One thing is clear, the kind of economic system adopted by a country factors heavily into the success or failure achieved by such a country. An economic system simply represents a system adopted by a country that guides how it produces, distributes, and allocates its goods, services, and resources.
In today’s world, most of the developed and successful developing countries adopt many elements of the capitalist or market-based system and this has been critical to their growth and development. This article aims to provide context into what capitalism is all about, where it exists in Nigeria and why capitalism and capitalist policies are needed in Nigeria.
Capitalism as an economic system
The great American investor, Warren Buffet describes capitalism as an absolute miracle that enables people to unleash their potential. Capitalism by definition is an economic system that involves private ownership and individual rights when it comes to the means of production and distribution. A capitalist economy is one where market forces (i.e. demand and supply) play a major role in the economy with little or no government regulation or intervention.
Capitalism is a system widely adopted in key ways by the world’s top economies such as the USA, China, the UK, Germany, Singapore, Canada, etc. Before 1979 China was economically poor and stagnant, and this was because the economic system it adopted was a strictly planned economic system also known as a socialist system, which is one where the government controls the means of production, distribution, and allocation.
In 1979, under the leadership of paramount leader Deng Xiaoping, China adjusted its economic system to a system with more market and capitalist influences, and these changes are responsible for China’s economic revival, where it is today, the 2nd largest economy. China has seen economic growth of about 6% and more in the last 40 years, has lifted more than 400 million Chinese from poverty and now it is home to financial and technology giants such as Alibaba, Tencent, and Bytedance among others.
Capitalism and Nigeria
It must be said that no country strictly practices capitalism, most economies around the world are mixed economies with either high or low capitalist input. Nigeria, in economic terms, is a mixed economy with a growing and much-needed capitalist input. In Nigeria, capitalism within our mixed economy is seen in sectors where there is a combination of two things, the first being private businesses who are primary drivers of production and distribution of goods and services, and the second being that the government’s only role is that of regulation and nothing else.
This capitalist dynamic between private business driving a sector and government regulating is seen in sectors that are growing and improving the lives of Nigerians. Key examples of hugely capitalist sectors in Nigeria are banking, broadcasting, cement, ICT, media, telecommunication, and trading. The telecommunications sector for example has seen a dramatic change in the last 20 years due to policy changes that allowed private businesses such as MTN, Glo, and Airtel to operate in a sector once dominated in the past by the inefficient government player called NITEL. Today we have an efficient telecommunications sector that meets customer demand and is driving innovation in another sector like ICT because it is driven by private businesses and regulated by the government through the NCC.
Even in sectors where there is the heavy involvement of the government such as Oil and Gas most of the production and efficiency happens within the Joint Venture not because of government enterprises like NNPC or NLNG, but because private businesses like Shell, Chevron, Total, and Mobil are critical growth players who provide financing, technological know-how as well as much needed infrastructure in this sector.
Why Nigeria needs more capitalism
The reasons there should be capitalism and pro-business policies and laws in Nigeria are quite straightforward. Firstly, what drives the economy when it comes to production, distribution, and allocation of resources are businesses and market participants, not the government.
Secondly, the economic activities of businesses and market participants are what provide the government and the economy with tax, export, and foreign exchange revenue. Finally, the economic activities of businesses and market participants are responsible for the innovation and wealth of a country and this is due to their dynamic nature and their ability to adapt to change.
While capitalism is here and thriving in many sectors within the mixed economy of Nigeria, many key sectors need more private business presence than government involvement. Reducing the government’s role in the economy of Nigeria is a major way for the country to achieve sustainable growth and development for its population. Key sectors of the economy such as power, ports, waterways, solid minerals, refining and value-added agriculture (i.e. palm oil, cocoa, rubber) are in need of more capitalism and pro-business policies.
Refining is a typical example of how capitalism and pro-business policies are essential to the growth and development of Nigeria. For many years the refineries in Nigeria have been owned and operated by the government and by every measure, these government enterprises in locations like Warri, Kaduna and Port Harcourt have been so highly inefficient that it begs the question of why they exist at all. Due to pro-business policy changes in this industry, it is expected that the Dangote Refinery (a private refinery) would be in operation in the 2020s. The Dangote Refinery is expected to process 650,000 barrels of crude on a daily basis, a processing amount more than all the government-owned refineries combined, and if the results of Dangote Cement is a barometer of success, then refining as an industry is expected to be a key driver of revenue, growth and supply of refined products to the Nigerian economy.
There you have it, some clear reasons why the Nigerian economy should be more open and deliberate in adopting more policies that are pro-business and capitalist in nature. Capitalism is and has proven itself to be a key driver of growth, wealth and development to many top economies in the world. It is therefore imperative that policymakers and decision-makers in Nigeria adhere to what works if Nigeria is ever to truly fulfil its ambition of being one of the top economies in the world.
Contributed by Frank Ebomah