Platinum Essays in the Philosophy of Applied Economics of Development: Theories, Techniques and Practice

By Herbert Onye Orji

This book, Platinum Essays In The Philosophy Of Applied Economics Of Development, is a collection of interrelated and interconnected essays on applied economics of development with underlying philosophy contents. The topic and areas of coverage were carefully chosen to comprehensively reflect a mandatory range of issues, germane to the understanding, teaching, research, publication and practice of applied economics of development, particularly in medium-to low income emerging markets.

There are twenty one chapters each with a topic of major developmental significance in applied economics. Based on the clear and lucid underlying philosophical statements, the broad scope of the applied definitions, analytical and descriptive review of relevant modern and dated literatures, germane to the discourse, observations, recommendations, conclusions and range of ease or otherwise of policy implementations, the key objectives of the book have been achieved.

• Language: English
• Publisher: AuthorHouse
• Release date: Sep 19, 2011
• ISBN: 9781463443702

Herbert Onye Orji

Herbert Onyekwere Orji, FCIB (London), CFA, OON Professor Orji, Global Investment Banker and Chartered Stock Broker, is the Chairman and CEO of Summa Guaranty & Trust Company Plc,(Member of the Nigeria Stock Exchange). He previously served with the IFC-Emerging Markets Inc. as a Consulting Senior Advisor on Discount Houses; Managing Director & CEO of Progress Bank of Nigeria Plc. (1985-1991); Pioneer Representative and General Manager of United Bank for Africa in the U.K; Vice President of American Express Bank Group on Wall Street, USA and a Computer Systems Programmer with Riggs National Bank, Washington DC (now PN Bank N.A.). Professor Orji graduated with a first class honors in Mathematics and Economics from Howard University. He received an MBA (Finance& Operations Research) with distinction from the University of Michigan. Thereafter he received a PhD from Union Inst. & Univ. and a PMD from Harvard Business School. He has published five books, two of which are publishers’ award winners, and over 120 articles in Nigeria and abroad on Banking & Finance, Operations Research, Investment Management and the Applied Economics of Development. He has also lectured at Howard, Union, Lagos Business School, the Nigeria Institute for Policy and Strategic Studies, Harvard and Clark-Atlanta Universities. Orji is the President‘s Council Professor of Banking, Finance and Applied Economics at City University Los Angeles. Professor Orji serves on a good number of Boards, including the parent Board of Harvard Business School Alumni, Boston, and Chairmanship of United Way-Nigeria. He is married to Dr. Nnenna A. Orji, Chairman and Chief Judge of the Investments and Securities Tribunal, and they have seven children. Prof. Orji was honored with the National Award of Officer of the Order of the Niger (OON) by the President of the Federal Republic of Nigeria in 2011, for exceptional contributions to banking, finance, applied economics and post-graduate education. N.B: This book, The Risk Underwriters, was written in 1976-77, when the author was coming up as a young Investment Banker on Wall Street, New York City. OT HER BOOKS BY THE AUTHOR: 1. Forward Ever. Eastern Nigeria Printing Press, 1967. 2. Interstate Regional Banking Systems. University of Michigan Microfilms, 1980. 3. Regional Banking & Economic Development in Nigeria. Fourth Dimension Publishers, Enugu, and Millimot of London, 1986. 4. Platinum Essays In The Philosophy Of Applied Economics of Development. Author House, Bloomington, Indiana, 2011.

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© 2011 by Herbert Onye Orji. All rights reserved.

No part of this book may be reproduced, stored in a retrieval system, or transmitted by any means without the written permission of the author.

Published by AuthorHouse 06/21/2013

ISBN: 978-1-4634-4368-9 (sc)

ISBN: 978-1-4634-4369-6 (hc)

ISBN: 978-1-4634-4370-2 (e)

Library of Congress Control Number: 2011913669

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Because of the dynamic nature of the Internet, any web addresses or links contained in this book may have changed since publication and may no longer be valid. The views expressed in this work are solely those of the author and do not necessarily reflect the views of the publisher, and the publisher hereby disclaims any responsibility for them.

Condition for sale: This book is sold subject to the condition that it shall not by way of trade or otherwise be lent, re-sold, hired out or otherwise circulated without the copyright owner’s prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser.

