in business circle is defined as “a congenial investment environment.” Thus the consensus among some World Bank circles that African university is outdated and the new lip service attention being paid to “traditional knowledge – which, like traditional medicine, from the World Bank point of view”, has the advantage of coming at no cost.

Let it be known that any government that is committed to academic freedom should not embrace SAP otherwise it can no longer escape the logic of repression as it happened in Uganda in 1990. North American academic community should support Africans who are fighting for academic freedom. The reason being that with collectively efforts, much could be achieved by both efforts of the African academic community and North American academic community. Silvia supported this when he writes: I conclude that the struggle of African students must be given more attention and

support than they have received so far, not only by the grassroots activists, but also by academics and student in North America.

The above applies in particular, to those who are concerned with the on going “structural adjustment” of our own educational institutions, and with the propaganda of “African knowledge” that is, the knowledge produced on the African continent, whose existence and circulation are in good measure, dependent upon the success of struggles such as those that African students are fighting.

We must note that the World Bank uses its aid to encourage debt settlement and support private investment. Nations who lent money to developing countries control the economy of those states and decide what should be done and what should not be done, how, and when and for what purpose – by lending or withholding money. We now remember the words of Chinweizu (1978) when he says “An economy dominated by foreign investment, is an economy managed from foreign decision. It is a colonized economy (282).


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In Nigeria, there must be a national policy on education. The type of educational policy or philosophy to be designed or adopted must be the type that will meet the societal needs. Just as it happened in Russia in 1957 when it launched her sputnik into space and caught the attention of the whole world. It all started with a well articulated philosophy of education which was implemented as the responsibility of government through mobilizing resources from its entire economy.

More emphasis must be placed on, and a critical evaluation made on the ten-year education plan of Nigeria that was launched in 1944. Their emphases were on:

1. A type of education more suitable for the needs of the country. 2. Better conditions of service for teachers employed by the missions in order to

provide a better trained and more contented staff. 3. Adequate financial assistance to missions and other voluntary educational

bodies 4. Financial assistance to nature administration to assist them to expand

education in their areas (Adesina 1977, 85). The crux of the matter here is that the whole plan is to be re-visited and a critical look be cast on it. For instance, the type of education needed would surely be the one to enhance our economy and also takes into account our realities. We have to draw a line between the secular and state and indicate how and where our staff are to be trained. In a nutshell, we have to be academically independent. According to policy statement, Nigeria philosophy of education should be based on two premises the integration of the individual into a sound and effective citizenry, and; equal educational opportunities for all citizens of the nation at the primary, Secondary and tertiary levels, both inside and outside the formal school system (Adesina: 83) Now relating this philosophy to national objective, the philosophy has to be geared towards self realization, better human relationship, individual and national efficiency, national consciousness, national unity as well as towards social, economic, political, scientific and technological progress. There should be special education and by this I mean an education of individuals who have learning difficulties because of different sorts of handicaps: blindness, hardness of hearing, mental retardation, physical handicaps, etc. It should also consider the specially gifted children. The intention of social education will reflect the demand to equalize educational opportunities for all individual in the society. Let more money be alloted to education from the federal account. The government needs to examine critically her stand on receiving grants and loan from the international bodies like World Bank and IMF. Let there be a prudential management of our fund. More money should be channeled to research. Evaluation and Conclusion Nigeria now has a philosophy of education, the foundation of which is the five main national objectives which the government believes education can promote. A careful appraisal of philosophy of education in Nigeria reveals the fact that our philosophy is eclectic, and the danger in eclectic philosophy which might arise from the conflict of view point can be either under “concept” or “conceptual relations”. In the problem of “concept” we might be confronted with how we can interpret various concepts, for instance, how is the government going to realize the issue of free education for all? What actually is the interpretation of “free” here? Then in respect to two concepts: how to reconcile a free and


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democratic society? With the provision of equal educational opportunities for all how can one be indoctrinated and at the same time be trained to develop his/her faculty for scientific thinking?

It should however be clear from our studies so far that for us to make any head way in our academic freedom and progress; we must as a matter of utmost urgency shun SAP and its allied forces. For our conclusion therefore, we must harken to what university teachers draft code of ethics for global Education in Africa says:

We will never take a position with or cooperate with the World Bank, the IMF, USAID, or any other organization whose policies encourage the expropriation of Africa from the universal and local means of knowledge and devalues the African people’s contribution to world culture (Silvia, George & Ousseina:240).

References Ekpo, A. H. and T. Agiobenebo (1985) “Corruption and Prices: A Theoretical Analysis”. Nigeria

Journal of Economic and Social Studies, Vol. 27 No. 3. Frantz Fanon, The Wretched of the Earth, Trans. C. Farning & MacGibbon & Kee. Gylfason, T. (1987). Credit Policy and Economic Activity in Developing Countries with IMF

Stabilization Programmes, Princeton studies in International Finance No. 60 New Jersey Princeton Unipress.

IMF, IMF Bulletin, Various Issues, IMF (1987). World Economic Outlook.Washington D. C. October.

Kevin Harris (1982). Education and Knowledge: A New Introduction to the Philosophy of Education London: Routledge Kegan Paul

Kingsley Price, Education and Philosophical Thought 2nd ed. Boston Allyn & Bacon p. 325. Obodan, M. I. (1982). “Determinants of Direct Foreign Investment in Nigeria: An empirical,

analysts”, African Studies Review. Obodan, M. L. (1987). The theory and practice of second-tier Foreign Exchange market in Nigeria:

Nine months after” in Philips, A. and E. Ndekwu (eds.) Structural Adjustment Programme in a Developing Economy: The Case of Nigeria NSER.

Paul Bekett & James O’Connel (1977). Education and Power in Nigeria: A Study of University Students, Toronto: Hodder & Stoughton.

Paulo Freire, (1968). Pedagogy of the Oppressed, UK: Penguin Education Press. Silvia Federici, George Gaffentzis, Ousseina A Thousand Flowers: A social struggle Against

Structural Adjustment in Africa Universities. Sonni Anyang (1984). “Education: A Crisis of high expectations” Concord, October p. 7.


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Developing Office Management Techniques in Nigeria: Perspective, Profile and Prospects

Eneche J. B. Pius1 & Audu Joel Samson2 1Dept. of Office Management Technology, Federal Polytechnic Idah, Kogi State, Nigeria GSM:+2348065210527 2Dept. of Registry Dept., Federal Polytechnic, Idah, Kogi State, Nigeria. Email: [email protected]. GSM: +2348054836107

Manuscript ID: RCMSS/IJPAMR/14023 Abstract Office Management in developing countries is germane considering the inexhaustible and dynamic need to meet global competitiveness in terms of service delivery, effective planning and execution of day to day activities by organizations. This is in recognition of the fact that robust political, economic and social development in any nation cannot be accomplished without calculated office management techniques. This paper therefore empirically evaluates the perspective, profile and prospects of developing office management techniques in Nigeria. The researchers elicit data from both primary and secondary sources. Simple percentages, mean scores, standard deviation and co-efficient of variation were used in data presentation and analysis. The study revealed that the development of office management techniques is pivotal to enhancing service delivery. Thus, the paper recommends that there should be adequate training of employees in improving their techniques in office management and infrastructure should be improved to encourage office automation towards better service delivery. Keywords: Office, Office Management, Management technique, productivity. Introduction Most organizations find it extremely difficult if not impossible to achieve their targeted objectives without aggressively initiating and applying effective and efficient office management techniques. Thus, lack of office management techniques would result to increased organizational dispute, deceased moral, weak productivity, loss of co-operate organizational image and pre-matured organizational death. Stoner and Freeman (1989) see organization as an institution or functional group. Whereas, Bedeian and Zamnuto (1991) identified four key elements in conceptualizing the word “organization” such as: social entities, goal directed, deliberately structured activity systems and permeable boundary. Office organization is the allocation of duties, authorities and responsibilities to individuals working as a team in an establishment (Amos, 2005). Hence, office organization is the technical and management of office integration of sectoral and holistic activities in order to achieved the desired goals. Office management is the branch of management which is concerned with services of obtaining, recording and analyzing information through the planning, organizing, directing and controlling of human and material resources (Amos, 2005). Consequently, management functions of planning, organization, directing and controlling is performed from a location called office hence management functions and office can be said to be interdependent because of their complementary roles. The researchers shall explore some basic concepts of office management such as communication, organizational structure, office automation and filing so as to identify their pivotal roles to the functionality of an office in any organizations. Statement of the problem Management functions of planning, organizing, directing and controlling are very significant to the effective functioning of an office hence, while office is perceived as the soul of an organization management could be likened to the spirit of an organization. However, evidence had shown that these functions are not been put into practice effectively to actuate the functionality of office practices towards effective service delivery. The resultant effects are deceased morale, inconsistency in organizational policies, increased industrial dispute and low productivity. It is against this backdrop that this research is being carried out.



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Objectives of the study This research will specifically explore the perspective, profile and prospect of office management techniques in Nigeria and how it has enhanced organizational productivity. However, the researchers shall also proffer lasting solutions to the identified constraints which has mar effective functioning of office management. Research proposition Development of office management techniques such as planning, organizing, directing and controlling of both human and materials resources will enhance optimality of output and resourcefulness in organizations. Scope of the study The study examined government establishment in Nigeria. In doing this, employees in secretarial and executive cadre in Federal Polytechnic, Idah were selected. More so, the period of 2003 – 2012 was considered because this period is reasonable enough to measure the variables being discussed by the researchers. Research hypotheses Two hypotheses were formulated on this work such as: Ho: Office management techniques have not improved productivity in the organization. Hi: Office management techniques have improved productivity in the organization. Ho: Office management techniques do not improve employee morale. Hi: Office management techniques improve employee morale. Conceptual clarification An office is a place in which business, clerical, or professional activities are conducted. Amos (2005) defined office as any place either a building or a room in which clerical activities are carried out. Follet (1918) also posits that an office is a place where the functions relating to receiving, recording, arranging and giving out information are carried out vis-à-vis a place for safekeeping the properties of organizations. Amos (2005) noted that the historical evolution of the office is as old as the ancient civilization and the evolution of man because human brain itself has been functioning not only as think-tank but also the reservoir of knowledge, innovation, skills and information since human brain has long being recognized as a channel of processing information cum dissemination and retrieval. Office management is synergy of two words office and management. Having defined the concept of an office, the concept of management means the art of getting things done through people (Follet, 1918). Therefore, office management is the planning, organizing, directing and controlling of office activities to ensure that various resources (human and materials) are put into optimal utilization to ensure that the organizational aims are achieved (Yalokwu, 2006). Amos (2005) also sees office management as the branch of management which is concerned with services of obtaining, recording and analyzing information of planning, and of communication, by means of which the management of an organization preserves its assets. In the same vein, office management according to Koontz and Weilrich (1988) is an integral part of management which concerns itself with information function in an organization.Nwachukwu (2006) defined organization as an entity and also a process of coordinating individual efforts to accomplish a common objective. Meanwhile, Amos (2005) sees office organization as the allocation of duties, authorities and responsibilities to individuals working as a team in an establishment. Thus, office organization means the systematic organization of an office in order to get an effective and efficient productivity. Office management techniques: perspective, profile and prospects Planning according to Nwachukwu (2006) means a blueprint for action. Thus, it entails determination of control, direction and methods of accomplishing the overall organizational objective. This according to Yalokwu (2006) is a process that involves the establishment of objectives, strategies to achieve organizational objectives. Organizing on the other hand is the formal pattern of working relationships and coordination designed by management to link the activities of individual and groups so as to accomplish the organization objectives (Bartol and Martin, 1991). Directing means, actuating, motivating and inducing the employees to work enthusiastically without coercion (Nwachukwu, 2006). The concept of controlling is defined as that phase of the management process which maintains organization activities within allowable limits as measured from expectations (Fayol 1929). The techniques discussed above were not exhaustive however, these are the basic meanings and they perform pivotal role to the survival of office management even though they have not gain prominence in terms of financing the functionality of office largely relied on the techniques since that is the only way continuity of an office can survive in organizations.



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Functions performed in an office The functions performed in a modern office can be divided into two main categories, they include:

i. Basic or routine functions ii. Administrative management or ancillary functions

The basic functions include the following: - To receive or collect information - To prepare a record of such information. - To process and arrange such information. - To supply readymade information to the authorities when asked for. The administrative and management functions of an office are: - Management functions. - Development of office system and procedures. - Form designing and control. - Selection and purchase of office appliances. - Personnel functions. - Controlling office cost. - Maintenance of records. - Planning schemes and policies. - Safeguarding the assets. - Public relations Amos (2005), Lerner (1982).

Some basic tools used in an office Filing means keeping documents in a safe place and being able to find them easily and quickly. Filing system is the central record-keeping for an organization and it aid systematic handling of mails. Ajiboye (2002) sees communication as a process by which an idea is transferred from a source to a receiver with the intention of changing his behavior. The office is responsible for receiving and communicating information both internally and externally, office correspondence thus take the form of business letters, official letters, memo, circular, minutes, telegrams, cable grams, telex, Email etc. Hicks and Gullet (1987) also observed that organizational structure is a formalized intentional structure of roles which therefore structures the process of interaction and authority relationship in an organization. Finally, office automation involves the substantial use of computers in connection with other equipment to automate the basic secretarial, executive and clerical duties of an office. This involves the integration of computer, computers and associated technologies to provide an efficient service delivery in an office. Validity and Reliability of the instrument To ensure the validity of the instrument, the researchers employed the services of two Academic Staff, two Chief Executive Officers, and two Chief Confidential Secretaries and on Chief Clerical Officer from Federal Polytechnic, Idah for validity. The questionnaire was validated after thorough scrutiny and valuable contributions made duly incorporated. To estimate the reliability of the instrument employed for data collection, the instrument was administered twice to staff of secretarial and executive cadres numbering 20 from Federal Polytechnic, Idah. The second administration of the instrument was two weeks after the first and the resulting scores were correlated using Pearson’s product moment correlation (rho) approach. This yielded the co-efficient (pf) r = 0.58. This score indicates that the instrument is reliable. Research instrument The instrument for this study was a questionnaire titled “the Efficiency level of Office Management Techniques (EOMT). The questionnaire has two sections. Section “A” demands information on the efficiency of application of office management techniques, and section “B” contains information on the problems and prospects of office management techniques in Nigeria. The instrument is in form of Likert five-point rating scale. The response options have the values of 5,4,3,2 and 1 as follows: Strongly agree 5, Agree 4, Undecided 3, Disagree 2 and Strongly disagree 1.



