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Summary: Professors Acemoglu, Johnson, and Robinson have demonstrated through rigorous empirical studies that a country's welfare is fundamentally shaped by the quality of its political and economic institutions and Nigeria’s have been captured by powerful interests perpetuating extractive systems.

Introduction

The 2024 Nobel Prize in Economics, awarded to two Massachusetts Institute of Technology professors, Daron Acemoglu and Simon Johnson, along with University of Chicago economist, James Robinson, offers a sobering lens through which to examine Nigeria's deepening socioeconomic crisis. The prize was granted to the three scholars for their research on "how institutions are formed and affect prosperity." This year’s prize-winners’ work explains why Africa's former largest economy continues to flounder despite its enormous potential.

Architects of institutional theory

Acemoglu, Johnson, and Robinson (AJR) have demonstrated through rigorous empirical studies that a country's welfare is fundamentally shaped by the quality of its political and economic institutions. This defining role of institutions provides insights into the reasons some countries succeed, and others fail. In fact, it is the central theme of Acemoglu and Robinson’s acclaimed 2012 book, "Why Nations Fail," which argues that “inclusive institutions” – those that allow and encourage participation by a broad segment of society and protect individual rights – foster economic growth and prosperity. In contrast, “extractive institutions” – those that concentrate power and wealth in the hands of a few – lead to stagnation and poverty.

Johnson, who served as Chief Economist of the International Monetary Fund (IMF) between 2007 and 2008, did not co-author the book, but the trio of researchers are frequent collaborators, with their most influential work being on the institutional theory of development. Robinson, also a notable expert in the field of economics, was previously a Harvard University scholar for 11 years. Acemoglu, described by economist, Alex Tabarrok, as "an absolute monster of productivity" when it comes to research output, has been particularly influential in establishing how institutional frameworks determine economic outcomes.

Deteriorating socioeconomic indicators

The stark reality of Nigeria's institutional weakness is reflected in its rapidly deteriorating economic indicators. The country has witnessed an alarming decline in its gross domestic product (GDP), falling from Africa's largest economy to third place in 2023, behind Egypt and South Africa, following the naira devaluation by President Bola Tinubu's administration. The IMF projects a further slide to fifth place by the end of 2024, trailing two other countries – Algeria and Ethiopia. More troubling is the consistent erosion of living standards, with output per person contracting by an average of 2.9% annually since 2015, culminating in a dramatic 25% plunge from $2,162.6 in 2022 to $1,621.1 in 2023.

The manifestation of lack of institutional soundness extends across multiple sectors. The quadrupling of petrol prices from N238.11 in May 2023 to N1030.46 by September 2024 has triggered a cascade of inflationary pressures, particularly in food prices, thereby intensifying the hunger crisis that millions of Nigerians are facing. This economic distress is occurring against a backdrop of widespread insecurity, where Boko Haram and its splintered faction, the Islamic State West Africa Province (ISWAP), are still posing significant threats to the Nigerian people. Kidnapping for ransom remains a repulsive growth industry. Other forms of violent conflict – from armed herdsmen to banditry – continue to plague communities across the nation.

Tales of institutional decline

It takes time to build and strengthen institutions. But because Nigeria was a colony and quickly integrated into the global system post-independence, it leveraged the exposure to build and keep political and economic institutions that are fixtures of modern, Western-style democracies. However, despite their sparks of performance, the institutions have struggled to find consistency and longevity in achievement.

According to the theory of institutional development advanced by AJR, adopting inclusive policies is essential for societal institutions to perform better. At the best of times, the performance of Nigerian institutions is hindered by the limited vision of the political elite for building a united and virile federal republic. In recent years, many of the country’s vital institutions have relapsed into their worst performances. Hence, the reason the economy is on a downward spiral in terms of the welfare of the citizens.

The following short commentaries highlight some of the declining institutions and their inevitable impact on the polity and economy. (This section of the article focuses on the institutions and deliberately not on individuals.)

Independent National Electoral Commission (INEC): On the list of Nigerian institutions that are disoriented, INEC would rank high. Going by a time-honoured democratic ideal, the Nigerian electoral body is supposed to ‘return’ to office persons that are duly elected in free and fair elections conducted by it. But this has proven to be a tall order as the country is polarised by religion and ethnicity, and its elections have become much more important than governance.

