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Navigating Competitive Clientelism for Industrial Policy Success: Possibilities For Nigeria

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  • Clean Technology Hub
Conference Paper

Navigating Competitive Clientelism for Industrial Policy Success: Possibilities For Nigeria

Abstract and Figures

The political settlements framework has emerged as a powerful tool in understanding the diversity of industrial policy outcomes across countries and within countries and sectors. In sub-Saharan Africa, many countries are characterized by more dispersed distributions of power, weak capitalist and middle classes, and weak technological capabilities of domestic firms. The general weakness of state capacity and growth-enhancing ruling coalitions has necessitated a rethinking of the state towards a conception of “extended statehood”. The corollary of this movement within the industrial policy space, and in light of political settlements insights, is a need to experiment with institutional flexibility and mandate extension of pockets of bureaucratic effectiveness, a need to study subnational variation in elaborated political settlements, and the role of international actors and forces in supporting or inciting growth-enhancing coalitions. After considering the precolonial origins of sub-Saharan political settlements, these experimental avenues within extended statehood are applied to the case of Nigeria.
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Paper presented at the Joint SARChI and YSI Young Scholars Conference on Structural
Change and Industrial Policy in Africa, 20-21 July 2021.
NAVIGATING COMPETITIVE CLIENTELISM FOR INDUSTRIAL POLICY
SUCCESS: POSSIBILITIES FOR NIGERIA
Abel B.S. Gaiya
1
The political settlements framework has emerged as a powerful tool in understanding
the diversity of industrial policy outcomes across countries and within countries and
sectors. In sub-Saharan Africa, many countries are characterized by more dispersed
distributions of power, weak capitalist and middle classes, and weak technological
capabilities of domestic firms. The general weakness of state capacity and growth-
enhancing ruling coalitions has necessitated a rethinking of the state towards a
conception of “extended statehood”. The corollary of this movement within the
industrial policy space, and in light of political settlements insights, is a need to
experiment with institutional flexibility and mandate extension of pockets of
bureaucratic effectiveness, a need to study subnational variation in elaborated political
settlements, and the role of international actors and forces in supporting or inciting
growth-enhancing coalitions. After considering the precolonial origins of sub-Saharan
African political settlements, these experimental avenues within extended statehood are
applied to the case of Nigeria.
1. Introduction
The transition to capitalism and from pre-industrial to structurally-transformed economies for
sustained growth has never been devoid of state intervention. “Market failures” are systemic
and systematic throughout this process, making state capabilities important for correcting such
failures and managing the rents created through interventions. What is key is for the creation
of rents, and the managing of those rents to ensure that they are directed towards growth-
enhancing uses rather than growth-reducing ones.
1
Abel B.S. Gaiya is a consultant at Clean Technology Hub and holds an MSc in Development Economics from
SOAS, University of London. Email: abelgaiya@gmail.com.
2
While most postcolonial states pursued various forms of industrial policy after gaining
independence, the East Asian states were most successful, compared to most Latin American,
Middle Eastern, African (Mkandawire, 2001) and other Asian states. A major internal barrier
to industrial policy implementation success which most African countries face is the nature of
their political settlements. A political settlement is “a description of the distribution of power
across organizations that are relevant for analyzing a specific institutional or policy problem”
(Khan 2017: 640). Within this strategic action field”, the interaction of national elite actors
determines how resource endowments and ideas shape institutional and policy choices
(Yanguas, 2016: 5). A ruling coalition which faces a fairly low degree of contestation within
the coalition and a low degree of vulnerability to excluded elites, as the East Asian Tigers did,
would be better able to focus on long-term development rather than short-term political
survival. The ruling elites would also be better able to create and maintain pockets of
bureaucratic effectiveness and cohesion with which to implement industrial policy (Whitfield
et al., 2015). Pockets of effectiveness are defined as public organizations that are relatively
effective in providing public goods and services that the organization is officially mandated to
provide, despite operating in an environment in which effective public service delivery is not
the norm.” (Roll, 2014: 24).
Due to precolonial and colonial legacies, many African countries emerged from the colonial
order with a weak business, capitalist and middle classes and weak bureaucratic capacity. A
weak business and industrial class weaken the capacity for bottom-up pressures for industrial
policy due to the absence of capitalist funding of, and consequent membership of, ruling
coalitions. Such weak classes are then unable to maintain the political influence to secure the
emergence and maintenance of pockets of bureaucratic effectiveness to implement policy in a
growth-enhancing manner (Whitfield et al., 2015). In addition, colonial political policy enabled
or worsened ethnic fragmentation.
Therefore, most sub-Saharan African countries are characterized by highly dispersed
distributions of power political settlements referred to as “competitive clientelism”,
“dominant party systems” and “vulnerable authoritarianism”. These produce either high
contestation among elites or their followers within the ruling coalition (dominant party system),
the ruling coalition’s high vulnerability to excluded elites and their followers (vulnerable
authoritarianism), or a combination of both (competitive clientelism) (Whitfield et al., 2015).
The result is a short-term horizon adopted by ruling elites, and high levels of growth-reducing
corruption as more side-payments are made to sustain coalitions and ensure political survival
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against excluded elites. This is worsened by the lack of systemic vulnerability experienced by
many African countries to place pressure for more concerted top-down initiatives. This
ultimately makes mutual interests between ruling elites and potential industrial capitalists
weaker or less likely to emerge; pockets of bureaucratic effectiveness less sustainable due to
the difficulty of shielding them from inefficient interference from members of the ruling
coalition or from side-payment imperatives; and more difficult to discipline capitalists to
ensure productivity growth after receiving industrial policy rents.
Under such conditions where consolidation of power is unviable, it becomes even more
important to study and understand the intricacies of the distribution of power and loci of
growth-enhancing propensities in order to identify inadequately exploited windows of
opportunity and mobilizing resources and interventions in exploiting them. Experimentation
also becomes more important. This also requires a more flexible (and empirically accurate)
understanding of the state and realization of multiple spheres and levels of governance where
experimentation can take place.
Africa generally only had about 20 years to experiment with independent industrial policy,
before the postcolonial upswing of the global cycle of development (Ocampo and Parra, 2006)
ended and the structural adjustment programmes issued in the neoliberal era from the 1980s.
With a revival of industrial policy in the 21st century around the world, there is a need for more
nuanced and multi-level experimentation which takes into account the political settlements of
African countries. However, analyses of the origins of African dispersed distributions of power
have only focused on its origins in the colonial era (Khan, 2010; Whitfield et al., 2015), with
little to no application of the political settlements approach to precolonial African political
systems.
This paper explores a few avenues for possible experimentation and highlights many areas for
fresh or further research. Hence it raises more questions than it answers. It adopts a trans-
historical approach, contextualizing contemporary development and industrial policy problems
in historical terms. By embedding the political settlements framework into the extended
statehood model (Bachmann and Olanisakan, 2020), it also combines the political settlements
framework with other literatures such that that on local developmental states (Bateman, 2017),
precolonial political centralization (Herbst, 2000) and modes of integration within
transnational integration regimes (Bruszt and McDermott, 2012; Bruszt and Langbein, 2017).
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In addition to charting out the history of African political settlements characterized by
dispersed distributions of power (section 2) and the nature of Nigeria’s political settlements
(section 3), the paper presents an exploratory array of potential windows of opportunity using
the example of Nigeria. It identifies three avenues for exploration: function creep of national
agencies extending into the industrial policy arena, exemplified by Nigeria’s Economic and
Financial Crimes Commission (EFCC) (section 4); subnational/local developmental states
(section 5); and the role of international institutions in industrial policy (section 6). Each
experimental area presented also includes avenues for theoretical development and extended
application of the political settlements framework. The conclusion highlights the imperative of
experimentation as a substitute for the force of war in state-building and economic
development.
2. Origins of Sub-Saharan African Political Settlements
Urbanization, population size and population density have tended to be more limited in sub-
Saharan Africa relative to Eurasia because of ecological constraints. These include the lower
number of domesticable plants and animals, the lack of a Mediterranean climate for agriculture,
a North-South continental axis limiting transferability of crops and animals (Diamond, 1997;
Green, 2012), the tropical climate fostering malaria and disease which limit the use of draught
animals for agricultural productivity, a low number of navigable inland waterways relative to
continental size (Sachs and Warner, 1997), and land abundance and labour scarcity
incentivizing the adoption of land-extensive agricultural methods and reliance on rain-fed
agriculture (Austin, 2008).
These have produced lower state sizes, less political centralization (Herbst, 2000), lower levels
of urbanization (Green, 2013), and less pressures for warfare and geopolitical accumulation in
favour of “biopolitical accumulation” through slave- and cattle-raiding (Anievas and
Nişancıoğlu, 2015: 156), relative to Eurasia. Klein (2001: 52) estimates that in the fifteenth
century, most of West Africa was probably organized as decentralized societies. In contrast to
centralized societies such as Ashanti, Dahomey, Buganda, Basoga and Rwanda, for societies
lacking political centralization social and political organization is based on coexistence of
relatively autonomous groups of based on kinship, with none having enough power resources
to dominate the others and achieve political centralization (Osafo-Kwaako and Robinson,
2013: 9-10). Such “segmentary lineage societies not only prevented the consolidation of any
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particular clan or lower generalized trust in a society (Moscona et al., 2017) but also make
conflicts more frequent, more intense and longer in duration than non-segmentary lineage
societies (Moscona et al., 2020), similar to contemporary competitive clientelism.
