(a) What is a development plan ? (b) Discuss the various ways of financing economic development in Nigeria.

Answer Details

(a) A development plan is a deliberate, coordinated government programme that sets out the economic and social targets a country intends to achieve over a specified period (usually three to five years), together with the projects, policies and resources required to reach those targets. It states objectives such as raising national output, reducing unemployment and improving welfare, and it allocates funds across sectors to achieve them.

(b) Ways of financing economic development in Nigeria:

• Taxation: revenue from direct taxes (personal income tax, company income tax) and indirect taxes (VAT, customs and excise duties) funds public investment.
• Oil and mineral revenue: royalties, rents and profits from crude oil and gas provide a large share of government finance.
• Internal (domestic) borrowing: the government raises money from citizens and institutions through treasury bills, treasury certificates and development stocks or bonds.
• External borrowing: loans from foreign governments and multilateral bodies such as the World Bank, IMF and African Development Bank.
• Foreign aid and grants: bilateral and multilateral assistance that need not be repaid.
• Foreign direct investment: capital brought in by multinational companies to establish or expand production.
• Surpluses of public enterprises: profits from state corporations reinvested in development.
• Deficit financing: the central bank creating money or the government spending beyond current revenue to stimulate activity, used cautiously to avoid inflation.

A sound plan combines several of these sources so that the country is not over-dependent on volatile oil earnings or on debt that raises future repayment burdens.