INTRODUCTION
THE last installment of this treatise considered the Nigerian economy along with other challenges such as poverty, our mono-cultural (oil-dependent) economy; it then proffered some suggested reforms including economic diversification, agriculture, leveraging on ICT, and manufacturing. This week’s feature continues the theme of reform, focusing on institutional reform and good governance, corruption, strengthening weak institutions including the judiciary, eliminating red-tapism, human capital development, power and transportation, investing in public institutions, and education. These are evidently also the areas of concern. But not exclusively, as other challenges include insecurity and instability, and policy inconsistencies. Enjoy.
INSTITUTIONAL REFORMS AND GOOD GOVERNANCE
Holistically, governance can be defined as the overall complex system or framework of processes, functions, structures, rules, laws and norms borne out of the relationships, interactions, power dynamics and communication within an organised group of individuals which not only sets the boundaries of acceptable conduct and practices of different actors of the group and controls their decision-making processes through the creation and enforcement of rules and guidelines, but also manages, allocates and mobilizes relevant resources and capacities of different members and sets the overall direction of the group in order to effectively address its specific collective needs, problems and challenges.
CORRUPTION, ET AL
Nigeria’s economic potential is significantly hampered by systemic issues of bad governance. Corruption is a systemic challenge in Nigeria, deeply rooted in both public and private sectors. The siphoning of public funds diverts critical resources away from healthcare, education, and infrastructure development. For example, the National Bureau of Statistics (NBS) reported that Nigerians paid an estimated N721 billion in cash bribes to public officials in 2023.
Nigeria’s Anti-Corruption Agencies estimate that the country loses a staggering $18 billion annually to corruption and financial crimes (Sope Williams, AdedejiAdeniran, and Aloysius UcheOrdu, ‘Can we change the narrative on corruption in public procurement in Nigeria?’ (August 24, 2023)). This figure amounts to 3.8% of Nigeria’s 2022 GDP and largely tells on the nation’s economic growth and development. These losses hinder investment, erode public trust, and divert resources from essential public services needed across sectors such as infrastructure, healthcare, education, and other essential services, ultimately undermining the country’s progress toward a more equitable and prosperous future. This, in turn, limits job creation and economic opportunities for Nigerians.
WEAK INSTITUTIONS
Weak institutions further worsen the corruption problem, as they fail to hold corrupt individuals accountable, further impeding Nigeria’s economic development. This culture of impunity undermines public trust and deters foreign investment. Studies have shown that countries with weak institutions find it difficult to evolve rapidly enough to enjoy economic growth and development. Viable institutions foster social cohesion and macroeconomic stability, thereby increasing investment and growth.
THE JUDICIARY
A judiciary plagued by delays and corruption undermines the rule of law and discourages investment.
RED-TAPISM
Inefficient public sector institutions, characterized by bureaucratic red tape and corruption, hinder the delivery of public services and stifle economic activity. These institutional weaknesses collectively contribute to a hostile business environment, discouraging domestic and foreign investment, and ultimately hindering Nigeria’s economic growth and development. Moreover, a lack of transparency and accountability in government institutions fosters nepotism and cronyism, exacerbating economic inequality and hindering equitable development. These factors collectively impede Nigeria’s economic growth and its ability to realize its full potential as a global economic player.
INSTITUTIONAL REFORMS
Attempts have been made by the Nigerian government to enhance the quality of institutions in Nigeria, such as the establishment of the Code of Conduct Bureau (CCB) in 1979, the Service Compact with All Nigerians (SERVICOM) in March 2004, and the Public Complaints Commission in October 1975. To enhance fiscal prudence and accountability in both the public and private sectors, institutions such as the Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices Commission (ICPC), and the Nigerian Financial Intelligence Unit (NFIU), were established to further strengthen institutions, which in turn, is expected to promote sustainable economic growth. However, Nigeria continues to suffer from poor institutional quality as these institutions themselves are weakened.
