Research Articles Base: Economic Development In Africa

Sample Dissertation Research on the Cause of Financial Banking Distress in Zimbabwe

Chapter 2 Review of related literature Introduction This section of the study primarily focuses on the different researches and other literatures that focused on several aspects that will help with the progression of this study. With the topic mainly concerning on the banking financial distress in Zimbabwe, the paper’s main aim is to determine the cause of the financial distress in Zimbabwe, through this appropriate conclusions and eventually recommendations can be made. The literatures presented will come from books, journals, and reports that are deemed to be helpful in the advancement of awareness concerning the subject.   Sub-Saharan Africa Sub-Saharan Africa is in a deep economic crisis. For instance, the World Bank reports that Africa, a region of 450 million people in 1987, had a total GDP of around 135 billion US dollars, about the same as that of Belgium, which has only 10 million inhabitants. A similar indicator of Africa’s economic performance is the fact that Singapore, a small island of only 2.7 million inhabitants, exports some 50 per cent more manufacturing products than all of Sub-Saharan Africa together (Blomström & Lundahl 1993). The situation in Africa has been bad for a long time, but during the 1980s it deteriorated much further. The continuing crisis has several dimensions. Stagnating or negative economic growth, serious balance of payments and fiscal problems and sluggish agricultural performance, coupled with rapid rates of population increases, are only some signs of the economic disaster. The social dimensions of the crisis include increasing unemployment, decreasing expenditure on social services and education, worsening nutrition and continuing high infant mortality. Environmental problems, such as desertification and deforestation, are accelerating. Moreover, the political systems are generally characterized by corruption, inefficiency and instability. And as if this was not enough, news of another round of severe drought and famine in Africa came up (Blomström & Lundahl 1993).   Today, most African countries are facing the task of achieving important structural changes in their economies. The intermediate objectives of the ongoing adjustment programs are generally to reduce inflation, to eliminate deficits in the balance of payments, in the government budget or in public enterprises, and to adjust to growing debt services. However, in the long run, the purpose is different. The long list of fundamental objectives reaches from the aim to accelerate economic growth, eliminate hunger and malnutrition and improve income distribution, to the need to lower the demographic pressure and solve environmental problems (Blomström & Lundahl 1993). The economic and social conditions in Sub-Saharan Africa have been gloomy most times since independence. After an initial period of growth, most African economies stagnated, and during the 1980s they began to decline. With only a few exceptions, per capita income has been falling during the last decade and most of the other development indicators have deteriorated in the same manner. There are few signs of improvements, despite the countries’ own efforts and the inflows of aid resources (Blomström & Lundahl 1993). Most countries have now introduced far-reaching structural adjustment programs, but the projections for growth and development are still bleak. In fact, most projections for the first half of the 1990s suggest that scheduled debt service will continue to increase in the African countries and there are no signs of an upward trend in the inflow of new financial resources. Moreover, the manufacturing sector in most African countries is still far too small to allow significant import substitution. In this perspective, growth of export earnings is presumably the only means of obtaining the foreign exchange needed to import intermediates and investment goods (Blomström & Lundahl 1993).   The economic crisis that first emerged in South Africa during the early 1970s brought an end to decades of rapid economic growth.  During the half century between 1919 and 1969, South Africa’s real national income grew an average of more than 5.5 percent per year making it one of the fastest-developing countries in the world but rapid economic growth was not widely shared. The white minority, some 17 percent of the population, took 71.9 percent of the national income in 1970, which provided whites with a per capita income of more than ,000 a year and wages twenty times those of black workers. Sustained economic growth and the benefits it provided to whites were made possible by the exploitation of the country’s natural resources and human populations. South Africa’s rich natural resources, particularly its gold and diamonds, were produced cheaply because the regime used its political monopoly, which was institutionalized after 1948 in a set of laws known collectively as apartheid, to control the black labor force and supply it at low cost to industry and agriculture. Because the regime’s political power kept labor costs low and profits high, between 1963 and 1972 the rate of return on invested capital was the highest in the world.  High profit rates encouraged massive foreign investment, which in turn reduced trade deficits that persisted from 1946-1971 (Schaeffer 1997).  But South Africa’s ability to attract foreign investment, which fueled economic growth in the postwar period, depended on apartheid. And apartheid was both an attraction and curse to foreign investors. On the one hand, apartheid made foreign investment extremely profitable. U.S. manufacturers, for example, earned a 31.7 percent return on their investments in 1980. But apartheid also put investment at risk because it greatly antagonized the black majority, leading to conflict and violent reaction by the regime. When conflict erupted, as it did after the 1960 Sharpeville massacre, foreign investors temporarily withdrew and economic growth briefly slowed (Schaeffer 1997).   In the 1970s, and especially in the 1980s, many countries in Africa experienced economic crises of varying severity. Their economies have been characterized by weak growth in the productive sectors, with the initial spurt of industrial growth faltering, by poor export performance, reflected in the falling share of African exports in world trade and the unchanged export structure, and by increasing debt, a deteriorating economic and social infrastructure and increasing environmental degradation. This crisis has important implications for the prospects of transforming African economies, as imagined by African governments (Wangwe 1995). Debates on the causes of the crisis have centered on two categories of factors. The first category comprises exogenous factors such as bad weather, deteriorating terms of trade, fluctuating international interest rates and reduced inflows of foreign aid. The second category of explanations emphasizes endogenous factors such as inappropriate domestic policies, including incentive structures, and the mismanagement of public resources. One response to these crises has been the adoption of economic reforms. Most economic reforms have been implemented under the influence of multilateral financial institutions, notably the International Monetary Fund and the World Bank (IMF) (Wangwe 1995).    According to these institutions, the rationale of these reforms is that Africa’s slowness to respond to changing circumstances basically reflects domestic policy inadequacies, and it is these policy inadequacies that need to be addressed. In order to realize economic recovery, stabilization of the macro balance has been accorded high priority in policy-making. The conditions attached to external support have primarily been concerned with macroeconomic policy variables. The nature and content of economic reforms carried out in various countries in Africa have varied in terms of coverage and emphasis. However, the main elements of economic reform have been liberalization of internal and external trade, greater reliance on market forces, tight monetary policies mainly in the form of credit squeezes, and tight fiscal policy in the form of budget cuts and public sector reforms. These policies have primarily been designed to restore equilibrium, especially in the balance of payments and the fiscal and monetary variables (Wangwe 1995). The discussion of the events in Sub-Saharan Africa tends to serve as a background of why the country’s financial situation acts in such way. The discussion of the events in Sub-Saharan Africa serves also as a prelude to the discussion of the economy of Zimbabwe.   Zimbabwe economy and its trade policy Zimbabwe’s economy is well balanced between market agriculture, mining, manufacturing, and tourism, with a considerable subsistence-farming sector. Before the arrival of European settlers in the late 19th century, the peoples of the region practiced mixed farming which is raising both crops and livestock, with cattle ranching predominating in the drier south and west. Gold mining and trade supplemented agriculture. The arrival of Europeans led to the growth of the commercial farming sector. Much of the best land was taken over by white settlers, who grew corn or fruit or practiced mixed farming. By the 1930s, however, the mainstay of settler agriculture was tobacco. Large numbers of low-paid Africans worked settler farms, many recruited from Mozambique. Gold mining continued, but the development of a large mining and industrial sector only took off after World War II, when Southern Rhodesia (as Zimbabwe was then called) benefited from large-scale investment that flowed into the colony. A wide range of mining enterprises were begun, exploiting the colony’s chrome, asbestos, and copper deposits, and an industrial sector developed producing consumer goods and even heavy steel manufactures such as railway locomotives (Lundahl  2001).   The international community imposed economic sanctions on Rhodesia when its white government declared independence in 1965. This resulted in further diversification of industrial production, particularly in the sector of consumer goods, as local producers sought to beat the sanctions by servicing the demands of domestic and regional markets. However, the civil wars in Mozambique and Angola in the 1970s and 1980s limited those markets and cut off direct routes to the sea. After independence in 1980, Zimbabwe joined the Southern African Development Coordination Conference (now the Southern African Development Community), a regional economic bloc. However, the country faced strong competition from South African industries and agriculture suffered from severe drought for much of the 1980s.   