Journal of Social Sciences

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Market Economies, Globalisation and the Role of

Good Governance in the Development Process:
Challenges for the Nigerian Economy

Christopher O. Orubu & Patience O. Awopegba

To cite this article: Christopher O. Orubu & Patience O. Awopegba (2004) Market
Economies, Globalisation and the Role of Good Governance in the Development Process:
Challenges for the Nigerian Economy, Journal of Social Sciences, 9:3, 163-175, DOI:
10.1080/09718923.2004.11892446

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© Kamla-Raj 2004 J. Soc. Sci., 9(3): 163-175 (2004)

Market Economies, Globalisation and the Role of

Good Governance in the Development Process:
Challenges for the Nigerian Economy
Christopher O. Orubu1 and Patience O. Awopegba2

Department of Economics, Delta State University, Abraka, Nigeria

E-mail: [email protected]
National Centre for Economic Management and Administration (NCEMA), Ibadan, Nigeria
E-mail:[email protected]
KEYWORDS Globalisation; benefits; market economy; good governance

ABSTRACT The new globalisation phenomenon is an inevitable force that cannot be ignored, as we enter the 21st
century. This paper examines the implications of globalisation for the development process in the typical developing
market economy. Against this background, the potentials of the Nigerian economy benefiting from the gains of
globalisation are examined. The chances are admittedly slim, and the authors see good governance as one veritable
avenue through which the benefits of globalisation can be maximised. Efforts to enthrone good governance in the
process of economic management in the country have however focused more on the government sector. The design
and implementation of a programme of good governance, which recognises the interplay of political, economic and
corporate dimensions is therefore recommended.

INTRODUCTION to be in the past, where governments were

expected to play active roles in fostering the
The market economy is an economic system development process through the maintenance
that relies on the price mechanism in the allocation of large public enterprise sectors. As the forces
of economic resources among competing of economic liberalisation and globalisation gather
demands – either in production or consumption. momentum as we enter the 21st century, compe-
Market economies are also generally character- tition has become the keynote of economic
ised by private ownership of resources and means survival of national economies. Privatisation of
of production. Thus it is the private sector impulse erstwhile (usually inefficient) public enterprises,
that leads the development process in the typical is now a prime paradigm that foresees the eventual
market economy.1 Since the collapse of dominant withdrawal of the state from engaging in active
socialist doctrine towards the end of the 1980s, a economic activities, thus paving the way for a
large number of countries, have tended more private sector-led development process. In a
towards market orientation in the process of number of developing countries, both financial
economic management. Closely associated with and capital markets are being liberalised and
this development has been the implicit acknow- globalised, with definite implications for the
ledgement that it is only a system of democratic domestic economy in the face of weak
government that can effectively facilitate and institutional structures.2 Liberal world trade being
guarantee individual and corporate economic fostered by the World Trade Organization (WTO)
freedoms. Thus more significant attention has also has definite implications for the survival of
been accorded democracy as the ideal political the typical developing market economy.
counterpart of the modern market economy. For It must however be noted that even though
example, by the middle of the 20th century, there government is expected to withdraw from active
were no more than 22 democracies in the world. participation in economic activities in the market
But by the end of the century, there were about economy, the democratic system of government
120 democratic states, with at least 63% of the still provides a rational and participatory
world’s population living in democratic states framework for economic management and the
(Freedom House, 2000)! development of institutions and structures that
Today’s new democracies are however create the enabling environment for private
operating in a different context from what it used enterprise to thrive in the face of competition from
164 CHRISTOPHER O. ORUBU AND PATIENCE O. AWOPEGBA

