Abstract
The paper revealed how Nigeria has remained perpetually underdeveloped by various development indicators. To explain Nigeria’s perpetual underdevelopment, the paper presented a Structural Theory of Development Policy. The theory postulates an interrelationship among four components of any economic system, comprising policy instruments (vector x), external exogenous variables (vector u), target and non-target endogenous variables (vectors y and z), impacting welfare function w(y), as illustrated below: The theory elucidates perpetual underdevelopment by the following obstacles: (i) Perverted articulation of development objectives (ii) Deficient knowledge of the economic system (iii) Excessive vulnerability to external factors (iv) Limited capacity for policy implementation The resolution of these obstacles was discussed. However, the deficient knowledge of the economic system was considered the critical factor for extensive empirical analysis. A classical illustration is the foreign-exchange excess-demand theory, empirically proven to be a false paradigm, inapplicable to the Nigerian economy characterized by overwhelming dependence on primary commodity exports, price and income inelastic demand for goods and services, double-digit inflation rate, severe political instability, and unbridled corruption fuelling capital flight. Comprehensive econometric analysis for Nigeria negated the foreign exchange excess demand theory in all its ramifications, justifying the need for foreign exchange market regulation.
Highlights
1.1 Perpetual Underdevelopment in Less-developedCountries Some development economists had predicted that lessdeveloped countries of the Third World would remain perpetually underdeveloped on account of their unfavorable external dependence, especially on their former Colonial Masters, based on neo-classical dependence theories, false paradigms, or centerperiphery development models (Weisskopf, 1972; Galtung, 1972; Baran, 1975; Leys, 1975; Griffin and Gurley, 1985; Singer, 1970; Lewellen, 1995; Chang, 2002; Olutayo, 2007)
Challenging these positions for the explanation of underdevelopment are the arguments of Neoclassical Counterrevolution that the major cause of unrelenting underdevelopment is the absence of marketfriendly policies (Little, 1982; Bauer, 1984; Lal, 1985; among others) and the contentions of Public Choice Theory identifying unbridled corruption of public office holders as the major cause (Buchanan, 1954; Grindle & Thomas, 1991; among others)
We have argued that foreign exchange excess demand for a country like Nigeria is more related to the problems of the rapid inflation rate, immense capital flight connected with corruption and political instability, inelastic demand for imported goods, predominant primary-commodity exports, and unavoidable payments for non-factor and factor services
Summary
Countries Some development economists had predicted that lessdeveloped countries of the Third World would remain perpetually underdeveloped on account of their unfavorable external dependence, especially on their former Colonial Masters, based on neo-classical dependence theories, false paradigms, or centerperiphery development models (Weisskopf, 1972; Galtung, 1972; Baran, 1975; Leys, 1975; Griffin and Gurley, 1985; Singer, 1970; Lewellen, 1995; Chang, 2002; Olutayo, 2007). Challenging these positions for the explanation of underdevelopment are the arguments of Neoclassical Counterrevolution that the major cause of unrelenting underdevelopment is the absence of marketfriendly policies (Little, 1982; Bauer, 1984; Lal, 1985; among others) and the contentions of Public Choice Theory identifying unbridled corruption of public office holders as the major cause (Buchanan, 1954; Grindle & Thomas, 1991; among others). Twenty countries of Sub-Saharan Africa belong to the Low Income, fifteen belong to Low Medium Income, while only three small countries with populations below 3 million belong to Upper
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