EFFECTIVE GOVERNANCE
For Nigeria to experience notable economic progress and smooth implementation of sustainable policies, it is good governance as well as institutional reforms for weak institutions are vital. Effective governance is central to economic sustainability. In this context, such governance must take note of the major recipients of the impact of its measures, the society. People, as both consumers and producers, drive economic activity and are impacted by its outcomes, making participation and empowerment crucial for sustainable economic development. The consideration and implementation of measures that prioritize responsible resource management, equitable distribution of wealth, and policies that prioritize the sustainability of the continent and planet at large are also crucial in the creation of strategic economic reforms in Nigeria.
INVEST IN PUBLIC INSTITUTIONS
In the same vein, investing in the capacity of public institutions to deliver quality services is crucial for building trust between the government and its citizens. Institutional reforms to strengthen the judiciary, improve fiscal transparency, and fight corruption are essential for creating an environment conducive to growth. These reforms would improve governance, boost investor confidence, and encourage domestic and foreign investment. Strengthening anti-corruption agencies, such as the Economic and Financial Crimes Commission (EFCC), and ensuring transparency in public expenditure are crucial steps. Technology, like e-governance systems, can also play a vital role in reducing opportunities for graft. Tackling corruption head-on is not just a moral imperative but an economic necessity.
INFRASTRUCTURE DEVELOPMENT
Infrastructure development is a key driver for progress in Nigeria and a critical factor for productivity and sustainable economic growth. Infrastructure affects growth through several channels of demand and supply, as such; investments in energy, telecommunications, and transport networks would positively impact the economy, as all types of infrastructure represent an essential input in any production of goods and services.
Infrastructure is critical in economic development as it influences production processes and enhances the overall quality of the business environment. Improvements in infrastructure, such as transportation, energy, and telecommunications, can significantly impact an organization’s productivity, profitability, and employment generation, ultimately driving economic growth.
POWER & TRANSPORTATION
Nigeria’s infrastructure deficit remains a significant barrier to economic growth. Numerous studies have demonstrated that these infrastructure gaps significantly hamper economic growth and development. The nation’s power sector, for instance, generates only a fraction of the electricity needed to support industrialization and improve living standards. Frequent power outages force businesses to rely on costly generators, which erodes profitability and discourages investment. Similarly, inadequate roads, railways, and ports lead to high transportation costs and delays, making Nigerian products less competitive in both local and international markets. Access to clean water and sanitation remains a challenge for millions, compounding public health issues. Inadequate roads, unreliable power supply, and poor telecommunications infrastructure increase business costs, reducing competitiveness.
While Moody’s estimates that a substantial investment of US$3 trillion is required over the next 30 years to bridge the infrastructural gap in Nigeria, the annual infrastructure budget of Nigeria is less than 5% of what is required (US$100 billion). It is therefore of necessity that strategic investments in infrastructure – spanning public-private partnerships (PPPs), efficient resource allocation and project financing – are needed to meet the existent infrastructural gap, thereby enhancing productivity and business operations. Investing in infrastructure is not just about building roads and bridges; it’s about creating an enabling environment for businesses and improving the quality of life for citizens.
HUMAN CAPITAL DEVELOPMENT
Human capital, the sum of a nation’s skills, knowledge, and health, is a critical driver of economic growth and development. A well-educated and skilled workforce is essential for innovation, technological advancement, and increased productivity. Investments in education, healthcare, and training improve individual lives and also strengthen a nation’s competitiveness in the global economy. By fostering a skilled and adaptable workforce, countries can attract investment, create jobs, and improve overall living standards. In other words, human capital development is paramount to achieving long-term economic sustainability. The Human Capital Index takes into account, the knowledge, skills and health of individuals. According to the World Bank, in 2020, Nigeria’s Human Capital Index (HCI) stood at 0.36 and ranked 168th out of 174 countries. This is far below the 56 percent standard.
POOR EDUCATIONAL ENVIRONMENT
Education catalyzes economic growth by cultivating a skilled and knowledgeable workforce. By enhancing cognitive abilities, problem-solving skills, and critical thinking, education empowers individuals to contribute meaningfully to economic development. A well-educated populace is more productive, innovative, and adaptable to technological advancements, leading to increased efficiency and higher output.
