Opinion: How will we drive investment and growth in Nigeria: Handcuffs or Reforms?

 by Abimbola Agboluaje

Corruption is a product of a deep architecture of politics. The pillars of this architecture include the use of identity codes and money by a network of regional Godfathers

Nigeria generates about the same quantity of electricity that is consumed around Tokyo Airport. The problem is not the extreme sophistication of the technology or inability of citizens to pay. Nigerians complain about high telephone tariffs, yet active telephone lines have grown from under 500,000 in 1999 to over 60 million after legislation replaced state monopoly with private sector competition. No subsidies were involved in delivering this phenomenal growth. The incipient transfer of Nigeria’s power sector to private managers will trigger an annual investment of about $5 billion. Similar reforms can bring about massive investments in transportation, agriculture, housing, mining etc. Sadly, while Nigerians expect the Government to create jobs, the arduous legislative and policy reforms required are seldom the topic of public discussion of politics and the economy. Corruption dominates.

It is wholly desirable to jail every corrupt bureaucrat and Minister but politics is the art of the possible. Corruption is a product of a deep architecture of politics. The pillars of this architecture include the use of identity codes and money by a network of regional Godfathers who must be lavishly rewarded with state resources to control the majority of voters. This system doesn’t throw up a Mr. Transparency as President. It instead draws citizens and business and intellectual elites into the network. Can such a system suddenly start jailing the powerful and corrupt?

Governance reforms which shift incentives and practices inherent in Nigeria’s inclement political architecture towards administrative, political and economic practices that benefit all Nigerians are more promising. It is possible to consistently ameliorate the effects of “bad politics” with “better governance”. This requires policy wonks who understand how to alter the perverse incentives that are embedded in policies and institutions rather than wonder-working priests who see corruption as an élite or mass moral infirmity. Clarity of vision, competence and influencing skills are more important than messianic zeal or personal probity. It’s probably easier to get powerful elites to agree on creating wealth in telecommunications, mining, real estate, agriculture etc than on jailing corrupt leaders. 

The extent to which President Jonathan’s Government can improve Nigeria’s investment and growth prospects partly will be determined by the scope, nature and interactions of social (traditional and social media, public intellectuals, youth groups etc) and political (the ruling and opposition parties) demand for reforms. Unfortunately, impassioned anti-corruption demands which are often virulently anti reform dominate Nigerian politics. But on the brighter side, there is now a largely pro-reform private sector which could be skillfully deployed to provide political cover for policy changes. There is also abundant example of how reforms have been successfully implemented despite social opposition elsewhere.

President Jonathan’s performance can be judged on progress in five key areas: power industry liberalization, petroleum industry regulation/oil subsidy removal, infrastructure/ Public Private Partnerships, land and housing policy and civil service reforms. Salaries in the bloated and grossly inefficient bureaucracy and the wasteful oil subsidy together account for 57% of Nigeria’s budget.

While the Government is formally committed to reform, actual implementation reflects neither an understanding of investor sensibility nor the earnestness required to realize Nigeria’s economic ambitions. Structural factors have weighed on progress. The President’s party has little interest in economic policy; the National Assembly it dominates sometimes joins opposition groups to block reforms. Youth groups have greatly strengthened the entirely uninformed but virulent opposition of labour unions and Nigeria’s vibrant media to reform. They revel in their power to block reforms while lacking a strategy for change, gradual or revolutionary.

Yet, Government’s lack of a coherent strategy to drive reform and deficient political management of the reform process have been more important than structural constraints. The Government abruptly removed the petroleum subsidy in January after a lackluster public consultation. Elsewhere, governments have succeeded in boosting their popularity while eliminating subsidies. In Iran and India, subsidies are being replaced by direct cash payments to the poorest citizens.

 This requires a level of organizational competence that the Nigerian Government is not showing it is in a hurry to develop. It established an agency to reinvest funds saved by partial removal of the fuel subsidy only as an after-thought; this agency now seems more likely to reinforce the Government’s reputation for waste than win the confidence of the public. Bungling simpler reforms emboldens vested interests and their unwitting supporters in the media and the internet and makes it almost impossible to even contemplate more complex reforms such as public services restructuring.

The much-awaited Petroleum Industry Bill (PIB) that the Government has sent to parliament disheartens reformers as it preserves much-abused discretionary powers rather than promote transparency. It’s simply distressing that opposition parties and social groups that blocked the oil subsidy removal have kept totally quiet as the Government’s PIB seeks to preserve Nigeria’s biggest structure of corruption i.e. Government’s control of the national oil company.

Critical reforms have not been isolated from politics and politicians. Even the power sector reform which the President has pursued doggedly has been shocked by intrusions of personal agendas. This includes the swiftly reversed cancelation of the all-important management contract for Nigeria’s power transmission company and the unexplained sacking of the head of the Government privatization agency while the sale of state electricity firms is yet to be completed. Also, a new Minister of Power that is technically competent to coördinate sector reform and that can also strengthen reformers in the Federal Cabinet is yet to be appointed four months after the removal of the last incumbent. All this does not create the impression that deepening reforms and attracting investment is a priority for Nigeria.
Reforms demolish the structures of corruption (such as telecommunications, railway, power etc monopolies) even when corrupt practices (e.g. taking bribes to award licenses or contracts) may not diminish in the short term. Nigerians suffer doubly when the Government does not crack down on corrupt practices and is also slow or is impeded in carrying out structural economic reforms.

Today no powerful politician is in jail as a result of the anti-corruption crusade of former President Obasanjo but Nigerians are enjoying the benefits of telecommunications and financial sector reforms. Despite growing disenchantment with corruption, what the incoming Chinese Premier has promised to deliver is the “dividend of reforms” as rising labour cost erodes China’s “demographic dividend”. Clearly, what has worked for China are reforms rather than a ferocious EFCC.
Nigeria is much closer today to economic transformation than China was when the Communist Party decided to liberalize China’s economy. Nigeria’s People Democratic Party’s successes such as telecommunications and power sector reforms and Nigerians’ disillusionment with corruption and unemployment should serve as an impetus for President Jonathan to transform his party’s approach to policy execution. Buffoonish attacks on critics by spokesmen and purchasing votes can’t secure Nigeria’s survival even if they can keep the PDP in power.

The most critical requirement is a core economic team of about 5 Ministers to replace the unwieldy business lobby currently in place. It will accelerate reforms by driving actual policy execution on behalf of the President rather than merely advising. It will ensure consistently high-quality decisions in reform-critical areas, including the administration of Public Private Partnerships (PPPs) and other key contracts, across Ministries. The core economic team, which itself needs to be checked by a well-publicized code of ethics, will provide political backing for and make the Coordinating Minister for the Economy more effective.  Everyone must know that you can’t obstruct this team and survive.

Ministers now do whatever they like regardless of the Government’s commitment to a private sector-led development strategy. The Federal Government funds a regulatory agency for infrastructure PPPs but it strangely has remained unperturbed as Ministers concentrate on cancelling rather than packaging infrastructure PPPs. Reinforced political management of reforms in Nigeria will greatly expand opportunities for investment and create the confidence to actually invest.

It is crucial for President Jonathan’s political fortunes and legacy. There will always be room to reward political Godfathers and foot soldiers outside the firewall built around key reform processes and institutions. They have nothing to lose while Nigeria has a world to gain.

*Dr. Agboluaje is a Visiting Member of the Editorial Board of the Guardian and contributes this article to YNaija based on a presentation to UK foreign direct investment professionals

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