By Kingsley Moghalu

It is a given that the incoming Federal Government of Nigeria will have to decisively tackle the macroeconomic challenges of a fraudulent and wasteful petrol subsidy regime; our debt, revenue and resource allocation crisis; and a broken foreign exchange regime, in order to get our economy back on track.

Nigeria cannot become a wealthy, prosperous country without first becoming a nation with a shared sense of national identity and unity of purpose, even in our diversity. Development begins in the mind. When people agree on a common goal of prosperity, based on an inclusive sense of national identity, shared values, justice and equality before the law, they can collectively put their shoulders to the wheel and push in unison. This characteristic, sometimes described as “social cohesion”, can have a transformative impact in terms of productivity. Because our country has been fractured along ethnic and religious lines of primordial identity, our politics reflects this fractionalisation. Electoral outcomes create “Governments of Nigeria” that frequently (mis)manage the economy, not for purposes of real wealth creation, but for that of advancing group vested interests of class, ethnicity, religion, or partisan political affiliation. In essence, then, what passes for economic management has become mostly a “rewards” system for chosen cronies of multiple hues. A national economy managed in this manner, rather than on the basis of technocratic competence, cannot create the wealth of nations.

Moreover, the matter of constitutional reform back to real federalism has foundational implications for Nigeria’s chances at economic prosperity. The recent constitutional amendments signed into law by President Muhammadu Buhari, including giving states powers over electricity generation,  transmission and distribution, as well as to establish railway services, are a pointer to the potentially positive impact on our economy of an even more foundational constitutional restructuring of Nigeria. Such restructuring will also address questions of nationhood, equity and justice, creating a more durable foundation for development.

Political will to embark on necessary reforms to reverse state capture by vested interests requires the self-confidence and courage of elected political leaders. While it might be assumed that such political will can only come from a political leadership that emerges from “outside the system”, there is nothing that decrees — especially given the existential crisis of the Nigerian state and its economy — that it cannot exist, even if imperfectly, in a leadership that has emerged from “within”. Whatever its provenance, such political will depends largely on the decisiveness of an elected political leader, and is essential for our national economic progress because of the challenge of state capture.

Perhaps the most tricky problem of economic policymaking in Nigeria is that of knowledge gaps. I use the word “tricky” advisedly, and based on both insight and experience. Most Nigerian political leaders have university degrees and Nigeria has thousands of brilliant economists, yet we have a suboptimal economy. This reality is due not just to the two big issues of a weak sense of nationhood and absent political will, but just as important, a frequent lack of fundamental understanding of economics and its relationship with the other social sciences, law, and technology to create a productive economy.

The first problem is that, even within the economics profession itself, there often is an emphasis on the technical and the mathematical, with little appreciation and application of a sound knowledge of economic philosophy and political economy as the necessary foundations of economic development and wealth creation. All successful economies are based on some sort of philosophical foundation or the other. The internal dynamics – and sometimes contradictions – of these philosophical leanings matter for economic policy, as do their differences. This, then, requires a certain amount of intellectual interrogation, a level of comfort with ideas and concepts, and their application to everyday economic policy challenges. Alas, this is only too rarely a habit of economic policymaking in Nigeria.

Let me illustrate this: Most Nigerians today believe in profit-oriented, market activity. We are dynamic and entrepreneurial. We are therefore mainly capitalist in persuasion, at least to varying degrees. But, you see, capitalism is a philosophy. If we fail to understand this, as we often do, we will copy capitalist societies who understand this, and then fail to create wealth for 200 million Nigerians the way these societies have done for their citizens. The wealth of a few and the poverty of many are the natural outcomes, because we are “doing” but without first thinking deeply. According to the Nigerian Deposit Insurance Corporation (NDIC), 99.4% of Nigerians who are banked have less than N500,000 in their bank accounts. From this we can see why, for the average Nigerian, an “alat” hitting his or her “acant” is a truly big deal.

