Too often, one hears that it is not Nigeria that needs restructuring, but the minds of Nigerians and their leaders. Those who hold that view try to shift the emphasis away from structure to culture. They are wrong! Of course, culture matters, and leadership matters too. But empirical studies around the world show that it is the right institutions, the right governance structure, the right political system that creates the incentives that shape behaviour and drive political and economic progress.
The best insight on the powers of incentives came from Steven Levitt and Stephen Dubner, authors of the fascinating book Freakonomics. They said: “Incentives are the cornerstones of modern life – and understanding them is the key to solving just about any riddle.” They added: “An incentive is a bullet, a lever, a key; an often-tiny object with astonishing power to change a situation.”
Well, the idea is that if you change the incentives that people face, you will change their behaviour. For instance, the reason a person would drive recklessly in Nigeria but obey the traffic rules in the UK or the US is that the incentive structures are different: the system works in Britain and in the US, where rules are strictly enforced both formally as well as informally, through a social feedback loop; but the system does not work in Nigeria, because rules, even where they exist, are haphazardly enforced and subject to abuse of discretion. And so, while a person can get away with behaving badly in Nigeria, he or she cannot in the UK or the US. Thus, incentives, as Levitt and Dunbar rightly put it, have an “astonishing power to change a situation.”
But the most powerful incentive that can shape human behaviour and trigger cultural change for the better is the right institutions, the right systems, the right structures. As one scholar puts it, humans do not only “live culturally,” they also “live in cultures,” and are subject to symbolic structures that constrain, enable and guide people’s behaviour. Indeed, institutions, systems, and structures themselves embody culture; they emerge through a process of dialectical discourse about norms and values, which are components of culture. That is why institutions, systems, and structures must be underpinned by the right norms and values; otherwise, they will not work. Indeed, for any institution or system to endure, it must be values-based; only then can it be robust enough to trigger cultural transformation and create disincentives for those trying to live culturally in a bad way!
To be sure, there are contrasting views about the relationship between culture and structure. For instance, in his book The Wealth and Poverty of Nations, the economic historian David Landes cite many reasons why some nations are rich, and some are poor. But his overarching argument is that culture matters. As he puts it: “If we learn anything from the history of economic development, it is that culture makes all the difference.” He compared Indonesia and Nigeria, saying: “In 1965, Nigeria (oil exporter) had higher GDP per capita than Indonesia (another oil exporter), twenty-five years later, Indonesia had three times the Nigerian level”. Why? Cultural differences, he argues!
However, the economics Nobel laureates Daron Acemoglu and James Robinson provide a contrasting perpective in their best-selling book, Why Nations Fail. To them, it is the right political and economic institutions that make all the difference. They studied several countries that had the same characteristics, such as same geographical area or same culture, and found that those that had the right political and economic institutions were politically, economically, and socially more successful than those without such institutions. Countries, they argue, become prosperous because of different political and economic choices; the right choices create the incentives that generate prosperity. While not dismissing the role of culture, they insist that every culture, every behaviour, exists within the boundaries created by institutions.
Now, what are the lessons for Nigeria? Well, it must avoid the institutions that cause a nation to fail and embrace the ones that help a nation to succeed. Acemoglu and Robinson described two types of institutions: inclusive and extractive. Inclusive political institutions ensure the distribution and devolution of power, effective checks and balances and accountability in the exercise of power, while extractive institutions overcentralise power and are captured by vested interests. Inclusive economic institutions ensure that wealth and the means of getting wealth are democratised and widely spread across society. By contrast, extractive economic institutions concentrate wealth in few hands. Crucially, the authors argue that the existence of inclusive economic institutions is not possible without inclusive political institutions, so political institutions matter hugely.
Sadly, Nigeria lacks inclusive political and economic institutions. It is an extractive state, where wealth and political power are concentrated in few hands. As a result, instead of empowering the body politic, Nigeria’s extractive state weakens it. For instance, in the US, an inclusive state, billionaires emerge through a competitive free-market economy; in Nigeria, an extractive state, they emerge mostly through crony capitalism, through selective state patronage. But the greatest insight from Why Nations Fail is that inclusive political and economic institutions cause states to succeed, while extractive political and economic institutions cause states to fail. And truth is, Nigeria cannot unlock its enormous potential and engender prosperity for its people as an extractive state.
So, the type of institution, system and structure matters. For instance, another empirical study, conducted by Richard McManus and Gulcin Ozkan, covering 119 countries from 1950 to 2015, found that parliamentary systems produce superior economic outcomes than presidential systems because they have the attributes of inclusive institutions, such as checks and balances and accountability. It is not surprising that most of the world’s democracies run a parliamentary system of government or a hybrid of presidential and parliamentary systems.
This is where the right leadership comes in. In their seminal report entitled Escaping the fragility trap, Professors Paul Collier and Tim Besley said: “Good leaders change policies, but great leaders build institutions.” But Nigeria has never had great leaders that are committed to building institutions and creating a political and governance system that works for the country. Why? Well, blame the lack of political will and the absence of visionary and principled political leadership.
For instance, before he became president, Bola Tinubu made a profound statement, saying: “Nigeria can’t make progress under the current political system.” But now in power, he is exploiting the same deeply flawed political system. It is called the “iron grip of oligarchy” whereby those who opposed a system in opposition defend the same system in power, rather than changing it. But great leaders build institutions, and transform systems. For they know that it is all about the system, all about the structure. They know that a deeply flawed political and governance structure will cause a country to fail, not to succeed. That’s the lesson for Nigeria: the right structure, the right system, matters!
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