The Successes and Failures of Economic Reform in Nigeria’s Post-Military Political Settlement, By Zainab Usman


There are limitations in the explanatory power of prevailing theories on the political economy of Africa’s  growth without  industrialization  that emphasize the resource-curse, ethnicity, neopatrimonialism, and the devel- opmental state. This article uses a political settlements approach to explain the institutional underpinnings of Nigeria’s economic transition. It shows how external constraints on ruling elites interact with the distribution of power and institutions to stimulate episodic reforms in an ‘intermediate’ Nigerian state. Rather than a ‘developmental’ state presiding over indus- trial upgrading or a ‘predatory’ state operating solely on neopatrimonial basis,  this  intermediate  state  presides  over  selective  reforms  and  bursts of  economic  growth  and  diversification.  Thus,  specific  constraints  in Nigeria’s post-military political settlement from 1999 generated the initial impetus for successful telecoms liberalization, while inhibiting growth in the oil sector. This article contributes to advancing the political settlements framework in applying it to resource-rich countries, by outlining the four dimensions of the distribution of power and the constraints for institutional persistence  or  change,  and  their  varying  economic  implications.  It  also reclaims the concept of ‘elite bargains’ as a defining feature of the horizon- tal distribution of power and demonstrates its centrality to the durability or fragility of institutions, especially at critical junctures of resource booms and busts.

The contemporary understanding of the political economy of African states has largely been framed by resource-curse, ethnic pluralism, neopatrimo- nialism, and more recently developmental state theories. Despite providing important  insights, the  significant  limitations  in  their  explanatory  power were laid bare by the recent rapid growth without industrial transformation of  many  African  economies.  In  Africa’s  largest  economy  Nigeria,  for instance, recent growth has been driven by non-oil sectors, especially ser- vices, and the oil sector has steadily declined as a share of Gross Domestic

Product (GDP) although without  a concurrent diversification of exports and government revenue. The policy arena is more dynamic with varying reform  outcomes  in  service  sectors,  contrary  to  predictions  of  inertia, stagnation and policy failure predicted by resource-curse, neopatrimonial, and ethnic pluralism theories.

This article makes the case for using the political settlements approach as  an  alternative  analytical  framework  on  the  political  and  institutional underpinnings  of  economic  transitions  in  African  countries.  Using  the period  after  military  rule  in  Nigeria  from  1999  as  a  case  in  point,  the article shows how the interaction of external pressures with the domestic power configuration enabled a growth-orientation in service sectors such as telecommunications but not in the oil sector. It argues that the distribution of power and constraints on ruling elites are the political foundations of an

‘intermediate’ Nigerian state. Rather than a ‘developmental’ state presiding over industrial upgrading from low- to high-value economic activity, or a

‘predatory’ state operating solely on a neopatrimonial basis, this intermedi- ate state presides over selective reforms, thereby driving bursts of economic growth  and  diversification.  This  argument  is  pursued  through  the  lens of  political  settlements,  as  the  distribution  of  power  in  society  between elites  and  other  groups  and  within  institutions.  The  political  settlement is  also  an  analytical  framework  for  examining  which  institutions  emerge in  different  contexts  and  how  effective  they  are  in  achieving  particular economic objectives.1

For  decades,  four  sets  of  theories  have  dominated  the  scholarship  on institutional  foundations  of  the  failure  of  economic  transition  in  African countries. Firstly, the resource curse literature explains why resource- and especially oil-rich countries suffer from slow growth and political instability. Through the Dutch disease2  and rent-seeking, these resources undermine growth, ‘good governance,’3  political stability, and democracy.4  However, the rapid growth of resource-rich countries during the commodities super- cycle of the 2000s questions these deterministic assumptions about natural resource abundance. These resource-curse theories hardly considered how history,  power  relations,  and  political  coalitions  drive  changes  in  policy

1.     Mushtaq  Khan,  ‘Introduction:  Political  settlements  and  the  analysis  of  institutions’,

African Affairs 117, 469 (2018), pp. 636–655.

2.     The Economist, ‘The Dutch disease’, 26 November 1977, pp. 82–86; Jeffrey D. Sachs and

Andrew M. Warner, ‘Natural resource abundance and economic growth’ (NBER Working Paper

5398, 1995), (20 March 2015).

3.     For a useful review of the resource-curse policy literature, see GIZ, ‘The political economy of  extractive  resources’,  [Deutsche  Gesellschaft  für  Internationale  Zusammenarbeit  (GIZ), Eschborn 2016].

4.     Michael  L.  Ross,  The  oil  curse: How  petroleum  wealth  shapes  the  development  of  nations (Princeton  University  Press, Princeton, NJ, Oxford, 2012); Paul  Collier, The  bottom  billion: Why  the  poorest  countries  are  failing  and  what  can  be  done  about  it  (Oxford  University  Press, Oxford, 2008).

responses  to  resource  booms.5   The  vicious  scramble  for  political  power in many countries predates a resource windfall.6  Rents from a centralized state authority generate neither uniform scales of rent-seeking nor uniform developmental consequences.7

The  second  set  of  theories  posits  that  plural  societies  are  vulnerable to  poor  economic  outcomes  because  ethnic  fragmentation  undermines consensus for growth-promoting public goods.8  These countries make sub- optimal  policy  choices,  which  are  consumption  orientated,  foster  rent- seeking,  and  engender  conflict.  However,  some  of  these  large-cross- country studies identified correlations are characterized by endogeneity and inverse-causality, rather  than  causations  between  diversity  and  economic performance.9  Multi-ethnic and multi-racial countries such as Brazil and Malaysia have successfully transitioned to upper-middle income status.

Third,  theories  of  neopatrimonialism  point  to  the  particularism  in African  societies,  especially  the  prevalence  of  informal  institutions,  as the   main   obstacle   to   economic   transformation.10    Neopatrimonialism characterizes the patron–client relations outside formal Weberian rational– legal  authority  as  pathologies  of  Africa’s  ‘retrogressive’  political  culture. This  clientelism  undermines  political  stability  and  the  administrative capacity to facilitate economic transformation. The ‘neopatrimonial logic’ operates through the application of public office to private ends, obstruction of  a  business  class, expansionary  monetary  policy, and  trade  and  indus-

5.     For a critique of the resource curse, see: Samuel Hickey and Angelo Izama, ‘The politics of  governing  oil  in  Uganda:  Going  against  the  grain?’  African  Affairs  116,  463  (2016), pp. 163–185. and Amy R. Poteete, ‘Is development path dependent or political? A reinter- pretation of mineral-dependent development in Botswana’, Journal of Development Studies 45,

4 (2009), pp. 455–456.

6.     Terry-Lynn Karl, The paradox of plenty: Oil booms and petro states (University of California Press, Berkeley, CA, London, 1997); Riccardo Soares de Oliveira, Oil and politics in the Gulf of Guinea (Hurst and Company, London, 2007).

7.     For detailed critique of both Dutch Disease and Rentier-State models of the resource curse thesis, see Jonathan Di John, From windfall to curse? Oil and industrialization in Venezuela,

1920 to the present (The Pennsylvania University Press, University Park, PA, 2009), p. 3,7.

8.     Yusuf Bangura, ‘Ethnic inequalities in the public sector: A comparative analysis,’ Develop- ment and Change 37, 2 (2006), pp. 299–328; William Easterly and Ross Levine, ‘Africa’s growth tragedy: Policies and ethnic divisions’, The Quarterly Journal of Economics 112, 4 (1997), pp.

1203–1250, p. 300; Alberto Alesina and Eliana La Ferrara, ‘Ethnic diversity and economic performance’. (NBER Working Paper 10313, 2004) (20

March 2015).

9.     For  critique  of  ethnic  fragmentation  theories,  see  Christopher  Cramer  and  Ha-Joon Chang,  ‘Tigers  or  tiger  prawns?:  The  African  growth  “Tragedy”  and  “Renaissance”  in perspective’, in Célestin Monga and Justin Yifu Lin (eds), The Oxford handbook of Africa and economics: Volume 1: Context and concepts (Oxford University Press, Oxford, 2014), pp. 484–


10.     Thomas M. Callaghy, ‘The state as lame leviathan: The patrimonial administrative state in Africa’, in Ergas Zaki (ed), The African state in transition, (Macmillan, London, 1987), pp.

423–442.; Patrick Chabal and Jean-Pascal Daloz, Africa works: Disorder as political instrument (James  Currey, London, 1999); Nicholas  Van  de  Walle, African  economies  and  the  politics  of permanent crisis 1979–1999 (Cambridge University Press, New York, NY, 2001).

trial  policies  encouraging  rent-seeking.11   However,  neopatrimonialism’s explanatory   power   is   limited   because   both   Weberian   rational–legal authority  and  clientelism  are  outcomes  and  distortions  respectively,  of capitalist  development,  rather  than  its  preconditions.12    Consequently, neopatrimonialism  is  unable  to  correctly  explain  differences  in  political stability and economic outcomes among ‘neopatrimonial’ societies,13  and even among industries or regions within one economy.

Developmental  state  theories  made  headway  in  explaining  differences in  economic  outcomes  in  developing  countries  in  ostensibly  clientelist political  systems.  Early  works  focused  on  the  state’s  role  in  economic transformation  and  its  internal  organization  and  relations  to  society  in the industrialization of Northeast Asia.14  Later versions analysed how the state’s political character, including the nature of business-state relation- ships and the strategies for political survival employed by ruling elites, shape policy choices and determine economic outcomes.15  Peter Evans’ typology of state capacities includes the ‘developmental state,’ which presides over industrial transformation due to its corporate coherence, institutionalized ties to society and pursuit of collective goals; the ‘predatory state,’ which is extractive because it is characterized by lack of bureaucratic coherence and personal ties to society by incumbents; and the ‘intermediate state,’ which presides  over  variable  economic  outcomes  in  different  sectors  because  it has some semblance of bureaucratic organization but not a high degree of coherence.16   In Nigeria, according to Atul Kohli, the state is ‘predatory’ and  ‘neopatrimonial,’ with  diffuse  power  that  preoccupy  it  with  corrupt

11.     Summarized in Thandika Mkandawire, ‘Neopatrimonialism and the political economy of  economic  performance  in  Africa:  Critical  reflections’,  World  Politics  67,  03  (2015),  pp.


12.     Hazel  Gray  and  Lindsay  Whitfield,  ‘Reframing  African  political  economy:  Clien- telism,  rents  and  accumulation  as  drivers  of  capitalist  transformation’  (Working  Paper Series,   International   Development,   LSE,   159,   London,   2014) internationalDevelopment/pdf/WP/WP159.pdf  (25 March 2015).

13.     Mushtaq Khan, ‘Political settlements and the governance of growth-enhancing institutions’ (School of Oriental and African Studies SOAS, London, 2010); Mkandawire, ‘Neopatrimo- nialism’.

14.     Among  others, see  Alice  H. Amsden, Asia’s  next  giant: South  Korea  and  late  industri- alization  (Oxford  University  Press, New  York, Oxford, 1989); Robert  Wade, Governing  the market: Economic  theory  and  the  role  of  government  in  East  Asian  industrialization  (Princeton University  Press,  Princeton,  NJ,  1990);  Peter  B.  Evans,  Embedded  autonomy:  States  and industrial transformation (Princeton University Press, Princeton, NJ, 1995).

15.     On  political  organization  of  the  developmental  state, see  Adrian  Leftwich, ‘Bringing politics  back  in: Towards  a  model  of  the  developmental  state’, The  Journal  of  Development Studies 31, 3 (1995), pp. 400–427.; David Kang, Crony capitalism:Corruption and development in South Korea and the Philippines (Cambridge University Press, Cambridge, 2004). On business- state  relations,  see  among  others  Sylvia  Maxfield  and  Ben  Ross  Schneider  (eds), Business and  the  state  in  developing  countries  (Cornell  University  Press,  London,  Ithaca,  NY,  1997). On political survival of ruling elites, see among others Richard F. Doner, Bryan K. Ritchie and Dan  Slater, ‘Systemic vulnerability and  the origins  of developmental states: Northeast and Southeast Asia in comparative perspective’, International Organization 59, 02 (2005), pp.


