Nigeria’s market-driven stagnation

When I heard over the radio last week that the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, was launching yet another “market-driven” mortgage fund called the Ministry of Finance Incorporated Real Estate Investment Fund (MREIF) to address the nation’s staggering housing deficit, I could scarcely hold back a chuckle. Market-driven? […]

When I heard over the radio last week that the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, was launching yet another “market-driven” mortgage fund called the Ministry of Finance Incorporated Real Estate Investment Fund (MREIF) to address the nation’s staggering housing deficit, I could scarcely hold back a chuckle. Market-driven? Yet again? I asked myself as the broader implications of it all hit me.

I sincerely wish the Honourable Minister all the best in his latest endeavour of trying to solve deeply rooted political economic problems merely through the whims of the market. And no, I am no anti-capitalist or anti-market by any stretch. If anything, I do recognise the importance of markets and the free enterprise they engender for economic development in emerging contexts like Nigeria’s. Still, we must also recognise that markets do not develop in a vacuum or outside of some historical, social and even moral moorings. After all, markets, like schools or families, are still fundamentally social institutions. Nor are markets the perfect solution to all economic problems, in Nigeria or anywhere else.

Most importantly, I think, the idea of a “market-led economy”—and the sundry ideas associated with it such as privatisation, deregulation, and liberation, and so on—has been on the ascendance in Nigeria (and Africa) since at least the second half of former President Obasanjo’s eight-year tenure, by which time nearly all previous opposition to it had become mooted. True, some of the early opposition to markets in the 1980s and 1990s in Nigeria, and on the continent, had been rather more dogmatic than substantial. But markets and the values associated with them have been the force majeure behind the Nigerian economy over the past 25 years, and it is important to take a critical look at how markets have worked here specifically, if for nothing else for what we might learn about how to make them work better.

Has the idea of market-driven economy worked out well for Nigeria? I doubt it. The examples given to advance the suitability of markets and free enterprise for Nigeria’s (and Africa’s) development are often the very cases that illustrate their failures best. In Nigeria, the best, or at least the most frequently cited example in both academic and popular discourse of how a “market-driven economy” will deliver the good returns for society as a whole is in the telecoms industry. Before our telecoms companies rolled out mobile telephony services some 23 years ago in August 2001, there were reportedly 450,000 active telephone lines in Nigeria, that is, connecting just about 0.36 per cent of the total population of over 126 million in the country at the time, and nearly half of this number were in Lagos and Abuja alone.

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Today by contrast, there are about 205 million active mobile telephone lines in the country, a 91 per cent coverage, according to the database Statista. Who will argue against such a wonderful return for all, for the fisherman in the village as for the fish-seller in the town’s market square? Not me. Still, a deeper look at this story tells a narrative not of progress, but of stagnation. After all, progress is measured not only in numbers, but also in quality of service or other metrics. I have used a mobile phone in Nigeria continuously since at least 2004, and I cannot remember any time in which the service was generally different from what it is today, for better or worse.

The same problems with network stability in the early 2000s remain to date: dropped calls, breaking in service, unsent messages, distorting noises, and so on, particularly as data services have grown. In fact, there is a sense in which the quality of service today has grown only worse now than before. This is not the case in other countries at all. As I remember in England, a cruel joke among we Nigerians was that if you hear someone shouting “can you hear me, can you hear me now?”, they are probably talking to someone in Nigeria. That was more than a decade ago, and not much appears to have changed. In other words, while we all can agree that the market has definitely added value to the Nigerian telecoms sector in terms of the near universal coverage it has enabled, we can also agree that the quality of service has remained poor, if not abysmal, throughout this period. Why so?

Perhaps the most important element of the market, as a model of economic development, is also what is sorely missing in Nigeria’s particular variant of a market-driven economic development model: innovation, itself brought on by research and development. In a true market driven economy, research and development are at least likely to not only bring about higher rates of access and availability of products and services, of better quality and cheaper prices, but also help to result in new products and services and therefore whole new sectors and industries to the economy. And more than these, research and development also other multiplier effects in the form of more funding to the universities and research institutes, more funding for start-ups and youth enterprise programmes, and generally greater returns for the economy and society as a whole. All of these, in turn, mean that the society is investing in itself over the long haul, which ultimately results in greater political stability and significant reduction in all these nasty conflicts we have here.a

Yet, the Nigerian model of market-driven economy has not delivered on this most important dimension of the market. The stagnation in the telecoms sector is also everywhere evident. The electricity distribution companies are still unable to deliver even something as basic to electricity services as meters to consumers. The banks have not changed much in their services from what they were 25 years ago. Market-driven universities have improved access, but the quality of what they offer as degrees is something else. The pension funds have money but don’t know what to do with it. Indeed, had there been a proper market-driven economy here, Nigeria would not have had to wait to 2024 to welcome its first domestic private refinery. Indeed, the Ministry of Finance would not still be talking about using government money to establish a mortgage fund, when pension funds administrators, banks, the stock exchange and so on declare billions annually in profits.

The market, in short, is not working here as it works in other places, and we might as well rethink the entire approach. What we call “market-driven” here may be no more than a mechanism for transferring public money into the private pockets of a few, with little or no valued-added for the economy, let alone for the society as a whole.

But to hit the point home let us all remember that in 2001, there was no Facebook and Amazon was only still selling books online. WhatsApp, in particular, would not be born until 2009, and then only as a messaging service for text and image from one person to another. Today, you can make video conference calls with it, send and receive document folders, and set up channels to attract millions of followers to your content. Much the same story applies to the global tech giants: all started with one product or service, but quickly grew into not just many of products and services, but opened up whole new sectors and markets. Xiaomi, established only in 2010, is not only one of the world’s largest mobile devices making company, but is now into making electric cars and trucks.

During the same time, however, our telecoms companies have delivered just the same basic services, with the same abysmally poor quality. Market-driven economy indeed.