The general elections in Nigeria’s First Republic (1963-1966) were preceded by two national censuses. The results of the 1963 national population recount reversed the ones of the 1962 census, which showed the South was more populous than the North. This set the stage for the disputed 1964 federal election. The subsequent regional elections in 1965 witnessed violence and rigging in the Western Region. These early post-independence elections significantly limited the role of the electoral body at the time, the Federal Electoral Commission, to conduct free and fair elections as the power of incumbency at the federal level was used to undermine the political opposition with the aim of fostering northern political dominance in the country. The ripples of crisis that ensued led to the first military seizure of power in January 1966 and the outbreak of the civil war the following year.

With the presidential elections of 1979 and 1983 (the period spanning the Second Republic) being apparent keen contests between the three major parties then, various electoral malpractices were deployed, marring the elections. In the transitional period of the 1990s, the military Heads of State tinkered with the names of the national electoral body when their intention was to hang on to power. Early in the Fourth Republic, the political elite’s consensus on power rotation between the North and South of the country did not make the elections less competitive. But fair competition increasingly became disfavoured by the political gladiators, and INEC’s officials have grown in being the decisive factor in the elections.

The electoral debacles have had the effect of reducing the interest of the electorate in elections. As such, voter turnouts have continued to decline since the 2003 general election. The 2023 presidential election returned a president who won 37% of the votes, in an election marked by widespread voter intimidation, vote suppression, and violence. While a whopping N313.4 billion was released to INEC to conduct the election, and with electronic voting system being the major cost, the central election server allegedly went offline at the vital time for electronic transmission of results from the polling units. Till date, INEC has faced no accountability for the expensive, actual or contrived operational failures that marred the election.

All of these have had the cumulative effect of INEC being an incompetent institution, superintending elections that are acceptable only to the winners announced by the electoral body. Also, its announcement of results is no longer final in deciding high-stake elections.
 
The military: The powerfulness of nation-states is determined by the strengths of their economies and militaries. Nigeria was created 110 years ago with the potential of being a powerful State, even if it was then a colony of Great Britain. At independence in 1960, Nigerians were rightly brimming with hope, given the country’s relatively large population, huge landmass that is mostly fertile, expansive coastal areas, and being surrounded by much smaller countries. The country started to manifest significant soft power right after its independence, playing major roles in anti-colonialism and anti-apartheid movement in Africa.

The Nigerian military’s strength was particularly demonstrated in its contributions to peacekeeping missions of the United Nations around the world and the decisive peace enforcement role it played in ending the civil wars in Sierra Leone and Liberia in the late 1980s to early 2000s.

But the Nigerian military was quick to be distracted after independence, although its history predates the founding of the country. Some of its senior officers first seized political leadership of the country in 1966. This insubordination to the constitutional civilian authority (notwithstanding the political crisis at the time that was used as justification) was an exercise in self-immolation of the military’s officers and rank-and-file members. Many fine military leaders were killed in the coups of the 1960s to the 1990s. With young officers leading the country and the wantaway Biafra Republic, they plunged the country into a civil war that was catastrophic not only in terms of civilian deaths but also military losses.

However, the Fourth Republic appears to be dealing a different but also heavy blow on the military. To sustain the democracy, the civilian presidents have tended to prioritise political control of the military over its continued professional leadership growth. This has meant early retirement for senior officers to make way for the appointments of military heads that the presidents are inclined to work with. The stratagem has been successful in preventing military seizure of political power. However, it has also allowed the military to retain an influence on the fringes of politics.

This disorientation of the military by political leaders that are not always nationalistic in their worldviews can explain why insecurity has been a major challenge in the country. From initial insurgent activities by a handful of Islamist agitators, insecurity in the North has festered to include terrorism, banditry, kidnapping for ransom, and others, and has spread to the other parts of the country. And despite the gallantry its officers and soldiers are known for, the military was unable to nip in the bud what became oil theft of industrial proportion in the oil-producing Niger Delta region.

Of course, democracy and a professional military can grow side by side as seen in other advanced and emerging world power nations. But in Nigeria, the history of the antagonism of democracy and the military has meant the weakening of both in the current republican government stretching beyond two-and-a-half decades.