CONTENTS

About The Author

Dedications

Acknowledgements

Preface

Foreword

1 Millennium Development Goals, The Nigerian Capital Market And Stock Exchange

2 Sovereign Credit Rating: The Experience Of Sub-Saharan African Countries With Special Emphasis On Nigeria

3 Cross-Border Investor Protection And Global Capital Market Integrity

4 Harmonisation Of Regulatory Framework Towards Enhancing Reliability Of Financial Reports

5 Foreign Direct And Portfolio Investments In Africa: The Supply And Demand Environment In Nigeria And Selected African Countries

6 Overview Of The National Economy

7 Dynamics Of The Nigerian Financial System

8 Review Of The Law And Practice Of Commercial Banking In Nigeria

9 Regional Banking And Economic Development In Africa And Asia

10 Project Financing And Management Of Plantation Agriculture In Nigeria: The Prospects And Problems Of Sustaining An Optimal Production Level For Cash Crops

11 Project Financing: Emphasis On Aircraft And Ocean-Going Vessels.

12 Financing Marine Resources And Management In Africa

13 Reviews And Evaluation Of The Programmes And Procedures Leading To Quotation Of Shares Of A Company On The Nigerian Stock Exchange

14 Accessing The Capital Market For Infrastructural Development

15 Building Effective Ppps For Infrastructure Services In Nigeria

16 Effective And Reliable Rating Of Quoted Stocks: Issues, Challenges And Prospects

17 The African Union: Challenges, Prospects And Benefits Of Integrating African Capital Markets

18 The Usa Securities And Exchange Commission (Sec): Powering The World’s Most Influential Economy

19 Imf-Supported Adjustment Programme In Africa: Success Or Failure?

20 Developing The Real Sector: The Challenges And Prospects Of Applying The Techniques And Practice Of Derivatives

21 George Soros Reflexivity: New Paradigm Shifts In The Applied Economics Of Money And Capital Markets & The Crash Of 2007/2008

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ABOUT THE AUTHOR

Herbert Onyekwere Orji; FCIB (London),CFA.

Professor Orji, Global Investment Banker and Chartered Stockbroker, is the Chairman and CEO of Summa Guaranty & Trust Company Plc. (Member of the Nigerian Stock Exchange). He previously served with the IFC-Emerging Markets Inc. as a Consulting Senior Advisor on Discount Houses; Managing Director & CEO of Progress Bank of Nigeria Plc. (1985-1991); Pioneer Representative and General Manager of United Bank for Africa in the U.K; Vice President of American Express Bank Group on Wall Street, USA and a Computer Systems Programmer with Riggs National Bank, Washington DC (now PN Bank N.A.).

Professor Orji graduated First Class Honors in Mathematics and Economics from Howard University. He received an MBA (Finance & Operations Research) with distinction from Michigan. Thereafter he received a PhD from Union Inst. & Univ. and a PMD from Harvard Business School.

He has published four books, two of which are award winners, and several articles in Nigeria and abroad on Banking & Finance, Operations Research, Investment Management and the Applied Economics of Development. He has also lectured at Howard, Union, Lagos Business School, the Nigeria Institute for Policy and Strategic Studies, Harvard and Clark-Atlanta Universities.

Orji is the President’s Council Professor of Banking, Finance and Applied Economics at City University Los Angeles. Professor Orji serves on a good number of Boards including Harvard Business School (HBS) and Chairmanship of United Way-Nigeria. He is married to Dr. Nnenna A. Orji, Chairman and Chief Judge of the Investments and Securities Tribunal, and they have seven children.

Prof. Orji was invested by the President & Commander-in-Chief of the Federal Republic of Nigeria with the national honor of Officer of the Order of the Niger, OON.

OTHER BOOKS BY THE AUTHOR:

1. Forward Ever.

Published by the Eastern Nigeria Printing Press, 1967.

2. Interstate Regional Banking Systems.

Published by the University of Michigan Microfilms, 1980.

3. Regional Banking& Economic Development in Nigeria.

Published by Fourth Dimension Publishers, Enugu, and

Millimot Ltd of London, 1986.

4. The Risk Underwriters.

Published by Author House, Bloomington, Indiana, 2013.

