Peering into the blackbox: economic management in Nigeria post-May 2015 – By Abimbola Agboluaje
The outcome of Nigeria’s March 28 2015 polls has significant consequences for Africa’s largest economy. The pace and quality of economic reforms, never sterling, have become patently mediocre under President Goodluck Jonathan. Pervasive perception of the government’s incompetence and corruption has fed widespread disaffection. With the fall in international oil prices through which the country earns 95% of its foreign exchange and 70% of its revenues, the state’s capability to support consumption and growth is severely curtailed. More than ever, Nigeria needs to initiate and credibly implement economic and institutional reforms that will attract a scale of investment and unlock the quantum of growth sufficient to establish it as a diversified middle income economy. This will have salubrious political effect as Nigeria’s economic policy weaknesses are closely related to the incapacities that threaten the Nigerian state.
Bye-Bye to Goodluck?
The most credible opinion polls have either projected an election too close to call (e.g. ANAP Foundation’s) or clear victory for General Mohammadu Buhari, candidate of the opposition All Progressive Congress (Eurasia’s). A Buhari win is potentially better for reforms and growth in Nigeria. The Jonathan administration will be unable to muster the institutional energy, discipline and coherence required to implement critical but controversial reforms (such as trimming and paying the civil service better). Intensified political opposition to a re-elected Jonathan administration will transform the credibility gap it suffers to near illegitimacy, further rendering it unable to overcome the social opposition to reforms (which it has often managed in a shambolic manner).
Nonetheless, it cannot be taken for granted that a Buhari Government automatically will launch Nigeria on the path of economic, institutional and political reforms. The All Progress Congress (APC) has not shared any coherent economic policy plan that would enable Nigerians and investors to predict the direction of economic policy after a likely APC victory on March 28. Predictions have to be based on an analysis of Nigeria’s political economy, especially historic and recent patterns of interactions between ethnic identity politics and economic policy.
Nigeria’s politics have bred poverty, waste and corruption principally because of poor policy choices that have favoured consumption over investment and ineffective state interventions over market provision. Nigerian political elites have been able to continue with these ruinous policy choices because of the absence of strong pro-reform domestic constituencies and modes of political mobilization centered on ethnic and religious identities rather than economic interests. The politics of the 2015 elections have not been different. Supporters’ (as well as some analysts’) expectations of improved governance and economic performance under Buhari rest exclusively on his (personal) probity. This emphasis on personal character is superficial given the fact that most consequential forms of corruption and Nigeria’s persistent failure to fulfill its economic potential have been rooted in poor policy and institutional choices. General Buhari’s ability to turn Nigeria around should be judged more on the possibility of decisively altering the course of policy.
The Eurasia Group Nigerian elections report notes a “vast policy gap” between the “pro-business” and “pro-liberalisation” southwestern wing of the APC and the more “statist and nationalist orientation” of the northern politicians around General Buhari and predicts that “the ascendant” south-westerners will dominate economic policy in an APC Federal Government. The Eurasia report underestimates the significance of fact that social policies such as conditional cash transfers, rooted in Awoist “progressive” Yoruba politics, constitute the central economic platform of the APC manifesto.
The lack of attention to urgent investment-stimulating and jobs-creating reforms is as worrying as the macroeconomic threat social welfarism poses in a world of half-price oil. The welfarist policies are likely to be partly pursued despite their onerous costs. They are partly principled beliefs and partly an electoral policy (rather than a coherent or sustainable development strategy) for Awoist political parties.
The Princeton economic historian Atul Kohli wrote of the Action Group’s universal education policies of the post-independence period “scarce resources were thus utilized ineffectively, mainly to satisfy the short-term political needs of the emerging leadership” – (Action Group’s welfarism was much more affordable as the cocoa export earnings of the Western Region, was four and seven times the earnings of the Eastern and Northern regions respectively). The utter silence over the frittering of about $ 5 billion of Nigeria’s foreign exchange reserves in futile defense of the Naira seems another evidence of the APC’s lack of policy capacity and/or the distance between its economic advisers and the more influential politicians.
The “˜pro-business’ orientation of the dominant southwestern wing of the APC appears completely virtuous only when compared to the party’s Northern wing. The Peoples’ Democratic Party also isn’t anti-business but has been far from a consistent promoter of free or transparent markets. The “˜pro-business’ orientation is most clearly expressed as a procurement system which has also been a means to finance the party and for its leaders to dominate regional politics. This is also much in keeping with the Awoist tradition. This system somewhat benefits from more effective central control in APC Lagos than PDP Abuja. The way it is adapted to function at the federal level has substantial implications for infrastructure procurement, including through public-private partnerships and strategies to expand or create key industries. Will APC economic strategy aim to attract investments from international capital or will it favour indigenous crony capitalists? What will happen to policies such as the nepotism-riddled “land allocation” system and import waivers which largely have bled the treasury and failed to expand industries and create jobs?
There will be actors on both wings of the APC who will promote corruption-prone industrial policy and subsidies, falsely arguing that under General Buhari, the Government will have the discipline to implement them productively. As a military ruler, General Buhari’s instincts were clearly statist; his total lack of interest in and understanding of the economy has shone through four presidential campaigns. He will be far from being a competent umpire of squabbles over economic policy in the cabinet. Advocates of statist interventions and subsidies are likely to be more successful in getting General Buhari to back them. The position of would-be reformers already is weakened, but not fatally or conclusively, because the party has not committed itself to or stated its positions on crucial economic policy issues during the campaign. One of the early signs of whether a Buhari Government will represent inter-elite distributional politics as usual would be if it appoints the “constitutional” 36-person Federal Cabinet.