The police: Nigeria maintains federal police, whose recruitment and command structure is centralised. It is hardly a workable arrangement for a country that is sharply divided by geographical features, religion, ethnicity, and vision of progress. The Nigeria Police can at once be seen as an expressed ambition of the country for national unity and a pretention to it. First organised for regime protection, its functioning has broadened but largely for the protection of powerful members of the society.

Like most Nigerian institutions, the police grapples with institutional disorientation. The force’s leadership is regularly purged through forced early retirements of more senior officers to make way for their juniors to lead, for the political convenience of the president in office. The men and women of the force are poorly paid. Armed with guns and afforded meagre pay cheques, many of them are seen at ‘check points’ extorting money from motorists. The police barracks are a metaphor and a glaring picture for Nigerian institutional decay. And in many reported cases, criminals outmatch the operatives in weaponry. The indignity of the institution has also included the use of the law enforcement officers in fomenting electoral malpractices or offering protection to those doing it.

The reform imperatives of policing in Nigeria are obvious. Restructure it to include federal, state, and community police. Let the police have operational independence. Adequately fund it and pay its operatives decent wages and emoluments. And make it an accountable institution. But as with situations that experience delay in interventions, it is increasingly difficult now to implement these reform measures that should have been introduced decades ago. But until this is done successfully, the police will remain unresponsive to public need for security, while it continues embarrassing itself and the nation by its unprofessional conducts for which it may not be solely blamed.

The judiciary: The Nigerian judiciary is the most enduring of the country’s arms of government, post-independence. During the coup d’etats the country has experienced, the military would take over the top executive functions of government and sack the legislature. But the courts were allowed to continue functioning. This longevity ought to have strengthened the judiciary and made it self-assured. But somehow, the institution is manifesting the opposite outcomes.

Like most Nigerian institutions at birth, the judiciary was initially vigorous, benefiting from colonial legacy and well-trained judicial officers. Judges were socially unheard or unseen. Nevertheless, the moral authority of their voices rang from the benches, through their adjudication of civil and criminal cases. The nation also waited with bated breath on the pronouncements of the Supreme Court on constitutional disputes, as its interpretation of the constitution is final and binding.

But the public perception of the judiciary has recently changed. A 2022 report, “The State of Freedom in Nigeria Report”, funded by the Washington D.C.-based National Endowment for Democracy, found that 71% of Nigerians lack trust in the judiciary. The decline in the perception of the institution is concurrent with falling public trust in other government institutions, including those mandated to tackle corruption. This is as the judiciary has become increasingly involved in deciding electoral matters and as the welfare of judges has become subject to the generosity of leaders of the executive branch of government rather than direct fiscal appropriations to the judiciary.

With judges inundated by what should have been unwanted political cases, the nation is seeing judgments in which the judges refrain to back with sound legal opinions. One of the most befuddling cases was the Supreme Court’s declaration of someone who received the fourth-highest votes in a gubernatorial election as the winner of that election.

In recent years, a Chief Justice of Nigeria (CJN) who was believed to be sympathetic to the opposition party was suspended and later resigned following allegations of misconduct against him. These incidents happened between when the result of the 2019 presidential election was announced in favour of the incumbent president and when the Supreme Court was to rule on the appeal seeking to overturn the result. Three years later, an internal memo signed by 14 Justices of the apex court revealed accusations that the successor CJN was diverting budgetary allocations of the judiciary and denying Justices of the Supreme Court basic work tools and training. A few days after the ‘unprecedented’ public revelation, the CJN resigned, citing ill-health.  

The judiciary exists as the last hope of the common man. Where the hope of legal justice is diminished, the nation will drift towards anarchy and lose the ability to emerge as a well-functioning market.

The legislature: Nigeria’s incumbent legislature is the 10th National Assembly (NASS). Seven of the Assemblies have existed in the Fourth Republic, by far the most enduring in Nigeria’s history of constitutional democracy. At the federal level, the country practices a bicameral legislature, and at the state level, the legislative arm of government is unicameral. Ordinarily, this is a good setup for a representative democracy. Whereas, the US, with a population estimate of over 340 million and a total landmass of 9,372,610 km2, has 100 Senators and 435 members of the House of Representatives, Nigeria with estimated 230 million population and 923,768 km² in total landmass has 109 Senators and 360 members of the House of Representatives.

