Back on Track? Nigeria's Hard Path toward Reform

Article excerpt

Nigeria's most recent presidential election demonstrated the country's fractious political situation and widespread lack of transparency. Throughout much of its post-independence history, Nigeria has suffered under a three-way geo-ethnic political divide that has helped breed corruption, a heavy dependence on oil, and a lack of economic development. President Umaru Yar'Adua, a member of the People's Democratic Party and handpicked successor of former president Olusegun Obasanjo, has inherited this system; ironically, many would argue that it is this corrupt system that led to Yar'Adua's election. Nonetheless, it will be his responsibility to increase accountability at all levels of government and continue economic reforms to encourage sustainable, broad-based development.

Nigeria's record on economic development has been substandard; according to the World Bank, it ranks behind only China and India in terms of absolute number of people living on less than US$1 a day, but it certainly does not display the accelerated growth of these Asian economies. This situation has much to do with the poor political choices made as a result of distorted economic incentives caused by Nigeria's resource curse. Even though, and perhaps because, it is endowed with copious oil reserves in the Niger Delta region, many governments since the 1970s have consistently failed to develop other sectors of the economy, particularly agriculture, upon which most of the population attempts to earn a living.

Furthermore, despite volatile prices, successive Nigerian governments have relied on oil for operating revenues. As a result, the tax system is rudimentary. Without taxes, the population loses a primary avenue of holding its government accountable. Overlooking development problems allows the government to pay off key supporters with oil revenues. Because the government can maintain its control by paying supporters, it lacks the incentive to provide public goods, which would win over voters in a functioning democracy. The private sector also suffers as the government has failed to sustain the proper institutions of property rights and contract enforcement.

While some of his economic policies followed the above trends, former President Olusegun Obasanjo attempted to change these tendencies. The IMF notes that the Obasanjo government took steps to eradicate government corruption, further civil service reform, and promote the Extractive Industries Transparency Initiative (EITI). The EITI, in particular, has been a key component of Nigeria's national development strategy; it seeks to transform Nigeria from an oil-dependent, failing state to a prosperous nation with regional acclaim. …