A new kind of coalition
The rollback of reforms under former President Yaradua was presaged by an extraordinary declaration by its powerful secretary Baba-Gana Kingibe that “reforms are dead”. This was widely interpreted as an ethnic reaction against reforms under former President Obasanjo that had seen Northerners excluded in the acquisition of valuable state assets and licenses. But it seems more plausible that Yaradua’s advisers merely aligned to his ideological proclivities. He had been an avid Marxist in his lecturing days and later member of the socialist Peoples’ Redemption Party. Aliyu Dangote, a Northerner whose business had been boosted by the Obasanjo Government’s patronage, was one of the major beneficiaries of the oil refineries sale that became the first targets of Yaradua’s strike against reforms.
While Buhari certainly isn’t an advocate of the free-market, he is unlikely to burden his Government with Marxist baggage like Yaradua. He will lack the political capacity to carve out a Northern anti-reform “kitchen cabinet”. A Buhari-led APC Government will have unique features for a Nigerian Federal Government which will confer more advantages than liabilities. Historically, successful Federal parties have been founded, crafted or controlled by politically dominant conservative Northerners who co-opted bigwigs from other regions to help them secure enough votes to win federal elections. The only common purpose of these coalitions was to win power and keep it by sharing government positions and associated material resources as fairly as possible. Ruling party coalitions were not only unable to develop an economic strategy or development vision, they also lacked the capacity to execute policy no matter how poorly defined.
No doubt, power rather than policy solutions to Nigeria’s myriad economic and social problems have also been the primary preoccupation of APC coalition building. And the pursuit of wealth will continue to be a significant part of Nigeria’s political culture under an APC Government (General Buhari’s aides accused accomplished policy wonks who joined his 2011 campaign of wanting to hijack the Buhari brand they had been nurturing after “˜chopping’ in the PDP). But an APC Federal Government will be politically resilient and have the confidence and capacity to implement those reforms it chooses to initiate. It will enjoy the support of the politically powerful North, opposition from whom diminished considerably the political capital President Jonathan (would have) required to pursue reforms consistently. The APC’s southwestern bulwark and the region’s vigorous media will complement the Government’s northern support. Key political appointees will be less of overly independent ethnic power brokers or nominees of regional godfathers rewarded for participating in a successful electoral coalition and more of party people anchored in defined authority structures and hence more easily marshaled to execute policy.
General Buhari will not be an all-powerful president (like President Obasanjo) or be compelled to disruptively subdue opposition within the party (like President Jonathan). The influence the leaders of the southwestern wing of the APC will seek to exert on the Buhari Government will be overt, legitimate and institutional as opposed to the hold President Obasanjo unrealistically sought singly to exercise on successive regimes from his Otta farm. Policy decisions under an APC Federal Government is thus unlikely to be subjected to the whims of the President (or that of individual free-agent ministers) and will thus be more sustainable. Squabbles within the ruling party, often ethnic-centered, though highly detrimental to the definition and implementation of economic policy, have been over power rather than policy itself.
Nigeria is likely to get a breather from power squabbles at least for four years should the APC win the elections. The personal relationships forged as well as the understandings reached during four years of negotiating a (failed and then successful) merger will be useful in averting disagreements (over the gains of power) strong enough to fracture the APC into its ethnic constituents. It would greatly help to formulate a semi-formal system of procurement, especially of private investment and operation of public infrastructure, which meets the expectations of both APC wings and deepens Nigerian capitalism while not overburdening the populace. Such must also be clean enough to attract international capital. President Jonathan’s power sector privatization has fallen short of many of these criteria.
There will also be the question of what a Buhari government has to deliver for the Northern talakawa that constitute his core political base and also Nigeria’s poorest citizens. Any sustainable improvement to their plight will come through leaps in the quality of basic education, healthcare and agricultural extension services and security, stuff that can only be delivered through steady improvement in state capacities rather than a splurge on infrastructure or cash transfers.
The APC has touted General Buhari’s incorruptibility rather than advance a clear economic strategy and agenda for institutional reform. If it wins the March 28 elections, it will enjoy a short honeymoon within which it quickly needs to establish its reform credentials before investors and a reputation for competence and trustworthiness before Nigerians. This has to substantially supplant its welfarist plans. It could succeed if it exploits its political heft in appointing competent professionals (who can be found amongst people close to both the Buhari and the southwestern wings of the party) rather that reward regional political bigwigs with ministerial and other important appointments.
This will be the decisive test of General Buhari’s incorruptibility. His Government needs to quickly package key reforms and clearly explain to Nigerians why they are critical to the goal of changing Nigeria from a corrupt and poverty-ridden country into a fairer and progressively richer society with a more competent and honest government. To have any chance of fulfilling even some of the aspirations of its teeming supporters, he must first and quickly let down the party men of various ranks who will be angling for gains of Nigerian politics as usual.
Dr. Agboluaje is a Lagos-based strategic communications and policy consultant.