In the early and mid-1990s the end of the civil war in Mozambique and the transition to majority rule in South Africa coincided with improved climatic conditions and led to a rapid development of tourism as another arm of the Zimbabwean economy. Debt has risen since independence and has been accompanied by high rates of inflation, which averaged 27 percent annually in the period of 1990-2000. In 1990 Zimbabwe agreed to an International Monetary Fund (IMF) Structural Adjustment Program aimed at reducing government control over the economy, lowering inflation, and encouraging investment. Government expenditure was reduced, and unemployment rose sharply as a result. In 2000 Zimbabwe had an estimated gross domestic product (GDP) of .4 billion, or 0 per person (Lundahl 2001). Zimbabwe is one of the low-income developing countries, and it is also a country having a small population. Its population is only 9 million, with a per capita income of well under US,000. It also suffered severe restrictions on its output in 1991-1993 because of drought. This directly affected its agricultural production and its manufactured output. It also had indirect effects on markets, confidence, and policy-making. The resulting 9% fall in GDP in 1992 means that any appraisal of the structure of the economy must use a combination of recent and more normal figures. Throughout most of the period since independence, the Zimbabwe economy has been highly regulated internally, with controls on both exporters and importers. The period of sanctions had seen very close cooperation of the government with private industry, followed by equally strong intervention by the new government in the 1980s, but with different objectives and less support from the private sector. Foreign-exchange controls, import licenses, and domestic price fixing for the major export commodities were used. It is against this background that exporters’ and official reactions to conditions in external markets must be assessed (Page 1994).   Since 1990, Zimbabwe has greatly altered the conditions for exporters, partly directly by removing some of the foreign-exchange controls and also the subsidies, but also by liberalizing the import regime. As most exporters of manufactures are principally producers for the home market and all depend on imported inputs, they have, faced potentially offsetting changes. The objectives of the economic program explicitly included stimulating exports of manufactures, to increase income and to aid development. It included a phased increase in the amount of export revenue which could be retained by companies to finance their own imports, from 7% in the first half of 1991 to 35% by 1993, a gradual freeing of imports from restrictions, accompanied by higher tariffs for those on the unrestricted list, and financial liberalization which resulted in higher interest rates, including on credits needed by exporters. There was also a large devaluation, followed by a year of exchange-rate stability and a further devaluation at the beginning of 1993. The effects on individual exporters varied with the extent to which they had been able to obtain imports under the previous restrictions. Some large firms therefore found that the higher tariffs on derestricted imports and the higher interest rates offset any gains from freer imports. This failure to benefit large exporters by removing restrictions parallels that in Colombia, and suggests that programs of liberalization may have very different effects on large and small producers. The total effect also depended on the extent to which producers’ own output faced greater competition in the Zimbabwean market (Page 1994).  The discussion of the economy of Zimbabwe gives more information on why Zimbabwe’s finance is in that state of condition.  The next discussion focuses on economic distress and financial distress. Through this discussion more understanding of why such situations occurs and how the situation came to be. Economic Distress and Financial Distress In economic distress, the net present value of a firm’s assets is negative and, from a financial valuation point of view, the firm should be shut down in its present form. It is possible, however, that under different management the physical assets would produce a positive net present value. If so, it would be efficient to auction or sell the firm as a going concern to new owners who would be able to improve management. Under financial distress, the net present value of the assets is positive but the value of debts exceeds the present value of cash flows generated by assets. Thus, a firm in financial distress is insolvent but its assets produce a positive value from a social point of view. In this case, debt reduction and rehabilitation, possibly in combination with more fundamental restructuring, such as a change in control, would be efficient. A firm may also find itself in financial distress because of liquidity constraints, even if the present value of cash flows from assets exceeds the debts. This situation presumes that the financial system for one reason or another is failing in its role of providing liquidity to solvent firms. The obvious remedy is rescheduling of debt or liquidity infusion (Kayizzi-Mugerwa 2003) .Financial distress is generated by the presence of debt in the sense that the larger the fixed interest charges created by the use of leverage, the greater the probability of decline in earnings and the greater the probability of incurrence of costs of financial distress (Riahi-Belkaoui 1999). An existing crisis may be deepened and prolonged if financially distressed firms are not rehabilitated but are forced to shut down. Similarly, a crisis is deepened if liquidity problems cause the shutdown of operations in a credit crunch. Widespread financial distress in a country may be caused by severe macroeconomic shock, large exchange rate changes or increases in interest rates (Kayizzi-Mugerwa 2003). From the discussion of what economic distress and financial distress is and why it occur; measures can be developed to solve the financial crisis of Zimbabwe.  Related to the discussion of the economic distress and financial distress is the sector that is highly affected by such and that sector is the banking sector.   The banking sector Banking is the business of providing financial services to consumers and businesses. The basic services a bank provides are checking accounts, which can be used like money to make payments and purchase goods and services; savings accounts and time deposits that can be used to save money for future use; loans that consumers and businesses can use to purchase goods and services; and basic cash management services such as check cashing and foreign currency exchange. Four types of banks specialize in offering these basic banking services: commercial banks, savings and loan associations, savings banks, and credit unions. Banking services are extremely important in a free market economy such as that found in Canada and the United States.   Banking services serve two primary purposes. First, by supplying customers with the basic mediums-of-exchange which include cash, checking accounts, and credit cards, banks play a key role in the way goods and services are purchased. Without these familiar methods of payment, goods could only be exchanged by barter or trading of one good for another, which is extremely time-consuming and inefficient. Second, by accepting money deposits from savers and then lending the money to borrowers, banks encourage the flow of money to productive use and investments. This in turn allows the economy to grow. Without this flow, savings would sit idle in someone’s safe or pocket, money would not be available to borrow, people would not be able to purchase cars or houses, and businesses would not be able to build the new factories the economy needs to produce more goods and grow. Enabling the flow of money from savers to investors is called financial intermediation, and it is extremely important to a free market economy (Butler, B, Butler D, & Isaacs 1997).   The banking sector is constantly and rapidly evolving; the last two decades, in particular, represent a substantial metamorphosis for banking sectors in countries around the world. For example, the Norwegian banking sector was deregulated in the 1980s, while U.K. banks faced increased competition due to the entry of other non-bank lending institutions. Meanwhile, in the United States, the deregulation movement, which began in the 1970s, expanded to many industries including banks in the 1980s. Under the loosening of regulatory constraints, which continues into the 1990s, U.S. banks have found greater versatility in their operations. In addition, the industry now has available many new financial instruments and technological advances. Finally, the restructuring and consolidation wave of the 1980s, which engulfed the industry, has continued into the present with the recent trend toward mega-mergers generating empirical evidence that fuels the debate on nationwide branching (Semenick Alam 2001). The next discussion is a more specific discussion of the banking sector particularly the banking sector of Zimbabwe and related articles that can further the need to find the solution for the financial problem of the country.   Zimbabwe and the Banking Sector In an article from Machipisa (1998), the banking sector of Zimbabwe was becoming concerned of the closure of the United Merchant Bank (UMB).  Because of these instances several banks in the country are on the brink of collapse. UMB’s collapse comes at a time when Zimbabwe is facing serious labor unrest, and the macro-economic environment is unstable. Trading was thin on the money market amid uncertainties surrounding the banking industry. The key Industrial Index lost a massive 145 points yesterday to close at 7409 as industrials and financials on the Zimbabwe Stock Exchange (ZSE) remained depressed. A number of counters, including the bourse’s largest quoted counter, Delta, which shed 25 cents to 1,175, went down as the market hobbled on without direction. The UMB closure jeopardizes the future stability of the sector. It’s really a bad development in the sense that there is loss of confidence in the sector at the moment. What really disturbs banking experts is that the crisis could have been avoided had the relevant authorities acted earlier. In the last three years, many new banks have opened in the Zimbabwean capital of Harare, as the government continues to open up the market and deregulate the financial sector. But in the case of UMB, it was not the cut-throat competition that forced the bank to collapse. It simply lacked portfolio and risk management skills. Another mistake was the UMB was just giving loans without respecting the principals of prudent bank management, which are profitability, prudence, solvency and liquidity. The whole thing raises a question of poor management of the banking sector and also raises issues of supervision by the relevant authorities (Machipisa 1998)   In another article from Agence France Presse English (9 January 2004) Prices of some commodities, particularly furniture and electrical goods, have started dropping drastically in Zimbabwe, but a crisis in the banking sector continues to hound depositors. Zimbabwe’s prices have been on an upward trend since the 1990s, with inflation galloping from around 50 percent 30 months ago to more than 600 percent now. Some retailers are reducing prices due to the introduction of a value added tax (VAT) which is seeing some goods that were taxed at 25 percent under the old sales tax system now attracting a lower rate of 15 percent.  Foreign exchange rates on the parallel market  on which virtually all foreign currency business is traded have plunged with one greenback now buying about 4,500 Zimbabwe dollars, compared to 6,200 early last month. The banking sector, which has been gripped by a crisis since the closure of a leading asset management firm which allegedly defrauded its clients of billions of Zimbabwean dollars, has left many current account holders in the cold as their cheques are no longer accepted for payment of goods and services. Supermarkets, companies and the capital city’s municipality have blacklisted at least six recently established commercial banks, rejecting cheques drawn on them. Several banks have been experiencing liquidity difficulties in recent days after the central bank recently launched a probe into their operations believing they were involved in clandestine speculative activities.   