Effects Of Infrastructure On Economic Growth In Nigeria

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Effects Of Infrastructure On Economic Growth In Nigeria


The purpose of this study is to show the role of infrastructure and its effects on the economic growth of Nigeria. The main data for this study will be secondary data and the source of collecting these data is Central Bank of Nigeria (CBN) Annual Publication and Statistical Bulletin, National Publication, social and economic journals, Text Books and other articles on the issue of infrastructure development and Economic Growth that are relevant to the pursuit and achievement of the objective of this research. The study will also recommend ways in which infrastructure development can be improved in order to boost the growth and development of the economy likewise to improve the living standard of Nigeria populace.

Table of Contents

  • Title Page
  • Certification
  • Dedication
  • Acknowledgements
  • Abstracts
  • Table of contents

Chapter One

1.0 Introduction

  • 1.1 Background Information
  • 1.2 The Ube Program
  • 1.3 Linkage between Infrastructures in Nigeria and Mdgs
  • 1.4 Infrastructure Development and Economic Growth in Nigeria
  • 1.5 Statement of the Problem
  • 1.6 Research Questions
  • 1.7a Objectives of the Study
  • 1.7b Specific Objectives
  • 1.8 Research Hypothesis
  • 1.9 Justification of the Study
  • 1.10 Scope of the Study

Chapter Two

2.0 Literature Review and Theoretical Framework

  • 2.1 Theoretical Review
  • 2.2 Concept of Infrastructure
  • 2.3 Nature and Type of Infrastructure in Nigeria
  • 2.4 Regulation and Competition of Infrastructure in Nigeria Economy
  • 2.5 Infrastructure Appraisal and Evaluation for an Economic Development
  • 2.6 Funding and Financing of Infrastructure Development for Nigerian economy
  • 2.7 Government Expenditure and Economic Growth in Nigeria, 1970-2008
  • 2.8 Review of Nigeria Budgets (1979-2003)
  • 2.9 Policy Reforms in Nigeria
  • 2.9.1 Modeling the Link Between Infrastructure, Economic Growth and Development
  • 2.9.2 Problems of Infrastructural Development in Nigeria
  • 2.9.3 Infrastructure Development in Nigeria, Way Forward
  • 2.9.4 Broad Based Economic Growth with Equity

Chapter Three

3.0 Methodology

  • 3.0 An Overview of Nigeria Economy
  • 3.1 Method of Data Collection
  • 3.2 Source and Nature of Data
  • 3.3 Analytical Techniques

Chapter Four

4.0 Empirical Analysis of Regression

  • 4.1 Variable Identification
  • 4.2 Model Specification
  • 4.3 Presentation of Regression Result
  • 4.4 Interpretation and Discussion
  • 4.5 Research Findings and Implication

Chapter Five

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendations
  • References
  • Appendix

Chapter One


1.1 Background Information

Nigerian government has made significant efforts in recent years, not only in the fair distribution of such facilities to different parts of the country but also to increase the quality and improve the quality of such facilities.

The development of infrastructural facilities today is the responsibility of the Federal and state government. However, it should be noted, that until recently most of the infrastructure facilities developed in the country were established, staffed and controlled by religious organization, private initative and other voluntary agencies such as local communities, individual and local councils as pointed out by Stolper (1982).

The fourth National Development plan of Nigeria (1981-1985) was made to address the inadequacies and imbalance in infrastructural development and it had a projected capital expenditure of about N82.2 billion, 86% of this was to be spend on public sectors especially in the development of various infrastructures. This was the first time the local government participated in their capacities as the third tier of the government created by the constitution.

Regarding education as essential for the development of high quality manpower as been recognized in the level of public expenditure on such institution like primary, secondary and tertiary institutions in Nigeria and in the number of scholarships to Nigerians on education both at home and abroad. The literacy rate is about 20 percent in urban areas and 2 percent in the rural areas Kesside (2003).