international forces. It therefore turns out that the benefits of a country’s competitive advantage
what makes the difference between a well- within the context of a globalised world. In the
functioning market economy from a non-market fifth section, we discuss briefly Nigeria’s
economy is not necessarily the degree to which experience with policies of good governance,
the state withdraws from productive activities, against which background the challenges facing
but largely by the extent to which the system is the country are identified, and an appropriate
able to guard property rights and enforce framework for good governance suggested. The
contracts, guarantee the realisation of the sixth section concludes the paper.
objectives of corporate entities, and protection
of economic agents from the misuse of GLOBALISATION: HISTORICAL
distributional, economic and informational power CONTEXT AND IMPLICATIONS FOR THE
by state agents (Bruszt, 1999). The ability of the DEVELOPING MARKET ECONOMY
state to guarantee these freedoms has become Globalisation is a generic concept, which has
more crucial to sustainable development as the been used to describe a multiplicity of processes
world economy becomes more integrated due to at the economic, social, political and cultural
the forces of globalisation. dimensions (Nemedia, 1998, Kwanashie, 1999;
The forces of globalisation are demonstrating Obadan, 1999), depending on the effects of the
that economic management strategies must be process being emphasized (Rodrick, 1999, 2000;
directed at repositioning the domestic economy O’Rouke, 2002a). Without going into definitional
vis-à-vis other countries in a new competitive controversies, we will operationally define
world order. Such strategies must go beyond globalisation as the increasing tendency towards
simple comparative advantage to global integration of countries into the world economy
competitive factors, from pure macroeconomic as well as contacts among enterprises, institutions
focus to factors that secure microeconomic and peoples across national boundaries.
leverage, from rigid and hierarchical organisations Globalisation as usually idealised by its
to flexible and meritocratic organisations in state proponents, is capable of producing positive
bureaucracy, and from dependence on foreign aid effects on the development process. For example,
and benevolent partners to innovation and some of the positive effects of globalisation have
business productivity. These are the surest been observed in the increasing magnitude and
means of the survival of the developing market structure of international trade in goods and
economy. Above all, the economy must be seen services since the 1990s, increased capital
to have developed and adopted minimum movements across national boundaries, gains in
standards, which make for acceptance as a productivity and efficiency in production, all of
credible partner for development in a world with which factors contributed to driving the growth
a new global order. The view we advance in this process and creating jobs in the industrial
paper is that good governance has a critical role countries since the mid-1990s 3. On the other
to play in engendering competition in the hand, there are sceptics of globalisation who hold
developing market economy, particularly in sub- the strong view that most developing countries
Saharan Africa. do not stand any significant chance of benefiting
This paper therefore examines the issue of meaningfully from its forces. One fact is however
globalisation, drawing out its implications for the certain. This fact is the inevitability of the forces
economic survival of the typical developing of globalisation and the need for national
market economy. Within this context, the role of economies to develop strategies that will enable
good governance towards the realisation of the them to derive maximum benefit from these forces.
benefits of the market economy is examined, using Globalisation is not an entirely new
Nigeria as a case. Following this introductory phenomenon. O’Rouke and Williamson (1997)
section, the next section examines globalisation have shown how an earlier period of globalisation
in its historical context, drawing out its which spanned about one century, between the
implications for the development of the market period 1840 – 1940, provoked a backslash that
economy. This is followed by a discussion of the stemmed the cross-border flow of goods, people
potentials of Nigeria benefiting from globalisation, and financial resources by countries that felt they
while the fourth section is specifically concerned would be losers in a globalised world. And they
with the role of good governance in enhancing predict that this could well happen again! They
MARKET ECONOMIES, GLOBALISATION AND GOOD GOVERNANCE 165

note in particular that the globalisation technological change and innovation that have
phenomenon of the 19th century and first two led to rapid dismantling of barriers to international
decades of the 20th century was a far more dramatic trade and mobility of capital, the implementation
occurrence than the integration of world markets of outward-oriented policies of economic reforms
that has been taking place gradually since the (including privatisation of public enterprises) in
end of World War 11. The first episode of developing countries, as well as advances in
globalisation was marked by faster falls in inter- information technology and communication
national transport costs and more phenomenal (ITC), transportation and the general trend
capital flows across national boundaries. Cross towards the adoption of democratic government.
border human migration was also higher between On the issue of economic reforms for instance,
Europe and the New World (the Americas). Thus since the 1980s, a number of African countries
between the second half of the 19th century and suffering from fundamental macroeconomic crises
1914, about 60 million Europeans set sail for the have adopted adjustment and reform programmes
resource-rich and labour-scarce Americas.4 in line with dictates of the Bretton Woods
For a very long time before World War I, it Institutions5. Key points of economic policy in
was thought that the world would continue to these various adjustment programmes relate to
move towards an integrated whole. This view trade and financial liberalisation, public enterprise
turned out to be wrong, as losers from that reform and the need for government to withdraw
globalisation experience constrained its further from active participation in productive economic
significant spread until the onset of World War I activities, and allow the private sector to lead the
sealed its fate as it were. It is significant to note development process. Understandably, these
that the USA was one of the early losers of policy efforts were geared towards developing
globalisation. In the 1860s, the USA had closed the pre-requisites for a more virile market
its markets to free foreign influx of goods. It also economy, which is the focal economy in the new
raised tariffs to help finance its Civil War, and global order. Thus knowingly or unknowingly,
soon after, erected further barriers to protect its the developing countries, particularly in sub-
infant manufacturing industries from European Saharan Africa, have been preparing themselves
competition. There was also the reaction against for participation in the new global race since the
migration. Well before the famous American 1921 1980s6! At the supranational level, a number of
Emergency Quota Act, America had also put in institutions are already in place, for the purpose
place restrictions against immigration. It was of channelling the forces of globalisation. Of
therefore not surprising that the first quest for these, the WTO, which is working towards
globalisation in its next round using a trade anchor complete liberal trade, the Basle Accords
after World War II under a proposed International (concerned with rules of the game for the banking
Trade Organisation (ITO) was successfully system), and the Montreal Protocol (concerning
blocked by the USA. The failure to establish the the release of ozone-depleting chemical agents)
ITO led to formation of the General Agreement stand prominent. Now, what can the developing
on Tariffs and Trade (GATT) in 1947, which was market economies, particularly in Africa gain from
to provide a guided but gradual movement globalisation?
towards free trade. By the time the World Trade One visible consequence of globalisation and
Organisation (WTO) was put into effect in 1995, its associated liberal trade has been an increase
the free trade negotiations had covered a period in world trade. As noted by Nzekwu (1999),
of more than forty years! No doubt, the western during the period 1985-95, the ratio of world trade
developed market economies (particularly the to the world gross domestic product (GDP) rose
USA), more than forty years after World War II thrice faster than in the preceding ten years, and
are now in a better position to lead, and benefit twice as fast than it was in the 1960s. Since the
from the new globalisation, which is now more of 1990s, there has however been some disparity in
a deliberately driven phenomenon. the trade performance of the different regions of
Factors which have facilitated this new round the world. For example the share of Africa in total
of globalisation include deliberate and widespread world exports fell from 1.86% in 1985 to 1.71% in
push towards liberalisation of trade and capital 1999, while the corresponding figures for Asia
markets, the increasing internationalisation of were 18.15% and 18.69% for the respective periods
corporate production and distribution, (IMF, 2000). Thus as a group, African countries
166 CHRISTOPHER O. ORUBU AND PATIENCE O. AWOPEGBA

