Free Market in Governance and Nigeria.
By: Olamide Eyinla
Tags: Africa, Nigeria, Economics, Development, Politics

Free Market in Governance and Nigeria.

There has been an argument between those who support the ruling party or Government and those who do not about the competence of Government. Like we all hate to agree, we have 2 tiers of Governments, Federal Government and States (we know that Local Governments are extensions of States). The question of the incompetence of Government thereof does not begin or end with the Federal Government. We also have these questions same questions to be asked all our State Governments, even when the incumbents possess stellar performance track records prior to getting to the office.

There have been discussions about the efficacy of our leadership selection process in Nigeria, however, we seem to always be at the short end of the stick with respect to the output of the leaders we have. This recurring outcome has kept me in a state of confusion, and sometimes makes me think and ask what if the leaders are not actually the problems? With the state of how bad things are, it is indeed difficult to absolve our leaders from our current realities. What is the chance that all our leaders are bad? Having a probability of 1 is a rarity statistically for a lot of incidences, but it appears this happens too frequently in Governance in Nigeria. Could it be that the system is what makes these leaders bad? So, in Governance, what are the factors affecting the system? According to #FixPolitics, we need regulators, supply-side, and demand-side. This aligns directly to the fundamentals of a free market, which invariably implies that good Governance is not autonomous, but it to be demanded and supplied at the benefits of both market agents with the regulators servicing as the control system in order to protect both the demand side and supply side.

The Demand side of this is the electorates and the citizens. The electorates are citizens who have decided to actively participate in choosing their leaders, however, there are more citizens who for many reasons are not able to vote, but must bear the consequences good or bad of the decisions of the electorate are part of the demand side. The Supply-side of Good Governance has as major players the Political Parties and the Politicians. However, the effect of these groups is not efficient without the working of the Civil Service which has the key to deliver as the Political class wishes. On the regulatory side, we have the law of the land which is the constitution of the Federal Republic, and other institutions set up to enforce the law which includes the Independent National Electoral Commission, the Police, the Judiciary, etc.

I am not particularly sure why we expect that the good Governance system excludes the most important piece of the equation which is the Demand-side. From what I have heard and read, the expectations of better Governance are often on the Supply-side and the Regulator and less on the Demand-side. On many accounts, the demand side is the most important and powerful side of the equation. It is a known fact that without the knowledge of power, it cannot be exerted. It appears the citizens who are oblivious of the extent of their power are not using it enough. There are probably genuine reasons why the people are not using their power, but until this is done, little or nothing will change.

It is a known fact that those who benefit from a broken system have no sufficient incentives to make the change. The change is normally driven by those who suffer most from status-quo. However, it is important that these people know their power and what they want. Knowing what they want is also very important as this might get out of hand, especially if the supply side does not meet them halfway.

The Civil Service and Political class have their work cut out as they need to show the people, they are working to fulfill their heart desires, however, with reasonableness in it. Understandably, the people demand all they want from the Government; however, the Government cannot do all the people want. No Government can, and that is why globally, we have Governments voted in and out. Government admitting that they cannot do all the people want is not a failure, it is when Government is not able to deliver on the promises, they make is when they fail. In a Free Market economy, the Government’s role is not to provide economic goods, but to provide the environment through policies for this to happen. The Government can only intervene when the markets fail. In Nigeria, Governments do not intervene, as they are already playing on the supply side whilst attempting to provide what the market needs, i.e., roads, rail, airports, seaports, hospitals, etc. What the Government being a player does is discouraging private investors, as I am not sure of who wants to go into competition with their regulators, which in this case is also the Government.

Time has shown us that Free Market provides the best outcomes, which periodic intervention from the Government to adjust the market where need be when acting as the “unseen hand”. If this hand is seen, it takes away the confidence that the market needs to show for more players to trust it. Unfortunately, in Nigeria today, the hand is so seen that all the economic agents from the demand-side and the supply-side are directly influenced by the Government. The biggest example of this is the role of the Central Bank of Nigeria (CBN) in the allocation of foreign exchange. The central bank today, almost unanimously determines the price of the Naira, without much recourse to the Market. Recently, the CBN made a rather commendable policy that should encourage the flow of remittances to Nigeria by the International Money Transfer Organisations (IMTOs) remitting in foreign currencies, however, these same rule the CBN made is being blatantly disobeyed by them. Nigeria earns United States Dollars (USD) when we sell crude oil, which is paid into the JP Morgan accounts in London, however, when the CBN is to pay this money into the federation accounts, they pay the Naira equivalent at an exchange rate determined by them. The Minister of Finance should be challenging this inefficient practice as Nigeria loses billions in this practice yearly.