In a related article from Xinhua News Agency (7 July 2005), the Parliament of Zimbabwe passed a banking amendment bill, which intends to see that the Minister of Finance is to be consulted on the registration of banks. The bill seeks to amend the Banking Act by making provisions for the Minister of Finance to be consulted on the registration, cancellation of registration, changes in ownership or the placement of banking institutions under the management of curators. A total of eight financial institutions, including Time Bank, three Intermarket Holdings subsidiaries, Royal Bank, Barbican Bank and Trust Bank were for various reasons put under the management of curators last year while Century Discount House, Barbican Asset Management and Rapid Discount House were liquidated. The Reserve Bank of Zimbabwe said the move was taken to foster stability and confidence in the financial sector.   The Xinhua News Agency (3 January 2004) reported that the Reserve Bank of Zimbabwe (RBZ) said that it would intervene to end a devastating banking crisis that has led to the closure of a discount house and the arrest of two top bank executives. In a statement, the central bank said the measures would be taken to ensure that depositors were not unduly inconvenienced. The RBZ did not give details of the measures to be taken but said some banks were experiencing liquidity problems as a result of their involvement in non-core and speculative activities. Zimbabwe’s banking sector is facing severe strain after central bank governor Gideon Gono threatened to get tough with offending institutions. While delivering the 2004 monetary policy statement, Gono said liquidity support to faltering banks would no longer be delivered on a silver platter as some of them abused it for speculative purposes. Gono said support to under-performing banks would only be for the purpose of protecting investors. He threatened to fire boards, managements and treasury departments of failing banks in exchange for RBZ support. Zimbabwe has 17 commercial banks with assets amounting to 2.9 trillion Zimbabwean dollars. Average liquidity ratio as at Sept. 30 was 58.2 percent.    In an article from Hartnack (2004), Zimbabwe faces its worst economic crisis since independence from Britain in 1980, with acute shortages of food, gasoline, medicines and other essential imports. Foreign loans, aid and investment have dried up since the often violent seizure of thousands of white-owned farms for redistribution to impoverished blacks plunged the country into political and economic turmoil. More than a third of Zimbabwe’s commercial banks are unable to honor their customers’ checks, threatening to cause gridlock in the southern African nation’s already troubled financial sector, for the past two weeks, six of the financial institutions have been suspended from the daily clearing of inter-bank debt because they do not have the cash to pay other banks. John Robertson an economist has said that the crisis was in the making for the past few years and that certain stores were already issuing list of banks whose checks they would not accept (Hartnack 2004)   Robertson said that many Zimbabwean businessmen were borrowing money at cheap rates and buying forward in expectation of a quick profit as prices increase due to inflation. These businessmen were investing in limousines, real estate, building materials and foreign currency. But a sudden drop in demand coupled with sharply rising interest rates at the end of last year left many unable to repay their loans, he said. The reserve bank governor in an earlier statement said that the institution would no longer intervene to keep interest rates down. This resulted to lending rates surging from below 100 percent to over 500 percent.  The information minister of the country countered South African and British media reports that the banking crisis could trigger economic meltdown; he said a slump in the black market rates for foreign currency showed the economy of the country was recovering. The information minister also said that a government clampdown on cross-border traders who buy comparatively cheap Zimbabwean goods for resale in neighboring countries was behind the drop. While Analysts said the troubled banks and indebted businesses were selling hard currency and other assets to try to repay their loans, contributing to the drop in the unofficial exchange rate and to the economic problems the country is currently experiencing (Hartnack 2004).    In an article from Johwa (2003), Zimbabwe has an acute shortage of its own bank notes and inflation is not slowing. Inflation currently stands at 400 percent but it was projected to exceed 800 percent. It seems the economic situation cannot get any worse. Yet all over the country bank queues have become a permanent fixture, it has become an ample evidence of the economic crisis that has made Zimbabwe the world’s fastest declining economy. Automated teller machines have become obsolete; it takes days to withdraw enough to live on. Many parents are queuing up to amass enough cash for their children’s school fees which have increased substantially. The shortage is self-perpetuating as those with cash, both individuals and corporate, see no point in going to the bank since gaining access to it at a later stage would be difficult, if not impossible. In any case, money in the bank earns a negative interest rate of at least 360 percent so there is little to be gained from banking it. Across the country, finding cash has become an activity on its own, resulting in a loss of valuable productive hours for the relatively few businesses still operating. With no benefit from banking the cash, an underground market has emerged. Middlemen have sprouted to share the 20 percent commission that is often the cost of cashing a cheque. For retailers it has not been all sighs though, as some insist on a customer spending at least a sizeable percentage of the value of a cheque if he is to be rewarded with the change. Analysts point to Zimbabwe’s sizeable budget deficit as the main cause of the country’s hyper-inflation. The second major cause of Zimbabwe’s inflation is the loss of export earnings which has created a foreign currency shortage that is driving the parallel market. The Zimbabwe dollar is on a free fall, with values plummeting almost daily. To restore confidence in the banking sector, experts said that the government has to raise interest rates and attract savings and lessen the cash deficit. In the meantime, Zimbabweans are bracing for increasing hardships since prospects for recovery are a distant prospect.   In an article from Rob (2004), Zimbabwe’s Reserve Bank governor, Gideon Gono has had a torrid two months in office as the country’s banking system came close to the brink of collapse at the beginning of January. The crisis was shocking in its intensity and even caused ripples in the stable banking sector of neighboring South Africa. Gideon Gono’s rapid and bold steps appeared to have calmed the stormy waters at the moment but public confidence in the country’s banking system has been severely shaken. At the crisis’ worst point, Zimbabwe’s Reserve Bank had suspended seven of the 17 banks operating in the country from settling inter-bank debts through the central bank’s settlement system due to concerns that these struggling institutions did not have sufficient money to pay the other banks. As liquidity problems became apparent at these banks the problem spread tentacle-like into an economy already suffering a recession. Companies, fearing that their cheques would not be honored, began refusing to accept any form of cheques and with confidence in the banking system starting to crumble, public fears began to spread. One of the institutions involved admitted that consumers had withdrawn up to 30% of their deposits during the crisis while the independent Zimbabwean media reported runs on some of the other new banks. As the crisis escalated, South African banking giants Absa, Nedcor and Standard Bank, all of which have major stakes in Zimbabwean banks, voiced their public concerns that the brewing banking crisis could spark a systemic collapse of public confidence in the banking system; it is a worst case scenario that would have affected all the banks operating in the country. Although Gono has already acted to stem the banking crisis, Zimbabwe’s fragile economy is more vulnerable than most to any radical policy changes (Rob 2004).   In an article from Shaw (2004), the state central bank tried to stem panic withdrawals from several troubled banks, saying it won’t let the finance houses collapse.  A run on banks has been triggered by a deadline set by the Reserve Bank for all financial institutions to declare their capital reserves and show they have enough liquidity to continue operating, or face being shut down. The market was advised to continue conducting banking business in a calm manner. The deadline would not translate into a free-fall Armageddon for the banking system as some have been speculating. A rush for cash emptied many automatic teller machines during the weekend. Some lines have formed outside banks during business hours since the closure Thursday of the locally owned Trust Bank. The central bank put Trust Bank under the curator ship of an independent accounting expert and said its assets were being frozen for six months. Three other locally owned banks have been closed while being put under fiscal supervision this year, with central bank-appointed curators sent in to try and resuscitate them. The central bank said Trust Bank’s own plans to seek new investors and shore up its viability had failed. The agriculture-based economy has been crippled by the often violent seizure of thousands of white-owned commercial farms. Shortages of gasoline, food, hard currency and even local bank notes spurred speculation that gave finance houses a boom. Businessmen were borrowing money to invest in cars, scarce imports, building materials and hard currency in expectation of quick profits as prices rose with inflation. But a sudden drop in consumer demand, coupled with sharply rising interest rates at the end of last year, left many speculators unable to repay their bank loans (Shaw 2004). The different articles showed the different financial problems the country continuously faced. Through the articles the gravity of the country’s situation can be seen and what is being done and what should be done to improve the situation can be formulated.   Conclusion To identify the root of the financial problem the country has, backgrounds of the Sub Saharan Africa, Zimbabwe’s economy, was discussed. Through these discussions the factors that caused the problem was found out. Through situation of the continent and the economic situation of Zimbabwe trends of why such problems occur was determined. To understand more the problem discussion of financial and economic distress was discussed. Through the discussion of the economic and financial distress the need for the study was strengthened. The last part of the discussion focused on the articles that focused on the banking sector of Zimbabwe. This part tends to determine how grave the situation is and it tries to explain the need for solution to the problem.  This chapter dissected probable reasons for the problem. It discussed the different caused problems of the problem.   Credit:ivythesis.typepad.com