may not have recorded any significant emergence of a new imperialism arising from
proportionate improvement in export performance foreignisation. Such fears are particularly relevant
since the mid 1990s. There is also the benefit in countries pursuing privatisation programmes.
ensuing from the integration of world capital In Tanzania for instance, such fears have led to
markets. A number of developing countries have the development of a home initiative to pool the
already liberalised their capital accounts, and this resources of nationals in order to be able to buy
development has the potential of making their the assets of enterprises being privatised,
markets more attractive to investors from through the assistance of a civil society
developed countries wishing to diversify their organisation (CSO).7
portfolios. Closely associated with this potential Globalisation also has the potential benefit
benefit is that of increased private capital flows resulting from labour migration from one country
around the world in search of areas of highest to another, thereby helping to reduce unemploy-
returns arising from the globalisation of financial ment in countries with excess labour. In particular,
markets. The records on private capital flows labour movement from developed into developing
since the late 1980s however indicate that African countries and vice-versa has the potential of
countries have not benefited as much as the facilitating transfer of technology. However,
Asian countries – the most significant ones being experience since the 1990s indicates that
China, Republic of Korea, Malaysia and Indonesia movement of labour from African countries into
- from the flow of private capital - although it has Europe and the USA has been constrained by a
also been shown from the financial crises in number of migration laws in these countries.
several Asian countries during the second These and other issues related to the distribution
quinquennium of the 1990s, that there are risks of of the benefits of globalisation raise fundamental
financial instability and contagion associated questions which border on equity – an issue that
with wholesale financial liberalisation. This is has been addressed in a number of recent studies
particularly so when the appropriate institutional (see for example, O’Rourke, 2002a; 2002b;
anchor is lacking (Nemedia, 1998; Knight, 1998), Chiswick and Hatton, 2001; Lindert and
which condition exposes the domestic economy Williamson, 2001; Dowrick and Akmah, 2001).
more pungently to transmission effects arising One point must be made very clearly at this
from international financial perturbations. juncture. This is the fact that this new round of
Technological advantages are also associated the globalisation phenomenon is deliberately
with globalisation. In particular, the opportunities driven. It is therefore not out of place to reason
for technology transfer and adaptation are quite that the countries at its wheels, and who control
high in a globalised world economy characterised it, will seek to secure the maximum benefit from it.
by sophisticated information technologies that Given this background, what then are the chances
make access to a multiplicity of scientific of the Nigerian economy benefiting from this
information a very simple feat. At the level of round of globalisation? This is the issue that
conferring efficiency for instance, advances in gains our attention in the next section.
information and communications technology GLOBALISATION AND THE
have figuratively transformed the world into one NIGERIAN ECONOMY
global village in which trade transactions can be
effected without the need to travel and at minimal To begin with, we attempt a brief review of
cost. Information relating to new industrial the progress of the Nigerian economy. The
products, financial products, peace and war, etc, Nigerian economy is an essentially monocultural
in most parts of the civilised world can now be economy, relying almost exclusively on the
assessed just with the touch of a button. petroleum sector for its survival. From the point
There is also the associated effect of the of view of historical reference, Nigeria experienced
increasing internationalisation of corporate the “oil boom” during the period 1973-1977, and
production and distribution, with the transnational its effects lingered on through a substantial
corporation at the central stage. While this is an fraction of the second quinquiennium of the
advantage for the typical developing country with decade of the 1970s, and well up to 1981. At the
scarce resources, the internationalisation of international level, Nigeria then asserted itself as
business raises fundamental fear bordering on the Giant of Africa, becoming a political mustering
the issue of economic sovereignty and the point for all Black Africa, including those in the
MARKET ECONOMIES, GLOBALISATION AND GOOD GOVERNANCE 167