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DEDICATIONS

To My Parents: Sir Emmanuel Onoh ORJI: FRSA, FREcons, FRGeo.S, Papal Knight (1960) & Princess Josephine Ugonma ORJI (nee Nwachukwu).

TO My Wife Dr Nnenna Adaeze ORJI & Children Olivia, Vivianne, Leslie, Krystal, Edward, Emmanuel and Samuel.

To My Sisters Lady Juliana, Justina, Elizabeth, Jane, Francisca, Henrietta, Beatrice, Christiana & Brother Anthony Chukwuemeka.

To My Schools: St. Paul’s Primary School, Owerri; Township School, Owerri; Ngwa High School, Aba; Government College Owerri; Howard; Michigan, Union Inst. & Univ. and Harvard.

To My Affiliated Institutions: The UNO, UWW, BSO, NSE, NESG, CIB, CISB, ABFA, NES, RCS and ABA.

Thank you for your long-term inputs of two to over five decades and your continued support and encouragement.

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ACKNOWLEDGEMENTS

I would like to acknowledge the moral support and sustained academic and professional pressure from my uncle, Professor Joseph Ogbonnaya Irukwu (SAN) to keep writing useful and meaningful books. He has written over fifteen world class bestsellers while this is my fifth. In the long run, I will not disappoint him. I would also like to acknowledge and thank my dear wife, Dr Nnenna A. Orji, Chairman, Investments and Securities Tribunal of the Federal Republic of Nigeria whose background in Economics, business and law have by way of general suggestions, enriched the outlook of the book. Professor Onwuchekwa Jemie, another of my cerebral uncles and Editor-in-Chief of Business Day of Nigeria, did a good forensic editing on some of the chapters. I am very grateful. My first and fourth daughters, Olivia Ola and Krystal Ogechi, also deserve my acknowledgement for assisting in typing, proofreading and electronically arranging the contents of the chapters in brilliant formats. I am grateful to them. My compilation proofreader and index arranger, Mr. Moses Amadi, has done a difficult but successful job. He deserves my acknowledgement also and I am grateful to him. My gratitude also goes to Mr. Michael Chima Oleru, an IT Executive in Business Day, Nigeria, whose application of his background and knowledge in Information Technology raised the design and editing level of the book to the pedestal of international best practices.

Finally, I must take full and final responsibility for the contents of the book including errors and omissions, if any.

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PREFACE

This book, Platinum Essays in the Philosophy of Applied Economics of Development, is a collection of interrelated and interconnected essays on applied economics of development with underlying philosophical contents. The topic and areas of coverage were carefully chosen to comprehensively reflect a mandatory range of issues, germane to the understanding, teaching, research, publication and practice of applied economics of development, particularly in medium-to-low income emerging markets.

There are twenty-one chapters, each with a topic of major developmental significance in applied economics. From the Millennium Developmental Goals in Chapter One to the Paradox of Sovereign Credit Ratings in Chapter Two, through Project Financing and Management of Large Scale Plantation Agriculture, Aircraft and Ocean-going Vessels in Chapters Ten and Eleven respectively to George Soros Reflexivity; New Paradigm Shifts in the Applied Economics of Money and Capital Markets & the Crash of 2007/2008. The focus in each case was to prime the topic sufficiently to effectively play the role of intrados or a strong leverage distribution structure for the contents of each chapter. Based on the clear and lucid underlying philosophical statements, the broad scope of the applied definitions, analytical and descriptive review of relevant modern and dated literatures, germane to the discourse, observations, recommendations, conclusions and range of ease or otherwise of policy implementations, the key objectives of the book have been achieved. At the discretion of readers, economic planners, policy makers and implementers, scholars, researchers and general readers in development studies, question and answer sessions will be entertained through [e-mail].

Development is an ongoing process that is both dynamic and evolution-oriented. Some of the observations and conclusions reached in this book could be subjected to practical and intellectual stress tests. The author states that he will be willing and able to participate in them through the proposed question and answer sessions or webinars.

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FOREWORD

The primary objective of this book, PLATINUM ESSAYS IN THE PHILOSOPHY OF APPLIED ECONOMICS OF DEVELOPMENT, is to present in a clear, cognizable and concise format, topics of major significance in modern economic development. This presentation is focused upon Nigeria, Africa and the world as measured, shifting concentric epicentres of economic growth and development. The author, Professor Herbert Onye Orji in this and in his four previous books, has maintained a lucid, creative substance and style of writing. Initially, he states the underlying philosophy of applied economic development in each major essay topic. He then proceeds on a parallel basis with a lucid descriptive and numero-graphic analysis of the theory, employing case studies in some instances.

