USAID / Nigeria Economic Growth Activities Assessment
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USAID/Nigeria: SO 2 Portfolio Review MOBIS Contract #: GS-23F-8004H USAID / Nigeria Economic Growth Activities Assessment TRANSITION PERIOD SUMMARY REPORT David T. King, Ph.D. March 2003 IBM Business Consulting Services 1616 North Fort Myer Drive Arlington, VA 22209 USAID / NIGERIA ECONOMIC GROWTH ACTIVITIES ASSESSMENT Contents 1. Introduction ........................................................................................................................1 2. Critical Obstacles to Economic Development During Nigeria’s Democratic Transition.....................................................................................................................................2 2.1 Statism and Rent-Seeking...........................................................................................2 2.1.1 Economic Dominance of the State ..................................................................3 2.1.1.1 The “Commanding Heights” Philosophy ...........................................3 2.1.1.2 The Dutch Disease ...........................................................................4 2.1.1.3 Misguided Trade Policy.....................................................................5 2.1.2 Character and Pervasiveness of Rent-Seeking...............................................7 2.1.3 Impact on Nigeria’s Economic Development...................................................8 2.1.3.1 Starvation of Income-Enhancing Investments ..................................8 2.1.3.2 Ineffective and Inefficient Government Institutions ...........................9 2.1.3.3 Repression of the Entrepreneurial Economy ..................................10 2.1.3.4 Prevention of Reform ......................................................................10 2.2 Unsupportive Business Enabling Environment .........................................................11 2.2.1 Commercial Law and the Enforcement Environment ....................................11 2.2.2 Availability and Cost of Business Finance.....................................................12 2.3 Macroeconomic Policy Instability and Financial Unsustainability..............................14 2.3.1 Budget Imbalance, Inflation, and Excessive Debt .........................................14 2.3.2 Balance of Payments Instability and the Exchange Rate ..............................15 2.4 Democratic Transition Obstacles to Adopting the Reform Program..........................16 3. The USAID Transition Period Economic Growth Program: Design, Execution, and Impact ........................................................................................................................................17 3.1 USAID Economic Growth Objectives and Program Design: the Transition Period Results Framework ............................................................................................................18 3.2 Program Execution and Activity-Specific Results......................................................20 3.2.1 Economic Policy Coordination.......................................................................21 3.2.2 Privatization ...................................................................................................23 3.2.3 Foreign Investment Promotion ......................................................................28 3.2.4 Trade Policy...................................................................................................30 3.2.5 Commercial Law............................................................................................32 i USAID / NIGERIA ECONOMIC GROWTH ACTIVITIES ASSESSMENT 3.2.6 Anti-Corruption ..............................................................................................34 3.2.7 Domestic Debt Management .........................................................................36 3.2.8 Export Competitiveness.................................................................................37 3.2.9 Economic Policy Capacity-Building ...............................................................39 3.2.10 Budget Planning and Preparation..................................................................39 3.3 Overall Program Outcomes and Impact ....................................................................40 3.3.1 Program Outcomes vs. the Results Framework............................................40 3.3.2 Program Impact on Nigeria’s Key Development Problems ...........................42 4. Recommendations for Medium-Term Country Development Strategy.......................43 4.1 Lessons Learned from the Transition Period Program..............................................44 4.1.1 What Worked, and Why.................................................................................44 4.1.2 Impediments to Effective Impact ...................................................................44 4.2 Success Prerequisites for the Medium-Term Strategy..............................................45 4.2.1 Success Requirements for Improved Economic Governance .......................45 4.2.1.1 Effective Local Counterpart Agencies.............................................46 4.2.1.2 Operationally-Focused Activities.....................................................46 4.2.1.3 Public Constituency-Building for Reform ........................................46 4.2.2 Success Requirements for Non-Oil Private Sector Business Development..47 4.3 Specific Programmatic Priorities and Recommendations .........................................47 4.3.1 Economic Governance ..................................................................................48 4.3.2 Private Sector Business Development ..........................................................51 4.3.3 Cross-Cutting Themes and Cross-Sectoral Collaboration within USAID ......54 4.3.3.1 Democracy and Governance ..........................................................54 4.3.3.2 Gender............................................................................................54 4.3.3.3 Health and Education......................................................................54 4.3.4 Coordination with Other Donors ....................................................................54 5. Summary: The Evaluation Questions ...........................................................................55 Appendix 1: Documentary References ..................................................................................61 Appendix 2: Interview Sources...............................................................................................64 ii USAID / NIGERIA ECONOMIC GROWTH ACTIVITIES ASSESSMENT Tables Table 1: Nigerian GDP by Sector ..............................................................................................4 Table 2: Government Sector Expenditure, by Type ................................................................9 Table 3: Sectoral Financial Balances .....................................................................................13 Table 4: Results Framework Applicable to Economic Growth Activities............................19 Table 5: Economic Growth Activities Contracts ...................................................................20 Table 6: Performance of Activities vs. Results Framework .................................................40 Table 7: Summary of Impact on Key Economic Development Obstacles...........................43 Table 8: Summary of Recommended Activities ....................................................................53 Table 9: Summary of Cooperation with Other Donors..........................................................55 iii USAID / NIGERIA ECONOMIC GROWTH ACTIVITIES ASSESSMENT Acronyms and Abbreviations Item Meaning AGOA Africa Growth Opportunities Act AIAE African Institute for Applied Economics BPE Bureau for Public Enterprises (Nigeria) CBN Central Bank of Nigeria CDIE Center for Development Information and Evaluation (USAID) CEAP Chief Economic Advisor to the President (Nigeria) CLDP Commercial Law Development Program (US Dept of Commerce) CSO Civil Society Organization DFI Development Finance Institution DFID Department for International Development (U.K.) DMO Debt Management Office (Nigeria) DOC U.S. Department of Commerce ECOWAS Economic Community of West African States EG Economic Growth (USAID activities) EOI Expression of Interest EPCC Economic Policy Coordinating Committee (Nigeria) FBO Federal Budget Office FEC Federal Executive Council (Nigeria) FGON Federal Government of Nigeria FIAS Foreign Investment Advisory Service (IFC) FMC Federal Ministry of Commerce (Nigeria) FMI Federal Ministry of Industry FOS Federal Office of Statistics (FGON) GDP Gross Domestic Product GFS Government Financial Statistics (IMF standards) IAWG Interagency Working Group on Nigeria (USA) ICPC Independent Corrupt Practices Commission (Nigeria) ICT Information and Communications Technology IDA International Development Association (World Bank funding) IDR Institute for Development Research (Nigeria) IEC Information-Education-Communications IFC International Finance Corporation (World Bank) IMF International Monetary Fund IPR Intellectual Property Rights IR Intermediate Result (USAID) IRM Investor Road Map ISI Import Substitution Industrialization MAN Manufacturers Association of Nigeria iv USAID / NIGERIA ECONOMIC GROWTH ACTIVITIES ASSESSMENT Item Meaning MFI Microfinance Institution MOF Ministry of Finance (Nigeria) NACCIMA Nigerian Association of Chambers of Commerce, Industry, Mines & Agriculture NAPEP National Poverty