Despite having a young, burgeoning population, Nigeria’s young population has been both a resource and a challenge. The state of education in Nigeria is a pressing concern, characterized by inadequate funding, dilapidated infrastructure, poor teacher quality, and a curriculum that is outdated and ill-suited to the demands of the 21st century. (Chinedu Friday, ‘The state of education in Nigeria: Challenges and opportunities’ <https://www.linkedin.com/pulse/state-education-nigeria-challenges-opportunities-chinedu-friday/> accessed 9th December 2024.) Currently, Nigeria’s literacy rate stands at 59.57 percent . UNICEF reports that Nigeria has the largest number of out-of-school children, with over 18.3 million children not enrolled, while over 12.4 million children are reported to have never been inside a classroom, and 5.9 million students are estimated to drop out. Professor Ismail Junaidu, Executive Secretary of the Nigerian Educational Research and Development Council, underscores the role of low literacy rates in perpetuating social inequality, particularly among rural and marginalized communities. This literacy gap not only traps individuals and communities in cycles of poverty but also limits their access to opportunities for social and economic advancement.
In the same vein, unemployment and poverty remain two of the most daunting challenges facing Nigeria. Youth unemployment, in particular, is at crisis levels, with millions of young Nigerians either jobless or underemployed. This is not only a waste of human capital but also a potential trigger for social unrest. Widespread poverty heightens inequality and perpetuates cycles of underdevelopment, as families struggle to afford necessities such as food, healthcare, and education. According to the World Poverty Clock, Nigeria has the dubious distinction of being the country with the largest number of people living in extreme poverty with an estimated 71 million Nigerian living in this condition. Policies aimed at boosting job creation, especially in sectors like agriculture, manufacturing, and technology, could provide much-needed relief. Programs such as vocational training and microcredit schemes could empower individuals to create their own economic opportunities, reducing dependency on formal employment.
Additionally, a strong correlation exists between health and economic growth. Investments in public health, such as access to quality healthcare, sanitation, and nutrition, are critical for a nation’s economic prosperity. A healthy workforce reduces absenteeism, increases labour productivity, and attracts foreign direct investment. An improvement in health enhances labour productivity and leads to gains in economic growth. Improved education will reduce the skills gap; enhance productivity, and foster innovation, while better healthcare will ensure a healthier and more productive workforce.
CHALLENGES FACING STRATEGIC ECONOMIC REFORMS IN NIGERIA
INSECURITY AND INSTABILITY
Security challenges have deeply impacted Nigeria’s economy, particularly in regions like the Northeast, where the Boko Haram insurgency has displaced millions and devastated local economies. Banditry, kidnapping, and communal conflicts further exacerbate instability, disrupting agricultural production and scaring away investors. Insecurity also strains government resources, as funds that could be allocated to development projects are diverted to security operations. Addressing these issues requires a multi-faceted approach that combines military interventions with socio-economic programs aimed at reducing poverty and unemployment, which often fuel these crises. Building stronger state institutions and enhancing community engagement can also foster stability and trust, creating a more conducive environment for economic activities.
POLICY INCONSISTENCIES
One of the most significant barriers to Nigeria’s economic development is policy inconsistency. Frequent changes in government priorities, coupled with poor implementation of reforms, have created an unpredictable business environment. For instance, shifts in foreign exchange policies and abrupt bans on imports or exports have left businesses grappling with uncertainty. This lack of continuity deters both local and foreign investors, who require stability to make long-term plans. Clear, consistent, and transparent policies are essential for fostering investor confidence and ensuring sustainable growth. Establishing independent regulatory bodies to oversee key sectors could help ensure that reforms outlast political cycles and maintain their intended impact. (To be continued).
THOUGHT FOR THE WEEK
“Strategic planning is worthless – unless there is first a strategic vision”. -John Naisbitt.