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These less
politically-centralized states therefore did not have as much capacity to provide public goods
that more politically-centralized ones did a legacy with impact till today (Michalopoulos and
Papaioannou, 2015). It is therefore revealing that Africa scores the lowest in Bockstette,
Chanda, and Putterman’s (2002) State Antiquity Index (a measure of the age and degree of
political centralization).
Although politically-centralized states may have been more stable (conflict-wise) than
segmentary lineage societies (Moscona et al., 2020), it is unclear how the stability of their
political settlements compares to the rest of the world. Blaydes and Cheney (2013) argue, using
ruler duration as an indicator, that European feudal political settlements after 1000 CE may
have been more stable than those of the Ottoman Empire due to the greater capacity to include
the interests of feudal elites under forms of executive constraint than of Mamluk elites in
Muslim lands. Drawing on Morby and Rozier’s (2002) compendium of rulers across 11
precolonial politically-centralized states (with the earliest observation only beginning from
1230 CE), it is possible to compare ruler duration with those of Medieval Islamic lands and
Western European ones. The average ruler duration for all years (1230 to 1975) appears to be
lower for precolonial Africa than for Middle Eastern and North African Muslim lands prior to
1200, and about the same afterwards (Blaydes and Cheney, 2013: 20). This would therefore
imply that precolonial African politically centralized states may have also faced greater
difficulties in placating powerful elites than feudal Western Europe where executive constraint
was institutionalized based on military decentralization and emergence of parliaments. This is
corroborated by Baten and Alexxopoulou (2021) who, for the first time trace long-term
differences in elite violence (that is, share of rulers killed in battle or during other occasions of
interpersonal violence, typically murder at the hands of family members or a competing
nobility) for African regions between 1400 and the 20th century, and conclude that in contrast
to Europe where elite violence declined during the early modern period, many African regions
experienced an upward trend in elite violence.
However, for Europe, as Voigtländer and Voth (2013: 168) note, “No other continent in
recorded history fought so frequently, for such long periods, killing such a high proportion of
2
Although Lovejoy (2002: 252) argues that the focus on segmentary lineage societies neglects the role of slave
trade-related political fragmentation in creating them.
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its population.” Thus sub-Saharan Africa benefited from less inter-state warfare, with data
since the 14th century showing a substantially lower frequency, scale and reach of wars and
empire-building on the continent relative to Eurasia (Brecke, 1999; Herbst, 2000). If external
threats and aspirations for geopolitical accumulation through campaigning wars are an
important pressure for consolidating domestic political settlements, then perhaps the weaker
pressures of inter-state warfare and geopolitical accumulation characterizing sub-Saharan
African politically centralized kingdoms may have contributed to less consolidated domestic
distributions of power.
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With raiding wars (fostering biopolitical accumulation) rather than
campaigning wars (fostering geopolitical accumulation) being more common in precolonial
Africa and absent from Brecke’s (1999) dataset, neighbouring societies which engaged in
raiding “inter-state” warfare, national unification under colonial rule, such precolonial inter-
state raiding warfare would translate to national inter-ethnic conflict and low social trust within
postcolonial nations. In fact, Dincecco, Fenske and Onorato (2019) demonstrate that there is a
positive correlation between historical warfare and civil conflict today for sub-Saharan Africa
Africa that is not present for the rest of the Old World.
Over the course of centuries since the late medieval period, the spate of inter-state wars in
Europe produced the growth of national states, greater centralization of military, fiscal, political
and administrative power in central governments (Tilly, 1975). These were then complemented
by the proliferation of mercantilist (developmental states) policies, from 1485 English Tudor
Plan to the 19th century economic nationalisms of nations such as the United States, Germany
and France.
At the same time, West Africa fell into political fragmentation following the Moroccan-led
collapse of the Songhai Empire in 1591 and the West and Southern-European trans-Atlantic
slave trade which intensified from the 1680s. Political centralization for some slave-raiding
states (such as Lagos, Dahomey and Kongo) was counteracted by political fragmentation for
others. Moreover, the politically-centralized ones responded to the perverse incentives against
adopting mercantilist policies to imitate imported manufactured goods by having easy access
to such goods through slave-raiding and trading. The result was political fragmentation, a
breakdown in productive regional trade and non-slave trade and trade networks, decline in the
chances of protoindustrialization (Inikori, 2009), and loss of a substantial percentage of its
3
In fact, Blaydes and Cheney’s (2013) argument rests on the role of warfare in pressuring Western European
monarchs to embed the interests of feudal elites (who had high levels of disruptive potential) within ruling
coalitions and reduce their tendency to threaten the coalition’s political survival as excluded elites.
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labour force through the death or exportation of enslaved people. Nunn (2011) has also shown
that current differences in trust levels within Africa can be traced back to the transatlantic and
Indian Ocean slave trades. He demonstrates that individuals belonging to ethnic groups that
were most exposed to the slave trades exhibit lower levels of trust in their co-ethnics and local
government today (Nunn, 2011: 3222). Low social trust makes it more difficult to build and
maintain political coalitions.
With abolitionism gaining ground in the 19th century, political consolidation occurred for some
African states. However, those politically-centralized states close to the coasts which attempted
to be developmental states in the face of apparent European and African security threats (or
with the enticement of the fruits of “modernity”) faced vulnerability to their ruling coalitions
and contestations within the ruling coalition. These include Asante, the Egba United Board
Management (EUBM), Fante Confederation and Liberia in West Africa, and Abyssinia in East
Africa. Others which faced stable and potentially growth-enhancing political settlements (such
as the Merina Empire in Southern Africa and Zanzibar in East Africa) faced the threat of
European colonial absorption which limited their development policies. The Sokoto Caliphate
in the hinterland was the largest state with the most advanced crafts industry in sub-Saharan
Africa. However, it faced weaker external threats from Europe due to its hinterland location.
Not only was it not very politically centralized due to the vast expanse of land that needed to
be governed, it did not possess the monopoly of the means of violence to completely end the
enslavement of freeborn Muslims (Lofkrantz, 2011), and from the mid-century it was also beset
by a number of political rebellions (Chafe, 1994).
By the time of expansive colonial conquests in the late 19th century, most sub-Saharan African
states were less politically-centralized than those of North Africa, Asia, Europe, Iberianized
Central America, South America and the Neo-European settler societies. It was the continent
with the highest number of states and stateless societies, the highest degree of ethno-linguistic
diversity (Green, 2013), the lowest level of population density (Herbst, 2000) and a lower level
of urbanization than Eurasia. In the face of the administrative constraints encountered in
governing such societies and unwillingness or political infeasibility in undertaking large-scale
subsidization for the creation of strong state apparatuses as was (infamously) the case with
Japan in East Asia, European colonial powers embraced amalgamations to create very large
and ethnically diverse states, in many cases demarcated arbitrarily (Englebert, 2000; Green,
2013).
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In a subcontinent with the greatest ethnic diversity on the planet and holding thousands of
societies (Easterly and Levine, 1997), colonial amalgamations created states which would
inevitably suffer from ruling coalitions which would be vulnerable to excluded elites and face
internal contestations. These states, poorly funded by the metropole, would also suffer from
poor administrative capacity (Herbst, 2000) and thus weak pockets of effectiveness, especially
since they governed large areas of low population density. Colonial rule not only employed
divide-and-rule strategies to exploit ethnic divisions and variation in pre-colonial legacies in
political centralization (Ray, 2016). By creating states where areas with lower precolonial
political centralization received greater missionary education and bureaucratic advancement
shared statehood with areas with higher precolonial political centralization, colonial formations
were poised for conflict (Ray, 2016). It is therefore not surprising that postcolonial Tanzania
faced less political instability and no civil war since it experienced little such spatial
inequalities (Green, 2011), while Nigeria experienced such a civil war.
Colonial rule also employed economic policies which slowed or prevented the rise of stronger
entrepreneurial, commercial and industrial classes and interests which could have advocated
for stronger growth-enhancing mutual interests with colonial authorities and native ruling
coalitions (Whitfield et al., 2015). The absence of strong capitalist transition, urbanization and
complex class formations, combined with the salience of regional inequalities and ethnic
divisions in relatively new political units enabled political mobilization to occur mainly on the
basis of the multiple ethnic, religious and clientelistic identities rather than class and ideology.
With a small formal sector and its little contribution to the state apparatus, political
mobilization inevitably occured on the basis of informally-sourced resources and patron-client
networks.
Indirect rule and the absence of adequate subsidies to support colonial state administrations
made native and colonial authorities too autonomous from forces and checks on the ground,
while distance made colonial authorities largely autonomous from close metropolitan
oversight. Therefore, “decentralized despotism” resulted (Mamdani, 1996), making mutual
interests between ruling elites on one hand and native business elites and citizens’ socio-
economic interests very weak (Dinceco, Fenske and Onorato, 2019: 5-6) and reinforced by a
reliance upon colonial and postcolonial marketing boards, indirect taxation and/or point-source
natural resource rents rather than direct taxes. It also meant a weak state administration and
greater incapacity to discipline firms which receive industrial policy rents. It is therefore not
unexpected that Mauritius, where direct rule was practised in Africa (and hence enjoyed greater
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commitment to the creation of a strong state administration), inherited a stronger state
bureaucracy from colonial rule which helped it on its path to becoming a developmental state
(Lange, 2003). The other types of states with strong constructed state bureaucracies have been
the settler colonies such as South Africa and Zimbabwe. These have however been on the basis
of a strong exclusion of native elites and followers through the exercise of coercive power,
creating very high levels of wealth, racial inequality and inter-racial conflict.