It is the primary objective of the Federal and State government to reduce the rate of illiteracy; hence there is a rapid increase in Primary, Secondary and University enrolment to a substantially increased level. Though the enrolment in other educational institutions has shown a similar trend. The government made education free especially primary education throughout the country. The Universal Basic Education (UBE) has now made education compulsory up to Junior Secondary Level.

1.2 The UBE Program

Curriculum renovation that is realistic and child centered, that is quick in rejuvenating and revitalizing hope and passion for acquisition of broad based knowledge that is worthwhile in a learner should be the focus of the structure. Methodology that will aid self discovery and problem-solving ability which allow learners the opportunity for creativity should be entrenched in the curriculum. Quality and relevance are the two features that curriculum development in Nigeria now needs. Equally, changes and innovations of a school system of our globalized environment must involve the emergence of elastic curricula models and educational policies which emphasize interdisciplinary courses, open-ended systems, intergenerational and inter-professional relationships, multi-culturalism and sustainability. The need for a paradigm shift from theoretical and paper certification to a practical application of knowledge necessary for future employment and skills development for self-employment should be the cardinal objectives of Nigerian education. Curriculum developers should also adopt the interdisciplinary approach to curriculum especially at the primary and junior secondary school levels. Emphasis should be on the changing needs of the society through enhance on the understanding and application of new technologies. Finally, to teach a new curriculum at all levels of education, the teachers and instructors currently employed by the Government have to receive further training.

According to Ukpong (1979), inspite of the growth rate in electricity production and consumption in Nigeria, the per capital consumption of electricity is among the lowest in Africa. In term of per capital consumption 107HWHK for developing countries per capital consumption of less than 40KWH etc.

The role of infrastructure and its effects as an agent of growth and development is not a new phenomenon’s is a very important parameter for economic growth that no one can deny. Development of infrastructure implies a complete modernization of the economy as a while which leads to substantially increased output and productivity. It entails conversion from peasant farming society to an industrial nation; it is a way of change in the living standard, life expectancy, reduction in infant mortality. It is perhaps for these reasons that there is no unanimity as to the criteria for measures development of infrastructure.

1.3 Linkage Between Infrastructures in Nigeria And MDGs.

The millennium development Goals (MDGS) are a series of time-bound development targets aimed at addressing the challenge of under-development. The MDGS address issues on infrastructural facilities and global partnerships for development, agreed by the international community to be achieved by year 2015. This is perhaps the most significant step in the war against poverty.

Attainment of the Millennium Development Goals (MDGS) is largely dependent on the availability of functional infrastructure. Decentralization is an opportunity that can be used to realize the MDGS especially at the lower levels of the society and Government. Decentralization, which is about central government increasingly devolving certain jurisdictional functions to local authorities, has diverse impact. A major impact area that can have direct benefit to communities in the provision of infrastructure. This is because economic growth is linked to poverty reduction and improved access to infrastructural services induces economic growth in a cyclical manner. Therefore, carefully thought out mechanism that ensures functional nexus of infrastructural services and economic activities are rudimentary ingredients for liveable human settlements.

The suitability and sustainability of human settlement for economic development is strongly linked to the level of serviceability and liveability. Serviceability connotes the quality of being able to provide good services and the extent to which these services are adequately available in an area. Liveability, refers to overcoming poverty, providing basic public services, maintaining minimum level of environmental standards, adequate housing, security and safe environment, access to amenity and learning institutions. The issue of settlement service ability and liveability is infrastructure-based, where water services function, as a basic amenity.

Water is the worlds most important resource and a necessity of life. Adequate access to social welfare services, such as medical services, education, portable water supply, roads, electricity e.t.c. are strong indices of development (Adeyemo, 1989). Portable water supply is both a function of adequate and accessible functional water infrastructure.

Water infrastructure stands out of all infrastructures (Physical and social) as critical to the attainment of the MDGS. This is because beside goal number 7 and target 10 which are specifically water based, issues addressed by goal 1-7 in general directly or indirectly relate to water availability. Meeting the water needs of African countries would be many steps closer to attaining the overall MDGS (AWDR 2006).