Sample Dissertation Research on the Cause of Financial Banking Distress in Zimbabwe

Chapter 2 Review of related literature Introduction This section of the study primarily focuses on the different researches and other l...

THE IMPACT OF INTERNATIONAL TRADE IN ECONOMIC DEVELOPMENT IN AFRICA

THE IMPACT OF INTERNATIONAL TRADE IN ECONOMIC DEVELOPMENT IN AFRICA   The principles of dynamics trade policies in Africa  have contributed to the effective development and  economic growth in the African region. In many sub-Saharan African countries,  it goes on to reject the restricted and sterile nature of current trade policy debate between openness and control in the region. The impact of international trade liberalization on the economic development in Africa is tremendous.  Recently,  there was widespread agreement on the relationship between trade liberalization,  growth and development that reﬂects a broad consensus in the African economy and government. The orientation of foreign investments in the country especially in the exporting sectors is  focused on the local markets.  In the past years, that there were many misallocation of financial resources and weak growth and poor productivity in the African region.  However, these days, international trade in the region has been able to correct all those distortions and misrepresentations of  financial budgets and allocations in the  public business sectors.  At present, there is a wide spread of optimal promotion of right and appropriate allocation of financial resources and investments in the developing countries like Africa. It also revives economic growth and enables the African  economy to play a more competitive role in a global market. (http://www.uneca.org/atpc/Work%20in%20progress/6.pdf) Furthermore, the common agreement on the benefits on growth and development of trade liberalization in Africa,  whether direct restrictions by means of quotas and non-tax  barriers, high customs levies and export taxes; or indirect ones such as foreign-exchange policies unfavorable to export activities; have made Africa one of the world’s most closed regions in terms of the global economy. Subsequently, the difference between Africa and the Middle East, the second most restrictive region towards international trade, is greater than that between the Middle East and more open regions such as the Far East regions. The methodological preferences and a series of experimentations in the African economy led to a conclusion that there will be positive international relationships in terms of external openness and growth in the region.  In Africa, the contribution of Rodrik and Rodriguez heightened certain concerns among decision makers on the impact of trade liberalization on Africa. The concerns are based on three trends. First, issue relates to the impact of reforms on the competitiveness of the region’s economies. In this regards, it is clear that trade liberalization has not produced the promised increase in growth rates or improved international integration for Africa. (http://www.uneca.org/atpc/Work%20in%20progress/6.pdf) On the contrary, the continent has become increasingly marginalized in international trade, with signiﬁcant fall in its share of world exports, from 4.1 percent to 1.6 percent of global exports between 1980 and 2000. Africa’s imports have also decreased steeply during the same period, from 3.2 percent to 1.3 percent of the world’s overall imports. The marginalization of Africa in world trade has also affected trade in raw materials. The region’s share in world trade in raw materials has fallen sharply, from eight percent in 1980 to 4.4 percent in 2000. Thus, economic reforms and the liberalization of world trade have not led to an improvement in Africa’s international position, and have failed to compensate for the growing marginalization of the continent’s economies. Second, decision makers relates to the consequences of trade liberalization on state revenue.  It must be taken into account that the monetary income of many African countries is closely monitored by the customs revenue agency.  Third, the developed countries are continuously protecting their markets and products, inspire of all commitments made in multilateral agreement among countries.  Foremost, the developed countries have a strong support to their agricultural producers through export funding.  In the case of Africa, where  there is no strong support system coming from the government,  African industries are greatly affected by the state intervention, since a highest tariff and progressive customs practices are mostly prevalent in the labor intensive products which are exported by the developing countries. (http://poldev.revues.org/78)  So, while developing countries have implemented major reforms in order to make their economies more open, the issue of access to developed countries’ markets is still a very difficult one. The big question here is when will be that time that transparency and external openness in business tariff will occur in the African countries?  When is the time that the African leaders will focus on the effective strategies to have a just and fair trading regulatory policies that will protect the small businessmen against the big corporations and government officials who are known as corrupt and abusive in nature over the ordinary people.   Nonetheless, the South-East economy is much stronger compared the African countries for more than three decades now.  As a result, South-East Asian countries are more competitive and  integrated into the global economy, moving from export of raw materials to a more dynamic trading that  focused on highly innovative products and services. (http://poldev.revues.org/78) References: (http://www.uneca.org/atpc/Work%20in%20progress/6.pdf) (http://poldev.revues.org/78)     Credit:ivythesis.typepad.com