In other words, precolonial geo-climatic legacies, the trans-Atlantic slave trade, stronger
bellicist pressures in Europe and Asia, colonial conquest and ruling strategies, and weak
postcolonial bellicist pressures have produced a dominance of competitive clientelist civilian
political settlements (and vulnerable authoritarian military political settlements), weak mutual
interests and weak pockets of effectiveness in sub-Saharan Africa. Where these negative
structures have been weaker, both in independent states and subnational states, they are
strongly associated with precolonial political centralization and boundary modern demarcation
more strongly linked with premodern boundaries such as Botswana, Rwanda and Ethiopia.
In the absence of structural preconditions for democracy (strong capitalist and middle classes
which demand, finance and sustain civil, political and democratic rights), many of these
postcolonial societies also fell into various forms of authoritarian rule. Even these have
produced political settlements with dispersed distributions of power vulnerable
authoritarianism. This is characterized by relatively low contestation within the ruling coalition
or military regime, combined with high degree of vulnerability to excluded military and non-
military elites. This still produces a short-term horizon and resort to repression and coercive
power to restrain competing factions and secure regime survival, a far cry from the consolidated
military rule experienced by the East Asian Tigers.
Using Schulz and Kelsall’s (2020) political settlements database (PolSett), it is apparent that
sub-Saharan Africa, like the Global South in general, tends towards dispersed distributions of
power, although with a slightly narrower inclusion of non-elites within ruling coalitions than
the Global South average (figure 1).
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Figure 1: Author’s illustration of political settlements across regions of the developing world
(Schulz and Kelsall, 2020)
These types of political settlement can be easily seen in the case of Nigeria. Characterized by
high levels of ethnic fractionalization, dominance of the informal sector, weak capitalist,
business and middle classes, political mobilization and competition in Nigeria has dominantly
been on the basis of competitive patron-client networks and susceptibility to vulnerable
authoritarian rule.
3. Nigeria’s Competitive Clientelism and Vulnerable Authoritarianism
Using ruler duration as an indicator of the degree of contestation within the ruling coalition and
its vulnerability to excluded elites, it is possible to see how Nigeria compares with the rest of
Africa. Using the Archigos database of (de facto) political leaders (Goemans et al. 2009),
Nigerian political leaders have ruled for an average duration of 3.7 years, compared to an
African average of 7 years.
It is therefore no wonder that Nigeria has been clearly identified as a clear case of competitive
clientelism under civilian rule and vulnerable authoritarianism under military rule, with a
dominant party settlement during the first 16 years of the Fourth Republic under the People’s
Democratic Party (Roy, 2016; Usman, 2020).
0
0.5
1
1.5
2
2.5
3
3.5
Nigeria Sub-Saharan
Africa
Middle East
and North
Africa
(MENA)
Latin
American and
Caribbean
Southeast
Asia
East Asia Global South
Khan's political settlement typology ESID political settlement typology
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Figure 2: The evolution of political settlement in Nigeria (Roy, 2016: 20)
In fact, Schulz and Kelsall’s (2020) database shows that not only does Nigeria’s political
settlement tend strongly towards competitive clientelism, this tendency is substantially stronger
than the sub-Saharan African average as well as those of other regions of the developing world
(figure 3).
0
0.5
1
1.5
2
2.5
3
3.5
Nigeria Sub-Saharan
Africa
Middle East and
North Africa
(MENA)
Latin American
and Caribbean
Southeast Asia East Asia Global South
Policy Implementation Power Concentration Manufacturing firms' capabilities
Manufacturing firms' political power Khan's political settlement typology
ESID political settlement typology
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Figure 3: Regional comparison of elaborated political settlements (Schulz and Kelsall, 2020)
The outcome of competitive clientelism, vulnerable authoritarianism and dominant party
politics is high levels of policy inconsistency and reversals, high incidence (and high
decentralization) of political and bureaucratic corruption, and short-term horizons enabling
significant levels of predatory corruption.
The Nigerian bureaucracy comprises 774 local government councillorship and bureaucracies,
36 state governors, 975 State Houses of Assembly members in total and hundreds of state
ministries, departments and agencies (MDAs) Lagos State alone has about 107 MDAs and
Rivers State about 120 as of 2013 (for all Nigerian states it is likely more than 3600 state MDAs
in total). There are also 469 members of the National Assembly, over 943 federal ministries,
departments and agencies, 541 federal state-owned enterprises (Nwezeh, 2021), and 95
ambassadors. There are also 289 special advisers, senior special assistants, special assistants
and personal assistants to the office of the presidency (Amaefule and Adetayo, 2019). There
are therefore at least almost 8000 top leadership positions in the Nigerian government system
taking into account deputy and assistant leaders, this can easily extend up to 24,000 top
leadership positions at the local, state and federal levels (not including local, state and federal
judiciaries). This is not trivial by controlling the legitimate (armed forces and law
enforcement) and illegitimate (politically-funded thugs and gangs) means of coercion, and
access to revenue extraction and distribution processes, they can extract trillions in rents from
Nigerian society, maintain political power, and pursue rule by law to for their interests and
those of their followers. With the public sector also being the largest employer in the formal
economy, public employment and leadership in this great bureaucratic complex are a means of
informal social policy and patron-client rent distribution (Rodrik, 2000), despite the shaky but
existent social order and economic growth it facilitates.
The pressures of party reward systems and patron-client demands, and the dependence of the
state’s finances upon an enclave minerals sector creates an inclination towards distribution of
political and bureaucratic offices in growth-ambivalent or growth-reducing ways. This is
especially in the absence of strong private sector business elites with adequate technological
capabilities and middle classes to be embedded in the ruling coalition and press for PoEs. The
result is the creation of policies to serve as rent-scraping channels (Wedeman, 1997), and an
inability of a ruling elites to successfully enforce policy effectiveness by implementation
agencies who may allow or orchestrate the capture of industrial policy rents. It also reflects in
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the inability of the Auditor General to ensure MDAs hand in their audited reports, to discipline
them for the remittance of revenues to the Federation Account, and to prevent unauthorized
deductions from the Federation Account to the tune of trillions of naira (Uduu, 2020). It also
manifests as a lack of coordination and in fact a presence of contestation among MDAs on
policy issues and programmes.
In South Korea, Park Chung Hee secured a bifurcation of the state bureaucracy that allowed
him to meet his patronage requirements and still pursue economic efficiency aimed at economic
development (Kang, 2004). For example, the “fiscal” ministries directly involved with
industrial policy had relatively little military infiltration, whereas ministries not directly related
to development were staffed heavily with ex-military officials to buy off their loyalty to the
regime (Kang, 2004, 87). In Indonesia, rent extraction was “franchised”, enabling bureaucrats
to pursue economic growth and corrupt extractions in their sectors as long as they provided
tributes to Suharto (McLeod 2000). Again, these were more viable due to the capacity to
consolidate power and then adequately coordinate the distribution of rents, thereby producing
“coordinated corruption” (Enweremadu, 2013). In the absence of such a consolidation of
power, the result an inability to consolidate the leadership of industrial policy bureaucracies
among technopols and qualified people. Leadership over these bureaucracies is also a major
means of rewarding and retaining political loyalists and containing powerful opponents.
Moreover, the vulnerability of the ruling coalition to excluded elites means that ruling elites
inordinately focus on survival, thereby having a short-term horizon. The result is greater
“decentralized corruption” in Nigeria than was the case in Indonesia and East Asia
(Enweremadu, 2013). It also creates a visibility bias whereby ruling elites prioritize reforms
with visible impact in order to ensure that prospective voters can attribute performance to the
regime ahead of elections and thus most public investments are undertaken not with the
objective of achieving inclusive development, but with short-term political considerations in
mind(Abdulai, 2020: 5-6). Thus service extension triumphs over improvement in service
quality.
The impact of dispersed distributions of power, especially in the absence of strong capitalists
with high levels of technological capabilities to influence PoEs in growth-enhancing directions
is seen in many industries, industrial policy tools and implementing agencies. These include
conflicts between the Nigerian Customs Service and the Ministry of Finance over import duty
waivers (Burgess, 2015); conflicts between the Ministry of Industry and Ministry of
Agriculture over financing focus (Aremu et al., 2017); customs officers undermining import
14
bans and tariffs, thereby fostering smuggling (Raballand and Mjekiqi, 2010: 207-210);
bureaucrats siphoning away funds and undermining SME development policy (Page and
Okeke, 2019); gross abuses of import duty waivers (Modebe et al., 2014; Anyadike and Eme,
2017: 40); massive holes in infrastructure investments and projects (Marwah, 2011); and so on.
State-owned enterprises established between independence and the 1980s largely failed, unlike
in China or South Korea, because of the inability of ruling elites to keep a long-term horizon
and to shield the enterprises from growth-reducing political interference. These have been
driven by both a difficulty in controlling lower-level elites within and outside the ruling
coalition, as well as the short-term-driven patron-client politics of ruling elites.
