Governance and Nigeria

Governance and Nigeria’s Ailing Economy

Victor E. Dike

Addressing a nation’s economic problem requires an in-depth examination of the root causes of the problem. There have been endless debates about Nigeria’s economic malaise yet the economy wobbles. While some people are blaming external factors for Nigeria’s woes others, including this writer, argue that institutional factors and poor governance are the main culprits. Any person who is blaming Nigeria’s woes entirely on external factors has lost his or her mind because they are not the cause of the unethical behavior of the leaders and the resultant democratic nightmare. This article, therefore, illustrates how poor governance has combined with corruption to create a weak economy, high unemployment and inflation, poverty and rising crime and offers a solution to Nigeria’s ailing economy.

One of the aims of any organization (or nation) is to produce good quality products and services and this is much more manifest and desirable in the present highly competitive global economy in which only organizations (or nations) whose products and services are of high quality could compete effectively and thrive. However, this would be impossible without good leadership and effective institutional structures to define and regulate sociopolitical and economic activities. Institutional deficiencies in the society are strangling the economy! For one, the monetary policy of the CBN has been rendered ineffective and thus could not mop the excess liquidity in the system so as to tackle inflation. In its Economic Report (August 2005) the CBN noted that aggregate money supply grew by 39.8% during the period as against the targeted growth of 15% for Jan 2005. The CBN appears to lack a focus and independence from political pressures; and weak fiscal institutions (for example, poor tax collection system) and crude political activities are not helping the economy. No amount of monetary policy will correct the anomalies in the system with fragile financial system, institutional weaknesses and infrastructures. As Susan Rose-Ackerman (2004) noted without a well-functioning government, macro-economic policy would not be effective. How would Nigeria improve her global competitiveness with weak economy and currency (present official exchange rate of about N130/$1 or N80/$1 of the late 80s) and poor quality products? Crude politics, corruption, selfishness and greed have not allowed the political leaders to fix the institutions that are the commanding heights of the economy.

For instance, despite her energy wealth, Nigeria is often mired in the dark; and despite her abundance human resource we cannot effectively manage our economic and political affairs as evidenced in the on-going unusual political cannibalism in the society that is crippling the economy. Is cannibalism a normal political and human activity? However, political democracy involves unhindered citizen participation and tolerates opposing views, abhors arbitrary rule and unilateral decision-making. The President does not act god in a true democratic society and solely make national policy-decisions that affect the entire economy. The president works with the National Assembly on policy matters. However, since 1999, the society has witnessed an increasing build-up of authoritarian structures and institutions and human rights abuses have worsened. The resultant unstable political atmosphere has combined with poor social infrastructure to frighten off local and foreign investors.

Part of the challenges facing the economy is the present government of disunity and corruption. Thus there is need to bring together the increasingly fractious ethnic political class because national disunity is affecting government policies and the economy. Political leaders are hopelessly sunk into their ethnic suspicions as every section is protecting their own, instead of the nation. Growing evidence shows that the crises bedeviling the political economy could partly be attributed to the authoritarian tendencies of the President. He has not been conscientious as his integrity has seriously eroded. A market-oriented economy is better suited for economic growth and development as genuine capitalistic economies are controlled by market forces and not by personal idiosyncrasies. But Nigeria’s economy is controlled by the President as he is in control of almost every facet of the economy. Even the on-going privatization process is being controlled by the presidency as he appears to determine who takes part in the exercise. Also he controls petroleum sector, including the pricing of petroleum products and controls the electoral machinery. For example, he sets the tone for elections and determines who is corrupt and who should be removed from office or not and decides whether or to implement national budgets and when to withdraw money from government coffers (without approval from the National Assembly). Thus fiscal indiscipline, corruption and lack of democratic governance are some of the causes of Nigeria’s weak economy and rising poverty.

However, after years of Independence Nigerians are still walking around with colonial mentality that public money belongs to the “white man” and, therefore, any person who has access to pSkiublic fund should divert it into their personal account. There is almost no genuine medicine, no clean water, not enough food and no stable electricity (except from power generators) for the people and businesses. Nigeria must operate a genuine democratic system in which the electorate would hold the politicians accountable for their actions or inactions. Proper political education and socialization is important!

