Nigeria: an infected economy

Malpractice and mismanagement have long been the emblem of Nigerian government. Covid has added to the West African nation’s woes and young Nigerians are fleeing their homeland. Grimot Nane looks for a way back.

 

The call to ‘build back better’ is a strong and rational response to the calamity, destruction and disruption caused by the Covid. So who will do the building?

Economist, Amartya Sen, in his 1999 book, Development as Freedom, made the argument that governments do not develop or rebuild their economies through smart policies but by endowing their citizens with economic, political and social capabilities cum freedoms. We also need factors of production to grow or revive economies, with human resources built through positive incentives and entrepreneurship in an enabling environment.

“The outlook for Nigeria to build back better from the Covid pandemic does not look good.”

However, discussion about approaches to rebuilding a post-Covid world has mainly been focused on developed nations and based on new economic thinking. But how equipped, ready and open-minded are developing countries, such Nigeria, to build back better?

The outlook for Nigeria to build back better from the Covid pandemic does not look good. Rebuilding the economy is not yet an official policy goal of the government. President Muhammadu Buhari has been unusually quiet for a national leader about the Covid problem and its aftermath. The cautionary lockdown was haphazardly applied and non-existent in many parts of the country. It might well be the hot weather that has kept the infection rate low, more than any strategic government action per se

DEATH AND CORRUPTION BEFORE AND SINCE THE PANDEMIC
Mass murder has become commonplace in Nigeria.

Nomadic cattle rearers, the Fulani herdsmen, under impunity granted by their patron, President Buhari – have been on sprees of kidnappings, robberies and murders around the country, unlawfully occupying or trespassing private land to graze their cattle. The Middle Belt states are considering secession in response to the mayhem caused by the Fulani herdsmen in their lands.

Islamic insurgent group, Boko Haram, has killed military and police personnel, sacked towns in North-East Nigeria, kidnapped young girls and carried out bombings, assassinations and beheadings.

In the South, the anti-pollution and compensation-seeking militant group, the Niger Delta Avengers, successfully bombed vital oil export infrastructure in response to its perceived marginalisation in the distribution of oil wealth.

In the South-East, many youths belonging to the Indigenous People of Biafra – a secessionist group responding to political marginalisation – organised peaceful marches and boycotts against the high-handedness of the Buhari government.

The South-West, having endured much senseless violence against them across their land by Fulani Herdsmen and recent Northern Nigerian migrants, have formed a militant self-defence force, Amotekun. The agitation by Yoruba people for a separate republic – the Oduduwa Republic – is the most recent tension.

Amid the Covid pandemic we have witnessed shocking cases of corruption.

An audit of the state oil monopoly, Nigerian National Petroleum Corporation, revealed corruption in the running of three refineries with cost of production to income ratios of 12:1. The loss of a cumulative sum of NGN1.64 trillion (£3 billion) in the refineries attributed to management expenses was the key finding in the audit report.

The Economic and Financial Crimes Commission’s acting anti-corruption czar, Ibrahim Magu, became the third appointee in a row to be sacked, arrested and imprisoned for corruption.

The COVID-19 pandemic created an opportunity for political appointees of the Niger Delta Development Commission to embezzle NGN1.5 trillion (£2.8 billion). A vote by the Commission’s board resolved to provide a “Palliative to COVID-19.” This palliative was intended to help people get adequate nutrition during the lockdown in the oil-producing states of the country. A small section of the intended recipients received derisory one-off packages of less than 3,000 calories, and a few elderly people got NGN 5,000 (£10) in cash.

Nigeria was not even minimally prepared for the pandemic despite its recent encounter with Ebola. The unpreparedness of Nigeria for Covid is due to a poor-performing and fragile economy, insufficient public spending and endemic political instability. Other contributing factors are the lack of adequate infrastructure and services, a reliance on imports, and government apathy. There is no adequate health service in Nigeria; healthcare has been grossly underfunded since the early days of the International Monetary Fund’s Structural Adjustment Programmes. Preventative public health programmes have not been a government priority for decades. 