Professor Orji’s extensive summary research reports on economic issues of major significance including sections such as George Soros and New Paradigm Shifts in the Money and Capital Markets, Endless Struggles with Boom-Bust Cycles; The Paradox of Sovereign Credit Ratings; Regional Banking and Economic Development in Africa & Asia; Foreign Direct & Portfolio Investments in Africa; Cross Border Investor Protection & Global Capital Markets Integrity; Millennium Development Goals and The Nigerian Capital Market; Building Effective PPPs for Infrastructural Services Development; The USA Securities and Exchange Commission’s Power and Influence on the Global Economy; Project Finance for Large Scale Plantation Agriculture, Aircraft and Ocean-going Vessels (Separate research reports & essays); and Harmonization of Regulatory Framework Towards Enhancing the Reliability of Financial Reports, have won accolades and admiration from policy makers, international and multilateral institutions, academia and major research centres in Nigeria, throughout Africa, Asia, Western Europe, Canada and the United States.

It is partly as result of this positive resonance that the author decided to produce these interconnected and interrelated topics, issues and reports in a platinum book form. Among other advantages, this book to a large extent serves as an encyclopedia for government and private sector policy makers, academia, multilateral institutions and major research centres. Some topics are current to the time of publication with projections through 2010 and beyond, while some essays are deliberately dated to reflect the economic and policy environment within a specific time frame. The author has gone beyond the call of duty in search of solutions to the problems of economic development and global resource management.

Wallace FORD: BA (Hons) Dartmouth, JD (Harvard).

Former New York City Commissioner of Finance and President New York State Mortgage Corporation.

President & CEO, Fordworks Associates, Inc.

New York City

March 2010

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Chapter 1

MILLENNIUM DEVELOPMENT GOALS, THE NIGERIAN CAPITAL MARKET AND STOCK EXCHANGE

We may not get to the moon but we can certainly get to the clouds above. This includes rising above the tallest trees. The Millennium Development Goals are achievable targets and the Nigerian Stock Exchange (NSE) with its numerous constituencies, one of which is the long-term investor, will be amply rewarded. Capital formation in a developing economy is the responsibility of both the private and the public sectors. All goals and targets must have wholesome credibility.

Introduction

A cursory look at the twin concepts of the Millennium Development Goals (MDGs) and the Nigerian Stock Exchange (NSE) may throw up two seemingly disparate issues. The former borders on a socialist/public welfare orientation whereas the latter is the vanguard of a modern capitalist economy. However, profound thoughts on this subject will reveal an intricately woven relationship that is result-based and necessary for sustainable national development.

This study will shed more light on the nature of MDGs, the level of compliance to their requirements in Nigeria, the activities of key stakeholders, the challenges of MDGs and the regulatory imperatives and challenges of the Nigerian Stock Exchange (NSE). The study will also examine the prospects of the MDGs and proffer recommendations. Finally, the role of the business community in achieving sustainable national development will be discussed.

Definition of terms

A stock exchange is a centralized market for buying and selling stocks where the price is determined through supply-demand mechanisms; individuals and institutions buy and sell stocks in an auction-like forum. The goal of the participants is primarily wealth creation. The Nigerian Stock Exchange is therefore, an organized market place, approved and regulated by the Securities and Exchange Commission (SEC) where members gather to trade securities. Members may act either as agents for customers or as principals of their own.