THE IMPACT OF INTERNATIONAL TRADE IN ECONOMIC DEVELOPMENT IN AFRICA

THE IMPACT OF INTERNATIONAL TRADE IN ECONOMIC DEVELOPMENT IN AFRICA The principles of dynamics trade policies in Africa have contrib...

Rehema

The Government of Tanzania embarked on Civil Service Reform Programme in late 1990s with an aim of among others, improving employ pay packages for the Public Servants. However, experience from Kinondoni Municipal Council, in Dar es Salaam has indicated a big number of indebted employees whose credits from the Banks have left them with net salaries less than 10% of their Basic salary contrary to the Government Policy that insists that deduction from the salaries should not exceed 40%. The research seeks to explore why Government Employees in Local Government are highly indebted and suggest the measures to be taken to remedy the situation.   In addition, looking at administrative reform in Tanzania, it is argued that external involvement in sub-Saharan Africa is becoming increasingly differentiated. For some states a key set of continuities and changes allows us to conceptualize a regime of post-conditionality. Tanzania regimes exist where extreme external dependence and economic growth produce a set of political dynamics in which external–national distinctions become less useful, in which there emerge a set of unequal mutual dependencies, and in which donor/creditor involvement in reform becomes qualitatively more intimate, pervading the form and processes of the state. Details of dispensation are provided in an analysis of key ministries and key interventions by creditors. There may be finishing ways by considering the contradictions of the post conditionality regime as well as civil program prospects.   <li class="MsoNormal" style="line-height: 200%"> What comprises of civil service reform program? How the program is applied by government of Tanzania? Provide insights</li> <li class="MsoNormal" style="line-height: 200%"> Why Government Employees in Local Government are highly indebted and suggest the measures to be taken to remedy the situation? </li> <li class="MsoNormal" style="line-height: 200%"> What the government policy tells about the situation? And how things are avoided to protect government employees? Explain </li> <li class="MsoNormal" style="line-height: 200%"> What are some of the ways that the government of Tanzania can achieve effective status of civil service reform program? How can Tanzania government employ changes of civil service? Discuss </li>   Tanzania is known for its past strong socialist orientation. The assessment of the nation’s effort to reform the banking system, state owned enterprises, taxation system and the public services sector, (2000 ), emergence of the private sector. Comparisons are made where relevant with the experiences from transition economies in Eastern Europe. Major reforms have taken place in all the sub-sectors, and there is significant increase in the participation by the private sector in the economy with increased production. Private banks have increased from zero in 1994 to thirteen in 1998. Over 40 percent (2000 ) of former state owned enterprises have been divested, 50 percent of which were sold (2000). Some are performing well, contributing to government income and reversing the drain through subsidy. There recognizes the role played by the private sector and has introduced new mechanisms to collect taxes. Private sector investment has increased and major developments are notable in mining and tourism. The welfare to poorer sections of society has been inadequate as extension of financial services to small businesses and rural areas as several investments are required, especially on employees’ health, education and infrastructure (2000).   The core method of research is case study approach as there is ample need to look at civil service reform program in Tanzania adhering to certain government rules and policies as Tanzania has been pursuing program of civil service reform which has emphasized job reduction. In local government the importance of reform and the lack of previous training for the manpower management officers responsible for job reduction are an argument for training, while the complex institutional arrangements of local government and the difficult circumstances in which the manpower management officers work are potential constraint on its effectiveness. A program of training for manpower management officers and its theoretical underpinnings in terms of transfer of learning are outlined. Discussion of the program’s effectiveness leads to a discussion of the limited effectiveness of even well designed training in isolation, and of the complementary organizational and institutional development interventions which are desirable in order to increase its effectiveness. The need for research to contribute in the discussion of the nature of external intervention in the reform processes of indebted states. In the process of structural adjustment and economic liberalisation, former strong socialist sub-Saharan African countries are experiencing additional challenges in their efforts to develop the private sector, compared to those that had relatively market oriented economies.       Credit:ivythesis.typepad.com

Rehema

The Government of Tanzania embarked on Civil Service Reform Programme in late 1990s with an aim of among others, improving employ pay pac...