diaspora. During this period, it was generally the Structural Adjustment Programme (SAP) was
acclaimed that the Nigerian economy was doing embarked upon during the third quarter of 1986
well, and government seemed not to have faced by the new military administration of General
any visible constraint in disbursing funds for all Babangida under an IMF/World Bank support
conceivable projects. The so-called oil boom framework. In principle, SAP was specifically
therefore not only created tremendous changes packaged to help to remove both internal and
in the patterns of consumption, investment and external imbalances, including other structural
production, it also profoundly altered Nigeria’ distortions and factors of inertia, which had held
socio-cultural values, political aspirations, style the economy down for so long.
of economic management as well as the After more than fifteen years of the inception
perceptions of government as to its role, and the of SAP, the Nigerian economy has continued to
actual policies and programmes that it embarked present the symptoms of a country in a state of
upon through the various development plans regress. Poverty, in both absolute and relative
implemented. Although it is on record that the terms has continued to bite had on the citizenry
economy recorded relative growth during the first with its vast majority living on below one US dollar
half of the 1970s, it soon became evident that the per day. The Human Development Index (HDI)
economy was progressing like a house without a has been below 0.5 since the 1990s, while the
solid foundation. In the first instance, the pattern Human Poverty Index (HPI) remains the highest
of growth in the industrial sector was such that it among all member countries of the Organisation
was dependent on the external sector. And then, of Petroleum Exporting Countries (OPEC). Despite
agriculture, which was the undisputed mainstay policy efforts made towards diversifying the
of the economy during the 1960s, remained largely economy since the mid-1980s, the petroleum
backward and neglected during the 1970s. sector continues to account for up to 96% of the
Expectedly, the giant initial strides taken by country’s total export value. The industrial sector
government towards rapid growth and has remained relatively weak and uncompetitive
development of the economy could not be with manufactured goods accounting for less
sustained, as the world oil market slumped during than 3% of total export value (Orubu, 2000)8. Table
the early 1980s. Thus with the almost complete 1 summarises selected macroeconomic indicators
collapse of the oil market between 1982 and 1986, for the Nigerian economy.
the Nigerian economy began to crumble under As can be seen from Table 1, the Nigerian
the stress of both internal and external economy is highly open. Over the period 1979 –
disequilibria. 1989, the share of imports in the gross domestic
Earlier in 1982, the Federal Government under product averaged 24.3%. This rose to about 26%
President Shehu Shagari had introduced some during the period 1990 – 2000. In terms of export
austerity measures under the Economic composition, the economy is almost totally
Stabilisation Act of that year. As it turned out, dependent on crude petroleum, which accounts
the nature of the excruciating economic conditions for about 97% of total export value during the
was such that a more fundamental approach was period 1990-2000. The country’s manufactures
required to stem the rapid movement towards have an abysmal showing in the international
phenomenal regress. Apart from the shock effects market (as the share of the manufacturing sector
emanating from the external sector of the in the gross domestic product continues to be
economy, internal economic distortions, structural relatively insignificant, see Table 1). Indeed the
rigidities and similar factors also contributed to share of manufactured goods in the country’s
the heightening of the crisis of the 1980s. total export value was consistently below 1%
Consequently, by 1985, in spite of the efforts made before 1998! The near absence of Nigerian
by government to implement the austerity manufactured goods in the world market is a
measures (which were continued during the serious cause for concern, and it is pertinent for
regime of General Buhari), the crisis worsened. us to compare the Nigerian experience with what
And at this point, it became clear that a much obtains in some of the fast growing middle level
more fundamental and comprehensive change in developing market economies. In 1980 for instance
economic policy and management perspectives the share of manufactured goods in South
was called for, if the economy was to move out of Africa’s total export value was 18%. By 1998, this
the doldrums. It was against this background that had gone up to 54%. Expansion in the share of
 168

