By Nasiru Ibrahim
In Nigeria, government policies to improve the economy often fail to serve the broader population. Instead of addressing systemic issues, these policies often become tools for political favouritism, corruption, and inefficiency, benefiting only a few. This results in greater inequality, inefficiency, and social unrest, leaving millions of Nigerians struggling.
The critical question is: Are these economic problems not necessarily created by private organisations enough to justify applying the Keynesian model in developing countries like Nigeria?
We need to examine Nigeria’s economic realities in light of Keynesian theory to answer this. While the theory suggests that government intervention can correct market failures and stimulate growth, such interventions often exacerbate the problems they aim to solve in Nigeria. By comparing Nigeria’s situation to Keynes’s assumptions, we can determine whether government intervention is more of a curse than a blessing.
Keynesian Economics and Nigeria’s Reality
Keynesian economics is based on several assumptions: income, employment, output, money supply, and investment. Let’s break down how these assumptions fare in Nigeria’s context:
Money Supply and Interest Rates: Keynes argued that an increase in the money supply reduces interest rates, which should increase investment, income, output, and employment. In theory, this should stimulate economic growth. However, in Nigeria, despite the Central Bank of Nigeria (CBN) increasing the money supply, interest rates remain high, and inflation continues to rise. This inflationary pressure discourages investment and undermines businesses, many of which struggle to survive.
Effective Demand and Unemployment: Keynes suggested that unemployment is caused by a deficiency in effective demand, which typically occurs during the downward phase of the business cycle. However, Nigeria’s unemployment crisis is not cyclical but structural, stemming from insufficient capital formation and inadequate resources. Even during periods of economic growth, unemployment remains high, revealing deeper systemic issues than those addressed by Keynes’s theory.
Investment and Marginal Efficiency of Capital (MEC): According to Keynes, investment depends on the MEC, which is determined by the expected return on investment. In Nigeria, the MEC and actual investment remain low, primarily due to instability, poor infrastructure, and weak institutions. The lack of investor confidence further hampers growth.
Saving and Consumption: Keynes viewed saving as detrimental to economic growth, as it reduces consumption, which affects income and employment. In advanced economies, excessive saving may reduce demand, but the opposite is true in Nigeria. Saving is necessary for capital formation, yet savings rates are already low. Nigerians spend more than 80% of their income on consumption, limiting capital available for productive investment.
The Role of Foreign Trade: Keynes’s model was based on a three-sector economy (households, firms, and government), while Nigeria operates a four-sector economy, with foreign trade playing a significant role. Imports and exports, especially of crude oil, heavily influence national income and economic performance. However, Nigeria’s dependence on imports and volatile oil prices highlights the vulnerability of its economic structure.
Government Intervention: A Curse or a Blessing?
Government intervention can either benefit or harm an economy. However, history suggests that government intervention has primarily been a curse in Nigeria. The country’s interventionist policies have been marred by chronic corruption, policy inconsistency, weak institutions, and political patronage, leading to inefficiency and social harm.
Several examples illustrate the disastrous impact of government policies:
The Anchor Borrowers Programme: In 2023, the CBN admitted that over 76% of the loans disbursed under the Anchor Borrowers Programme had not been repaid. The scheme, designed to support farmers, became riddled with corruption. Many recipients were political loyalists without agricultural expertise, undermining the program’s effectiveness and inflating public debt.
Misuse of Public Funds: In 2020, a leaked memo revealed that over ₦81 billion was paid out through fake contracts to party loyalists, with no actual work being done. This wasted public funds that could have been invested in schools, hospitals, or infrastructure, further deepening the nation’s economic woes.
Ghost Workers in Kogi State: Over 3,000 ghost workers linked to political patronage were discovered on Kogi State’s payroll. These fictitious workers were paid salaries meant for public service, siphoning funds away from essential government services.
Political Patronage in Government Programs: Programs like TraderMoni and SURE-P, initially aimed at alleviating poverty, were instead used to reward political supporters during election periods. In 2019, around ₦10 billion was distributed under TraderMoni, with no clear records of repayment or follow-up, reducing the program’s ability to address real economic problems.
The Power Sector Crisis: Nigeria’s power sector remains in shambles despite spending ₦2 trillion in bailout funds since 2015. Many areas receive less than 8 hours of electricity daily, forcing businesses to rely on expensive generators, which increases their operational costs and deters potential investors.
The 2019–2021 Border Closure: The government closed borders to combat smuggling and encourage local farming. However, this policy led to soaring food prices—rice, for instance, increased from ₦15,000 to over ₦27,000 per 50kg bag. The policy also harmed small traders and businesses, exposing the fragility of Nigeria’s local production capabilities.