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Research Design The survey research design was adopted in this study. This design was employed because of it exploratory nature. The researchers also employed both primary and secondary sources of data collection. Primary data were collected through the administration of questionnaire while secondary data were gathered from related literatures, textbooks, journals, periodicals etc. The sample size is 151 out of 242 based on judgemental sampling. The respondents were secretarial, executive and clerical staff of the Federal Polytechnic, Idah. The Yaro Yamani statistical formula for the determination of sample size was used. The formula is: n N 1 + N(e)2 Where n = sample size N = population e = allowance error 1 = constant Thus, N = 242 and e = 5%: 0.05 Hence 242 1 + 242 (0.05)2

242 1.605 = 151 TABLE I: DISTRIBUTION OF RESPONDENTS IN RESPECT OF EFFICIENCY OF OFFICE MANAGEMENT TECHNIQUES EXPECTED MEAN-3 PERCENTAGE OF RESPONSES MEAN SCORES OF RESPONSES S/N VARIABLES 5 4 3 2 1 MEAN STANDARD

DEVIATION COEFFICIENCY OF VARIATION

% % % % % % 1 There is adequate

application of office management techniques

54 21 12 8 5 4.11 0.71 17.27

2 Communication is highly effective in the organization

62 24 10 3 1 4.43 0.82 18.51

3 Office management techniques do improve productivity in the organization

58 23 10 7 2 4.28 0.76 17.76

4 There is adequate provision of facilities in the organization

60 19 14 4 3 4.29 0.79 18.41

5 The employees need adequate supervision

5 7 9 19 60 1.78 1.15 64.61

Source: Field Research (2014) Decision criterion: Accept any value with cal mean 3.0 and CV 30.0otherwise reject. Table I above shows that 75% of the respondents were of the view that there is adequate application of office management techniques in the organization. 86% of the respondents were of the opinion that communication is highly effective in the organization. 81% of the respondents agreed that office management techniques have



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improved productivity in the organization. 79% of the respondents agreed that there is adequate provision of facilities to the employees to enhance their performance and 12% of the respondents were of the opinion that the employees need adequate supervision. Hence, item 1,2,3,4 are accepted considering the mean and coefficient of variation values while item 5 is rejected. TABLE II: DISTRIBUTION OF RESPONDENTS IN RESPECT OF IMPROVING EMPLOYEES MORAL

THROUGH OFFICE MANAGEMENT TECHNIQUES EXPECTED MEAN=3 PERCENTAGE OF RESPONSES MEAN SCORES OF RESPONSES

S/N VARIABLES 5 4 3 2 1 MEAN STANDARD DEVIATION

COEFFICIENCY OF VARIATION

% % % % % % 1 The employees are adequately

motivated 62 18 9 5 6 4.25 0.86 20.24

2 Industrial dispute is imminent in the organization

6 10 11 12 61 1.88 1.05 55.85

3 Employees are sent for training 60 19 8 9 4 4.22 0.82 19.43 4 The working environment is very

attractive 58 21 7 5 9 4.14 0.81 19.57

5 The employees are involved in the decision making process of the organization

4 9 8 20 59 1.79 1.13 63.13

Source: Field Research (2014) Decision criterion: Accept any value with cal mean3.0 and CV 30.0otherwise reject. Table II above shows that 80% of the respondents agreed that the employees are motivated. 16% of the respondents were of the view that there is frequent industrial dispute in the organization. 79% of the respondents agreed that employees are sent for training. 79% of the respondents were of the view that the working environment is attractive while 13% were of the view that the employees do involved in the decision making process in the organization. Hence, item 1, 3 and 4 are accepted considering the mean and coefficient of variation values while item 2 and 5 are rejected. Conclusion From the results of data analysis and subsequent discussion of findings, the paper concludes that development of office management techniques is pivotal to enhancing improved service delivery in Nigeria but considering the dynamic nature of organization in this jet-age, consistent training of employees need to compliment such organizational ideas. Recommendations In the light of the findings and conclusions of this paper, the researchers recommend that: 1. The employees should be involved in the decision making process so as to create sense of belonging and

sincere commitment by members of the organization. 2. There should be provision of more incentives to employees so as to motivate them for improved

productivity. 3. Automation of all offices should be priotise so that the intellectual capability of the employees could be

properly harnessed. 4. In other to sustain the current industrial harmony, the organization should be proactive in foreseeing likely

areas of dispute and timely addressing same. 5. There should be periodic review of the organizations human resource programmes so as to identify likely

areas of strengths and weaknesses. References Ajiboye, S.O. (2002). Managing the Institution. Ibadan: Scepotre Prints Ltd. Amos, O.O. (2005). Secretarial Duties and Human Relations, Kaura-Namoda: Educational Associates.



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Amos, O.O. (2005). Office Management Today, Kaura-Namoda: Educational Associates. Bartol, K.M. and Mortin, D.C. (1991) Management, New York: McGraw-Hill Inc. Bedian, A.G. and Zamunto, F.R. (1991) Organization: Theory and Design, New York: Dryden Press. Collins English Dictionary (2005). Complete and Unabridged © HarpercoLlins Publishers. Fayol, H. (1929). Industrial and General Administration. London: Pitman Pub. Follet, M.R. (1918). The New state: Group Organization and the solution to popular Government

London: Longmans, Green and Co. Hicks, H.G. and Gullet, C. R. (1987). Management, New York: McGraw-Hill. Koontz, H. and Weirich, H. (1988). Management. New York: McGraw-Hill. Lerner, J.J. (1982). Introduction to Business Organization and Management. New York: McGraw-Hill. Nwachukwu, C.C. (2006). Management Theory and Practice, Onitsha: Africana First Publishers Ltd. Stoner, J. and Freeman, R.E. (1987). Management. Eaglewood: Prentice Hall Inc. Yalokwu, P.O. (2006). Fundamentals of Management, Lagos: African Centre for Management and

Education.


Omika Mohammed , 2014, 2(2):193-198

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Re-positioning Commercial Banks to enhance the productive capacities of Small and Medium – Scale Enterprises (SMEs) for Economic Growth of Developing

Nations: A Focus on Nigeria Omika Mohammed 1

1Dept. of Accountancy, Federal Polytechnic Idah, Kogi State, Nigeria. GSM: +2348152046044. Email: [email protected]

Manuscript ID: RCMSS/IJPAMR/14024 Abstract This research examines the necessity and strategies of re-positioning commercial banks in order to enhance the productive capacities of Small and Medium-Scale Enterprises (SMEs). The study was intended to determine whether or not re-positioning commercial banks has impacts on SMEs and determine the effects of enhancing SMEs activities with regards to economic growth. The Ordinary Least Square (OLS) was used. The Augmented Dicky-Faller (ADF) Unit Root Test was used. The Error Correction Model (ECM) was used in recognizing inherent errors. Augmented Engle Granger (AEG) Co-integration Test was used to test for the impacts of commercial banks relationship with the capacities of the SMES. The results showed that there was co-integration between re-positioning of commercial banks and capacities of SMEs to deliver products/services and there was significant dispersion resulting from lending conditions and macroeconomic variables. It was concluded that the previous Global Financial Crisis really brought with it economic hazards leading to Banking Sector Crises. It was recommended that government should relax the conditions for lending offered by the Commercial Banks through the Central Bank, revitalize the Capital Markets and Prioritize the SMEs in order to contribute to Economic Growth.

Keywords: Small and Medium-Scale Enterprises (SMEs), Commercial Banks, Economic Growth, Lending Conditions, Macroeconomic variables.

Introduction National development is a necessity in many Countries especially in the developing nations. One of the indicators of development is the consumption pattern of the citizenry. By extension, the nature of products and/or services consumed depicts the consumption pattern. Most developing nations are characterized by series of Strata in the population make-up. Broadly, the population is usually made up of High Income Earners, Medium Income Earners and Low Income Earners. The Consumption needs of the Medium and Low Income Earners are usually met by the Small and Medium – Scale Enterprises (SMEs). In another perspective, the satisfaction of the lower strata of the population is normally accomplished through the Consumption of the home-made goods/services. The finances needed by the SMEs cannot be wholly generated by private savings instead some helping hands have to be rendered by the commercial banks. Commercial banks are fundamentally for economic and financial growths in every economy: developing and developed. In every economy, resource surpluses or deficits exist. These resources, especially financial resources, must be bridged between economic units. The bridging processes must be covered by adequate profitability in order to create cost effectiveness. According to Ongore and Kusa (2013), commercial banks play a vital role in the economic resource allocation of countries. They channel funds from depositors to investors continuously. They can do so, if they generate necessary income to cover their operational costs they incur in the due course. In order words, for sustainable intermediation function, banks need to be profitable. Beyond the intermediation function, the financial performance of banks has critical implications for economic growth of countries. Good financial performance rewards the shareholders for their investments.


Re-positioning Commercial Banks to enhance the productive capacities of Small and Medium – Scale Enterprises (SMEs) for Economic Growth of Developing Nations: A Focus on Nigeria

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Principally, banks are concerned with Liquidity. Prominent financial and economic activities cannot be performed without liquidity-cash. The desired liquidity cannot be obtained easily from the commercial banks. By extensions Commercial banks Complain of lack f liquidity. The pain of obtaining financial facilities by Small and Medium- Scale Enterprises (SMEs) through bank lending is discouraging to entrepreneurship generally. The Central Bank of Nigeria (2010) portrayed liquidity problem in the banking sub-sector thus: The Current liquidity issue and the inadequate lending to real sector, that could result to economic growth has generated considerable discussions while the central Bank of Nigeria (CBN) has risen up to these challenges by ensuring that liquidity in the banking system is adequate and that sectoral credit allocation to the sensitive sectors of the economy (Agriculture, Power, Aviation and SMEs) that will impact on the real sector for growth are handled with all the attention required. The frequent changes in the Financial Management and policies of the public sector resources by the Central Bank of Nigeria (CBN) had greatly affected the sensitive sectors of the Nigerian economy. Agreed, the CBN is the Financial Organ of the Nigerian economy. It is expected to be constructive but never destructive.Within a decade ago, the CBN had come with Prudential Policy to be implemented by the Commercial banks. In another period, CAMEL assessment was performed by the CBN leading to distress, mergers, acquisitions and/or consolidations among commercial banks. Lately, it has come with cashless policy currently being implemented in some regions of the economy and many more are being expected. Which policy is to be followed and for how long?

In the developing economies, SMEs are the pillars to most developmental efforts of the governments. Unfortunately, the necessary finances cannot be accessed (Global Development Advisors, 2011).

Delberg (2011) confirmed that SMEs are a fundamental part of the economic fabric in developing countries, and they play a crucial role in furthering growth, innovation and prosperity. Unfortunately, they are strongly restricted in accessing the capital that they require to grow and expand, with nearly half of the SMEs in developing countries rating access to finance as a major constraint. There are no meaningful or productive activities that can be embarked upon the SMEs without adequate financing. Banks’ reluctant to lending should be viewed from the extent or degree of porosity of some SMEs. Banks are into business and can never allow the whole or significant proportion of the capital base to be tied-up only in the investment of SMEs.

The informal nature of SMEs is not helping matters. Adequate record - keeping in not ensured by the SMEs and if ensured, they are not disclosed appropriately. Therefore, financial institutions consider SMEs as risk-prone. Kaufmann (2005) put it that small business in Africa can rarely meet the conditions set by the financial institutions, which see SMEs as a risk because of poor guarantee and lack of information about their ability to repay loans. The financial systems in most of African countries are under-developed, however and so provides few financial instruments. Although banks place emphases on lending conditions, the government through the Central Bank should adequately regulate such conditions to boost economic growth and development. This is essential considering the crucial roles of SMEs especially in terms of employments generation which is equally a matter of utmost concern to the government.

According to Safiriyu and Njogo (2012), for an economy to live up to expectation in the committee of nations’ development, such economy must achieve accelerated economic growth which is since qua non for improving quality of life. Small and Medium – Scale Enterprises are strategic to attainment of economic prosperity objective of any government.


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The economy depends on its working population for economic growth and development in which the youths constitute greatest percentage and this further establishes the reason why the youth should be gainfully employed.

Despite the elaborate studies on SMEs, the availability, and recognition by government through Government polices is at low ebb. The lack deserving recognition of SMEs by the government had caused apathy in terms of government formulation and implementation of financial polices of capable of deep-rooting SMEs for national growth.

Lack of government recognition notwithstanding, the SMEs still have potentials for economic growth of the developing nations. Aigboduwa and Oisamoje (2013) states that Small and Medium – Scale Enterprises (SMEs) are generally acknowledged as having huge potentials for employment generation and wealth creation in any economy. Hence, interest in their development continues to be in the forefront of policy debates. In Nigeria, however, the sector remains relatively small in terms of its contribution to GDP or to gainful employment.

The small nature of SMEs is a result of lack of recognition by the government. Government, through its policies, can make impacts in every sector of the economy: public or private but where the policy instruction has not put the recognition of SMEs in motion, other economic variables cannot do so. The government, through the Apex Bank, can empower the SMEs. Sometimes, the government can empower the commercial/Bank to enhance SMEs performances. In most developing nations, most policies are always in debates. Some polices can transcend into formulation but few of the policies are implanted.

Literatures Review Significance of SMES The Small and medium –scale Enterprise (SMEs) have been at the fore-front of economic development especially the developing nations. The provision of employments in the public and private sectors are insufficient. Hence, there is need for SMEs to augment the low rate of employment existing currently. Small and Medium-Scale Enterprises possess qualities peculiar to themselves and rarely found in other forms of business ownerships. A major characteristic of Nigeria’s SMEs relates to ownership structure or base, which largely revolves around a key man or family. Hence, a preponderance of the SMEs is either sole proprietorships or partnerships. Even where the registration status is thus that of a Limited Liability Company, the time ownership structure is that of a one-man, family or partnership business. Other common features of Nigeria’s SMEs include the following among others:- Labour-intensive production processes; Concentration of Management on the key man; Limited access to Long Term Funds; High cost of funds as a result of high interest rates and bank charges; Over-dependence on imported raw materials and spare parts; Poor intra and inter-sectorial linkages – hence, they ha rdly enjoy economies of scale benefits (Ngwu, 2005). Commercial banks’ operations are usually done with high level of prudence. The prudence is highly observed in relation to cash management. Proper cash management is a necessity in the banking sector as most products and services traded revolve around cash.