AN EVALUATION OF THE ROLES OF CAPITAL MARKET IN THE INDUSTRIAL DEVELOPMENT OF NIGERIA

Introduction Nigeria’s economy is one of Africa’s biggest, a fact that partially explains the country’s political significance. With an area of 357,000 square miles, Nigeria is not particularly large by African standards, but its 100 million people make it the largest demographically, providing a sizable workforce and domestic market. Variable climates ranging from sparsely populated Sahelian and savanna conditions in the north to densely populated rain forest in the south have had an impact on the range of agricultural products harvested. Colonialism, too, had a significant impact on agricultural production, marketing, and exports, which in turn influenced the shape of the emerging political economy ( 1998).  During the 1960s, a combination of factors contributed to a dramatic shift of economic profile, and agriculture was replaced by petroleum as the mainstay of the economy, in terms of both export revenues and attracting foreign investment–though, importantly, not in terms of employment. By the mid-1990s, Nigeria was the eighth largest producer of petroleum in the world, though only the thirtieth in gas production. Unfortunately, social indicators reflecting the quality of life for the average citizen remain poor ( 1998).    Half of the population lives below the poverty line of a day, and the country’s literacy and infant mortality rates are among the lowest in the world. Although petroleum has annually accounted for more than 90 percent of export revenues and 80 percent of government revenues over the past two decades, there was a very different economic picture before the 1970s. Unfortunately, as the 1980s wore on, the country’s oil revenues continued to fall. The debt situation of the country worsened, and the deteriorating economy forced greater concessions to IMF demands. Nigeria’s economic performance has not matched its potential ( 1998). From the standpoint of the 1970s, it is difficult to explain how the economy degenerated into its present condition. The large revenues from oil were and are being squandered, either in development projects that did not prove worthwhile or, sadly, in the obscene corruption of successive elites. Far from building an economy matching the champion of Africa, governments have helped relegate it to the status of chump. Political instability, uncertainty, and bankruptcy plague the economy, in which the World Bank has increasingly become the key player. And in the current climate, agreements with the IMF seem to be very difficult to achieve. Agriculture still lags, as do manufacturing and industry; and petroleum, though still the lifeblood of the country is open to many political pressures ( 1998).   One can hope that something called the Nigerian spirit or character will lift the country from the mire of pessimism. The immediate focus of policy remains the outcome of the structural adjustment program and the question of whether it can give the economy sufficient strength to compete in the global economy. Until such issues are resolved, long-term confidence in Nigeria’s economic development must remain in the balance ( 1998). The research intends to evaluate of the role of capital market in the industrial development of Nigeria. The research will conduct a study of the stock exchange of Nigeria. Industrial development The globalization of markets, manufacturing and techno-industrial innovation therefore gives particular importance to the different kinds of networking. In contrast to previous forms of the international division of lab our, location participation is less denned by contributing products than by contributing to the various processes of production. These highly globalize processes are decisive for both different types and different opportunities for industrial development that can be identified at different industrial locations ( 2003). Global tendencies in industrial development are leading to a more complex form of the international division of labor. While the relocation of mature and old industries has induced regional crisis in the traditional industrial centers, now the transfer of such industrial capabilities provides the basis for advanced industries to keep costs under control and to gain competitiveness based on low production costs at locations where suppliers for these parts are based. This kind of hierarchical integration is based on different production costs and demands successful networking between locations that are on different levels of industrial development. Depending upon the competitive situation and the opportunities to gain benefits from relocating manufacturing, there is a tendency towards the integration of new industrial locations ( 2003).   Even though there is a new pattern of integration due to both international production networks and processes of globalization, this does not relate to a complete change in industrial development. The continuation of key strategic centre or of the manufacturing of key elements at established locations, competing against relocated advanced production units in new locations, is sharpening the regional expression of the international division of labor that can be understood only if the underlying processes of organizing global manufacturing are analyzed National strategies for techno-industrial innovation are inevitably picking particularly appropriate cases for success ( 2003).  The pre-existing regional structure, the very specific requirements for these new technologies and new forms of industrial development, and the need for immediate realization of these processes consequently do not take into regard attempts at regional development ( 2003).      Developments in certain industrial sectors have a regional expression, and these regions also form the basis for uneven economic development. Whilst not denying the importance of public policies, regional development to a great extent follows from the geographical expression of national industrial capabilities. Even though many of the previous centers of industrial development reemerge in relation to current innovations, the regionalized division of labour changes with regard to new technologies ( 2003). Industrial development in Nigeria was had its attention on the making sure that the country will have better relationship with the private sector. The government wants to make sure that all profitable resources of the country will be used for Nigeria’s development. The government also intends to fully develop its oil and gas resources so that the country can recover from its economic slump. Nigerian Stock Exchange Along with Kenya and Zimbabwe, the formal financial system in Nigeria is one of the most diversified in sub-Saharan Africa. It is comprised of a large number of heterogeneous institutions under mixed ownership. At the end of 1992 there were sixty-six commercial banks, fifty-four merchant banks and 401 community banks licensed by the Central Bank of Nigeria. There are also a large number of banking institutions which are not licensed by the Central Bank of Nigeria, including several Direct Foreign Investment (DFIs), 145 mortgage finance institutions, 228 people’s banks and the Nigerian Export-Import Bank (NEXIM). In addition, there are at least ninety-two insurance companies and several reinsurance companies, over 700 finance houses, 25 several pension funds and the National Economic Reconstruction Fund (NERFUND). Capital market institutions include three licensed discount houses, and there are 132 foreign exchange bureaus (&  1998).  This proliferation of banking institutions, facilitated by a very liberal licensing policy, has created major regulatory problems. In particular, it appears that the primary interest of many of the new banks was not in banking operations but in the possibility of capturing considerable ‘arbitrage rents’ in the foreign exchange markets, where banks had secure access to allocations of foreign exchange in a weekly auction ( &  1998).   The Nigerian Stock Exchange operates four trading floors in Lagos, Ibadan, Port Harcourt and Kano. The floors are regulated by the Securities and Exchange Commission (SEC). Trading volume has been small, with a sharp decline in real terms during the 1980s. By the early 1990s, total market capitalization amounted to 6 per cent of GDP. Only a limited number of private equities have been listed, most of them the result of indigenization program of the early years or the more recent privatization program. There have not been active secondary markets, as most institutional investors such as pension funds and insurance companies acquire equities under government directives. Prices of new issues are set low by the SEC, while transaction costs are very high. Traders constitute the dominant group of clients for informal finance in both rural areas and urban centre. Besides consumption purposes, informal financial loans and savings are utilized by traders mainly to smooth working capital requirements for their commercial activities ( & 1998).   