WASHINGTON, DC – Nigeria’s election on February 25 might be its most critical since independence in 1960.
After eight years of turmoil under outgoing President Muhammadu Buhari, the next government has an opportunity to embark on necessary and long-overdue reforms that, if done right, could usher in an era of explosive – and, one hopes, inclusive – economic growth.
The election comes at a difficult time for Africa’s most populous country and largest economy.
Nigeria is in the midst of a mounting debt crisis, with 100% of the country’s revenues going toward servicing its nearly $200 billion national debt, implying more borrowing to finance current spending.
Inflation is at 21%, owing in part to a chronic dollar shortage, and exacerbated by large-scale theft of the crude oil that accounts for more than 90% of its foreign-exchange earnings.
Unemployment is at 33%, with more than half of Nigeria’s young people currently unemployed.
This grim economic reality, together with the constant threat of terrorism and separatist violence, has led to a sharp decline in productivity, intensifying Nigeria’s already acute poverty crisis.
With 20 million school-age children out of school and 133 million of its 219 million people living in multidimensional poverty, wasteful subsidies on refined petroleum imports prevent the government from making the investments in education and health required to achieve sustainable economic growth.
The roots of Nigeria’s current economic woes lie in its decades-long leadership crisis. The country is a prime example of the so-called resource curse, which took hold as the 1970s oil boom turned the country into a rentier state in which rival ethnic and religious groups fight over control of the distribution of oil rents.
The transition to democracy, following nearly four decades of military dictatorship, led to further fragmentation, as Nigeria’s corrupt political elite has exploited rising poverty to buy people’s votes through various patronage schemes.
Whoever forms the government following this month’s election will inherit this toxic cocktail. To succeed, the next president must focus on transforming Nigeria’s political economy.
In particular, constitutional reform is needed to address immediate challenges like the debt crisis and rampant oil theft, as well as long-term structural problems.
When Nigeria obtained independence from the United Kingdom in 1960, it was a decentralized federation.
This enabled the country’s leaders to focus on economic governance and made them more attentive to people’s needs.
But a series of military coups, starting in 1966, has turned the military’s culture of centralized command into the defining feature of Nigeria’s political system.
As the federal government amassed more power, state governments became increasingly content with monthly allocations of oil revenues (which have dwindled over the past few decades) and little else.
Nigeria’s next president must restore the balance of power between the central government and the states, granting regional bodies and state governments greater authority over their jurisdictions’ economies and security.
This will not be easy, because the vested interests that benefit from the concentration of power will undoubtedly oppose any change that endangers their control of resource rents.
What Nigeria needs, then, is a visionary leader. The country has a thriving private sector, but the absence of a consistent governing philosophy has prevented the Nigerian economy from reaching its full potential, because the balance between the state and the market changes from one administration to the next.
But Nigeria needs more than a figurehead. Over the past few decades, political dysfunction has severely weakened the country’s institutions, undermining economic growth and national security.
The absence of strong institutional capacity has undermined both the current administration’s statist approach and previous administrations’ greater emphasis on the private sector, which led to regulatory capture, crony capitalism, and inequality.
Both approaches have failed to deliver prosperity. Without strong, independent institutions ensuring transparency and a level playing field, Nigeria’s next leaders do not stand a chance.
Lastly, Nigeria’s next government must address the poverty crisis by combining effective social protections with market-led initiatives that create opportunities to escape poverty traps.
Moreover, the country must address its rapid population growth, one of the main factors contributing to the increase in extreme poverty.
The fact that the leading presidential candidates have raised some of these issues during their campaigns is an encouraging development.
But the real question is whether Nigeria’s next leader will have the political vision, courage, and perseverance to reinvigorate the institutions needed to tackle the widespread corruption that has limited the country’s economic potential and immiserated its population. We will soon find out.
Kingsley Moghalu, a former deputy governor of the Central Bank of Nigeria, is President of the Institute for Governance and Economic Transformation, a public-policy think tank, and a non-resident senior fellow at the Council on Emerging Market Enterprises at the Fletcher School of Law and Diplomacy at Tufts University.
Copyright: Project Syndicate, 2023.