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Results and Discussions

Table 1: Regression Result Dependent Variable: Lending Variables Independent Variable: Financial Hurdles (FHs) Method: Least Square Date: 15/02/2014 Time: 14:05 Period of Coverage: 2007 - 2013 Variables Coefficient Std. Error t-statistic Prob. KR 53732.32 53208.17 -0.685763 0.4325 IR 418523.03 671846.22 -0.643625 0.4838 Cs 437483.21 663472.18 -0772532 0.3935 Fs 464752.04 593642.05 -0.695347 0.3875 FHs 5.734632 0.087324 45.04773 0.000000 R – Squared 0.592534 Mean dependent Var. 743246.4 Adjusted R-Squared 0.573875 S.D dependent Var. 183563 S.E of Regression 3.948264.4 Alaike Info. Criterion 28.374241 Sum Squared Resid. 3.83E+12 Schwarz Criterion 28.43742 Log Likelihood - 463.6422 F-Statistic 2472.347 Durbin-Watson Stat. 1.427948 Prob. (F-Statistic) 0.000000 Source: e-view program From the Regression Result shown, there is significant relationship between the lending variables and the Financial Hurdles. The Coefficient of Lending Variables are positive which indicate that for Financial Hurdles to be crossed, there must be corresponding positive movements by the SMEs in terms of their capacities to meet the lending conditions. Hence, there must be 55%, 54% 56% and 50% satisfaction of the conditions before lending can be done. The coefficient of determinant (R2) showed a good fitness with the regression of the observed samples of both dependent and independent variable with a value of 59%. Durbin-Watson Test value of 1.43 is significant for evaluation purposes and it was positive in the first-order correlation. F-Statistics of the model showed that the model was statically significant. The S.E of Regression of 3.95 was statistically significant too. The critical value for testing the hypotheses is 5%. The Augmented Dicky-Fuller (ADF) Test showed a value of -3.376532 which is less than -3.2521 at 5% critical.

Table 2: Regression Result Dependent Variables: Economic Variables Independent Variables: Access to Bank Loans Method: Least Square Date: 15/02/14 Time: 14:36 Period of Coverage: 2007 – 2013 Variables Coefficient Std. Error t-Statistic Prob. ΩA Bf Gp VR

547323.15 534613.09 556739.11 501473.01

73137.11 674895.07 663853.04 713635.16

-0.635213 -0.643733 -0.664310 -0632518

0.5462 0.51530 0.57325 0.531092

AB 5.819365 0.083653 43.04528 0.000000 The Regression Result presented above show high level of correlation between the Economic variables and Access to Bank Loans. The coefficient of dependent variables are positive depicting that to have Access to Bank Loans; the Resource Availability, Bank Funding and Government Policies


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R-Squared 0.734653 Mean dependent var. 643582.6 Adjusted R-Squared 0.714386 S.D dependent Var. 1846352 S.E of Regression 332561.4 Alaife Info. Criterion 26.215323 Sum Squared Resid. 3.43+12 Schwarz Criterion 26.38523 Log likelihood -530.2432 F-Statistic 2517.624 Durbin-Watson Stat. 1.285351 Prob. (F-Statistic) 0.000000 Source: e-view program Inflation Rate must be considered. Hence, there must be 55%, 53%, 56% and 50% tendencies of Economic Variables stability be Access to Bank Loans can be guaranteed by the SMEs. Again, the coefficient of determinant (R2) showed a good fitness with the regression of the observed samples. F-statistics of the model showed that the model was statistically significant. Durbin-Watson Test value of 1.29 is a positive first – order correlation.

Table 3: ADF Result ADF Test Statistic -3.376532 1% -3.2521 Critical Value 5% -2.5923 Critical Value 1% -2.04383 Critical Value Mackinnon Critical Values for rejection of hypothesis of a Unit Root. Source: e-view program

Summary of Findings, Conclusions and Recommendations The study was on re-positioning of commercial Banks to enhance the productive capacities of the Small and Medium –Scale Enterprises (SMEs) .The needed financial facilities are so large enough that only the Commercial Banks can provide them. It was also discovered that the lending conditions offered by the Commercial Banks were so stringent for the SMEs and that some of the lending conditions are dependent on economic variables that are purely macroscopic to the SMEs. To properly re-position the Commercial Banks for the enhancement of productive capacities of the SMEs, the government has a very big role to play; the government, through its financial policies, should play-down on the stringent conditions as put forward by the Commercial Banks to the SMEs. The government should equally ensure the re-vitalization of the Capital Markets in order to ensure enhanced or robust financial activities in the markets and allow for transcend of financial flows to the Commercial Banks. The governments should priotize the SMEs as functional economic organs that can contribute meaningfully to the economic growth (GDP). The recent global financial crisis has caused untold hardships in the banking sector as well as the capital markets. Illiquidity has come to stay in the various banks. Bonafide customers cannot obtain cash in some banks let alone the banks giving them loans. There is overall ‘jack-up’ on lending conditions. There is constant down-sizing of staff (work force) thereby making banking sector jobs un-interesting with the resultant impacts on the labour turnover.



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References Aigboduwa, J. E. & Oisamoje, M. D.(2013) [Abstract]. Promoting Small and Medium-scale

Enterprises in the Nigerian Oil and Gas Industry – European Scientific Journal. 9(1). Azhar, M. M. & Siti, K. M.(n.d.).Business Financing for Small and Medium Enterprises (SMEs):

How to strike? Central Bank of Nigeria (2010). The Liquidity and the Sectoral Credit Allocation.January- March,

30(1) Delberg Global Development Advisors (2011). Reports on Supports to SMEs in Developing

Countries Through Financial Intermediaries. Esisal, L.(2009). Financing Options for Small and Medium-sized Enterprises (SMEs) Exploring Non

– Bank Financial Institutions as an Alternative Means of Financing. Kama, U.(2010). Banking Sector Crises and Resolution Options in Nigeria. Bullion ( Publication of

the Central Bank of Nigeria. 34( 1 ) Kauffmann, C. (2005). Financing SMEs in Africa- Policy Insight ( African Economic Outlook). No.7 Martin, B. (2008). The Causes of Financial Distress in Local Banks in Africa and Implications for

Prudential Policy No.132 Ngwu, B. O. (2005). Small and Medium Enterprises (SMEs) in Nigeria: Problems and Prospects-

Unpublished Dissertation submitted to St Clements University. Ofoegbu, E. O.,Akanbi, P. A. & Joseph, A. T.(2013).Effects of Contextual Factors on the

Performance of Small and Medium-scale Enterprises in Nigeria: A case Study of Illorin Metropolis ( Advances in Management and Applied Economics). 3(1) PP95-114

Ogujiuba, K. K.,Ohuche, F. K. & Adenuga, A. O. (2004).Credit Availability to Small and Medium-scale Enterprises in Nigeria : Importance of New Capital Base for Banks-Background and Issues( Working Papers)

Oke,M. O. & Adeusi, S. O.(2012). Impact of Capital Market Reforms on Economic Growth: The Nigerian Experience – Australian Journal of Business and Management Research.2(2). PP20-30

Olokoyo, F. O.(2011).Determinants of Commercial Banks’ Lending Behaviour in Nigeria 2(2).doi:10.5430/ijfr.v2n2p61

Ongore,V. O.& Kusa, G. B.(2013). Determinants of Financial Performance of Commercial Banks in Kenya; International Journal of Economics and Financial Issues 3(1) pp 237-252

Raghavan, R. S.(2003). Risk Management in Banks. PP841-851 Safiriyu, A. M & Njogo, B. O.(2012) [Abstract].Impact of Small and Medium-scale Enterprises in

the Generation of Employment in Lagos State .Kuwait Chapter of Arabian Journal of Business and Management Review 1(11).


Attah Amana Philip, 2014, 2(2):199-208

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The Verity of Urbanization and Public Health System in Nigeria

Attah Amana Philip1 1 Department of Social Science and Humanities, Federal Polytechnic Idah, Kogi State. Email: [email protected]. GSM: +234(070)55161705, +234(080)69619629

Manuscript ID: RCMSS/IJPAMR/14025 Abstract The increasing quest for improved standard of living, access to greener pastures, white-collar jobs and improved socio-economic wellbeing have made interest on urbanization germane. However, its attendant consequences of population explosion, over-stressed of the existing infrastructures, environmental degradation and increase crime rate have posed serious challenges to the public health system in Nigeria. This paper, therefore, is written to explore the verity of urbanization and public health system in Nigeria. The researchers elicit data from both primary and secondary sources while the data were analyzed using the simple percentages, the mean score, standard deviation and coefficient of variation. A sample size of 399 respondents out of a total population of 28, 2254 was adopted using the Yaro Yameni statistical formula. The paper concludes that the public health system in Nigeria has been adversely affected due to urbanization. Thus recommends that: basic infrastructure and employment opportunities should be made accessible at the rural areas, more health personnel’s be employed with health facilities upgraded to suit the current realities.

Keywords: Urbanization, public health, infrastructure, diseases.

Introduction Contemporary globalization and urbanization is reproducing classic conditions historically associated with the emergence of infectious diseases and the periodically recurring pattern of epidemics and pandemics. The dynamics of contemporary globalization has contributed to various institutional gaps that make dealing with infectious disease increasingly difficult and threaten concentrated human populations with potential calamity (Gibson and Gumer 2012). Over the past few decades, there has been a rapid urbanization of the world’s population. The United Nations (2013) defines urbanization as movement of people from rural to urban areas with population growth equating to urban migration. It can also be seen as, change in size, density, and heterogeneity of cities which could be as a result of rural to urban migration or a national population increase due to a decrease in death rates while birth rates remain high. Global population trends in the 21st century reveal increased migration from rural to urban areas of the world and rapid population growth in urban centers’ (Vlahov et al., 2007; Raskin & Kemp-Benedict, 2004).

The United Nations Department of Economic and Social Affairs indicated that, in 2007, 74% of the population in more developed regions lived in urban areas, compared with just 44% in less developed regions. The pace of urbanization continue to raise in both developed and under develop countries, as the estimate shows that, 70% of the world’s population will be living in an urban area by 2015. In Nigeria, the Human Development Report (2004) shows that, 45.9% of the 120.9million (2002estimates) working population of Nigeria resides in urban centers. According to Mabogunje (2002), residents of urban centers in Nigeria in 1950 were less that 15% of the population. By 1975, this proportion had risen to 23.4% and by 2000 was 43.3%. According to



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him, urban population growth rate is 4.8% annually; which is higher than the national annual growth rate of 2.2 % (HDR, 2004). The implication is that by 2015, more than half of the nation’s population would be urban dwellers. This rapid rate of urbanization has over stretch the public health facilities in most urban center resulting from environmental noise, air pollution, reduction of soil moisture, intensification of carbon-dioxide emissions, strain in the cities’ infrastructure, unplanned and congested residential areas, and the shortage of safe drinking water, which lead to environmental changes that affect Public Health systems in Nigeria. Public health is the science and art of preventing disease, prolonging life and promoting health through the organized efforts and informed choices of society, organizations, public and private, communities and individuals” (Winslow C.E.A 1920). It is concerned with threats to health based on population health analysis. Lokoja is the capital city of Kogi State and has been experiencing an accelerated shift of population from rural to urban areas. Record has shown that, Lokoja as a state capital has a population of 106,423 people in 1991, 187,200 in 1995, 237,920 in the year 2000, 282,245 in 2006, and 314,264 in the year 2011. It was estimated that the population of the city as a state capital will increase to 391,498 by the year 2020 (KSRDA. 2012). Table 1: Projected Population Growth of Lokoja Kogi State Capital

Year Population of Lokoja as Local Govt. HQ (000)

Projection of Lokoja Population as State

capital. (000) 1991 96,423 106,424 1995 117,202 187,300 2000 149,583 237,921 2006 195,261 282,254 2011 213,121 314,264 2020

(Projection) 237,920 391,497

Source: (KSRDA. 2012). As the population continues to increase without corresponding increase in the existing health infrastructure/facilities, this has engendered several Health challenges and problems like shortage of health personnel, inadequate provision of health facilities, infectious diseases, poor sewage/solid waste disposal, poor sanitation and hygiene, air/noise pollution etc; which has a negative effect on the quality of life that urban people experience in Lokoja. Despite the quantity of studies carried out on this topic, no study of this nature has been conducted particularly in Lokoja, Kogi State, to determine the impact of urbanization on the health of the urban populace. It is to this end that this work will study urbanization and public health system in Lokoja, Kogi State, Nigeria. The study will be useful to urban planners and health policy makers in the areas of policy formulation and implementation in the State.

Statement of the problem The rapid rate of uncontrolled and unplanned urbanization in the state has brought with it complex urban health related problems. This implies a situation where health facilities become overcrowded and inadequate for the growing population, the distribution of health personnel and institutions are also inadequate. One of the most serious environmental problems facing Lokoja town is the uncontrolled heaps of refuse in open spaces, stream/water channels, road



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sides and market places, which resulted to poor sanitation and hygiene leading to the spread of various infectious diseases within the metropolis. It is against this backdrop that this research seeks to explore the consequences of urbanization on public health with Lokoja metropolis as a reference point.

Objective of the Study This research will empirically explore the verity of urbanization to public health system in Nigeria. Meanwhile, the researcher shall also make sound recommendations which will create a balance between public health system and urbanization. Research proposition Urbanization has threatened the public health system in Nigeria due to its attendant consequences.

Scope of the Study The study examines the verity of urbanization and public health system in Nigeria. Lokoja, the Kogi State capital in north central Nigeria was used as a case study, and the period of 2009- 2013 was considered since this period is reasonable enough to ascertain the variables being considered by the researcher.

Hypothesis Ho: Urbanization does not significantly affect public health system in Lokoja Kogi State Nigeria. Hi: Urbanization significantly affects public health system in Lokoja, Kogi State Nigeria. H2: The people residing in urban areas do not have access to basic infrastructures. H3: The people residing in urban areas have access to basic infrastructure.

Review of related literature: Literatures were reviewed on thematic basis for the of clarity.