The Mismanagement of COVID-19 Funds: During the COVID-19 pandemic, the government allocated over ₦500 billion for palliatives, but many Nigerians, especially in rural areas, saw no relief. In some cases, food items meant for distribution were found rotting in warehouses, while the funds disappeared without adequate documentation.
The Ajaokuta Steel Company: Over $8 billion (approximately ₦12 trillion) has been spent on the Ajaokuta Steel Company since the 1970s, yet the facility remains non-operational. Despite its potential to transform Nigeria’s industrial landscape, it has become a symbol of inefficiency and political exploitation.
Foreign Exchange Crisis: The mismanagement of Nigeria’s foreign exchange policy has led to multiple exchange rates, fueling corruption and economic instability. The naira now trades at over ₦1,600 to the dollar, creating further challenges for businesses and pushing more Nigerians into poverty.
NNPC Report (2022): The Nigerian government spends ₦6 trillion annually on fuel subsidies, which mainly benefit the wealthy and fuel importers. This massive amount could have been used to improve critical sectors like healthcare, education, or infrastructure. Instead, it adds to Nigeria’s debt and fuels inflation, making life harder for ordinary Nigerians and slowing economic growth.
National Social Investment Programme (2021): Programs like the N-Power initiative, which aimed to tackle unemployment, have been poorly managed. Despite billions allocated, only about 5 million people benefited by 2021, and many faced delays in receiving payments. The program failed to meet its objectives, wasting public funds and doing little to address Nigeria’s unemployment crisis.
EFCC Report (2020): Corruption remains rampant. The government loses ₦500 billion annually due to corrupt procurement deals. These misappropriated funds could have been used to improve infrastructure, healthcare, and education, yet they enrich a few, further deepening inequality.
World Health Organisation Report (2021): Despite allocating ₦100 billion annually for healthcare, only 30% is used for healthcare services. Much of it is lost to corruption or mismanagement, leaving Nigeria’s healthcare system underfunded and unable to meet the population’s needs, which worsens the economy’s overall productivity.
Federal Ministry of Agriculture Report (2021): Over ₦50 billion was meant to support farmers, but due to corruption, most of this money never reached those who needed it. As a result, agricultural productivity remains low, food prices rise, and the country struggles with food insecurity, exacerbating inflation.
Petroleum Industry Bill (2021): Delays in implementing the Petroleum Industry Bill have cost Nigeria ₦2 trillion in potential revenue. Failing to reform the oil sector has discouraged foreign investment, leaving Nigeria more dependent on oil exports and vulnerable to fluctuating global oil prices.
PIB Implementation Report (2021): The government has repeatedly delayed reforms to the petroleum sector, costing Nigeria about ₦2 trillion in lost revenue. This delay has hurt the oil industry and discouraged foreign investment, contributing to economic instability.
The Path Forward: Making Government Intervention Effective
For government intervention to be a true blessing, it must be transparent, effective, and focused on the long-term interests of the nation. Here’s how Nigeria can reverse the curse of misguided interventions:
Tackle Corruption: Hold government officials accountable for misused funds. Ensure that contracts are transparent and traceable.
Boost Local Production: Support farmers, manufacturers, and small businesses with affordable credit, reliable power supply, and the necessary tools to succeed.
Fix the Forex Crisis: Diversify exports, improve domestic production, and establish a unified exchange rate to stabilize the currency.
Create Sustainable Jobs: Focus on creating employment in agriculture, technology, and manufacturing—sectors that offer long-term growth, not temporary handouts during election periods.
Reduce Wasteful Spending: Cut unnecessary expenditures and focus on essential sectors such as healthcare, education, and infrastructure.
Stabilize Policies: Implement long-term economic policies that provide certainty and build trust among businesses and investors.
Strengthen Institutions: Ensure that institutions like the Central Bank of Nigeria (CBN) and the Nigerian National Petroleum Corporation (NNPC) function efficiently, regardless of political changes.
Invest in Power: Improve the power sector to reduce costs for businesses and encourage investment.
Promote Value-Added Exports: Move beyond raw material exports and focus on producing finished goods that earn Nigeria more revenue on the global market.
Involve the People: Engage citizens in decision-making processes and use data-driven approaches to inform policy.
Conclusion
For Nigeria to thrive, its government must rethink its approach to intervention. Instead of using economic policies as tools of patronage, it should focus on policies that genuinely stimulate growth, reduce inequality, and improve the lives of Nigerians. Only then can government intervention become a true blessing, rather than a curse.
Ibrahim is a graduate of the Department of Economics from Bayero University, Kano, and writes from Jigawa.