Table 1: Selected economic indicators for the Nigerian economy

Share of
Overall deficit Total external Exchange rate Share of crude Share of total Share of Share of
GNI per capital goods
Year capita (-) or surplus public debt as % (Naira/US $) petroleum in imports manufacture manufacturers in
(+) as % of of exports of goods period average total exports (%) in GDP (%) and raw
(US $) GDP in (%) total exports (%) materials in
GDP and services
imports (%)
1979 660 3.4 2.17 0.6040 96.0 25.00 N.A.6.7 0.1 71.7
1980 780 -3.4 4.09 0.5468 96.8 22.90 N.A.7.7 0.2 60.3
1981 780 -12.2 9.06 0.6177 97.1 31.68 9.8 0.3 55.5
1982 740 -16.3 16.10 0.6735 94.2 29.88 11.2 0.2 57.9
1983 550 -13.1 23.62 0.7244 95.0 32.72 8.4 0.4 58.3
1984 410 -5.0 32.67 0.7665 96.7 31.42 7.8 0.3 61.9
1985 360 -1.2 33.64 0.8938 93.1 26.21 8.6 0.4 70.5
1986 290 3.4 28.41 1.7545 95.3 15.52 8.0 0.6 70.3
1987 260 -5.2 14.10 4.0160 90.1 17.41 8.4 0.2 75.9
1988 280 -4.5 29.54 4.5370 90.1 19.06 8.7 0.2 71.2
1989 270 -2.5 20.90 7.3647 93.3 15.49 8.2 0.8 72.6
1990 270 3.1 23.34 8.0383 96.2 17.32 8.2 0.7 73.3
1991 270 0.7 23.36 9.9095 96.3 28.60 8.3 0.9 74.8
1992 290 1.9 30.87 17.2984 97.9 21.95 7.9 0.5 65.6
1993 240 -5.0 14.77 22.0654 97.7 31.19 7.3 0.4 65.0
1994 220 -4.8 19.49 21.9960 97.4 27.52 7.2 0.6 63.9
1995 210 3.5 15.31 21.8953 97.6 29.25 6.7 0.5 66.8
1996 250 2.6 15.17 21.8844 98.2 18.40 6.5 0.4 61.2
1997 270 -1.0 8.88 21.8860 97.8 26.17 6.3 0.7 62.2
1998 260 -9.1 11.74 21.8860 95.5 28.66 5.9 1.80 60.7
1999 250 -8.5 31.49 92.3381 98.4 25.15 5.9 1.81 59.8
2000 260 2.2 15.51 101.6970 98.7 30.1 6.0 1.82 60.9
Source: African Development Bank (2001), and Central Bank of Nigeria (2001)
CHRISTOPHER O. ORUBU AND PATIENCE O. AWOPEGBA
MARKET ECONOMIES, GLOBALISATION AND GOOD GOVERNANCE 169

manufactured goods has been generally more its ability to reduce various forms of
phenomenal in Asia’s fast growing economies, inefficiencies.
compared to the situation in African countries.
As noted by Obadan (2001), during the 1990s, GOOD GOVERNANCE: CONCEPTUAL
African countries as a whole accounted for only FRAMEWORK AND ROLE IN THE
about 3% of world trade, and this is one factor CONTEXT OF GLOBALISATION
that potentially limits the potential of the continent As a concept, governance has several dimen-
to maximise the benefits of globalisation (see sions to it.9 Simply defined, governance, refers to
Sachs and Sievers, 1999). For example in 1980, the manner in which power is exercised in the
the share of manufactures in total export values management of the affairs of a nation, be it in the
for Thailand and Malaysia stood at 25% and 19%, economic, political or wider social spheres of life.
rising to 71% and 79% respectively, by 1998. In In today’s modern society, governance is
the Republic of Korea, manufactured goods embodied in well-defined institutional arrange-
account for well over 90% of total export value ments, consultative mechanisms as well as policy-
(World Bank, 2000). These comparative figures making processes, all set within the framework of
provide some food for thought on the state apparatus of overall political control. There
international competitive standing of the Nigerian are three important dimensions of governance –
economy. political, economic, and corporate dimensions
There is also the problem of weak institutional (ADB, 2001). The relationship between these
structures, which problem has rendered three dimensions is analogous to a series of
ineffective most of the economic management concentric circles in which political governance
strategies adopted since the 1980s. Rent-seeking provides the encompassing universe (Otobo,
behaviour has also significantly imposed undue 2000, 2001), as shown in figure 1.
cost on the society, and in most cases, culprits Political governance is concerned with the
have escaped unpunished. It is interesting to note process of decision-making relating to public
that the Corruption Perception Index (CPI) of policy. It supplies the institutional infrastructure
Transparency International computed for 22 for the polity as well as the orientation of the
African countries for the year 2000 placed Nigeria economy. Economic governance provides the
as the most corrupt country (ADB, 2001). Coupled framework for decision-making processes that
with long period of military rule (between 1960 affect an entity’s economic activities and its
and 1999, the military ruled Nigeria for nearly relationship with other entities, organisations and
thirty years) and the high degree of insecurity nations. It provides the regulatory framework for
characteristic of such regimes, the international the conduct of corporate affairs in the market
business community, for a long time looked upon economy, and also sets the macroeconomic
Nigeria with disdain. There is no doubt a number framework. Corporate governance, on the other
of these characteristic features of the Nigerian hand sets the rules on the basis of which the
economy and its history reviewed above work as corporation is to be managed and controlled in
potentially effective constraints against reaping
the benefits of globalisation. While it could be
argued that the return to democratic government
since May 1999 has opened up an era of new
opportunities, much needs to be done to keep Political Governance
the economy on a trajectory of competitive
advantage, in order for the country to maximise
the benefits from the new globalisation. Phillips
(1999), for instance has rated the chances of the
country benefiting from globalisation as very Economic Governance
minimal, and identified a number of constraints,
which must first be surmounted. Our proposition
is that good governance can enhance the benefits
of globalisation for the Nigerian economy. This Corporate Governance
argument is hinged on the institutional
strengthening function of good governance and Fig. 1: A Concentric frame for governance
170 CHRISTOPHER O. ORUBU AND PATIENCE O. AWOPEGBA