16.     Evans, ‘Embedded autonomy’, p. 12, 60.

personal  enrichment  and  sectarian  appeasement  rather  than  a  growth orientation.17

While developmental state explanations are a major theoretical advance- ment, they do not account for within country variations. In any one country, the  development  stages  over  time  each  require  varying  levels  of  state capacity to create incentive and regulatory structures, with implications for society’s politics.18  In Nigeria, some growth-orientated economic policies have  been  attempted  with  some  successes  and  numerous  failures  across sectors. To  use  Evans’ terminology, Nigeria  is  more  of  an  ‘intermediate’ state,  than  a  ‘predatory’  state  operating  solely  on  a  neopatrimonial  and

‘prebendal’ basis as described in some established accounts.19  This inter-

mediate state has episodic coherence and capacity to facilitate economic growth  through  haphazard  reforms,  and  does  not  thereby  preside  over industrial  upgrading  from  low-  to  high-value  economic  activity.  Using the lens of political settlements, I attribute this variation in the Nigerian state’s capacity to the configuration of political power and specific political constraints on ruling elites, which inform their policy choices.

The political settlement is the distribution of power in a society among the elite and other contending societal groups and within institutions. The conceptual  foundations  of  political  settlements  emerged  from  a  critique of  New  Institutional  Economics  on  the  primacy  of  formal  institutions (i.e. property  rights, regulatory, contractual, and  democratic)  for  growth and  prosperity.20   The  absence  or  distortion  of  these  institutions  creates dysfunction. Mushtaq  Khan  argues  that  it  is, rather, the  organization  of power  that  explains  differences  in  the  costs  of  creating  and  enforcing growth-enhancing institutions across developing countries.21  In this regard, if the distribution of net benefits supported by an institution is consistent with  the  overall  power  configuration, there  will  be  minimal  contestation from  powerful  groups,  and  enforcement  costs  are  likely  to  be  low;  the

17.     Kohli’s  three  archetypes  of  the  political  character  of  a  state  are  cohesive-capitalist, fragmented multiclass and neopatrimonial. See Atul Kohli, State-directed development: Political power  and  industrialization  in  the  global  periphery  (Cambridge  University  Press, Cambridge,


18.     Di John, ‘From windfall to curse?’, pp. 9–10.

19.     On prebendalism and neopatrimonialism, see respectively Richard Joseph, Democracy and the rise of prebendal politics in Nigeria: The rise and fall of the Second Republic (Cambridge University Press, Cambridge, 1987) and Peter Lewis, Growing apart: Oil, politics, and economic change in Indonesia and Nigeria (University of Michigan Press, Ann Arbor, MI, 2007).

20.     Notable proponents include: Oliver E. Williamson, The economic institutions of capitalism (Free  Press,  New  York,  NY,  1985);  Douglas  C.  North,  Institutions, institutional  change  and economic performance (Cambridge University Press, Cambridge, 1990).

21.     Khan, ‘Political Settlements’, pp. 12–13, Mushtaq Khan, ‘Rents, efficiency and growth’, in Mushtaq Khan and Kwame Sundaram Jomo (eds), Rents, rent-seeking and economic devel- opment  (Cambridge University Press, Cambridge, 2000), pp. 21–60; Mushtaq Khan, ‘State failure in weak states: A critique of new institutionalist explanations’, in John Harris, Janet Hunter and Colin M. Lewis (eds), The New institutional economics and Third World development (Routledge, London, 1995), pp. 11–21.

costs  are  likely  to  be  high  if  the  reverse  were  the  case.  Thus,  political settlements  incorporate  the  missing  link  of  power  relations  to  explain the dynamic interaction between institutions and growth outcomes. Some aspects of New Institutional Economics superficially overlap with political settlements  such  as  formal  and  informal  institutions  and  de  jure  and  de facto power, employed in this paper.22  The point of departure however is the  foundational  assumption  of  New  Institutional  Economics  about  the characteristics  of  developing  countries  and  an  ideal  end  state  of  open economic and political systems.23

Accordingly, this article contributes to advancing the political settlements framework in applying it to resource-rich countries, where rents flow from single commodity exports. It explains how external pressures interact with the  distribution  of  power  and  institutions  in  resource-rich  countries  to stimulate episodic but not transformational reforms. This contribution is attempted in two ways. The first is to outline the four dimensions of the distribution  of  power  and  the  constraints  for  institutional  persistence  or change, and their varying economic implications. These four dimensions are  elite  bargains, coalitions  with  societal  groups, economic  agenda, and institutionalization. In doing so, the article draws on the ‘critical junctures’ and ‘systemic vulnerability’ literature to explain how new institutions and policies emerge at critical junctures as ruling elite respond to constraints of various types. These constraints can elicit growth-enhancing or growth- retarding policy responses based on the nature of threats they pose to the political  survival  of  ruling  elites, and  the  capabilities  of  elites  to  address them.

The second aspect of the contribution is reclaiming the concept of elite bargains as a defining feature of the horizontal distribution of power and demonstrating  its  centrality  to  the  durability  or  fragility  of  institutions, especially at critical junctures of resource booms and busts. In resource- rich  countries  such  as  Nigeria, a  consensus  by  powerful  actors  over  the allocation  and  use  of  oil  rents  is  a  defining  feature  of  the  distribution  of power. Rapid swings in the flow of these externally-derived rents have a sig- nificant impact on the political settlement either by reinforcing the existing power configuration or by leading to a renegotiation and reconfiguration. Powerful actors, usually elites, who capture and allocate resource rents play key decision-making roles at critical junctures of resource boom and busts.

22.     For  instance,  concepts  of  defacto  and  dejure  political  power  can  be  found  in  Daron. Acemoglu and James. A. Robinson, ‘Paths of economic and political development’, in Barry R. Weingast and Donald. A. Wittman (eds), The Oxford handbook of political economy (Oxford University Press, Oxford, 2008), pp. 673–693.

23.     For  an  elaboration  of  this  point, see  Khan, ‘Political  settlements  and  the  analysis  of institutions’.

This  article  draws  from  a  larger  project  on  ‘the  political  economy  of economic  diversification  in  Nigeria’ for  which  120  interviews  were  con- ducted, mostly  in  Nigeria  between  2014  and  2015. It  draws  on  some  of the elite interviews, in addition to economic data, documentary evidence and  insider  knowledge  of  the  country  from  personal  networks. It  uses  a process-tracing method that relies on insider accounts and documentation of events and processes of the telecoms and oil-sector reforms. This enables the tracing of decision-making and an understanding of the power relations in Nigeria. Evidence is drawn from interviews with key players including politicians, bureaucrats  in  government  agencies, business  elites, oil  com- pany representatives, journalists and civil society actors, supplemented by policy documents, news reports, memoirs, and other published material.

In  Nigeria,  the  diversification  of  GDP  and  yet  concurrent  continued dependence on oil for exports and fiscal revenue are outcomes of economic policy  reforms  by  an  intermediate  state  capable  of  episodic  reform  but incapable of driving industrial transformation. This article argues that the foundations of these policy reforms are external constraints of low oil prices operating through three causal mechanisms.

First, the  external  shocks  which  created  fiscal  pressures  on  the  ruling elite  from  1999  provided  the  impetus  for  reforms. This  ruling  elite  had negotiated a power sharing consensus within the People’s Democratic Party (PDP) to manage horizontal competition between northern and southern elites, which ended military rule in May 1999. Second, this ruling elite and a domestic business class constituted a growth coalition with the capacity and  resources  to  pursue  reforms.  However,  the  clientelistic  deployment of  rents  within  this  coalition  had  varied  outcomes  depending  on  the nature  of  enforcement  costs  in  the  sector  in  question.  New  institutions and  policies  were  sufficient  to  drive  growth  in  service  sectors  such  as telecommunications  but  not  oil-sector  growth. Third, the  distribution  of benefits of this diversifying economy to a narrow elite deepened vertical- societal  and  horizontal-elite  distributional  pressures  and  increased  the enforcement costs of new institutions and policies, which translated into revenue  leakages  and  an  anti-reform  impulse  in  the  oil  sector.  Rising poverty and welfare concerns pitched Nigeria’s trade unions against market reforms  and  armed  insurgents  against  the  state.  The  concentration  of growth dividends as well as presidential power in the South undermined the reforms’ horizontal  legitimacy  among  mostly  northern  politicians  within the ruling PDP.

The article is structured as follows. The next section presents Nigeria’s recent  economic  performance  as  driven  by  non-oil  sectors  and  charac- terized  by  both  GDP  diversification  and  concurrent  dependence  on  oil for  exports  and  revenue.  Then,  I  explain  how  the  political  settlements approach enables us to understand the institutional foundations of Africa’s economic  transition. I  outline  the  four  dimensions  of  the  distribution  of

power  in  the  political  settlement  as  well  as  the  horizontal,  vertical,  and external constraints on ruling elites at critical junctures. The article then analyses the distribution of power in Nigeria’s political settlement and the growth  coalition  that  emerged  at  democratization  in  1999.  Finally,  the article examines how external constraints on Nigeria’s ruling elite enabled the  successful  liberalization  of  telecoms,  while  countervailing  horizontal and vertical constraints generated an anti-reform impulse in the oil sector.

Nigeria’s economic transition

Nigeria’s economic growth in the 21st century is one of the drivers of the

‘Africa Rising’ narrative.24  In the early 2000s, economic growth averaged 7 percent per annum, offsetting economic stagnation of less than 3 percent per  annum  in  the  1990s. In  April  2014, Nigeria  became  Africa’s  largest economy,  and  the  world’s  26th  largest  economy  with  a  GDP  of  N113 trillion or US$376 billion in 2017. However, growth crashed to 2.8 percent in  2015  and  −1.5  percent  in  2016.  Christopher  Cramer  and  Ha-Joon Chang note that this growth spurt in parts of Africa was mainly due to one- off factors and not accompanied by an increase in productive capabilities.25

This  article  discusses  how  changing  external  conditions  such  as  rising demand  for  resources  interact  with  internal  political  transitions.  This section shows how Nigeria’s recent economic performance in the 2000s was driven  by  non-oil  sectors  and  characterized  by  both  GDP  diversification and  concurrent  dependence  on  oil  for  exports  and  revenue.  Nigeria’s growth is engendered by the balance of power and political constraints in its political settlement for two reasons. First, it is driven by non-oil sectors. Second, there is some structural transformation that is not accompanied by industrialization but is reinforcing the economic dependence on oil.

Nigeria’s recent economic growth has been driven by non-oil sectors. In the 10-year period from 1999 to 2009, the fastest growing sectors of at least

10 percent were non-oil. These include services (12.2 percent), especially telecommunications whose average was 122 percent, trade (11.3 percent) and agriculture (10.4 percent), as Figure 1 shows. Within this period, the oil and gas sector’s average growth rate was 1.3 percent.

These  changes  in  the  growth  drivers  continued  after  the  base  year  for Nigeria’s GDP was upgraded in 2014 from 1990 to 2010.26  Between 2011 and  2017, the  sectors  with  the  highest  growth  rates  were  manufacturing

24.     The  Economist,  ‘Africa  rising’,  3  December  2011,

21541015 (3 June 2013).

25.     Cramer and Chang, ‘Tigers or tiger prawns?’.

26.     Data from the pre-revision figures are used for 1999 to 2009, while the revised figures cover  2010  to  2016.  See:  NBS,  ‘Measuring  better:  Frequently  asked  questions  on  the rebasing/re-benchmarking of Nigeria’s gross domestic product (GDP)’ (Nigerian Bureau of Statistics NBS, 2014).

Figure 1  Average growth rate by sector (%) 1999–2009.

Source:  Author’s  calculations  from  Nigerian  Bureau  of  Statistics  Data


Figure 2  Average growth rate (%) by sector, 2011–2017.

Source:  Author’s  calculations  from  Central  Bank  of  Nigeria  Statistics

Database (2017).

(8.8 percent), solid minerals (8.4 percent) and construction (7.4 percent), as Figure 2 shows. However, oil contracted by an average of 4.5 percent, despite high global oil prices of around $100 per barrel. There is, however, a strong indication that these non-oil sectors driving growth are linked to the  oil  sector. This  is  because  since  mid-2014, the  collapse  of  global  oil prices (from a peak of $111.63 in 2012 to $52.32 in 2015) and reduction in Nigeria’s oil output (from a peak of 2.44 million bbl/d in 2010 to 2.12 million  bbl/d  in  2015)  slowed  economic  growth  and  led  to  shortfalls  in non-oil revenue, a drop in international reserves and disruptions in private sector activity.27

27.     IMF, ‘Staff report for the 2016 Article IV consultation’ (International Monetary Fund

IMF, Washington DC, 2016). NBS, ‘Nigerian gross domestic product report: Quarter one

2016’ (Nigerian Bureau of Statistics NBS, 2016).

