Moghalu: Good Governance, Security, Strong Institutions Key to Economic Development

•Says African leaders must be accountable, weak institutions cost countries $1.2trn in GDP annually

James Emejo in Abuja

Economist and former Deputy Governor of the Central Bank of Nigeria (CBN), Prof. Kingsley Moghalu, has emphasised that effective governance remained a main prerequisite for economic development.

He said fundamental issues around security, strong institutions and rule of law must be established and effectively administered to trigger confidence in the system, leading to investments and other economic activities.

Citing World Bank estimates, he said African countries lose about $1.2 trillion in GDP annually to weak institutions.

According to him, life and property must also be “protected effectively, and citizens must have confidence that this protection is a reality”, adding “that is the necessary foundation for economic productivity”.

Moghalu expressed his opinion on the matter via a Linkedin post.

He said, “Without these foundations, macroeconomic reforms or other ‘development’ processes—such as poverty alleviation or foreign investment—can never yield genuine economic transformation that creates wealth or sustainable livelihoods for the majority of citizens.”

He said, “I am worried about a seeming absence of understanding about what truly creates development in African countries, and a tendency to chase shadows while leaving substance severely alone.

“The first prerequisite for development is effective governance — the organizing principle of any entity or society. This includes the fundamental matter of security, as well as strong institutions and the rule of law.

“Life and property must be protected effectively, and citizens must have confidence that this protection is a reality. That is the necessary foundation for economic productivity.”

According to him, “This is why the ongoing conflict in Sudan and the massive rise of terrorism in the Sahel make it impossible for many African countries to make real progress unless these crises are resolved and defeated.

“Individuals must also be equal and accountable before the law. That is the difference between organised society and the jungle, where might is right and reigns supreme. We see, for instance, the Prime Minister of Israel indicted and charged for alleged ethical breaches that are offenses under the laws of Israel, and a former President of South Korea indicted and removed from office.

“In what African country has any leader been held to account in such a manner?”

The former CBN deputy governor further stressed that governance by any government in any country must demonstrably deliver on security of life and property; effective and efficient taxation as part of a social contract; effective delivery of social services such as healthcare, education, and social protection as well as an enabling environment for business and wealth creation.

He said, “These are the core elements of state capacity. For these to be achieved, every country needs a capable state — that is, a public sector and civil service bureaucracy equipped with the knowledge and skills to deliver these requirements consistently and sustainably over generations. This is how development happens.

“According to the World Bank, African countries lose about $1.2 trillion in GDP annually from weak institutions. Only three African countries—Mauritius, Seychelles, and Botswana—make it into the top 50 countries in the world for governance effectiveness.”

He insisted that “All the emphasis on ‘markets’, without state capacity, cannot create the wealth of nations” adding that “functioning markets are, of course, essential”.

“But it takes a capable state to create an enabling environment for efficient markets,” he added.

Continuing, Moghalu stressed, “This is not the same as governments attempting to become the market themselves, set prices, or choke economic life and productivity with excessive regulation. No.

“These fundamental understandings are the foundation on which Africa can build the African Century.”