Should governments be in business? What is the proper role of the state in the economy? How can governments best foster growth and development without being too intrusive? These questions are as old as the economics discipline itself. However, they are as relevant to Nigeria and other countries as ever.
While standard economic theory often prescribes that governments should maintain an arms-length relationship with businesses, the reality in Nigeria is that financial markets are not sufficiently mature, private sector capacity is often weak, and the state may be the only actor that can mobilize resources for national development, and often for the long haul.
China’s rapid development in the last thirty years, the experience of the East Asian Tiger economies in the second half of the 20th century, as well as critical role government played during the global financial crisis happened and the covid-19 crisis suggests that government involvement or interventions are often prerequisites for successful development. If nothing else, they are catalytic in purpose.
How then should (Nigerian) government be involved without crowding out private sector initiatives? How can governments develop commercial capabilities without wastage of precious resources or creating incentives for rent-seeking and corruption? When should governments be involved and when should they exit? And, if it is to be involved, what form should that involvement take? Should the government focus on being a regulator? Or, should it also be a purchaser, a promoter, a partner, and a shareholder? Does a higher level of government involvement in business help or hinder a country’s development?
When I began exploring and expanding on the various themes around the timeless debate of government in business, never had I thought that I would witness the about-turn of long-held assertions all in the space of one year. Where it was fashionable not too long ago to incline towards a “less government, more market” economy, the Covid-19 pandemic has turned almost everything on its head.
All at once, the government had to take control of everything – from the regulation of the procurement of surgical masks and personal protective equipment to oversight of both public and private healthcare facilities to the availability of test kits. On the economic front, some of the harshest, but deemed absolutely necessary, steps taken pertained to grounding all activity to a halt.
The pandemic’s consequences are mind-boggling – the Nigerian economy will definitely remain severely dented for a while. Unemployment has spiked and households are crumbling from healthcare fears and joblessness.
Very quickly, it has become virtually an “all or more government, no or less market” situation. Both the federal and state governments have scrambled to mount a series of rescue or stimulus packages, all aimed at a combination of providing relief to the people from the ensuing hardship and stimulus to kick-start the economy. Their packages, which are far larger than anything in recent memory, would have a long debilitating effect on the country and respective states’ financial wherewithal, some unfortunately, permanently.
The financial woes do not stop here – the government was duty-bound to bail out essential businesses. Given the local and global travel restrictions, airlines were badly affected. Hitherto, several airline companies were already struggling to balance their books. The pandemic has brought most of them, including the well-run ones, to their knees and presented the government, regardless of ownership, with bailout obligations. The list goes on.
Regardless of how long it will take for the global economy and of course the Nigerian economy to recover from the pandemic, my expectation is that once normalcy is restored, albeit new normal, the same debate and themes would re-emerge. It would once again revolve around the various roles that government should play and the extent to which it should intervene, especially in newer areas of innovation.