BY Kingsley Moghalu
The 2015 presidential election that Gen. Muhammadu Buhari (rtd) won has demonstrated that Nigeria can bounce back and go beyond merely reclaiming its perpetual promise to actually realising it. But how? The answer lies in addressing three foundational questions and three paradigm shifts. This is the task before Buhari. It calls for putting leadership well above the politics with which leadership is often wrongly confused in Nigeria.
Three fundamental questions need to be addressed. The first is the question of how federalism is practised and the matter of the restructuring of the federation. A perceived excessive concentration of power in Abuja prevents greater transparency and accountability for the management of economic resources being brought closer to the people through sub-national units. This problem is exacerbated by the country’s large size and population, but also by the questions of leadership ability and capacity that have historically challenged Nigeria since independence. And so the question becomes: between structure and leadership, which is the bigger problem? I believe in the unity and continued existence of Nigeria as a corporate entity, but believe also that both problems of structure and leadership have contributed to this country’s economic challenges.
Second is the tension between political influence and rational economic management. Some politicians resent and resist “technocrats” in economic management positions in the executive branch of government, especially in the fiscal function (the Federal Ministry of Finance) and the monetary function (the Central Bank of Nigeria). One of the ultimate tests of leadership in the Nigerian environment is that of (a) whether or not a president himself and his political party have a clear economic philosophy and vision; (b) the calibre and competence of the persons appointed to formulate and execute economic policy; and (c) importantly, what level of authority they have and the extent to which these economic managers are insulated or not from political pressures and from vested interests that have political influence over the political superiors of these technocrats. This is perhaps the nexus at which the economic future of Nigeria will be determined.
The third question is that of the tension between spending and saving. Here, we have seen the deleterious impact of a combination of the oil price crash and a lack of significant savings, symbolised by the rapid and near complete draw-down of the Excess Crude Account on the country’s fiscal position, the external reserves, and on the value of the naira. It is imperative that any natural resource-based economy must have a mechanism to hedge on the price of its products to protect itself from price volatility in the global markets (as oil-producing Mexico does) and have a robust savings fund that will enable it respond to price shocks, while working assiduously towards diversifying its economic base within a clear time frame. And there is no alternative to reducing Nigeria’s huge costs of governance.
Regarding the longer term requirements for economic and socio-political transformation, Nigeria must execute three paradigm shifts. The first paradigm shift is not purely economic but social, political and psychological, and that is the need to manufacture the consent of Nigerians about their nationhood, a worldview for the Nigerian nation and the value system that will underpin it as well as the country’s economic philosophy. Critical to achieving this is the positioning of men and women who will craft and drive Nigeria’s worldview. This requires strong, purposeful leadership, for the manufacture of consent is what creates fertile ground for economic transformation.
When citizens understand and agree with the national vision and the economic philosophy, it becomes easier to mobilise and organise their productive energy in a purposeful uniform direction. But it requires skilled management, effective strategic communication (call it propaganda if you will) and a thoroughly revamped educational curriculum that emphasises history (which has been dropped from the curriculum of most Nigerian secondary schools), mathematics and the sciences, and technical skills and technology. The artful manufacture of consent is what made the United States a world power.
The second paradigm shift is an economic one, and that is economic complexity. This is a wider and deeper concept than the simplified prognosis that “we need to diversify our economy”. Economic complexity is the idea that truly transformative economic growth is based on the development of complex products and differentiated exports, and not on the basis of comparative advantage such as natural resources.
This is why factor endowments such as land, labour, minerals and large populations do not necessarily create wealth. Japan, South Korea, Singapore, South Korea and Switzerland are wealthy not because they have raw materials or large populations (the latter two countries each has less than 10 million people) but because their economies are based on the principle of economic complexity. And this is why, despite being the world’s most mineral-endowed continent, Africa has remained the poorest. The economic secret of the wealth of nations is to invest in manufacturing products that have value and insight embedded in them, and to make such products in a competitive manner, not just in terms of content, but also in terms of cost and specialisation. This is what creates structural transformation. The Aliko Dangote Group’s 650,000 barrels a day petroleum refinery in Lagos, scheduled to commence in 2018, combined with the innovative local vehicle manufacturing by Innoson Motors in Nnewi, are Nigeria’s first real steps towards endogenous economic complexity.
This paradigm shift requires several factors to succeed. The many factors that need to come together include major changes in policy making approaches, including subjecting industrial policy to a test of whether firms within the ecosystem collaborate on the basis of a value-chain approach, and massive investments in human capital formation, knowledge, and innovation. Government policy must also proactively establish and coordinate incentives that promote investment in new areas of opportunity for complex manufacturing, overriding the temptation businesses naturally feel to remain in the comfort zone of comparative advantage and factor endowments. As the Harvard University professors Ricardo Hausmann and Dani Rodrik have argued, “unless purposeful action is taken to move towards new activities, countries may not be able to overcome the market failures that affect the process of structural transformation”.
The macroeconomic factor of Nigeria’s currency exchange rate also matters because this affects the productivity cost of inputs for local exporters and foreign investors. It is only when an economy becomes productive based on complexity that the exchange rate can become a tool for real economic growth beyond a limited role in financial stability and inflation management.
The third paradigm shift is in the area of institutions. We have made some progress but not enough. The Independent National Electoral Commission should be funded more independently. Nigeria’s judiciary, the armed forces and the country’s central bank are critical institutions of state that must be truly independent for Nigeria’s promise to be realised.
The conundrum of whether strong institutions matter more than strong men or women is a false one. Especially in a developing country such as ours, littered with immature institutions and powerful vested interests, the personality and character (which in turn influences their ability to be independent and objective or not) of individuals who head certain institutions matters just as much as their professional competence. Some institutions have in reality become fiefdoms for cabals and tools for sub-optimal agendas, with these cabals taking “turns” to control these institutions depending on which group has access to the reigning political authority of the day. Professionalised institutional independence and growth is thus rendered impossible.
These institutions ought to survive transient administrations and carry the state on their shoulders. The real question, then, is whether they have the vision and authority to make progress, for which politicians can conveniently take the credit, or whether they are weak, static or subverted by unnecessary and ultimately self-defeating external interference.
The 2015 elections were the first time since the return to democratic rule in 1999 that the country has witnessed a democratic power shift from a dominant ruling party to an opposition party that trumped it at the ballot box. This should mark the beginning of our adulthood as a country. Let there be from now on, in the words of the Economist magazine’s motto when it was founded in 1843, “a severe contest between intelligence, which presses forward, and an unworthy timid ignorance obstructing our progress”.
• Moghalu, former Deputy Governor of the Central Bank of Nigeria, is Professor of Practice in International Business and Public Policy at Tufts University’s Fletcher School of Law and Diplomacy, USA