Presentation by charles soludo at 4th PGLS, Aug. 2016

25/8/2016 4th Progressive Governance Lecture Series

CHUKWUMA CHARLES SOLUDO, CFR
Apc governors’ lecture series: august 25, 2016
25/8/20164th Progressive Governance Lecture Series

outline I: INTRODUCTION
 II: CONTEXT 1: GLOBAL ECONOMY AND THE GREAT UNRAVELING
 III: CONTEXT 2: NIGERIAN ECONOMY: OPPORTUNITY AND
THREAT OF THE OLD ECONOMY
 IV: TOWARDS A PROGRESSIVE RESPONSE: APC
STATES/GOVERNORS AS BEACONS OF CHANGE??
 V: CONCLUSION: COMMUNICATING CHANGE AND BUILDING
COALITIONS FOR SUSTAINABLE CHANGE!

I: INTRODUCTION
 Assigned Topic? “Building the Economy of States: Challenge of Developing
Inclusive and Sustainable Growth”. Has been focus of policy since 1962! Still
‘the issue’ today!
 Expectation? We can’t write a “blueprint” in a lecture. Only broad pillars
possible, while a “dedicated Team” sits to iron out the “Details”.
 Dealing with Twin Shocks? Oil/economic and political--- Response depends
on whether interpreted as “temporary” or “permanent” shocks; Denial versus
Reality?
 Our Thesis: “Growth in Nigeria/states won’t be inclusive if we don’t break the
dynasties of poverty and maximize States’ and Nigeria’s comparative and
competitive advantages. It won’t be sustainable if Nigeria is not secured and
politically sustainable; deal with the demographics and environment as well as
loosen the stranglehold of Abuja on the states”.
 Focus? “A Fragile State with a Failing Economy: Making Progressive Change
Work for Nigeria”
 As first Lecture since the inauguration of APC Government, May 2015??

INTRODUCTION……
 FOCUS: META-LEVEL ARCHITECTURE: NO STATE CAN DEVELOP
SUSTAINABLY IF THE OVERALL GOVERNANCE AND ECONOMY ARE IN
CRISIS--- A creative destruction process is underway, and we need to get the
fundamentals right, first: then meso, macro and micro level issues can follow
simultaneously
* AIM TO RAISE SOME GENERAL QUESTIONS/ISSUES THAT MUST
UNDERPINE SEARCH FOR INCLUSIVE AND SUSTAINABLE ECONOMY----
NOT TO WRITE ‘BLUE PRINT’ FOR SPECIFIC STATES
 Given resource base of each state (human and material), we can brainstorm on
state-specific programs to cope and compete in the evolving ‘new economy’….
 No prize for governing at a time of twin crisis: But there also lies the
Opportunity for Statesmanship! My commiserations and congratulations!
 I see collapse of oil price as Great Opportunity and Blessing for Nigeria….
 DESPITE ALL ODDS, I STILL SEE HOPE AND GREATNESS AHEAD,
PROVIDED…….

II: CONTEXT 1: GLOBAL ECONOMY AND
THE GREAT UNRAVELLING??: THE BURST
might BE HERE FOR A WHILE…
 Global Economy stuck in a “low-speed lane” and economies running out of instruments to
jumpstart rapid growth– liquidity trap and limited fiscal space due to debt overhang
 China is re-balancing: excess rural labour drying up, and wages rising; from investment-driven
growth to domestic consumption: Cooling-off mode! Opportunity? Chinese Flying Geese!
 European Union under pressure; the US struggling to maintain economic and military
hegemony; Emerging markets unravelling; Many primary commodity economies imploding;
etc….
 Commodity super-cycle is over: primary commodity price collapse (including oil and solid
minerals)
 Unprecedented inequality and youth unemployment
 Waves of anti-globalization and anti-immigration
 Terrorism and violence becoming a “new normal” globally
 Opportunity? Swaths of huge but cheap finance abroad; large market for Export-Oriented
Industrialization; Technology to leap-frog; etc.

