Building Nigeria is a joint project. This was evident at Tuesday’s convening at the Shehu Musa Yar’adua Centre in Abuja, where key figures in Nigeria’s policy space gathered to witness the launch of Dr Zainab Usman’s book titled “Economic Diversification in Nigeria: The Politics of Building a Post-Oil Economy”.
Diagnosing Nigeria’s slow-growth economy and its over-reliance on crude oil over the years, the book makes a compelling argument as to why, unlike other states with similar socioeconomic prospects, Nigeria has failed to transition into a developmental nation.
Specifically, the author argues that the failure of successive governments to implement long-term economic planning and diversify Nigeria’s economy is explainable by the political economy concept of Political Settlement (an agreement by which powerful groups, organisations and individuals in a society set the political and economic rules that maintain the peace among competing groups, thereby ensuring stability and a balanced distribution of benefits).
The key point here is that the type of political settlement that Nigeria operates prevents policy continuity and the institutionalisation of reforms that allow for long-term economic planning and growth. Unlike what is seen elsewhere —as in the much-cited East Asian Tigers or Africa’s developmental state poster child, Botswana — the unstable political arrangement in Nigeria prevents the possibility of an elite-led positive state-society relations.
Such ‘national consensus’ should foster a shared vision that facilitates painstaking long-term institutional reforms, diversification, and resultantly, economic growth. Rather, as in a classic political settlement scenario, Nigeria’s focus has been on crisis management and keeping the peace among rival political actors. According to the author, this creates unstable “coalitions that do not allow for smooth [policy] transitions across governments” (p.212)
In her 1-hour summarisation of the book, Usman outlines her central thesis in 8 key logics. First, she makes the case that the classic ‘resource curse’ theory which has been used to explain the paradoxical coexistence of poor economic growth and natural resource endowment in many African states does not adequately capture Nigeria’s realities. Rather, as explained above, she deploys an alternative analytical lens to view Nigeria’s economic challenges.
With her second point, she begins probing how this happens in the form of a focus on short-term, low-hanging fruit reforms such as macroeconomic stability and tax reforms, and the lack of long-term structural reforms such as civil service reforms, institutional and governance reforms, and agricultural sector reforms.
Third, Usman re-emphasizes that, in this situation, reforms have largely concentrated on the management of crises rather than structural economic diversification. This is easily seen in the Nigerian government’s increasing reliance on oil for its revenues
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Fourth, and ironically, despite the government’s long-term reliance on the sector, oil revenues have continually recorded negative growth over the years. As a result, Nigeria’s post-2000 policy reforms have expanded non-oil sources of growth, leading to other sectors such as agriculture overtaking the oil sector in terms of value addition to GDP.
Fifth, regardless, these changes have not diversified Nigeria’s exports or fiscal revenues — as oil still constitutes about 95 percent of the country’s FX earnings and 80 percent of its budgetary revenues.
Sixth, this dependence on oil revenues is more acute at the sub-national level, as seen in the heavy reliance of Nigeria’s 36 states on monthly allocation from the FG, with such allocations accounting for about 70% of most states’ revenue, and only about two to three states having a healthy IGR profile.
Seventh, to juxtapose a successful political settlement and a failed one, Usman zooms in on two states that could arguably be referred to as Nigeria’s commercial centres — Lagos and Kano. While Lagos on one hand is an exemplar of economic diversification and reforms brought about by the ability of its ruling elites to build “a political coalition to coordinate the state’s advantageous factor endowments” (p.17), Kano on the other represents Nigeria’s failed agro-industrialisation project, brought about by the failure of its political elites to build a pro-growth coalition.
Finally, Usman concludes that while Nigeria is neither a failed nor a developmental state, it could be more accurately described as an ‘intermediate state’. She closes her presentation with two addendums: one, that the global low-carbon transition and the growing importance of other natural resources will further reduce the demand for oil, and two, that an increasingly illiberal international trade environment could further affect Nigeria’s economic prospects.
Yet, as with most social science submissions, a few points may have been inadequately addressed in the book: an example is the much-discussed impact of neoliberal structural adjustment of the 80s, which according to the famous African economist, Mkandawire, was what actually put African countries on a “low-growth path”.