Millennium Development Goals on the other hand were developed out of the eight chapters of the United Nations Millennium Declaration adopted by 189 nations and signed by 147 Heads of States and Governments in September 2000. MDGs are eight goals and twenty-one targets that will be achieved by 2015 in response to the world’s main development challenges. The goals include the following:

1. Eradication of Extreme Poverty and Hunger

· Halve between 1990 and 2015, the proportion of people whose income is less than one dollar a day

· Achieve full and productive employment and decent work for all, including women and young people

. Halve between 1990 and 2015, the proportion of people who suffer from hunger

2. Achievement of Universal Primary Education

· Ensure that by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling

3. Promotion of Gender Equality and Empowerment of Women

· Eliminate gender disparity in primary and secondary education preferably by 2015, and at all levels by2015

4. Reduction of Child Mortality

· Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate

5. Improvement of Maternal Health

· Reduce by three quarters, between 1990 and 2015, the maternal mortality ratio

· Achieve by 2015, universal access to reproductive health

6. Combating HIV/AIDS, Malaria and Other Diseases

· Must have halted by 2015 and begun to reverse the spread of HIV/AIDS

· Achieve by 2010, universal access to treatment for HIV/AIDS for all those who need it

· Must have halted by 2015 and begun to reverse the incidence of malaria and other major diseases

7. Ensuring Environmental Sustainability

· Integrate the principles of sustainable development into countries’ policies and programmes and reverse loss of environmental resources

· Reduce biodiversity loss, achieving by 2010, a significant reduction in the rate of loss

· Halve by 2015, the proportion of people without sustainable access to safe-drinking water and basic sanitation

· By 2010, to have achieved a significant improvement in the lives of at least 100 million slum dwellers

8. Creation and Maintenance of Global Partnership for Development

· Develop further, an open trading and financial system that is rule-based, predictable and non-discriminatory including a commitment to good governance, development and poverty reduction, nationally and internationally

· Address the special needs of the least-developed countries. This includes tariff and quota-free access of their exports; enhanced program of debt relief for heavily indebted poor countries; and cancellation of official bilateral debt; and more generous official development assistance for countries committed to poverty reduction

· Address the special needs of landlocked and small island developing states

· Deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustainable in the longer term

· In co-operation with developing countries, develop and implement strategies for decent and productive work for youths

· In co-operation with pharmaceutical companies, provide access to affordable essential drugs in developing countries

· In co-operation with the private sector, make available the benefits of new technologies, especially information and communications

The MDGs synthesize, in a single package, many of the important commitments made separately at the international conferences and summits of the 1990s; and recognize the interdependence between growth, poverty reduction and sustainable development. MDGs also acknowledge that development depends on democratic governance, the rule of law, respect for human rights, peace and security.

The Nigerian Experience

MDGs have become key tools in monitoring human progress across nations. The United Nations Development Program (UNDP) has been given the role of Global MDG Monitor for the UN System, a role that UNDP Nigeria takes very seriously. The UNDP has transformed the MDGs into an actionable instrument of development management by turning the eight goals into 18 targets and 48 indicators that can be used to monitor human progress. Nigeria amongst other nations had signed up to these goals, targets and indicators. Below is a summary of the UNDP’s recent reports on MDGs’ compliance in Nigeria:

Goal 1: Eradicate Extreme Poverty and Hunger

People living in relative poverty declined from 65.6% to 54.4% in 2004 while 35 out of 100 people live in extreme poverty and 30 out of 100 children are underweight. Poverty incidence has been consistently higher in rural areas than urban areas while wide disparity occurs in poverty trend in the zones. The prospect of reducing poverty in Nigeria is bright in view of the macro-economic stability and progressive economic growth in the last six years. Government policies at the three tiers should be focused on increased productivity in the agricultural sector. Investment in infrastructure, especially in the rural areas should be scaled up.

Goal 2: Achieve Universal Primary Education

Performance on this goal is on course. About 84 out of 100 school-age children attend school and an increasing number stays there through to primary six. Net enrolment ratio in primary school education was 84.26% in 2005 as against 81.1% in 2004. The literacy rate among 15 to 24-year olds improved from 76.2% in 2004 to 80.2% in 2005. The success was bolstered by the implementation of the Universal Basic Education (UBE), improved policy environment and better intergovernmental co-ordination in the sector. Concerted efforts are needed to reduce the cost of primary and junior secondary schools, improve the quality of teaching and schooling, and sustain political commitment to the implementation of UBE.

Goal 3: Promote Gender Equality and Empower Women

The ratio of boys to girls in primary schools improved from 79% in 2003 to 81% in 2005 while the proportion of women in non-agricultural wage employment stood at 79% in 2005. The proportion of women in the national parliament was 5.76% as against 30% target. Secondary school enrolment has increased for both males and females at the tertiary level. There is need to mainstream gender issues into local, state and federal governments’ development strategies.