The most operationally efficient agencies (which may be operationally efficient to enable rent
extraction for ruling elites), intentionally shielded from inordinate and decentralized rent-
extraction tend to be those involved directly in managing the finance of the state and hence the
reproduction of ruling elites the Ministry of Finance, Central Bank of Nigeria, and Federal
Inland Revenue Service (Hickey, 2019).
However, the long-term political settlement does not preclude the episodic emergence of
growth-enhancing political settlements arising from a developmental deals environment
influenced by new macroeconomic, trade and investment conditions, intensified redistributive
demands and political realignments, such as that which prevailed under the Obasanjo regime
(Usman, 2020). There has indeed been significant economic diversification over the last 21
years, but this has not involved structural transformation. Hence the political settlement is not
growth-enhancing enough to enable an investment-savings-growth nexus to absorb millions
living in poverty and unemployment.
Despite the fact that the state is the largest formal sector employer in Nigeria, it is the richest
20% of the population which accounts for nearly half of all employment in the public sector,
as well as 40 percent of private wage work (World Bank, 2015: xiv). More than 80 percent of
the population works in agriculture or is engaged in a household nonfarm enterprise (World
Bank, 2015: 15). And among non-agricultural wage workers (those with an employer), three
out of four are informally employed (World Bank, 2015: 15). Therefore, for all the ruckus
about a growing Nigerian middle class simultaneously with a high and unchanging poverty
rate, this seems to be the result of public employment (World Bank, 2015: 38) and modest
economic diversification enabling a minority skilled segment of the population income growth
in the limited formal private sector.
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Navigating competitive clientelism differs from, and is more complicated than, navigating
more consolidated political settlements such as those of Botswana, post-genocide Rwanda and
Mauritius. It also requires a deeper understanding of the interactions between distributions of
power and pockets of effectiveness, as well as an equal consideration of lower levels of analysis
(subnational levels) in analysing development policy and political settlements. Neo-Weberian
analytical modes of thought blinds thinkers to micro-political and amorphous situations which
may include opportunities for improving growth, development or distributive outcomes for
societal groups.
Without the bellicose pressures for the consolidation of power, projection of power through the
improvement of administrative and tax capacity, and subjection of industrial policy rent
recipients to the demands of the externally-threatened ruling coalition, Weberian formations
are not the norm. This means that developing countries, especially sub-Saharan African
countries, must envision the state beyond Weberian formalism, and include both political and
economic formal and informal institutions, distributions of power, and political settlements.
This means that a notion of “extended statehood” must be adopted, which expands the scope
of governance beyond Weberian formalism and beyond national-level politics and institutions
(Bachmann and Olanisakan 2020). Bachmann and Olanisakan (2020: 6) represent Extended
Statehood as “the totality of stakeholders involved in policy-making, and in the case of state-
building and polity-making.” In this approach, “Both the creation and implementation of
governance-enhancing policies can, therefore, be described as functions of a multiplicity of
interacting processes between and among the spheres of governance” (Bachmann and
Olanisakan, 2020: 6).
Indeed, Mohan (2019) is the first attempt to connect the pockets of effectiveness (PoEs)
debates, political settlements literature, critical political economy analysis and state theory.
Mohan (2019: 14-15) invokes Painter’s (2006) notion of state practices and “prosaic
geographies of stateness” which are “hetereogenous, constructed, porous, uneven, processual
and relational character”. This shares the functional and empirical as opposed to Weberian
normativity approach advocated by Bachmann and Olanisakan (2020: 6), and therefore
indicates that the political settlements literature is moving in the direction of employing a state
theory close to that of extended statehood.
16
Figure 4: The National Level of Governance of Community; Interacting Spheres (Bachmann
and Olanisakan, 2020: 8)
In other words, given the empirical realities of multi-level governance of communities,
“Weber’s state covers just one of the four elements that represent governance of community at
the national level: the political formal one” (figure 1), and this applies at all levels of
governance of community (Bachmann and Olanisakan, 2020: 7). This includes the national,
local, sub-national, international and global community levels of governance (figure 2).
17
Figure 5: Multilevel governance of community and scaffolding of extended statehood circles
represent interacting spheres of governance represented in figure 1 (Bachmann and
Olanisakan, 2020: 9)
The political settlements approach has done quite well in exploring the spheres of political
informal governance and economic informal governance. However, it needs greater
exploration of multi-level governance. In this spirit, this paper identifies three potential avenues
for improving such navigation, with a focus on industrial policy, using the case of Nigeria.
These avenues operate at the generation of mutual interests, fostering of pockets of bureaucratic
effectiveness, and enforcing learning for productivity, touching upon various components of
extended statehood.
18
4. Central Government Variation in Pockets of Effectiveness and Secondary
Mandates among Agencies
In the 1960s when decolonization in Africa was the trend, Green (1963: 164) complained about
how “general writings on development usually devote substantial attention to institutions, but
either say very little about the forms appropriate to Africa or take some set of assumptions
based on industrial economies”. Within his analysis of African state institutions, he then
proceeded to argued that the implicit belief that single institutions should normally
concentrate on one aim, are highly unrealistic and operationally undesirable in many African
situations” (Green, 1963: 165). For African states a much broader view of the role of
institutions as policy-implementing agencies is needed, emphasizing the changing and flexible
institutional structures needed for African states, at least in the short-to-medium term (Green,
1963: 165).
Green (1963) drew from the example of the Ghana Cocoa Marketing Board experience of
1938-60, which spontaneously extended its policy objectives from short- and long-run cocoa
price stabilisation to income stabilisation, redistribution and effectively fostering the
implementation of fiscal and monetary policy by making the collection of revenue easier and
by favouring the release of aggregate purchasing power, respectively (Serra, 2014: 13). There
was even at some point independent Board construction operations on the local amenity level,
given the weakness of the Public Works Department and private contractors in terms of
specialized competence and available personnel relative to the Board (Green, 1963: 170). This
extension arose spontaneously, and Green argued that it may be more deliberately fostered.
Green’s argument for being in constant search for spontaneous emergence of multi-purpose
institutions and deliberate fashioning of such institutions seemed to have gone without
influence, with only a few citations in about 50 years since the paper was published.
4
I will
resurrect the argument for multi-purpose institutions, drawing on the political settlements and
PoE frameworks and using the example of Nigeria’s Economic and Financial Crimes
Commission (EFCC).
The notion of spill-overs of PoEs has been recognized as the gold standard of the PoE literature.
PoEs do not spill-over to other agencies through their capacity-building activities or personnel
transfers/exchanges. This is because the political settlement underlying the emergence and
4
Google Scholar lists only five citations two in 1974, one in 1982, and two by Gerardo Serra in 2014 and
2015.
19
maintenance of the PoE in the first place cannot be transferred to another agency simply
through capacity-building and personnel transfer. Therefore, no case of spill-over has been
observed in the literature (Hickey, 2019).
However, rather than propose the spill-over of PoEs to other agencies, Green (1963) implicitly
argued for the allowance and encouragement of PoEs to extend their policy objectives,
spontaneously and deliberately. While alluding to the Cocoa Board’s superior “specialized
competence and available personnel” as the basis for its greater bureaucratic capacity and better
performance, the reason for the emergence of this capacity in the first place was not assessed.
Yet marketing boards perform a core state function of revenue generation, and Hickey (2019)
notes that they therefore typically become PoEs, protected and supported by the ruling
coalition. Hence, whereas the interaction of historical contingencies and structural conditions
can enable the emergence of political support for a particular bureaucracy and its emergence
as a PoE, it should be allowed to be flexible enough to extend its policy objective and mandates
as they spontaneously emerge when demand for such extension emerges.
A contemporary example is the Economic and Financial Crimes Commission (EFCC) in
Nigeria. In post-military era of the Fourth Republic, the high corruption environment facilitated
by the country’s competitive clientelism and oil-dependence produced its premier anti-
corruption agency, the Economic and Financial Crimes Commission (EFCC). Although it has
not substantially reduced corruption due to the structural nature of the problem, it has garnered
significant investigative capabilities. It has also retained some political support as a vehicle for
signalling a ruling coalition’s anti-corruption orientation to gain electoral suitability in a high-
corruption country, and as a political tool of ruling elites to delegitimate and derail opponents.
Its function creep into industrial policy enforcement is manifest, and there is the potential to
strengthen its involvement in this area. This may also include the possibility of leveraging
corruption investigation threats to redirect some corruption capital from unproductive to
industrial activities.
It may be argued that in such situations, it is important to maintain an analytical framework of
institutional flexibility, and identify situations of “capacity gap”. Where such capacity gap
exists, multi-purpose institutions can be created through the design of a closer working of the
primary-mandate and secondary-mandate institutions, or subsuming the mandate under the
relative PoE’s function. However, the PoE literature, in searching for spill-overs of PoEs,
focused on the (unrealized) potential for a PoE to create another PoE agency through capacity-
20
building (training) of, and personnel transfers to the weaker agency. There was no research into
the PoE itself extending its mandate/policy objectives into other areas.