Urbanization Ojogbe (2004) sees urbanization as the process by which large numbers of people become permanently concentrated in relatively small areas, forming cities. In the same way, Salau (2012) states that, rural to urban migration means that people move from rural areas to urban areas. In this process, the number of people living in cities increases compared with the number of people living in rural areas. Kotz (2009) has noted that, natural increase of urbanization can occur if the natural population growth in the cities is higher than in the rural areas. This scenario, however, rarely occurs. A country is considered to be urbanized when over 50 percent of it’s population live in the urban areas (Long 1998). Migration is the main reason for rapid growth of mega-cities, and this has been going on over centuries as its normal phenomenon, when considering urbanization rural-urban and urban-rural migrations are very important. Urban-urban migration means that people move from one city to another, and this is quite common, for example, in Nigeria (Bilsborrow 2011; Sajor



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2012). The urbanization process has significant effects on the natural and cultural environment, on housing arrangements and Health/social networks, as well as on housing and employment patterns, not only in the cities, but also in the rural areas. Access to health care and social services and cultural activities are in many cases better in the cities, but access may not be evenly distributed among the blown population (Martin, 2011). Urbanization is a movement with cultural shifts and is posing new major demands that we must face. The health-consequences of political measures must be evolved in multiple sectors, like culture, environment, and education (Kindig, 2012). Similarly, Oguntola (2011), observe that, increasing urbanization is responsible for many health challenges, especially those related to water, environment, crime, injury, non-communicable diseases and other risk factors like tobacco, alcohol and unhealthy diet. The rapid increase of people living in cities is among the most important global issues of the 21st century. The rapid rate of urbanization has brought about in recent times changes in physical and social determinants of health (Garrent, 2010). Adeyomi (2009) stated that, movement of people whether from rural to urban areas or from one country to another often alter the characteristic of epidemiological disease profile and at the same time new diseases appear or old ones re-emerge. Such is the case of HIV/AIDS, tuberculosis, yellow fever, denudes and Lyme disease. Gbolahan (2013) affirmed that, the growing trend of urbanization, which encouraged poor nutrition, alcohol and smoking, were reasons city dwellers also have increased risk for violence, chronic disease and some communicable diseases. Harpham and Tanner (1995), Atkinson et al (1996) and Bradley et al (1999) in various studies discovered that urban dwellers in less developed countries are exposed to the traditional scourges associated with living in a poor country, such as malnutrition, measles, and malaria; afflictions resulting from newly modernizing societies, such as obesity, cancer, and road accidents; the deterioration of mental health, increased rates of psychiatric disorders and deviant behavior that are associated with degraded living conditions, overcrowding, and rapid social and cultural change in urban areas. All these health consequences of urbanization are evident on the Nigerian cities.

Public Health The dimensions of health can encompass “a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity”. As defined by the United Nations’ World Health Organization, Public health incorporates the interdisciplinary approaches of epidemiology, biostatistics and health services. Environmental health, community health, behavioral health, and occupational health are other important subfields (WHO. 2005). Just as Studies on the health impacts of urbanization reveal that urbanization can have both positive and negative effects on health. Urban life can be rich and fulfilling since it is more diverse, stimulating, and full of new opportunities. Individual and family mobility make it easier to escape from oppressive social relationships. Cities are sources of ideas, energy, creativity, and technology. They can, for example, foster enlightened, congenial, and multicultural living (McMicheal 2000). Health Reform Foundation of Nigeria (2012) affirmed that, urbanization should be seen and addressed as a public health issue to be tackled. There is the need to have urban planning, decongest the urban areas by ensuring peripheries are provided essential amenities such as good roads network water, electricity, health facilities and good schools .Also, the issues of



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environmental sanitation should be adequately tackled, while facilities for recreation and walk-ways should be provided on roads for health-walk “he stated. Iyun (2009), also affirmed that the “health status of urban people is expected to be worse in comparison with those in the rural areas considering their various health challenges such as poor sanitary conditions, lack of potable water and high pollution level. Abiodu (2010) explain the need for Nigeria to explore and strengthen other mechanisms of health system and shift focus from out-of-pocket payments, address the issues that have undermined public health care financing in Nigeria, improve on evidence-based planning, and prompt implementation of the National Health Bill when signed into law. Onwujekwe et al (2010) explain that, In spite of the various reforms to increase the provision of health care services to the Nigerian people, health access is only 43.3%. The inadequacy of the health care delivery system in Nigeria could be attributed to the peculiar demographics of the Nigerian populace. About 55% of the population lives in the rural areas and only 45% live in the urban areas. Moe et al (2007) opined that, Provision of timely information aimed at combating possible health menace among many other things is an important function of public health. Hence, inadequate tracking techniques in the public health sector can lead to huge health insecurity, and hence endanger national security, etc. Ekudayomi and Adekpoju (2008) in their study, “Public Health and Population Growth” revealed that; the available health facilities/infrastructure in the cities become over stretched as urban population continue to rise without improving the existing facilities or providing additional one, they further explained that, failure of the Nigerian government to respond adequately to the increasing demand for urban Health infrastructural services has had the following consequences like, deteriorated quality of life in the city, the inadequate provision of infrastructural services, shortage of drug, decline in the productivity of workers. In the same way, Harris (2003) advised that in other to avert the consequence of uncontrolled urbanization on public health, government across the world must, as a matter of priority, devise ways to plan their cities, improve urban living conditions, like water and sanitation, housing, transportation, promoting health behavior and safety condition.

Validity of Instrument To validate the research instrument, the researchers employed the services of two environmental officers, two employees and two employers of labors from Lokoja the Kogi State capital in north-central, Nigeria for validity. The questionnaire was validated after thorough scrutiny and valuable contributions made duly incorporation.

Reliability of the Instrument To estimate the reliability of the instrument employed for data collection, the instrument was administered twice to town planning officers, medical doctors, environmental officers, employees and employers of labours numbering twenty from Lokoja. The second administration of the instrument was two weeks after the first exercise and the resulting scores were correlated using Pearson Product Moment Correlation approach. This yielded the co-efficient Pf r = 0.82. This score indicates that the instrument is very reliable.



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Study Instrument The study was conducted in Lokoja local Government area of Kogi State, Nigeria. Sample selection of respondents located in residential (households) and institutional (Health) facilities was drawn for the study using cluster sampling. Questionnaires and in-depth- interview were administered to retrieve information from the households in the cluster and respondents in selected Health institutions were interviewed. 399 questionnaires were administered out of which 367 were retrieved and analyzed giving a response rate of 92% For more in-depth understanding of the social reality of population growth and it impact on the health system in Lokoja metropolis, 15 in-depth interviews (IDIs) were conducted among the Management and staff of some selected health institutions, environmental officers, town planning officers, employers and employees of labors using simple random sampling. The questionnaire was title “Effect of Urbanization on public health system (EUPHS).” The questionnaire has two sections. Section “A” demands information on the effect of urbanization on the public system and section “B” contains the likely measures to addressing such negative effects. The instrument is in the form of likert five point rating scale. The response options have the values of 5, 4, 3, 2, and 1, respectively.

Study Area and Population The study focused on people living and working in Lokoja metropolis. The present Lokoja is situated at the confluence of the rivers Niger and Benue and nestles at the foot of Mount Patti. It was said to have been founded in 1860 by Dr. William Baikie who made up his mind to found a settlement at the site of the land between the confluence and the mountain when he took a clear view of the area during his Benue expedition of 1854 (Ocheja, 2010: 9). Lokoja was the first British settlement in the northern part of Nigeria, and it rapidly developed in the 1860s as a result of the European economic activities and later, political activities, especially at the turn of the century. The town started as a cosmopolitan settlement which attracted people from various parts of what is now Nigeria, Sierra Leone, and Europe (Mohammed, 1984:50). The significance of the town is not only due to its geographical location as the confluence of Rivers Niger and Benue, but also to the historical fact that it was the first colonial administration capital of Northern Nigeria with rich tourist attractions. Today, Lokoja is the Capital cities of Kogi State with a population of about 282254 according to the 2006 national census. It is one of the seven LGAs in Kogi West Senatorial District. The major occupations of people are farming, fishing and trading.

Methodology The Survey research design was adopted in this study. This design was employed because of its

exploratory nature. The researchers also employed both primary and secondary sources of data collection. Primary data were collected through the administration of questionnaire while secondary data were gathered from related literatures, textbooks, journals, bulletins and periodicals. The sample size is 399 out of the total population of 282254 based on judgmental sampling, and the Yaro Yamani statistical formula was used in the determination of sample size.



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Table II Distribution of Respondents in Respect of the Effect of urbanization to public health system S/No Expected mean =3

Percentage of Responses

Mean scores of Responses

Variables 5 4 3 2 1 Mean Standard deviation

Coefficient of Variation

% % % % % %

1 They have knowledge of urbanization and public health system.

55 23 10 8 4 4.17 0.72 17.27

2 Urbanization affect disease pattern

63 22 11 3 1 4.43 0.84 18.96

3 There are enough medical personnel in the hospitals

6 8 10 14 62 1.82 1.12 61.54

4 The respondents are affected by air pollution and poor sewage system.

58 23 8 5 6 4.22 0.79 18.25

5 There are adequate access to basic facilities

5 4 21 10 60 1.88 1.14 60.64

6 There is improved standard living

7 11 6 17 59 1.90 1.02 53.68

7 There employment opportunities

59 20 9 5 7 4.19 0.81 19.33

Sources: Field Research (2014)

Decision criterion: Accept any value with calculated mean ≥ 3.0 and Calculated Value ≤ 30.0, other wise rejected. Table II above shows that 78% of the respondents agreed that they have knowledge of urbanization and public health system; 86% agreed that urbanization affects the disease pattern. 14% of the respondents were of the view that there are enough medical personnel in the hospital, 81% of the respondents were of the view that they are affected by air pollution and poor sewage system and 9% of the respondents said that there is adequate access to basic facilities. More so, 18% of the respondents agreed that there is improved the standard of living while 79% of the respondents agreed that they have access to employment opportunities in Lokoja metropolis. Hence, item 1, 2, 4 and 7 are accepted considering the Mean and Coefficient of Variation values while item 3, 5, and 6 are rejected.



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Table III: Distribution of Respondents in Respect of likely Measures to addressing the Effects of Urbanization to Public Health System in Lokoja Kogi State S/No Expected Mean =3 Percentage of

Responses Mean score of Responses

Variables 5 4 3 2 1 Mean Standard Deviation

Coeficient Variation % % % % %

%

1 The existing Law should be strengthened

61 21 8 6 4 4.29 0.83 19.35

2 There should be proper environmental surveillance

57 16 10 9 8 4.05 0.79 19.51

3 Upgrade of medical facilities and increased Medical personals

64 19 12 2 3 4.39 0.86 19.59

4 Adequate infrastructure and employment opportunities at the rural area

50 24 13 9 4 4.07 0.63 15.48

5 Organizing town planning and health Education.

58 20 11 8 3 4.22 0.77 18.25

Sources: Field Research (2014). Decision criterion: Accept any value with calculated Mean ≥ 3.0 and calculated value ≤ 30.0 otherwise rejected. Table III above shows that 82% of the respondents agreed that the existing Laws relating to urbanization and public health system need to be strengthened, 73% of the respondent agreed that there should be proper environmental surveillance, 83% of the respondents are of the view that there should be upgrade of Medical facilities and increased of the Medical personnel.74% of the respondents agreed that adequate infrastructural facilities vis- a -vis employment opportunities at the rural area be provided. Finally, 78% of the respondents suggest that there was need to organize town planning health education to the respondents. Hence, item 1, 2, 3, 4, and 5 are accepted considering the Mean and Coefficient of Variation Values. Suggestion for Further Studies This study can be replicated in other geopolitical zones of Nigeria; this will create room for comparative analysis of urbanization and public health system in Nigeria. Conclusion and Recommendations From the result of the data analysis and subsequent findings made by the researcher, the paper concludes that the public health system in Nigeria has been adversely affected due to urbanization. Consequent upon the findings and conclusion, the researchers recommends that: I. The existing Laws relating to urbanization and public health system should be

strengthened II. There should be proper environmental surveillance in Lokoja metropolis. III. The Medical facilities should be upgrades and the Medical personals be increased.



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IV. Adequate infrastructural facilities and employment opportunities should be provided at the rural area to reduce the burden at the urban centers.

V. There should be proper town planning and the citizens be given adequately health education.

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ABDUL, Haruna & EDINO, Ojonimi Ferdinand, 2014, 2(2):209-218

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Performance Improvement through Non-systematic Training Premises

ABDUL, Haruna 1 & EDINO, Ojonimi Ferdinand 2 1 Director Studies and Head, Management Consultancy Services Department, Administrative Staff College of Nigeria (ASCON), Topo – Badagry, Lagos State, Nigeria. GSM NO: +2348063050788 2Department of Public Administration, University of Calabar, Nigeria. Email: [email protected]. GSM NO: +2348056985005

Manuscript ID: RCMSS/IJPAMR/14026 Abstract Effective managers resort to training as a means of performance improvement. He/she also adopts the systemic approach to training in order to train on a scientific basis. The interest in taking these actions is efficiency in performance and enhanced productivity. Five distinct approaches to training were identified by Boydell (1976), out of which the systemic approach was found as more scientific and appropriate for organisational development. In spite of the perceived benefits of adopting the ‘systems approach’, managers neglect them and adopt other methods which give only “accidental improvement”. Some of these other methods could be perceived by managers as giving ‘mere’ accidental improvement, but the manager realizes that such other approaches would need to be adopted now and then, in order to have industrial peace. Also, the desire of the manager, which is organisational sustainability, is not often that of the group, which is “satisfaction of social relationships”. The forward-looking manager may succeed in changing his/her organisational culture on training approach, by insisting on the right approach, but once in a while adopts any of the other non-performance enhancing methods, in order to motivate staff and have industrial harmony. Key Words: Performance, Training, Training Approaches, Systematic Training. Introduction It is generally believed that ‘training’ is a panacea for most organisational performance problems. Hence, in situations of a performance gap and low productivity, managers resort to training in order to make good or achieve the required level of performance. At the beginning of each financial year, managers make budget or set aside some funds for training of employees during the period. In order to demonstrate their competence and effectiveness, some managers strive to utilize these training votes by all means in the training of workers, what and how of training notwithstanding. “Just let us train staff”. While some managers sent personnel on training because money voted for that activity must be used during the financial year, others do so as a way of satisfying the personal desires of employees. There is another group of managers who send employees on training because they want the trade unions to see that management is ‘cooperating’ with them, therefore, the latter should cooperate with management whenever there is any kind of industrial dispute. In such practices, personnel are sent on training or training vote is employed for the wrong reasons. In many cases, such practices bring about improved performance, even though the improvement may not really be the same level with training undertaken under the right processes. The Management may see itself as being ‘training conscious’ and as making improvements through training of workers, but managers in such organisations fail to realize that their seeming successes and improvements were only accidental and would have been higher or more beneficial to the organisation if the right processes were adopted. The effective manager does not look for improvement at any level without considering the efficiency with



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which the improvement was achieved. He/she is also interested in sustainability of performance and long term achievement of organisational goals. This study set out to examine the issue of ‘accidental performance improvement’ recorded by managers through training, with a view to determining processes for effective training exposure of personnel. Managers would also be encouraged, not to do training for the wrong reasons or on faulty premises, but on systematic’ or rational basis. Definitions of Training Today’s organisations regard attendance at any training event as a serious investment that must provide value for money and relate to the objectives of the business. So, what is meant by training? In the view of Kenny, Donnelly, and Reid (1977:2), training is helping an individual to learn how to carry out satisfactorily the work required of him in his present job. In line with Kenny et al’s (1979) view that training is geared towards work performance, Marsick (1987:3) states that training usually refers to short-term activities that emphasize practical skills immediately applicable to the job. In other words, when an employee is involved in an activity involving the acquisition of skills to be applied on the job, we refer to it as training. This definition indicates that if learning is not directed towards practical application of same, then it could not be referred to as training. It also suggests that when organisational members are sent on training, then one expects or rather; they should apply knowledge and skills acquired from that training to the job, and otherwise they were not trained. In defining raining from another perspective, Laird (1978:9), states that it is the acquisition of the technology which permits employees to perform to standard. This reference to the standard aspect of organisational life is supported by Robinson (1988:12), who said that training means to improve a person’s behaviour pattern, in the areas of knowledge, skills or attitude in order to achieve the desired standard or level of performance. By these definitions, one understands Laird (1978) and Robinson (1988) as saying that training is for the attainment of set standards. In other words, every organisation operates on a set or desired standard of operation. Therefore, where one is not measuring up to a set standard, he/she is sent on training, to develop and improve the workers’ ability to the required standard. It is important to note that the expected result sets the standard of performance; compelling employees to work towards the achievement of desired results, based on defined performance standards. This also implies that anybody who is not performing according to set standards is not giving the desired result and needs to be put in line through a training programme. Reilly (1979:22) defines training as the development of a person’s knowledge, skills and attitudes for a vocational purpose. In the same vein, Maduabum (1996:4) sees it as the behaviour in order to accomplish the stated objective; while Oatey (1970:4) defined it as any activity which deliberately attempts to improve a person’s skill at a task. Considering both Hasseling (1971) and Oatey (1970) definitions, we can regard them as being wide because, they appear to give room for the inclusion of education and development from what we can actually call training. For our purpose, we can define training as any action which deliberately attempts to improve a person’s skill in a job (as against education which deals with personal development as against direct job-relevance). It is not our intention to join the controversy on the difference between education and training in this study, but suffice it to say that Marsick (1987:3) explains that education usually refers to longer-term courses that develop generic knowledge, skills and attitudes rather than specific job-related competencies.