order to ensure that its management practices are credible financial systems.
balanced between the profit motive and the We briefly examine some of these factors.
fundamental objective of societal welfare. Thus, Institutions constitute the formal and informal
in principle, corporate governance, in terms of rules that affect human behaviour in any society.
set language, is an intersection of law, public Traditionally, it is the state, which puts in place
policy and business practices. Irrespective of the the formal rules through a defined social and
dimension from which we are examining the political process, while the informal rules are those
concept of governance, its key elements must that have developed by culture, history, and
include probity, integrity, transparency and convention over time. Conceptually, we different-
accountability. Other key elements of good iate between institutions and organisations. While
governance include the rule of law and democratic institutions provide the rules of the game, organi-
participation (Orubu, 2001). A combination of sations are the players. Both institutions and
these key features necessarily imply that good organisations constitute what may be termed as
governance must lead to better economic perfor- society’s institutional structure of any society.
mance and economic growth and competi- The issue of credible institutions has gained
tiveness, reduction of poverty and inequalities prominence in the literature in recent times (see
of different forms, enhance social cohesion, and for examples Aron, 2000; Frank, 2000; Commander
lead ultimately to sustainable human develop- et al. 2000; and Alston, 1996). The emergence of
ment. institutions in development policy debate can, in
Critical aspects of good governance, which the main be traced to the observed weak economic
can help to improve economic performance of the performance of many developing countries
typical developing African market economy and particularly in Africa and Latin America despite
assist it towards maximising the benefits of economic reforms undertaken in such countries
globalisation include, inter alia: since the 1980s. Furthermore, the Asian crisis of
(i) the existence of virile and credible the late 1990s indicated that liberalisation and
institutions globalisation could be inimical to growth in the
(ii) the existence of policies that enhance the absence of credible state institutions. And most
ability of the private sector to have access importantly, the transition from growth to
financial resources, both domestic and sustainable development in a globalised world
foreign. requires credible institutions in order to protect
(iii) the willingness of government to continue property rights, provide sound regulatory
to invest in infrastructure particularly in the framework and robust financial systems, effective
areas of power, roads and communication judiciary and law enforcement. Indeed, weak
systems and the adoption of other policies institutional structures in many African countries
that promote education and the can be regarded as the major constraint against
development of technology. their benefiting from the gains of globalisation
(iv) the ability of the state to effectively combat while most of the other constraints identified are
corruption in both the private and public actually subsets of institutional incapacity.
sectors of the economy. It is important to note that the various
(v) the acceptance of agricultural and industrial dimensions of good governance seek to use
development as core concerns of economic different systems of incentives and discipline to
policy. foster transparency and accountability. In this
(vi) policies that improve human capacities, respect, the emerging private corporation,
particularly in organisations that represent particularly in African countries, which is the
the interest of the country in international product of public enterprise reform needs to
bodies benefit from policies of corporate governance
(vii) the existence of a credible legal and judicial which will enable it to tap financial resources from
system both domestic and foreign sources. In particular,
(viii) the adoption of a political system that globalisation of capital markets and the evolution
guarantees individual freedoms and policies of sound financial practices will help to secure
that enhance sustainable human some degree of competitive advantage for the
development corporation. Thus as noted by the African
(ix) a relatively independent Central Bank and Development Bank (ADB, 2001), as African
MARKET ECONOMIES, GLOBALISATION AND GOOD GOVERNANCE 171

