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Recent
developments in that bit of the economy usually referred to as the
“corporate sector” confirm some of our worst fears. Nigeria does have a
very serious governance problem.

If principals
cannot trust their agents to act in the best interest of the former,
what recourse remains? Conceivably, it ought to be more difficult to
unwind the accoutrements of civilisation especially the devise of the
legally enforceable contract, than it would be to find solutions to
this problem.

However, we have
seen attempts to align the interests of managers of businesses with the
goals of the firms they run (in the United States of America, at least)
through share options and a cornucopia of other fancy incentive plans,
result in companies focusing on short-term increases in share values to
the apparent detriment of sustainable growth in shareholder value.

Erosion of trust

So, even this expedient is no longer available as remedy to our problems.

The consequent
erosion of trust represents a real and present threat to all efforts to
grow this economy. I have no doubt that until the requisite levels of
trust for running a modern economy are in place, we would want for the
right quantity of investment in just about every sector of the economy.
This again goes beyond our familiar plaint about the constraining
effects of poor infrastructure. It is instead best addressed by a
workable response to this question. Why would anyone put money in any
sector of this economy, without a clear indication of where the returns
will come from, and how?

I have listened to
advocates of the economic opportunities available in emerging markets
admonish would-be (non-resident) investors to seek partnerships with
trusted nationals with the right connections if they expect to make a
good fist of their investments in such places. And always, I wonder by
how much such counsel reinforces the odious traditions of related-party
transactions that lie at the heart of these economies’ underdevelopment.

Obviously, this
trust deficit plays fast and loose with the supply of investment to
economies like ours. There is though, an added dimension to it. It also
pushes available investment to the speculative end of the continuum. If
you cannot trust your investment partners in any economy further than
you can throw them; if their value as partners depends not on
institutional guarantees, but on their often fickle connections to
local centres of influence and power; then invariably, one would seek
out business opportunities with shorter investment cycles, and returns
that compensate for the capricious transaction base. Not surprisingly,
therefore, most investment in this country is of a speculative variety.

This sadly is not
all. As an economic jurisdiction, we also suffer from an enforcement
problem. One explanation for the rise of meta-state institutions (such
as the mafia in Sicily) is the need – in the absence of competent state
authorities – for some agency to guarantee the integrity of
transactions between individuals/institutions. The police find excuses
for the breakdown of law and order. And only those who court trouble
attend to the courts of law.

Acting in restraint

In the run up to
another general election, not much is being said about all this. There
is the argument that further commentary might be rendered superfluous
by the fact that the responsible regulators are acting in restraint of
the excesses that the earlier passages describe. But I do not see a
consensus on the causes of these infractions. Nor am I convinced that
we are agreed that infractions indeed they are. What to make of the
local aphorism that “one eats where one works”? Is there a national
sense of the tension between what is moral and what the laws allow?
Moreover, how much agreement is there on the notion that not all is
expedient that is legal? Besides, what do these mean?

Arguably, around the issues that we may claim to have reached
agreement on (the need for government to hands-off certain sectors of
the economy, and the need to correct the biggest shortcoming of this
economy – the want of public infrastructure) not much has happened on
the current government’s watch. In the absence then of the failure of
serious engagement around the contribution of the failure of our social
infrastructure to our lack of economic development, any chance that the
government that will take office in 2011 would find the resources and
the will to address these challenges?