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Approaches to Training So many methods are adopted by different organisations for sending or exposing employees to training programmes. While some organisations do so in a carefully thought-out way, others train by the rule of thumb. Whichever way they adopt, one finds that some results are obtained. Such results would have been higher or better if they are well thought-out before embarking on the training programmes; while other methods would have been avoided, knowing that they would not give appreciable effect. Most of these results obtained are term ‘accidental’ and managers would agree that planned results are better than accidental result. Boydell (1976:33), provided five approaches to training by organisations, and they are organisation development approach; welfare approach; administrative approach; political approach, and systems approach. These approaches are analysed as follows: Organisation Development (OD) Approach Here, the focus is on ensuring that every group in the organisation is trained. Hence, groups are sent on training in order to either obtain their support or favour. The training division does not want to be seen as neglecting any group; so, either a member of the group needs training or not, the group (occupational) must be represented. Welfare Approach This relates to the personal growth of the person; often, for economic goals of the individual. In many organisations in Nigeria, for example, employees are recommended or sent to training as a way of ‘rehabilitating’ them when under financial stress. Sometimes, it is done in order to enable the individual attain a ‘lucrative’ position that is, or likely to be vacant in the near future. Administrative Approach This approach sees training in terms of number of persons that have been trained rather than on the Knowledge, Skills and Attitudes to be gained. It could also be on the number of staff who attended various courses. Hence, a manager may observe that they have few numbers of staff in a particular occupation who have attended any course in the last two years, and decided to make it higher, for no practical reasons. Political Approach This approach means “where there is an opportunity to gain further influence, power and fame for myself”? Here, the manager in charge of training uses this approach to acquire fame or political power in the organisation. For example, in organisations where training takes place abroad, one finds that the training manager wields a lot of influence because, both superior and subordinate officers lobby for selection, either for themselves or their cronies. Systems Approach In systems approach to training is different segments, and the movement from one segment to another is in a step-by-step fashion which is referred to as systematic or methodical. The different segments include:

(i) Identification of Training Needs or Training Needs Analysis; (ii) Designing of training programmes;



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(iii) Implementation of training programmes; and (iv) Evaluation of training.

Identification of training needs is always the first step in the training system. In fact, it is the pivot of training since every other activity or segment in the training system depends on how successfully this first step is carried out. Because of the use of Training Needs Analysis (TNA) under the systems approach, it is widely agreed by managers that this approach is the most recommended. In fact, any of the other four methods could be found as satisfactory if they engage in the use of Training Needs Analysis before selecting staff for training. There are many advantages derivable from the application of Training Needs Analysis, which makes this step recommended by managers. So, what do we mean by Training Needs Analysis (TNA) or Identification of Training Needs? Training Needs

One of the most important steps in the training process is the establishment of the training needs. In using this term, we are implying that there are weaknesses somewhere in the system which demands strengthening by means of training in some form or other (http://collections.infocollections.org/ukedu/en/d/Jh0239e/5.html_br). Even when there are no weaknesses observed. Training can be embarked upon to introduce a new product line, new technology or a new process that will lead to enhanced performance. The sum total is that it will keep the organisation ahead of competitors,. Osborne (1996:43) is of the view that a training need exists when the gap between the ‘actual’ and the ‘required’ performance (i.e. training gap) can be most economically matched by a training intervention. This view is supported by Robinson (1988:37), who defined training needs as the gap which exists between the true requirements of a given job and the present capabilities of the incumbent. Both Osborne (1996) and Robinson (1988) could be regarded as using performance gap as an indication of training need, and Maduabum (1992:184) joins both of them by saying that a training need is a gap between the kind of performance improvement that can best be met by training of some kind. This definition is very easy to be applied to so many situations because, for example, it did not specify the area of human performance, whether a work relationship or participant position. In other words, one many need training in order to be a good wife or husband; a good member ofsociety or community or a good worker. All that Peterson (1992) advocated was that if a human situation requires performance improvement, then training need has been established. The danger in using this definition is that it could also encroach on the area of ‘education’ which we have been trying to avoid. For example, a student who has been passing at lower grade consistently, and who wants to start passing at distinction level, is in the quest for performance improvement. What shall we call this scenario, training or education? For our purpose, we do not want to treat training needs wider than is applicable to the work situation; in order to prevent us from following an endless track of an argument. Therefore, applied to the work situation,training need stems from an equation which shows that a factor is missing, and the training event is what supplies those missing factors. We shall take it that the existence of a training need states or implies that a change is necessary: a change from a situation or performance which is below that level required to attain at least the



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minimum performance level. And that the change agent is the training event. Craig (1976:9) stated that:

A training need may be described as existing any time an actual condition differs from a desired condition in the human, or “people” aspect of organisation performance, or more specifically, when a change in present human knowledge, skills or attitudes can bring about the desired performance.

Turell (1980:14) concluded that a training need had been revealed if the results we get from the present organisation structure or present procedures are below an acceptable standard. This we can interpret to mean that when an organisation or a procedure within it is operating below an acceptable level of effectiveness, it may be because the people who work and operate procedures have not been sufficiently been well developed and trained. In other words, they have training needs. Rae (1986:12) has the same view of training needs with Turell (1980) by defining training need as meaning that performance is not up to the level required, and this in turn means that both the existing level of achievement and that required have been measured and assessed. This indicates that in order to confirm that there is training needs; both the existing level of achievement and that required must have been measured and assessed. Having known what training needs is, how and why do we carry out training needs analysis? This would be treated in the next section. Training Needs Analysis It is true that performance has to be enhanced in order to enable the individual job holder perform at optimum level.We also know that where such a need is not rectified, there would be ineffectiveness and inefficiency on the part of the job incumbent and ultimately the work group/organisation. It is widely acknowledged that there has to be an assessment of “what is” and “what ought to be” before training needs could be established. This assessment is done through what is termed as Training Needs Analysis (TNA). The exercise is described as an examination of the organisation’s present operation, expected operations, present and manpower requirements in order to identify the number of staff and manpower categories needing to be trained and retrained, individual training needs which enable a person to reach the required standard of performance in the current job or the future job (Osborn, 1996:138): The complete process of training needs analysis according to Peterson (1992:14) means specifying those gaps or discrepancies in performance that actually exist between what people are capable of doing now, and what you want them to do in the future. Managers who adopt the systems procedure in determining training recipients in their organisation could be seen as very rational-looking at the requirements of training needs analysis. It is doubtful if any other training approach could match or even surpass the benefits of systems approach to training. Some managers are not careful about engaging in training needs analysis and use “accidental results” as their encouragement for training. Such managers may need to reconsider the necessity of adopting performance improvement through training based on needs analysis, than that obtained through accidental approach. Why We Need to Assess Training Needs In the view of Reilly (1990:17), the short answer is that:

A tremendous amount of training resources are wasted when training needs are not properly assessed. First, training may not be the appropriate response to a particular



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organisational problem. Second, when training is the correct response, it is important to identify what kind of training. Thus, managers and trainers should try to find out where training might improve the performance of an organisation before they commit resources to training.

Goldstein (1989:29) stated that training needs assessment provides information on where training is needed, what the content of the training should be and who within the organisation needs training in certain kinds of skills and knowledge. He further explained that once an organisational analysis has been concluded to identify where training is needed, (for example, in a department or a workgroup); a task analysis determines the activities performed on the job and the conditions under which the jobs are done. Perceived Attractions of ‘Training for other Reasons” by Managers Considering all other training approaches so far highlighted, one would recommend or support ‘systems approach’ to training. But is there no merit in the use of other approaches? Under what conditions would it be advantageous to overlook the use of systems approach? The systems approach to training supports the rational nature of man, but sometimes, the manager finds it useful to train for some other reasons. Such reasons may not be widely acclaimed, but reasonable to the manager who engages in them. What are the issues that attract the manager to the use of other approaches as against the systems approach to training, and is he/she justified to adopt such approaches? We shall tackle these questions by reviewing the other approaches to training not recommended so far and whose result on performance may be is accidental.

Organisation Development Approach (OD) The background in the use of Organisation Development Approach (OD) is one of social psychology, with special emphasis on the dynamics of working groups. In consequence, much of what is referred to as OD is concerned with the application of behavioural science techniques – especially social and group psychology to the solving of organisational problems. Consideration of group perception is adopted in deciding whether a member of the group needs training or not. In the view of Boydell (1976:34), groups in organisations concern themselves with typical issues in identifying training needs as shown below: Organisation Development Approach Level (of Group) Typical issues involved in Identifying needs Organisation Wide

- What are the norms, expectations, of employees’ behaviour? - How do people feel about the organisation, about top management, about the products, processes and policies of the organisation? - How is power distributed and used? - Is the climate democratic or autocratic, co-operative or competitive?

Inter-group

- Is there evidence of inter-group conflict, ‘us-and-them’ syndrome, for example between management and unions, specialists and line, administrators and professionals? - How do various groups see each other? - Do they help or hinder each other’s effort?

Group

- How well does the group function as a team? - What is the leadership style in the group? - Does it make effective use of its resources? - What is the quality of the relationship between the group members?

Source: Boydell, T.H. (1975). A Guide to the Identification of Training Needs



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Looking at the needs perceived as relevant by groups in organisation and comparing same with that perceived as important to ‘Management’ in organisations; one finds that while that of groups focus on social relationships, that of ‘Management’ concentrates on productivity and survival of the enterprise. The question to be answered is whether a dissatisfied group can be productive. Not likely, but the issues that cause dissatisfaction and disaffection to group are not performance related. Hence, in order to reduce the negative effects of group dissatisfaction, Managers send personnel on training on the basis of Organisation Development Approach, if only to have organisational or industrial peace. With the group thus satisfied, some measure of performance improvement is achieved although not as would have been obtained using the systems approach. The top manager should be able to read the pulse of the organisational politics in order to defuse tension in a diplomatic way. Hence, Managers sometimes train on the basis of Organisational Development Approach, not because they do not know the most appropriate method, but because there has to be industrial peace before one can talk of productivity. The results of the Hawthorne studies by Roethlisberger and Dickson (1967) are a good example of how productivity could be influenced by group behaviour, indicating that matters affecting a group could give unexpected results if not properly handled. Hence, one may not totally discourage Managers from using the Organisation Development (OD) approach to training. At that point, Managers are thinking about maintaining a cohesive and motivated workforce before any other considerations. The other question that arises is – to what extent could Managers adopt OD approach to training? Definitely, any organisation that neglects performance and productivity is heading towards its doom. Hence, Managers cannot train by OD approach all the time. In what proportion then should the apply OD approach be used? This is where the Manger has to use discretion and good judgement, which allows for the satisfaction of work groups without relegating productivity and competence. Welfare Approach The background in the use of the Welfare Approach is to enable the individual make some economic gains. Either as a compensation for good performance or assistance in time of economic hardship. Using this approach, it will be difficult for the manager to know all that the personnel is going through, unless they all confide in him/her, which is very remote. And in terms of reward for good performance, organisations already have provisions and salary increases. Hence, the Manager may not have greater reasons for adopting welfare approach. The experience is that welfare approach is adopted mainly in developing countries by Managers in government establishments. In such government establishments, a large number of employees may be nominated to attend a training programme that falls on the week before a religious festival. The reason being to enable the participants derives some financial benefits that would ‘cushion’ the financial effect of the festival. The Manager could afford to send those officers on Welfare basis because, in the developing nations, government business is not strictly profit oriented, and budget must be implemented whether revenue is earned or not. The Mangers in a commercial enterprise cannot afford to do that mass training on Welfare Approach; else, the organisation would fold up. The reality is that beneficiaries of welfare approach get motivated to the extent that the output of the ‘sensible’ or ‘appreciative’ ones amongst beneficiaries double, leading to higher



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productivity. However, such improved productivity may not be based on efficiency which is as a result of competence. Hence, when employees increase or improve their performance/productivity, the discerning Manager asks questions concerning the efficiency of the increase. Administrative Approach The background to this approach is that Managers using this approach want to be seen as being pro-organisation by implementing every proposal ‘to the letter’ without questions. That the performance or effectiveness of the Manager is measured in terms of his/her work output, and in this case, the number of persons sent annually on training. Such Managers forget that some of the staff sent on training may not be exposed to the right kind of training without systematic training needs analysis. Hence, the individual may come back from training without effecting positive learning transfer. Given the number of personnel sent on training in a given period, to what extent did they make any meaningful impact in the performance of the organisation? Are all the problems of the organisation training based? The Manager who adopts Administrative Approach could get some positive results but are these results worth the effort? These accidental results may encourage the Manager, who has little knowledge about the benefits of systematic training approach. Political Approach The background to this approach is that the Manager uses it to acquire some political power in the organisation. It is obvious that training which takes place abroad attracts some benefits and allowances, making the decision-maker in such cases much ‘sought after’. Such positions put the Manager in an influential status as only the favoured get involved in such training programmes. When people learn on international programmes, they tend to acquire enhanced knowledge, but sending staff on overseas training indiscriminately often leads to sending the wrong persons on training. The training recipients come back well equipped, but many are unable to transfer learning because, such training is received outside their area of performance. No doubt, there may be some accidental improvements, but it would have been higher if the training was focused on the individual’s area of performance. The reality is that, in practice, many beneficiaries of overseas training were nominated to enable them ‘travel out’, whether the sponsoring organisation would benefit from such training or not. Organisational Culture Contributory to Accidental Performance Improvement The culture of an organisation determines the kinds of decisions emanating from its Managers and its management style. The culture of any organisation builds up mostly from the reactions of its founding fathers or pioneer managers, and hardens into a way of life or norm of the organisation. In situations where the pioneer management staff imbibes systematic approach to training, subsequent managers and organisational members look forward to or practice it without problems. But, where other approaches were introduced ab initio, it becomes odd for one to change or rather correct the initial error. Hence, one discovers that the culture which current Managers met on assumption of office tends to determine their approach. Every business, in fact, every organisation has a culture. It is not easy or even possible to know an organisation’s culture from outside, nor can anybody say for certain what an organisation’s culture is unless one has close contact with the organisation. An organisation