In order for capitalism to create wealth, we must come to a clear, pragmatic understanding of the right balance between the state and the marketplace (this leans too much in favour of the state in Nigeria, thus distorting the economy), the essential bedrocks of successful capitalist economies (strong property rights as opposed to state ownership of land, an important factor of economic production, under the Land Use Act, an innovation-driven economy, and capital), as well as the four kinds of capitalism – entrepreneurial capitalism that is dominant in the United States, welfare capitalism that is practised in Europe, crony capitalism that is dominant in Russia and Nigeria, and “state capitalism”, an unlikely but functioning oxymoron that has been invented and practised in China over the past 40 years.

Another example: We are fixated on economic GDP growth. “The Nigerian Economy Will Grow by X % in 2023” is a frequent headline of economic news. But we have taken our eyes off the ball: Such growth must be inclusive. To be precise, this means it must be broad-based across sectors and anchored on a steadily increasing productivity of labour.

This misunderstanding takes us away from a more important focus on overcoming poverty with skilled human capital, jobs, and increasing GDP per capita. Nigeria’s GDP per capita is $2,000, and its average between 1960 and 2021 was $1,867.70. Comparisons with Malaysia, Indonesia, Thailand, Brazil and South Korea will make you weep, and I don’t want you to cry. Our economic policymaking, going forward, must understand the distinctions and the three stage-linkages between human development (literacy, water, health, skilled human capital), economic growth, and structural economic transformation. Economic growth without real human development is not just unsustainable. It will not be able to yield structural economic transformation. The latter means a shift from subsistence agriculture, commodities and mineral resources as a share of the GDP, to value-added manufacturing and export as an increasing part of GDP. This cannot happen without “productive knowledge” (PK), or skills. This means that educational system reform must become the number one priority for our medium/long term economic progress.

We were once tipsy with the “Africa Rising” myth, when the continent had not yet become an industrially productive economic powerhouse, with a significant share of world trade (only 3% today) and foreign direct investment (5%). Ten years ago, I argued in my book Emerging Africa: How the Global Economy’s ‘Last Frontier’ Can Prosper and Matter against the conventional wisdom that Africa was rising. The continent, I asserted, was simply emerging from the shadows, and setting out an agenda for its possible rise. “Rising” was more accurately applicable to Rising Asia – China, India, Malaysia, Thailand, Vietnam, etc. Looking back now, I take no pleasure in having been proved right.

I would recommend two (in my view) critical executive education programmes for political leaders and economic managers in Nigeria (federal and state levels). The first is “Leading Economic Growth”, taught at Harvard Kennedy School by Professor Ricardo Haussmann and his colleagues. This course provides important knowledge and perspective on how to actually diversify an economy and achieve “economic complexity”. The second is “Macroeconomic and Financial Sector Management”, taught at the International Monetary Fund (IMF) Institute.
And then we have the matter of institutions. Without strong, independent institutions to uphold accountability and the Rule of Law, and to regulate the economy to create a level playing field for market players, a national economy cannot prosper. Institutions need to be independent, precisely so that they can work for the citizens and the economy broadly, and not for cabals or for partisan political interests. Where the latter is the case, the economy suffers because it weakens investor confidence, reduces both foreign and local investment, and promotes capital flight. But the truth is that institutions also cannot be strong, especially in an economy such as ours, without strong, competent individuals leading them.

These are the big issues as I see them, along with the immediate crisis of the petrol subsidy, irresponsible and untransparent borrowing, and a dysfunctional forex regime, all of which need to end as soon as possible, in order to stop the economic bleeding of our country. Alongside these reforms, however, we must also engage the heavy lifts – the even bigger work that must also proceed apace – of national consensus building and constitutional reform for greater national stability and prosperity. Nigeria can be the next China – on its own terms. The foundation can be laid over the next four years.

Kingsley Moghalu, a former Deputy Governor of the Central Bank of Nigeria, is the CEO of Sogato Strategies LLC, a global investment advisory firm, and President of the Institute for Governance and Economic Transformation (IGET), a public policy think tank.