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CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Nigeria is urbanizing at an astonishing pace. The share of Nigeria’s population increased from 20% in 1970 to about 38% in 1993 (the world banking) of the nearly 110 million Nigerians, about 40 million are now living in cities and towns. The urban population grew at around 5.5% per year from 1980 to 1993 (compared with 2.9% for the national population). This is among the highest urban growth rates in the world, due mainly to migration from rural areas. At current roles, the number of urban dwellers will double in only 13 years. This is equivalent to a city of three million each years. Such growth is creating an immense and largely unmet demand. For urban services such as water, sanitation, road, public transport, waster disposal, health and education. The physical condition of Nigeria’s infrastructure water supply, sewerage, sanitation, urban road, electricity, drainage, waste disposal, school hospital is generally poor. For example only about half of the people in Nigeria’s urban areas have access to pipe-born water in and, or around their homes. All types of infrastructure suer from a massive backlog of neglected rehabilitation and maintenance, not to talk of the investments needed to serve future growth. Periodic and routine maintenance by for the most management of municipal wastes – sewage, seepage, and refuses Nigeria major urban environmental problem. Improving waste management is more of a policy and management issue than a technical one. Industrial waste is another major urban environmental concern.

The most critical firms with 50 or more employees, these extra costs amount to some 10% of the total machinery and equipment budget. For small firms, the burden is an high as 25%. According to the world bank reports, inadequate public services can also raise cost. For the urban poor, who wither rely on alternative, costly provides (such as water vendors) or spend large amount of time (as in fetching water from inconvenient sources) the world banks, 1995. A large number of people in Nigeria’s urban area do not have enough income to meet their basic needs of food, shelter and cloth. About 21% of the urban population-8.5 million people (as per 1991 population census) was estimated to be below the poverty line in 1992/93 (the world bank, 1995). Of these, about 1.1 million were classified as “several poor” by the world bank. The vast majority of the urban poor are in cities other than Lagos, such as Onitsha, Kano, Kaduna, Abuja, Enugu, Port Harcourt etc. Their cash income is insufficient to cover minimal standards of food, water, fuel, shelter, medical care, and schooling. The urban poor live in airborne emission are sulphur dioxide, carbon monoxide, and nitrogen oxides, which pose serious health hazards in urban areas.

Industrial and air pollution need to be dealt with by enforced regulation coupled with economic incentives to change the behavior of industries and users of motor vehicles. From the foregoing, one will notice that our infrastructures have deteriorated an urban services collapsed. But no one is le in doubt the crucial role urbanization plays as a positive force in economic development. Cities and towns are the home of most industry, commerce, and services. These sectors of the economy can be highly productive. World wide, higher per capital incomes are closely related to higher levels of urbanization. Urban based, non-oil industry and services accounted for about half of Nigeria’s gross domestic product (GDP) between 1995 and 1994. thus, average per capital income in urban areas is around one third higher than in rural areas. This is the basic reason why attention should be focused on financing strategies for urban infrastructure development in Nigeria to boost productivity and growth of our developing economy. It is on this premise that the author (researcher) wishes to study empirically the sources of finance available and financial strategies available to finance the urban infrastructure and services with regard to Nigeria economy. The problems associated with government past option and agenda towards the restoration of urban “decay”. In this work also, the writer dealt on the institutional arrangement from the world bank and other similar bodies-both in short term (immediate) and medium term.

1.2  STATEMENT OF THE PROBLEM

As have been noted, the benefit that an economy can derive from infrastructure development cannot be over emphasized. The economic pressures behind urbanization are very powerful. Cities and towns are the home of most industry, commerce, and services. These sectors of the economy can be highly productive. World wide, higher per capital incomes are closely related to higher levels of urbanization lack of infrastructure, limits investment and the lack of limits infrastructure, low-level equilibrium to finance urban infrastructure and services. Urban public authorities in developing countries like Nigeria have come under increasing financial pressures during the last decade. They now face a rapidly growing demand for urban services as a result of continuing rapidly growth howe4ver, there capacity to supply urban services as well as undertake the necessary infrastructure development, is severely constrained by a shortage of fiscal resources. This situation is the result of a combination of factors including reductions in inter-governmental transfers, increased cost of debt servicing, as well as the cost of borrowing due high interest rates, and higher unit costs of providing services which have restricted revenue growth. To compound the problem many cities not only have a massive backlog of new infrastructure requirements but also need to allocate substantially more resources to maintenance renovation, and replacement of older, deteriorating equipment.

However, in Nigeria, government has not lived up to expectations envisaged convening urban infrastructure and services provisions. This situation is not unconnected with many problems these urban centers hold for the economy, which are follows: i. Urban poverty ii. Urban pollution iii. Urban policies in disarray. But government cannot do every thing. The widely held view that government should handily all urban development activities is another big problem. This idea persists even in the face of the obvious weaknesses of public sector institutions: inadequate budgets, low remuneration of employees, poor management practice and political interference, to name a few. Ineective local government system is another critical problem in urban infrastructure development in Nigeria. Today’s local government administration is little more than caretakers, unable to carry out their statutory and assigned functions. The large numbers of local government is a huge administrative and fiscal burden for states and the federal government in urban infrastructure and service deliveries in Nigeria. Hence, the author (researched would advance solution to the problems and at the some time make very useful recommendations that will both alleviate these problems and enhance development of urban infrastructure and service in developing countries (Nigeria).