Iii: context 2: Nigerian economy:
unravelling or opportunity?
 Nigeria as a Fragile State (the Failed/Fragile State Index)? FRAMEWORK FOR
NEW BEGINNING
 Ranked 54th in 2005; and deteriorated to 14th (2010-2012); 17th (2014); and 14th in 2015
and now 13th in 2016 out of 178 countries.
 Very High Alert:
1. Somalia; 2. South Sudan; 3. Central African Republic; 4. Sudan; 5. Yemen; 6. Syria;
7. Chad; 8. Congo, D.R.
High Alert:
9. Afghanistan; 10. Haiti; 11. Iraq; 12. Guinea; 13. Nigeria; 14. Pakistan; 15. Burundi; 16.
Zimbabwe; etc, etc.
Variables in the computation of Fragile State Index (U.S. Fund for Peace)
1. Uneven Economic development; 2. Poverty and economic decline; 3.
Demographic pressure; 4. Group grievance; 5. Refugees and IDPs; 6. Human
flight and brain drain; 7. State legitimacy; 8. Public services; 9. Human rights and
rule of law; 10. Security apparatus; 11. Factionalized Elite; 12. External
Intervention.
25/8/2016
4th Progressive Governance Lecture Series

Economy unravelling vs opportunity??
Fragile State: (a “Hostage Economy”– Hakeem Baba-Ahmed)
--- With widespread “localized trapped economies”– encaged by terrorism,
kidnapping, militancy, violence and desertification.
 --- Agitations for self-determination; and elite discord.
 FAILING ECONOMY?
 ** Oil price shock, and burst of rentier, consumption-based, dysfunctionally-
diversified economy (by-passed competitive industrialization)……….
 GDP compression from about $575 bn to about $296 bn (almost 50%); back
to 2nd position in Africa after South Africa; technically in RECESSION!
 Per capita income down from about $3,100 to about $1,582 *****
 Per capita income growing NEGATIVELY as population growth rate higher than
GDP growth

Economy unravelling vs opportunity??
 Nominal and Real Wage compression: Nigerian workers badly hit
 Unemployment especially youth, Poverty, and Inflation soaring--- compare to APC
promises??
 Capital market still in coma with trillions of Naira in asset loss – critical barometer
 Nominal Exchange rate on free-fall with crude capital controls – A moving target?
FGN budget in US$ as smallest in recent years $15- 19bn depending on exchange rate
and about 5% of GDP--- or approx. $80 per capita!
** Recurrent Exp. = 107% of total FGN revenue?
*** More than 100% of Capital expenditure is borrowed
AGGREGATE REVENUE IMPLODES: IMPORT COMPRESSION AND FALLING
CUSTOMS REVENUE; INCOME TAXES FALL ---- Fiscal Pressure; Rising DEBT and
Contingent Liabilities
PUBLIC SECTOR EMPLOYEES (States) OWED MONTHS OF SALARY……Fiscal
Viability of States?

Economy unravelling vs opportunity?
 STRUCTURAL COMPLICATIONS???
 1) Demographics and Migration/urbanization???
 Preparing for 400m population by 2050 (433 per sq.km or 722 per sq.km for land
unencumbered by desertification and erosion). Currently, 213 per sq.km (India 404; US 33;
China 143). Pressures on land and water; urbanization rate one of the highest in the world;
ageing pop without social protection; youthful pop with little education/skills: JOBS???
 2) Desertification, terrorism and violence; and North-South Migration----
 Desertification = 0.6km per annum (350,000 ha per annum): in 100 years, about 60km
southwards and increasing.
 55 million people in 11 states under serious threat (Adamawa; Bauchi; Borno; Gombe;
Katsina; Jigawa; Kano; Kebbi; Sokoto; Yobe; Zamfara) and these account for 40% of
Nigeria’s land: These are also the POOREST States in Nigeria.
 Crop yields in these states drop by 20%; and estimated $5.1bn lost in these economies per
annum
 Search for new grazing land and tensions over land; Deadly erosion especially in the South
East
 North-South Migration escalating: implications for citizenship questions and pressures on
land?