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may have an imposing or beautiful structure which could easily entice passers-by, but a close relationship with that organisation may reveal a different perspective. What gives the organisation any kind of identity is the behaviour of the people that constitute its personnel and which sum total gives the organisation its culture. Whether weak or strong, culture has a powerful influence throughout the organisation. It affects particularly everything: from who gets promoted and what decisions are made, to how employees are trained, how they dress and what properties they own. Because of this impact, it is considered that culture has a major effect on the choice of training approach adopted by the organisation. Handy (1976:177) stated that, in organisations, there are deep-set beliefs about the way work should be organised, the way authority should be exercised; people rewarded, and people controlled. These are all parts of the culture of an organisation. In the view of Taylor (1977:1) culture is that complex whole which includes knowledge, belief, art, law, morals, custom, and any other capabilities and habits acquired by man as a member of a society. Taylor’s definition covers the critical areas of social life which he rightly described as ‘complex’. One can hardly talk about the culture of the people without referring to their belief, law, morals and custom. These become habits to the society concerned and these habits are acquired as one lives in that community for a long time. In reality, ‘culture’ is mere ‘habit’ on any aspect of human life. So, once a group of individuals acquires a habit, it is adhered to as precedence in doing something. Even the Public Service and Legal System operated by ‘precedence’ which is a habit that has been practiced over the years or in certain situations. Therefore, if members of an organisation form the habit of doing one thing on each of such instances, it can be rightly regarded as their ‘culture’. The definition of Taylor (1977) represents that of Unoh (1986:3), having defined culture in the exact words of Taylor (1977). This means that a culture encompasses conventional understandings and practices which give a people its uniqueness. And thus render such a people distinct from all others. The people may be a community or social setting of any magnitude; it may also be an organisation made up of individuals from diverse backgrounds, but the culture becomes a unifying factor; a habit which all members of that group exhibit unconsciously. Deal and Kennedy (1982:4) and Burrel and Morgan (1985) all gave definitional insights that are useful to this study. Conclusion It is generally agreed that training is a pre-requisite for organisational performance, but different Managers adopt different approaches, all aimed at organisational improvement and sustenance. Modern day managers regard attendance at any training events as a serious investment that must provide value for money and relate to the objectives of the business. Of the five approaches to training identified by Boydell (1976) the ‘systemic approach’ was considered as most scientific and systematic, capable of delivering the required results. In spite of the benefits of a systemic approach to training, some managers adopt some other approaches which give an accidental improvement. Such approaches are adopted because the Manger wants industrial peace between Management and occupational groups. All the benefits of the systemic approach may not be realizable if groups are dissatisfied. Again, the organisational training culture established by the organisation’s founding fathers may be such that considers social relationships as paramount. However, the Manger should, once in a while use the other approaches that would motivate and satisfy individuals and groups. While



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government establishments could afford to adopt other methods that are not systematic, commercial enterprises have to abide strictly with the approach that would keep them afloat.

References Boydell, T. H. (1976): A Guide to the Identification of Training Needs. 2nd ed. London: BACIE. Burrell, G. and Morgan, G. (1985): Sociological Paradigms and Organisational Analysis: Elements of

the Sociology of Corporate Life. Aldershot: Gower. Craig, R. L. (ed.) (1976): Training and Development Handbook: A Guide to Human Resource

Development. 2nd ed. New York: McGraw – Hill. Deal, T. E. and Kennedy, A. A. (1982): Corporate Cultures: The Rites and Rituals of Corporate Life.

Reading, Mass: Addison – Wesley. Goldstein, I. L. (1989): Training and Development in Organisations. San Francisco.: Jossy – Bass. Guide to Developing Training Strategies: 4. Identifying needs. (n.d.). Retrieved from

http://collections.infocollections.org/ukedu/en/d/Jh0239e/5.html_br Handy, C. B. (1976) Understanding Organisations. Hammondsworth: Penguin Books. Hasseling, P. G. M. (1971) “Evaluation of Management Training in Some European Countries”. In Abt,

L. E. and Riess, B. f. eds. Clinical Psychology. No. 9, pp.91 – 105. Kenny, J. Donnelly, E. and Reid, M. (1979): Manpower Training and Development: An Introduction:

2nd ed. London: Inst. of Personnel Management. Laird, D. (1978): Approaches to Training and Development. Reading, Mass: Addison – Wesley. Maduabum, C. P. (1992): Identification of Training Needs” in, Yahaya, A. D. and Akinyele, C. I. eds.

New Trends in Personnel Management: A Book of Readings: Topo-Badagry: Administrative Staff College of Nigeria.

Maduabum, C. P. (1996): Management of Training in the Nigeria Public Service, (1914-1993). Topo-Badagry: Administrative Staff College of Nigeria.

Marsick, V. ed. (1987): Learning in the Workplace; London: Crom Helm. Oatey, M. (1970): “The Economics of Training with Respect to the Firm” in British Journal of Industrial

Relations. Vol. 8, No. 1. Osborne, D. (1996): Staff Training and Assessment. London: Cassell. Peterson, R. J. (1992): Training Needs Analysis in the Workplace: London: Kogan Page. Rae, Leslie (1986) How to Measure Training Effectiveness; Aldershot: Gower. Reilly, Wyn (1979): Training Administrators for Development: An Introduction for Public Servants and

Government Training Officers. London: Hienemann. Reilly, Wyn (1990): Training for Public Management: A Handbook for Management Development.

London: commonwealth Secretariat. Robinson, K. R. (1988): A Handbook of Training Management. 2nd ed. London: Kogan Page. Roethlisberger, F. J. and Dickson, W. J. (167): Management and the Worker: An Account of a Research

Programm conducted by the Western Electric Company. Hawthorne works. Cambridge, Mass: Harvard University Press.

Taylor, E. B. (1977): Primitive Culture, Researches into the Development of Mythology, Philosophy; Religion, Language, Art and Customs. New York: Henry Hole and Co.

Thorn, K and Mackey, D. (2007): Everything You Ever Needed to Know about Training. 4th ed. London: Kogan Page.

Turell, M. (1990).Training Analysis: A Guide to Recognizing Training Needs. Estover, Plymouth: Macdonald and Evans.

Unoh, S. O. ed (1986): Culture Development and Nation Building. Ibadan: Spectrum Books.


Innocent Okoi, Stephen Ocheni & Sani John, 2014, 2(2):219-234

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The Effects of Corporate Governance on the Performance of Commercial Banks in Nigeria

Okoi Innocent Obeten1, Stephen Ocheni2 & Sani John3 1Dept. of Banking and Finance, University of Calabar, Calabar, Cross River State, Nigeria 2Ministry of Foreign Affairs, Abuja, Nigeria. Email: [email protected] 3 Dept. of Accountancy, Federal Polytechnic, Idah, Kogi State, Nigeria Email: [email protected]

Manuscript ID: RCMSS/IJPAMR/14027 Abstract The paper takes a look at the effects of corporate governance on the performance of commercial banks in Nigeria. As a managerial tool for judicious, preservation and prudent management of resources, corporate governance contributes to the economic health of banks in Nigeria. This explains the public interest and debate on corporate issues in Nigeria. The paper therefore concludes in absolute terms that corporate governance does affect banks’ performance and value of the firm. That strong governance standard is important for banks and increased governance quality leads to higher levels of investment as well as greater responsiveness of investment to growth opportunities. However, the paper avowed that substantial part of variability in corporate governance practices of commercial banks is due to interaction of forces from regulatory authorities, capital markets, government policies, environment factors as well as asset quality. Key Words: Corporate Governance, Profitability, Banking Sector, Regulatory Authorities

Introduction The concept of corporate governance has attracted a good deal of public interest in recent years, because of its apparent importance on the economic health of corporations and society in general. Basically, corporate governance in the banking sector requires judicious and prudent management of resources and the preservation of resources (assets) of the corporate firm; ensuring ethical and professional standards and the pursuit of corporate objectives, it seeks to ensure customer satisfaction, high employee morale and the maintenance of market discipline, which strengthens and stabilizes the bank

Recently, the banking industry in Nigeria has been undergoing serious reforms over the past three years arising from the central bank of Nigeria's requirement for banks to increase their capital base (share) to a minimum level of twenty five billion naira (N25B), (Ogbeche, 2006:1). This triggered off several merges and acquisitions that have reduced the number of players from eighty nine (89) to twenty five (25) banks as at the beginning of 2006 (Kama, 2006; 66). It is imperative to note that at the end of the consolidation exercise, the total capitalization (the value of all equities of the banks came to N775.0 billion compared to the figure of N327 billion before the commencement of this programme in July 2004. (Adedipe, 2004: 52).

However, the successful banks accounted for about 93.5% and 97% of the total deposit liabilities and assets of the banking system respectively. (CBN Annual report, 2007: 26). Before the consolidation exercise, the banking industry had 82 active banks whose overall performance led to sagging of customer's confidence, as there was lingering distress in the industry. The supervisory structures were inadequate, as they were cases of official recklessness amongst managers, and the industry was notorious for financial abuses. However, in November, 2005; the CBN blacklisted six officers of banks, including a chairman and a non-executive director, for unethical practices and professional misconduct. The same year, 110 cases of fraud and forgeries totaling N1.5 billion were reported by various Banks; and fifty six (56) of the cases amounted to N 1.38 billion, representing 91.8% of the total amount (N1.50B) CBN annual report, 2006: 64). Poor corporate governance was identified as one of the major factors in virtually all the cases. Other



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forms of bad corporate governance were insider abuses, poor quality services and weak supervisory structures. The issue of corporate governance is important and indispensable for the realization of the basic corporate objective of profitability and liquidity.

Corporate governance is designed to promote a diversified strong and reliable banking sector which will ensure the safety of depositor's money as well as play active developmental roles in Nigeria's economy. Corporate governance is used to monitor whether outcomes are in accordance with plans and to motivate the organization to be fully informed in order to maintain organizational activity. It is also seen as a mechanism by which individuals are motivated to reconcile their actual behaviours with the overall objectives of the organization. It ensures that the values of all stakeholders are protected and also minimizes asymmetric information between bank's managers, owners and customers.

Corporate governance has become a global issue over the last decade, leading to countries around the world amending their legal system and stock exchange listing requirements to conform to corporate governance principles as well as developing new codes of best practices.

Recently, there has been considerable interest in the corporate governance practices of modern corporations, particularly since the high profile collapse of a number of large U.S. firms such as Enron Corporation and WorldCom (Adedipe, 2004:56). The development has forced national government and regional economic organizations to come up with various guidelines and codes to get businesses to behave decently. One of such institutions is the Organization for Economic Cooperation and Development (OECD), which has undertaken much work on corporate governance for a number of years. The OECD is an ideal forum for putting together an international framework on corporate governance. The organization accounts for more than 90% of the world stock market capitalization. It is internationally competitive and attracts foreign direct investments. The first international code of good corporate governance standard of the 1999 OECD Principles of Corporate Governance, focused on publicly quoted companies, while coming to assist government in improving the legal, institutional and regulatory framework that underpins corporate governance

Corporate governance arrangements and institutions vary from one country to another. There is no single framework that is appropriate for all countries. The Corporate governance code covers every aspect of the organizational set up, right from how resources are generated and how they are utilized. Therefore, there is need to understand the concepts, processes and problems of corporate governance both from the perspective of those who direct, those concerned with returns and accountability as well as those concern with corporate regulation, because there is a growing consensus that corporate governance has a positive relationship with national growth and development (http://onlinelibrary.wiley.com/doi/10.1111/1467-8683.00251/abstract_br).

In fact, the influence of internal and external factors of insider abuse, inflation, political instability and others, alongside the influence of corporate governance practices will be greatly explored in this study. In an attempt to restructure the entire Nigeria economy, the Obasanjo Administration in Nigeria (1999-2007) introduced a vast number of reforms, with the financial sector reforms being the anchor for other sectors reform and also being the focus of this study. The Central Bank of Nigeria introduced a new code of corporate governance for Nigeria Banks in April 2006, which was a vast improvement on the former code of corporate governance (Financial standard September 3, 2007:37). However, a prognostic view shall be implored to examine the effect of corporate governance on the performance of Nigerian banks, with respect lo the code, measurement, principles, performance of corporate governance, the theories as well as structure of corporate governance in Nigeria.



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In the past five years, corporate governance has become one of the most debated corporate issues in Nigeria. In 2001 the Securities and Exchange Commission (SEC) of Nigeria set up a committee that came up with a code of best practices for public companies in Nigeria (“the code” in 2003). In 2005 the Institute of Directors of Nigeria set up a Centre for Corporate Governance to champion the cause of good corporate governance amongst its members. In 2006 the Central Bank of Nigeria issued post-consolidation corporate governance guidelines for all banks operating in Nigeria; the Nigeria code of corporate governance is primarily aimed at ensuring that managers and investors of companies carry out their duties within a framework of accountability and transparency. This should ensure that the interests of all stakeholders are recognized and protected as much as possible. The code of best practices for public companies in Nigeria (“the code”) is voluntary even though it is recommended that all Nigeria Public companies comply with the code and are required to state reason for non-compliance. Ogbeche (2006: 15) posits that corporate governance simply put, is ensuring good business behaviour. He further asserts that it is about “doing the right things and doing the things right”. It is about the way in which boards oversee the running of a company, its managers, and how board members are in turn accountable to shareholders and the company. This has implications for company behaviour towards employees, shareholders, customers, and other stakeholders (http://www.oecd.org/corporate/ca/corporategovernanceprinciples/improvingbusinessbehaviourwhyweneedcorporategovernance.htm_br).