Goal 4: Reduce Child Mortality

Reduction of child mortality remains a key challenge. Nigeria has the third highest child mortality rate in the world. As against the global target of 30/1000 live births in 2005, Nigeria had 110/1000 live births. Low maternal education, low coverage of immunization, weak primary health care system, high incidence of poverty and inequality, and poor household practices, accounted for the high mortality rate. Percentage of one-year olds fully immunized against measles rose from 31.4% in 2003 to 50% in 2004. However, wide disparities subsist between rural and urban centers and among geographical zones. There is need for improved co-ordination among the three tiers of government in the provision of health services. Better decentralization of immunization management, strong advocacy on better household practices, access to drinking water and adequate sanitation are needed for success.

Goal 5: Improve Maternal Health

Maternal mortality remains a daunting challenge to Nigeria. Against a global target of less than 75/100,000 Living Births (LB) in 2015, Nigeria had 800/100,000 LB in 2004—the second highest maternal mortality rate in the world. Rural areas and the northern regions are worse than the national average. The various factors contributing to such high rates are unsafe abortions, inadequate post-abortion care, early and child marriages, early pregnancies, high fertility rates, inadequate family planning services, and the low rate of contraceptive usage. Other factors include high cost of treatment and some socio-cultural practices that discouraged patronage of health infrastructure.

Goal 6: Combat HIV/AIDS, Malaria and Other Diseases

The HIV prevalence rate fell from 5.8% in 2001 through 2005 to 4.4%. Prevalence across the states, however, varied significantly. Although AIDS orphans remain on the increase, the percentage of people reporting the use of condom during sexual intercourse with non-regular partners increased. Malaria and tuberculosis (TB) still remain major public health problems. Malaria accounted for 60% of all outpatient attendance, 30% of all hospital admissions and 300,000 deaths annually. Blood transmission, unsafe injection and sexual practices are key drivers of HIV and AIDS while stigmatization and discrimination against people living with AIDS remain rife. Poor sanitation and high cost of treatment accounted for the prevalence of malaria while poor reporting network and weak public education are responsible for the spread of TB.

Goal 7: Ensure Environmental Sustainability

Nigeria’s rich environmental resource base is being undermined by deforestation (3.5% per annum), erosion, desertification, gas flaring and oil production. Access to safe drinking water is improving but access to sanitation is still low while housing has reached a crisis point with only 31% having secured tenure. Environment programs need to be mainstreamed into the development agenda of the three tiers of government while resources for environmental management should be increased appreciably. Strong collaboration among key stakeholders is also needed.

Goal 8: Develop a Global Partnership for Development

Nigeria has enjoyed the benefits of progressive partnership with the international community. The decision to exit the Paris Club creditors was finalized in 2005 while FDI has increased significantly. However, accessing Nigeria’s agricultural and semi-processed goods to industrial countries remains weak.

Challenges of MDGs in Nigeria

A critical barrier to planning for the achievement of the MDGs continues to be the non-availability of up to date data on most of the indicators. This is compounded by the limited funding available for data generation and management. Constitutional responsibility for implementation on almost all the goals, rests with the states and local governments in Nigeria’s federal structure. In spite of remarkable strides at the federal level, appreciation of the requirements for meeting these goals, as well as institutional capacity, remains relatively low at the lower levels of government. Poor governance, changes in policy thrusts of successive administrations and integration of the MDGs in the national development strategies, have also been a challenge while other challenges include a weak monitoring mechanism for the MDGs and low stakeholder involvement of the civil society organizations, private sector, the business community and specifically the Nigerian Stock Exchange which is in a vantage position to harness private sector funds and support.

The Regulatory Imperatives and Challenges of the NSE

The Nigerian Stock Exchange (NSE) experienced an unprecedented growth in the eight years’ democratic rule of 1999-2007 when world class financial professionals were engaged in rebuilding an economy ravaged by several years of military misrule. Appointment of the right crop of leaders to key positions in national finance and economic management ushered in a wave of good ideas and effective regulatory policies.

Landmark financial reforms led to robust economic growth and buoyant investor confidence. The unleashing of the private sector created demand for services such as project finance, debt/equity capital-raising to fund expansion ventures, corporate advisory as well as new capital market products like exchange traded funds and derivative products linked to real estate investment.

