A neoliberal parable: An economist in Nigeria

A distinguished economist visits Nigeria for the first time. She has built a reputation in elite institutions abroad—teaching economic theory, advising governments, and contributing to policy debates.

She is taken to Abuja, where she meets with the country’s senior economic policymakers. Present are the Minister of Finance, the Governor of the Central Bank, officials from the Budget and Planning Ministry, and senior advisers from the Presidency. They are courteous, but direct.

The policymakers admit, “The Nigerian economy has been in difficulty for the last 10 years of the APC. We have had two recessions. Growth has been relatively weak. We removed fuel subsidies two years ago, but inflation remains high. The naira continues to depreciate on the global stage, despite our transition to a unified exchange rate. We remain heavily import-dependent. Investment across the board is low, which compels more government spending. Public debt continues to rise. What should we do?”

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The economist acknowledges that she knows far too little about Nigeria to offer precise policy advice. She would need time—to study the data, understand the institutions, travel beyond Abuja, and see how people live and work. She would want to observe the informal sector, speak with business owners, meet civil servants and traders, and understand how government policy interacts with the lived economy.

But her Nigerian policymaking counterparts press on. “We respect your caution. But you are a leading economist. Is economics not a science? Surely, even without knowing the full internal details, you can point us to the broad principles? Give us a framework. Some guidance.”

Faced with their insistence, she decides to speak. Not with certainty, but with honesty.

First, she says, economic growth depends on how well a country allocates its resources. When resources—land, labour, capital—are put to productive use, the economy prospers. Efficiency matters. But efficiency depends on incentives. Business owners must be rewarded for risk-taking. Firms must be confident that they can retain the returns on investment. Property rights must be protected, and contracts enforced.

Without those basics, no amount of reform slogans will attract investors. Nor will the private sector thrive. Growth needs trust in rules and a state that can uphold them.

Second, she warns that good institutions alone are not enough. Macroeconomic instability can destroy even well-functioning markets. If inflation is high and volatile, if the currency cannot maintain its value, or if public debt spirals out of control, then long-term investment becomes impossible.

Therefore, the Nigerian government must pursue sound monetary policy. The supply of money should grow in line with demand. The central bank must be shielded from political interference. Inflation should be restrained—not just to please foreign investors, but because the poor suffer most when prices rise too fast.

Fiscal policy must also be sustainable. The growth of debt should not outpace the growth of national income. Borrowing to build infrastructure may be justified; borrowing to pay salaries is not. Nigeria cannot continue to run deficits without a credible plan to generate revenue, increase productivity, and eliminate waste.

The financial sector, too, needs supervision. Loose regulation invites reckless lending. When banks collapse, it is ordinary depositors and small businesses that pay the price.

And she added her last point. Economics is not only about efficiency and growth. It is also about fairness and incentives. Even if economists do not prescribe how much redistribution a country should pursue—that is a political matter—they do say something about how redistribution should be structured.

She referred to Aristotle, who explains that a community is not made out of equals. On the contrary, it is made of people who are different and unequal. The community comes into being through equalising.

Taxes should have a broad base, but Nigeria cannot tax its way to growth. Exemptions, waivers, and “pioneer” status often benefit the powerful, not the productive. On the spending side, social programmes should support the vulnerable—but without encouraging dependency or punishing effort.

By the time she finished, the economist had outlined what could be mistaken for a neo-liberal agenda. Efficiency. Incentives. Property rights. Fiscal discipline. Sound money. A sceptical Nigerian official might raise an eyebrow: is this not just the same old gospel that the IMF, World Bank, and foreign consultants have preached for years? But that would be a misunderstanding.

The economist has not proposed a policy package. She has offered a set of broad economic principles—what economists call “first-order principles.” These are not blueprints. They are starting points. And they require context to become meaningful.

Neoliberalism’s mistake lies in assuming that these general ideas map neatly onto a single model of reform. That controlling inflation targeting must be done in a linear fashion. That property rights must take the form of Anglo-American private law. That efficiency requires privatisation, deregulation and a small state. No. Our realities are different.

Take property rights. What matters is not who owns an asset on paper, but whether that asset is used productively and protected from arbitrary seizure. A system that protects innovation and investment is good. A system that shields monopolies or politically-connected insiders is not. In some settings, formal legal protection works. In others, informal guarantees—backed by political arrangements or social norms—work better.

China offers the clearest example. Its growth to a trillion-dollar economy in the 1980s and 90s did not follow the neoliberal textbook. It did not dismantle the state sector or immediately embrace free markets. China did not expose its state firms to global competition; instead, it created special economic zones. Entrepreneurs were protected not by courts, but by local officials who had a stake in their success. These innovations were not ideological—they were pragmatic. And they worked.

The economist told her Nigerian hosts that the real lesson is that China adapted first-order principles to its own political economy. And if this is neoliberalism, then the term holds little meaning.

No single institutional model can guarantee prosperity. OECD countries vary widely. In the UK, public spending accounts for approximately 45 per cent of GDP; in China, the US and South Africa, it hovers between 32 and 36 per cent; in Finland, it is nearly 60 per cent. Labour laws, financial systems, and tax regimes differ across rich economies. Yet all have achieved high living standards.

So, the task is not to choose between neo-liberalism and statism. It is to build institutions that deliver growth, stability, and fairness—on their own terms. The economic principles are useful. However, they must be implemented through local arrangements.

The economist ends where she began: with modesty. She has not offered a roadmap. Only a compass. The route must be charted in Nigeria.