Figure 3   Sectoral contribution (%) to 2000 & 2009 GDP (%) in current prices.

Source:  Author’s  calculations  from  National  Bureau  of  Statistics  Data


Figure 4  Sectoral contribution (%) to 2010 & 2017 GDP in current prices. Source:Author’s calculations from Central Bank of Nigeria (CBN) Statistics Database (2017).

Second, there is structural change, though not to the extent of industri- alizing Nigeria’s economy (Figures 3 and 4). Recent economic growth has diversified Nigeria’s GDP but not its exports and fiscal revenue. By 2017, the oil and gas sector declined to 9.1 percent of GDP from 48.9 percent in  2000, but  contributed  92.3  percent  of  export  earnings  and  only  56.2 percent  of  government  revenue. Services, including  trade, accounted  for

59.5 percent of GDP. This indicates a diversification, partly attributable to Nigeria’s revisions of the GDP base year, which now capture 46 economic sectors rather than 33 in the old series.28  However, the decline of Nigeria’s

28.     NBS, ‘Measuring better’.

Figure 5  Resource rents as percentage of GDP in Africa’s top oil producers,

2000 & 2016.

Source:Author’s calculations from the WDI database and CBN (2017) data. Note:This figure includes only veteran oil-rich countries which were pro- ducing and exporting oil by the year 2000. It excludes Cameroon (due to the small scale of production) and DRC (due to the abundance of other minerals and metals).

∗Nigeria’s figures are from the CBN database for consistency. My calcu-

lation using the CBN data results in figures close to the WDI +/−  a few percentage points. The difference can be explained by the use of different currencies,  exchange  rates,  whether  the  absolute  values  are  nominal  or constant, and what base year is used (e.g. 1990 or 2010).

∧ Libya’s 2016 figures are from the year 2011, the last year for which data

are available at the time of writing in December 2018.

∗∗Equatorial Guinea’s 2000 figures are from the year 1999.

oil sector is indicative of a growing non-oil economy in a manner that is markedly  different  from  other  large  African  oil  producers.  Even  though Nigeria  is  Africa’s  largest  oil  producer, as  Figure 5  shows, it  is  the  only major oil exporter whose oil sector contributes less than 10 percent of GDP. Besides, manufacturing was Nigeria’s fastest growing sector between 2011 and 2017, as Figure 2 indicates.

In exports and revenue composition, there has been no structural change. In 2017, the oil sector constituted 92.3 percent of export earnings, barely declining  from  98.7  percent  in  2000,  as  Figure 6  shows.  Concurrently, government revenue composition is changing. Oil revenue accounted for

83.5  percent  in  2000, 79.9  percent  in  2011  and  is  declining  as  Figure 7 shows. The share of non-oil revenue increased from less than 20 percent in 2000 to 43.8 percent (2017). Non-oil revenues grew both relative to the

Figure 6  Distribution of exports (%) 1999–2017.

Sources:  Author’s  calculations  from  CBN  Statistics  Database  (2017)— Includes estimates for informal cross border trade.

Figure 7  Composition of government revenue (%) 1999–2017.

Sources: Author’s calculations from CBN Statistics Database (2017).

contribution from the oil sector and in absolute terms due to improvements in tax collection.29

The  paradox  is  that  while  Nigeria  is  a  rentier  state  grappling  with resource dependence, as with many oil-exporters, it does not have a rentier economy. A rentier state derives more than 40 percent of its fiscal revenue from  external  rents,  and  in  a  rentier  economy,  resources  constitute  60–

80  percent  of  GDP.30   The  growth  and  diversification  of  output  without

29.     CBN,   ‘Annual   economic   report   for   2013’   (Central   Bank   of   Nigeria   CBN, Abuja, 2013). (04 June 2015).

30.     Hazem Beblawi, ‘The rentier state in the Arab world’, Arab Studies Quarterly 9, 4 (1987), pp. 383–398.

industrialization have not equally transformed the structure of exports and government revenue. This complex economic performance is inconsistent with  the  inertia  and  stagnation  predicted  by  prevailing  theoretical  lenses applied to Nigeria and oil exporters.

The political settlement in Africa’s resource-rich countries

The political settlements framework presents a theoretical alternative to the resource  curse,  ethnic  pluralism,  neopatrimonialism,  and  developmental state theories in explaining the economic transition in Africa. It accounts for a range of outcomes by mapping the changing policy arena in terms of the power, interests, and interactions of key actors. There is an emerging literature  on  political  settlements,  but  no  consensus  on  all  its  precepts. At  least  two  strands  of  literature  are  identifiable  based  on  how  they conceptualize the distribution of power and the role of key actors in shaping institutions.31

In the first strand, Mushtaq Khan focuses on the distribution of holding power (capability to sustain oneself in contests seeking to influence insti- tutional outcomes) among organizational groups.32    His three dimensions of analyzing the distribution of power are horizontally within and outside a ruling coalition, vertically among non-elite groups, and within productive groups.33  Notable applications include Lindsay Whitfield and colleagues’ conceptualization of the distribution of power between ruling elites, bureau- crats  and  capitalists  as  the  politics  underpinning  the  implementation  of industrial policies.34    For Mariz Tadros and Jeremy Allouche, the political settlement  demarcates  a  new  ‘phase’  in  a  country  brought  about  by  a rupture in the status quo, such as regime change or an end to conflict.35

A second strand defines political settlements as outcomes of negotiations among  contending  elites  on  the  distribution  of  power  and  resources  in society.36     It  emphasizes  the  event  dimension  of  the  political  settlement,

31.     For a review of different approaches to political settlements, see for instance Behuria et al., ‘Studying political settlements in Africa’ and Khan, ‘Political settlements and the analysis of institutions’.

32.     Khan, ‘Political settlements and the analysis of institutions’, p. 20.

33.     Behuria et al., ‘Studying political settlements in Africa’, p. 512.

34.     Lindsay Whitfield, Lars Buur, Ole Therkildsen, Anne M. Kjaer, The politics of African industrial policy: A comparative perspective (Cambridge University Press, New York, NY, 2015).

35.     Mariz Tadros and Jeremy Allouche, ‘Political settlements as a violent process: Decon- structing the relationship between political settlements and intrinsic, instrumental and resul- tant forms of violence’, Conflict, Security & Development 17, 3 (2017), pp. 187–204, p. 187.

36.     Edward  Laws,  ‘Political  settlements,  elite  pacts  and  governments  of  national  unity’ (Developmental  Leadership  Program,  2012);  Thomas  Parks  and  William  Cole,  ‘Political settlements: Implications for international development policy and practice’ (The Asia Foun- dation, 2010); Alina Rocha Menocal, ‘Political settlements and the politics of inclusion’ (State of the Art: Developmental Leadership Programme, no. 7, 2015); Jonathan Di John and James Putzel, ‘Political settlements: Issue paper’ (Government and Social Development Resource Centre, 2009).

emerging say in post-conflict or electoral transitions. Elites are central to the horizontal negotiations which result in pacts, although the vertical relations with  their  followers  also  matter.  The  desirable  political  settlement,  one which provides stability, is resilient and drives prosperity, is underpinned by ‘open and  …  more inclusive institutions.’37  This approach is employed by international development agencies in state-building, especially in fragile and post-conflict contexts to broker more inclusive arrangements.38

However, Khan and followers critique this elite pact approach because it ignores the broader definition of the political settlement as a stable distri- bution of power across organizations.39    The suggestion that an ‘inclusive’ political settlement is more likely to be stable and allow greater development appears to be at odds with situations, where a narrow distribution of power has endured and in some cases driven growth. They also find the focus on elites rather than powerful organizations to be ‘very misleading.’ 40  Those described as elites in developing countries, such as educated professionals, may have little organizational power while non-elite actors, such as rural activists,  could  mobilize  and  wield  considerable  holding  power.  These criticisms,  while  valid,  misread  elite  pacts  by  equating  them  to  a  peace agreement to end conflicts.

As  I  will  demonstrate  in  this  article,  the  concept  of  elite  pact  can  be reclaimed  to  capture  an  important  aspect  of  the  horizontal  distribution of  power.  In  many  societies,  the  ongoing  negotiations  among  powerful groups  and  the  horizontal  power  configuration  within  and  outside  the ruling  coalition  can  be  discrete  pacts.  As  Tim  Kelsall  also  notes,  what makes political settlements distinct from other political economy analyses is  the  ‘identification  of  a  set  of  institutions  and  distribution  of  power on  which  powerful  groups  are  agreed, and  …  heavily  invested, not  just because they furnish an acceptable level of benefits, but because there is a mutual expectation that their alternative is  …  violent conflict.’41  Surely, the difficulty of identifying elite groups should not mean analysts discard the concept, but should call for more refined analytical tools. For instance, according to Anthony Bebbington and colleagues, a natural resources lens to  political  settlements  analysis  introduces  spatiality  and  time  to  explain

37.     Menocal, ‘Political settlements and the politics of inclusion’, p.3.

38.     DfiD, ‘The  politics  of  poverty: Elites, citizens  and  states: Findings  from  ten  years  of DFID-funded research on governance and fragile states 2001–2010. A synthesis paper’ (UK Department for International Development, 2010); World Bank, ‘World Development Report

2017 Governance and the Law’ (World Bank, Washington, D.C., 2017).

39.     Khan, ‘Political settlements and the analysis of institutions’, pp. 652–653; Behuria et al.,

‘Studying political settlements in Africa’.

40.     Khan, ‘Political settlements and the analysis of institutions’, p. 653.

41.     Tim Kelsall, ‘Towards a universal political settlement concept: A response to Mushtaq

Khan’, African Affairs, 117, 469 (2018), pp. 656–669.

how new actors, say in resource-producing communities, emerge, accrue and lose holding power at sub-national, national, and transnational levels.42

This article contributes to applying the political settlements framework to  resource-rich  countries43   like  Nigeria  with  two  building  blocks:  the distribution  of  power  and  the  constraints  for  institutional  persistence  or change.  In  this  endeavour,  I  reclaim  the  concept  of  ‘elite  bargains’  as  a defining feature of the horizontal distribution of power, and demonstrate its centrality to the durability or fragility of institutions especially at critical junctures  of  resource  booms  and  busts.  I  argue  that  in  resource-rich countries, a  consensus  over  the  allocation  and  use  of  oil  rents  is  central to  the  distribution  of  power. Since  oil  rents  are  derived  externally, rapid swings  in  their  flow  disrupt  the  political  settlement  either  by  reinforcing the  existing  distribution  of  power  or  by  leading  to  a  renegotiation  and reconfiguration. The decisive actors at these historic junctures are usually elites who capture and allocate resource rents. By analysing the distribution of power and constraints on ruling elites at these junctures, we can better understand the political foundations of Nigeria’s ‘intermediate’ state which intermittently  implements  reforms,  thereby  driving  bursts  of  economic growth and diversification rather than innovative industrial upgrading.

In  extending  the  political  settlements  approach  to  analysing  Nigeria’s economic performance, the four dimensions of the distribution of power below are the first building block for the analysis. These are elite bargains, coalitions with societal groups, economic agenda, and formal institutions. An elite bargain, or pact, is a discrete consensus over the horizontal distri- bution of power among elites in society. It captures the event dimension of  a  political  settlement  as  a  marker  in  ongoing  political  processes.44   It is  neither  the  sum  total  of  political  settlements45   nor  synonymous  with peace agreements. This consensus is a credible commitment among elites that they will not fight each other,46  underpins the political and economic systems and is about resource management. Where rents flow largely from a central source, such as in oil-rich countries, the elite consensus constitutes the  informal  rules  over  their  productive  or  predatory  allocation. Formal

42.     Anthony Bebbington, Abdul-Gafaru Abdulai, Denise Humphreys Bebbington, Marja Hinfelaar, and Cynthia Sanborn, ‘Resource extraction and inclusive development: Extending the  bases  of  the  political  settlements  approach’,  in  Anthony  Bebbington,  Abdul-Gafaru Abdulai,  Denise  Humphreys  Bebbington,  Marja  Hinfelaar,  and  Cynthia  Sanborn  (eds), Governing extractive industries: Politics, histories, ideas (Oxford University Press, Oxford, 2018), pp. 1–23. For instance, Scott proposes a way of conceptualising ‘elites’: John Scott, ‘Modes of power and the re-conceptualization of elites’, Sociological Review 56, no. Issue Supplement s1 (2008), pp. 28–43.

