Nigeria under APC needs to prioritize wealth creation, by working closely with private industry and developing policies that will spur economic growth. The ruling government is somewhat alienated from private business, and it seems the only engagement the government wants is to collect taxes.
President Muhammadu Buhari’s victory in the 2015 elections was a watershed moment for the majority of Nigerian’s who worked tirelessly on the ground and on social media. It had implications for democracy in Africa and beyond. The world watched as PDP – another ruling political party in Africa – was booted out, this time in Nigeria – the most populous nation.
There was so much joy and euphoria that no one really cared to immediately nudge the president to commence work immediately. Thus, a lot of mistakes in the next five months that followed, such as failure to constitute a cabinet, poor management of petroleum marketers and economic policy vacuum led to a recession and subsequent and unprecedented high unemployment. Till date Nigerians are still grappling with economic problems and successive waves of federal and sub-national taxes, unemployment, reduction in wages and recently the COVID-19 pandemic has ruffled the livelihoods of Nigerians, especially those in the informal economy.
We all agree that Nigeria has gone south when it comes to development and many of the gains in the PDP era have been rolled back, either systematically or based on the pressure of the global economy, especially prices of crude oil. However, we need to examine the political underpinnings of the Buhari government and the sort of political economy Nigeria is running. Particularly, the role of the state- institutions of governance needs to be understood in the light of economic development.
The Nigerian State and its institutions
The state is traditionally defined based on institutions such as the judiciary, fire service, taxation authorities, military, economic agencies etc. These bodies are maintained by taxpayer money and are supposed to be neutral in the discharge of their duties, while they work effectively for the material well-being of the average citizen. However, what is missing in this description of the state is how Buhari has mobilized the state and what ideology is prevailing over Nigeria’s economy.
Buharinomics and the social democracy model
Buharinomics; that is the nature of economic policy in the Buhari democratic dispensation is underpinned by the social democracy model in its bid to develop the Nigerian economy.
The social democracy model assumes that capitalism and its tensions need to be rolled back, while economic resources need to be distributed equally to relieve the disadvantaged in society. It is not in the nature of this model to consider wealth creation primarily. What comes first is wealth distribution. This sort of model will be good intermittently in even very rich countries, but not a poor country like Nigeria. A fair contrast of our economy with a state in America – California – shows a $3trn GDP; bigger than Nigeria’s by more than seven times.
In Nigeria, the obvious manifestation of the social democracy model is the National Social Investment Programme. This programme, created in 2016, comprises N-Power, Conditional Cash Transfer, Government Enterprise and Empowerment Programme and Home Grown School Feeding Programme, all managed the presidency. The programme has since been moved to the Ministry of Humanitarian affairs since 2019.
Based on a previous response of the Special Adviser to the President on Social Investment Programme- Maryam Uwais to the national assembly, the total appropriation for the 4 programmes is N1.7trn, but N619bn has been released. While these programmes have gained visibility and perception nationwide, there is a challenge assessing its impact on the overall economy and in fact, the details and transparency also remains an issue of doubt amongst Nigerian lawmakers, who have insisted on creating a legal framework for the NSIP, in the fashion of the Social Security Act of 1935 in the USA and the Unemployment Act of 1934 in the United Kingdom. Though the program coordinators stress the presence of hosted registers in resident ministries of planning across the federation, doubts remain about the list.
Despite the disbursement of funds and execution of the programmes, the unemployment rates (27.1% Q2 2020) keep rising and the minister of finance, Zainab Ahmed keeps warning of dwindling finances and risks of a continued recession. This is aside the urgency to revise the national budget downwards. The implication of this is that the NSIP has little or no impact on the economy, the best case is that it has kept a few people off crime and hunger in the short term. It also has no definitive or even a moderate contribution towards the economy.
Instead, what we see is sustained pressure on the economy, desperation that leads to import substitution policies, inability to fund projects, thereby leading to obscene borrowings lately and many development challenges.
Challenges of the social democracy model
The current social democracy model Buhari has employed did not fail because of poor implementation. It is bound to fail by its very nature of overly focusing on wealth distribution, instead of wealth creation considering Nigeria’s economic productivity posture.
Social democracy campaigners usually over-promise and under-deliver because they do not even have enough resources to deliver the goods they promise. And the model, while it appreciates the need to allow markets to function almost keeps them in check by stifling innovation through intermittent taxation on the initiative and not providing the ideal climate for businesses to thrive.
We see this tendency in the overall actions of the ruling APC who through the state tax authority; Federal Inland Revenue Service has instituted various taxes on digital businesses and one regulation or the other stifling logistics startups with various regulations that seek to raise funds for the big and inefficient government in Abuja.
Since social democracy is not primed to generate wealth or put wealth creation on the front burners, then, there will be little or nothing to distribute, except government, keeps inventing various forms of taxes which will make way for a disenchanted population of people who may take to cutting corners or sacking workers who may ultimately end up in criminal ventures.
In a parallel vein, the challenges of the Nigerian economy is not abnormal, it is largely forced and unfortunately well-architected by structural issues such as inefficiencies and little productivity of the constituent states. Thus, social democracy is not the solution to this sort of problem, it’s a catalyst that will ensure that we all go down in poverty and insecurity.
It is obvious that Buharinomics and its underpinning social democracy model has failed. What then is the solution? The development state model is the best for Nigeria.
The development state in Nigeria
While there are other models of state such as the minimalist states that encourage laissez-faire market economies and radical individualism and the social democracy which was discussed, the development state is optimal for Nigeria because of the level of development and the need for government to work with innovators, entrepreneurs and corporates to foster economic development. It is an integrative and robust approach which is not entirely new in Nigeria as it was employed under the Olusegun Obasanjo government.
It will be useful to explain how this model works using the examples of Germany and Japan. Germany has a social partnership with businesses, develops solutions, while seeking input from businesses and other interest groups on areas where the government needs to allocate scarce resources to get the best results. Invariably, the government ensures that inclusive development happens by employing a social market capitalism model which involves everyone and has more feedback for economic improvement.
This contrasts with what we currently have in Nigeria, where the government sees its objectives as different from private firms and sometimes sabotages them. Evidence of the overnight ban of O-Pay and other bike hailing firms in Lagos State and stifling of logistics firms through expensive licensing fees by NIPOST, proves that the government needs to consult with private business to reduce distortion and frustration of business owners.
In Japan, the Zaibatsu’s established family businesses worked with the government and the Bank of Japan to plan and determine critical areas of investment, thereby catapulting industry in Japan.
Currently, both Japanese and German economies rank as 3rd and 4th respectively globally, which proves the potential of the development state model.
Nigeria under APC needs to prioritize wealth creation, by working closely with private industry and developing policies that will spur economic growth. The ruling government is somewhat alienated from private business, and it seems the only engagement the government wants is to collect taxes.
Finally, The Ministry of Planning needs to do more than prepare and defend the budget. It needs to create an architecture to work with growth determinants such as the tech industry, real sector, research institutions, hubs and education firms to drive economic growth for Nigeria.
A development state model is most suitable for Nigeria.
Babatope is a management consultant and public policy analyst based in Lagos.
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