Thirty years ago Nigerian economic troubles would have been quickly blamed on World Bank and general imperialist meddling in domestic affairs, but today that is no longer the case. Poor banking policies and a corrupt bureaucracy are homegrown issues, and Nigerians know that the most important limits on their growth are domestic. The FT reported earlier this month that:
In the decade to 2009, higher capital requirements helped to reduce the number of banks from 89 to 24. But lenders raising equity during Nigeria’s stock market boom (it rose by 70 per cent in 2007) fed a bubble, in part by margin lending to buy bank shares. Banks also lent heavily to the downstream oil sector.It was an accident waiting to happen. The global crisis, oil price slump and currency slide wiped out the capital of 10 banks, accounting for about 40 per cent of the system’s assets.
The good news about the source of your problems being domestic is that in theory at least you are free to fix them. The bad news is that often these problems are deeply rooted in history, culture, and patterns of behavior that are hard to change. Powerful interest groups fight any change to the status quo, and when a culture of corruption is as deeply entrenched as in Nigeria change may come slowly if at all. With an enormous chasm between the rich and the poor (and often the north and the south), former World Bank managing director and now Nigerian finance minister Ngozi Okonjo-Iweala has much work to do.Another controversy is meanwhile taking attention away from the need for basic banking reform. Currently, Nigerian central bank governor Lamido Sanusi is pursuing this very path. Because sharia law doesn’t permit paying or receiving interest, Sanusi recently introduced an Islamic banking system in an effort to bring Nigeria’s nearly 80 million Muslims, mostly located in the North, into the economy.However, Sanusi’s actions have not gone over well with the nation’s large Christian population, which includes about 75 million people centered in Southern Nigeria. Last week, 20 Anglican bishops gathered to condemn the Islamic banking system, suggesting that it contravenes Nigeria’s secular constitution.Nigeria has more people than any other sub-Saharan country (by far) and has the potential to become Africa’s largest economy. So far, it has not found a path to turn that potential wealth into actual prosperity; Nigeria’s progress or lack of it in the next ten years will tell us a lot about where Africa is headed.