43.     Other works in this area include growth and decline in oil-rich Venezuela, Di John, ‘From windfall to curse?’; on oil sector negotiations in Uganda, see Hickey and Izama, ‘The Politics of governing oil in Uganda’.

44.     Laws ‘Political Settlements, Elite Pacts and Governments of National Unity’.

45.     Di John and Putzel, ‘Political settlements: Issue paper’.

46.     ibid (pp. 14).

institutions such as the civil service, the parliament, political parties, and intergovernmental  transfers  will  either  reinforce  this  informal  consensus, or be distorted when there is no alignment with this underlying pact. The durability  of  the  pact  is  based  on  the  extent  to  which  it  both:  includes powerful actors and is thereby resilient to contestation by excluded factions, and  enforces  actual  agreements  thereby  preventing  the  exit  of  powerful members  who  can  contest  it. The  organizational  basis  for  fortifying  this consensus  could  be  a  political  party, the  parliament, the  military, or  the bureaucracy.47  These pacts are negotiated by a range of political, bureau- cratic, economic, professional, and traditional elites, collectively referred to as a ‘ruling coalition.’ They also involve negotiations with other powerful actors  including  sub-national  power  brokers  and  international  actors.48

Recognizing the importance of elite bargains allows us to identify the role of  powerful  actors  and  marks  discrete  points  in  the  political  settlement, coinciding with mineral boom and bust cycles.

A political settlement is also defined by the vertical distribution of power within non-elite and societal groups. These groups could be youth move- ments,  trade  unions,  traditional  and  religious  associations,  civil  society, or  even  armed  groups. The  coalition  could  entail  a  vertical  relationship between elites and a non-elite support base.49  This vertical distribution of power  refers  to  ‘the  relative  power  of  higher  compared  to  lower  factions within the ruling coalition.’50  Societal groups could also wield autonomous power  unrelated  to  elites. They  can  exert  independent  influence  on  elite pacts  and  challenge  the  power  configuration.51    Thus,  the  relationship between elites and other societal groups could be top-down, such that elite negotiations affect citizens, or bottom-up, such that citizens exercise agency through collective mass revolt or the withdrawal/endorsement of legitimacy of elites.52

An  economic  agenda  is  the  economic  policy  regime,  which  sustains a  ruling  coalition  and  determines  resource  production,  accumulation, allocation and exchange in society. We can envision at least two types of economic agendas based on the nature of the business-state relations,53  and

47.     Ibid.

48.     On powerful actors beyond the capital city, see Tadros and Allouche, ‘Political settle- ments as a violent process’, (p. 198). On transnational actors, see Bebbington et al., ‘Resource extraction and inclusive development’, and Hickey and Izama, ‘The Politics of governing oil in Uganda’.

49.     Khan, ‘Rents, efficiency and growth’, pp. 21–60 and Laws ‘Political settlements, elite pacts and governments of national unity’, p. 20, 36.

50.     Khan, ‘Political settlements’.

51.     Tadros and Allouche ‘Political settlements as a violent process’, p. 196.

52.     Ibid, p. 197.

53.     The literature on business-state relations is vast and includes Maxfield and Schneider,

‘Business  and  the  state  in  developing  countries’; Richard  Doner  and  Ben  Ross  Schneider,

‘Business  associations  and  economic  development’,  Business  and  Politics  2,  3  (2000),  pp.

261–88.;  Deborah  Brautigam,  Lise  Rakner  and  Taylor  Scott,  ‘Business  associations  and

the property rights, investment, production, and trade regimes. One which enables basic production and exchange which may not grow the economy, but  is  reproducible,  sustains  society  and  prevents  economic  collapse.54

A  second  type  involves  deeper  business-state  interactions  on  economic privileges that can become a ‘growth-coalition’55  or retard growth. In devel- oping countries, the rents transfer system often privileges powerful groups (say  armed  movements  or  political  entrepreneurs)  with  weak  productive capabilities in order to maintain political stability and avert costly conflicts, while  marginalizing  the  politically  weak  but  productive  entrepreneurs.56

This economic agenda thus captures the distribution of economic power and privileges in the political settlement.

The   institutionalization   in   the   political   settlement   is   the   acknowl- edgement  and  enforcement  of  the  distribution  of  power  and  allocation of   resources.   The   institutionalization   can   be   informal,   when   these arrangements become part of society’s norms. It can also be formal, when enshrined in law, say the constitutional separation of governmental powers; intergovernmental  fiscal  transfers; on-budget  food, higher-education  and petroleum  subsidies; or  trade  tariffs. More  importantly, these  rules  have to be enforceable or self-reinforcing to ensure that powerful actors adhere to them. To be self-enforcing, these rules must reflect the distribution of power in society, otherwise they will be undermined by powerful actors.57

Once these rules become self-enforcing, an equilibrium is reached between the  distribution  of  benefits  attributed  to  particular  institutions  and  the distribution of power across groups.58

The  constraints  for  persistence  and  change  are  the  second  building block in applying the political settlements approach to explain institutional changes  and  economic  outcomes  in  resource-exporting  countries. These constraints  encompass  conditions  and  decisions  in  which  the  political settlement  emerges,  evolves  or  collapses,  and  the  policy  implications. Changes to a society’s power configuration can result from sudden shifts in institutions and the associated distribution of benefits, as well as slow incremental processes.59

growth  coalitions  in  sub-Saharan  Africa’,  Journal  of  Modern  African  Studies  40,  4  (2002), pp. 519–547.

54.     Khan, ‘Political Settlements’, pp. 20–21.

55.     For  more  on  growth  coalitions,  see  for  instance  Richard  F.  Doner,  ‘Limits  of  state strength:  toward  an  institutionalist  view  of  economic  development’,  World  Politics  44,  03 (1992), pp. 398–431; Peter Evans, ‘The state as problem and solution: Predation, embedded autonomy and structural change’, in Stephen Haggard and Richard Kaufman (eds), The politics of economic adjustment (Princeton University Press, Princeton, NJ, 1992), pp. 139–181.

56.     Khan, ‘Political  settlements  and  the  analysis  of  institutions’, p. 651; Khan, ‘Political settlements’, p. 26; Whitfield et al., ‘The politics of African industrial policy’.

57.     Adam  Przeworski, ‘Institutions  matter?’ Government  and  Opposition  39, 4  (2004), pp.

527–540, p. 529.

58.     Khan, ‘Political settlements and the analysis of institutions’.

59.     Ibid.

A  window  of  reform  in  seemingly  fixed  institutions  opens  at  critical junctures, accounting  for  swift  policy  fluctuations. Critical  junctures  are periods when a constellation of economic, political and social ‘contingent’ conditions,60   build  up  slowly  or  erupt  suddenly,  loosening  the  existing institutional order. As defined by Giovanni Capoccia and Daniel Kelemen, critical junctures are characterized by the relaxation, for a short period, of the structural (that is, economic, cultural, ideological, organizational) influ- ences on political action.61  Consequently, the range of plausible choices for powerful political  actors expands and, the implications  of their decision- making are more momentous. These conditions can be endogenous (social unrest, economic crises, and conflict) or exogenous (technological advance- ments,  global  economic  shocks  and  external  aggression)  to  the  political settlement. In resource-rich countries dependent on commodities exports, the boom and bust cycle is a major driver of these conditions. A sudden collapse in prices can reduce resources distributed through formal social expenditure or informal patronage leading to a fracture in political alliances, and  mass  action  through  a  balance  of  payments  crisis, foreign  exchange shortages, and  budget  deficits. These  conditions  can  ‘shock’ and  modify society’s  balance  of  power,  leading  to  major  changes  in  political  and economic institutions.62

The  response  of  powerful  actors, especially  ruling  elites  to  conditions at these historic junctures determines the maintenance of the institutional order (persistence),63  or its collapse and replacement (change). As Capoc- cia  and  Kelemen  note,  re-equilibration  of  an  institution  may  be  one  of several outcomes of critical junctures,64  and many institutions may remain unaffected.65   During  this  time, powerful  actors  such  as  political  leaders, bureaucrats, the  military  and  social  activists  can  shape  outcomes  toward a  new  equilibrium  of  institutional  persistence  or  change,  than  normal circumstances  permit.66   Ultimately,  these  decisions  at  critical  junctures

60.     On  contingent  conditions,  see  James  Mahoney  and  Celso  M.  Villegas,  ‘Historical enquiry  and  comparative  politics’,  in  Carles  Boix  and  Susan  C.  Stokes  (eds),  The  Oxford handbook of comparative politics (Oxford University Press, Oxford, 2009), pp. 507–548.

61.     Giovanni Capoccia and R. Daniel Kelemen, ‘The study of critical junctures: Theory, narrative, and counterfactuals in historical institutionalism’, World Politics 59 (2007), pp. 341–

69, p. 343.

62.     Acemoglu and Robinson, ‘Paths of economic and political development’.

63.     James Robinson, ‘Elites and institutional persistence’ (WIDER Working Paper 2010/85,


64.     Capoccia and kelemen, ‘The study of critical junctures’, p. 352.

65.     Wolfgang Streeck and Kathleen Thelen, ‘Introduction: Institutional change in advanced political  economies’,  in  Wolfgang  Streeck  and  Kathleen  Thelen  (eds),  Beyond  continuity (Oxford University Press, Oxford, 2005).

66.     Capoccia  and  Kelemen,  ‘The  study  of  critical  junctures’,  p.  354;  Peter  A.  Hall  and

Rosemary C. R. Taylor, ‘Political science and the three new institutionalisms’, Political Studies

44 (1996), pp. 936–957. James Mahoney, ‘Path dependence in historical sociology’, Theory

and Society 29 (2000), pp. 507–548.

close off alternative options and lead to the establishment of institutions that generate self-reinforcing path-dependent processes.67

Thus, this article notes that the policy responses by powerful actors to crises  and  contingent  conditions  at  critical  junctures  are  determined  by two factors. The first is the nature of specific threats these crises pose to their resource base and political survival. The second is their political and technical capacity based on their degree of fragmentation or cohesion, the financial and technological resources at their disposal, and how these are deployed.68  These are collectively the ‘constraints’ on a ruling coalition.

These constraints are illustrated in Figure 8. They operate at three levels, horizontal, vertical, and external, and at each level, certain policy choices are more probable. These policy choices could be executed through formal institutions or informally. Similarly, Richard Doner and colleagues argue that  the  interplay  of  three  political  constraints  or  ‘systemic  vulnerability’ inspires rulers to forego their individual interests in maximizing patronage resources in favour of improved economic performance.69  They argue that it  is  only  the  combination  of  these  three  constraints—broad  coalitional commitments, scarce resource endowments, and severe security threats— that can result in a developmental state capable of driving industrialization based on innovation from lower-value to higher-value economic activities. Whereas any of these three coalitional, resource, or geopolitical constraints individually  may  only  lead  to  an  intermediate  state,  which  could  drive growth without exports diversification.70

What  this  article  does  differently  from  Doner  and  colleagues  is  to examine  how  these  individual  constraints  and  their  policy  responses  can result  in  an  intermediate  state.  This  intermediate  state  can  facilitate episodic reforms to generate economic growth and diversification but not the  sustained  economic  transformation  to  support  industrialization  and exports diversification. Furthermore, I separate coalitional constraints into horizontal-level pressures within the ruling coalition and vertical-societal pressures.

The horizontal level within the ruling coalition is characterized by the extent  of  the  cohesion  or  fragmentation  of  the  ruling  coalition.  With  a fragmented elite, the constraint comes from the threat of a ‘palace coup’ by  a  powerful  rival  faction. Reforms  at  times  of  such  political  crises  are likely  to  focus  on  inclusion  or  pacification  of  excluded  groups  in  the

67.     Capoccia and Kelemen, ‘The study of critical junctures’.

68.     Similarly,  Whitfield  and  Therkildsen  examine  how  policies  are  influenced  by  the characteristics of ruling coalitions in terms of their vulnerability, fragmentation and financing, pp. 17–26.