There are many more examples to buttress this point. There is sufficient fact to back the fact that as a country, we lack progress in areas and sectors where Government is the key provider. Government for many reasons is not designed for efficiency and it is not a coincidence that countries that appear to work are countries that are private-led. The Top airports globally are Private Sector owned and run, yet we have Governments in Nigeria planning to build airports. If there are enough economic incentives to build airports, private capital would be channeled there. Many of the airports in Nigeria are not doing more than an average of 10 airplanes daily. That traffic would not justify the construction of an airport; however, we have impoverished States prioritizing the construction of airports whereas they do not have good primary schools, primary healthcare centers even security.

The Government is not designed to solve all economic problems, whoever, it is easy for them to frustrate the private efforts at this, thus, the Government and her agencies must be strategic and deliberate in her attempt to engage. When the Government’s invisible hands become visible, they become an encumbrance rather than a helping hand. Even the well-intentioned Government interventions have a negative effect as Governments are not usually well equipped to intervene as their focus is always on the demand side. Provision of accurate data and information is one of the Government’s most important contributions to improving the market performance. However, the Government of poor countries like Nigeria believes that their interventions should be in form of provision of funds. Whilst cash is very important, it must be targeted, and it is best gotten from data and information that the Government has not sufficiently provided. We have information that the Government has rightly started to consider using some private resources to build public infrastructures like roads and bridges, however, these private sector funds must also include Citizens funds through Pension Funds contribution as well as listing the Special Purpose Vehicles (SPVs) on the Stock Exchange in order to get more citizens to co-own these public infrastructures. There should be regulations that investments in Public Utilities and Infrastructure must be done by publicly traded companies to significantly reduce the chance of corruption.

The National Bureau of Statistics has been doing a good job, however, limited as there are few resources to do broader as well as deep jobs around data gathering and processing. Access to information would help the business leaders in the countries to make calculated investment decisions. I am not sure why we do not have the States Bureau of Statistics in Nigeria as I am not aware of any laws inhibiting the establishment thereof. Nigeria is currently in recession as a country, but which States are the biggest contributors to this? What sectors fell the most in the states? These levels of information are not readily available; thus, it becomes difficult to address the decline directly. The investments State Governments are making in other economic advancement programmes could be redirected to data gathering, and this shows likely organic business opportunities that could be job creation, thereby addressing the same problems in a more sustainable way. The Federal Government pays hundreds of thousands of unemployed citizens through the N-Power scheme and some of these people could be used by their State Governments for data gathering and the professional Statisticians process them.

The country and her economy are at an edge; thus, it is important that we make the best decisions and not just the most politically acceptable decisions. Insecurity has been a big problem for more than a decade, and yet we have not done any drastic change to Internal Security architecture other than weaken her and replace them with the Military. The problem with this also is that the Military is overstretched, thereby affecting their ability to deliver to the highest level they are capable of. It is harebrained to expect a single command for a very diverse country like Nigeria. This is another call for the establishment of State Police and Prisons, as the mindset and structure that got us here cannot get us out. It is understandable that all the States might not be able to afford a local police service, but that should not stop states that are able to and battling spiraling insecurity.

The free market is not a perfect market, but it is the closest to the perfect market there is. Different countries have also decided how to practice their kind of free market, as there is no best approach. China has shown the world another kind of Capitalism, State Capitalism. At the core of State Capitalism is efficiency which Nigeria does not have. There is no one size fits all approach to solving problems, however, considering all options create a good chance of addressing the myriads of problems that keep piling up in the country. It is also not a coincidence that it appears all things are getting worse as things either get better or worse. The quantum of work required to keep things at the stagnant (neither better nor worse) level is so much that a mediocre effort would fail significantly. We need to evolve our systems and processes as the problems in the country are evolving and mean efforts by both state and Federal Governments will never be sufficient.

Olamide Eyinla shares his thoughts from Lagos.