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Seven governance challenges behind Nigeria’s economic laggardness – Part 2

By Banji Oyelaran-Oyeyinka
16 November 2022   |   3:30 am
The World Bank frames State Capacity as Government Effectiveness (GE). It ranks GE in percentile, which compares the country’s position among all countries covered by the aggregate indicator.


Seven State Capacity Challenges as the sources of Industrial Failure
The World Bank frames State Capacity as Government Effectiveness (GE). It ranks GE in percentile, which compares the country’s position among all countries covered by the aggregate indicator. Zero (0) corresponds to lowest rank, and 100 to highest rank. This ranking corrects for changes
The percentile rank for Nigeria was 14.42 % in 2021, according to the World Bank collection of development indicators, compiled from officially recognized sources. The average ranking for 2021 based on 192 countries shows the country with the most effective governance with the highest value was in Singapore, which was 1st, the lowest value was in Yemen at 192 position. Nigeria ranks 165 out of 192.  The domains and sub-domains consist of a wide range of factors; not a subject of this paper.

I will enumerate a few of them as the seven critical challenges of governance. I focus specifically on industrial governance. The seven are:
(i) Quality of public services, the quality of the civil service and the degree of its independence from political pressures;
(ii) The quality of policy formulation and implementation;
(iii) The credibility of the government’s commitment to industrial policies.
(iv) Ease and cost of doing business; (v) Infrastructure and transportation,
(vi) Consistent Effort towards Economic Diversification, and (vii) Security including ability to defend industrial and economic assets.

The below show the ranking for Nigeria over the last twelve years. I will not discuss these in detail but suffice to say that the case I cited earlier exemplifies the issues quite clearly. This is the pattern over the last forty years.

There is clearly a lack of effective government capacity as demonstrated by the cases cited. Ineffective state institutional instruments explain in large part the widespread failure of industrial programs. There are significant deficiencies within the industrial structures of the country including lack of organized high-level skills and capabilities necessary to operate and maintain facilities.

Governments are indispensable to economic functions and markets particularly but sadly, bureaucratic processes have proved more of barriers than solutions. Infrastructure and transportation have caused diverse problems resulting in high transaction costs. The more backward a country is, the more critical the government role. It is doubly problematic for economic growth when an underdeveloped private sector co-exists with ineffective government.

State and government effectiveness result in strong service delivery including the supply of physical infrastructure, which consists of a host of components such as transport, power, and other utilities. These factors have serious effects on production and firm productivity.

Critically, human capital is the largest component of global wealth, accounting for two thirds of total wealth globally. While rich technologically advanced nations prioritize human capital, poor countries have developed a chronic affinity with natural capital which accounts for 9 percent of wealth globally, but makes up nearly half (47 percent) of the wealth in low income countries1.

What should be done to ensure Effective Governance for industrial progress
It is hard to decouple the political economy and national leadership and governance from what befall universities, companies, S&T laboratories and research institutions. For oil-rich nations, oil wealth tends to be a barrier to building and nurturing quality S&T institutions that undergird industrial and scientific dynamism.

National institutions have been degraded because bureaucratic and political elites are deeply entwined in corruption, patronage, and granting of privileges to friends and associates rather than to the most competent. Bad governance has been far more debilitating and explains in large part why oil bonanzas over several decades have undermined the performance of Nigeria’s oil-dependent economy.

(1) Reduce and Rationalize the Scope of the State and ensure bureaucratic independence from political pressures
President Goodluck Jonathan, 2011, set up the Presidential Committee on Restructuring and Rationalization of Federal Government Parastatals, Commissions and Agencies, under the leadership of Steve Oronsaye. The committee submitted an 800-page report on April 16, 2012, which recommended the abolition and merger of 102 government agencies and parastatals, while some were listed to be self-funding. The report revealed a high level of competition among several overlapping agencies, which had not only created ill feelings among government agencies but also brought about unnecessary wastage in government expenditure. There were no fewer than 250 additional agencies, commissions and parastatals created through new legislative bills in the National Assembly. For instance, according to the 2012 Oronsaye report, there are 106 public-funded core research and quasi-research centres spread across the country, including a full-fledged institute for the study of Trypanosomiasis. Only about 10 percent of their funds is expended on core research work with the rest going to staff salaries and procurements.
The Report also identified 50 agencies without any enabling laws and 55 others not under the supervision of any ministry! This phenomenon results in high personnel cost as “many of them receive more budgetary allocations for personnel than they require because that component of their budget is usually inflated”. Several of them are also “obvious duplications of existing bodies” which then underscores the fact of “overlaps and enormous wastage of scarce resources”.

Four of these agencies are beyond scandalous: National Agency for Population Programmes and Development; Population Activities Fund; Population Fund Activities Agency and Population Research Fund!2
Recommendation: Implement the Orosanye Report urgently. Most agencies exist only as conduits for corruption. Focus investment on few critical Science, technology and industrial areas and fund them to global standards.
2.0 Invest more deliberately in Infrastructure for Industrial Manufacturing
Infrastructure and economic growth are closely related. We estimate Nigeria’s infrastructure deficit at $100 billion annually.

To be continued tomorrow

Professor Oyelaran-Oyeyinka is senior special adviser to the President on Industrialization, African Development Bank (AfDB)
Professorial Fellow, United Nations University (o.oyelaran-oyeyinka@afdb.or). He delivered this as recently.

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