A known fact about the much-referenced East Asian tigers is that they all developed on the back of extensive state interventionism and the protection of infant industries, not with the help of liberalisation. Were Nigeria not subject to the 1980 liberalisation reforms which required it to open up more to import trade, would it have been forced to develop its infant industries, maintaining its growth levels — evidenced by the 1970s representing one of the highest GDP growth periods in Nigeria’s history? Admittedly though, the book briefly touches on this, highlighting the positive impact of liberalisation on the oil and banking sectors in the 80s, and stating its negative effect on the economic condition in Nigeria’s northern states (p.89). The author also briefly addresses liberalisation in the sub-national context, with reference to the crevice between pro-protectionism stakeholders and liberal trade supporters in Kano preventing the socioeconomic development the state seeks. However, the impact of neoliberal structural adjustments on Nigeria’s growth stagnation post-1980s was not sufficiently accounted for.
Could protectionist policies be better for Nigeria now — amidst the gradual collapse of the current neoliberal economic order, and given that numerous examples abound of the East Asian Tigers’s success with protectionism?
Perhaps, adequately discussing the impact confounding variables on this subject could have taken what is already an excellent work to an irrefutable proposition.
Another point is whether high heterogeneity might have made it difficult or nearly impossible to achieve a positive political settlement in Nigeria. Again, perhaps the highly homogenous nature of countries like Botswana, Hong Kong, South Korea, and Taiwan made it easier for them to convene differing socio-political and cultural groups along one vision. Of course, one could easily cite Indonesia as a counterargument here: it is one of the most heterogeneous countries on earth, yet has been able to achieve a level of economic growth and poverty reduction Nigeria still dreams of. However, Indonesia also faced high regional development disparity issues, until its recent regional autonomy reforms.
The key reflection here is whether restructuring the current federal governance system — which breeds over-reliance on the central government — into a confederation or more culturally cohesive self-governing regions might be more beneficial to achieve this positive political settlement the author speaks of.
A final point is whether the nature of Nigeria’s mineral resources itself might be a stronger explanatory variable here. The depleting value of oil over the years lends credence to this argument. The author cited Botswana as an example of an African country with such ideal political configuration with long term economic planning and positive political buy-in, yet might this be because diamonds, as we know it, increases in value over time, while oil prices are often on a fall?
For instance, immediately after Botswana’s independence, diamond mining constituted less than 8 percent of government revenues, but, by 2009, these figures had increased to 75 percent of export earnings and 50 percent of government revenues. Yet, in those 40 years, Botswana’s industrial sector had only grown at a maximum of 4 percent of the total annual GDP growth. Like the renowned economic historian, Ellen Hillbom, asked about Botswana, is this diamond or development?
In fact, the reference to the existence of a long-term institutional reform in Botswana may have been limited to its mining sector. As Hillbom notes, the Botswana Meat Commission (another natural resource sector) has been mostly controlled by large producers and other elites who disproportionately benefit from the commission’s profits, at the expense of their smallholder counterparts. Relatedly, according to the UNDP (2021), Botswana is among the top 10 countries with the highest income inequality in the world, with a GINI coefficient of 0.53 (a .5 GINI coefficient reflects acute income inequality) — much higher than Nigeria with a GINI index score of 0.35. Botswana is described by Hillbom as, at best, a ‘Gatekeeping State’. Perhaps, its success is mostly attributable to the nature of diamond constantly increasing in value, and not necessarily enviable institutional/political formations that Nigeria could emulate?
Noteworthily though, these counter arguments are presumptive postulations which may or not hold true in the face of further rigorous analysis. Overall however, the author presents a compelling narrative to substantiate her position and provide nuance on Nigeria’s oil discourse beyond the usual explanations of neopatrimonialism and oil curse.
With reference to Tuesday’s event, the book’s accounts offered a converging point for policymakers and government officials present to discuss their own experiential understanding of Nigeria’s economic development journey over the years. Indeed, this is a manuscript for understanding Nigeria’s long standing socioeconomic challenges.
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