countries make the transition from state-led to support of trade and investment programmes.
private-sector-led development, institutional One good example here is the WTO, in which
strengthening of different aspects of corporate many developing countries (including Africa) are
governance, including those that facilitate access signatories to the various agreements, and yet
to international capital markets has become a the technocrats who took part in signing such
crucial issue in sustaining the development agreements lack the knowledge of the main issues
process. As globalisation progresses, govern- involved, not to talk of the technical expertise
ment must continue its role as the most critical required for the necessary negotiations (see for
investor in the infrastructure sector, particularly example, Fosu, 2001; Chemengich, 2002,
in the provision of electricity, roads and communi- Muradzikwa, 2002).
cations. This must be done in the most efficient The legal and judicial framework is an
way, in order to reduce the cost of doing business, important anchor for good governance, and is of
thereby enhancing the competitive standing of prime importance in the context of globalisation.
domestic enterprise in the international economy. In principle, a credible legal and judicial system
In a way, this also helps to encourage foreign provides an anchor of confidence in the conduct
investors to come into the domestic economy. of business. For foreign investors, investment
The promotion of education and knowledge resources will flow more into a country where the
acquisition are other vital areas of good economic rules governing the conduct of business obey
governance that enhance the extent to which a the principles of reliability and impartiality and
country can benefit from the gains of globali- equitable treatment, for example, with respect to
sation. Education and technology are two the rights of shareholders – irrespective of
variables that are intricately intertwined, and both whether or not they are nationals or foreigners.
work together in synergy in harnessing and A credible legal and judicial system also ensures
utilising scientific knowledge. that the rules laid down by the relevant regulatory
To benefit from the forces of globalisation, a bodies are adhered to in a transparent manner.
country must make definite efforts to stem Such a system also ensures that government will
corruption in all its ramifications – including rent- obey its own rules in dealing with corporations.
seeking behaviour in political administration, Much more than this, a credible legal and judicial
interaction of social agents with business (local system will ensure that enterprises, including
and international), customs processes, tax trans-nationals will play the role of the “corporate
administration and procurement practices. Apart citizen”, and help the regulatory institutions to
from distorting the process of resource allocation, minimise the divergence between private and
corruption, which involves wrong -doings to the social costs and benefits.
economy and society, can destroy the image of a As already noted, the current globalisation
country at the international level, to the extent phenomenon is a deliberately driven pheno-
that other countries’ nationals are unwilling to menon, whose most intense phase has been
do business with the nationals of the “corrupt closely associated with the fall of the Berlin Wall.
country”. Its prime movers are therefore mainly the western
It has also been shown that the institutional democratic “capitalist” countries, led by the
capacity of the state is of prime importance for United States of America. Consequently,
efficient markets, productive investments and democracy as a system of government has come
equitable access to development opportunities to be accepted as an implicit political correlate for
in a variety of ways (World Bank, 1997). It turns a country to benefit from the gains of
out that human capacity matters in determining globalisation (Phillips, 1999). This is now a fact
the strength of institutional structures. It is this, that no developing market economy in Africa can
which justifies the huge amounts of financial wave away10.
resources expended by organisations on the The role of efficient central banking in
development of human capacities. No where is enhancing the competitive standing of an
such huge expenditure justified as in economy should also be noted. The Central Bank
organisations that relate a country to the is the apex bank of a country. Apart from the
international system-particularly in the responsibility for broader monetary policies, its
negotiation and ratification of international key role is to ensure that the banking system
agreements, and in developing strategies for the operates in a prudent and efficient manner so as
172 CHRISTOPHER O. ORUBU AND PATIENCE O. AWOPEGBA

to avoid financial crises. It does this through Federation, professionalism is now emphasised
laying down the rules for the establishment of in the employment of accountants and auditors.
new banks and stipulating monitoring For a very long time, financial reports for various
procedures to ensure proper accounting and government ministries and agencies were in
auditing. A well-managed and monitored arrears, but as a result of the new emphasis on
financial system promotes a more credible market probity, integrity, accountability and trans-
support system that can help to enhance the parency, financial reports are now being brought
competitive position of the economy in a to up-to-date, and interim audit reports are now
globalised world. It assures all key players in the being submitted without having to wait until the
economy, both nationals and foreigners that there end of the financial year. The Public Accounts
exists a regulatory anchor for all financial Committee (PAC) of the National Assembly has
transactions. also been active in terms of inviting government
From the foregoing, it is evident that some functionaries for questioning on the use of public
critical aspects of good governance, particularly funds, while in the year 2000, the Independent
those that strengthen institutional efficiency and Corrupt Practices and other Related Offences
capacity are fundamental to the fostering of Commission was established.
competitive leverage for the economy, which Two key observations can be made in respect
should ultimately enhance the gains from of the efforts made towards enthroning good
globalisation. In the next section, we therefore governance in Nigeria. First, they are more
examine briefly Nigeria’s experience over the specifically related to the public sector. Second,
years, in respect of efforts to enthrone good unlike other African countries such as Ghana
governance in the processes of economic and and Tanzania, which have embarked on specific
political governance, as well as the challenges programmes of good governance, no definite
posed for the future, as the basis for the design attempts have been made so far in integrating the
of an appropriate policy programme of good various efforts into one program that can be
governance. evaluated on the basis of an appropriately defined
THE NIGERIAN EXPERIENCE WITH logical framework. However, there are also a
GOOD GOVERNANCE POLICIES AND number of efforts at good governance that have
CHALLENGES FOR THE FUTURE been undertaken which could improve both
economic and corporate governance, and by
A number of measures have been taken in the implication, have some bearing on improving the
past in order to enthrone good governance in competitive standing of both the private and
Nigeria, particularly in the public sector11. The public sectors. For example, reforms, which have
various reforms in the Civil Service, the taken place in the financial sector since the 1990s
establishment of the Code of Conduct Bureau, have in one way or the other introduced some
which requires political and public office holders degree of order into the banking sector, while the
to declare their assets periodically are all efforts capital market has also significantly expanded in
directed at realising the objective of good its activities. The Failed Banks Tribunal, which
governance. The institutional framework for was put in place during the regime of General
financial accountability has also improved Sani Abacha did achieve some measure of
significantly since the beginning of the new success in curbing corruption in the banking
democratic regime in 1999 and this has resulted sector. The Central Bank of Nigeria has also woken
in greater probity, integrity, accountability and
up to dealing decisively with cases of money
transparency in the conduct of government
business. For example, the old Financial Control laundering and the so-called “advance fee fraud”
and Management Act is being reviewed, and at and has adopted an essentially stakeholder
the end of the day, this should result in greater approach to the conduct of monetary policy
accountability and transparency in the through its regular quarterly Monetary Policy
management of government finances and the Forum.
procurement of goods, works, and services. At The Presidency has also done some work,
present, all major procurements are expected to particularly through the country’s foreign
go through Open and Competitive Tender (OCT). missions, and the personal efforts of the President
In the office of the Accountant-General of the in helping to repair the damaged image of the
MARKET ECONOMIES, GLOBALISATION AND GOOD GOVERNANCE 173