But instead of a hyper representation of the aspirations of Nigerian people in the NASS, the lawmakers are committed to essentially their own career interest. They are one of the highest paid legislators in the world and consume a disproportionately high percentage of the country’s financial resources. In 2014, appropriation for the NASS with a total 469 members or 0.0002% of the country’s population was 2% of the year’s budget. And they continue to ask for more, although they would be embarrassed if their current total emoluments are publicly disclosed. Therefore, members refrain from making the disclosure.

The most important law that the Nigerian populace has yearned for in the last few years was electoral reform, one that ensures that actual votes count as enabled by electronic voting and electronic transmission and collation of results. After much posturing, and with the passing of the Electoral Act 2022, the nation’s elections are still riddled with old issues without effective framework to electronically checkmate the falsification of results.

The 9th Senate was described as a “rubber stamp” of the executive. The current one may be accused of being an extension of the executive arm of government. Both chambers of the current NASS function in contravention of the “tripartite system” that insulates the distinct roles of the three arms of government through the doctrine of separation of powers, which is strengthened by the principle of checks and balances. Accordingly, the term “state capture” has become more popular in describing the country’s current political reality, denoting the overwhelming control by an overbearing executive arm.

The recent senate approval of the securitisation of the N30 trillion Ways and Means Advances by the Central Bank of Nigeria (CBN) to the federal government glossed over the illegality of the accumulation of the lending above its legal limits. This is besides the contribution of such liquidity surfeit to the country’s high inflation. Also, the award of the contract of N15.6 trillion for the Lagos Calabar Coastal Road did not follow legal due process, neither was the first payment instalment appropriated. These constitute direct erosion of the powers and functions of the legislature.

By not always upholding the rule of law, the NASS is undermining the country as a viable democracy and investment destination. Research by Xiujie ZHANG and Weihua LIU concludes that “In order to attract more inward FDI into the host country, the overall level of Rule of Law should be enhanced.”

The presidency: The introduction of US-style federal system of government in Nigeria in 1979, and the constitution underpinning it, was a military imposition. The system to be operated by elected civilians, therefore, drew influence from the absolute power wielded by the then-military head of state. Thus, the Nigerian presidency, which has not imbibed the accountability ethos of its Western counterpart, is powerful and unaccountable until the next electoral cycle. Today, it executively controls the institutions that constitutionally should hold it in check and moderate the exercise of its enormous power to promote public good.

Nigerians have thought that such a powerful institution should be headed by a ‘strong’ individual. But while the president should not shy away from the exercise of the full constitutional power of the office, any notion of strength – or powerfulness – outside of this is an invitation of autocratic governance. And so, at a gathering of lawyers in the country in 2018, the then-president powerfully asserted: “Rule of law must be subject to the supremacy of the nation’s security and national interest.” But once the law is subordinated in one area, there is no telling the other areas to follow.

Even then, the Nigerian presidency has served to advance ethnic and vested interests than national ones. The notion that it is a turn-by-turn affair for the major ethnic groups in the Fourth Republic has fostered limited competency in government, bred division, and is currently unleashing the worst economic nightmares on Nigerians.

Central Bank of Nigeria:  The CBN is Nigeria’s reserve bank. Through the CBN Act 2007, the Central Bank became an independent economic institution of the country. Like other modern reserve banks, the CBN is empowered to independently conduct monetary policy to achieve price stability, economic growth, and full employment. It is also saddled with the supervision of banks. In the mid-2000s, capital reform of the banks by the CBN drove economic growth and the growth of the Nigerian middle class. It demonstrated what the country can achieve with a competent and visionary leader.

But the euphoria did not last. The success was limited by the compromise of a regulator that unconventionally hogged the limelight, which enabled bankers to game their shareholders and inevitably pay scant attention to risk management. What followed this era of mixed outcomes was a course correction, before subsequent mutations from the apolitical institutional role of the CBN. With the 2015 election won by an opposition candidate, the role of the Central Bank in indirectly funding that election was exposed. Political meddling has since become the cause of instability in the leadership of the monetary institution.

Under the past leadership of the apex bank, the CBN created a multiple exchange rate system, leaned on development finance that turned out to be a scam precisely because of the phony rice pyramid it unveiled in Abuja as a statement of success of its Anchor Borrowers’ Programme, broke the law with reckless abandon through advances to the government beyond legal limits, and the then-incumbent governor audaciously sought to be a candidate in the 2023 presidential election while remaining in office.