69.     Doner, Ritchie and Slater, ‘Systemic vulnerability’.

ruling coalition.71  Within a cohesive ruling coalition facing no significant threat from excluded groups, entrepreneurs can exert pressure for reforms targeting specific industries of interest, whose outcomes could be extractive or  growth-enhancing.  David  Kang  argues  that  the  nature  of  balance  of power between economic and political elites is a key variable, which spiraled into growth-retarding politics in the Philippines while reducing transaction costs and enabling sustained growth in South Korea.72

The  vertical  level  of  constraints  in  wider  society  is  characterized  by the  extent  to  which  non-elite  groups  accept  or  reject  the  distribution of  resources.  These  groups  can  contest  the  status-quo  by  withdrawing support for the ruling coalition during elections, through mass action or violence. These actions can undermine the survival of the ruling coalition. To  stem  this  tide  of  discontent,  the  ruling  coalition  is  likely  to  opt  for redistributive  policies. Khan’s  notion  of  politically  organized  transfers  to sustain political stability rather than growth applies here.73  These transfers are provided across advanced and developing countries as a social compact with  citizens,  such  as  Europe’s  welfare  state  from  the  20th  century.74

71.     Khan  also  examines  a  range  of  possibilities  when  excluded  factions  are  weak/strong relative to the ruling coalition. Khan, ‘Political settlements’, pp. 64–65.

72.     His typology of state-business relations has combinations of a coherent/fractured state and  a  concentrated/dispersed  business  sector  resulting  in  four  scenarios.  Kang,  ‘Crony capitalism,’ pp. 7, 11–18.

73.     Khan, ‘Rents, efficiency and growth’.

74.     In Western Europe, a welfare state emerged in the early twentieth century, in response to mass political mobilizations and in-roads made by communism, to provide unemployment, housing and other social insurance benefits to citizens. In the United States, redistribution schemes such as the Trade Adjustment Assistance supported workers who lose their jobs to import competition. In Japan and some parts of East Asia, this social insurance is provided

In developing countries with weaker administrative capacities to manage elaborate income transfers, these social security benefits take the form of public works programmes, on-budget fuel and food subsidies, public sector employment as well as off-budget payments to political brokers and armed groups.

The external level of constraints in the external environment constrains ruling  elites  through  the  threat  of  external  aggression,  pressures  from foreign  donors  or  commodity  price  swings.  A  ruling  coalition  is  likely to  embark  on  extensive  economic  reforms  to  build  economic  resilience against geopolitical conflict,75  as conditions for donor financial assistance or to diversify commodity exports. In oil-rich countries, where oil earnings make foreign aid relatively inconsequential and allow the state to acquire military capabilities, the impetus for economic restructuring has historically been global oil shocks. In Saudi Arabia, the collapse of oil prices between

2014  and  2017  led  to  a  historic  decision  to  aim  for  a  public  listing  of Aramco, its national oil corporation, and to unveil an economic reform and diversification plan.76  However, when commodity prices recover, an anti- reform impulse results from rising government spending and distributional demands on the state. This unsustainable consumption lays the foundation for vulnerability to future shocks and ensuing economic crises. Moreover, the sudden downward swing in oil prices, which reduces foreign exchange and  government  spending,  can  drive  the  fragmentation  of  the  ruling coalition and mass discontent.

Nigeria’s post-military political settlement at the critical juncture of democratization

The  power  configuration  in  Nigeria’s  political  settlement  explains  why and how Nigeria’s ruling elites, in a manner that is neither developmental nor fully predatory, preside over episodic growth and GDP diversification, but  not  sustained  industrialization  and  exports  diversification.  On  the first  dimension  of  the  political  settlement, the  elite  consensus  in  Nigeria has  been  characterized  by  the  rotation  of  power  to  address  horizontal elite  competition. Power-sharing  agreements  moderate  historic  competi-

by large firms directly to their workers through life time employment, housing and healthcare benefits. See Dani Rodrik, ‘Sense and nonsense in the globalization debate’, Foreign Policy,

1997, 19.

75.     In resource-poor North-East Asia, ruling elites in South Korea, Taiwan and Singapore faced regional insecurities from neighbours which impelled them to transform their economies to  bolster  their  security. See: Doner, Ritchie  and  Slater, ‘Systemic  vulnerability’. This  also echoes the argument by Charles Tilly that strong states in Europe emerged in response to security threats (cited in Doner, Ritchie, and Slater).

76.     Anjli   Raval   and   Andrew   Ward,   ‘Saudi   Aramco   plans   for   a   life   after   oil’,   The Financial Times, 10 December 2017, c64b1c09b482 (30 March 2018).

Figure 9   Colonial map of Nigeria showing the three regions and contem- porary map of Nigeria showing the 36 states and six geo-political regions.

tion  among  Nigeria’s  regional  elites  in  pursuit  of  national  power.  Even before  political  independence  in  1960, tensions  within  Nigeria’s  tripolar ethnic  and  bicommunal  religious  structure77   resulted  in  a  perennial  fear of political domination. This ‘fear’ was driven by the political and socio- economic inequalities among the regions. Upon independence, the ruling elites  in  the  predominantly  Hausa  and  Fulani  northern  region  feared domination  by  the  educationally  advanced  southerners  in  public  service and  educational  institutions.  The  southern  regions  on  the  other  hand feared the North’s political domination in parliament, the federal cabinet, and the army, which it secured using its landmass and higher population numbers as Figure 9 shows.78  The crises created by these tensions caused military  coups  and  the  1967–1970  civil  war. A  post-war  consensus  from

1970 prioritized stability and national integration over democracy, through military rule led by officers who fought the civil war. Eventually, military rule ran its course as domestic and internal pressures for democratization intensified in the 1990s.

77.     Out  of  over  400  ethnic  groups,  the  Hausa  and  Fulani  of  the  North,  the  Yoruba  of the south-west and the Igbo of the south-east are the majority groups. Ethnic mobilization is tripolar reinforced by the tripodal regional administrative set-up of colonial rule and the tendency  of  many  minority  groups  to  cluster  around  these  big  three  groups. There  is  also a bicommunal religious structure consisting of a predominantly Christian population in the South  and  a  predominantly  Muslim  population  in  the  North  See  Abdul  Raufu  Mustapha,

‘Ethnic structure, inequality and governance of the public sector in Nigeria’, (United Nations Research  Institute  for  Social  Development,  no.  24,  2006);  Ladipo  Adamolekun  and  John Kincaid, ‘The  federal  solution: Assessment  and  prognosis  for  Nigeria  and  Africa’, Publius: The Journal of Federalism 21, 4 (1991), pp.173–188.

78.     Billy J. Dudley, An introduction to Nigerian government and politics (Macmillan, London,

Democratization in 1999 was underpinned by an informal elite consen- sus on power rotation within the then ruling party, PDP, in 1998, called

‘zoning,’ to  reconcile  competing  regional  elites. This  entailed  a  periodic rotation  of  elective  offices, particularly  the  presidential  seat  between  the North and the South every eight years, as a founding member of the PDP explained to me.79  Zoning complemented formal affirmative action policies such as the Federal Character principle for political stability.80   Although zoning emerged from the PDP and its predecessor, the National Party of Nigeria the ruling party of Nigeria’s Second Republic (1979–1983), it was a  consensus  accepted  by  other  political  parties  and  in  society.  In  1998, under General Abdulsalam Abubakar’s transition government, a southern president was preferred81  since the North had produced successive military heads of states from the end of the civil war in 1970. Olusegun Obasanjo, a  Yoruba  Christian  and  a  former  military  head  of  state  (1976–1979), emerged  as  the  first  president  under  this  arrangement. Although  zoning was not stipulated in the Nigerian Constitution, the elite bargain ensured that  the  new  1999  constitution  was  an  amended  version  of  the  1979 constitution, rather than constitutions drafted in the 1990s from society- wide consultations by derided military regimes.82

However, this zoning consensus began to unravel at the presidential level for  several  reasons. Olusegun  Obasanjo  unsuccessfully  attempted  a  third presidential  term  in  2006. His  successor  Umaru  Yar’adua, a  northerner, died in his third year in office in 2010 before he could complete the ‘North’s slot’  of  two  terms  of  eight  years.  Goodluck  Jonathan,  a  southerner  and formerly Yar’adua’s vice president, succeeded him in 2010 and defied the power-rotation  to  the  North  by  running  for  office  in  2011. In  2015, the PDP  was  defeated  in  the  presidential  elections  by  Muhammadu  Buhari, a  northerner  of  the  All  Progressives  Congress  (APC).83    Although  the incumbent PDP coalition was displaced in the 2015 presidential election by  the  APC,  the  zoning  principle  of  power  sharing  remains  a  broadly acknowledged norm for stabilizing elite competition for presidential power. Muhammadu Buhari and another northern candidate, Atiku Abubakar of the PDP, were the main contenders in the 2019 presidential election, with

79.     The  initial  terms  of  ‘zoning’ in  1998  was  for  power  to  alternate  between  the  North and the South for a single term of four years for 30 years. However, after President Obasanjo completed his first term in 2003, he was allowed to run for another term on the understanding that power would shift to the North after eight years. Interview, Abuja, 14 May 2014.

80.     Abdul Raufu Mustapha, ‘Institutionalising ethnic representation: How effective is the Federal Character Commission in Nigeria?’ Journal of International Development 21, 4 (2009), pp. 561–576.

81.     The three main political parties at the time, the All People’s Party (APP), the Alliance for Democracy (AD) and the PDP, produced southerners as presidential contenders.

82.     Interview with founding PDP member (referred to in footnote 80), Abuja, 14 May 2014.

83.     Olly Owen and Zainab Usman, ‘Why Goodluck Jonathan lost the Nigerian presidential election of 2015’, African Affairs 114, 456 (2015), pp. 1–17.

Figure 10  Timeline of Nigeria’s Presidents from 1999.

the expectation that from 2023, presidential power will shift to the South

(Figure 10).

The  vertical  distribution  of  power  in  Nigeria’s  political  settlement  is characterized  by  distributional  and  welfare  demands  of  non-elite  groups as well as new platforms of power to influence the ruling coalition. Despite the economic boom of the 2000s, there is no strong social welfare system. Consequently, traditional trade union groups such as the Nigeria Labour Congress are heavily dependent on and defensive of government employ- ment and petroleum subsidies. New platforms for expressing discontent for young people and the poor are emerging. These range from social media influencers on Twitter and Facebook, to influential Pentecostal preachers and Islamic clerics, to armed movements like militants in the Niger Delta and  the  Islamist  insurgents  of  Boko  Haram  in  the  northeast.84   These platforms can mobilize large numbers of people during elections or contest the  state’s  authority. Starting  with  SURE-P  in  201285, a  series  of  social protection programmes including cash transfers, school feeding, graduate

84.     On  the  Niger-Delta  violence,  see  Crisis  Group,  ‘Curbing  violence  in  Nigeria  (III): Revisiting  the  Niger  Delta’  (International  Crisis  Group  Report  No.  231,  Africa,  Brussels, September, 2015). On the Boko Haram insurgency, see Crisis Group, ‘Curbing violence in Nigeria (II): The Boko Haram insurgency’ (International Crisis Group Report No. 216, April


85.     In 2012, the Subsidy Reinvestment and Empowerment Programme (SURE-P) was set up to use the N32 per litre of petrol saved from the partial removal of subsidies to pilot social safety nets and mass transit schemes. Interview with SURE-P Chairman, Abuja, 18 June 2014.

training, and youth entrepreneurship schemes have been piloted in order to address the tide of discontent.86

Historically, a  major  driver  of  economic  reforms  has  been  external  oil shocks. Nigerian governments typically proclaim an economic diversifica- tion agenda but it is oil boom and bust cycles that prompt actual action. Since oil prices are central to Nigeria’s export earnings and fiscal revenue, a  sudden  oil  price  collapse  may  encourage  a  growth  agenda  to  mitigate the  ensuing  crisis.  During  a  time  of  low  oil  prices  in  2001,  a  series  of macroeconomic,  private  sector  development,  and  public  sector  reforms culminated  in  the  National  Economic  and  Empowerment  Development Strategy. This strategy was transformative in liberalizing the telecom and banking  sectors  and  establishing  an  anti-corruption  agency.  It  also  set a  longer-term  policy  framework  under  the  Nigeria  Vision  20:2020  to transform and diversify Nigeria’s economy.87

From  2014  to  2017,  a  downward  trend  in  global  oil  prices  created another economic crisis. Muhammadu Buhari’s Economic Recovery and Growth Plan in 2017 emphasized economic diversification through agri- culture, infrastructure, social investments, and anti-corruption.88  Windfalls are  accompanied  by  increased  consumption  and  revenue  leakages.  The administrations of Umaru Yar’adua and Goodluck Jonathan (2007–2015) presided  when  oil  was  over  $100  per  barrel  without  sustained  economic transformation  resulting  from  their  signature  policies:  the  Seven-Point Agenda and the Transformation Agenda.89

What was the ruling coalition and who were its members? This ruling coalition negotiated the power sharing consensus, which formed the basis of democratization, the political system, and the country’s economic orien- tation. From 1999 to 2015, the platform for elite coordination was the PDP, comprised of senior military officers, bureaucrats, and politicians, including those  from  previous  military  regimes,  business  leaders  and  traditional leaders. The democratic transition allowed for a conversion of de facto state power  by  prominent  military  officers  into  de  jure  political  and  economic power.  Many  ex-military  personnel  ran  for  elective  positions  or  were

86.     In  2015,  a  new  government  replaced  SURE-P  with  the  Nigeria  Social  Investment Programme (NSIP) comprised of cash transfers, a school feeding programme, an enterprise scheme and an employment scheme, N-Power. NSIP. ‘Investing in our people: A brief on the national social investment programmes in Nigeria’.  (13 March


87.     NPC,  ‘Nigeria  Vision  20:2020:  Abridged  version’  (National  Planning  Commission

NPC, Abuja, 2010).

