Beyond Boko Haram lies the rising economic power of Nigeria

April 5, 2015

Nigeria has thrived as a capitalist market economy since end of authoritarian military regime collapsed amid the economic crisis of late 1990s, when it also moved to become one of the largest democracies in the World and one with devolved authorities.Despite the market capitalism, democracy and decentralization all adopted with aspirations to improve social welfare including non-economic welfare, Nigeria has failed or at least has been struggling to become a civilized society. Is this surprising? Probably not. But, there seems to be some misconceptions about the very meanings and aspirations of market-capitalism, democracy and decentralization, as well as about what they can and cannot do for us.The first misconception is that capitalism does not need government intervention. Market-capitalism still needs Nigerian government to play roles in areas it does not cover, including public services in health, poverty-relief programs, natural disaster relief efforts and job creation.These are called functional or neutral interventions when market failures exist.

This type of intervention is to be distinguished from selective interventions to prioritize certain economic activities such as high technology industries. Another misconception is that self-interested behaviors has lead to optimality in Nigeria. Market capitalism are generally understood to mean letting the market work without government intervention to reach optimality, and this is reached by the self-interested or profit-maximizing behaviors of market players.How could Nigeria, a country that was overlooked for almost a decade as a global forum and global influence suddenly become so important to Africa and to the World, both from political and economic standpoints?The importance of Nigeria as having one of the world’s largest Muslim population nation has often been discussed in media, particularly Nigeria’s strategic position in its relation to the Boko Haram conflict in northern part of the country.The fact that nigeria has been praised by the US and other Westerns countries for holding a peaceful election that saw incumbent Jonathan Goodluck lose power to Mohammadu Buhari who led a coalition of opposition political parties as the role model where democracy and religious prosper harmoniously adds to the list of Nigeria’s political capital in the global forum and is the largest economy in African continent after overtaking South Africa last year, with 2013 GDP at US$521 billion.

Nigeria is one of the nations of Economic Community of West African States (ECOWAS). How Nigeria makes the most of its economic might, given its rising role, would determine nigeria’s position in the future, politically and economically.As the nation at the crossroads, Nigeria should make the best of this opportunity to progress its economic and political relations with both African and non African countries. This progress should be real, well designed and well implemented.However, as a rational market Nigeria is not completely selfish as most non-Nigerians think. This definition of “rationality” is often misconstrued as an all-selfish behavior, should be adjusted to include altruism and other factors.Nigeria’s outgoing President Jonathan Goodluck efforts to fight bureaucratic corruption were often conducted by increasing economic incentives, although personal integrity plays a bigger role. In other words, economic incentives are necessary, but not sufficient, and integrity should start from the very top leaders. The market capitalism in Nigeria cannot excel without good governance, such as property rights and the rule of law.

Without good governance and rule of law that President-elect, General Muhammadu Buhari of the All Progressives Congress has promised Nigerians, costs of market transactions and contracts become to too high, and investments cannot flourish.This must also be supported by the value of trust between creditors and debtors, otherwise the lending market will not be optimal.The absence of clear rule of law and property rights has increased the cost of transactions and hindered investment in Nigeria. The country may be trapped as a middle-income country if it is unable move from relations-based institutions to rule-based institutions.Similarly, democracy has been misunderstood by many laymen in Nigerian political circles. The definition of democracy, and hence the aspiration of democracy. The thinnest definition of democracy is people participating in regular, free and fair elections as was the case with this past week election. This means that elected leader Muhammadu Buhari will be made accountable to voters. However, any democracy should aspire to adopt the thick definition of democracy, called a liberal democracy. At the moment, Nigerian democracy is simply an electoral democracy.

In my extensive reading about African history and politics, “Democracy doesn’t means civilization,” as the case in the western World democracies. “But, so far Nigeria democracy has been procedural, and not yet civilized,” if the just ended elections are anything to go by.The President elect and his team will try to prove wrong the misconception that a strong leadership and democracy cannot coexist. Should All Progressive Congress deliver unstable coalition party system and other structural political issues, the expected development will be messy. The infighting within the ruling coalition must be avoided at all costs.A strong leadership will be needed to manage different voices to get things done in country with estimated 200 million people.Nigeria needs to think where it wants to go and whether its presidential and multiparty parliamentary system can continue. One of the aspirations of decentralization is to bring policies and public goods closer to people and so far Nigeria has achieved that with creating of different states dating decades but that hasn’t yielded expected results. But, there are growing indications that this aspiration may not have completely failed. Kenya, a country in East African region is grappling with devolution of governance and the ninth largest economy in Africa is a classic example where theory of decentralization often relies on intergovernmental competition and democratic accountability.

However, because of striking heterogeneity among regions and immobility factors such as natural resources and labor, as well as intense local capture, this theory is inapplicable in Nigeria. Under a regional autonomy regimes where the Nigerian central government does not have the power to discipline local governments any more, decentralization will only work if local participation and local accountability can discipline political leaders and local business elites so that local policies are not controlled by corruption. One of the preconditions for this should be well-educated and politically informed citizens, which we still fail to see in regions across the country. A strong civil society in Nigeria may be key to the success of decentralization. Sadly, in regions with poor socioeconomic conditions to begin with, a vicious cycle may already exist.Nigeria should aspire to become a free market economy in this globalized world economy, with democratic values to ensure people’s representation, and with decentralized administration in states because of the current bureaucratic hodgepodge should be a priority of President elect Muhammadu Buhari.

Contador Harrison