The governor has since been replaced by another that is trying to clean the Augean stable. But what the incumbent is doing in this regard pales into insignificance compared to the economic impact – which is distinguishable from the market impact – of the foreign exchange reform the CBN has introduced. Together with its monetary policy of hiking interest rate with significant pass-through to commercial borrowers, the foreign exchange reform has contributed to rising inflation, low productivity, and investment and job losses.

And so, the credibility of the CBN remains in doubt, not by any misdeed by its individual or collective leaders now, but by the outcome of the policy it has embraced.

National Bureau of Statistics (NBS): With the advent of the Fourth Republic, which marked an intent by the nation to move away from the issues that have undermined the economy for decades, the reform of the NBS was carried out. The statistics agency started to provide data updates on the macroeconomy with regularity and expanded its research coverage. It recently had a brilliant economist as the head of the agency and Nigerians couldn’t be prouder of the work he was leading.

But the work of the NBS could be incorrectly viewed as a praise or rebuke of the government. Its work is to provide data insight, which is important for policymaking and demonstrating the impact of policy. But as, for instance, the unemployment chart continued to rise, NBS stopped publishing the data. Between Q4 2020 and Q3 2023, the jobless data was not published.

Under the new leadership of the statistics agency, a new methodology for unemployment has been introduced. And the methodology, rather than jobs created by government or private organisations, has dramatically lowered the national unemployment rate. From 33.3% in Q4 2020, the national unemployment rate dropped to 5.0% in Q3 2023 (with the use of the new Nigeria Labour Force Survey), which counterintuitively compared well with US unemployment rate of 3.7% in the same period.

Disputation of data by NBS is nothing new. The opposition party – now the governing party – scoffed at the national output data in 2013 following the rebasing of the GDP. Ahead of the next election at that time, it did not serve the political interest of the party to accept that the economy was doing so well, and for Nigeria to have become the biggest economy in Africa. Under the current horrendous economic reality Nigerians are facing, NBS data is relevant when it confirms it and is ignored when it suggests, like the slower August 2024 inflation data, that a macroeconomic indicator is turning bright. This situation, therefore, perpetuates unscientific determination of knowledge in a society that needs to enter the 21st century without further delay.

Political parties: Political parties are the primary institutions for producing political leaders in electoral democracies. In their international bestseller, “How Democracies Die”, Steven Levitsky and Daniel Ziblatt identified political parties as a ‘guardrail’ of democracy. Therefore, beyond their primary aim of capturing political power by winning elections, political parties have the responsibility of preventing the derailment of democracy. In the advanced democracies, political parties are clearly ideological. This means the contest for power is done mainly through pitches of ideological programmes to the electorate, thereby limiting the scope of the contest – for instance, one that excludes violence.

Although a federation, independent Nigeria under a parliamentary system started with parties with regional – and not ideological – bases. This is not to say that some of the leaders could not be identified as conservatives or progressives. But regional affiliation was stronger, and in each of the regions one party tended to be dominant. In the Second Republic, the country’s federal, multi-party presidential system gave more national orientation to the parties. Although the first two republics were short-lived, the parties and their leaders were easily linked to the development in their regions.

In the political engineering for the even more fleeting Third Republic, two parties were created by the military leader for the politicians to join based on their ideological inclinations. That experiment was not ripe for result before it was ultimately sabotaged by the annulment of the 1993 presidential election. Subsequently, the country flirted again with multiparty system, but one that would likely produce only one major candidate.

The Fourth Republic has featured a multiparty system that has coalesced into two dominant parties, with fringe candidates running under the much smaller parties. The exception of a strong showing by a smaller party was in 2023 when a third party put up a fight that was supercharged by the youth. Nevertheless, the two major parties are ideologically unrecognisable. Neither can be pigeonholed into a main ideology – and this has not played out to be a good thing. It has limited the policy choices presented to the electorate; for example, all the three leading presidential candidates in 2023 said they would end the petrol subsidy programme. But more damaging for the democracy and the polity is that the two dominant parties are unable to limit the scope of the contest for power, thus political assassinations, election-day violence, rigging, vote-buying, and other electoral malpractices are par for the course for them.

Nigeria’s democracy is said to be ‘nascent.’ But the political parties don’t assure that the young democracy is growing.  

Nigerian Television Authority (NTA): The NTA captivated Nigerians in the late 70s to the early 90s. Its stations provided news and entertainment and educative programmes to Nigerians. Its presenters were some of the best professionals in broadcasting that the country has produced. Some of them also remain fashion icons.