88.     MoBP. ‘Nigeria economic recovery and growth plan: 2017–2020’, (Nigeria: Ministry of

Budget and National Planning, Abuja, 2017).

89.     There were important initiatives such as the Niger Delta Amnesty scheme, reforming the agriculture fertilizer scheme, the youth entrepreneurship scheme YOU-WIN and putting together the Nigerian Industrial Revolution Plan (NIRP). These were however not sustained. NPC,  ‘The  transformation  agenda  2011–2015:  Summary  of  federal  government’s  key  priority policies, programmes and projects’, (National Planning Commission NPC, Abuja, 2013).

appointed into Olusegun Obasanjo’s federal cabinet.90  The entrepreneurs included  wealthy  military  officers, bureaucrats, industrialists, merchants, bankers  and  financiers.  Their  proximity  to  the  ruling  party  gave  them influence over economic policies, which they reciprocated with donations to  political  parties  under  banners  such  as  ‘Organized  Private  Sector’  or

‘Corporate  Nigeria.’91    In  the  immediate  transition  years,  several  high-

level technocrats gained influence within the ruling coalition, conditional on the president’s support. Through the influential Vice President, Atiku Abubakar,  Obasanjo’s  government  recruited  a  team  of  12  technocrats to  coordinate  economic  policy.92   According  to  former  Finance  Minister and head of the reform team, Dr Ngozi Okonjo-Iweala, ‘for much of the duration  of  the  reform  program,  the  president  gave  his  backing  …  his support wavered as  …  presidential elections approached.’93

The zoning elite consensus, however, did not address wider developmen- tal and redistribution concerns in society. The political settlement centered on the elite bargain of sharing power and economic privileges by the ruling coalition  in  order  to  stabilize  the  competition  that  had  led  previously  to a civil war. Thus, excluded young people, the middle class, and the poor made  distributional  demands  on  the  state  or  found  outlets  in  religious movements,  armed  groups  or  social  media.  When  a  growth  orientation emerged at the critical juncture of democratization, it was merely a response to external constraints of oil shocks, neither developmental nor sustained. Immediately  after  military  rule,  external  factors  constrained  Nigeria’s policy makers to be growth-oriented. The paradigm shift was driven by the low global oil prices at $17 per barrel in 1999, which reduced the resources available  to  service  Nigeria’s  debt  of  $3  billion  per  annum  by  2004  (or

90.     Among dozens were General T.Y. Danjuma (Defense Minister), Vice Admiral Murtala Nyako (who became governor of Adamawa state), Colonel David Mark (who became Senate President), Air Commodore Jonah Jang (who became governor of Plateau state), and Admiral Augustus Aikhomu.

91.     ‘Corporate Nigeria’, loosely modeled after Corporate America in the USA, became a prominent donor to the PDP from 2003, when it donated N2 billion ($10 million) towards Obasanjo’s re-election in 2003. Pioneered by the then Director-General of the Nigerian Stock Exchange,  Ndidi  Okereke-Onyiuke,  it  was  comprised  of  industrialists  like  Aliko  Dangote, bank  CEOs  such  as  Pascal  Dozie, Jim  Ovia  and  other  prominent  private  sector  operators (,  2003).  In  the  run-up  to  the  2015  elections,  they  contributed  65  percent of  the  N21.2  billion  ($106  million)  of  the  PDP’s  publicly  declared  donations.  Olalekan Adetayo,  ‘Governors,  businessmen,  others  donate  N21.27bn  to  Jonathan,’  The  Punch,

21  December  2014.

27bn-to-jonathan/ (13 June 2017).

92.     The  team  included  Charles  Soludo  the  Central  Bank  governor,  Nasir  el-Rufai  head of  the  Bureau  for  Public  Enterprises  and  subsequently  the  minister  of  the  Federal  Capital Territory, Obiageli Ezekwesili, head of the Budget Monitoring and Price Implementation Unit. For more on the economic team, see Nasir El-Rufai, The accidental public servant (Safari Books, Ibadan, 2013).

93.     Okonjo-Iweala, ‘Reforming the unreformable’, p. 132.

41  percent  of  the  annual  budget)94   and  the  donor  precondition  for  debt relief of articulating a comprehensive economic reform blueprint. Under these constraints, Nigeria’s policy makers implemented policies to reform public  contracting,  privatize  enterprises,  pursue  economic  liberalization, and demonstrate commitment to anti-corruption. These reforms eventu- ally resulted in the National Economic and Empowerment Development Strategy95  in 2004. As one member of Obasanjo’s reform team explained to  me,  the  government  consciously  adopted  a  growth  orientation96   ‘to demonstrate  to  the  world  …  that  Nigeria  had  changed  its  past  ways  of profligacy  …  that Nigeria would make judicious use of revenues  …  to ensure debt relief would not just be squandered.’

The  alternative  pathway  was  the  status-quo,  mired  in  debt  and  fiscal deficits. Consequently, quick technical fixes were made in sectors such as telecoms, banking, and financial services. Sectors like agriculture, manufac- turing and oil which needed deeper institutional reforms, were objects of elite competition and redistribution demands and remained dysfunctional. This inconsistency characterizes the intermediate state described by Evans in  which  ‘joint  projects  (with  business  elites)  may  be  possible  in  certain sectors or periods but degenerate into clientelism in others.’97  Furthermore, historical moments may constitute a critical juncture with respect to one institution but not to another.98

Successful liberalization of Nigeria’s telecommunications sector

Liberalization  was  pursued  with  relative  success  in  telecommunications, a  major  growth  driver  in  the  first  decade  of  Nigeria’s  democratization. The  notorious  inefficiency  of  NITEL  prompted  the  government  to  pen- cil  the  utility  alongside  several  state-owned  enterprises  for  privatization during  structural  adjustment  between  1988  and  1993.99   The  Nigerian Communications  Commission  was  set  up  as  a  regulator  in  1992,  while General  Abdulsalam  Abubakar’s  military  government  promulgated  the Public Enterprises Act of April 1999. Under Obasanjo’s administration, the

94.     DMO,  ‘Annual  report  and  statement  of  accounts  2005’  (Debt  Management  Office, Abuja, 2005), p. 44.

95.     NPC, ‘National Economic Empowerment and Development Strategy’ (National Plan- ning Commission NPC, Abuja, 2004).

96.     Interview, 08 March 2015.

97.     Evans, ‘Embedded autonomy’, p. 60.

98.     Cappoccia and Kelemen, ‘The Study of critical junctures’.

99.     Between 1985 and 2000, more than $5 billion was spent on digitalizing the telephone network  that  ended  up  with  just  300,000  connected  users.  William  Wallis,  ‘The  telecoms numbers  that  didn’t  add  up’,  Financial  Times,

11e2-b011-00144feabdc0.html#axzz3cPtrPXQd(08 June 2015).

Figure 11  Growth rate (%) of the telecommunications sector, 1999–2009.

Source: Author’s calculations from NBS Data 2015.

Bureau for Public Enterprises (BPE) scheduled NITEL for privatization alongside 74 public enterprises.100

The liberalization, marked by the introduction of cellular networks, the Global System for Mobile (GSM), in August 2001, engendered the sector’s expansion.  In  2000,  there  were  just  400,000  phone  lines;  as  at  2016, there were 235 million connected mobile and fixed lines and 126 million active internet subscriptions,101   the largest mobile market in Africa. The telecommunications  sector  expanded  from  just  0.1  percent  of  GDP  in

2001 to 7.5 percent in 2017, growing at an average of 122 percent from

1999  to  2009, as  Figure 11  shows. Nigeria  is  the  biggest  market  for  the South African mobile firm Mobile Telecommunications Network (MTN), in  terms  of  subscriber  base, constituting  27.7  percent  of  its  231  million subscribers across 22 countries.102  Nigerian-owned Globacom, is a major player across Africa.

Using  the  political  settlements  framework,  I  argue  that  external  con- straints  on  ruling  elites  enabled  a  pro-reform  mindset  to  liberalize  the sector. The business elites within the ruling coalition that stood to gain from liberalization also made the government more committed to the reforms,

100.     Said Adejumobi, ‘Introduction: State, economy and society in a neo-liberal regime’, in Said Adejumobi (ed.), State, economy, and society in post-military Nigeria (Palgrave Macmillan, New York, NY, 2011), pp. 1–23, p. 9.

101.     NCC,    ‘Subscriber    statistics,’    Nigerian    Communications    Commission    (NCC), technology-data(9 October 2018).

102.     Chris   Spillane,  ‘MTN’s   profit   declines   as   sales   fall   in   Nigeria,  South   Africa,’ Bloomberg, sales-fall-in-nigeria-south-africa (21 October 2015).

with Nigerian rather than international capital as central players. Despite professing a nominal commitment to liberalizing the telecoms sector, presi- dent Obasanjo only became committed upon realizing the potential for gen- erating non-oil resources. His administration initially revoked the 27 mobile operation licenses provided to investors by the previous military regime of General Abacha, which had placed Obasanjo on death row.103  Therefore, the first attempt at GSM licensing in 2000 failed due to the power tussle among  Obasanjo, former  military  ruler  General  Ibrahim  Babangida  and other military elite. It was only when Obasanjo’s government realized the wealth-generation potential that a second bid round was conducted in the UK  in  2001.104   Specifically,  Obasanjo’s  government  was  encouraged  by the  high  bids  for  the  three  licenses,  each  auctioned  at  $285  million  by Communication  Investments, Econet  Wireless  Nigeria, and  MTN. This amount far outstripped the $100 million quoted for each license—the most expensive issued in Africa at the time according to the Econet CEO Strive Masiyiwa.105   Thereafter,  the  administration  became  more  committed  to pursuing liberalization.

Furthermore, development partners and regional competition pressured ruling elites to liberalize the sector. Conditional assistance by the Bretton Woods  institutions, OECD  countries  and  the  World  Trade  Organisation (WTO) facilitated liberalization. As a precondition for debt relief during low oil prices, Nigeria had to develop a reform strategy approved by the IMF.  Consequently,  in  July  2000,  the  government  pledged  to  minimize spending  on  restructuring  NITEL  as  a  pre-condition  for  a  $1  billion standby agreement.106  There was also neighbourhood-rivalry within West Africa.  The  realization  that  earlier  failures  had  left  Nigeria’s  telecoms network  several  years  behind  those  of  Ghana,  Ivory  Coast,  and  other regional rivals may have expedited the GSM auctions in 2001.107

Given  these  external  pressures,  business  elites  in  the  ruling  coalition shaped  the  direction  of  liberalization  to  be  driven  largely  by  domestic rather than international capital. Officials and business partners of previ- ous  military  regimes  owned  shares  in  these  first  wave  of  telecoms  firms. For  instance, Colonel  Sani  Bello  (Rtd.), a  former  military  governor  and ambassador and an oil tycoon, owned a minority stake in MTN Nigeria,

103.     BBC News, ‘Nigeria awards telecoms licences’, BBC News,

hi/business/1126538.stm (07 June 2015).

104.     Interview with an adviser for Obasanjo’s government, Abuja, 13 May 2014.

105.     Strive  Masiyiwa,  ‘It’s  time  to  play  by  a  different  (ethical)  set  of  rules  (Part  7) Nigeria  1.’  Econet, to-play-by-a-different-ethical-set-of-rules-part-7-nigeria-1-of-5/ (20 October 2015).

106.     Chukwudiebube  Opata, ‘Transplantation  and  evolution  of  legal  regulation  of  inter- connection arrangements in the Nigerian telecommunications sector’, International Journal of Communications Law & Policy 14 (2011), pp. 1–14.

