Wednesday, August 26, 2015

Abiola Kazeem Olalekan — Why The Nigerian Economy Fails and the Path To Economic Prosperity

Nigeria’s historical trajectory is paved with several attempts by the government to engender economic development by regulating the economy. The outcome of this closed, state-regulated economic policy, however, is an economic failure so total that, apart from the oil sector that generates about 98 percent of the foreign exchange, every sector in Nigeria is struggling to raise their head above the water. The Nigerian state, thus, has failed to engender any tangible development.

The situation in Nigeria is not unique, in that countries that embark on state-regulated economy face Nigeria-style problems. In their classic book, Why Nations Fail, Daron Acemoglu and James Robinson argue, with rigour, that developed countries, such as the United State, the United Kingdom, Japan, and Botswana in Africa, developed by liberalizing their economy, but not until they, too, had failed to engender economic development through state-regulated economic arrangement. The book concludes that economic liberalization offers the best solution not only to underperforming economies, such as Nigeria’s, but also, in the long run, political instability, such as insurgency and terrorism.

In order to engender economic development in Nigeria, therefore, there is no alternative to economic liberalization. There is need for unlimited capital flow into and out of Nigeria in order to boost growth and efficiency, and the government should be reduced to an unbiased umpire, not actor, in the economic affair—thus, providing new opportunities for the diversification of the present monotonous economy and encouraging both foreign and locally-based firm to invest in the economy. Although, some administrations in the past have implemented certain numbers of policies to plant economic liberalization in Nigeria (for instance, the regimes of General Ibrahim Babangida in 1986 and President Olusegun Obasanjo in 2000); however, these attempts succeeded only to the extent that liberalizing the economy aligned with the political objectives of the political elite that initiated them. And as it turned out, Nigeria is still far behind on the ladder of liberalization, and the economy is still under the intense control of the government and some strong business interests.

The path to economic development is clear—economic liberalization; how to achieve it is even clearer—elimination of any obstacle to free flow of capital within and across borders. Economic histories of developed and developing countries prove it: there is no alternative for Nigeria, or any other country that seek economic development. Economic liberalization is the only path.

This short essay by Abiola Kazeem Olalekan is one of the winning essays in the SYPALA 2015 Essay competition organised by