Nigeria’s development: From transactional to developmental governance

Prof. Sheriffdeen Tella (Lecturer, Department of Economics, Olabisi Onabanjo University) and David Adonri (Chief Executive Officer, High Cap Securities Limited)

Another year passed without fanfare, but with another promise of a better tomorrow and renewed hope. President Bola Tinubu promised that economic reforms are over and economic prosperity should be the next stage. Hopefully, another external shock will not take us back to the drawing board. The PUNCH, on its front page of the October 1 edition, presented the eight priority areas of the present administration’s Renewed Hope Agenda, while the back page contains some results of the policy implementations.

The priority areas of the agenda are reform of the economy to deliver sustained inclusive growth; strengthen national security for peace and prosperity; boost agriculture to achieve food security; unlock energy and natural resources for sustainable development; enhance infrastructure and transportation as enablers of growth; focus on education, health and social investment as essential pillars of development; accelerated diversification through industrialisation, digitisation, creative arts, manufacturing and innovation; and improved governance for effective service delivery.

The government reported some achievements in the last three years to include highest level of external reserves of US$55bn, growth of non-oil sector by some 21 per cent, availability of 120,000 CNG vehicles and over 2,700 kilometre of roads constructed, almost 14,000 bandits neutralised and almost 10,000 hostages freed; power generation peaked at 5,000 MW (lower than some periods during Muhammadu Buhari); many mineral resources processing plants installed; introduction of NELFUND with disbursement of over N355bn; improvement in economic diversification and landmark achievement in governance including autonomy for local government financially.

The fact is that the Nigerian middle class and the poor are worse off in terms of living standards, with ravaging inflation, growing unemployment, restricted money in circulation, falling life expectancy, rising number of out-of-school children, and growing statistics on poverty level. This is because the country lacks a well-laid-out national plan with a growth trajectory and timeline; budgets are not implemented as and when due, and external debt is rising, with debt servicing and repayment taking money away from development and budget implementation.

Economic policies have been transactional, and the need to shift to developmental governance has become imperative if the stability the president envisaged is to ease hardship in the living conditions of the middle class and the poor, with the ultimate goal of sustainable development. By transactional governance, I mean a situation in which the government throws governance to market forces, almost standing aloof, trying to minimise friction and exhibiting opportunistic behaviour by seeking the best of the economy to run the government.

Such a government believes in some short-term gains by looking for soft chances to get revenue to run its affairs instead of working hard to promote production and productivity that will lead to higher output, generate employment and income or revenue therefrom. The government encourages the private sector, whose business is profit maximisation and cost minimisation, to scheme the people, make profit, and pay huge taxes to the government.

That seems to be what we have been doing. How can a government leave energy prices to continue to respond to market forces in an economy where prices are sticky downward?

Energy prices affect production, transportation, and the distribution of goods, as well as everyday life, particularly in an economy without efficient and effective electricity.

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A developmental state, or developmental governance, is a state-led or collaborative process of managing public and economic affairs to actively promote long-term economic growth, social progress, and poverty reduction. It focuses on a proactive, goal-oriented approach to improve human welfare and deliberately bridge the gap between the rich and the poor. Goal-oriented in the sense that it prioritises measurable outcomes: infrastructure, job creation, better healthcare, and quality education over and above macroeconomic issues of growing external reserves. The focus is on fixing market failures, encouraging technology use and efficiently allocating resources.

In terms of multi-stakeholder collaboration, the government works with the private sector, the non-governmental organisations and the civil society to produce goods and services rather than working alone or leaving the market to do the job. In addition, the government aims to distribute wealth fairly and uplift marginalised or deprived groups rather than focusing on satisfying the political class.

Over a decade ago, the World Bank launched the concept of developmental governance as involving commitment, coordination, and cooperation. Developmental governance is bigger than good governance because it is more all-inclusive. It is a situation in which no one is left behind in the development trajectory. Even the poor are seen as contributors to the development of the economy and are thus helped to get involved. As elections approach, the government will be seen introducing short-term palliatives and consumption-enhancement packages instead of production and productivity incentive programmes that are long-lasting, durable, and employment-generating.

Governments everywhere intervene in their economies directly or through enforceable policies. There is always something to learn from Chief Obafemi Awolowo’s economic policies in the Western region of the past. The agricultural policy of establishing agricultural settlements and backing these up with cooperative banks and other financial architecture remains relevant for state governments, which should be the anchor for agricultural production and processing. The modification will be the addition of small- and medium-scale industries based on the agricultural production in the area, initially financed by the government and later sold to the public in the spirit of the Dangote business model.

Nigeria cannot continue to postpone industrialisation because that is the fastest route to reducing unemployment and generating the desired revenue. Lagos State, the most industrialised State in Nigeria, has the highest level of employment and IGR. Ogun is following because of the spillover of industrial development from Lagos. The federal and State governments must of necessity, take industrialisation seriously in economic planning. Actually, the federal and state governments need to learn or adopt the Dangote business model.

The Federal Government can start capital-intensive businesses where individuals might find it difficult to take the risk or do not have the capital outlay. This is different from using the Bank of Industry to finance business, but it is direct intervention. Once the business becomes functional, shares are sold to the public, and the initial committed funds are partly recovered and used to fund new projects. The same goes for the states, particularly those that are not in a position to attract industries from the private sector. The modification to the Dangote model is that the government does not need to have a controlling share so that the business retains the name of the state, like Dangote Cement or Dangote Refinery. The businesses are thoroughly privatised to avoid destruction by corruption, as in the case of NNPC.