107.     BBC, ‘Nigeria Awards Telecoms Licenses’.

one  of  the  three  beneficiaries  of  the  2001  auction.108   Econet  Wireless Nigeria (now Airtel Nigeria), the first telecoms firm to operate in Nigeria, had a consortium of 22 all-Nigerian financiers including Diamond Bank and other banks, the Lagos and Delta state governments, military generals who were founding members of the PDP, and industrialists such as Oba Otudeko, who made fortunes during military rule in the 1980s.109   Many multinational telecoms firms at that time were wary of investing in Nigeria given  a  widespread  perception  of  fraud  about  the  country.  There  were serious  cases  of  bribery  and  underhand  dealings  in  the  license  auctions. Econet  Wireless  Nigeria  was  asked  to  pay  $9  million  in  bribes  to  senior politicians who mobilized financial investments for the license. According to  the  firm’s  CEO  Strive  Masiyiwa,  his  refusal  to  authorize  the  illegal payments  led  to  the  cancelation  of  their  management  contract  by  the Nigerian shareholders.110

This involvement of domestic private sector was a watershed for market reforms in Nigeria. Whereas in the past economic reforms were state-led and beholden to regional patron–client networks, the businessmen allied to ruling  elites  championed  the  telecoms  liberalization. They  demonstrated their  capacity  to  generate  new  sources  of  rent  and  to  ease  budgetary restraints, which although one-off, allowed key elites to position themselves in emergent economic sectors and created a model for replication in other sectors.111  The counterfactual is that even without the involvement of local financiers, GSM would eventually have spread to Nigeria, but would have been wholly led by multinational firms.

Through  the  political  settlements  lens,  we  are  able  to  identify  how external  constraints  can  enable  the  emergence  of  a  growth  coalition  in Nigeria. At  the  turn  of  the  century, a  ruling  coalition  was  able  to  drive market reforms in the telecommunications sector, despite oil wealth, ethnic pluralism  or  the  ‘neopatrimonial  logic,’ which  would  otherwise  obstruct growth.

108.     On share ownership for the pioneering telecoms firms, see Masiyiwa, ‘It’s time to play by  a  different  set  of  ethical  rules’; Fola  Akanbi, ‘Forbes: Nigerian  new  entrants  to  rich  list grew wealth through investments in oil and gas’ Thisday, forbes-nigerian-new-entrants-to-rich-list-grew-wealththrough-investments-in-oil-and-gas/

131583/ (20 October 2015).

109.     Ibid.

110.     See Masiyiwa, ‘It’s time to play by a different set of ethical rules’. A large international operator was invited to replace Masiyiwa’s Econet as technical partner, the name was changed as new technical partners were involved, from Econet to V-Mobile, and then to Vodacom, Zain, Celtel and finally to Airtel.

111.     Through  the  ‘Backward  Integration  Policy’,  monopoly  rents  were  allocated  in  the cement and fruit juice industries to select firms such as the Dangote conglomerate. Nigeria became a net exporter of cement by 2013, see Crusoe Osagie, ‘Nigeria: As Dangote transforms Nigeria into an export nation’, (04 July 2016).

Figure 12  Oil sector growth and share of GDP (%) 1999–2017.

Source: Author’s calculations from NBS Data, CBN (2017).

The decline of Nigeria’s oil sector

Within the same period, external constraints did not engender growth in the oil sector, which rather stagnated and declined. The sector grew at an average of 1.3 percent between 1999 and 2009, and −4.5 percent between

2010 and 2017 (Figure 12). On one hand, its decline as a share of GDP from  a  peak  of  48.9  percent  in  2000  to  9.1  percent  in  2017  indicates diversification of output. However, the sector’s absolute decline points to a deeper malaise. Since 2013, production averaged 1.9 million bbl/d below peak  capacity  of  2.4  million  bbl/d,  and  the  target  of  4  million  bbl/d.112

Nigeria’s proven reserves have not grown from 37.2 billion barrels despite targeting  40  billion  barrels.113   Oil  earnings  routinely  disappear  through leakages across the industry value chain. Nigeria lost $217.7 billion from

1970 to 2008,114 and $20 billion between 2010 and 2012.115 The Petroleum

Industry  Bill  meant  to  harmonize  the  disparate  legislations  governing

Nigeria’s oil industry has stalled for almost two decades.

112.     EIA, ‘Nigeria’ [United States Energy Information Administration (EIA), 2013]. http://; CBN, ‘Annual economic report for

2013’ (Central Bank of Nigeria CBN, Abuja, 2013).

%202013%20Annual%20Report.pdf (04 July 2016).

113.     EIA, ‘Nigeria’.

114.     AU  and  ECA, ‘Report  of  the  high  level  panel  on  illicit  financial  flows  from  Africa’ AU/ECA (Conference of Ministers of Finance, Planning and Economic Development, 2014).

115.     Sanusi L. Sanusi, ‘Memorandum submitted to the Senate committee on finance on the non-remittance of oil revenue to the federation account’ (Central Bank of Nigeria, Abuja,


Through a political settlements lens, this article argues that external fiscal pressures have not resulted in a growth agenda in the oil sector because of countervailing horizontal and vertical constraints on Nigeria’s ruling elites. Despite  GDP  diversification, the  oil  sector  is  Nigeria’s  foremost  foreign exchange earner. Its centrality to economic accumulation drives tensions with  international  oil  companies,  vulnerabilities  to  external  shocks,  elite competition, and societal redistribution demands for petro-dollars accruing to the state (see Figure 13). These competitive and distributive pressures result in revenue losses, inertia for reform and stagnation of the oil sector. The  tension  between  the  Nigerian  government  and  international  oil companies  on  the  country’s  fiscal  regime  undermines  the  prospects  for successful oil-sector reforms. The government seeks to increase its share of oil revenues to 91 percent on onshore joint ventures and 89 percent on offshore  production  sharing  contracts.  International  oil  companies  push back  arguing  that  the  proposal  would  deter  investment  in  the  sector  by rendering  many  new  and  existing  projects  uneconomic.116   By  attaching these  fiscal  provisions  to  the  Petroleum  Industry  Bill, the  Nigerian  gov- ernment was set on a collision course with the international oil companies. The revision of the production sharing contracts terms defined during low

116.     Wikileaks ‘Re: Analysis for comment—Nigeria—barriers to reform of Nigerian oil & gas—The Petroleum Industry Bill #1365386’ Wikileaks. 16 June 2013, gifiles/docs/13/1365386_re-analysis-for-comment-nigeria-barriers-to-reform-of.html      (07

oil prices and military rule in the 1990s is a contentious focus area in the Petroleum Industry Bill117  and a major reason for the legislative stasis. The international oil companies also employ hedging strategies such as transfer pricing and deferred revenue from oil theft in order to profit from a weak regulatory  environment. Although  international  oil  companies  ostensibly support  reforms,  which  improve  the  security  situation,  their  overriding objective is their own profit. According to confidential documents from a multi-stakeholder initiative:

  the IOCs [international oil companies] will only support regulatory, contracting or restructuring processes that make operating in Nigeria eas- ier  …  for them. They seek to retain valuable acreage, minimize contact with the bureaucratic and patronage systems that slow operations, control the  security  situation  …  minimize  regulation,  and  avoid  any  increase in fiscal terms. [ ] the majors [fear] that the proposed reforms would strengthen rather than limit government’s control over the industry 

Thus, there have been no new investments in the sector for over a decade, while oil majors are moving offshore partly due to insecurity in the Niger Delta,  where  they  are  liable  to  less  tax  under  the  production  sharing contracts. The government earns less oil revenue than it should, and could lose  its  global  oil  market  share.  The  country  has  high  volumes  of  illicit financial flows, losing almost $250 billion between 2000 and 2009 largely in the oil sector, and up to $5 billion in 2011 to transfer pricing.118  New oil  producers  in  Africa, the  US  shale  oil  and  gas  revolution  and  China’s economic rebalancing and growth slow-down all affect the destination for Nigeria’s oil and the investment decisions of international oil companies. In 2012, only five of Africa’s 54 countries were not producing or looking for oil, and in 2013, 6 of the 10 global discoveries in the oil and gas sector were made in Africa.119  The USA reduced its imports of Nigerian crude by

95 percent from a peak of 1 million barrels per day in 2007 to 58,000 in


The  horizontal  constraints  include  formal  inter-governmental  distri- butional  pressures  on  oil  receipts  between  the  federal  and  sub-national

117.     EIA, ‘Nigeria’; John Heilbrunn, Oil, democracy, and development in Africa (Cambridge

University Press, New York, 2014), p. 98.

118.     AfDB and GFI, ‘Illicit financial flows and the problem of net resource transfers from Africa:  1980–2009’,  (African  Development  Bank  [AfDB]  and  Global  Financial  Integrity [GFI], 2013), p. 26; PWC, ‘Transfer pricing perspectives: spotlight on Africa’s transfer pricing landscape’, Price Waterhouse Coopers, 2011), p. 5.

119.     See BBC News, ‘Africa debate: will Africa  ever benefit  from  its natural  resources?’,

15 October 2012, (26 October 2015); EY

calculations of data from US Department of Energy/EIA database, (26 October 2015); Alex

Vines, ‘Africa’s oil and gas potential: Boom or hype?’ CNN, 18 September 2014 http://edition. (5 April 2019).

120.     EIA, U.S. imports of Nigeria crude oil. (EIA Database, 30 September).

executives  and  informal  distributional  pressures  from  within  the  ruling coalition.  State  governors  are  distrustful  of  the  opaquely  run  state-oil corporation, the NNPC, the Ministry of Petroleum Resources, the Ministry of  Finance  and  other  federal  agencies.121   These  sub-national  executives challenge  the  fiscal  buffer  instruments,  the  Excess  Crude  Account  and the Sovereign Wealth Fund as unconstitutional deductions of their share of oil earnings. While the Nigerian constitution stipulates the distribution of oil revenues among federal, state, and local governments in a 52:27:21 ratio,122  the Excess Crude Account in particular is enabled by an informal consensus between the federal and state executives. However, there is very little sub-national trust in federal executives’ supervision of the oil industry. For  example,  there  is  no  accurate  data  on  actual  oil  production  across federal agencies. Despite recommendations by external auditors, President Obasanjo, who doubled as oil minister, refused to install a metering system to  measure  actual  oil  production.123   Buhari  is  also  Nigeria’s  defacto  oil minister  Nigeria’s  oil  production  data  are  estimates  derived  at  export terminals rather than from the well-end as is global best practice.124  This distrust of federal agencies in oil industry management exacerbates inter- governmental distributional pressures on oil receipts.

Within the ruling coalition, the deployment of oil-sector instruments to pacify factions undermines a growth agenda.125  In 2011, when Goodluck Jonathan  defied  the  PDP’s  consensus  for  a  power  shift  to  the  north, the oil sector was used, beyond historical norms, to buy political support in a fragmenting party. The fraud in the fuel subsidy regime illustrates the use of off-budget political transfers, as conceptualized by Khan, in the oil sector to powerful groups for political survival. In 2012, the federal government spent  $14.6  billion  on  fuel  subsidy, of  which  $6  billion  was  lost  to  false claims  and  inefficiencies. The  number  of  oil  marketers  grew  from  45  to

128 between 2009 and 2011.126  Expenditure on subsidies skyrocketed by

800 percent, from N295.5 billion in 2006–2008 to N1.7 trillion in 2011, when oil price was at a historic peak.127  The list of oil marketers investigated included the sons of two former PDP chairmen, Senator Ahmadu Ali and Bamanga Tukur.128  This came at a time when the PDP’s northern caucus

121.     Interview, Ministry of Petroleum Resources, Abuja, 30 April 2014.

122.     For a historical analysis of Nigeria’s revenue-sharing formulas, see Ehtisham Ahmad and Raju Singh, ‘Political economy of oil-revenue sharing in a developing country: Illustrations from Nigeria’ (IMF Working Paper WP/03/16, 2003).

123.     Interviews with senior government officials, Abuja, April–May 2014.

124.     Ibid.

125.     These instruments include import licenses, oil blocks, and crude lifting contracts.

126.     House of Representatives Nigeria, ‘Report of the Ad-Hoc Committee ‘To verify and determine the actual subsidy requirements and monitor the implementation of the subsidy regime in Nigeria’ (House of Representatives, Abuja, 2012).

