Nigeria has a shockingly tiny government

These are figures from an IMF Article IV country report in April of this year:

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The one thing that jumped at me from this table was how little(as a share of total national output) the Nigerian public sector spends. The government barely takes in 10% of GDP in revenues; and spends between 11-12%. Also, for a country at its level of development (and with an economy of its size), Nigeria is weirdly debt free (relatively speaking).

You may be thinking that these figures must exclude state government expenditures — and you are wrong. The 11-12% figure is inclusive of state government expenditures.

In my view, this is a PFM smoking gun on the distortionary effects of oil dependence. Nigerian policymakers appear to be sated with the little revenue they are consuming (as a share of GDP) from the oil sector.

For a comparative perspective, take a look at Kenya’s numbers:

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The Kenyan government gobbles up about a fifth of GDP in revenues, and spends about a quarter. The Nigerian government only takes in a tenth of GPD and spends just a little over a tenth. In addition, the Kenyan government’s debt/GDP ratio is twice Nigeria’s.

General government spending as a share of GDP within the OECD ranges from 33.7% in Switzerland to 58.1 in Finland. The OCED debt/GDP ratio average is 90%.

Back in grad school I took Avner Greif’s economic history class in which he emphasized the importance of organizations for economic development. Societies, big and small, organize out of poverty — by building and maintaining socially-attuned institutions that lower transaction costs. The scope and intensity of organizational capacity therefore matters for economic development (For more see here). It takes a well ordered state.

And from these two tables, it is fair to say that the Nigerian state is underperforming relative to its organizational potential. Perhaps it’s time more people in Abuja started reading Alexander Gerschenkron (however dated this might be).

 

 

Workshop Fatigue: Residents of Kibera Demand Sitting Allowances to Attend NGO Meetings

The residents of Kibera, in Nairobi,  have a message for foreign aid groups in their community: if you want us to come hear what you have to say, you need to pay us.

So many non-governmental organizations (NGOs) have flooded this poor area that many locals have become disillusioned by the foreigners who say they want to help.

Inundated by invitations to go to meetings and trainings put on by NGOs, the  residents now seek compensation for their time. The handouts, known as “sitting allowances,” generally range from about $1 – $3 per hour, which can buy a fair amount here.

“Trust me, no one will go without the sitting allowance,” said Sharon Ogolla, 20, as she stands outside the hair salon she runs with her mother.

Asked whether most locals go to hear what the NGOs have to say, or just to collect the payment, Ogolla said, “Well, both, but mostly, honestly, to get the fee.”

For more see here. You should also read it for commentary on misguided foreign interventions.

H/T Laura Seay.

When Markets Discipline Politics

President Jacob Zuma continues to be in conflict with his own Finance Minister, Pravin Gordham, over fiscal policy (and propriety in the management of public finances). The markets trust the latter. The former has more power, including the coercive apparatus of South Africa’s administrative state. Having just presided over a disastrous outing for the ruling ANC in this month’s municipal elections, Zuma needs to create more policy wiggle room for his floundering administration. And Gordham’s commitment to fiscal discipline stands in the way. So far the markets’ reaction to Zuma’s machinations at the Finance Ministry have managed to discipline intra-ANC elite politics. But as Zuma gets closer to retirement (or being forced out) it is unclear how much he is willing to continue humoring the markets…

The revelation on Tuesday that Gordham may be forced out via (likely dubious) charges of improper conduct while he served as head of the South African Revenue Service sent the rand tumbling, again.

This is the third time the police unit, known as the Hawks, have questioned Gordhan. Earlier this year, just days before he was set to deliver a crucial budget speech, the Hawks demanded Gordhan answer written questions. Then in May, rumors of Gordhan’s imminent arrest sent the currency tumbling, just as ratings agencies were assessing South Africa. Gordhan was not arrested then, and went on lead South Africa’s recent economic recovery, assuring international investors of the country’s stability.

Screen Shot 2016-08-24 at 11.13.59 AMAnalysts believe Gordhan is the target of president Jacob Zuma and his political allies. The two are reported to be at loggerheads over the management of South Africa’s state-owned enterprises, especially the national carrier South African Airways. Gordhan’s office has delayed bailing out the embattled carrier until a new board is appointed (effectively removing those close to Zuma, according to reports). Gordhan’s office has also curbed spending on plans to build a new nuclear power plant.

Earlier this week, a cabinet briefing announced that Zuma himself would now directly oversee state-owned companies. Analysts say the move allows Zuma to maintain political power and protect his interests after historic losses in this month’s local government elections. Zuma’s office has denied that there is a rift between the president and the finance minister. According to reports, Gordhan is determined to resist pressure to resign

For more on this visit Quartz Africa:

The Secret to Autocratic Success (The Example of China)

This is from The Economist:

Even so, Mr Xi’s authority remains hemmed in. True, his position at the highest level looks secure. But among the next layer of the elite, he has surprisingly few backers. Victor Shih of the University of California, San Diego, has tracked the various job-related and personal connections between the 205 full members of the party’s Central Committee, which embodies the broader elite. The body rubber-stamps Mr Xi’s decisions (there have been no recent rumours of open dissent within it). But the president needs enthusiastic support, as well as just a show of hands, to get his policies—such as badly needed economic reforms—implemented. According to Mr Shih, the president’s faction accounts for just 6% of the group. That does not help.

Admittedly, this number should not be taken too literally: it is difficult to assign affiliations to many of the committee’s members. Doubtless, too, many members who are not in Mr Xi’s network support the president out of ambition or fear. Still, Mr Xi can rely on remarkably few loyal supporters in the Central Committee because he did not choose its members. They were selected at the same time he was chosen as party leader in 2012, a process overseen by the dominant figures of that period, Mr Hu and the long-retired Mr Jiang.

Most people who laud China’s autocratic success conveniently choose to ignore two important facts:

  1. That China’s rulers, at least since the late 1970s, have not been totally unaccountable. The country is a dictatorship by committee. And a large committee at that. It is not a personalist one man show.
  2. The the Chinese party-state works tirelessly to reduce the cost of compliance among its citizens — through conscious state building, coercion, and public services.

What this means is that in order to replicate China’s autocratic success, would be little Chinas must invest in both state capacity and intra-elite accountability (perhaps by building strong, institutionalized parties).

Absent this, what you are likely to get are mediocre petty tyrants running disorganized non-states with infant mortality rates straight out of the 16th century.