Thursday, November 22, 2012

“The effectiveness of Development Aid ODA’s Countries toward Poverty Problem In African Countries” (Study case: Nigeria)

A. Introduction
    In the developing countries, especially in Africa, foreign aid actually distributed with good purposes. The problem comes when foreign aid distributed without clear mechanism and clear coordination. Most of the foreign aid does not have accountability in the process of distribution. Dubiousness rises up, whether this aid ended with good aim or ended in the corrupt government.
Foreign aids are set up as a response of developed countries toward problems which exist in developing countries, such as Africa, particularly poverty problem. In developmental studies, there is a concept called development ladder. Most of African countries have not reach the development ladder, even in the lower stage.

    Poverty consists of 2 categories. The first category is extreme poverty. Extreme poverty is condition where the society does not have earning to fill their daily needs, does not have access to education and health, and suffer from hunger acute. Even if they have earnings, it is under 1 dollar per day. The term extreme poverty is also sometimes used as synonym for absolute poverty. Extreme poverty exist in under-developed countries, such as African region. UN declaration as an outcome from World Summit on Social Development, Copenhagen in 1995 stated that:
absolute poverty is a condition characterized by severe deprivation of basic human needs, including food, safe drinking water, sanitations facilities, health, shelter, education and information. It depends not only on income, but also on access to services.”

    Eradicated extreme poverty has been identified as the most challenging problem in the world in the status quo. Even in MDG’s eradicated extreme poverty become goal number one to be achieved in 2015. Every leader in the world recognize the important of eradicated poverty problem. The second term of poverty is moderate poverty. Moderate poverty indicated that the society have earnings to fulfill their daily need around 1-2 dollar a day, higher than extreme poverty. Moderate poverty exist in developing countries. Moderate poverty actually can also be used in a different sense to mean “relative poverty”. But relative poverty only exist in developed countries. Relative poverty can be defined as a different income in the society. For example, if the median household in wealthy neighborhood earns 1.000.000 dollar a year compare with a family with 100.000 earnings per year, the gap between wealthy neighborhood and a family earning called relative poverty.

Nigeria is one of African countries which located at western Africa. Nigeria categorized by IMF as an under-developed country. Due to fulfill its people needs, Nigeria receive amount of aid from ODA’s members. The latest amount of money that Nigeria was received 2.068.660.000 dollars in 2010.
Nigeria is the most populous and diverse nation with an estimated population of over 140 million; over 200 ethnic groups, 500 indigenous languages and the major religion (Christianity and Islam). Nigeria currently has one of the weakest economies in Africa(GDP per capita (PPP) rank 158 out of 177; and is also one the poorest countries in the world with approximately 90 million people living in absolute/extreme poverty).

If two million dollars have been distributed a year in this country, then why Nigeria still suffer from extreme poverty? Why there are still 90 million of its people living in absolute poverty if aid distribution mechanism has been established since 1961? There are actually two different opinions toward the effectiveness aid in African countries, especially in Nigeria.

B. Elaboration
There are many definitions about poverty, UN stated that;
“Fundamentally, poverty is a denial of choices and opportunities, a violation of human dignity. It means lack of basic capacity to participate effectively in society. It means not enough to feed and to cloth a family, not having a school or clinic to go to, not having access to credit. It means insecurity, powerlessness and exclusion of individuals, households, and communities. It means susceptibility to violence, and it often implies on marginal or fragile environment, without access to clean water or sanitation” .

UN also proposed operational definitions of deprivation of basic human need, such as food, water, sanitations, health, shelter, education, and information. The poverty threshold is equal to 2 or more basic need that person need. So, if people have 2 or more deprivation in their basic need, they are categorized as poor people.
Official development assistance is an official term used by Organization for Economic Cooperation and Development’s Development Assistance Committee (DAC) which focusing its services in developmental aid, such as to eradicate extreme poverty. ODA was first established in 1970 by United Nations. Member of DCA consist of 22 donor countries and several countries from European Commission. The members ODA verified 0.7 % of its GNI to be distributed as financial aid . OECD stated that:
“Flows of official financing administered with the promotion of economic development and welfare of developing countries as the main objective, and which are concessional in character with a grant element of at least 25 percent (using a fixed 10 percent rate of discount). By convention, ODA flows comprise contributions of donor government agencies, at all levels, to developing countries (“bilateral ODA”) and to multilateral institutions. ODA receipts comprise disbursements by lateral donors and multilateral institutions. Lending by export credit agencies- with the pure purpose of export promotion- is excluded ”.

The effectiveness of foreign aid is still debatable. There are two main perspectives that the scientists use to see whether this foreign aid mechanism is efficacious or not.
The first perspective reckon that developmental aid bring betterment toward government and society in the recipient country. They believe that the foreign aid which given by ODA donors help the poor country to reach the development ladder. The prominent scientist who believed the effectiveness of developmental aid is Jeffrey Sachs. Through his book, The End of Poverty, Jeffrey Sachs arguing that extreme poverty in Africa exist not only because of the fault of its government, but also because of several factors, such as geographical factor, culture factor, history, fiscal trap, geopolitics, lack of innovation, demographic trap, and so on. That why we need to help African countries through giving them aid to help them to find their way to economic growth. 

Jeffrey Sachs stated in his book why countries fail to achieve economic growth:
“The key problem for the poorest countries is that poverty itself can be a trap. When poverty is very extreme, the poor do not have ability- by themselves- to get out from the mess. Here is why: consider the kind of poverty caused by lack of a capital per person. Poor rural villages lack trucks, paved roads, power generators, irrigation channels. Human capital is very low, with hungry, disease ridden, and illiterate villagers struggling for survival. Natural capital is depleted: the trees have been cut down and the soil nutrients exhausted. In these conditions the need is for more capital- physical, human, natural-but that requires more saving. When they are poor, but not utterly destitute, they may be able to save. When they are utterly destitute, they need their entire income, or more, just to survive. There is no margin of income above survival that can be invested to the future.”

