Understanding the Sorry State of Nigeria Economy through the Lens of Paul Collier’s “The Bottom Billion” (Part I) By Semiu A. Akanmu

Quite frankly, it is worth asking: Why are prices of products in Nigeria always increasing (inflation)? Why are there no jobs to do (unemployment) or no jobs that commensurate with one’s qualification (underemployment)? Why do we always experience job loss to company liquidation, macroeconomic instability? Why are businesses always crashing? The overall feeling is that, to earn a decent living, live a decent life, in Nigeria, just as other poor countries, is an “opportunity” of few. Nigerians living below the poverty threshold of $1 per day are more than 70%. Why Nigeria economy is in a sorry state, why are we poor, and what can be done about it? These are questions investigated by one of the leading developmental economists; Paul Collier.

Paul Collier’s “The Bottom Billion”, published in 2007 by Oxford University Press, has become a seminal book for students of public policy and developmental studies; a resource book for African economists and policy makers; and a good-to-have literature for any curious mind interested in a deep perspective and diagnostic discourse on why some countries are poor, and the remedies for the ravaging and monstrous symptoms of poverty. This essay attempts to present a review of the book, and use it to diagnose Nigeria economy –the proverbial stone that kills two birds.

“The Bottom Billion” is a 5-part book, with eleven (11) chapters in totality. Part one, with a chapter content, gives an overview of what is “falling behind and falling apart” for the poor countries –mostly Africa and Central Asia.  “This book is about four traps that have received less attention: the conflict trap, the natural resource trap, the trap of being landlocked, and the trap of bad governance…,” Collier writes. Each of these traps, as constructed as the poverty traps, is discussed in part two of the book, on a chapter-by-chapter basis. The part three, with one chapter, inquires what globalization can do for the countries of the bottom billion. Collier opines that the poor countries are marginalized from the growing world economy. Part four presents –with a chapter each –the four poverty-ameliorating instruments: Aid, Military intervention, Laws and Charters, and Trade policy for reversing marginalization. The fifth part, as the concluding part, presents an action plan for action. It is a thorough book, a final product of 8-year research; with not-less-than 22 peer-reviewed journal publications. It undoubtedly extensively pushed the boundaries of knowledge, with clear-cut empirical data, and statistically-fortified findings. 

On conflict as one of the causes of economic retrogression and impediments to growth, “seventy-three percent of people in the societies of the bottom billion have recently been through a civil war, or are still in one,” Collier posits. What causes civil war ranges from social, political, geographic, economic factors, and every country that has undergone one has the high tendency of re-experiencing same. In Nigeria, this story is familiar. Nigeria went through civil war in 1967 – 70, and the wound is not healed until this moment. This is the sentiment being currently exploited by the Independent People of Biafra (IPOB) movement, and because we have experienced it before, and for other reasons, we can still experience it, if ethnic agitations are not well managed –politically and socioeconomically. Apart from this full-blown civil war, Nigeria has been witnessing devastating interethnic conflicts: Ijaw-Itshekiri, Berom-Fulani settlers of Plateau state, Ife-Modakeke, Nupe-Yoruba, and the Eggon-Fulani of Nassarawa state. The human and material cost of the currently-battled Boko Haram insurgency cannot be overemphasized. People have lost jobs, economy has been grounded, and property has been shattered. The cost of prosecuting war against the Islamist militancy, of feeding displaced persons, of providing health care services for victims, and necessary state intervention for reconstruction of physical structures –schools, hospitals, police stations, markets, houses –incurred (and being incurred) would stimulate economic growth, if it is so directed. Conflict is one of the factors impending Nigeria economic growth.

Natural resource trap, resource curse, is also a factor affecting economic retrogression of “The Bottom Billion”, according to Paul Collier, and Nigeria perfectly fits into this narrative. This is very interesting. How will abundant natural resources, from gold to bauxite, crude oil to aluminium, to tin ore, be responsible for stifling economic growth? It is a paradox, but that is the reality. Considering Nigeria as a case study, our politicians have no regard to usually-repeated boom-and-burst’s cycles of oil market. Collier explained that the boom of the 1970s made Nigeria politicians to abandon other commodities such as peanut and cocoa. The Dutch disease –defined as “the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves. The currency inflows lead to currency appreciation, making the country's other products less price competitive on the export market” –induces rent-seeking style of governance, encourages lavish spending, stifles fiscal economy, and kills creative economy. Nigeria has its fair share. During the oil boom, politicians were embarking in white elephants projects of no or little economic prospects, equally using such as conduits of siphoning fund. As we are experiencing presently, only few states are viable, many cannot pay workers’ salary. Things have gone from bad to worse, to worst, and there is no hope in sight. There you have it: Natural resource is a poverty trap, and this is why the recent news of possible exploration of oil from the Lake Chad basin in the North-Eastern part of Nigeria is not a good one. We should rather farm and process our produces to finished goods for both internal consumption and export.

