The Role of Government in the Economy. Overbearing?

The rhetoric about the Nigerian situation has been quite similar for the last few years, and your age doesn’t even matter! It has almost always been that of hope on the one hand and despair on the other. An average Nigerian would have heard more times how blessed, endowed Nigeria is, than (s)he has seen a public officer without the regular sirens and escorts to a routine meeting or function. It is almost impractical that a week passes that you don’t get a piece of news that questions your affection for the fatherland.

Thinking about the root causes of this despair is not a mean task. The issues are hydra-headed and would in no way be solved by one or two interventions. Ever wondered that regardless of the caliber of people we elect into Governance, especially the Executive, the outcome still remains the same? There is practically no state in Nigeria that feels out of place in Nigeria, as the obvious outcome of failure, poverty, and despair rings through. The Federal Capital Territory seems like it was designed for the best of Nigeria, but only a 20 minutes drive out takes us back to familiar sights. It is the same everywhere.

In my time, I have read a number of articles about what is wrong in Nigeria. I sometimes feel tired as we can all see and feel what is wrong. I seldom see materials about why Nigeria is the way it is. There are a lot of historical materials about how Nigeria got it wrong, but not enough on why we are still getting it wrong many years after. Lord Lugard, Colonialism, Great Britain, Civil Wars, etc have been given as reasons, but these causes are over 50 to over 100 years ago, depending on which we think. For the more contemporary analysts, we have heard resource control, corruption, tribalism, etc. Whilst all these points have contributed, I am not optimistic that removing these would significantly change our situation.

For the students of the classical economists, National Income is determined by the value of consumption (C), investments (I), government expenditure(G), and net export (X̄). Y=C+I+G+(X-M). From the above, the Government should basically have 2 roles, Spend Money (G) and introduce policies that would help C, I, G, and ̄X grow. Sadly, the Nigerian Government from time memorial has often embedded herself as the most important Economic Agent in the economy. The Government plays in almost all areas of the economy, not just as regulators but as service providers. They provide Housing, Water, Electricity, Education, Healthcare, Transport infrastructure, Airports, Telecommunications, Petrol, Gas, etc. In some of these cases, they act as sole providers. A line that can be drawn through the inefficiencies of the Agencies and Enterprises through which the services are provided.

The importance of the Market cannot be overstated, as it is a natural phenomenon. The market is a self-organizing system that is fairly difficult to kill. If you attempt to kill the market, it is created elsewhere and it is commonly called a Parallel Market, and in some other cases Black Market. In a market, everyone has a role to play, commonly buyers and sellers. The government also have their role to play either as a regulator or any of the economic agents (Buyer and Seller). In this context, the Government must regulate as an interventionist, otherwise, the Government creates an imperfect or a failed market. In the market being described here, the Government becomes the largest buyer or seller as the case might be. Today, we have examples in the Foreign Exchange Market, Petrol Supply, Tertiary Healthcare, Infrastructure, etc.

As awkward as this might sound, the Government is actually playing a role that was given to her by the 1999 FGN Constitution in Section 16(1). Though we can all argue the implied definitions, the meaning of certain words cannot really be misunderstood. Excepts is shown below. Emphasis is mine.

(a) harness the resources of the nation and promote national prosperity and an efficient, a dynamic and self-reliant economy;

(b) control the national economy in such manner as to secure the maximum welfare, freedom and happiness of every citizen on the basis of social justice and equality of status and opportunity;

(c) without prejudice to its right to operate or participate in areas of the economy, other than the major sectors of the economy, manage and operate the major sectors of the economy;

(d) without prejudice to the right of any person to participate in areas of the economy within the major sector of the economy, protect the right of every citizen to engage in any economic activities outside the major sectors of the economy

The Government has the above constitutional mandate with respect to the economy. The Government has tried to play this role, albeit disastrously as the shape of the economy is almost always in a downward spiral. The only time the performance of the economy was step-changed was when the Government allowed for the private sector to have a driving seat in sectors that were initially exclusive to Government, and the Government played an important role as regulators. It is no coincidence today that the 2 best performing sectors in the economy are Telecommunications and Banking (both are private sector-led, and regulated by the National Communication Commission and the Central Bank of Nigeria). To the best of my limited knowledge in Law, the above points in the constitution are non-justiciable (Government cannot be sued for not delivering).

The role of politics and politicians cannot be understated, as any attempt by the executives would be opposed by the opposition parties. Even the legislature would oppose this, primarily for optics. Their positions with respect to the adjustment of the price of petrol and electricity clearly shows where they stand. A lot of these positions are not out of malice at times, as they may not believe in the alternatives, especially as many of them grew in a Nigeria where the Government was the alpha and omega in producing a lot of benefits such as free education and healthcare, cheap water, electricity and petrol, just to mention a few. They forget there were just about 40million Nigerians in that time, whereas we are now currently over 200million.

Yearly, I hear the Federal Government stating their expectation of the new year or couple of years, without any sort of synchronization with the plans of the States Governments. States Governments would have their plans without synchronization with the Private Sectors who are providing Goods, Services, and Jobs to the people. There is no synchronization at all, and thus, it is not surprising that we do not meet those expectations year in year out. Last year, the President announced he was going to move out 100million people out of poverty (plausible), but there is no evidence to show that this has been linked to the 10-year plans of the businesses in the country, even the big business. I am yet to come across any materials that address the spread of the 100million people across the 36 States.

In winding down, could the major problem we have in Nigeria be that the Government is too tied down with a lot of their direct responsibilities to the people, and they have not been able to deliver ?. It is actually fairly difficult to deliver, even by the most competent of people without the Government reevaluating her role in the fulfillment of the demand of the people and the constitution? India was in a similar situation with us, bogged down by the overbearing nature of the bureaucracy in the Market. The shed off some of their Market limiting roles in the early 1990s, and we can all see their trajectory ever since.

There are a lot of Market failures in Nigeria, and they are often due to the Government’s role. It is important that the Government understands her role in the Market, and it is not as a Seller. The question then is, what would be the role of Government? Other than the protection of lives and properties from internal and external aggressors, they would be charged with setting and driving policies(all monetary and fiscal), enabling businesses, and intervention in the market as might be required. The government can intervene in markets by regulation, providing scholarships, fellowships, co-paying of health insurance premiums, tax credits, etc.

Whilst there are no silver bullets anywhere, I am fairly optimistic our situation would improve significantly (in the Long Run) despite the reasonable call for the “proper” federalization, resource control, corruption, tribalism, etc. That said, we still need to address all the limiting behaviours listed. Eventually, the market will always cater to all the players!

Olamide Eyinla shares his thoughts from Lagos, Nigeria