As Nigeria passes through another difficult patch in its
economic development, a huge opportunity exists for the most populous black
nation to restructure and position itself for future sustained growth. In this
light, it has a lot to learn from Chile, the quintessence of economic
development in the last 25 years.
As recently as the early 1970s, Chile was about the poorest
Spanish colony in South America with an entrenched socialist regime. However, with
a measure of consistency in sound policy choices and good institutions, Chile
has transformed into the most stable economy in South America with the highest
per-capita income in the region. Chile is currently the only recognized
“Developed Country” in Latin America and the first and only member of the Organization for Economic Cooperation
and Development (OECD) from that region.
How did Chile escape the underdevelopment trap transitioning
from third to first world economy?
- First, the economy was freed up by removing many of the tax, regulatory, trade and other impediments to growth imposed by the socialist regimes of the past
- Secondly, the rule of law was established and maintained by an independent and efficient judicial system
- Thirdly, in spite of its huge mining sector, the economy was gradually diversified to reduce over-dependence on commodity exports while private property rights protection was entrenched to avoid over-regulation and destabilizing corruption that plagues most resource-rich nations
- Lastly, strict limits were placed on government size and spending keeping public debt and budget deficits under control
Chile’s emergence as a developed economy, despite its numerous
challenges, is a clear proof that reaching development is more a function of
adopting well-designed institutions and accurate public policies. Hence, there
is also hope that Nigeria might also emerge as an economic leader in the Sub Saharan
Africa sub-region if it starts implementing sound polices.
Amid many other things, Nigeria has to reduce regulatory and state
control on the economy transitioning to a private sector driven economy. Heavy
government involvement and control opens up avenues of corruption, which in
turn discourages entrepreneurship. Likewise, the size of government also has to
be cut down to free up necessary funds for capital expenditure and
infrastructural development. All these will take time and calls for a comprehensive
medium-to-long term economic road-map that stands regardless of changes in
regimes.