But the NTA started on a wrong footing as the only institution for national television broadcasting. It was launched in 1977 after the military merged the government’s television stations with the intent of controlling the information that was beamed into the homes of Nigerians and to promote national unity the government’s way. NTA operated as a monopoly. And by competing with itself, it was inefficient.

The inefficiency has caught up with the national broadcaster. The licensing of private TV stations has compounded the competition brought on by the stations floated by many state governments. NTA used to have the slogan “you can’t beat the reach.” But according to a 2023 data provided by Statista, NTA’s reach in Nigeria was beaten by Channels Television, BBC (TV and radio), CNN, and TVC News.

The glory days of NTA, like those of many other Nigerian governmental institutions, are for now in the past. Like in many spheres of life where the government provides public services, the private sector, residential associations, and homeowners have picked up the slack. While the inefficient government establishments continue to draw significant amounts of public resources, Nigerians have moved on to private domestic or international providers. This will make it harder for the public agencies to make a comeback. Unfortunately, there are many institutional gaps that the private sector cannot fill.

The foregoing indicates that institutional reforms, rather than tweaking market policies, are critical to revamping the Nigerian economy. If the political and economic institutions begin to function well, the economy will start to perform well.

NNPC Limited (NNPCL): As required by the Petroleum Industry Act 2021, the national oil company, Nigerian National Petroleum Corporation (NNPC), transformed into a private limited liability company, NNPCL in 2022. The legislation, amongst its other provisions, stipulates the transition of NNPC as both a regulator and operator in the oil and gas industry to a full-time operator, allowing the new entity to operate with greater commercial autonomy and efficiency.

Despite its new status, NNPCL remains fully owned by the government. The expected joint ownership with other investors and the possibility of further transformation into a publicly quoted company have yet to happen.

NNPCL inherited the assets and liabilities of the defunct NNPC, including its four moribund refineries. Despite missing the eighth deadline since 2015 for the Port Harcourt refinery's turnaround maintenance, no new completion date has been provided. Instead, the Senate is investigating the $1.5 billion spent on the refinery's rehabilitation in 2021. Rather than fixing its own refineries, NNPCL became the sole offtaker for a private mega refinery, built during the years the national refineries remained idle. Now, the company has shifted from this role, opting to import petrol, further straining the naira and failing to resolve the lingering petrol scarcity.

NNPCL's inefficiency is well-known. A more pertinent debate is whether the company is meant to be efficient and transparent. If so, the last president, who served as petroleum minister, and the current one would have ensured the company’s operations are based on these standards. Instead, NNPCL's financial performance remains opaque. Recently, the company claimed humongous profits and no major financial obligations, only to later reveal it was owing over $6 billion to international traders for petrol imports.

As part of its roles in the upstream sector, NNPCL manages Nigeria’s joint ventures with international oil companies, holding a majority 60% stake in the operations. However, investment in oil exploration in the country has fallen short. The pipeline infrastructure for transporting crude oil from the onshore and shallow water oilwells has deteriorated and been sabotaged for years, causing severe economic and environmental damage to oil-producing regions, where oil spills have contaminated water bodies and destroyed farmlands. Consequently, due to inadequate investment and industrial-scale theft, Nigeria is now unable to meet its oil export quota.

Under the national oil company, the Nigerian oil industry has faced significant mismanagement. Despite crude oil exports accounting for over 90% of government’s foreign exchange revenue for decades, the sector has been severely undermined. With oil export shortfalls, the naira is depreciating in value, government deficit financing is increasing, poverty levels are rising, and the country is ill-prepared to finance its energy transition.

Comparative analysis: Nigeria vs. Chile

One of AJR's best-known research papers, "The Colonial Origins of Comparative Development," published in 2001, shows a strong correlation between a country's protection against expropriation, a measure of institutional quality, and its income per capita. Over 50% of the variation in income per capita across countries is associated with this institutional index. The authors then illustrate their finding with a comparative analysis of the contrasting trajectories of Nigeria and Chile. Specifically, they show Nigeria as being in approximately the 25th percentile of the institutional metric and Chile in the 75th percentile. This result suggests that improving Nigeria's institutions from the bottom quarter of countries ranked by the quality of their institutions to the level of Chile could potentially lead to a seven-fold increase in Nigeria's income per capita.