The United Nation’s estimates 1.1 billion people lacking access to safe drinking water, is compounded by the record of 2.4 billion people without access to adequate sanction (Cunningham, 2004). African countries have embraced the decentralization as a mark of good governance, given that it is an antidote to poverty perpetuation. Nigeria and Ethiopia are the most populous countries in Africa and operates decentralized systems.

In 2004 for example, safe water coverage in Nigeria was only 48 percent (FGN, 2004). Ironically, water is very important for socio-economic development, this is in addition to portable drinking water supply being a basic human need and sufficient water for good hygiene is a prerequisite for public health (World Bank, 1994) when access to water is disrupted, people therefore face acute human security risks transmitted through poor health and the disruption of livelihood (UNDP, 2006).

In view of the foregoing, it is obvious that water front is where the war of poverty and by implication attainment of the MDGS would be won or lost. The contention is that infrastructure, especially water infrastructure is critical if MDGS are to be attained.

1.4 Infrastructure Development and Economic Growth in Nigeria

The role of infrastructure as an agent of development is not a new phenomenon. A wide range of evidence on the importance of infrastructure on an economy, drawing the conclusion that infrastructure contributes to economic growth both through supply and demand channels by reducing cost of production, contributing to the diversification of the economy and providing access to the application of the modern technology, raising the economic return to labour (by reducing worker time in non-productive activities and improving health with skill). (Smith 1776).

Furthermore, infrastructure raises the quality of life by creating amenities, providing consumption goods (Transport and Communication services) and contributing to Micro economic stability (Kesside 1993).

World Bank Report (2003), examined that ICT has definitely influenced, “Capital deepening”, (Increased the intensity of Physical capital per unit labour) and shown additional gains in assisting more efficient work organization outside of ICT sector, where productivity gain have been significant both inside and outside of ICT sector, it is proposed that this is the result of policy and institution setting conducive to innovation and adoption of new technologies. The report further stated that “Sound infrastructural development policy setting is a key ingredient for sustainable long term growth”. Investment in human, physical and knowledge capital is identified as the key driver of economic growth and macro economic policies (including price stability, inflation control, tax structure system, facilitating of international trade growth, pro-competitive regulation facilitating the entry of innovation firm, facilitating the skill and education of the existing and potential work force, encouraging R and D (Research and Development) removing barrier to network access) are found to facilitate investment.

As observed by the United Nation, the provision of adequate amount of electric power is important in the establishment and maintenance of a modern economy and ensuring its growth.

Ukpong (1979) stated that the disparities in the level of development between the different states and geographical regions of Nigeria are attributed in part to the uneven distribution of such facilities as education, health, transport, power and Communication, he stated further that Nigeria has made significant efforts in recent years, not only in the fair distribution of such facilities to the different parts of the country but also increase the quality and improve the quality of such facilities.

Good Governance, Transparency, Accountability, Social Responsibility And Infrastructure Development in Nigeria.

Corruption is generally acknowledged as having adversely affected previous infrastructural development effort in Nigeria. Corruption is one of the aspects of bad governance. The anti-corruption crusade of the past and present administration is expected to have favorable implication on infrastructural development and poverty alleviation, if successfully carried out. The communiqué earlier referred to as one of the imperatives for success of the infrastructure development, “Ensuring that corruption and other sharp practices at any stage of the programme are not condoled but severely punished”.

The manifestation and problem associated with corruption have various dimensions. Among these are project substitution, plan distortion, mis-representation of project finances, diversion of resources for usage to which were not meant for, conversion of public funds to private use etc. The effect of corruption is both direct and indirect on infrastructure shortage and increase in poverty. On the other hand, the indirect effect follows from the reduction or misapplication of resources which paralyses growth rate and growth potential. When growth rate are lowered, there will be no output and income to be redistributed, so poverty will escalate. Direct effect is that the poor in the society are denied resources and access to required life support infrastructural facilities that could have been provided through judicious application of siphoned or diverted resources.(Todaro, 2007).

A related problem is that lack of social responsibility manifest in vandalization or willful destruction of facilities that benefit the poor. It is expected that the bottom up approach identification with attendant association of beneficiaries with the project, will minimize vanadilization. But beyond that, it is crucially necessary that efforts and resources are committed to security of provisions.