The banking system consolidation between 2004-2006, became a catalyst for dynamic reforms in pensions, the bond market and the insurance sector, thus impacting the wider economy. To that extent, the newly-enlarged banks were instrumental in the financial market revolution which opened up domestic stock and debt markets, and expanded liquidity. This in turn, fuelled the boom in non-oil sectors, pressurizing the capital market to fund infrastructure projects, especially in power, water transportation and communications (which are key MDGs indicators).

High oil revenues driven primarily by the conflict in the Middle East generated double-digit growth figures in nominal gross domestic product (GDP) between 2003 and 2006, with the economy doubling in size over the period to US$115.46bn. Annual real GDP growth averaged 7.3% during 2003-2006, exceeding the regional average of 5.3%. By contrast, the economy grew by just 2.7% per year in 1997-2001, according to the International Monetary Fund.

Financial developments further enhanced the nation’s prosperity and a 2007 IMF report showed that in 2006, the non-oil economy (where four-fifths of the workforce are employed), expanded by 7% for the fourth straight year, led by financial services, information technology, retail and wholesale trade, as well as agriculture where cocoa production and exportation grew by over 15% and inland fish production grew by 33% within eight years.

The private sector and specifically the Nigerian Stock Exchange, came to the fore in the march towards sustainable national development. Foreign direct investment (FDI) reached a record high of about US$7—US$9.1bn in 2006, of which almost a half or US$4.1 went in non-oil sectors. The bulk of FDI was channeled through the NSE into the oil and gas industry, with beverages, telecoms and banking also attracting large amounts.

European and US firms have traditionally been the major investors. However, Chinese firms were now making big inroads. The country enjoyed surpluses on both its fiscal and external trade accounts whilst forex reserves surged to over US$43bn in 2006 (the highest in sub-Saharan Africa), compared to only US$5.5bn in 1999.

The Nigerian authorities gained credibility and respect from the global financing community. The improved macro policy framework, strengthened institutions and wide-ranging structural reforms led to impressive macro-economic outcomes—notably robust growth and low inflation, as well as improved investor confidence. The parliamentary passage of the Fiscal Responsibility Bill was a key step in ensuring prudent use of oil wealth. It requires future governments to continue depositing windfalls into excess crude account. Spending from the latter would be authorized only in times of revenue shortfalls or capital expenditures in future years. The law also aimed at improving fiscal transparency as all the three tiers of government are required to publish bi-annual audited accounts. Penalties for non-compliance include heavy fines and even imprisonment.

Nigeria also slashed its debt stock from nearly US$37bn in 2004 to below US5bn as at February 2008, a phenomenal reduction through debt forgiveness and buy-back programs. The only debts outstanding were owed to multilateral institutions and a few bilateral loans.

The Nigerian Stock Exchange (NSE) in the last seven months of 2007, ranked among the world’s top performers, with All-share index surging 55% (on top of a 37.8% gain over 2006). Growth in market capitalization was equally stunning. In June 2007, the value of equities traded on the Exchange hit N7.86 trillion (US$61.6bn), representing a hefty capital appreciation of 85.4% since end 2006. The main contributors to soaring equity prices were blue-chip stocks in the oil and gas, banking, food and beverages, and building materials sub-sectors. The growth was driven by new listings and supplementary listings of new shares by quoted companies as well as upbeat market sentiments. Conducive business climate and tax incentives invariably attracted foreign investors, hence increasing the activity level. Nigerian firms and the NSE were thus able to form global partnerships for sustainable growth and development.

The NSE index of 2007 outpaced the performance of 2006, which ended with a return of 39.3% in US dollar terms, making the bourse to record its best performance in three years. Most observers expected the bullish trends to continue into the third quarter of 2008.

The current administration inherited a relatively strong economic legacy. However, critics maintain that it lacks its predecessor’s capitalistic bent and market-driven orientation. Some critics even go as far as saying that ethno-tribal sentiments have crept back into the Nigerian economy. This, they maintain, has led to policy somersaults by the regulators of the capital and money markets with an attendant dip in the indices of corporate performance in the stock market in the first half of 2008.

For instance, the stock market which began the year on a bullish note with the All-share index appreciating by 22 percent to peak its year at 66,371.20 points in the first quarter ended March 31, had the trend reversed in the second quarter as the bears dominated, causing the indices of corporate performance to plunge drastically.