Jeffrey Sachs believed that developmental aid needed by people who utterly destitute. This is the reason why the poor always become the poor. Because at the first place, they do not have any saving for the future, for example, to gain more money by buy a machine. The poor conditions become trap for them. The aid will give the poor more opportunity to gain more money.

The scientists who believe in the effectiveness of the developmental aid recognize the problem in developing countries, such as corruption and the inefficiency in their government itself. That’s why Jeffrey Sachs proposed a mechanism that proper to be applied in developing countries, called “clinical economics”.
The second opinion about the effectiveness of the aid comes from scientists who do not believe that aid will not bring betterment for the government and the society of recipient countries. Simply they said developmental aid will create dependency to recipient countries toward donor countries.
In her book, Dead Aid, Dambisa Moyo said that Africa should focus on encouraging investment rather than waiting for handouts from donor countries. She stated that:
“….many African countries the government basically not involved in the society. They have completely abdicated their responsibility. The continent is covered with hundreds NGO’s who provide goods, very often in inefficient way because the can only target a small number of people. So perhaps, in the population of Zambia of 10 million, maybe 5000 people get education. But what happens when the money dries up and the NGO leaves? The society is quite vulnerable.”

Most of the government of African countries abdicated of their responsibility toward their people. They only wait for handout from other countries to help them to solve their problem, especially in poverty. Ethiopia’s government is one of inefficient government. 97 percent of its expenditure budget comes from donor countries. The scientists who disagree with aid mechanism believe that aid make the government of developing countries, especially in Africa, so relaxed to do their responsibility as a government. Most of African government who are charged with responsibility of providing good but they are not doing their job. So, aid here allows the government to sit around and forget about their responsibility. It is one of the reasons why several scientists avoid to give aid to Africa. Dambisa Moyo Stated that:
“The notion that Aid can alleviate systemic poverty, and has done so, is a myth. Millions in Africa are poorer today because of aid: misery and poverty have not ended but have increased. Aid has been, and continuous to be, unmitigated political, economic, and humanitarian disaster for most parts of the developing world.”
Basically, the scientists who disagree with aid mechanism admit that there are advantages of aid itself. We can see a girl who come from poor family have opportunity to go to school. But, the scientists believe that if we want African government out from poverty trap, we have to let African government stand in their own feet. These scientists see this problem in macroeconomic perspective.

C. Conclusion
The circumstance in Africa is a serious thing. International community has stated that they have been distributed 600 million dollars over the last 40 years to help Africa get out from poverty. And the current expenditure of is around 25 billion dollars a year. The UN report claims the number of people living below the poverty rose from 200 million to 400 million people in this region. Based on UN report also, there are 300 million unemployment able body men who are completely isolated from economics activities. This situation is even worse in Nigeria. Based on CIDA report, only 10 percent of Nigerian is living below 2 dollars per day.

We recognize the importance of aid. We admit that admit help several poor people to get more opportunity to get better life. The question is, when we have to stop to giving African government developmental aid? When African government can stand in their own feet and stop so-relaxed with their responsibility to provide welfare to theirs citizens?
The best that we can do, by my opinion, is stop to giving aid to Africa gradually. Gradually mean that we don’t have to stop giving aid suddenly to African government, but we could decrease the amount of aid gradually. So while the amount of aid decreasing, they will learn on how to take their responsibility as a government.

Currently, member of DCA propose to distributed more money to Africa. I think this is bad idea. In the statusquo, Nigeria got 749 million dollars aid to its government. But, we see the fact that a huge amount of aid since 1961 could not help Africa, especially Nigeria to get out from poverty problem, even that huge of money increasing the number of poor people who living below 1 dollar a day. What happen if DCA/ODA members increasing their aid to this region?

Second of all, in terms to integrated Africa, especially Africa to economic growth, African governments should apply microcredit toward their society, like what happened in Bangladesh . Microcredit will foster the economic growth. Microcredit mechanism created by Muhammad Yunus, an economist from Bangladesh.
Microcredit is the extension of microloans to impoverished society who do not have any capital to do economic activities. Microcredit mechanism applied at the first time in Bangladesh by Greemen Bank, and this mechanism quite success in Bangladesh. It is should be applied also in Nigeria. Microcredit mechanism created opportunity to poor people to do economic activities. And in the end of the day, it will foster economic growth.

I believe that aid help Africa to face their economic problem. But Chinese proverb said, ”give a man fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime”. We cannot let African government depend on handout from developing countries. We must teach them on how to stand in their own feet.

Moyo, Dambisa. 2009. Dead Aid : Why Aid Is Not Working and How There Is Another Way For Africa. New York. Farrar, Straus, and Giroux.
Sachs, Jeffreys D. 2005. The End Of Poverty : Economic Possibilities for Our Time. New York. The Penguin Press.
Okoli, Uchenna.2009. Development Aid and Nigeria’s Poverty Challenge: Millenium Development Goals 4 and 5 in Focus.
Briefing Paper. 2008. Aid Effectiveness After Accra: How to Reform The Paris Agenda. Official Development institute.
HPG Policy Brief 32. 2008. Need and Greed: Corruption risks, perception and prevention in humanitarian Assistance. Official Development institute.
Killen, Brenda. How Much Does Aid Improve Development Outcomes?. Busan Background Practice
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