Finally, in order to ensure transparency and accountability in the management of poverty reduction and infrastructure development programmes and projects, all the stakeholders should be involved in the monitoring and evaluation of such projects. To this end, there is the need for agreed infrastructure development and poverty reduction agenda that can be used by all stakeholders’ i.e. Federal government, state government, local government, NGO’s and the international donor community.

Nevertheless, it is generally agreed that development of infrastructure is multi-dimensional in nature having political and socio-economic implications.

1.5 Statement of the Problem

The state of the Nigerian roads has not been satisfactory despite its enormous potentials for growth and development. The poor transport facilities and infrastructure have severally delayed economic development, and this has weakened the transport sector. However, only purposeful and realistic planning can lay the solid foundation for sustained economic greatness of the Nigerian roads which will form the base for the coming generation to build upon.

The provision of roads and transportation facilities are fundamentally important to the development of Nigeria as well as the well-being of her citizens (Minton, 2000).

Nigerian roads needs urgent attentions, considering that an average of 50 people die everyday by road accidents, as claimed by a survey (Minton 2000).

Only 80% of federal roads in Nigeria are partially paved, out of the nation’s over 900,000km2 landmass (World Bank report 2004). Technically, over N200b will be required to construct and maintain it. The entire roads in the country are just a bit less than 200,000km2 of federal state and local roads of which only about 50,000km are paved. Considering president Obasanjo’s inaugural address of May 1999: “Transport is the lifeline of the economy and social interactions. An efficient transport system implies stagnation in all sectors”. The federal ministry of works is charged with the responsibility for the planning, design, construction and maintenance of the Federal Highways. The 36 states ministries of works and transport have similar responsibility for the state roads while the 774 local government works departments have the responsibilities for local roads (Adeyemo 1999). Simply put, they have failed. The works and the workings of the works ministry are no longer workable. As at date, the ministry has committed the total sum of over N360 billion during the period from May 1999 up to July 2003, however, they have only a very scantly in road maintenance and construction to show for it. The drafted budget of 2002 provides only N5.1 billion for maintenance works only compared to the N38.6 billion provided for rehabilitation. This only shows the extent of our understanding in differentiating between rehabilitation and maintenance. We are only interested in design and construction of roads network, neglecting the normal simple international procedures of planning, design, construction, maintenance and rehabilitation (PDCMR) Federal ministry of works (2003).

It is obvious that “Numbers of accidents on the particular road, political interest and concern and economic benefits form proposals submitted from stakeholders serves as characteristics of pavement condition used in evaluating pavement rehabilitation to Nigerian roads.

With a 23, 000km of federal roads network, a workable senerio is the tasking of about 60 small size specialized company to maintain about 400km of federal roads each. This will only involve just 2 contractors per states with the total cost per states with the total cost per year less than N160m.(Eberts & McMillan 1996) there is urgent need to preach breakage from past wastefulness, negligence, deceit and bad policy as regard the road network in the country. However, the state of infrastructure in the country is alarming and calls for urgent intervention of the government, private initiatives, public-private partnership etc. so as to make infrastructure perform its role of nation-building and development.

1.6 Research Questions

The importance of this study is to show the role of infrastructure and its effects on economic growth of Nigeria. To achieve these purposes, the following research questions are raised and answered, these research questions includes:

  1. What are the effects of infrastructural development on the overall economy of Nigeria?
  2. How can reliable infrastructure development plan be achieved?
  3. How can Nigeria improve the existing infrastructure for the overall growth of her economy?
  4. What are the benefits of building additional infrastructure to the existing ones?

1.7A. Objectives Of the Study

The broad or major objective of this study is to examine the role of infrastructure and its effects on the economic growth of Nigeria likewise to examine the rate of overall growth in the economy.

1.7B. Specific Objectives

  1. To determine the trend of expenditure on infrastructure?
  2. To examine the relationship between various infrastructure expenditures and economic growth?
  3. To make useful recommendations based on the research findings.