Yet such spontaneous and ad hoc “function creep, enlargement of policy objectives or
mandate extension is perhaps also detectable with the Nigerian army’s activities in civil affairs
(Mbachu and Ibukun, 2018), which is the mandate of the police. This arises due to the
inefficiency of the police and the greater capacity of the army which receives greater high-level
political support.
5
It may also be detected in the Central Bank of Nigeria’s (CBN) foray into
development finance (Ekine, 2019), under the stress of limited forex reserves and given the
failures of the state’s development finance institutions (DFIs).
6
Combined with the EFCC case
and Green’s (1963) Ghana’s Cocoa Marketing Board case, there is therefore prima facie
evidence to suggest that function creep may be likely to emerge under three conditions. The
first is when there is a capacity gap’ between two state agencies. The second is when one
agency receives significantly greater high-level political support for various political economy
reasons (identified using political settlements analysis). And the third condition is when their
functions are related, although their mandates/policy objectives may differ. In the EFCC case,
its investigative and prosecutorial powers enable it to have related functions with the police
force, the justice system, and the monitoring and evaluation investigative apparatuses of
industrial policy implementing agencies. This may be an important area for in-depth study.
This proposition is also reminiscent of the linkage thesis in the field of international relations.
Issue linkage is the simultaneous negotiation of multiple issues for joint settlement, as a means
of increase the probability of agreement on both issues (Poast, 2012). As Perez (2005: 735)
explains,
The idea of linkage emerged as a response to the problem of managing global dilemmas
in an anarchic world that is governed by weak and fragmented international institutions.
Linkage can help in coping with this governance "deficit" by unleashing hidden
synergies between regimes, thereby creating more effective governance structures”.
5
The military is better funded than the Nigerian Police Force (NPF) due to its instrumentality for foreign
diplomacy and regional hegemony, historical legacies of military domination of national politics for the majority
of Nigeria’s postcolonial period, as well as the threat of military elites (as “violence specialists”) to civilian
elites requiring side payments to keep under the control of civilian ruling coalitions.
6
As Hickey (2019) notes, central banks typically become PoEs due to their instrumentality to the ruling
coalition’s need for financial and economic stability, as well as international pressures and support for central
bank independence.
21
Linkage between issues and cooperation across regimes is possible because “there are broad
commonalities in the identity of players across different regimes” (Perez, 2005: 737) such as
between competition policy and trade policy, environmental policy and human rights, security
and international aid. In addition, there is an asymmetry in regimes International economic
institutions are much more powerful in terms of their resources and political and legal influence
than other regimes (Perez, 2005: 739). Hence such institutions may use “the surplus
enforcement power that may be available in one policy domain to discipline cooperation in
other domains(Perez, 2005: 742). Here, linkage increases probability of agreement partly
because of the involvement of a more powerful champion of a particular issue getting involved,
such as the World Trade Organization (WTO) in contrast to economists who oppose its policy
“scope expansion” (Limão, 2005).
Even at the domestic level, it is found, for example, that the participation of influential land
and business owners (who can use informal power and networks to put pressure on contractors
and officials) in monitoring of climate projects improves the efficiency of use of climate change
adaptation project funds and the quality of the project infrastructure (Khan et al., 2020).
Securing buy-in from these influential locals was enabled by creating dual-use climate
infrastructure such as river embankments which could also be used as roads, and cyclone
shelters also usable as schools, health centers, offices and community centres (Khan et al.,
2020).
7
In light of linkage thesis, my proposition embeds “enforcement linkage”, which links deviation
from expected performance under industrial policy with punishments under anti-corruption
efforts. In light of dual-use benefits, this enables the dual use of industrial policy as an anti-
corruption effort (monitored by a relatively more influential government agency).
5. Subnational Variation in Political Settlements
Bateman (2017) has argued that what looks like the work of post-war national “developmental
states” has actually been the result of both central governments and subnational governments
(“local developmental states”). Drawing from an impressive set of case studies and global
examples, he argues that the focus on national-level developmental states has blinded
7
This also implies that road and other infrastructure projects could be closely complemented by industrial
policies aimed at and business owners in the project communities, in order to make them engage more closely in
monitoring the infrastructure projects to increase their chances of effectiveness.
22
development economists to the important roles of local developmental states in driving national
growth and development. For instance, in China the fiscal contracting system and tax-sharing
system between the central and local governments incentivize local officials to promote local
business development (Lv et al. 2018).
What is interesting is that these have occurred both in association with national developmental
states, independent of them, and sometimes in opposition to them. This therefore implies that
subnational development may occur in locations where political, economic and administrative
conditions differ from national ones. The political settlements approach, like the developmental
state approach, has been criticized for focusing on national-level political settlements
(Goodfellow, 2017). There has therefore been some attempt to apply the framework to the
analysis of subnational political settlements (Goodfellow, 2017; Goodhand and Meehan, 2018)
and pockets of effectiveness. However, this is still in its infancy. Yet it may be as important as
national-level applications for countries where national-level political settlements are
characterized by competitive clientelism.
Thus, there may be opportunities for exploiting subnational variation in embeddedness. Nigeria
began as a federation of three regions, with a comparatively weaker central government. Many
of the successes in industrial policy were driven by regional industrial policy, aided by regional
fiscal autonomy through control over regional marketing boards. Although the relative power
of the central government strengthened over time due to changes in fiscal sharing formulas
forced upon the country by military rulers, as well as the progressive fragmentation of the three
regions into 36 states, the role of subnational industrial policies may be under-researched and
underestimated. At present, most Nigerian states rely minimally on internally-generated
revenue (IGR), and mostly on federal transfers derived majorly from oil revenues. Through the
resource curse, federal-level dependence upon oil revenues has therefore been replicated in
many states through the decrease in derivation rates retained by states, in a bid for the central
government and elites to capture oil rents.
However, there is some subnational variation in elaborated political settlements. For instance,
the country’s commercial capital, Lagos State, due to its coastal location, commercial density
and population density, has seen the highest IGR rate in Nigeria (30%) (Taxaide, 2020). It hosts
the largest share of MSMEs, industries and industrial investments, foreign trade and
commercial activity in Nigeria. Its politics is also much less ethno-religiously fragmented than
federal politics. There is some preliminary indication that its industrial policy and tax
23
institutions have therefore been more effective and more responsive to commercial and
capitalist actors than their federal counterparts (Page and Okeke, 2019: 12). It also appears to
give the greatest attention to commercial interests and effectiveness of industrial policy
institutions. In fact, its governor has recently decried the lack of availability of power to use
some industrial policy tools (such as import duty waivers) to attract foreign investment, and
thus has advocated greater policy autonomy from the federal government (Munshi, 2021).
Among the Northern states, Kaduna (created by colonial authorities for commercial and
administrative purposes and serving as the capital of the defunct Northern region) then Kano
(the center of precolonial sub-Saharan African crafts industry and the modern commercial
capital of the northern region), have the highest IGR share of revenues (Taxaide, 2020), and
also rank the highest out of all Nigerian states (cumulatively across all four sections of the ease
of doing business), after Jigawa, in the World Bank’s Ease of Doing Business Index (World
Bank, 2018: 4).
This is perhaps visible in the variation in types of engagement at the federal level. The
Presidential Enabling Business Environment Council (PEBEC) which is chaired by the Vice
President, and comprises ten ministers among other federal institutions, representatives of the
Lagos and Kano State governments are also members. This indicates their relative seriousness
in attracting national and foreign investments to their states.
There is scope for further research into this and the prospects for broadening, grafting or
outsourcing subnational industrial policy PoEs’ implementation and monitoring capabilities
into federal-level industrial policy initiatives. Foreseeable lines of research may be aligned with
the various channels of influence over national and subnational industrial policy available to
states. These include:
i. Federal Lobby: States can lobby for federal implementation of industrial policy
tools which favour their locations and the goods and services they produce. These
include lobbying for tariffs on particular goods, location of Special Economic Zones
(SEZs), and location of federal infrastructure. This may be formally through
National Assembly appropriations process, the National Economic Council, and
consultations on policy formation and design; as well as informally through
informal links to federal elites.
a. How effective are the channels of federal lobby in shaping policy direction
towards a state’s policy objectives?
24
b. How does federal-state difference in party affiliation affect effectiveness of
federal lobby?
c. How does a state’s more developmental ruling coalition compete with less
developmental ruling elites from other states over the direction of policy?
ii. Liaison: States cooperate with state liaison offices of federal industrial policy
institutions (such as the Bank of Industry and Ministry of Agriculture) during policy
implementation.
a. Are there better outcomes with states’ engagement with state liaison offices of
federal industrial policy implementing agencies than with the headquarters?
b. What national-level and state-level factors determine the possible variation in
performance of state liaison officers of federal industrial policy implementing
agencies?
iii. Direct Industrial Policy: Although trade policy lies beyond their direct powers,
states have powers over some industrial policy tools. These include subsidies,
development loans (funded through domestic taxation and loans, federal transfers
and foreign loans), tax incentives, infrastructure spending, land rights distribution,
public procurement, establishment and operation of state-owned enterprises
(SOEs), establishment of SEZs, and alterations to ease of doing business. They can
do these in order to create new enterprises, attract national enterprises, and attract
foreign direct investment.