In contrast, informal finance is not used as productive working capital or for investment by small and micro-enterprises on any significant scale, although urban moneylenders do grant loans to small business, and traders operate interlinked credit transactions among farmers. However, as in many countries of sub-Saharan Africa, personal savings or savings mobilized through esusu groups constitute the main source of start-up capital for small entrepreneurs. As expected, rural informal savings and credit transactions among farmers exhibit a high seasonality and volatility ( &  1998). The Nigerian stock exchange provides assistance to the economy of Nigeria. It serves as a measure of how well the country is doing in terms of its economy. Capital Markets             Almost without exception, contemporary economic theory extols capital markets as the financiers and controlling mechanism of the capitalist system. The financial failures of government-owned enterprises and the less developed countries are commonly attributed to the absence of capital market constraints on their profligacy. The main condition for the development of equity markets, the joint stock system of company ownership, did not become legal for industrial companies in industrialized countries until the 1860s ( 2000). Even then, the key actual function of the capital market was not the creation of a market that would allow capital to be switched between companies, but the tapping of the wealth of the old, principally landed, upper classes, in order to provide finance for the enterprises needed to establish the new capital-intensive industries of the second half of the nineteenth century. Through the capital market, those owners may more easily liquidate their interests in a company experiencing difficulties, providing there are buyers of their stock ( 2000).   If there are no buyers, then the shares are in effect suspended and the owners of such a company have to liquidate the company to retrieve their money. Thus the benefits of greater access to finance for companies that a capital market affords are offset to some degree by the weaker commitment of the owners to their enterprise. This increases the risks attendant upon capital market financing of fixed capital investment, and is the reason why rational entrepreneurs occasionally go private by buying out their less committed shareholders ( 2000). Although the issue of capital market instruments raises cash, that ash is the asset counter-part of the capital market liabilities. If the company buys other assets for that cash, the return on them must be at least as good as its payments commitments to the capital markets. There may appear to be many such opportunities in the boom, but they will almost inevitably bring reduced returns in a recession. If the proceeds of a capital market issue are retained as cash, then the credit represented by the bank deposits remains the asset counterpart of capital market liabilities. But because it is on the company’s account at the bank, it is indistinguishable from internally generated funds, so that it is more likely to be used speculatively on ventures which bring little or no return, or used to service capital market obligations which cannot be rolled over’ when the capital market is illiquid ( 2000).   In a recession, the demand for capital market finance tends to dry up, as firms concentrate on maintaining payments on commitments already entered into. Furthermore, the returns from fixed capital investments completed in the recession are now lower than anticipated, providing a less convincing case to the markets for subscribing to new stock that a company may try to issue. Eventually it may squeeze reserves and oblige companies to lower or even pass their dividends ( 2000). The capital market serves as added measure for governments and businesses to liquidate their interest in a certain company that has experienced various kinds of problems. Role of capital market in industrial development Capital market development is an intrinsic component of the overall strategy for economic development for three reasons. First, equity capital is an effective cushion against adverse circumstances. Second, equity capital markets are considered to be more efficient than bank-based debt markets. Third, inadequate provision of term finance and the lack of direct financial markets have resulted in high inflation in developing nations ( 1994). The stock market influences aggregate growth in two ways. First, the stock market increases firm efficiency by eliminating the premature withdrawal of capital from firms. Second, the stock market increases the resources devoted to firms. By increasing liquidity of firm investment, reducing productivity risk, and improving firm efficiency, stock markets encourage firm investment, which in turn stimulates human capital production and growth. By providing the opportunity to risk-averse investors to diversify, they are encouraged to invest more ( 1994).     The capital market provides assistance to the industrial development of Nigeria by helping the investors in this sector be protected against different internal and external factors that may affect their investments in the country. Capital markets will provide assistance to the investors in making sure that their endeavor in the country will be a success.  The Nigerian stock exchange serves as the overseer that enough assistance is given to investors so that they can provide their share in making sure that Nigeria’s industrial development will improve. The Purpose of the Study The objective of this research work will include the following;- 1.                  Looking into the type of market available at Nigerian Stock Exchange through which it can be effectively serve as a tool for finance and investment. 2.                  Examining the contribution the Nigerian Stock Exchange has made towards the growth of the economy. 3.                  Examining the type of securities available to the Stock Exchange. 4.                  Evaluating how these securities are owed and disposed off. 5.                  Determining the kinds of facilities that are available individuals and corporate bodies willing to raise funds through the Stock Exchange Market. 6.                  Finding out the number of floors available where securities could be traded on. 7.                  Knowing how the Nigerian Stock Exchange can be an alternative and easily accessible place for organizations on the bridge of collapse to raise enough funds, with ease, to finance new projects or expansion to existing ones.     Finally, providing conclusions and recommendations for this research work based on the finding obtained from data analysis carried out.   Research Questions The following questions will be designed as research questions for this research study. 1.                  Does capital market play any role in financing industrial development of Nigeria? 2.                  What contribution has the Stock Exchange Market made towards the Nigerian economy? 3.                  What securities are available to individuals and corporate bodies willing to raise funds from the Stock Exchange? 4.                  Which facility is the best acceptable to investors in the Stock Exchange? 5.                  Does the Stock Exchange Market help firms to raise funds for new projects and expansion?   Methodology   The statistical research method will be used in carrying out this research project. Questionnaires will be administered to the members and staff of the Stock Exchange and Stockbrokers for the purpose of gathering data for this research project. It is the researcher’s intention to initially undertake library based research to obtain data relating to the collection of Stock Exchange Market.       Conclusion The economic performance of Nigeria as a whole has not matched its potential. Until its many issues politically and financially are resolved, long-term confidence in Nigeria’s economic development must remain in the balance.  Industrial development in Nigeria was had its attention on the making sure that the country will have better relationship with the private sector. The government wants to make sure that all profitable resources of the country will be used for Nigeria’s development. The Nigerian stock exchange provides assistance to the economy of Nigeria. It serves as a measure of how well the country is doing in terms of its economy. It pictures the situation of the nation’s economy and how well it is doing. In the Nigerian stock exchange traders constitute the dominant group of clients for informal finance in both rural areas and urban centre. Besides consumption purposes, informal financial loans and savings are utilized by traders mainly to smooth working capital requirements for their commercial activities.   Although the issue of capital market instruments raises cash, that ash is the asset counter-part of the capital market liabilities. In a recession, the demand for capital market finance tends to dry up, as firms concentrate on maintaining payments on commitments already entered into. The capital market serves as added measure for governments and businesses to liquidate their interest in a certain company that has experienced various kinds of problems. The capital market provides assistance to Nigeria by helping the investors to be protected. References Credit:ivythesis.typepad.com

