Institutional strengthening and rule of law

“How we measure development will determine how we do development.” Inger Anderson, VP Sustainable Development Network, WB.

ACCORDING to the World Bank, the total economic value of natural assets was $44 trillion worldwide, or $7,000 per person on average, while “intangible” capital accounted for the greatest component of total wealth – worth a massive $540 trillion worldwide in 2005. Yet the developing nations of sub-Saharan Africa especially, have historically viewed wealth from the prism of their stock of natural capital. Sustained growth as evidenced by improved livelihoods for the citizens of these countries remains a mirage. Fact is that natural capital is useful and will contribute to increasing wealth and well-being of nations only if it is well managed.

This is particularly critical for resource-rich (oil) nations like Nigeria where the resource in fact, becomes the source of diversion that moves attention away from fragility of local institutions. The oil (in this case) creates the illusion of wealth and therefore, wealth gets measured from the prism of maximizing its transaction potentials (produce more, sell more, sell high). For Nigeria, natural capital as percentage of total wealth of the nation, mostly represented by its hydrocarbon activities, sat at a whopping 147% in 2000. This may be a classic symptom of the very well documented concept of “resource curse.”

The totality of the wealth of a nation has three key inputs; the nation’s produced wealth (e.g. infrastructure), natural wealth (e.g. oil and gas) and intangible wealth (e.g. human capital and quality of institutions). Worldwide natural capital accounts for 5% of total wealth, while produced capital and intangible capital account for 18% and 77% of total wealth respectively, making intangible capital, in fact, the true wealth component of “wealthy” nations. It is worthy of note that the richest countries of the OECD are characterized by high intangible capital and low natural capital, while the poorest countries of sub-Sahara Africa are characterized by high natural capital and lower intangible capital. Explaining 90% of the variations of intangible capital are human capital and the rule of law index.

For nations like Nigeria therefore, mitigating risks and reducing barriers to sustained development must be driven by efforts to increase stock of intangible wealth. We have to urgently and actively redefine our measure of wealth and development by strengthening human capital and local institutions. This is only possible through strengthening of the rule of law. A critical look at most rule of law indexes reveals that the lowest quintile are populated by developing countries and yet these developing countries have carried out different measures – particularly by transplanting the laws and legal systems from developed countries – to modernize their legal system, but they have usually not been successful. These may be a summary of the situation of Nigeria where despite seemingly best efforts, there is a certain culture of disrespect for the rule of law.

The failure of rule of law to effectively impact on the institutions of governance in Nigeria may largely be due to the institutional and cultural differences that exist between the developed countries whose laws and systems Nigeria has tried to transplant in the past and the peculiar realities of the Nigerian state. There is no single prescription for development for all countries and, hence, proper measures that fit the institutions of each country should be taken to realize economic growth. Such a process will not necessarily have to reinvent the wheel. It has to provide pathways through which institutions can be strengthened as a means of growing the country’s intangible capital, of which the rule of law is the largest, strongest and most impactful component. The role of the rule of law in the following national development imperatives will necessarily guide the enquiries of a justice reform effort:

Eradication of poverty: “Poverty eradication is the greatest global challenge facing the world today and an indispensable requirement for sustainable development.” (UN SDG)

Natural resource management: “changing unsustainable and promoting sustainable patterns of consumption and production and protecting and managing the natural resource base of economic and social development.”

Human resource development: How can the nation engender emergence of a large community of citizen decision-makers able to initiate and harness the vast intellectual resource base necessary to drive sustainable development processes?

Development of “produced capital” and improvement of “property rights”: Produced capital include structures and infrastructure available in the country. It forms a strong component of the enabling environment (e.g., power, transportation networks). Development of strong produced capital is in the purview of the private sector. Mechanisms are needed to encourage private sector actors to take active roles in developing produced capital, which will mean contributing to shaping of government policies.
Protection of human rights and law enforcement: On the platform of entrenched human right protection efforts is the need to enforce the law and punish crime with no prejudice.

These five requirements for solutions-based effort towards justice reform for Nigeria are not exhaustive. They however begin to introduce a focused approach to achieving the ultimate outcome of improving the country’s stock of intangible capital, a surer and only way of measuring and articulating the true wealth of any nation. A high intangible capital mitigates against the resource curse, for example, by diverting attention away from the resource and placing attention on how the resource is managed as a contributor to the livelihood of the people. A true and focused contextual reframing of the Rule of Law represent the only way to achieve this developmental imperative for Nigeria, and in fact for sub-Sahara Africa.

Intangible Capital is by far the strongest contributor to the sustained wealth of a nation. For Nigeria and her quest for sustainable development, true focus, as a matter of urgency, has to be put into increasing the nation’s stock of intangible capital, of which strengthening of the Rule of Law is the most critical component. The 2014 index of the World Justice Project ranks Nigeria very low on almost all of the Rule of Law components, invalidating the position of successive civilian governments in Nigeria that have always held respect for, and promotion of the rule of law as their governing mantra. The current administration is presented with yet another opportunity at validation.

• Dr Olarewaju is director and co-founder of the Sustainability School Lagos. He is also an associate lecturer at the Centre for Petroleum, Energy Economics and Law, University of Ibadan.