BUHARI: How To Industrialise Nigeria

We live in a stratified world. The rich and the poor. The haves and the have-nots. These distinctions exist at both the global and state levels. Inequality within a state can hinder its development and in turn weaken its ability to navigate the political and economic turbulence of a globalized world.

Nigeria stands on the precipice – our rich natural resources and immense population have led to impressive economic growth, despite our huge inadequacies, the political consequences of which we witness daily and has led to the downfall of the PDP and our seemingly weak outgoing president. 

According to Bloomberg, Nigeria is one of the fastest growing economies in the world, with a forecast GDP growth of 4.9% in 2015. This is the potential that we need desperately to tap, so that employment here can lead to our collective welfare and a change in the collective mind set of the average Nigerian, whether it is the man in the molue or the women selling roasted corn by the roadside.

Years of economic mismanagement, poor leadership and fragile institutions mean that these statistical gains have not resulted in any real impact for the wider population. Nigeria suffers from a nexus of intertwined and multi-dimensional problems, which propagate a vicious cycle. Weak governance leads to marginalisation and disillusionment; increasingly, this sense of frustration is being expressed through violence. The Movement for the Emancipation of the Niger Delta (MEND) and Jama’atu Ahlus Sunnah Lidda’awati wal Jihad (known as Boko Haram) and the incessant Fulani herdsmen and farmers’ conflicts are the ugly by-products of years of neglect. Violent groups exploit economic, political and identity issues and aggravate existing fractures and divisions, undermining trust and hindering development.

Violent extremism has had severe deleterious effects on the Nigerian economy, devastating local markets and shaking the confidence of foreign investors. However, there are a number of structural issues that the new government, led by President Muhammadu Buhari, will have to contend with. Indeed, since independence in 1960, corruption has been arguably the largest obstacle to real growth and development. The use of public office for private gain has been at the core of political culture in Nigeria throughout our short history. The amount of money generated by our resources that has been stolen and now sits in individuals’ bank accounts simply defies belief. Nigeria is notorious for the level of its corruption and is ranked by Transparency International as the 136th least transparent state in the world.

It is ironic that our greatest resource is perhaps the greatest contributor to our current woes. The link between dependence on oil revenue and corruption in weak states is well documented. By selling oil, a state has an easy source of revenue without necessarily having to build robust national infrastructure. Infrastructure that is built is simply for extractive purposes. 

Furthermore, the state can sustain itself without any real concern for its citizens. As long as the state provides a steady supply of oil, it can fend off the scrutiny of the international community, enrich key supporters and have plenty left over to ensure regime security. In the short to medium term, this can be a viable option for a government whose priority is to keep power. However, in the long term, it cripples the state, preventing the organic growth of institutions that spur development and increasing overall volatility by creating legitimate grievances among citizens.

Oil presents other issues too. The influx of dollars and expatriate workers tends to cause inflation, making life more difficult for ordinary citizens. Finally, dependence on oil is becoming an increasingly risky position in today’s economy. Over the last two years, the commodity’s price has fallen alarmingly, having an immense negative impact on the Nigerian economy. With increasing acceptance of climate change, consumers, corporations and states are changing behaviour. Simply put, oil is on the way out. Considering all of this, the diversification of the Nigerian economy must be at the top of the new government’s agenda. Nigeria is blessed with natural resources and fertile land. Unless we begin to utilize our resources properly, our economy will stagnate and our claim to be a regional power will fade away.

Agriculture should be a primary focus of the new government. Firstly, the combination of human and financial capital required is relatively low compared to other industries. Secondly, boosting the agricultural sector is one of the fastest ways to create jobs. From farmers, to drivers, to sellers, the agricultural sector stimulates job creation and infrastructure development. A thorough review of the existing agricultural policy is required to revitalize an industry that has stagnated since the 60s. Encouraging and incentivizing the production of home-grown agricultural goods should be the starting point. 