AN EVALUATION OF THE ROLES OF CAPITAL MARKET IN THE INDUSTRIAL DEVELOPMENT OF NIGERIA

Introduction Nigeria’s economy is one of Africa’s biggest, a fact that partially explains the country’s political significance. With an a...

The Role of Fiscal Policy and its Effects on the Real Sector of the Nigerian Economy

The Role of  Fiscal Policy and its Effects on the Real Sector of the Nigerian Economy Generally, the economy of Nigeria is a mixed economy of various industries with well improved financial, legal communications, transport and entertainment sectors.  As a matter of fact, the country is said to be ranked as 31st in the globe when it comes to GDP as 2009.  In this same manner, the manufacturing industry has been the second largest in the world in producing huge part of oil products and services for the West African region.  However, there are various reports of mismanagement in the Nigerian economy, but still, the country still managed to bounce back towards achieving its total economic development and growth.  In this connection, in 2005, Nigeria had acquired $ 170.7 billion properties, assets and revenues.  And, it even increased its GDP in 2010, up to $ 374.3 billion.  As a result, Nigeria became the largest economy in the West Africa Region, as well as the third largest economy in Africa.  Nigeria now belongs to the top 30 economies in the continent. (http://www.valuefronteiraonline.com/public_upload/file/Rethinking%20Monetary%20and%20Fiscal%20Policies%20in%20Nigeria.pdf) Nevertheless, even Nigeria considered the major source of oil production in the world; still it has been only producing about 3.3 percent of the world’s oil supply.  It only recorded as the fifteenth in oil production worldwide; it only produces 2.2 million barrels per day (mbpd).  In contrast, the  country has been obviously exceeded by the top three producers in the globe and they include Saudi Arabia which produces 10.7 mbpd or 16 %,  Russia produces 9.8 mbpd or 15.4 % and the United States produces 8.5 mbpd or 13.4  %  correspondingly.  For the record, Nigeria has an estimated oil export revenues of 1.9 millions barrels per day which is equivalent to the price of $ 65 per barrel this fiscal year.  The country anticipates   $ 52.2 billion income from oil industry within this year.  Evidently, the petroleum sector does not really boost up the overall Nigerian economy.  (http://www.valuefronteiraonline.com/public_upload/file/Rethinking%20Monetary%20and%20Fiscal%20Policies%20in%20Nigeria.pdf) On the other hand, the agricultural area of economy does not meet the rapid population growth in the country.  This is the reason that the Nigerians are importing their food products from other countries.  The country’s economy is still in hurdle to leverage its enormous wealth and natural resources while poverty still exist among many  communities in the country.  Nonetheless, it is reported that the World Bank has discovered that because of the wide spread corruption in the country, only 1 percent of eighty percent of oil revenues goes to the Nigerian communities.  In addition, Nigeria made an agreement with the Paris Club; this is a lending nations association.  Under the agreement, Nigeria will pay off its outstanding balance by its energy revenues.  It is observed that without the oil industry of Nigeria, the country would have total difficulties in its entire economy since human resources and infrastructure are apparently underdeveloped.  The country only ranked 151 among the 177 nations in the United Nations Development Index in 2004.  (http://www.valuefronteiraonline.com/public_upload/file/Rethinking%20Monetary%20and%20Fiscal%20Policies%20in%20Nigeria.pdf) On the positive side, during 2003 to 2007 Nigeria established an economic recovery program through National Economic Empowerment Development Strategy (NEEDS).  The goal of this program was to elevate the people’s standard of living by means of macro economic stability, transparency and accountability in the different government sectors.  The reform program focused on the basic needs of the various communities such as need of fresh water for household use and irrigation, to improve the power supplies, to reconstruct old infrastructure, transformation of private corporations and foremost was to reduce the prevailing corruption activities in the country.    The government has been positive that the NEEDS program would provide 7 million employments for the Nigerian population.  In this same manner, it also targets to expand its economy by boosting non-energy exports, as well as to   increase industrial capacity operation and improve agricultural productivity.  Additionally, there was also a longer term economic development scheme that being created by the United Nations and it was called the National Millennium Goals for Nigeria.  This program covers from 2000 to 2015 in Nigeria’s commitment to attain its wide range of goals that involve poverty reduction, high quality of education, gender equality, and improvement of health service systems and environment development related programs. And, top of all is the international expansion plans for the entire Nigerian industries.  Moreover, as what being discussed, United Nations have found that Nigeria has been making progress and development in some aspects.  The Nigerians are improving in other areas in their economy.  The country has been doing all its effort to provide a global primary education for children as well as to protect their environment.  At the same time, the country started to develop global business partnerships with other nations.  (http://www.valuefronteiraonline.com/public_upload/file/Rethinking%20Monetary%20and%20Fiscal%20Policies%20in%20Nigeria.pdf)   References: (http://www.valuefronteiraonline.com/public_upload/file/Rethinking%20Monetary%20and%20Fiscal%20Policies%20in%20Nigeria.pdf) (http://www.valuefronteiraonline.com/public_upload/file/Rethinking%20Monetary%20and%20Fiscal%20Policies%20in%20Nigeria.pdf) (http://www.valuefronteiraonline.com/public_upload/file/Rethinking%20Monetary%20and%20Fiscal%20Policies%20in%20Nigeria.pdf) (http://www.valuefronteiraonline.com/public_upload/file/Rethinking%20Monetary%20and%20Fiscal%20Policies%20in%20Nigeria.pdf)           Credit:ivythesis.typepad.com

The Role of Fiscal Policy and its Effects on the Real Sector of the Nigerian Economy

The Role of Fiscal Policy and its Effects on the Real Sector of the Nigerian Economy Generally, the economy of Nigeria is a mixed econ...

Solutions to the Accommodation Problem for Low Income Earners in West Africa

Solutions to the Accommodation Problem for Low Income Earners in West Africa Prevalent issues affect the economic, social and political values attribute to the cause of general instability in West Africa. The predominant factor purport to the current debilitating state affairs on a holistic view bear to the region’s disinclination to reform center on socioeconomic, legal, social, financial and political structures, resources and values that demand a widespread reform.  Complicit drug trafficking corrupted the region as a pandemic and invincible activity existing for more than a century in West and Central Africa that lured not only local citizens but to youth themselves motivating to engage in this type of illicit livelihood driven by motives by wealth gaining with sheer efforts and labor. As a social and economic turmoil, all sorts of engagements in illicit drugs from trade to laundering served as central economic activities to be in extreme degrees that resulted the influx of illegal and tantamount amounts in the billion to trillion range of cash based transactions that surpassed levels to damage legitimate businesses and spur widespread violence that, in turn, took populous damage in tolls in all levels of society resulting to social collapse. Surging to a political viewpoint due to the severity and peripheral characteristics drug trafficking cause, with delibitating effects in folds, such a subversive disposition called concerns on international levels with ECOWAS and the United Nations to have dubbed the problem of drug trafficking to have affected the peace and security in West Africa. From the legal viewpoint the threat to the rule of law is prominent to the highest levels: the immense volume of criminal activity resulting to drug cases delivered to the court systems who to scales become overburdened and intimidating that overwhelm the judicial system and police force response to cope. The significance of peace and security concerns on a particular region on worrisome levels percolates to cover adverse economic, social and political instabilities (Shehu, 2009, p.5). From the onset of security measures in the region to suppress complicit activities, ended the region in economic shanty resulting to a sheer margin of jobs available, and hence low income in terms of GDP. Studies evident on this aspect emphasize the scant statistics of foreign direct investments into the region before 2007 at which sheered the region into reform (Shehu, 2009, p.8). Studies provide with hope to the least solutions at modest degrees with reference to gradual recovery mechanisms to curb such an apparent, invincible problem in Africa, not only confined to the western region of the continent: A model study found in the case of Botswana in its recent decades to pave its economic recovery from its poorest economic stage to a middle income country borne from its commitment to the fiscal and policy management discipline imperative in a national level towards urbanization, was made through engagements to peripheral discussion in a policy level to cope challenges not only centered over land and housing development, but resolving the employment and income issues as building blocks of economic indicators (Mosha, 2010, p.4). Inference from this study derives the possibility to empower West Africa within its regional capability through cooperation to overcome these mammoth challenges if tenets attribute to such indicators are taken into account in the reform process. The United Nations Cooperation on Trade And Development (UNCTAD) sources reveal economic recovery in some specific regions of West Africa manifest in the drastic surge in foreign direct investment inflows after 2007 as the onset period of the end of drug trafficking in the area (Shehu, 2009, pp.8-9). The following principles act as underlying guidelines to the reconstruction phase in the region: Financial Guard. A sturdy local and international banking and financial legal system should be on the guard against illicit monies which inflow. Since it proved evident that illicit activity toppled legal systems and businesses widespread in the region, reconstruction and restructuring on these building blocks is imperative towards social refinement. While the reform phase is onset, the banking system is still said to be on the vulnerable stage through existing trenches of illegal activity in the country and hence the likely possibility to a permeable trade flow of illicit financial resources (Shehu, 2009, p.7). A complete reform is achievable through the close cooperation and cohesive discipline with the United Nations, the World Bank and IMF to finance, devise and restore legal and financial regulation restructure planning and implementing complete resources provided that police the flow of trade activities . Educational Policy Formation. Sturdy educational policies should promulgate to suppress through massive campaigning the innate mentality of acquiring riches through illegal means. These discourage school attendance among the youth and leave illiteracy in high rates. It should also coordinate with nongovernmental and community based organizations and norms to campaign long term educational goals and adult reeducation as a slogan for social reform throughout communities in massive campaigns. Advocate groups should lobby legislative and judicial bodies diverse pool of resources with financing a priority to programs of such organizations and implement into detail parlance penal laws to prevent human trafficking coordinated with international law enforcement communities and to form local law enforcement personnel to prevent into resort. Credit:ivythesis.typepad.com

Solutions to the Accommodation Problem for Low Income Earners in West Africa

Solutions to the Accommodation Problem for Low Income Earners in West Africa Prevalent issues affect the economic, social and political ...