Curiously, both nations had comparable per capita incomes of $1,654 in 1982, according to World Bank data. Four decades later, the divergence is striking: while Chile's per capita income has increased nearly tenfold to $17,093.2 in 2023, Nigeria's has actually declined to $1,621.1, leaving its citizens poorer than they were 41 years ago. This disparity is not mere coincidence. As AJR's research demonstrates, it reflects fundamental differences in institutional performance.

Challenges of performative governance

The current administration's response to these challenges exemplifies what can be termed as "performative governance" – actions that create the appearance of reform while avoiding substantive institutional change. Unfortunately, many Nigerians have bought into these theatrics. The recent cabinet reshuffle, which expanded rather than streamlined the number of ministers from 48 to 50, illustrates this tendency. Despite dismissing five ministers and appointing seven new ones, the reshuffle retained or reassigned many underperforming officials, suggesting a preference for the political musical chairs game over meaningful reform. The scrapping and merger of some ministries and creation of the Ministry of Regional Development appear to be an exercise in bureaucratic reorganisation as opposed to clear strategic intent. Meanwhile, the discussion among some public commentators is whether the tepid cabinet reshuffle will ameliorate economic hardship in the country.

Barriers to effective reforms

An influential 1999 paper by Acemoglu and Robinson on political transitions provides crucial insights into why reforms prove so elusive. The authors argue that societies can become trapped in a cycle where extractive institutions persist because they provide immediate benefits to those in power, even as they undermine long-term development. The paper emphasises how societies controlled by wealthy elites are resistant to democratic consolidation and fiscal stability. It highlights how disenfranchised groups, particularly the poor, can instigate social unrest or revolution, especially during economic downturns.

This analysis perfectly captures Nigeria's predicament, where there is ample government’s resistance to the expressions of the constitutional rights of citizens to peacefully protest or voice out their yearning for a better country. The country’s economic challenges, exacerbated by corruption and mismanagement, aptly exemplify the paper's assertion that highly unequal societies face significant obstacles to achieving inclusive governance.

The central theses of AJR’s prize-winning research underscore the need for structural reforms that address the root causes of inequality and promote sustainable growth in Nigeria. The path forward for the country requires fundamental institutional reforms in three critical areas.

Recommendations for reform

Strengthening the rule of law: First, the rule of law must be prioritised to ensure protection of rights and consistent execution of the social contract between government and the people. This means not only ensuring the impartial enforcement of laws, particularly in cases involving powerful interests, but also putting the citizens' welfare front-and-centre in government decisions.

Combating corruption: Anti-corruption efforts must move beyond rhetoric to establish robust accountability mechanisms within public institutions. This requires strengthening oversight bodies, protecting whistleblowers, and implementing transparent procurement processes. The current practice of selective anti-corruption enforcement, often weaponised against political opponents while allowing allies to operate with impunity, must give way to consistent, apolitical application of anti-corruption laws.

Reforming governance structures: Governance structures need comprehensive reform to ensure efficient resource allocation and effective public service delivery. This includes streamlining bureaucratic processes, implementing merit-based recruitment and promotion systems, and establishing clear performance metrics for public officials. Giving directives to government officials to reduce their entourage without emphasising improvement in service quality based on specific benchmarks will not deliver meaningful institutional outcomes.

The Nobel laureates' research suggests that improving institutional performance is not merely about technical fixes, namely attempts to solve serious social or economic issues without addressing the underlying power dynamics and leaving their root causes unchanged. Real institutional reform requires transforming the ideological foundation of a political economy that perpetuates extractive systems. For Nigeria, this means confronting the entrenched interests that benefit from institutional weakness and building broad-based support for reform.

Conclusion

As Nigeria grapples with multiple crises, the clear takeaway from this year's Nobel economics prize is that without foundational institutional reform, policy tweaks and performative governance will fall short of achieving sustainable development. The big challenge lies in transforming the Nobelists' insights into practical reforms that can pave the way for Nigeria's journey towards shared prosperity. Without such changes, the country risks continued decline, with each passing year exacerbating the immense human and economic costs of poor institutional performance.

Jide Akintunde is Managing Editor, Financial Nigeria publications, and Director, Nigeria Development and Finance Forum. Martins Hile is a sustainability strategist and editorial consultant.