Economy unravelling vs opportunity?
 STRUCTURAL COMPLICATIONS
 3. Low Savings –Low Investment Trap (Paradox of huge capital flight in context of
capital scarcity): *** Foreign savings to fill the gap or innovative (forced) domestic
long-term savings
 4. Extreme (spatial and individual) concentration of wealth and inequality and
POVERTY
 5. Paradox: Huge excess capacity vs low absorption capacity
 6. Huge Infrastructure deficit especially transport and power
 7. Weak Institutions, pervasive corruption, and low value-for-money in public
expenditure
 8. Very low productivity and innovation
 9. Acute skill shortages: Extensive schooling with little education and skills
 10. Paucity of long-term finance for development
 11. Unsustainable twin deficits--- fiscal and current account
 12. Broken TRUST between Leadership-Citizenship (Taxation vs provision of
services)

Economy and opportunity beckons???
 Necessity as mother of invention? Finally, an OPPORTUNITY to actualize the 54 year-old
aspiration (since 1962 Dev Plan) for diversified and sustainable economy! Opportunity to
escape the OIL CURSE and RENTIER, consumption economy towards PRODUCTION.
 Huge Growth Reserves: Abundant cheap labour; Huge reserves of natural gas, oil?, solid
minerals; fallow arable land; extensive coastal land, high pop density for globally competitive
manufacturing; Diaspora resources; More diversified market economy with some “shock
absorbers”; cheap international finance; Huge elbow room for tax revenues--- can increase
from less than 5% to more than 20% of GDP: one of most under-taxed in the world! States can
learn from each other!
 We have been through this road before (see Shagari and Buhari 1—1981-85). SUCCESS
depends on whether oil shock is understood as temporary or permanent shock----hence
whether short-term demand management or long-term structural adjustment
 Fundamental Threat is Democracy with short-term electoral cycles and hence pressure for
“short-term” populist, albeit palliative response vs desired long-term but potentially painful
adjustment. Potential conflict between what the people “want” today vs what they “need”
tomorrow! A TIME OF CRISIS BRINGS OUT THE BEST OF LEADERSHIP!

IV: towards a “progressive response”…1
blame game plus trial and error coping
strategy
 Phase ONE: Seems to Assume shock is temporary; literally waiting for oil price to recover: POLICY
REGIME? More of the same +short-term DD management
 330 Working days (Mon-Friday): May 29, 2015 – Aug. 2016 (35.22% of effective working days until Dec.
2018)
 KEY PERFORMANCE? Fight against corruption and Boko Haram, and Treasury Single Account?
 2016 FGN Budget signals more of the same, with tinkering at the margins; bail-outs, borrowing, et
 Exchange rate and crude capital controls: Confusing trial-and-error of tried and failed neo-socialist
command and control policy regime of 1960s- mid 1980s. As predicted, quantities (employment and
output collapse)! Capital market comatose; capital flight with vengeance, private investment pulse,
inflation soars, and twin deficits exacerbate. Economy in Recession compared to APC 10% Growth; 3
million jobs p.a.
 Delayed, incoherent (dysfunctional), and incomplete adjustment exerting great toll on the economy
 OUTCOMES SO FAR (especially in 2016) SELF-INFLICTED by acts of omission and commission
 Nigeria would have avoided a recession: One year enough for blaming fall in oil prices; after that blame our
failures: “The fault, dear Brutus, is not in our stars but in ourselves”– Shakespeare– Julius Caesar.
25/8/2016

Extended coping strategy: “Emergency
economic stabilization bill 2016”….If true?
 A positive step forward: Akin to Shagari’s “Economic Stabilization (Austerity
measures) Act 1982??
 But must be seen as only “First Step”. Problems beyond short-term Demand
management!
 Premise of the Bill (if true?): Economic recession caused by insufficiency of
aggregate demand; but recession is largely supply-side, structurally, and
policy- induced?
 Focus so far? Stabilization plus reflation (basic pump-priming): The basis is
faulty, and could become race to the bottom.
 Transition to a Nigerian economy without oil cannot be sustainable by merely
pumping money into the system--- clapping with one hand! Where is the
Agenda for Supply-side/structural transformation?
 “Confidence grows at the rate that a coconut tree grows, but falls at the rate of
a coconut”: Investors don’t act like switch pumps.
25/8/2016