Another challenge of the Nigerian Stock Exchange was the delayed passage of the 2008 budget by the Federal Government which led to a liquidity drought. This situation was exacerbated by the regulatory policy to stop margin trading by stockbrokers. Besides, the increase in Monetary Policy Rate (MPR) by the Central Bank, made money market instruments more attractive, prompting investors to move funds from the capital market to the money market on one hand while on the other hand, increasing the cost of funds because several banks simply increased interest charged on credit by several points. The effect of this is a greater burden on the real sector, higher consumer prices and increased inflation.

The former Central Bank of Nigeria (CBN) Governor, Professor Charles Soludo, proposed the radical solution of currency redenomination to alleviate the strain on the economy but his proposal is yet to be adopted by the Federal Government.

The CBN policy of a uniform financial year-end to allow for better assessment of all the banks also affected the NSE because the banks became Machiavellian, with a drive to mobilize as much funds as possible in order to have an impressive balance sheet at the year—end. The capital market was losing funds to the money market and credit was not being extended to stockbroking firms; trading volumes were free falling alongside share prices. The situation deteriorated to the point that many banks refused to accept non-blue-chip shares as security for lending because the securities suffered steady price losses. It is however noteworthy that the CBN has extended deadline for compliance by a year, much to the relief of all stakeholders.

The policy of the NSE which increased the volume of trade from 15,000 to 100,000 units before share price could be allowed to move, made speculation unattractive to members who lack the financial capability to assume significant positions in stock market dealing. More so, allegations of price fixing by the Securities and Exchange Commission (SEC), the apex regulator, also dampened investor enthusiasm.

The primary market has also lost momentum as a result of regulatory policy changes. Some companies that had planned to approach the market were discouraged by the lackluster performance of the secondary market. The new NSE policy stopping newly listed companies from returning to the market until after one year, excludes many growing companies from equity financial sources. Besides, the NSE published a caveat emptor for unquoted companies planning private placements, indicating that henceforth, listing shall be allowed at the office price, which drowned the erstwhile market enthusiasm about private placements and the lure of premiums.

These challenges had the effect of undermining private sector participation in achieving the MDGs. Corporate captains had to look out for their organizations single-mindedly and many lost the little zeal they had in corporate social responsibility (CSR).

Implementation of the MDGs in Nigeria

Despite these challenges, political commitment remains very high at the federal level under the leadership of the senior special adviser to the president on MDGs. Under its four practice areas, UNDP has provided support to the government in the areas of poverty reduction, HIV/AIDS, democratic governance, energy and environment. UNDP seeks to partner with key stakeholders in the private sector like the NSE, to increase fund support and awareness in order to achieve the MDGs in Nigeria.

· Data Management

A major component of UNDP’s assistance has been the production of country MDGs reports published for 2003, 2004, 2005 and 2006. At the sub-national level, UNDP has succeeded in taking the message of preparing MDGs reports to the state level on pilot basis with Niger and Akwa Ibom states’ MDGs reports serving as the first set of pilots. About ten states are in the process of developing their MDGs reports. These will provide important baseline information and serve as advocacy and awareness—raising tools. A mid-term review of the MDGs is also underway. In collaboration with the office of the senior special adviser to the president on MDGs, the UNDP has undertaken a National MDGs Costing Exercise in eight key sectors (agriculture, health, education, road, energy, water resources, environment and housing). The financial results are being reviewed. This would provide a good basis for estimating the cost of achieving the MDGs in Nigeria.

· Debt Cancellation

Achievement of Goal 8 received a major boost in October 2005 when Nigeria and the Paris Club signed an agreement which guaranteed a write-off of 60% of the country’s external debt stock, paving the way for Nigeria to exit the Club. The Policy Support Instrument (PSI) concluded by Nigeria with IMF was approved by the Fund’s Executive Board on 17th October, 2005. The total stock of Nigeria’s public debt was estimated at US$36.2bn, out of which around US$30bn was due to the Paris Club (source: IMF staff report and Paris Club creditors). In total, this agreement allowed Nigeria to obtain a debt cancellation estimated at US$18bn (including moratorium interest). With the debt relief included in this agreement, the Paris Club creditors extended