Read: Understanding the Sorry State of Nigeria Economy through the Lens of Paul Collier’s “The Bottom Billion” (Part II)

A Review of Dambisa Moyo’s Dead Aid, by Semiu A. Akanmu

Photo Credit: RealSociology.Edu

Aid; “a sum total of both concessional loans and grants”, from donors –mainly Western –to Africa countries has “hampered, stifled and retarded Africa’s development” is the thesis of Dambisa’s Dead Aid.  It is a tightly-argued book, combative, deep, factual, and above all, problem-solving.

Dead Aid –a 187-page, 2-part, and 10-chapter book –is an army on its own in the ranks of anti-aid dependency model for African development. It attacks the moralist and the liberal developmental narrative of Africa’s needs of aid to fight its plague of diseases, build its social and physical infrastructure, and alleviate the poverty of its people. Contrary to that, Dambisa argues, aid kills economic growth, stifles African entrepreneurship, promotes corruption, encourages coup and leadership despondency, and plagues African countries to more socioeconomic crisis.  

“Sub-Saharan Africa remains the poorest region in the world with an average per capita income of roughly $1 a day… Life expectancy has stagnated, adult literacy has plummeted, diseases ranging from bilharzia to cholera are on the rise, the income inequality is worrisome, political instability is raging”, she laments, and asks rhetorically, “Why is that Africa, alone among the continents of the world seems to be locked into cycle of dysfunction? Why is it that out of all continents of the world, Africa seems unable to convincingly get its foot on the economic ladder?”,  “The answer has its roots in aid,” she posits. 

Dead Aid draws a historical background to explain the rationale behind the constitution of aid development, and what would later translate to three organisations: The International Bank for Reconstruction and Development (known as World Bank), International Monetary Fund (IMF) and the International Trade Organisation. It explains that, even though the concept helped in reconstructing Europe after the World War II, same cannot be said of Africa because (a) no institutional framework, (b) no transparency and accountability, (c) no exit plan for aid injection, and more pathetic (e) not really meant for African development. 

Dambisa listed the supporting proofs (Marshall plan, IDA graduates, with conditionalities, and a micro-macro paradox) of aid proponents, and dismantled each with potent empirical evidences and logical counter-explanation. She enumerated how “culture of dependency” naturally kills creativity, its casual effect on corruption because freebies are normally recklessly spent, and civil war. She lamented the civil society’s commodification of poverty to ensure tap of grants continues flowing, the inflationary effect of aid, among others. 

What stand Dead Aid out are its alternative provisions. It strongly suggests viable and result-oriented routes that can be taken instead of the aid-dependency developmental model. It elicited capital market, foreign direct investment (FDI), trade, micro-financing and lending, remittances, and savings –with respective systematic planning and application. It, however, does not suggest an instantaneous shut of aid door. Rather, a planned phasing-out timeline is suggested so that African countries can explore and implement other dependable options. Likewise, it supports humanitarian aid which is occasionally meant as relief in times of natural disaster and epidemic. 

What remains a debatable hypothesis, in the absence of empirical evidences, is whether aid moderates/correlates economic retrogression or causes it. Dambisa, knowing the strength of such assertions, tactically avoids it. However, she made veiled attribution of that when she writes “…where private capital trumps aid every time is on the question of governance”, “Good governance trumps all”, and  “…in a world of good governance, which will naturally emerge in the absence of the glut of aid…” What the above portends is that, good governance causes economic development, and it naturally exists in the absence of aid. We can rewrite it, as a pseudo-conceptual model, that: Aid (antecedent) leads to bad governance (mediator), then leads to economic retrogression. 

Even though the question of what measures “bad governance” is open-ended, one is tempted to agree with the hypothesised linkage between aid, bad governance, and economic retrogression. In all African countries, South Africa and Botswana are most economically viable, according to Dambisa, and they took a non-aid-dependency developmental model.