127.     Sanusi, ‘Memorandum submitted to the Senate Committee on Finance’, pp. 9–10.

128.     Ike  Abonyi  and  Akinwale  Akintunde,  ‘Subsidy  fraud:  EFCC  to  prosecute  23  oil marketers’ Thisday, oil-marketers/120779/ (25 October 2015).

opposition  to  Jonathan’s  candidacy  was  vociferous.129   Evidently, revenue leakages escalated in pacifying aggrieved members of the ruling party both for predatory purposes and to pacify aggrieved members of the PDP for political survival.

Vertical  constraints  on  ruling  elites  inhibit  a  growth  agenda  in  the  oil sector. These constraints include distributional pressures from trade unions for the retention of petroleum subsidies.130  While this advocacy is driven by  concerns  about  rising  costs  of  living, it  often  translates  into  hostility to market-reforms. Every increase in petroleum prices is accompanied by nation-wide  strikes  by  trade  unions.  The  800  percent  rise  in  petroleum subsidies  by  2011  led  to  their  partial  removal  in  January  2012  in  order to  tackle  grand  corruption,  according  to  former  Central  Bank  governor Lamido Sanusi.131  The wave of protests by labour unions, civil society, and the Nigerian public tagged ‘Occupy Nigeria’ in January 2012 was so severe that the subsidies were partially restored several days later.132

These vertical constraints also include the advocacy for increased allo- cation of oil rents and full sub-national resource control by oil-producing communities in the Niger-Delta, which leads to policy gridlock. NGOs and traditional councils advocate for direct payments and compensation for oil spillages.133  A UN report estimates that environmental restoration from oil spills and oil well fires in Ogoniland in the region may take up to 30 years.134

The  decline  of  livelihoods  was  a  major  driver  of  militancy  in  the  region against international oil companies (and the government) from the mid-

1990s. This advocacy led to an inclusion of 13 percent derivation to the oil-producing states in 1999, a proposal for 10 percent of international oil companies monthly profits to communities and other resource transfers to the Niger-Delta. The contention over these transfers to the Niger-Delta has delayed the Petroleum Industry Bill, according to government officials.135

Legislators of non-oil producing regions strongly oppose what they regard as one more payment to oil-producing regions already disproportionately

129.     Interview with Goodluck Jonathan’s adviser, Abuja, 16 September 2014.

130.     The  key  unions  in  the  sector  are  the  Petroleum  and  Natural  Gas  Senior  Staff Association (PENGASSAN) and the Nigerian Union of Petroleum and Natural Gas Workers (NUPENG). They represent the white-collar and blue-collar workers, respectively.

131.     Interview, Kano, 23 August 2014.

132.     Stephanie  Busari, ‘What  is  behind  Nigeria’s  fuel  protests?’ CNN, 13  January  2012,    (5

April 2019).

133.     In   2014   alone,   Royal   Dutch   Shell   and   ENI   admitted   to   550   oil   spills. See:  Amnesty   International,  ‘Nigeria:  hundreds   of   oil   spills   continue   to   blight   Niger Delta’  Amnesty  International, oil-spills-continue-to-blight-niger-delta/ (03 May 2017).

134.     See UNEP, Environmental Assessment of Ogoniland Report, (United Nations Envi- ronmental Program, Nairobi, 2013).

135.     Interviews with senior staff at Open Society Initiative for West Africa (OSIWA), NEITI, and with senior executive at the NNPC, Abuja, February–June 2014.

benefitting  from  oil  rents,  a  major  reason  for  the  delay  in  the  Bill.136

Armed  groups  also  emerged  from  these  historic  advocacies  against  the Niger Delta’s economic marginalization. Eventually, many veered toward criminality,137 destroying oil facilities, abducting workers from international oil companies and engaging in oil theft,138  contributing to divestments of onshore assets according to an international oil company chief executive.139

The progressively violent nature of this militancy in the destruction of oil facilities  cost Nigeria up  to 10  percent of daily  production, according to officials at the NNPC.140

Therefore, constraints of a competitive, distributive, and external nature in  the  political  settlement  obstruct  the  formation  of  a  growth  coalition in  Nigeria’s  oil  sector  during  boom  times  or  downturns.  This  political settlements analysis contrasts with the ‘resource-curse’ thesis that efficiency and  growth  in  the  resource  sector  will  crowd  out  the  non-oil  economy. The counter factual is that during the period of low oil prices, successive Nigerian governments could have unbundled the NNPC to make it more transparent,141  replaced the expensive petroleum subsidies with extensive social  protection  programmes  such  as  cash  transfers,142    which  would address vertical pressures from both trade unions and oil-producing com- munities, and updated petroleum industry legislation in installments.143


Despite  the  diversification  of  its  GDP,  Nigeria  remains  dependent  on oil  for  exports  and  government  revenue. This  article  makes  the  case  for

136.     Ibid.

137.     These  groups  include  the  Movement  for  the  Emancipation  of  the  Niger-Delta (MEND), the Niger-Delta People’s Volunteer Force (NDPVF) and the Niger-Delta Avengers (NDA).

138.     While oil theft was started in the 1970s by military officers, democratization enabled participation by  politicians and  through  an  Amnesty  programme  from  2008  for  ‘repentant militants’, many moved to crude oil theft, piracy and organized crime. See: Christina Katsouris and Aaron Sayne, ‘Nigeria’s criminal crude: International options to combat the export of stolen oil’ (Chatham House, London, 2013).

139.     Interview, 03 February 2015, London.

140.     Interviews in Abuja between April and May 2014; confidential documents.

141.     In September 2016, an attempt was made to restructure the NNPC after the crash in  oil  prices  from  2014.  The  plan  was  to  unbundle  the  corporation  to  allow  for  more accountability, transparency and ease of management. In 2017, a proposal in the Petroleum Industry  Governance  Bill  (PIGB)  aimed  to  create  three  entities  out  of  the  NNPC  to  deal with  asset  management,  investments  and  regulation.  The  PIGB  is  yet  to  be  passed  into law. See: Rotimi Akinwumi, ‘NNPC unbundled, new tax regime, more jobs coming’ https:// (25 July 2017).

142.     Recently, attempts have been made to pilot various social protection programs. These include SURE-P under Goodluck Jonathan, and the NSIP under Muhammadu Buhari, as discussed in footnotes 86 and 87.

143.     The Nigerian government recently split the PIB into several pieces of legislation. These include  the  PIGB  which  deals  with  policy  and  regulation  of  the  industry;  the  Petroleum Industry  Fiscal  Bill  on  the  fiscal  regime  and  IOCs, and  the  Host  Community  Bill  for  oil- producing communities. While the PIGB has been passed in Parliament and awaits assent by the President, there has been limited progress with the other two bills. KPMG, ‘The Petroleum Industry Governance Bill,’ (KPMG, 2017).

political  settlements  as  an  alternative  framework  to  better  explain  the political  and  institutional  underpinnings  of  the  ‘Africa  Rising’ economic growth without industrial transformation in Africa. In applying the political settlements  approach  to  resource-rich  countries  like  Nigeria,  the  article has shown how external pressures interact with the elite bargain and other dimensions  of  the  distribution  of  power  to  stimulate  reforms. Nigeria  is thus an intermediate state that can drive bursts of economic growth and diversification, rather than a developmental state presiding over sustained industrial transformation or a predatory state operating in a purely neopat- rimonial  fashion.  Immediately  after  military  rule  in  1999,  the  external constraints on the ruling elite generated the initial impetus for successful telecoms liberalization. These pressures were, however, insufficient to drive a growth agenda in the oil sector because of the horizontal-elite and vertical- societal distributive pressures on oil rents. The article identifies three causal mechanisms between constraints in the political settlement and economic policies, and their economic outcomes.

First, the external nature of threats on the ruling coalition’s access to oil rents provided the impetus for reforms. Since the fiscal crisis brought by low  oil  prices  and  odious  debt  were  severe  in  the  early  2000s, Olusegun Obasanjo’s  government  was  constrained  to  be  reform-orientated.  The relative ease of reforming telecoms sector globally was a ‘low-hanging fruit’ to meet donor preconditions for debt-relief and to grow its way out of debt and generate non-oil wealth.

Second, the relative success of the telecoms liberalization was largely due to the ruling elite’s capacity and resources. Obasanjo’s government sought to provide credible commitment signals to the private sector. This ‘growth coalition’ emerged  partly  due  to  a  reluctance  of  global  multinationals  to invest  in  Nigeria. A  capable  business  class  comprised  of  former  military officers, politicians, financiers, and  industrialists  allied  to  the  ruling  elite responded to this stimulus of market reforms. These findings are a depar- ture from developmental state144  and neopatrimonial145  descriptions of an inability  of  Nigerian  regimes  to  enable  private  investment  due  to  social divisions and political incentives. However, this clientelistic deployment of advantages to domestic business allies largely perpetuated cronyism in the oil sector.

Third, inequities  in  the  distribution  of  benefits  of  a  diversifying  econ- omy deepened horizontal-elite and wider-societal distributional pressures. These translated into an anti-reform impulse in the oil sector and decline in  two  ways.  One  aspect  was  that  the  absence  of  a  poverty-reducing component meant economic reforms did not address welfare concerns of

144.     Kohli, ‘State-directed development’.

145.     Lewis, ‘Growing apart’.

wider  society. The  National  Economic  Empowerment  and  Development Strategy  was  geared  toward  empowering  the  private  sector.146   The  ‘pro- poor social expenditures’ of the $1 billion per annum of savings from debt servicing147   did  not  directly  target  income  generation  and  jobs  creation. Although  maternal  mortality  decreased,  from  950  to  610  per  100,000 births between 2000 and 2010, poverty increased from 54.4 percent to 69 percent between 2004 and 2010, as did unemployment from 12 percent to 20 percent between 2006 and 2009.148  Unaddressed welfare concerns translated  into  vociferous  distributional  pressures  for  oil  rents  by  unions against deregulation and armed groups in the Niger-Delta, which affected growth.

The other aspect was that the regional concentration of growth dividends in the South undermined the reforms’ horizontal legitimacy among elites. Due  to  historic  socio-economic  inequalities  between  the  North  and  the South, the domestic private sector empowered by liberalization has been largely southern-based. From 1999, the North’s formal loss of presidential power—with the emergence of Obasanjo as President—laid bare its multi- dimensional  economic  weaknesses.  Obasanjo’s  market  reforms  further eroded  the  North’s  ability  relative  to  the  South  to  capture  economic resources. Jonathan’s breach of the PDP’s ‘zoning’ elite consensus threat- ened to permanently alter this precarious balance of power, and may have informed the unrelenting opposition to his presidency in the PDP until his electoral defeat in March 2015. Although economic liberalization opened up  new  economic  sectors, the  benefits  were  unevenly  concentrated  such that the oil sector was magnified both as an object of elite competition and as the primary means of dispensing patronage.

Therefore,  African  states  do  not  easily  fit  into  binary  descriptions  of being ‘neopatrimonial’ and incapable of being ‘developmental,’ due to their inherent  features  such  as  natural  resources  and  ethnic  diversity.  Using the  political  settlements  framework,  we  can  analyse  retrospectively  and potentially envision, the brief windows of opportunity that allow for bursts of  policy  reforms  in  seemingly  static  institutional  settings  even  if  their economic outcomes are neither entirely sustained nor fully transformative of society.

146.     Okonjo-Iweala, ‘Reforming the unreformable’, pp. 122–123.

147.     OSSAP-MDGs, ‘Monitoring and Evaluation for Accountability: The case of Nigeria’s virtual  poverty  fund’,  (Office  of  the  Senior  Special  Assistant  to  the  President  on  MDGs OSSAP-MDGs, 2006); Bright Okogu and Philip Osafo-Kwaako, ‘Issues in fiscal policy man- agement under the economic reforms (2003–2007)’ in Paul Collier, Charles C. Soludo and Catherine Pattillo (eds) Economic policy options for a prosperous Nigeria (Palgrave Macmillan, London, 2008), pp. 187–219.

148.     NBS, ‘Nigeria poverty profile 2010’ (Nigeria Bureau of Statistics NBS, Abuja, 2012); World Bank, ‘World Development Indicators’ (2015).

About the Writer: Zainab Usman is completing her doctorate in international development at the University of Oxford. Her research assesses the oil economy, economic reform and political institutions in Nigeria since the transition to democracy in 1999. She is also the co-convener of the Oxford University China-Africa Network (OUCAN). She tweets at @msszeeusman.

Source: Oxford Academic

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