Economic Development Planning
Definition of Economic Planning
Economic planning may be defined as government’s conscious formulation of economic policies for the allocation of resources to all sectors of the economy over a period of time. This brings about sustained growth in the economy.
Why Countries Embark On Economic Development Plans
(1) To increase the level of employment: A good economic plan will ensure the increase in the level of employment in the economy.
(2) To develop efficient technology: A good economic plan can promote a better and efficient technology.
(3) To increase the ‘real income of citizens: The real income of the citizens can easily be increased through a good economic planning.
(4) Equitable allocation of resources: Development plan is aimed at equal allocation of the country’s resources to all sectors of the economy.
(5) Diversification of the economy: Through good development planning, Nigeria’s economy will be diversified to many sectors.
(6) To bridge the gap between the rich and the poor: A good economic planning ensures distribution of income more evenly among individuals and the socio-economic groups.
(7) To achieve economic self-sufficiency: Through good development planning offers the essential mechanism for overcoming some obstacles to economic development.
(8) To ensure economic growth: Development planning offers the essential mechanism for overcoming some obstacles to economic development
(9) To reduce foreign control of the economy: A good development planning will assist to reduce foreign control or dominance of the national economy.
(10) To ensure joint business participation: A good development planning will increase the participation of citizens in the ownership and management of productive enterprises.
(11) To reduce rural-urban migration: A good development planning will also ensure that movement of people from rural to urban centres is reduced.
Types of Economic Planning
Generally, economic planning is grouped into different types on the basis of time dimension and area of coverage. In area of coverage, we have the following:
(a) Long Term Plans: These are known as perspective plans. The plan period of a long term usually spans a period of about 10 to 15 years.
(b) Medium Term Plans: The period for a medium term plan is 3 to 5 years. This plan is used to accomplish the perspective plan.
(c) Short Term Plan: This is the annual plan. An example is the budget. It is used to accomplish the medium term plan.
Other types of economic planning are:
(1) Financial economic planning: This type of economic planning involves the distribution of national income to various sectors of the economy.
(2) Strategic planning: This is the type of planning which is directed to meet certain objective in the economy.
(3) Comprehensive economic planning: This is the type of planning aimed at setting some targets to cover all major aspects of the national economy.
(4) Partial economic planning: This is the type of planning targeted at specific segment of the national economy e.g. plans to boost agricultural production.
(5) Controlled economic planning: This is also known as authoritarian planning common with socialist economic system in which government formulates and executes plans for the economy.
Ways of Financing Economic Development in Nigeria
(i) Internal borrowing, e.g. from banks.
(ii) Aids and grants from international economic organisations.
(iii) Loans from international financial institutions, e.g. IMF and World Bank.
(iv) Government savings and reserve.
(v) Debt conversation.
(vi) Through budget surplus.
(vii) Revenue generated from investments.
(viii) Privatisation and commercialisation of government-owned business enterprises.
Problems Associated With Economic Planning In West Africa
Problems facing development planners or associated with economic planning in West Africa include:
(1) Political Instability
(2) Inadequate Capital
(3) Insufficient Statistical Data
(4) Rapid Population Growth
(5) Reliance on foreign aids
(7) Burden of national debt
(8) Poor implementation plans
Objectives of National Planning
Any national economy is built up of several sectors broadly categorized as, for example, heavy industry, manufacture of goods, production of food, supply of services, tourism, etc. All generate wealth in some form and compete for resources in order to do so.
A National Economic Development Plan will analyse the country’s objectives and priorities in relation to all these sectors in response to well-identified national needs. It will propose and justify an overall plan in which the role of individual sectors, including aquaculture as a source of food, can be seen in context.
A well-researched and reasoned policy document is of immense value to a country in the allocation of its scarce resources. It relates the scope and timetable of projects to the resources available and the benefits which will accrue. It enables realistic and achievable decisions to be taken.
The private sector looks for a stable and sympathetic environment in which to invest securely and profitably. A national plan provides the evidence to make positive decisions.
In developing countries, a national plan also meets the need of the international development banks and donor organizations to make loans or to provide technical assistance to selected national projects with a clear understanding of the benefits, and assured of the government’s own wholehearted commitment. Without them, a project has little meaning or purpose. The national plan also enables these different organizations to avoid wasteful overlap and competition by coordinating their respective programmes.
Finally, the government which sees fundamentally what must be done to secure its country’s prosperity can act purposefully to bring it about. It can take strategic decisions which determine the course of events long into the future.
Nigeria Planning Experience
Nigeria has had several development plans since 1962. They are as follows:
(1) The first national development plan (1962 — 1968): The first national development plan of 1962 — 1968 envisaged a total investment of nearly N2.4billion and half of this amount was to come from external sources.
(2) The second national development plan (1970 – 1974): The second national development plan of 1970 — 1974 envisage a total investment of N2.0 billion naira by the government. This amount was later revised to N3 .27 billion.
(3) The third national development plan (1975 — 1980): The third national development plan of 1975 — 1980 initially envisage a total investment of N 10. 7billion but this was later revised in 1976 to N43.3billion
(4) The fourth national development plan (1981—1985): The fourth national development plan of 1981 — 1985 envisage a total investment or capital expenditure of N82.0 billion. Of this amount, N70.5 billion went to the public sector while N11.5 billion was allocated to the private sector of the Nigerian economy.
Reasons for Economic Planning
First, the major reason for development planning is to accelerate the pace of economic growth ‘and development. Thus, it is meant to complement a market-driven economy to ensure the attainment of desired national goats and objectives.
Second, a reason for planning is to avoid the pitfalls inherent in a market- driven economy. That is, to address established weaknesses and defects of market mechanism.
Third, planning in developing economies is to some extent, to provide enabling macroeconomic environment to ensure the attainment of developmental goats. This may be through the provision of necessary infrastructural facilities arid extensive investment in pivot sector(s) which may serve as a growth pole for the economy.
Another reason for development plan is to bring about even and coordinated economic growth and development in an economy as this may not be guaranteed solely by a market-propelled economy.
Problems of Economic Planning in Nigeria
(i) Poor Leadership: Lack of visionary leaders, a recurring feature in ‘Nigeria’s political history, is a major problem of development plans. Thus, good development plans packaged by economists and technocrats have often been made ineffective due to poor leadership.
(ii) Corrupt Leadership: In Nigeria, in addition to poor leadership quality is the problem of corrupt leadership. Thus, instead of development plans to be seen as a means of accelerating economic development, projects in development plans are seen as a means of corrupt enrichment by leaders. This quite often leads to the failure of such plans.
(iii) Political Instability: Instability in the polity characterised by frequent military rule and political problems such as civil war and election annulment with dire consequences for macroeconomic stability, are obstacles for successful implementation of development plans.
(iv) Political Factors: Often, a carefully prepared economic development plan has been made ineffective and economically unjustifiable due to political consideration in siting development plan projects.
(v) Funding: With a disproportionately large public sector and dwindling inflow of oil revenue, financial support for development plan has become a problem. It is common knowledge that good plans without financial muscle will not succeed.
(vi) Poor Planning: Projects in the plans often lack the necessary rigour. Thus, plans are short term in design but long term in implementation.
(vi) Poor Data and Information Base: To succeed, a good development plan should be premised on good data and information. In Nigeria, due to poor data and information culture, our plans are rarely premised on reliable data and information base. This causes plan failure.
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