TOWARDS A “PROGRESSIVE”
RESPONSE….2
Delivering the promised ‘change’ towards
a Nigeria without oil???
 IT IS ‘CHANGE’ WITH A DEADLINE (No Second Chance to Create a first impression, BUT…)
 Sept 2016- Dec 2018 –607 working days; Jan – May 29, 2019 is lame duck season! TWO MORE ANNUAL
BUDGETS before next electioneering!
 ECONOMY NOW STUCK ON A “SLIPPERY MUDDY LANE” WITH A FRAGILE STATE
 WHAT ARE THE ‘7 IROKO TREES’ THAT APC WILL SHOW NIGERIANS ON ITS PERFORMANCE
SCORE-CARD BY JANUARY 2019??-- OUT OF THE BOX IDEAS FOR UNUSUAL TIMES?
 APC: Moving from an Election-winning coalition to a Governing Team (in control of FGN, and 23 out of
36 states, NO EXCUSES!)
 CHALLENGE? First time a govt in Nigeria will be required to “structurally transform” but without
external ‘conditionalities’. Can we have the discipline to self-regulate and make the hard choices---
especially with next elections in mind?
 Big Ideas to steer the economy to the next level?-- Need agg public sector spending of 15-20% of GDP;
unconventional monetary-fiscal-exchange rate-financial regime; structural and institutional changes;
infrastructure boom; unleashing the States; etc: In short, where is the APC’s ‘New Deal’ for Nigeria?

Apc governors as the “force of change’??
 ABUJA AS ‘FORCE OF CHANGE’ was for the old, oil-based, distributional system. For a PRODUCTIVE
ECONOMY, Change must occur from BELOW, but ABUJA must unchain the stranglehold
 APC GOVERNORS AS A LOBBYING GROUP FOR CHANGE AND SOUNDING BOARD FOR FGN???----
Two Hands to Clap: COORDINATE! COORDINATE!!
 HOW DO WE RECOGNIZE AN APC STATE WHEN WE SEE ONE? (Compare to NPN and UPN states in 2nd
Republic): What are the “Common Core” that define APC states?
 APC AGENDA FOR BREAKING THE DYNASTIES OF POVERTY: ADDRESSING BOTH EQUALITY OF
OUTCOMES AND MORE SO, EQUALITY OF OPPORTUNITY---- especially accessible and qualitative
education and health!
 Exporting Human Capital as Sustainable Agenda for Job Creation??? Where is the Agenda?
 WHAT IS APC’S POLICY ON ‘POPULATION MODERATION’ VS POVERTY REDUCTION?? Dealing with
Desertification/Erosion
 Power of Collective Action? If 23 States under APC are ‘progressive’, Nigeria in aggregate will be ‘progressive’.
If 23 APC Governors agree, you can literally change the Constitution of Nigeria: Don’t repeat the mistake of
the PDP---whereby ‘Opposition’ was largely from within.
 NEED FOR INSTITUTIONALIZED THINK-TANK?? Can’t drive sustained, productive change on ad-hoc, ‘as
the spirit directs’ basis. It needs COORDINATED THOUGHT PROCESS AND PROGRAMMING!---A BIG
BRAIN BOX!

Apc policy war room or pgf secretariat?
 Pressing the Re-Set Button: APC Manifesto Vs the Change Nigeria Needs??
 Transforming “Progressivism” from just a Name or Slogan, into an ideology/executable Agenda for
‘transformational change’?? (Experiment: Quiz for 5 leaders of APC per state on what APC offers to
Nigeria--- result will be greatest comic relief of the century!) Still nostalgia about the UPN, NPN, PRP
days--- with clarity about ‘Vision for Nigeria’ and HOW to get there!
 Take another look at APC Manifesto on the Website: Compare to Actual programmes?
 POLITICS ALWAYS TRUMPS ECONOMICS, although Sound Economics is Excellent Politics:
Sustainable Change is impossible without POLITICAL TRANSFORMATION OF NIGERIA!
 --- No successful transformation to a “productive and competitive economy” with META-Level
institutions designed for ‘distribution and consumption’
 Where is the APC’s Political Agenda for Competitive Federalism via fundamental Constitutional
Change, including fiscal federalism—taxation powers, rights over natural resources, wage setting, fiscal
responsibility, etc---- breaking from unitary-federalism of uniform standards to multi-speed federalism
with only minimum standards?
 A coherent agenda is possible whereby after transitional 5- 10 years, every penny from mineral resources
would be devoted 100% to build bridges to the future--- infrastructure and education plus Fund for
Future!
 In the new Federal Structure, we could transit from current Federation Account sharing to a matching
grants scheme from FGN--- in a more transparent and accountable manner; there are just too many
change ideas to debate
 Too many of existing laws are inconsistent with a regime for competitive production; new ones needed!