country in the international community since the reality of globalisation, and so each must
inception of the current democratic dispensation. prepare to meet its challenges
Through the aggressive policies of the Nigerian (iv) privatisation process to be properly
Investment Promotion Commission, foreign channelled, while the need for foreign
investors are now thinking relatively more participation is balanced against the danger
positively about the business climate in Nigeria, of a new imperialism
than was the case during the long period of military (v) the need for economic management to be
rule. Then there is the on-going privatisation set within the framework of defining the
programme, which is focused on making the development vision of government based
private sector lead the development process – in on democratic principles, accountability and
line with the current global paradigm of transparency
development. Efforts are also currently being (vi) the need to mobilise the institutional
made towards the development of the Small and structure towards promoting a corruption-
Medium Enterprises (SMEs) sector, which is free society, and to enthrone responsible
considered to be critical to the integration of corporate citizenship in business, using
industrial processes and the development of a legislative and civil society structures.
competitive economic culture. Nigeria is also (vii) the need to build a credible institutional
currently working out a comprehensive framework foundation for development through the
for its Poverty Reduction Strategy. Poverty is a provision of supportive infrastructure,
fundamental problem in the country. As already appropriate legal and judicial reforms, sound
noted, a large proportion of the population still financial system and autonomous central
live on less than $1.00 per day. Poverty reduction banking, and a general capacity improve-
is an implicit condition for benefiting from the ment of the technocratic structure.
gains of globalisation. In many African countries, (viii) the need for economic policy to focus on
the issue of debt overhang has compounded the improving the performance of the
problem of poverty, since an increasingly large agricultural and industrial sectors, while
proportion of the GDP has to be devoted to debt exploring the regional framework for the
servicing (see Table 1).12.. purpose of trade expansion and collective
From the foregoing, it is clear that the problem economic action
has not essentially been whether efforts have (ix) the need to sustain democracy and foster
been made to foster good governance. What is better relationships between the different
however lacking is a deliberately targeted tiers of government so as to ensure societal
comprehensive and integrated framework that harmony that is so essential for a stable
brings together the critical elements of political, economic environment and sustainable
economic and corporate governance in Nigeria, human development, and finally,
in order to enhance the economy’s benefits from (x) the time has now come for the country to
the new global order. design and implement a credible program
The major challenge for the managers of the of governance, with an appropriate
Nigerian economy is therefore to design a logical mechanism that takes into account the
programme of good governance, as is already relationship between goals, outcomes,
being done in other African countries (Ghana is a output and inputs of the programme for the
nearby example). In designing the governance purpose of effective evaluation.
framework towards maximising the benefits of
globalisation in Nigeria’s developing market CONCLUSION
economy, the following critical points must be In this paper, we have examined the new
taken into consideration: globalisation as a reality, which the typical
(i) Christopher O. Orubu And Patience O. developing marketing economies of Africa cannot
Awopegba recognition of the private sector ignore. Efforts must therefore be made in order
as leader of the development process to face this reality squarely, and benefit from its
(ii) recognition of the state as effective regulator gains. Good governance incorporating political,
and provider of enabling environment for economic and corporate components is identified
the market economy as a veritable culture for enhancing the benefits,
(iii) the fact that no country can ignore the
174 CHRISTOPHER O. ORUBU AND PATIENCE O. AWOPEGBA

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