Between democracy, neoliberalism and the developmental

Nigeria stands at a critical crossroads. After decades of structural adjustment programmes (SAPs) and IMF-prescribed neoliberal reforms, the country's economy remains fragile, inequality is widening, and investor confidence is volatile. A growing consensus among policymakers and economists argues that Nigeria urgently needs a **developmental state model**—one that actively shapes economic policy to drive industrialisation, create jobs, and build productive capacity—rather than passively adhering to Washington Consensus prescriptions.

The tension is real. Nigeria's 2024 fiscal consolidation, privatisation agenda, and subsidy removals were celebrated by multilateral institutions but have strained social cohesion and squeezed manufacturing competitiveness. Meanwhile, peer nations—Rwanda, Ethiopia, Vietnam—have deployed state-directed industrial policy with measurable success, proving that development need not follow a single ideological path.

## What does a developmental state actually mean for Nigeria?

A developmental state prioritises long-term structural transformation over short-term fiscal metrics. It means strategic state investment in key sectors (refineries, semiconductors, agricultural value chains), targeted infant-industry protection, and deliberate human capital development. Countries like South Korea and Taiwan used this model to leap from poverty to high-income status. Nigeria's National Developmental Plan (2021–2025) hints at this direction but lacks the institutional autonomy and financing to execute.

The core problem: **IMF and World Bank conditionality has locked Nigeria into a narrow policy space.** Debt servicing now consumes 93% of government revenue (as of Q3 2024). This leaves minimal room for counter-cyclical spending, industrial subsidies, or long-term R&D investment—the exact tools a developmental state needs.

## Why are investors caught in this bind?

Foreign direct investment (FDI) into Nigeria actually *declined* in 2023 despite economic growth, signalling investor wariness. The reason: policy unpredictability. Are tariffs coming? Will exchange controls tighten? Will the government prioritise debt repayment over infrastructure? A weak, reactive state cannot answer these questions credibly.

Conversely, a coherent developmental strategy—with a 10-year industrial master plan, protected manufacturing zones, and guaranteed input subsidies—would create *predictable returns* for patient capital in agro-processing, petrochemicals, and technology.

## The renegotiation imperative

Nigeria needs to renegotiate its relationship with the IMF and World Bank on three fronts:

**1. Fiscal space for investment:** Debt relief or extended repayment terms (à la Zambia's 2023 deal) would free ~₦5 trillion annually for productive spending.

**2. Industrial policy carve-outs:** Explicit permission to deploy temporary tariffs, export credit schemes, and state-owned enterprises without triggering conditionality breaches.

**3. South-South bilateral deepening:** Strengthen partnerships with China, India, and the UAE for technology transfer and infrastructure financing outside traditional multilateral frameworks.

## The investor bottom line

A developmental state approach carries risks: corruption, inefficiency, and policy reversals could waste public capital. But the status quo is also risky—slow growth, youth unemployment, and capital flight. The real opportunity lies in **identifying which sectors the government will actually champion** (oil refining, agriculture, tech) and positioning accordingly.

Nigeria's next administration (2027 onwards) will likely face this choice explicitly. Forward-thinking investors should monitor technocrat appointments and industrial policy draft bills closely.

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