Apc policy war room or pgf secretariat?
 Operationally, the Secretariat or Policy War Room must be fully funded to, among other
things:
 A. Discover and disseminate global best practices on accountable governance and shared
growth;
 B. Peer Learning: Collect, collate, and study different approaches of different states on
different deliverables and budgets (e.g. short-term coping strategies with fiscal shocks and
restructuring, school feeding program; public works programme for employment;
environmental sustainability; urban renewal, etc) and provide comparative information. All
politics is local but innovative ideas can have universal applicability or adaptability.
Subsequent meetings of PGF (perhaps a day before or after NEC), to deliberate on “evidence-
based” presentations of best practices in the states and elsewhere??
C. Peer Review Mechanism
Secretariat to work with PGF to define and agree on measurable “common core” standards and
programmes for all APC States. Undertake periodic peer review (confidential in-house, peer
review evaluations)
D: Statistics and Baseline?? How do you measure performance? If you can’t measure it, you can’t
improve it! What is your baseline data? What are you trying to improve?---- GDP growth in your
state, employment, poverty, inequality, manufacturing-based jobs, indicators of ease of doing
business (See BECANS III for example).

Policy war room or pgf secretariat?
 Transiting to Diversified Economy, led by mass, export-oriented Industrialization
 With high pop density, highest urbanization rate, abundant natural resources, orchestrating mass
industrial revolution remains the KEY to a future economy without oil (correct the dysfunctional
diversification of the past: natural resource dependence on solid minerals and agriculture not
sustainable in the long-term).
 Where is the APC Industrialization masterplan? OR, Adoption of existing one?
 (Merely getting infrastructure and prices right won’t automatically ignite industrialization: it requires
intensive case study approaches---- Dangote or our big banks did not just happen: deliberate efforts
were set to “create them”.
 How does Nigeria strategically position itself to harness the Chinese Flying Geese for mass
industrialization?
 What is the APC’s stand on EU-ACP Economic Partnership for Africa and other TPAs?
 What is the APC’s agenda for Funding industrialization and transformation– borrowing or leveraging or
what??
 So far, much of what one reads about the Sectoral Strategies appear largely More of the Same--- just
tinkering at the margins here and there.
 There is huge and serious work to be done: HOW WE ADDRESS IT DEPENDS ON WHETHER WE
APPRECIATE THE STATE OF EMERGENCY OR WHETHER WE BELIEVE THINGS WILL SOON
RETURN TO ‘NORMAL’.

Conclusion: communicating change AND
BUILDING THE COALITION TO SUSTAIN
IT???
So far, a Mis-communication of the Change: Strategy is ‘backward-leaning’--- blame PDP; blame oil price;
blame corruption: Nigerians elected APC to sort out their problems. Assumption is that “things will soon
return to normal”…… maybe they won’t!
APC Govt to come clean with Nigerians: the old Nigeria with free rents no longer exists, and explain the
road to a more sustainable Nigeria…. Nigerians waiting for a costed program with a deadline!
“Be the Change you want to see”: “By their fruits, we shall know them”… Preach ‘change’ and tightening of
belts but ….. (Patronize ‘Made in Nigeria’ but they see the cars, dresses, shoes, etc;)
*** WHICH COALITIONS FOR SUSTAINABLE CHANGE ARE YOU BUILDING OR WILL IT BE A
FLUKE?
*** WHAT INSTITUTIONALIZED MECHANISMS FOR BUDGET COORDINATION BETWEEN FGN
AND PGF???
Generational Challenge: “Each generation must, out of relative obscurity discover its mission, fulfil it or
betray it”--- Frantz Fanon:
Can APC truly make ‘progressive change’ work for Nigeria?? History beckons! The clock is ticking!

Presentation by charles soludo at 4th PGLS, Aug. 2016

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Presentation by charles soludo at 4th PGLS, Aug. 2016