Education is an important factor in the growth and development of an economy. A society needs well-education individuals to manage its affairs and businesses should be administered by people with good quality education. As Victor Dike noted in Port-Harcourt Telegraph (Oct 21 & 23, 2006) the state of a nation’s educational sector, among other things, determines the economic health of the nation. According to Walter Nicgorski (1987) the “moral crisis of our time means more and more people lack the liberating self-mastery that allows them to commit and serve with an independence and integrity befitting a free people.” One cannot over emphasize the importance of teaching the values necessary for good citizenship and law-abiding society. Without “values education” the economy may not grow and prosper because the labor force must have the character traits of honesty, dependability, pride in work and the capacity to cooperate with others for increased productivity.

For the economic restructuring (privatization and deregulation) to achieve its purpose effective institutional infrastructure must be put in place. Without this “asset stripping rather than wealth creations” would result as the powerful oligarchy and special interest would buy the nation in the process. And the administration that has denied regulatory agencies in the society freedom to operate effectively, must allow them the unfettered hands to regulate the economy and to improve Nigeria’s ‘fragile financial system’ and corporate governance. The role of productivity in determining living standards is important for nations as it is for individuals. A nation enjoys higher standard of living if it can produce large quantity of goods and services needed by the population and extra for export as the nation should not depend solely on oil revenue. The productivity of a society is determined by many factors including physical capital, human capital, natural resources and technological knowledge (Mankiw 2001). One could venture to say that Nigeria’s economic problem is largely a productivity issue. To improve productivity the employers in the society must motivate the workers for increased productivity because Nigeria seems to have the worst reward system in the world. Good leadership and management are among the determinants of a nation’s productivity because shortage of “lead-manager” -Nigeria has more of “boss-managers”- is one of the deep-rooted impediments to higher productivity in Nigeria and the increasing poverty profile of the nation. Managers who use good rewards system get more from workers than managers who “boss” workers (William Glasser 1992).

Available economic indices show that majority of Nigerians live on less than one dollar per day. Are the leaders not unaware of this status? Without boosting economic growth and without empowering the people, ill-planned and hastily implemented poverty alleviation programs will not reduce poverty in the society. It appears that the more money Nigeria makes, the poorer the people become and the weaker the economy gets. According to the Punch of Nov 9, 2006 Nigeria earned about N3.8 trillion from oil exports between January and August 2006. However, the budgets of 2004, 2005 and 2006 were based on oil price of $25, $30 and $35 respectively, but the price of crude oil was $38.3 in 2004, and $55.3 in 2005, with a projected price of $ 68 in 2006 (BusinessDay, Oct 9, 2006); but lately the price of crude oil has been hovering around $68-$75.

These monies have unfortunately gone down the sinkhole created by corruption as unethical political conducts that litter the landscape in Abuja are permissible at the top. With the unending corruption scandals in Aso Rock the Presidency is still bombarding the public daily with preaches of leadership accountability and transparency. It was recently revealed how Andy Uba, Chief Obasanjo’s aide, used the presidential jet to haul a sum of $170,000, in cash into the United States (Daily Trust Editorial, Nov 10, 2006) for personal use and to distribute to his concubines while the rural dwellers are struggling daily for survival without assistance from the State. The rural sector is an important part of the economy and for the nation to achieve sustainable economic growth and development the rural communities in which the majority of the people live must be developed.

In the midst of global electronic communications revolution in which electronic information flows across national boundaries no society would succeed in building a thriving political economy without being technologically conscious. Information technology almost determines the nature of every human activity. Individuals and businesses now communicate much faster now more than ever. Even with the coming of the GSM Nigeria is still lagging behind in the integration of information technology in its daily activities. For reasons of technology, infrastructure and socioeconomic status many Nigerians lack access to electronic information. Modern technology is not the answer to all the problems facing the nation -it is only part of the solution. However, it is unassailably true that Nigeria’s problems are not from the “harsh-ness and the niggardliness of nature” (Keynes, May 1932) but the corrupt practices of the leaders that prevents the society from putting its abundant material and human resources into effective and productive use.