1.8 Research Hypothesis

  • Ho: There is no significant relationship between infrastructure expenditures and economic growth.
  • Ha: There exist a significant relationship between infrastructure expenditures and economic growth.

1.9 Justification of the Study

The purported drastic changes that lead to overall infrastructure development is being expected to bring about a higher growth rate for economic production, implying high output and supply of goods and services resulting in a reduction in the general price level of goods and services. Ironically, this has not been the case for instance; inflation has continuously rage against the economy.

Also inspite of the numerous natural attraction of investment within the economy such as the abundance of natural resources, extensive markets and enormous amount of entrepreneurial skills e.t.c. This is as a result of several unfavorable factors such as uncertainty about the policy environment, restrictive and cumbersome regulatory framework, inadequate incentives, political instability, reduction in cash flow as a result of weak demand and high interest e.t.c. These has this worsened the unemployment situation which otherwise should have been reduced by huge investment in infrastructure and increase the infrastructural level for massive employment opportunities and economic development.

However, it is evident that a conflict exists between the expected role of infrastructure in the overall economic development of Nigeria and what infrastructure actually does. Therefore, this study is justified in trying to examine the actual role infrastructure played in the economy compared with the expected role of infrastructure. The study will also recommend ways in which infrastructure development can be improved in order to boost the growth and development of the economy likewise to improve the living standard of Nigeria populace.

1.10 Scope of the Study

The study covers the period 1981-2005. This was the period during which the Nigeria government failed to improve on infrastructure and the time of democratic moments when bold steps were taken through the establishment and implementation of various policies to speed up the development and expansion of infrastructure in the Nigeria economy. The study is particular to Nigeria economy, it tries to explain the linkage between infrastructures and its effects on the economic growth of Nigeria.

Chapter Five

5.0 Summary, Conclusion and Recommendations

5.1 Summary

The role of infrastructure as an agent of growth and development is not a new phenomenon. It is a panacea for economic growth that can not be denied. The drastic change which brings about infrastructure development is expected to result in higher growth rate for economic production, implying high output and supply of goods and services resulting in a reduction in the price level of general goods and services.

Infrastructure does not create economic potential, it only develop it where appropriate conditions exist and other inputs such as labour and private capital exists. It is evident that increasing the infrastructural stocks induces faster productivity, thus leading to growth in output and the economy in general.

During the cause of this research it was found that establishment of infrastructure facilities likewise the development of infrastructures, both plays major role in the attainment of economic growth and development. As in the case of transportation services and telecommunication infrastructures in the empirical analysis.

The finding of the empirical analysis was that larger part of the dependent variables can be explained by the explanatory or independent variables.

It also revealed that there exist a positive relationship between dependent and independent variables for the case of telecommunication and transportation services as independent variables.

5.2 Conclusion

Although, it was discovered that infrastructure plays an important role in the economic growth and development of Nigeria. The expansion and development of infrastructure leads to substantial growth in the productivity and total output of an economy but it has been observed from our findings that the poor state of the Nigerian roads both state and federal has not been satisfactory, this was seen as a major challenge of infrastructural development in Nigeria.

Inadequate funding of infrastructure, lack of developmental legislations and obsolete developmental policies for infrastructural development in Nigeria were other problems. Therefore, infrastructure facilities remain grossly inadequate and insufficient for the attainment of economic growth in Nigeria.

5.3 Recommendations

Based on the above research findings and implication on infrastructure and economic growth in Nigeria, the following recommendations are hereby put forward;

  1. There should be development of modern policy with integrated infrastructure development scheme that will embrace systematic development of infrastructure in Nigeria.
  2. There should be adequate finding and financing of infrastructures to enhance proper growth of Nigeria economy.
  3. There should be adequate provisions of infrastructure according to the citizens’ needs of infrastructure in the different parts of the country in order to attain quality products and services nationwide.
  4. There should be structural integration among the different infrastructures to be developed to enhance economic growth and development, as in the case of telecommunications and transportation services.
  5. There should be guidelines including institutional framework to design the modern infrastructure, so as to meet its modern challenges of our time.

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