In a board culture of corporate governance business, author Gabriel O Donovan in Shleifer (1997: 25) defines corporate governance as “an internal system encompassing policies, processes and people, which serve the needs of shareholders and other stakeholders, by directing and controlling management activities with good business savvy, objectivity and integrity. Sound corporate governance is reliant on external market place commitment and legislation, plus a healthy board culture which safeguards policies and processes”. O’Donovan goes on to say that the perceived quality of a company’s corporate governance can influence its share price as well as the cost of raising capital. There is no single or simple definition of corporate governance and certainly no definition that all countries agree on (Myers, 1997: 148). Corporate governance is defined and practiced differently throughout the world, depending upon the relative power of owners, managers and providers of capital (Craig, 2005:1034).

Basically, different national systems of corporate governance reflect major differences in ownership structure of firms in different countries and particularly differences in ownership concentration (Shleifer and Vishny 1997: 36). Corporate governance, as a concept, can be viewed from at least two perspectives (Oluyemi 2007: 56). A narrow one in which it is merely as being concerned with the structures within which a corporate entity or enterprise receives its basic orientation and direction (Rwegasira, 2000: 51), and a broad perspective in which it is regarded as being the heart of both a market economy and a democratic society (Sullivan, 2000: 8). A narrow definition views the subject as the mechanism which shareholders are assured that managers would act in their best interests.

As far back as Adam Smith, as indicated in Henderson (1986: 16), it has been recognized that managers do not always act in the best interests of shareholders. For example, Jensen and Meckling (1976: 53-55) addressed the principal- agent problem, which occurs when managers with private information have incentives to pursue their own interest at the owner’s expense. The broad view of corporate governance, however, refers to the process that seeks to direct and control the affairs of an organization so as to protect the interest of all stake holders in a balanced manner. The process is under-pinned by the principles of openness, integrity and accountability.



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Nzota (2004: 464) opines that corporate governance is a term that is commonly used to describe the way business firms are managed. He further stated that corporate governance code covers every aspect of the organizational set up, right from how resources are generated and how they are deployed and utilized. Cook (1999: 26) in his journal, “A study of corporate governance of thrifts”, posits that corporate governance primarily concern with how equity investors induce managers to provide them with an appropriate return on their invested capital. In another development, corporate governance refers to the mechanism through which private or state owned corporations and their management are governed, and that it provides a structure which the objectives and the performance of a corporation are determined and monitored (Lemo 2007: 233). However, governance is broad in concept touching on human issues, political, judicial and corporate issues. Getting good governance calls for improvement that touch virtually all aspects of the public sectors from institutions that set the rules of the game for economic and political interactions, to organizations that manage administrative systems and deliver goods and services to citizens, to human resources that staff government bureaucracies, to the interface of officials and citizens in political and bureaucratic areas (http://www.sarpn.org/documents/d0002342/index.php_br).

It is also imperative to note that corporate governance requires the cooperation of various parties such as the board of directors, the chief executive officer, management and shareholders. These stakeholders are called the regulatory body. Others are suppliers, employees, creditors, customers and the community at large. The corporate governance structure specifies the rule and procedures for making decisions on corporate affairs. It also provides the structure through which the company objectives are set as well as the means of attaining and monitoring the performance of those objectives. Corporate governance is used to monitor whether outcomes are in accordance with plans and to motivate the organization to be more fully informed in order to maintain or to alter organizational activity. It is the mechanism by which individuals are motivated to align their actual behaviours with the overall participants (http://psychology.wikia.com/wiki/Corporate_governance_br).

Generally, the concept of corporate governance relate to the relationship between a company’s management board shareholders and other stakeholders. From the perspective above, good corporate governance entails efficient management of resources and provision of responsible leadership; it requires the provision of timely and quality information and the enforcement of sanction for breaches in ethical standard, regulations and Code of conduct (Ogbeche, 2006: 2).

Suffice it to say that the whole essence of corporate governance is to ensure transparency, investor protection, full disclosure of executive action and corporate activities to stakeholders, assurance of performance related executive compensation and full disclosure of executive compensation (Myers, 1997: 149). Corporate governance as a multi-faceted subject has an important theme which deals with issues of accountability and judiciary duty, essentially advocating the implementation of policies and mechanisms to ensure good behaviour and protect shareholders (Financial standard, Sept 3, 2007: 39).

Relationship between corporate governance and bank’s performance The factors underpinning corporate governance mainly include shareholding structure, board composition, and senior management. The relationship between these factors and firm performance is the focal point for many scholarly studies (http://aut.researchgateway.ac.nz/bitstream/handle/10292/739/YungMF.pdf?sequence=4_br). Moreover, it can be argued that firm performance can be improved with better corporate governance controls in a company. Famma and Jenson (1983:39) argued that corporate governance does affect



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firm performance. It was discovered that the majority of larger firms with stronger governance controls are rewarded over the long- term.

Klein, Shapiro, and Young (2004:32) examined the relationship between corporate governance and firm value by using the corporate governance index (CGI) and Tobin’s Q, which measures the firm’s value. The results concluded that corporate governance does matter in a firm value. In addition Carse (2000:25) argued that a strong corporate governance standard is particularly important for banks. This is because most of funds that the banks use for business belong to creditors and depositors. The failure of a bank will affect not only its own shareholdings, but have a systematic affect on other banks. Therefore, it is important to ensure that banks are operating properly.

On the other hand, a large number of studies have investigated the relationship between ownership structure, and firm performance. Morck, Sheifer, and Vishny (1998:45) argued that higher ownership concentration has a positive impact on firm performance, because it increases the ability of shareholders to properly monitor managers. Notbrook (2009:65) on corporate governance mechanisms and firm performance revealed that separation of the posts of chief executive officer (CEOs) is vital for strong and viable corporate governance sustainability. The result added that a board size of ten is more concentrated as opposed to diffused equity ownership.

The relationship between corporate governance and foreign investment can be discussed through the direct effects of governance on the firm’s investment level, and the firm’s behaviour towards investment opportunities. Empirical studies according to (Notbrook, 2009:45) shows that well governed firms invest more than badly governed ones .Within a broad sample of United States manufacturing firms, the study finds that increased governance quality leads to higher levels of investment and greater responsiveness of investment to growth opportunities. Higher quality governance mitigates the under investment problem that arises from incentive problems between managers and shareholders.

Corporate governance mechanisms Basically, one consequence of separation of ownership from management is that the day-to-day decision making power (that is the power to make decision over the use of capital supplied by the shareholders) rest and with persons other than the shareholders themselves. The separation of ownership and control has given rise to an agency problem whereby there is the tendency for management to operate the firm in their own interest, rather than those of shareholders (Jensen and Meckling 1976: 236, Fame and Jenson 1983: 73). These create opportunities for managers to build illegitimate empires and in the extreme, outright expropriation. Various suggestions have been made in the literature as to how the problem can be ameliorated (Hermolin and Weiisbach 2001: 697; Jensen and Meckling 1976:240; Shleifer and Vishny, 1997: 89). Some of the mechanisms and their impediments to monitor and shape banks behaviours are examined below: a). Shareholders: Shareholders play a key role in the provision of corporate governance. Small or diffuse shareholders exert corporate governance by directly voting on critical issues, such as mergers, liquidation, and fundamental changes in business strategy and indirectly by electing the boards of directors to represent their interest and oversee the myriad of managerial decisions to be taken by the management of the organistaion (http://studyclue.com/uploads/corporate_governance_and_financial_performance_of_banks.doc_br). Incentives contracts are a common mechanism for aligning the interests of managers with those of shareholders. The board of directors may negotiate managerial compensation with a view to achieving particular results. Thus, small shareholders may exert corporate governance directly through their voting right and indirectly through the board of directors elected by them.



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However, a variety of factors could prevent small shareholders from effectively exerting corporate control. There are large information asymmetries between managers and small shareholders as managers have enormous discretion over the flow of information. Also, small shareholders often lack the expertise to monitor managers accompanied by each investor’s small stake which could induce free-rider problem. That is each investor relies on others to undertake the costly process of monitoring managers, so there is too little monitoring (http://studyclue.com/uploads/CORPORATE_GOVERNANCE_AND_FINANCIAL_PERFORMANCE_OF_BA

NKS.doc_br). Large (concentrated) ownership is another corporate governance mechanism for preventing managers from deviating too far from the interest of the owners. Large investors have the incentives to acquire information and monitor managers. They can also elect their representative to the board of directors and thwart managerial control of the board. Large and well-informed shareholders could be more effective at exercising their voting rights than an ownership structure dominated by small, comparatively uninformed investors. Also, they could more effectively negotiate managerial incentive contracts that align owner and manager interests than poorly informed small shareholders whose representatives, the board of directors can be manipulated by the management. However, concentrated ownership raises some corporate governance problems. Large investors could exploit business relationships with other firms they own which could profit them at the expense of the bank. In general large shareholders could maximize the private benefits of control at the expense of small investors (De Angelo and De Angelo, 1985: 205; http://studyclue.com/uploads/CORPORATE_GOVERNANCE_AND_FINANCIAL_PERFORMANCE_OF_BANKS.doc_br). Thus, while concentrated ownership is a common mechanism for confronting the corporate governance issue, it has its own drawbacks (http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2004). b). Debt holders: Debt holders provide return for a promised stream of payments and a variety of other covenants relating to corporate behaviour, such as the value and risk of corporate assets. If the corporation violates these covenants or default on the payments, debts holders typically could obtain the rights to repossess collateral throw the corporation into bankruptcy proceedings, vote in the decision to reorganize and remove managers. However, there could be barriers to diffuse debt holders to effectively exert corporate governance as envisaged. Small debt holders may be unable to monitor complex organization and could face the free-rider incentives, as small equity holders. Also the effective exertion of corporate control with diffuse debts depends largely on the efficiency of the legal and bankruptcy systems (http://studyclue.com/uploads/CORPORATE_GOVERNANCE_AND_FINANCIAL_PERFORMANCE_OF_BA

NKS.doc_br). Large debts holders like large equity holders, could ameliorate some of the information and contract enforcement problems associated with diffuse debt. Due to their large investment, they are more likely to have the ability and the incentive to exert control over the firm by monitoring managers. Large creditors obtain various control rights in the case of default or violation of covenants. In terms of cash they can renegotiate the terms of loans, which may avoid inefficient bankruptcies. The effectiveness of large creditors however, relies importantly on effective and efficient legal and bankruptcy systems. If the legal system does not efficiently identify the violation of contracts and reorganize firms, then creditors may lose a crucial mechanism for exerting corporate governance (http://studyclue.com/uploads/CORPORATE_GOVERNANCE_AND_FINANCIAL_PERFORMANCE_OF_BA

NKS.doc_br). Also, large creditors, like shareholders may attempt to shift activities of the bank to reflect their own preferences. Large creditors for example as noted by Myers (1997: 147),



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may induce the company to forego good investment and take on too little risk because the creditor bears some of the cost but will not share the benefits. c). competitions in product market and take over: Some economists have argued that competition in the product or service market may act as a substitute for corporate governance mechanism (Allen and Gale 2000: 96). The basic argument is that firms with inferior and expropriating management could be forced out of the market by firms possessing non-expropriating managers due to sheer competitive pressure. That is rather than focusing on the mechanisms via which equity and debt holders seek to exert corporate control, market competition can discipline a poorly managed firm. Also a fluid takeover market is noted by Jensen (1993: 325), could create incentives for managers to act in the best interest of the shareholders to avoid being fired in a takeover. Evidence however suggests that given the power of managers and the scarcity of liquid capital markets, takeover are essentially non-existent as a corporate governance mechanism outside the U S A and U K (Shleifer and Vishny, 1997: 90). Structure of corporate governance in Nigerian commercial banks Owing to the unique nature of banking, there are adequate corporate governance laws and regulations in place to promote good corporate governance in Nigeria. Some of the most important ones include: The Nigeria Deposit Insurance Corporation (NDIC) Act of 1988, the Company and Allied Matters Act (CAMA) of 1990, the Prudential Guidelines, the Statement of Accounting Standard (SAS 10), the Banks and Other Financial Institutions (BOFI) Act of 1991, the Central Bank of Nigeria (CBN) Act of 1991, the CBN Circular and Guidelines, etc. Also, there are some government agencies and non-governmental associations that are in the vanguard of promoting good corporate governance practices in the Nigerian banking sector. These organizations, apart from the CBN and NDIC, include the Securities and Exchange Commission (SEC), the Nigerian Stock Exchange (NSE), Corporate Affairs Commission (CAC), Institute of Chartered Accountants of Nigeria (ICAN), Financial Institution Training Centre (FITC), Institute of Directors (IOD) Chartered Institute of Bankers of Nigeria (CIBN), etc (http://studyclue.com/uploads/corporate_governance_and_financial_performance_of_banks.doc_br). Basically, corporate governance in the nation’s banking system provides the structure and processes within which the business of bank is conducted with the ultimate objective of realizing long-term shareholders value while taking into account the interests of all other legitimate stakeholders. In meeting its overall commitment to all stakeholders, the various statutory and other regulations in the system impose the responsibilities with sanctions for breaches on bank (http://studyclue.com/uploads/corporate_governance_and_financial_performance_of_banks.doc_br) director to:

• Effectively supervise bank affairs by exercising reasonable business judgment and competence.

• Critically examine the policies and objectives of a bank concerning investment, loan asset and liability management et cetera;

• Monitor bank’s observance of all applicable laws. • Avoid self-serving dealings and any other malpractices; • Ensure strict accountability; etc.

A critical review of the nation’s banking system over the years, have shown one of the problems confronting the sector had been that of poor corporate governance. From the closing reports of banks liquidated between 1994 and 2002, there were evidences that clearly established that poor corporate governance led to their failures. As reveal in some closing



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reports, many owners and directors abused or misused their privileged positions or breached their judiciary duties by engaging in self serving activities. The abuses included granting of unsecured loans/credit facilities to owners, directors and related companies which in some cases were in excess of their bank’s statutory lending limits in violation of the provisions of the law. The magnitude of insider abuse in some of the failed banks before the pronouncement of bank consolidation and reforms is presented in Table 1.1 TABLE 1.1: Extent of insider credits in some selected banks in liquidation as at the date of closure. S/NO Banks (in- liquidation) Ratio of insider loans to total loans 1 ABC Merchant Bank Limited 50.66 2 Alpha Merchant bank Plc 55.00 3 Commercial Bank Plc 52.00 4 Commercial Trust Bank Plc 55.90 5 Credit Bank Limited 76.00 6 Financial Merchant Bank Ltd 66.89 7 Group Merchant Bank Ltd 77.60 8 Kapital Merchant Bank Ltd 50.00 9 Nigeria Merchant Bank Ltd 99.90 10 Prime Merchant Ltd 80.70 11 Republic Bank Ltd 64.90 12 Royal Merchant Bank Ltd 69.00 13 United Commercial Bank Ltd 81.00 Source: Closing Report, Receivership and Liquidation Department, NDIC.