As with general development policy analysis, the policies and political dynamics of the central
government tend to take centre stage. However, in countries where power is more dispersed
and there is substantial subnational variation in political settlements and developmental-
orientation, it is important to study the variation in form and effectiveness of subnational direct
and indirect industrial policy. How do developmentally-oriented states provide greater support
to federal pockets of bureaucratic effectiveness? What happens when they compete with less
developmentally-oriented states for the geographical direction and focus of federal industrial
policies? In addition, although it is expected that an LDS produces stronger productive classes
which enter into stronger mutual interests with national-level ruling coalitions, it is unclear
how an LDS can directly spill-over to another state or create a “subnational flying geese”
pattern of development within a region or geopolitical zone.
The study of subnational political settlements should not stop at the state level. There seems to
be wide variation in local government- and community-level pockets of effectiveness and rent
25
management systems. Emerging literature shows that stronger precolonial political institutions
allowed colonial and postcolonial African governments to better implement modernization
programs in rural areas (Gennaioli and Rainer, 2007). Bargaining with senior traditional leaders
in politically centralized rural communities, colonial and postcolonial governments could
foster policy coordination and implementation in those areas, leading to faster adoption of
European policies and technologies” (Gennaioli and Rainer, 2007: 186). On the other hand the
presence of too many traditional power holders rendered such bargaining very costly or
infeasible” (Gennaioli and Rainer, 2007: 186). They would also be more likely to be involved
in civil conflicts if they are excluded from control of national and state governments because
they cannot engage in credible commitments to nonviolent bargains with states (Wig, 2016).
Bandyopadhyah and Green (2016) test the centralization hypothesis at the subnational level in
a single country for the first time, using Uganda which shows “large variance” in centralization
across different parts of the country (Bandyopadhyah and Green, 2016: 473). They show that
precolonial centralization is highly correlated with present-day development outcomes at the
district, sub-county and individual levels.
Indeed, Nigeria seems to be something of a structural paradox. On one hand, the areas with the
most precolonial political centralization (and hence greater communal capacities to secure
pockets of effectiveness) are those that seem to suffer the most from a lack of mutual interests
(especially the interior north, with some exceptions). On the other hand, the areas with the
lower levels of precolonial political centralization and lower social trust perhaps due to the
trans-Atlantic slave trade (hence less communal capacities to secure pockets of effectiveness)
are those that enjoy the most from greater mutual interests with national capitalists (especially
those in proximity to the coast the South South and South-east regions). Indeed, personal
interaction with civil society groups in Delta State have complained about its excessively
uncoordinated and decentralized rent management system at local levels. Infrastructure
projects and contractors are typically faced with high levels of multiple and uncoordinated
demands for rents by community leaders, gangs and youths before they can begin, continue
and complete construction or installation. They compared this to what pertains in many
Northern Nigerian states where a formal memorandum of understanding and informal side
payments to community leaders can effectively secure unrestricted access to project sites. This
is an important topic for future research.
1. Is this actually an existing phenomenon?
26
2. If so, is it due to Niger Delta traditional rulers and communities not adequately
receiving their share of oil rents and therefore seeking large extractions from businesses
and construction sites (and uncoordinated due to relatively low political
centralization)?
8
3. Or is it due to traditional rulers being dependent on oil rents and being ambivalent to
community development, leaving community members to pursue uncoordinated rent
extractions?
4. Or do traditional leaders have growth-enhancing orientation but low political
centralization, combined with economic marginalization due to exclusions from oil
extraction and rents, make their attempts at centralized and coordinated rent
management relatively ineffective?
5. For states and communities facing such politico-structural constraints, what political
interventions can, and how can projects be designed to, enable a more coordinated rent
management and distribution system?
6. Much has been said about the incredible levels of corruption and non-completion
involved in Niger Delta Development Commission (NDDC) infrastructure projects.
Could community-level political settlements be a contributor to this but has hitherto not
been adequately recognized in the academic literature?
In essence, there is a need to more closely integrate the literature and research on subnational
elaborated political settlements, the literature on natural resource governance, and the literature
on developmental consequences of subnational variation in precolonial political centralization
in national and subnational development projects and policies.
6. International Institutions and Industrial Policy
Since the early modern era, the international sphere has aided critically in the formation of
nations’ capitalism and development policy through foreign trade, bellicose pressures and
subsidies (Anievas and Nişancıoğlu, 2015). Imperial conquest, national absorption and
colonialism have been, from the start, means by which a conquering state and its administrative
apparatus and political settlements may coercively transfer its developmental orientation
8
Indeed, news report, grey and academic literature are awash with complaints by traditional rulers and citizens
about neglect from oil companies, the Federal Minister of Niger Delta Affairs, the Niger Delta Development
Commission (NDDC), and the state government.
27
(whether negative or positive) to conquered societies, as with the cases of England towards
Scotland (Hont, 2008), Japan towards Korea (Kohli, 1994) or Britain towards Mauritius
(Lange, 2003). Whereas stronger states which enter into political and economic
integration/unification with weaker ones may be more likely to aid the latter developmentally
and administratively (Bruzst and Langbein, 2015; Gaiya, 2021), colonies often suffered
political marginalization and obstacles to their development and industrial policy from
metropoles within empires.
Hence colonial rule often produced negative outcomes for natives, especially since developing
another territory under direct rule (which better overcomes any growth-reducing native
political settlements) requires a large amount of material and coercive resources, personnel and
power, ability to convince metropole populations, expectation of net benefits and (short- to
medium-term) competition with colonial industries. Colonial development has therefore only
occurred under pressure of war (as in the case of Japan and its colonies) or generalized
economic crises and challenge from the conquered (as in the case of France and Britain
following World War II). It has also involved despotic disregard for native populations, as in
the Japanese case and the neo-European settler societies across the world. The first and most
ambitious international colonial institution to attempt colonial “development” under
multilateral auspices the International Colonial Institution (ICI) formed in 1893 did not get
enough access to colonial administrations and resources to be successful.
Besides colonial rule and super-sanction debt management committees, the first ever
intervention by an international organization in the reconstruction of a country's finances was
with the League (the EFO) providing a League-backed international loan, measures to ensure
currency stabilization and a balanced budget, and the appointment of a League High
Commissioner to oversee the programme and enforce budgetary discipline in Austria which
faced the first post-WWI case of inflation that reached crisis point in 1922 (Warnock, 2015: 8).
The League, from the 1920s, made “pioneering efforts in establishing international aid for
developing countries” by providing technical assistance (Zanasi, 2007: 143). It provided
orthodox financial advice, as the rest of the money doctors of the inter-war era did (Schuker,
2003). Therefore, the initial role of international institutions in aiding industrial policy was
limited to capacity-building, knowledge and data production for use by state agencies, and
support (consultation) for policy-design and implementation. The first proposal for a
multilateral development institution was Sun Yat-sen’s International Development
Organization proposed in 1919 in anticipation of the League of Nations (Helleiner, 2014). It
28
only advocated the institution channelling development loans to a sovereign China for
development and industrial projects, without interference in how those loans would be used.
China would present its plans, and the external institution would decide whether to fund those
plans or not. The post-war Bretton Woods international financial institutions (IFIs) were the
first to expand the role of international institutions to directly providing loans and funding for
infrastructure projects and budgetary support.
However, for good reason, such international institutions do not have the powers to adequately
enforce ex ante industrial policies such as tariffs (since tariffs are enforced by customs and
ports authorities, and collected by the state revenue agency), import duty waivers (waivers are
determined by the government and enforced by government agencies), state-owned enterprises
(IFIs cannot own shares in domestic SOEs), and so on. Through moderate conditionality on the
development financing that they provide and the development projects they fund, they have the
prerogative to specify participation criteria for recipient firms, and performance requirements
for continued participation. However, since project design has to be approved by the state, and
most of the enforcement personnel and agencies are government actors, there are still avenues
for strong influence of the domestic political settlements in such projects. Firm performance
reports and data can be doctored with the collusion of implementing agencies, representative
bodies and enforcement agencies. Where ex ante policy rents are disbursed, even when
monitoring, reporting and verification systems involving consultants and country offices hired
and established by the international institution reveals breaches on behalf of firms, there may
be limited capacity to recoup already-disbursed rents given the difficulties of navigating the
domestic court system and the absence of external legal enforcement mechanisms.
Therefore, with the rise of foreign aid for postcolonial states, by the 1980s there was uproar
concerning the degree of growth-reducing corruption and maintenance of anti-democratic
regimes involved with the use of foreign aid. This is in contrast to foreign aid in South Korea,
for instance, which was better used for infrastructural purposes and to cover the balance-of-
payments problems associated with technology imports during industrialization (Fischer, 2009:
862); and Bangladesh where aid supported better growth-enhancing political settlements
relative to Pakistan (Khan, 2014). In Nigeria on the other hand, between 1991 and 2001,
Nigerian World Bank projects have had poor ratings relative to the rest of Africa and the world,
and “moreover, project performance is generally improving overtime, worldwide and in Africa,
but not in Nigeria.” (World Bank, 2003: 22). One of the key contributors to this was the quality
of project supervision (World Bank, 2003: 22).
