Economic policy and governance are inseparable no matter how subjective they are defined. The big reason for this is there is a forward and backward feed between governance and economic policy. On the forward feed, economic policy determines governance because the performance of a government is appraised based on how effective its economic policy is. In the United States, for instance, the number of new jobs created, economic growth and inflation rate under an administration compared to its predecessor determine if that administration will get a second term. In short, good governance dovetails sound economic policies that have been implemented and have achieved result.
In terms of the backward linkage, governance is a direct influence on economic policy. The best way to rationalize this is to ask: who determines economic policies? The government does! A government can project its economic philosophy as capitalism, socialism or a blend of both. The choice of economic policy then reflects on the performance of the economy.
There is a chain of effect that rolls governance into economic policies. This chain would typically have its base effect on the microeconomic units, which is the households and the firms, and thereafter, ripples its effect on the macroeconomy. A good example of this is the N-power policy of the Federal Government of Nigeria which aims at putting 500,000 graduates and 200,000 non-graduates to a job. The direct effect of this is an increase in household incomes which grows consumption, increase aggregate demand, enables production companies to earn more etc. the fall out of the improvement in the households and firms is an increase in economic growth and a further reduction in unemployment.
In Nigeria, which is the case study here, the challenge has not always been with initiating economic policy. On the opposite, however, past and present administration can all boast of various economic policies. Notable examples include Vision20:2020 (Aim: To make Nigeria one of the top 20 economies in 2020), the Economic Recovery and Growth Plan (ERGP) (Aim: To ensure Nigeria recovers from the wrecks of the 2016-2017 recession) and recently, the Nigeria Economic Sustainability Plan. Each of these policies is geared at piloting the Nigerian economy towards medium-term growth and stability.
Examining each of these policies, the underlying goals are far from achieved. Nigeria is not currently one of the top 20 economies in the world and this is 2020. The ERGP is another story of policy failure. Whereas the policy was aimed at ensuring that Nigeria does not slide into another recession after 2016, the novel COVID-19 pandemic poses significant recession risk to the Nigerian economy as the International Monetary Fund predicts Nigeria will contract by 5.4% by the end of 2020. Despite the bottlenecks and stalemate around these policies, the federal government has introduced the Nigeria Economic Sustainability Plan to help Nigeria recover from the economic setbacks caused by the pandemic. No doubt, there is very little hope on the policy instilling economic recovery or growth.
Poor governance lies at the heart of understanding the ineffectiveness of economic policies in Nigeria. Policies are enunciated by the government, but in Nigeria, these policies are not well articulated in the first place. The prerequisite factors needed to spur the policies to success are not implemented before rolling out the economic policies
Furthermore, the implementation of economic policies once they are pronounced is always at a low ebb. What the Nigerian government does in most case is spell out the policies without implementing these policies or holding public institutions accountable for the implementation of these policies. Eventually, the expected duration of the policy expires, and the policy is jettisoned.
Governance also affects the performance of economic policies through poor evaluation. There is the school of thought that posits that even if policies fail, the government should still evaluate the policy, highlight the challenges and then use these challenges as a foundation for designing a new policy. Economic policy in Nigeria is devoid of this evaluation process. The fall out of this is a cycle of failed policy that continues to repeat itself.
The big lesson is that poor governance threatens effective economic policy. Governance is a means to an end as far as economic policy is concerned. The Nigerian government must look beyond the creation of policies and focus on implementation and evaluation because at the end of the day, what matters to Nigerians and the aggregate economy is the performance of the policies.
Written by Michael Ogunremi