1.3  STATEMENT OF OBJECTIVES

With reference to the problems already mentioned in 1.2 above, this empirical study is designed towards achieving the following objectives, which motivate the author (researcher) into action.
i. To critically examine and discuss the various ways urban infrastructure and service could be financed in a developing economic like Nigeria.
ii. To find out the role being played by the various government levels towards the provision of urban infrastructure and services to its growing urban population in an economy.
iii. To determine the extent institutional arrangements of the various economic groups like the world bank had helped in urban infrastructure deliveries in Nigeria.
iv. To analyze the overall problems that inhibits the present arrangements (practices) in Nigeria towards urban development.
v. To offer solutions and or recommendations that will help developing economic like Nigeria in urban development programme (in areas of urban infrastructure and services).
1.4  SIGNIFICANCE OF THE STUDY
This study comes at a key juncture for the world’s urban area. Urbanization is proceeding rapidly, and it is projected that by the year 2020 more than half the population of the developing world will live in cities and towns (the world bank, 1996). Yet even as cities increasingly become the nexus of economic and population growth, they do not deliver on the promise of a better quality of life to the extent they could. Millions of urban residents in Nigeria do not have access to potable water near their homes, basic sanitation is oen lacking, electricity and power supply is epileptic, roads had deteriorated with pot-holes, and access to health services and education pose serious problems in many cities.
i. It is view of above and more that the researcher is carrying out this study entitled “financing urban infrastructure and services in developing countries an empirical study of selected Nigeria cities”. It is hoped that the study when completed will disclose various ways urban infrastructure and services are financed in Nigeria.
ii. The study when completed will equally find out the role played by the governments towards the provision of urban infrastructure.
iii. It is hoped that this study will indicated the extent institutional arrangement had helped in urban infrastructure deliveries in Nigeria.
iv. It is also hoped that this study will analyze overall problems inhibiting the present arrangements in Nigeria towards urban development programmes.
v. Lastly, it is hoped that the recommendation of this study would be of empirical relevance to Nigeria government in several fields in urban infrastructures development programme, towards restoring urban Nigeria. Furthermore, the relevance of this study is inexhaustible as it will equally map out strategies and issues regarding urban infrastructure and services in Nigeria, all aimed at restoring urban infrastructure and services, better urban services and urban financial management in Nigeria.
1.5  SCOPE OF THE STUDY
The study will cover selected Nigeria cities comprise of Onitsha, port Harcourt, Kano, Kaduna and Lagos. Urban cities were chosen covering and spreading across Nigeria (Geographic balance). From the sample taken and studied, inferences can be made on the other urban cities not studies in Nigeria. Generalization therefore can be made regarding in fractural financial and development in developing economy. The selection of the five Nigerian cities is unique as all the five cities have many things in common commercial and industrial centers, state capitals with exception of Onitsha, estimated annual growth rate 3.5% with exception of Lagos which is 5.0% as per world bank report.
SELECTION OF SAMPLE CITIES
The Nigeria cities selected for the study were as follows:- - Lagos - Onitsha - Port-Harcourt - Kaduna - Kano AREA OF LOCATION
- Lagos - South, West - Onitsha - South, East - Port Harcourt – South, South - Kano – North, North - Kaduna – North central Analysis on how this cities finance urban infrastructures. Lagos – commercial city/industrial /administration Onitsha – commercial city / industrial city Port Harcourt – industrial city/ administration city Kano – commercial industrial/ administration city.
1.6  LIMITATIONS OF THE STUDY
This research work was constrained by academic work load, finances, time, paucity of data and other ancillary problems were the handicaps that limit the scope of the study. The responses from agencies and organization visited were not encouraging as many of them were public sector which is associated with bureaucracy and re-tape in the operations and deliveries. Nevertheless, it is hoped that the study will represent the financing alternatives available for urban infrastructure development not in Nigeria but in other developing countries of the world. It will also show a time and fair view and position of those cities studies so that any conclusion drawn from them will have empirical relevance not only to Nigeria but the world in general. Because of these limiting factors encounter the researcher is limiting his study to financing urban infrastructure and services in developing countries. An empirical evidence form selected Nigeria cities (of Lagos, Kano, Kaduna, Port Harcourt and Onitsha).
1.8  DEFINITION OF TERMS
Infrastructure: social goods such as road, electricity, water supply, sewage, drainage, solid waste collection, telecommunications, public housing, transportation, educations, and health facilities.
Developing countries:- sometimes known as LDCs (Less Developed countries), they comprise those countries which for some reasons have been backward in developing their economic resources with the result that their peoples have a much lower standard of living.
IDF – Infrastructure Development fund
SPO- Standing payment other
FMF – Federal ministry of finance
CBN – Central bank of Nigeria
SEC – Securities and exchange commission
Federation account – account of the federal government where all collectable revenues are deposited.
UDBN – Urban development bank of Nigeria federal statutory allocation- allocation made to levels of government through the federation account.
FMW&H – Federal ministry of works and housing.
PIU – Project implementation units.
PFI – Participating financial institutions.
Population – number of inhabitants of an area.
GDP – (Gross Domestic product) the money value of all the goods an services produced within a country but excluding net income from abroad.
GNP – (Gross National Product)- the money value of all the goods and services produced in a country during one year at factory cost, i.e excluding taxes such as VAT.
NUDP – National urban development policy.
1.9  REFERENCES
World Bank (1995) Restoring Urban Nigeria A strategy for restoring urban infrastructure and services in Nigeria, Washington D.C U.SA Ibid, P. 10 Ibid Ibid, P.9 Mc master James (1997) Urban financial management A training manual, world Bank Economic Development Institute, Washington D.C. USA, P.1 World Bank (1996) Better Urban services :- Dev in practice, series Washington D.C USA World Bank (1997), Nigeria Urban Infrastructure Financing Lagos and Abuja, May 1997

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