The various corporate misconducts in the affected bank caused pain and suffering to some stakeholders particularly depositors and some shareholders for no fault of theirs.

A review of on-site examination report of some banks in operation in recent times continues to reveal that some banks had continued to engage in unethical and unprofessional conduct such as:

- Non-implementation of examiners’ recommendation as contained in successive examination reports.

- Continual and willful violation of banking laws, rules and regulations. - Rendition of inaccurate returns and failure to disclose all transactions thereby

preventing timely detection of emerging problem by the regulatory authorities; etc.

Furthermore, some bank’s examination reports revealed that many banks were yet to imbibe the ethics of good corporate governance. One of such issues bordering on weak corporate governance had been the prevalence of poor quality of risk assets. Apart from those of other debtors, large non-performing insider related loans and advances in some banks had persisted due to the inability of the respective board and management to take appropriate action against such insider debtors. From the various reports reviewed, internal audit functions were, in some banks not given appropriate backing of the board and senior management. Lack of transparency in financial reporting had equally been noted in some banks examination report. The boards of some banks were also to be ineffective in their oversight functions as they readily ratified management actions even when such actions could be seen to violate the culture of good corporate governance. Many board committees were equally noted to have failed to hold regular meetings to perform their duties. From the forgoing, it is obvious that corporate governance in the system faces enormous challenges which if not addressed could have serious implications over the overall success of the bank exercise. If operators in the banking sector will keep to the rules as specified by the regulatory agencies and in individual banks’ policies and transactions procedures all things being equal, financial sector stability could be guaranteed. However, when there is the possibility of flagrant abuse of the ethical and professional demands on operators as evidence. In some failed banks closing report and on-site examination reports of some banks in operation, the prospect of restoring public confidence in the Nigeria banking sector may be difficult to position



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(http://studyclue.com/uploads/CORPORATE_GOVERNANCE_AND_FINANCIAL_PERFORMANCE_OF_BA

NKS.doc_br). The Banks' responsibilities in ensuring corporate governance Emphatically, corporate governance system should ensure that corporate managers and their supervisors are accountable to the shareholders and a host of other constituencies. It is seen as the management of corporate business and affairs of a company effectively in order to add value to the company. Anaroke, (2004:3) in his paper "addressing the challenges of corporate governance and the role of relevant institutions" posited the responsibility in ensuring corporate governance as follows:

Banks should engage qualified experts to conduct an internal review of i ts corporate governance practices, identify areas of lapses, and make recommendations which the board should commit to enforcing. Such review should formulate in details the role and responsibilities of the board and recommend further steps a board should take to be on top of its responsibilities. Such should include. Development of clear position description for the chairman of the board and the chairman of committee, develop clear position description for the MD, which should include delineating management's responsibilities, designed to enable the MD meet pre-agreed corporate goals and objectives; ensuring that new directors receive comprehensive orientation, which should focus on the roles of the board and its committees and the contributions expected of directors. Emphasis here should be on commitment of time and other resources the board experts of directors; provision of continuing education for all directors, so that they can remain current on their expected roles in light of the changing business environment and challenges of the company they serve; adoption of written code of business conduct and ethics, applicable to directors, officers, and employees. The code should address the following issues: Conflict of interest including transactions and agreement in which a director or executive officer has a material interest; Protection and proper use of corporate assets and opportunities; Confidentiality of corporate information; Fair dealing with the company's securities, holders, customer, suppliers, competitors and employees; Compliance with laws and regulations; Prohibition of insider dealing and Reporting of any illegal or unethical behaviour (http://www.deloitte.com/view/en_CA/ca/services/corporategovernance). Another responsibility is ensuing that it monitors compliance with the code and that if alone can approve any waiver from the code granted to directors or executives and ensuring that a procedure is in place for the affected officer to seek waivers from the board (Nzotta, 2004:149). One other key aspect of the IFC report as noted by (Tony, 2007:47) who addresses how boards can properly respond to the post consolidated corporate governance challenges is internal control. The report’s comment that “risk management capabilities in the majority of banks are yet to go beyond credit risk management" may be attributed to inadequate understanding of the concept of internal control. This process of internal control is affected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives following ways:

- Effectiveness and efficiency of operations. - Compliance with applicable laws and regulation and - Reliability of financial reporting.

Performance indicators on model specification Accounting information can be used to measure performance of public and private organizations (http://www.redorbit.com/news/health/1450984/kofenya_the_role_of_accounting_information_in_managing_the_



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risks/_br). That is corporate measurement which implies measure performance of division, measure performance of product or service, measure performance of equipment and persons. According to Ilaboya (2005:56) these performances can be measured in terms of profitability, liquidity and efficiency, etc. for the purpose of this research work, the above three ratios shall be used to assess the performance of commercial banks. Corporate governance causes improved economic activities of the bank leading to high earnings per share, liquidity, asset base (investment) and dividend per share. Therefore, corporate governance affects bank total profit. Profitability is the relative tendencies of profit making in alternative courses of action or decision (Ilaboya, 2005: 56). Profitability is a relative measure showing a more profitable alternative. Profit is an absolute measure of the overall amount of Net Income earned by a transaction. Profit is used as an index to measure performance; it measures the net effectiveness and soundness of business efforts and an ultimate test of business performance (Okoli, 2006: 12-17). It is the risk premium that covers the cost of staying in a business, replacement of obsolescence market risk and uncertainty. The importance of distinction between profitability and profit lies in the fact that profitability can be judged from the net return as well as the cost saving of alternative transaction. In the concept of profitability, it is enough that a company knows that it is making profit. It also needs to know if it is making as much profit as it could. While theoretical studies aim at maximization of profit, it is accepted that perfection is rather impossible to attain in practice and this often requires were practical test. These test can be regarded as the test of profitability and consist of test of possible cost reduction and net return improvement through either increase in sales of production or production mix. Summarily, profit provides an objective statistical or quantitative evidence or profitability in alternative transactions by showing their absolute profit margin quantitatively. Profitability in period t (PROFt) and investment in period t: Investment decision is a function of retained earnings and external financing as already noted. If companies are concerned about the maximization of shareholders wealth, the deployment of cash into profitable investments should usually take priority over dividend payments. Hence, the profitability and investment are expected to be positively related (Fama, 1974: 26). Profitability in period t (PROFt) and liquidity ratio in period t: Being profitable is not the same thing as being liquid, because the fund of a company may go into fixed assets and permanent working capital. Cash dividend represents a cash outflow, the greater the cash position and overall liquidity of a company the greater its ability to pay a cash dividend. The relationship between profitability in period t is positively related to the liquidity ratio in period t. It is normally observed that current asset should cover current liabilities two times before business is considered strong. Other reasons why liquidity ratio enters into the linear model are based on the following. That the main purpose of commercial hanks is to lend money, accept demand, time and saving deposit, That the main purpose of commercial banks is to lend money, accept demand, time and saving deposit. The survival of commercial banks is based on the liquidity of the banks as it is a bad management policy to ignore liquidity in the pursuit of profitability. The central bank of Nigeria has a solemn responsibility of protecting depositors' money with the commercial banks regulatory instruments and options. The minimum liquidity ratio requirement is one of the potent regulatory instruments used. For commercial banks, the ratio is based specified liquid assets to deposit liabilities. The variable (liquidity ratio) is important because cash dividend represents a cash outflow. Dividend per share (DPSt) and Earnings per share in period t (EPSt): One of the



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benefits of buying share in a company is the expectation of future dividends. As the earnings record of a company improves all things being equal increases in cash reflects concern by management for a reasonable payment for the use of the shareholders money as well as confidence in the company's future earnings potential. Given this, the relationship between dividend per share (DPSt) and earnings per share (EPSt) is positive (Akpan, 2006: 57). Earning per share ratio will be used in this work as one of the performance measurements of corporate governance in the banking sub-sector. This is because banks aimed at management of shareholders returns. Earning per share is performance indicator that is primarily of interest to existing and potential shareholders and their advisers. It is a crucial index to financial decision.

According to Adedipe (2004:56) earning per share refers to earnings per ordinary share. Basically, earning per share is calculated by dividing the operating profit after lax of a company for a financial year by the number of outstanding shares of the company during the financial year. It is worthy of note that operating profit/loss after income tax is the profit or loss for the financial year before extra ordinary items and after applicable tax expenses. It is an amount of profit of loss that includes exceptional items but excludes extraordinary items. The objective of the earning per share is to determine the amount of earning available to each ordinary share. Suffice it to say that, the fundamental question of corporate governance is how to ensure fund providers; including shareholders and depositors that get a reasonable return on their financial investment .It is the judicious and prudent use of management resources to maximize shareholders return.

Mbat (2001: 7 posits that wealth or economic value maximization refers to the generation of sufficient earnings in order to pay adequate dividends lo shareholders. He further stated that dividends represent one of the shareholder returns on investment and they exert pressure on the market prices of the share and implicitly shareholders wealth. The achievement of the wealth maximization objective is an indication of management effectiveness and efficiency. It shows a firm's ability to finance i ts growth as well as pay adequate dividends. Thus, growth in earnings per share represents the most preferred objective of financial management. The wealth maximization objective focuses on increasing the share prize of the stock. Shareholders wealth maximization therefore considers earnings per share, dividend yield and dividend growth rates as parameters for measuring the achievement of this objective. In another development, Pandey (2005:14) stated three main implications of the wealth maximization objective of shareholders which corporate governance lay emphasis .These are,

- Confidence with objectives of shareholders. Shareholders always preferred more wealth to loss.

- In line with the objective of employees and as such leads to the maximization of the benefits of employees.

- Optimal allocation of society's resources leading to the maximization of social benefits.

Investment is used and needed in the study as a result of the following:-Section 22 (1) of BOFIA (1991) requires commercial banks to acquire shares in small and medium scale industries, agriculture enterprises and venture capital companies. - Investments in subsidiary companies are held in order to exert a dominant role in developing policy or in directing operations of the subsidiary company. - A commercial bank like any other business applies its funds on operating activities, investing activities and financial activities. - Investment decision is a function of retained earnings and external financial dividend



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payout reduces the amount of money available for investment. In inflationary period shareholders may require higher dividends owing to the falling purchasing power. If this is the case, dividend in period t (DPSt) will increase as inflation rate in period t (Inft). On the other hand, during the periods of inflation, the company may not be able to afford large distribution as it would need a higher retention policy on earnings to overcome its loss in purchasing power, reflected in the higher replacement cost of fixed assets and inventory (stock). Still, much of the profits made during inflationary period are inflated reported profits because the historical cost accounting matches current revenue with out-of-date cost. If the whole inflated reported profits are distributed, the operating capacity or scale of operation of the business will be reduced or impaired. To prevent this reduction in the scale of operation dividend per share in period t (DPSt) must decrease with increase in inflation rate in period t (Inft). In this case, there is a conflict between what is good for the shareholders and what is good for the company. The shareholders want more cash divided during inflationary period while the company requires higher retention of profit in the company to maintain its scale of business. The net effect of these opposing influences on dividend retention ratio will depend on their strength. But as the board of directors of a company has a statutory duty to raise and maintain its capital, declare cash dividend along with its definite preference for retained earnings over the other source of funds, it follows that more funds will be retained in the company during periods of inflation. In this study, we assume that the relationship between dividend per share in period t (DPS,) and inflation rate in period t (Inft) is tentatively negative. Effects of corporate governance on performance of banks in Nigeria The hallmark of banking is the observance of high degree of professionalism, transparency and accountability which fundamental components for building strong public confidence. It is equally important to indicate some effects of good corporate governance on banks performance so as to maintain the safety and soundness of emerging bigger banks in the post consolidation era with a view to enhance public confidence in the nation’s banking system. Myers (1997:147-150) investigated the determinants of corporate borrowing and highlighted the following effects on corporate governance: Raising awareness and commitment to the value of good corporate governance performance among all stakeholders: An essential part of corporate governance concerns persons as well as groups which are considered as stakeholders. Awareness and commitment among banks, directors, shareholders and stakeholders as well as regulators are very critical for ensuring quality performance practices. Raising awareness means convincing people that good corporate governance is in their own interest. To improve the quality of corporate governance performance in a consolidated Nigerian banking system, there is the need for strict adherence to internationally recognized corporate governance codes/principles such as those of Central bank of Nigeria codes on corporate governance, the organization for economic corporation and development (OECD) and the Basel committee on banking supervision. To ensure good performance, banks should draw up a binding code of ethical and professional practice for all members. Effect on the board responsibilities: The ultimate responsibility for effective monitoring to the management and of providing strategic guidance to the bank is placed with the board. The OECD principles provide that “board members should act on fully-informed basis, in good faith with due diligence and care, and in the best interest of the company and shareholders”. For board to effectively perform its responsibilities, it must have the “right people” on the board who are independent, knowledgeable and ethical and whose integrity is unquestionable. Enhancement of internal control measures: The need for banks to continue to



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recognize internal and external auditors as important part of the corporate governance process can not be over-emphasized. Adequate internal control measures will help to discipline banks and enhance their daily business performance by ensuring compliance with internal and external rules as well as help the board to effectively evaluate the bank’s risks and ultimately its future strategy. The external auditors of the banks should be oblique to commit themselves to clarify with regard to their independence, professionalism and integrity. They should strive and rebuilt confidence in the profession through the preparation and presentation of credible and reliable financial statements reports. Effect on information disclosure and transparency: This has been discussed in corporate governance legislature. Transparency will enable the financial markets, depositors and other stakeholders to form a fair view of the bank’s value and develop sufficient trust in the quality and performance of the bank and management. The quality of information disclosure depends on the standard and practices under which it is prepared and presented. Comprehension disclosure should also include non-financial information. Effect on implementation and enforcement of corporate governance laws and regulations: to improve the quality of corporate governance on performance of banks in a consolidated Nigeria banking sector, sanction for violation of judiciary duty should be sufficiently severe to deter wrong doing. The good faith requirement imposed on bank directors, oblique them to honour the substance as well as the form of their duties. Enhancement of training of directors and shareholders to actualize performance: A well planned and properly executed continuous training programme will help directors and shareholders achieve their goals in the performance of judiciary obligation. This will contribute to the overall success of the banking sector. Protection of shareholders rights and equity treatment of all stakeholders: The protection of the rights is a pillar of an effective corporate governance system. Measures for protection include: strengthening disclosure requirements, clarifying and strengthening the judiciary duty of directors to act in the interest of the bank and all its shareholders. Summary and Concluding Remarks The study is concerned with the effect of corporate governance on the performance of commercial banks in Nigeria. This research work discusses the principles and mechanisms of corporate governance; the relationship between corporate governance and bank’s performance; the stakeholders’ theory; the banks responsibility in ensuring corporate governance, and corporate governance legislature.

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