Why has state capitalism failed so abysmally in Nigeria but worked elsewhere

By Ayo Akinfe

(1) One good thing to have come out of Nigeria’s 2019 elections is that a few governors have woken up to the realisation that they need to work on their state’s internally generated revenue (IGR). It is crystal clear to them that you simply cannot provide good governance or any kind of infrastructural development when your running costs are about four times the revenue you generate

(2) Over the last four months, I know that governors Babajide Sanwoolu, Dapo Abiodun, Seyi Makinde, Rotimi Akeredolu, Ben Ayade, and Kayode Fayemi have all been making noises about increasing their IGRs. How they do it though is key because it is one thing to have a goal and another to actually have a coherent policy that works

(3) Between 1999 and 2019, we kept hearing the slogan “Government has no business in business.” This thinking came about as a result of the failure of state parastatals over the decades. We all saw how the likes of Nigeria Airways, Nigerian Railway Corporation, Nigerian National Supply Company, Nigerian National Shipping Line, Nitel, etc all collapsed abysmally. These state-owned ventures failed to invest, were not competitive, did not audit their accounts, never upgraded their equipment and as such stood zero chance of succeeding in a competitive world

(4) I can thus understand why Nigerians believe that state-owned ventures can never work but alas, the evidence from elsewhere proves that they do. For instance, the Ghana Cocoa Board (Cocobod) and Ethiopian Airlines are both wholly state-owned and can compete with any of their international rivals. Cocobod has raised Ghanaian cocoa production to nearly 1m tonnes, wooed processors and along with Ivory Coast fixed the global price at $2,600 a tonne, forcing buyers to pay more than the market price of $2,400 a tonne. Ethiopian Airlines for its part is Africa’s most successful airline with a fleet of 100, yes 100 aircraft!

(5) Those of you who are historians will know that the economies of countries like China, Singapore, Malaysia, the United Arab Emirates, India and to a lesser extent Japan are all built on the state being the major player in the economy. In all these countries, publicly-owned companies are highly profitable, produce quality goods and operate to international standards

(6) Even in Britain, historically, the economy thrived at its best when state-owned firms like British Leyland, British Steel, British Coal, etc ruled the roost. They all operated in a global competitive economy delivering quality and volume just like any private sector operator. They were not subsided by the government and generated profits the way any multinational private firm would

(7) Today, if you look at China, the same can be said about its state-owned companies. China is currently home to 109 corporations listed on the Fortune Global 500 but only 15% of those are privately owned. The China State Railway Group Company can compete with Siemens, Mercedes or Phillips any day and the China State Shipbuilding Corporation can compete with any shipbuilder on planet earth

(8) Between 1928 and 1940, Joseph Stalin was getting something like 28% annual GDP growth with a state-run economy. However, the impoverished foundation upon which Stalin’s five-year plans were built meant that the country was still poor after 12 years of phenomenal growth. In Nigeria, our case is kind of similar as we have an annual $100bn infrastructural deficit with a mere budget of $25bn. We kind of need year-on-year 20% GDP growth over the next 30 years to get out of this rut

(9) We talk a lot about the private sector but all the evidence shows that our private operators have been just as abysmally poor as our state operators. Look at Arik Air, Aero Contractors and Medview. In what way are they any better than Nigeria Airways? Also, are some of our privatised electricity companies not 10 times worse than Nepa? At least Nepa could pay its staff and its power cuts did not last for as long as what we are witnessing today

(10) As our governors look at boosting IGR, they need to keep an open mind. All the evidence from Nigeria shows that private sector operators can be just as greedy, short termist, corrupt, incompetent and short-sighted as public corporations. Indeed many of these so called businessmen are not actually enterprueners at all but industrial cowboys searching for a quick buck. Maybe the starting point should be drawing up a database of genuine industrialists. A man who for instance became a millionaire just because he was given an oil block or granted a monopoly import licence is not a businessman but a crony, who is part of Nigeria’s problem. When we hand privatised electricity companies to such people to run, it is delusional to expect power supply!