29
With the observation of widespread government failure(Krueger, 1999), the Baker Plan
sought to use loan conditionality to coerce rolling back IP itself, limiting it to “general IP” and
using PPPs for general IP. The offspring “good governance” agenda of pressuring, using
foreign emergency loans as incentive, orthodox reforms aimed at creating more growth-
enhancing political settlements and strengthening the state bureaucracy has failed given the
structural origins of growth-reducing political settlements, corruption and weak politically non-
autonomous bureaucracies (Khan, 2007). Seeing this failure, several means have been
employed to attempt to enable buy-in, ownership and commitment to effectiveness of industrial
policy projects and programmes in aid-recipient states. These include mandating the national
government to provide counterpart funding for a project, and having the national government
design the programme implementation roadmap as in the Poverty Reduction Strategy Papers
(PRSPs). The extreme solution in this light is that proposed by Gilley (2015), in a redacted
paper. He suggests that given the weak self-governing capacity of poor countries” to
implement good governance reforms, “Western countries should be encouraged to hold power
in specific governance areas (public finances, say, or criminal justice) in order to jump-start
enduring reforms in weak states (Gilley, 2015: 1-2). This implies “transitionally hand over
sovereignty and power over industrial policy tools and the state administration to external
powers which he assumes have greater growth-enhancing interests and capabilities. The fact
that industrial policy is not mentioned and he supports “economic liberalisation, political
pluralism and administrative streamlining” (Gilley, 2015: 7) with the goals being “higher
foreign investment, lower external borrowing costs and greater business confidence(Gilley,
2015: 10) means that he does not consider the opposing and exploitative interests which may
be involved in handing over fiscal powers of a non-industrialized economy to industrialized
ones.
On the opposite side, the argument was that nations should retain their sovereignty and external
intrusions were neo-colonial. Moreover, industrial policy government failure with a higher
industrial share of GDP produced better outcomes than little or no industrial policy at all
(Reinert, 2009: 103). They have, however, underestimated the strength and persistence of
growth-reducing political settlements (Chibber, 2005). They therefore have not adequately
explored expanded facilities for international institutions to provide new forms of industrial
policy support. Others who demanded expanded roles for international institutions did so with
regard to the amount and type of finance they provided and the type of advisory and capacity-
building roles they play. There has been no analysis of how they could counteract growth-
30
reducing political settlements except by reducing aid to countries characterized by it (Moyo,
2009).
The central government of a politically unified national economy may contend with elites of a
particular subnational unit to impose a more growth-enhancing will. This is due to its control
of major industrial policy tools and power to influence local elites’ power calculus through
control of the national political party apparatus. Unlike Japan whose direct intervention and
coercive power upturned the power of the Yangban elites in Korea (Kohli, 1994), a
supranational entity without monopoly over the legitimate means of violence lacks such powers
and can therefore not be able to be as effective in altering national political settlements of
member states. This is poignant for realizations that regional integration in West Africa (under
ECOWAS) and Africa (under the African Continental Free Trade Agreement), requires
complementary regional coordinated industrial policy (UNCTAD) which national growth-
reducing political settlements may derail.
However, the role of foreign institutions in enabling domestic developmental coalitions to
bypass growth-reducing domestic elites has not been adequately explored in the political
settlements literature (Yanguas, 2016: 3). Yet several examples exist, in Nigeria and beyond.
In the early 2000s, the World Bank enabled the Bureau of Public Enterprises (BPE) under the
leadership of Nasir El-Rufai to bypass corruption demands from legislators as payment for
going through the legislative appropriation process (El-rufai, 2013). This was a similar case
with the Ghana Cocoa Board which was able to borrow from abroad from 1993 (Whitfield et
al. 2015, 242). In Nigeria’s Edo State under Governor Adams Oshiomole, World Bank
involvement and funding helped improve credibility in the administration to enable road
construction contractors to absorb the state’s uncertain cash flows (Bain et al. 2015). It is also
be possible for international donors to compel projects to engage with community actors
(especially powerful landed and business elites) in policy design to enable greater community-
level monitoring of infrastructure projects (Khan et al., 2020).
It is now time to consider systematically internationalizing industrial policy facilities explicitly
to enable growth-enhancing domestic (national or subnational) coalitions to bypass growth-
reducing coalitions. In other words, it is a way of supplementing the holding power of such
coalitions when faced with that of opposing coalitions. Yanguas (2016) has attempted to
theorize the impact of foreign aid upon domestic political settlements. He argues that this may
range from “softer” impacts like diffusion of ideas (to either support the adaptation of
31
incumbents or contestation by challengers), to certification (which either legitimates
incumbents or delegitimates them and hence strengthen challengers), and finally to brokerage
(which supports the consolidation of incumbents’ power or disrupts incumbents in favour of
challengers). Yanguas (2016: 12) understands that “All three options seeking to change the
underlying political settlement would entail significant investment with high political risks and
only indirect control over ultimate policy results”. These high political risks and significant
investment “also increases as one moves from diffusion to certification to brokerage”, with
disruption clearly being the most costly and uncertain option (Yanguas, 2016: 12). The
disruption, delegitimation or support for the adaptation of incumbents is not the only risk that
can come with foreign aid. Khan (2014) shows that foreign aid which legitimates or
consolidates incumbents and allows them to excluded intermediate classes with economic
power from the ruling coalition can weaken growth-enhancing policy orientation (by
weakening mutual interests) and increase conflict due to excluded groups turning to violence
as a means of demanding side-payments.
However, a major problem with these recent attempts to incorporate transnational actors into
political settlements theory (Khan, 2014; Yanguas, 2016) is that they do not adequately
differentiate the international institutions involved and the variation in interests of these actors
in policy areas (especially industrial policy). In other words, much as the political settlements
literature criticizes neopatrimonial and good governance approaches for not situating politics
within the national idiosyncrasies of capitalism, applications of the political settlements
literature to international institutions and foreign aid have not adequately situated it within
regional and global capitalism and interests.
Bruzst and Langbein (2017) classify economic integration into shallow, deep-deep and deep-
light integration. Shallow integration involves some degree of trade liberalization, but only
limited or no common regulations in few policy areas with a limited scope. Examples are
multilateral and bilateral free trade agreements (FTAs). Deep-deep integration, on the other
hand, involves not only the opening up of product and factor markets, but also the adoption of
common regulations across many policy areas (maximally including a common currency) and
their oversight by supranational rule-making institutions, often combined with proactive
supranational management of the potential large-scale developmental externalities of market
integration (Bruzst and Langbein, 2017: 301). Examples are the European Economic
Community (EEC) and national unification (such as colonial amalgamation of Northern and
Southern Protectorates of Nigeria). Deep-light integration on the other hand, represents a
32
highly problematic mixture of the shallow and the deep mode which attempts at full trade
liberalization and comprehensive regulatory but without developing mechanisms to anticipate
potential negative consequences of economic integration and providing assistance to alleviate
them (Bruzst and Langbein, 2017: 301-302). Examples are post-2009 EU approach to Eastern
neighbourhood countries (ENCs) and imperial economic integration (such as Bourbon Spain’s
commercio libre). What may be inferred from Bruzst and Langbein’s (2017: 301) schema is
that modes of integration have implications for the elaborated political settlements of nations
and the degree of power foreign institutions may have over domestic political settlements.
Under shallow integration, the absence of high levels of political and economic
interdependence between the dominant member states of international financial institutions and
developing economies means that the former has little interest in internalizing of the negative
developmental consequences of trade liberalization. There is weak incentive to promote
growth-enhancing mutual interests except to fund nascent developmental coalitions. Budget
support can be used by donors as leverage for policy influence (Swedlund, 2013); and in
periods of crisis when developing countries seek IFI emergency loans, growth-enhancing
coalitions are more likely to emerge, but under shallow integration it is at such times that IFIs
pursue shock therapies to impose conditionalities for rapid trade liberalization and retraction
of industrial policy rents without grace periods. However, without possessing strong military-
coercive power to disrupt or delegitimate growth-reducing ruling coalitions, seeking to change
the underlying political settlement [through aid] would entail significant investment with high
political risks and only indirect control over ultimate policy results(Yanguas, 2016: 12). PoEs
can only be given capacity-building and financing support (as witnessed in the cases involving
the World Bank); and there is weak capacity for the IFI to enforce learning for productivity of
industrial policy rent recipients. After learning from the devastation of shock therapy, the
participatory principles embodied in the Poverty Reduction Strategy Paper (PRSP) model
espoused by the World Bank and IMF in the early 2000s was expected to force elite actors
(using the material incentive of debt forgiveness) to engage with non-elites (strengthening
vertical ties), to empower those who would challenge the dominant political settlement
(horizontal and vertical inclusion) and strengthen accountability in service provision by
bringing providers and clients closer together (Yanguas, 2016: 8). Yet in the area of industrial
policy, it was severely lacking, and it generally failed ultimately.
Under deep-deep integration, there is stronger supranational in internalization of the negative
developmental costs of market integration. The prospects of accession to a major market can
33
incentivize or strengthen the formation of growth-enhancing mutual interests and coalitions;
grace periods for maintaining state aid, and the encouragement and pressure to restructure
industries can be an impetus to intensify efforts at making industries internationally
competitive; and the realization of uncertainty can improve embeddedness and the embrace of
a wide array of players to monitor and support the process of industrial restructuring.