Fixing Nigeria’s wobbling economy would require a holistic approach. As Susan Rose-Ackerman (2004) notes a “dysfunctional government” is often “captured by wealthy interests.” Law enforcement policies that deal with corrupt practices alone without tackling the underlying institutional problems, which are the root causes of the problem will not be successful. Efforts to improve governance must go beyond mere anti-corruption campaigns. The on-going reforms, if well-planned and implemented, could have huge benefits with less disruption; but they have serious distributive consequences. Unbundling corruption in the society would not be possible without effective checks and balances to monitor people’s activities and stiffer penalties such as longer and tougher jail terms should be given to treasury looters because confiscation of stolen properties and money and termination of employment are not effective deterrence. One of the reasons the economy is prostate is that political activities in the society are not adding any value to the economy. Nigeria operates a system modeled after the United States where the legislative branch plays an important part in the formulation of laws and influences policy directions. But in Nigeria the executive branch literally determines who gets what, when, and how much; and the unlimited power tussles, as seen from the current spate of impeachment of state governors, have destabilizing effect on the economy.

To transform Nigeria’s democratic experiment into a true democracy and for the economy to prosper, there should be proper balance of power among the branches. The National Assembly and the Judiciary could only influence national decision-making process when, and if, they are independent of the influence of the presidency. Until the society destroys the authoritarian institutions that are choking the nascent “democracy” her politics would remain authoritarian and chaotic with catalogue of human miseries. And to stimulate the economy the society must fix the dilapidated social infrastructure (roads and bridges, water, etc) truly reform the power sector and properly fund research and development institutions. Effective privatization of the power sector and control of corruption are critical part in the process of fixing the economy. The Guardian of Nov 5, 2006 notes that for the “reforms in the power sector to achieve its set objective a whopping $20 billion would have to be invested in the next 20 years.” Because of inefficiency and corruption (the leaders have stolen billions of dollars of public money) government-run organizations swallow huge sum of public money without good economic return. It requires good management (and not money) to turn NEPA and other public corporations into viable entities that would benefit the entire society. The educational system should be reformed with increased investment in human capital and creation of jobs, stable political environment and to ensure that the necessary factors of production are available at an affordable price. All these will improve the capacity utilization of industries and the economy. Recently, Charles Soludo pointed out that “The economy operates at only 25 per cent capacity” (Daily Independent, Nov 6, 2006).

The government cannot grow the economy without investing in social infrastructure. How can the private sector function without electricity, without access to financial capital, and without good road network and good operating environment? And for the economy to function well the environment must support small and medium scale firms that create employment to reduce the rising youth unemployment and crime rates in the society. Also, the nation should invest bountifully in information technology and spur the workers morale with incentives for higher productivity. Thus economic growth should be tied to activities in non-oil sector and agricultural productivity because resources from the oil sector alone wouldn’t grow the economy. The transformation and commercialization of agriculture (with commercial food processing) is necessary to increase food out-put because any nation worth its name must be able to feed, cloth and provide medical care and educate her citizen to enable them function in the 21st century economy. It is time for a new thinking in the old Kingdom; that means that a paradigm shift is necessary to unchain the impediments of economic growth in the society.

Freedom is an important part of the process! How could an economy grow if the people lack the freedom to control their destiny? As Amartya Sen (1999) notes “unfreedoms” leave the people with little choice to exercise “their reasoned agency.” He notes that “Freedoms are not only the primary ends of development, they are also among its primary means.” Development “requires the removal of major sources of unfreedoms.”

Given the present troubled path to Nigeria’s democracy it requires serious economic medicines to keep the economy up and running. One must not fail to mention that ‘inconsistent and unsustainable policies’ and ‘macroeconomic imbalances’ are part of the causes of the present ‘hemorrhage’ in the economy (Barry Eichengreen, 2004). However, for the economy to grow the nation must invest in institutional development and set up permanent institutional structures to tackle the nation’s problems as they arise. The nation should improve its electricity supply (without which there will be no development) and invest in information technology and expose the youths to emerging technologies early in life because technology and education play vital role in any sustainable economic growth and development process. More importantly, the society should control corruption, which is a sign of institutional failure and improve ‘access to clean water and sanitation’ (Frank Rijsberman 2004). Nigeria should operate genuine democracy to improve the eroding confidence in the system, improve its decision-making process and promote good governance, improve security and reduce social violence. The society should invest in agriculture and health care, good network of roads and efficient and reliable transportation system. The workers must be well-trained and motivated to work productively. The political leaders should limit foreign borrowing and set strict regulation of Nigeria’s financial institutions to tackle the problems of financial instability and the myriad problems facing the nation. The current corrupt practices and ad hoc ways of handling the affairs of the nation are strangling the economy! As Albert Einstein has noted, “the specific problems we face today cannot be solved at the same level of thinking we were at when we created them.”