Time has shown us that the free market provides the best outcomes, with periodic interventions 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.
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 two tiers of government – the federal and the state (as 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 the same question to be asked of all our state governments, even when the incumbents in power in that tier possessed stellar track records of performance prior to getting into 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 it sometimes makes me think and ask 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? As such, 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 is to be demanded and supplied to the benefits of both market agents, with the regulators serving as the control system in order to protect both the demand and supply sides.
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 include 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.
There is sufficient evidence 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 sector-led.
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 that they are working to fulfill their hearts’ 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 it made that it faisl. In a free market economy, the government’s role is not to provide economic goods, but to provide the right environment, through policies, for this to happen. The government can only intervene when 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 is doing, being a player, discourages private investors, as who wants to go into competition with their regulator, which in this case is the government?
Time has shown us that the free market provides the best outcomes, with periodic interventions 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 and the supply sides 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 currencies. 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 in foreign currencies to Nigeria by the International Money Transfer Organisations (IMTOs), however these same rule of the CBN is being blatantly disobeyed by its actors. Nigeria earns in United States dollars (USD) when we sell crude oil, which is paid into J.P. Morgan accounts in London, however when the CBN is to transfer this money into the federation accounts, it does so in the naira equivalent, at an exchange rate determined by the Bank. The minister of Finance of the country should be challenging this inefficient practice, as Nigeria loses billions of naira through this practice yearly.
There are many more examples to buttress this point. There is sufficient evidence 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 sector-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 does not justify the construction of an airport; however, we have impoverished states prioritising the construction of airports within their domains, whereas they do not have good primary schools, primary healthcare centres, or even adequate security.
The government is not designed to solve all economic problems, however it is easy for it to frustrate the private efforts at this; thus government and her agencies must be strategic and deliberate in their attempts to engage in problem-solving. When the government’s invisible hands become visible, they become an encumbrance, rather than helping hands. Even, well-intentioned government interventions have negative effects, as government is not usually best equipped to intervene, since its focus is always on the demand side. The provision of accurate data and information is one of the government’s most important contributions to improving the performance of markets. However, governments in poor countries like Nigeria believe that their interventions should be in the form of the provision of funds. Whilst cash is very important, it must be targeted, and this best achieved through data and information that the government has not sufficiently provided. We have information that Federal 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, such as pension fund contributions, as well as the listing of 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 free market is not a perfect market, but it is the closest to the perfect market there is. Different countries have also decided on how to practice their kinds 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.
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 business leaders to make calculated investment decisions. I am not sure why we do not have state bureaus of statistics in Nigeria, as I am not aware of any law inhibiting the establishment thereof. Nigeria is currently in recession as a country, but which states are the biggest contributors to this? Which 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 that state governments are making in other economic advancement programmes could be redirected to data gathering, and this will show likely organic business opportunities that could lead to job creation, thereby addressing 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 in data gathering and then have professional statisticians process the data harvested.
The country and its economy are on 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 now, and yet we have not carried out any drastic change to the internal security architecture of the country, other than weaken this and replace it essentially with the military. The problem with this is that the military is overstretched in a manner that has affecting their ability to deliver to the highest level they are capable of. It is harebrained to expect a single command to protect a very diverse country like Nigeria. This is another call for the establishment of the 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 local police services, but that should not stop states that are able to do so in 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 on how to practice their kinds 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 creates 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 states and the Federal Government will never be sufficient.
Olamide Eyinla shares his thoughts from Lagos.