At the end of this blog post you should be able to explain the meaning of economic development planning, differentiate between types of economic planning, explain the importance of economic planning in national development.
Table Of Content
- Definition of economic planning.
- Aims and objective of economic planning
- Types of economic planning.
- Ways of financing economic development in Nigeria.
- Problems associated with economic planning in West Africa.
- Nigeria planning experience.
Definition Of Economic Planning
Economic planning may be defined as government 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.
Aims and objective of Economic Planning or Reasons why countries Embark on Development plans
- To increase the level of employment: A good economic plan will ensure the increase in the level of employment in the economy.
- To develop efficient technology: A good economic plan can promote a better and efficient technology.
- To increase the real income of citizens: The real income of the citizens can be easily increased through a good economic planning.
- Equitable allocation of resources: Development plan is aimed at equal allocation of the country’s resources to all sectors of the economy.
- Diversification of the economy: Through good development planning, Nigerians economy will be diversified into many sectors.
- To bridge the gap between the rich and the poor: A good economic development planning ensures distribution of income more evenly among individuals and the social economic groups.
- To achieve economic self-sufficiency: Through good economic development planning offers the essential mechanism for overcoming some obstacles to economic development.
- To ensure economic growth: Development planning offers the essential mechanism for overcoming some obstacles to economic development.
- To reduce foreign control of the economy: A good development planning will assist to reduce foreign control or dominance of the National economy.
- To ensure joint business participation: A good development planning will increase the participation of citizens in the ownership and management of productive enterprises.
- To reduce rural Urban migration: A good development planning will also ensure that movement of people from rural to urban centers is reduced.
TYPES OF ECONOMIC PLANNING
There are different types of economic planning, and they are:
- Financial economic planning: These types of economic planning involves the distribution of national income to various sectors of the economy.
- Strategic planning: This is the types of Economic development planning which is directed to meet certain objective in the economy.
- Comprehensive economic planning: This is the types of economic planning aimed at setting some targets to cover all major aspect of the National economy.
- Partial economic planning: This is the types of economic development planning targeted at specific segment of national economy, e.g, plan to boost agricultural production.
- Controlled economic planning: This is also known as authoritarian planning common with socialist economic system in which government formulates and execute plants for the economy.
Ways of Financing Economic Development in Nigeria
- Internal borrowing, e.g, from banks.
- Aids and grants from international economic organization.
- Loans from international Financial institutions, e.g, IMF and World Bank.
- Government savings and reserve.
- Debt conversion.
- Through surplus budget
- Revenue generated from investments.
- Privatisation and commercialisation of government-owned business enterprises.
Problem associated with Economic Development Planning in West Africa
Problems facing development planners or associated with economic planning in West Africa include:
- Political instability: Political instability of frequent changes in government often leads to change in plans.
- Inadequate capital: Inadequate capital makes economic planning difficult to achieve.
- Misplacement of priorities: Resources are sometimes diverted to investments that yield no economic benefits to the people.
- Insufficient statistical data and information: Insufficient statistical data and information, which implies that most of the planning is done or wrong projection, is a problem associated with it.
- Inadequate skilled personnel: Another problems of economic planning is the inadequate skilled personnel. Inadequate skilled labour and expert make plans implementation difficult.
- Rapid population growth: The emergence of rapid population growth destabilises planning.
- Reliance on foreign aid: Over reliance on foreign aid and adherence to their conditionalities lead to plant failures.
- Corruption and nepotism: Economic planning is affected by corruption and nepotism. Planned decision may be influenced by selfish and parochial considerations.
- Poor implementation plans: Unexpected, sudden increases in the cost of projects compared to original estimates affect planning.
- Fluctuation in foreign exchange: Fluctuation in foreign exchange earning on which plans are based may hinder implementation of economic plans.
- Burden of national debt: This burden of national debt can also affect implementation of economic plans.
- Inadequate harmonization: Inadequate harmonization of the private and public sectors can also affect economic planning.
- Under utilization of labour: The services of skilled labour and experts are under utilised while making use of unskilled labour. For this reason, projects inadequately studied and not well implemented.
NIGERIA’S PLANNING EXPERIENCE
Development plan is a document that contains the policy framework and programme for the development of a country within a specific period of time. The plan sets national objective and priorities in development and outlines the programmes and projects that will achieve such.
Economic planning has been recognized by the government as an instrument of economic development. It has come to be accepted as an essential and pivotal means guiding and accelerating economic growth within the framework of the economy by improving the functioning of the markets, removing all of the obstacles to development, which we result in the improvement of the standard of living of the people.
Nigeria has had several Development plans since 1962. They are as follows:
- The first national development plan (1962 to 1968): The first national development plan of 1962 to 1968 envisaged a total investment of nearly 2.4 billion and half of this amount was to come from external sources.
- The second national development plan (1970 to 1974): The second national development plan of 1970 to 1974 envisaged a total investment of 62.0 billion by the government. This amount was later revised to 63.27 billion.
- The third national development plan (1975 to 1980): The third national development plan of 1975 to 1980 initially envisage a total investment of 610.7 billion but this was later revised to in 1976 to 643.3 billion.
- The fourth national development plan (1981 – 1985): default national development plan of 1981 to 1985 envisage a total investment or capital expenditure of 682.0 billion. Of this amount, 670.5 billion went to the public sector while 611.5 billion was allocated to the private sector of the Nigeria economy.