However, the government will also have to properly assess the mining industry. Ultimately, Nigeria needs to move beyond being a supplier of commodities and up the value chain, to being a supplier of manufactured goods. By producing and exporting manufactured goods, Nigeria would have the opportunity to vastly increase employment and would receive greater revenue from exports. To achieve this, urgent attention must be directed to our power and transportation systems; otherwise we simply will not be able to cope with the world markets.

Diversification of the economy is key but alone, it will have little effect on the endemic corruption that plagues the nation. Good policy is one thing but it needs to be supported by stable and inclusive institutions that promote good governance and stimulate the economy. In fact, the dominant school of thought in modern political economy is that institutions, both formal (laws, treaties, government structures) and informal (customs, accepted practices) are the single most important factor in determining growth and development. 

According to respected political economists, Acemoglu, Johnson and Robinson, “Of primary importance to economic outcomes are the economic institutions in the society… it is the way that humans themselves decide to organize their societies that determines whether or not they prosper.” Political economists believe that good institutions, such as robust property rights, play a crucial role in economic growth and development.

By contrast, developing countries are, and have historically been, beholden to extractive institutions. This has certainly been the case in Nigeria. The simple truth is that our informal institutions in Nigeria are based on ethnic, tribal and religious considerations that undermine our fragile formal institutions. As such it is imperative that the new government strengthens the rule of law.

Nigeria cannot continue to exist with one set of laws for the elite and another set for the masses. This sense of impunity trickles down into every facet of Nigerian life; police officers ask for bribes at checkpoints, drivers ignore the rules of the road, citizens do not pay taxes. While these examples as themselves are not the sum total of our economic problems, they are symptoms of the disregard for the rule of law that has permeated our society and the weak institutions that should form the foundation of the state.

The Office of the President sets the tone for the rest of the government and in turn the country. A president who does not tolerate disregard for law from anyone is an important first step. Still, the government must ensure the independence of other key structures such as the legislative arm, the judiciary and the financial crimes watchdogs. Nobody can be immune from punishment for illicit behaviour. This will foster greater respect for our laws and institutions, which should lead to greater confidence from both local and international investors and help put an end to the unrelenting dangerous and irresponsible behaviour that has marked Nigerian politics.

Informal institutions must also be addressed. Trust, as an informal institution, is often ignored but it is vital to political and economic activity in a society. “The level of trust in national culture can impact the economic development of a country.” Low levels of trusts result in higher transaction costs, restriction of market activity and stalling the growth of commerce. Economic success is down to more than just competition, technology and skills. Nigeria quite clearly suffers from a lack of trust on a national level and is still bitterly divided along ethnic and religious lines. The new government must present itself clearly as a government for Nigeria as a whole and cannot be perceived as a government for or against any part of the country.

There are few countries better placed to move swiftly from developing to developed state. However, Nigeria faces a number of severe challenges. From the rise of insurgency, to corruption and persistently weak institutions; there are myriads of issues for the new government to contend with. Diversification of the economy by moving away from our over-dependence on oil must be a top priority. A focus on agriculture, with a view to eventually producing manufactured goods will boost the economy and create much needed jobs. Governance structures must be strengthened substantially and made independent, with a very real emphasis on rule of law, which would likely have significant effects on a wider Nigerian society.

Finally, the trust deficit that exists in Nigeria must be directly addressed. Ethnic, tribal and religious divisions dominate political and social life to this day and will continue to have negative impacts on growth and development unless something is done. A comprehensive review will need to be done of all industries and sectors – this short piece cannot diagnose and propose solutions to all of Nigeria’s economic ills.

However, without taking serious steps to resolve the issues raised in this article, Nigeria will continue to be its own worst enemy. We are imperfect people and must battle it out in a democratic setting if we are ever to achieve our potentials. The future is bright but we must roll up our sleeves and feel the pain of nation building.

by Hamza Attah