Just before the outbreak of the pandemic, widespread tension, violence and terror had been worsening. This background of unrest and instability makes Nigeria a high risk for Foreign Direct Investment but the parlous state of the Nigerian economy means building back better in Nigeria will require considerable foreign investment. 

“This background of unrest and instability makes Nigeria a high risk for Foreign Direct Investment.”

Peter Bauer’s caution about West Africa in Reality and Rhetoric was that economies are not built by natural resources but by people, through their will and enabling facilities. Many observers refer to Nigeria’s oil as a curse. It is not; the true curse comes from leaders who squander their country’s wealth rather than develop the economy. Nigeria has earned over £1 trillion from oil revenues but remains a highly indebted, developing country. When the Covid pandemic struck, the price of oil collapsed to zero. Oil is the one single source of significant national income, and Nigeria was suddenly deprived of practically all of its income. We can expect drastic spending cuts, protracted non-payment of salaries, massive job losses, mass migration overseas, decreasing life expectancy and widespread despair. Nigeria owes over £100 billion in foreign debt drawn on future oil revenues. How is the nation going to pay it back and build back better? The debt burden of Nigeria has made its economic policies and thinking beholden to the neoliberal orthodoxy of its creditors – the multilateral agencies and donors.

“The true curse comes from leaders who squander their country’s wealth.”

Corruption and other forms of malpractice in the public and private sectors render Nigeria’s institutions ineffective and laws unenforceable. Almost every aspect of the nation’s economy and society is underfunded to varying degrees. This is another reason why much-needed foreign investment may elude Nigeria.

No Covid compensation packages have been offered to businesses. Enterprise for the majority of Nigerian business people remains at small, petty and subsistence levels. Medium- and large-scale businesses, though relatively few, tend to be dependent on government patronage and on oil wealth for success. In the absence of manufacturing, importing seems to be the best business activity. As regards raw materials, Nigeria is well-endowed, but lacking in the capacity to move up the value chain. Other obstacles to business include:

credit is scarce and short-term;

reliable electricity supplies from the national grid are derisory, worsened by the failed privatisation of the power sector;

roads are in poor shape and unpassable in places; and

rail travel is limited and mostly substandard.

Telecoms and mobile technology appear to be the only part of the national infrastructure that works.

Nigeria, for now, is an unlikely place for rigorous new economic thinking.”

Nigeria, in effect, has sought the unlikely paradigm of “jobless development.” It has followed an unusual quest to be a world-leading economy, but with neither industries nor a high-skilled population. The privatisation of the Nigerian power sector partly failed due to a severe skills shortage – and hiring foreign expatriates was too much of an overhead to manage.

The vast majority of Nigerians have not been engaged in the purposeful building of their country by the government. The average Nigerian is a redundant nation builder, and daily survival is his or her only goal in a world of high unemployment and underemployment. Most salaries in the country do not provide a living wage. Moreover, the brain drain has robbed Nigeria of its most-skilled citizens and going into diaspora as an economic migrant has become the best option for most young Nigerians. 

One unintended consequence of high unemployment in Nigeria has been the expansion of the informal sector of the economy. Ten years ago, the informal sector constituted 60% of the economy and now it is close to 75%. With unemployment so high and a formal economy so small, building Nigeria back better is an unlikely prospect without major structural economic  change and an end to the unitary system of government.

Only a restructuring of the country based on federalism can save Nigeria from further disunity and fragmentation. Fiscal federalism would also make the economy more productive through autonomous local economic and resource management.

The unitary system of government is responsible for the ruinous over-centralisation of Nigeria’s states and the economy. Corruption is unlikely to decline or expire in this climate of impunity and the situation where only those who practice corruption can attain public office. Almost anyone in power who might accuse another of corrupt actions is likely to be guilty of past corrupt practices, and vulnerable to retaliatory exposure. 

Nigeria, for now, is an unlikely place for rigorous new economic thinking and is reluctant to introduce new enabling economic policies under the dictates of neoliberalism. Were ‘building back better’ to be taken seriously by the government, it would first have no choice but to break the strangleholds of corruption, perennial government negligence, and the unitary style of government. These strangleholds undermine the capabilities and freedoms of the Nigerian people. And only through them will NIgeria build back at all.

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