There was outrage in Nigeria when the U.S. National Intelligence Council (NIC), at a conference in 2005, “Mapping Sub-Saharan Africa’s Future,”[1] dared to foresee Nigeria’s outright collapse before 2020 dragging down with it a large part of the West Africa region. The Nigerian Government, who preferred to underscore the fact that Nigeria’s economy was on a growth trajectory and things were getting better rather than worse, vehemently denounced this report as “glib talk arising from dubious or diabolical benchmarks.”[2]
Whether or not you agree with the NIC, Nigeria can today be described as a middle-income country characterized by weak state capacity and weak state legitimacy leaving citizens vulnerable to a range of shocks making it a weak state. The central argument of this article is that Nigeria’s corrupt political economy provides the precondition for crisis and that all it needs to set it off is a suitable triggering event such as the current oil price shock. The ensuing crisis events then drive the trajectory of its political economy for a while, followed by some form of recovery where it deals with symptoms not root causes, and typically lessons are not properly learnt leaving room for the crisis cycle to occur again due to incomplete recovery. We argue that only through a change away from a culture of corruption can it break the cycle and buck the loop.
What triggering events or combination of events drive Africa’s largest economy towards crisis? Four events could determine the direction in which Nigeria’s economy would travel between 2015 and 2020: international oil price shocks, the country’s unmitigated corruption, political instability occasioned by the 2015 elections and finally, heightened, widespread, sustained violence (resulting from political processes for 2015 elections and/or resumed insurgency in the Niger Delta, and/or heightened piracy in the Gulf of Guinea, and/or sustained terrorist action in the style and manner of Boko Haram). Will the crisis cause Nigeria to disintegrate as predicted, drift along dangerously towards a precipice or bump onto a trajectory that leads towards better outcomes?
By far the biggest shock to Nigeria’s economy in 2014, bigger than the effect of Ebola and US quantitative easing has been the oil price collapse. Nigeria needs just about $120 ppb for her budget to break even from income and taxes[3] and the price has now fallen to just under $70 ppb as at December 1, 2014. Nigeria has squandered resources it saved in an Excess Crude Account (which was meant to cushion the effect of oil price shocks); it has drawn down on its external reserves and cashed in large parts of its sovereign wealth fund leaving it no choice but to devalue its currency and announce a range of austerity measures. Much of the sums have been drawn to maintain political support within Nigeria’s patronage politics.[4] Public sentiment at the time of the NIC report in 2005 suggested that the US needs a stable Nigerian Government to ensure that Nigeria’s oil is available to the US and the West. The US shale oil revolution has in the last few years led to a decline in its oil purchases from Nigeria and the country is fast losing this strategic importance to the US.[5] Nigeria (holding current OPEC Presidency) and other OPEC countries in a bid to injure US shale oil have voted to keep pumping oil with the effect that global oil prices remain depressed.[6] Is Nigeria clutching at straws?
Corruption in Nigeria is endemic, pervasive and systemic and remains the single most dominant precondition to crisis in Nigeria. There are at least six reasons why it has become so: 1. Over the decades, personal values have been allowed to degenerate to the point that ethical action cannot be expected from a frightening number of citizens. 2. The erosion of personal values seems to have been reinforced by decades of unethical behaviour by Nigerian leaders allowing alarming levels of social tolerance for the malaise to evolve. 3. The high levels of social tolerance have weakened social controls over corruption and the corrupt to the extent that standards of behaviour, corporate and individual, in some cases have degenerated to unacceptable levels. 4. Eroded personal values, a social tolerance for corruption, weak social controls and unacceptable behaviour being displayed en-masse and at highest levels induce great apathy and resignation within the populace resulting in what seems like an unwillingness or inability to put effective controls in place. 5. The lack of controls has now given way to a system of perverse incentives allowing various forms of corruption to mutate and spiral freely into a new norm of impunity. 6. Corruption with impunity, which has been left unchecked for several years, reinforces the inevitability of corruption and the need to conform to survive. Many become induced in their thinking that this in large part is the way things are done in Nigeria and corruption has become institutionalized. Corruption is arguably the primary precondition for Nigeria’s series of crises over the years and one it has failed to address.
What could stop Nigeria from instituting effective crisis management strategies in order to survive and beat the NIC doomsday scenario? This is best explained through a caricature of the Nigerian political economy where enormous wealth is today synonymous with enormous power, and vice-versa. To have either, one has to be connected to public funds one way or another. To achieve that, the political aspirant enters into an unwritten pact with unofficial Kingmakers or “Godfathers”. The pact is a promise that the “Godfathers” would continue to have access to state funds whilst their rivals and competitors are kept out – in other words, a promise to “hold the cow of state steady whilst they milk it to death!” A successful politician in that scenario is one that delivers on the pact once in office, and therefore one that deserves reelection. Once reelected enough times (stopped only by constitutional dictates and the “greed” of other groups who want to replace them) they elbow their way till they can join the ranks of the “Godfathers” or unofficial Kingmakers.
Nigeria’s oil lubricates this system and corruption describes its mechanism. Violence or the threat of it is used to get a recalcitrant party to negotiate or make room for the callous at the table, and some have been honing their skills for the last 4 years to test their art at the next elections early in 2015. So, in the crudest form possible, violence or the threat of it drives access to oil; oil drives corruption; corruption drives the game of patronage politics played by Nigeria’s elite; and patronage politics drives public choice.
Unless Nigeria finds an answer to its pervasive, endemic and systemic corruption, the country may find itself, despite its best wishes, on a slippery route to major crisis precipitated by anyone or combination of four triggers: oil price shocks, unmitigated levels of corruption, political instability occasioned by the 2015 elections and finally, heightened, widespread, sustained violence (resulting from political processes for 2015 elections and/or resumed insurgency in the Niger Delta, and/or heightened piracy in the Gulf of Guinea, and/or sustained terrorist action in the style and manner of Boko Haram). Any response short of reducing corruption only postpones the doomsday.
[1] http://www.au.af.mil/au/awc/awcgate/nic/africa_future.pdf
[2]ThisDay Newspapers, via allAfrica.com, May 2005, “Yet Another Dubious U.S. Report”, http://allafrica.com/stories/200505270199.html
[3] http://www.vox.com/2014/10/14/6975977/which-countries-suffer-most-when-oil-prices-plummet
[4] Prof. Joseph, R., “The dangerous mix of terrorism and political power struggle in Nigeria”, http://www.vanguardngr.com/2014/11/dangerous-mix-terrorism-political-power-struggle-nigeria-us-prof-richard-joseph/?utm_source=dlvr.it&utm_medium=twitter
[5] Windrem, R., “Needle on Zero: Nigeria’s Economy Tanking as U.S. Oil Exports Dry Up”, http://ww.nbcnews.com/news/investigations/needle-zero-nigerias-economy-tanking-u-s-oil-exports-dry-n256236
[6] CNN Money, “OPEC’s Message to US Shale: Drop Dead”, http://money.cnn.com/2014/11/28/investing/opec-oil-price-us-shale/index.html
Soji Apampa is the co-founder of The Convention on Business Integrity, which sponsors the Corporate Governance Rating System in partnership with the Nigerian Stock Exchange. He is also a member of the Premium Times editorial board. Kindly give him feedback via Soji.apampa@cbinigeria.com, and on twitter: @sojapa
