One solution to the ease with which these private entities appropriate government revenue is to move the public sector’s revenue collection machinery online… But then, I am reminded that what reforms that leverage digitisation and digitalisation achieve is to cut out these lower apparatchiks from the baksheesh value chain.
Over the past four decades, “arbitrage” is easily implicated in any search for causes of Nigeria’s economic problems. Whether it is the pump-station price of petrol, interest rates, or the exchange rate of the naira, the difference between a government-mandated price and the price at which those without access to government’s influence and resources obtain a product or service has not helped our economy’s outcomes. Nearly always the former price is lower, as government persuades itself that the poor cannot afford higher petrol prices, small- and medium-sized businesses will soon be out of pocket without access to cheap loans, and every Nigerian should spend dollar-equivalents, as would every American.
One problem though with pricing below the rate at which the market clears the supply and demand for a good or service, is the failure of the consuming party to fully account for costs. In other words, to be competitive. In our case, we have also seen persons of influence introduce themselves between the markets for these two prices, resulting in the ironic spectacle of a policy designed to keep the poor and vulnerable in fine fettle, boosting the consumption of the rich and powerful.
So, do we let the price mechanism determine who has access to and consumes the diverse services and products of our economy? Yes. But would higher prices not mean that lower down the social ladder the adjusted quality of life worsens. Possibly. And is this not the cause of the crisis of democracy that we are seeing in developed democracies, where those left behind by the rapid economic changes of the late 20th century have turned to populist and anti-democratic narratives in their bid to put a stop to the erosion of their traditional ways of life? Yes it is.
…state governments impose fines so draconian they create arbitrage opportunities for their own agents charged with enforcing the law. In this case, the example is of government setting the sanction for a traffic offence above its market-clearing rate.
Then, how do we square this circle? One argument is that once government withdraws the respective subsidies, the funds freed up may now be available for pro-poor spending. Both the telecommunications revolution and advances in biometric identification have made conditional cash transfer programmes, such as India’s “Aadhaar” and Brazil’s “Bolsa Familia” possible, even here. But by far the more urgent spending need is for infrastructure – in aid of commerce – and education and health (in aid of the development of a panoply of useful talents, including the entrepreneurial).
In the end, this is a case for better policy formulation. Examples abound of how we continue to struggle with this aspect of governance. Some of the most draconian traffic rules exist at the regional levels, to cite but one particularly outrageous example. But you get the feeling that sub-regional governments have not framed the problem properly. To nudge citizens towards a desired outcome – not driving against traffic, to take another example – where the available incentives are all negative (fines, largely), the policy challenge is to balance the severity of the sanction (should hurt enough to dissuade repeat behaviour) with its collectibility (should not be so burdensome that violators prefer evasion). Instead, state governments impose fines so draconian they create arbitrage opportunities for their own agents charged with enforcing the law. In this case, the example is of government setting the sanction for a traffic offence above its market-clearing rate. The net effect is to divert revenue from the exchequer to private entities with government influence.
One solution to the ease with which these private entities appropriate government revenue is to move the public sector’s revenue collection machinery online. As with the Federal Road Safety Corps’ (FRSC) decision to have all payments for the processing of driver’s licenses done online, including (especially) for obtaining and renewing the national passport. Anyone who has processed their driver’s licence of late will tell of the increasingly wretched artifices that the FRSC’s lower level staff resort to in order to extort money. But then, I am reminded that what reforms that leverage digitisation and digitalisation achieve is to cut out these lower apparatchiks from the baksheesh value chain. Institutionally, funds may still be misappropriated on the scale that has had corruption feature atop the leader board of our national woes.
…reform of the public sector and the ways we have managed it up to this point might just be our most important need in the medium term.
All of which returns “governance” to the fore and centre of the discussion on how to extract value from the Nigerian state. At several removes, this is also a conversation on how to establish priorities amongst desirable projects, when the financing required to see the projects through is not always available. Given our ethno-national configuration, it will also be about choosing where projects will commence first. It will help that these decisions ride on a detailed estimate of the costs and benefits of each project. But no process of prioritisation will succeed without proper sequencing. This is as much about clearly understanding what the portmanteau of projects’ “start to finish” relationships are, as it is about following the money. All of which require a bureaucracy to succeed. But not the bloated structure that we currently have in place, with key cadres skilled in creating and leveraging arbitrage opportunities.
In which case, reform of the public sector and the ways we have managed it up to this point might just be our most important need in the medium term.