Supranational institutions may also finance and support PoEs, but do not have powers to absorb
the functions if the creation of PoEs is unviable. There is also some enforcement of learning
for productivity due to the stronger mutual interests, support for PoEs and business attraction
to the opportunities presented by the market access. It has been recognized that the case of the
European Union’s (EU) Eastern enlargement “is the only successful case for the deep market
integration of economies at lower levels of development” (Bruszt and Langbein, 2015: 3).
Research has shown that because of the starkness of the negative developmental consequences
of deep economic integration of poorer economies with richer ones (as the salience of the
devastating experience with German reunification), the EU also saw “large-scale
experimentation with mechanisms to manage developmental consequences of rule transfer”
(Bruszt and Langbein, 2015: 3). An important point to note is that the EU “had very little room
to fail” and “could not as easily externalize the costs of governance failure as the IFIs could”
since the integrity of the EU internal market could be dangerously affected by extending the
union to the periphery (Bruszt and Langbein, 2015: 18). Yet “Governments in the accession
countries had weak administrative and development-planning capacities, non-state actors
lacked resources and organization.” (Bruszt and Langbein, 2015: 18). It therefore relied on
“inter-DG coordination, on capacity building in the accession countries and on the mobilization
of a transnational network of private and public actors acting both as monitors of
implementation and as participants in joint learning.” (Bruszt and Langbein, 2015: 18).
Additionally, as indirectly argued by Bruszt and Langbein, (2015: 9), grace periods for phasing
out strategic industrial policies towards strategic economic sectors for a country applying for
accession into a regional common market may be an incentive for stronger growth-enhancing
political settlement to arise for that industry. In other words, in contrast to the use of
conditionalities to impose shock therapy based on universal checklists and externalize the costs
of structural adjustments by IFIs, the threat of post-accession disruptions and financial and
economic incentives of a common market may entice ruling coalitions of applicant nations to
enhance development outcomes under administrative, financial and grace-period support
provided by supranational institutions of economic communities.
34
Under unification (national or imperial), there is even stronger potential though not
inevitability for central government or imperial internalization of the negative costs of
integration due to stronger political and economic interdependence. In addition, imperial
(central government) growth-enhancing coalitions can more easily make national (subnational)
ruling coalitions more developmental due to their possession of military-coercive power, the
ability to depose and reward ruling elites what Yanguas (2016) calls disruption , and the
ability to orchestrate fiscal decentralization and create incentives for local developmental states
to emerge. They can also more easily develop or strengthen the state bureaucracy (under direct
rule under empire, and use of central government PoEs for industrial policy in subnational
governments having weak PoEs). They can also better discipline industrial policy rent
recipients.
The role of foreign institutions in creating or supporting growth-enhancing national coalitions
is therefore strongly influenced by the mode of economic integration defining the relationship
between the developing economy and the foreign institution. With the IFIs such as the World
Bank and the African Development Bank (AfDB), this is limited to providing financial and
capacity-building support to nascent growth-enhancing coalitions and PoEs. Under crisis
situations they cannot be expected to exploit the greater developmental orientation of national
ruling elites and use emergency loans to impose conditionalities for disciplining industrial
policy rent recipients.
As Khan (2013) argues, ex post industrial policy rent provision may be more suitable when
political settlements make it difficult to enforce ex ante rents. This would involve dispensing
the support/compensation/prize only after the firm made the required investments and achieved
the target performance criteria. This is less demanding for the PoE in terms of monitoring
requirements. Hence, Foreign Direct Investment (FDI) and Preferential Tariff Agreements
(PTAs) have been advocated by some as ways of providing ex post industrial policy rents. In
the former case, this was observed in India where Suzuki was attracted to make risky
investments in car manufacturing due to the profit opportunities arising from a protected market
(Khan 2013). For the latter, Collier and Venables (2007: 1333) propose that because trade
preferences in OECD markets are relatively immune from recipient country political economy
problems, they serve as a performance-based/ex post incentive. This is because the benefits of
market access and profits from PTAs can only be gained by investing in developing the
organizational and technological capabilities to become internationally competitive enough. It
may be possible, therefore, for a leader within a ruling coalition facing difficulties enforcing
35
ex post rents and adequately scaling ex ante rents to negotiate a facility with the AfDB, for an
autonomous disbursement of ex post industrial policy rents (since ex ante rents are more easily
captured) after firm performance has been verified. By elevating it to the supranational level,
it allows some measure of predictability and continuity against the potential for discontinuity
of the rents or failure of disbursement due to changes in the ruling coalition or its composition.
However, with the potential future emergence of deeper regional and continental economic
integration, the ECOWAS Bank for Investment and Development (EBID) and the ECOWAS
infrastructure Projects Preparation and Development Unit (PPDU) may prove instrumental in
exploiting supranational powers and opportunities to support and create growth-enhancing
mutual interests, PoEs and disciplining firms for productivity growth under deep-deep modes
of West African economic and political integration (if wealthier members can be made
amenable to the realization of such prospects).
7. Conclusion
Development still requires structural transformation (Rodrik, 2013) in order to overcome the
age-long problem of diminishing returns (Reinert, 2008). This cannot occur without industrial
policy (Chang, 2002) conducted by an ensemble of agents whose totality of engagement
enables the overcoming of coordination failures, enablement of large investments and
addressing other market failures. As the lack of war and the ubiquity of foreign aid prevents
Weberian pressures for securing empirical sovereignty (Jackson and Rosberg, 1986) and more
consolidated political settlements, the approach of extended statehood and multi-level
governance (Bachmann and Olanisakan, 2020) must be adopted by progressive African states,
peoples, elites and intellectuals. This also applies to the field of development economics and
the study of industrial policy.
Historically, the distance between progressive aspirations and realized outcomes has been filled
with power politics, growth-reducing and growth-ambivalent political settlements, corruption,
growth-reducing self-interested leadership and producing decades and centuries of no growth.
It has often been the pressures of existential threats war and revolution which have pushed
the powerful to alter their socially-destructive forms of self-interested behaviour (Scheidel,
2017) and incrementally enable more open access orders (North et al., 2009).
36
However, “No one would wish Europe’s history of international wars on Africa” (Herbst, 2000:
xvii). It is this massive and unwanted force of war that African peoples and development-
oriented elites must replicate through their experimental initiatives to navigate and bypass a
prevailing condition or default of growth-reducing political settlements within proto-
democratic, proto-capitalist and clientelist political orders. The long-run goal is for a
progressive and self-reproducing increase in the relative structural and instrumental power of
development-oriented agents and classes (such as middle classes, wealthier and more educated
electorates, and diversified sectors of industrialists and capitalists) within ruling coalitions
(Saylor, 2014), as well as well as enable political mobilization to be increasingly based on class
and ideology (Kam and Newson, 2021).
For Nigeria, the sclerosis of the oil rents-based fiscal distribution system is becoming starker
as the years go by. Five decades (since the 1970s) of oil-dependence and fiscal centralization
has only produced poor local and national developmental outcomes. In the second decade of
the 21st century Nigeria is at risk of becoming a failed state, with multiple economic, security
and political crises and conflicts ailing the state. Crisis and conflict may perhaps be the impetus
for the fiscal decentralization just as economic crisis, precipitated by the Cultural Revolution
(1966-1976) created popular pressure to raise living standards and forced China under Deng
Xiao Ping to transition from socialism to a developmentally-oriented state capitalism (Huan,
1986: 2) and local developmental states (Bateman, 2017: 25).
In the meantime, and if that happens, exploration and experimentation are key to the Nigerian
project. A bias for hope is therefore essential (Hirschman, 1971: 28). Scholars of Nigerian
development must not remain at the level of conventional economic thinking with its focus on
the methodological nationalism, methodological internalism, apolitical, non-institutional and
unsophisticated analysis, and conventional attitudes towards industrial policy. Nothing must
be taken for granted neither the nation, nor the state (Bachmann and Olanisakan, 2020), not
the bureaucracy, nor politics, nor development, nor even capitalism itself , especially in the
age of global structural and socio-ecological great transformations. Taking these things for
granted blinds scholars and policymakers to possible windows of opportunity that go
unexploited and nascent coalitions that go unsupported, including during crises when there may
be some malleability of the distribution of power.
In addition, the distance between policy-oriented experimental ideas and policymaking must
be shortened. This requires the African intellectual to be more embedded in collective action
37
networks than intellectuals from more materially advanced societies. This is in order to transmit
experimental ideas from ideation to policy testing to both local, national and international
actors. In other words, not only does the state require experimentation upon and the company
require innovations in its organizational and technological capabilities, but the intellectual
requires innovations in organizational capabilities as well within competitive clientelism.
A few experimental avenues have been proposed for improving industrial policy effectiveness
in the midst of competitive clientelist political settlements, using Nigeria as an example. These
involve the subnational, national and international levels. There are of course linkages between
these proposals. For instance, In addition to foreign and economic ministries, almost every
agency of modern government has a stake in some aspect of international relations and
maintains direct contactoften by-passing the foreign ministrywith its opposite numbers
(Haas, 1980: 357). This means the PoEs could be supported by international actors. Indeed,
one of the reasons for the EFCC’s greater financial buoyancy compared to the ICPC is that it
“enthusiastically welcomed funding from a variety of local (usually public) and international
institutions” (Enweremadu, 2012: 29). Additionally, the EFCC could support subnational
developmental coalitions who may be attempting to institute stronger controls against reneging
upon performance criteria.
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