Corporate Social Responsibility and Latecomer Industrialization: Can Nigeria Do It?

By Richard Joseph, Kelly Spence, and Abimbola Agboluaje

President Barack Obama in his recent Africa tour echoed the words of Howard French when he referred to sub-Saharan Africa as a region “on the move”. Nigeria, crippled in realizing its immense economic promise, was not again on his itinerary. However, Nigeria has been included among the focus countries of the Obama Administration’s “Power Africa” initiative to increase electrification in the continent. This represents an opportunity on which its leaders should capitalize. The initial funding provided for Power Africa could leverage the much larger sums needed. Central to such efforts is collaboration between the government and private sectors, domestically and internationally. This article will appear in a published volume on Corporate Social Responsibility. It should be read in conjunction with Célestin Monga’s AfricaPlus essay, “Governance and Economic Growth in Africa: Rethinking the Conventional Paradigm” and Howard French’s  Atlantic article on Lagos State. 

The authors of this paper adapted the notion of Corporate Social Responsibility (CSR) to the unique obstacles in Nigeria, and other African countries, to developing a manufacturing sector that is responsible in the sense of being productive, and not just extractive, and which also contributes to reducing governance and social welfare deficits. To accommodate the high rate of population growth, it is estimated that 7-10 million jobs must be produced annually in sub-Saharan Africa. Accomplishing this task will depend on the long-delayed industrialization of the continent. Pursuing this objective brings many of the known deficits to the fore: inadequate electricity, water and transportation infrastructures; deficient taxation systems; rent-seeking political behaviors; and what Monga calls incompetence in policy planning and implementation alongside corruption.

This case-study will take the reader into the fine-grain of overcoming the challenges to manufacturing in Nigeria. It draws on projects conducted in Nigeria in association with an American non-governmental organization, the Center for International Private Enterprise (CIPE), and the special insights of a Nigerian scholar-practitioner who is closely involved in the initiatives being examined. Nigeria has to break out of the cycle of economic growth accompanied by increasing unemployment and poverty. The most critical aspects of the reform agenda -in electric power, oil and gas, transportation, enabling fiscal systems -are widely known and recognized. The question before Nigerians today, as it has been for decades, is “Can they do it?” Particular attention is paid to business associations that represent the manufacturing sector as well as coalitions of business associations that operate in several of Nigeria’s thirty-six states. Although we briefly discuss the well-known issues of corruption and money-laundering, most attention will be devoted to efforts to develop a socially responsible corporate sector and what that means in such a difficult context.

 

The principles of Corporate Social Responsibility derived from a concern for extreme imbalances in the distribution of wealth produced by networks of production and finance. Of the many definitions of corporate social responsibility, one articulated by Charlotte Walker Said is very pertinent to contemporary Nigeria: “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large.” CSR reflects the evolution of human rights, she contends, to include not only economic rights but also “humanitarianism”. The “current humanitarian and interventionist character of the human rights agenda”is relevant to Nigeria’s delayed industrialization.[1]

In Nigeria, CSR has usually been approached from the perspective of palliative humanitarianism by both multinational companies and national firms. This approach is reflected in the discourse of a wide range of stakeholders: government, the media, civil society groups, and prominent citizens. Businesses in Nigeria tend to engage the government to further their interests as individual owners rather than society as a whole. There is an obvious tension as private returns are not well aligned with social returns.[2] The CSR agenda in Nigeria, and in other African countries, is evolving to include improving the environment for private sector growth alongside the usual range of human rights and societal concerns.

Overcoming Corporate Social Irresponsibility

Corporate Social Responsibility in Nigeria is overshadowed by what could be called Corporate Social Irresponsibility (CSI), a phenomenon that particularly afflicts mineral-exporting countries. In this chapter we will focus on efforts to develop a manufacturing sector that is responsible in the sense of being productive, and not just extractive, and which also contributes to reducing governance and social welfare deficits.[3] However, while assessing progress along these two tracks, the deep shadow cast by CSI in Nigeria cannot be overlooked.

The term “toll-gate society” was coined to refer to the innumerable bribery transactions that occur.[4] Individuals entrusted to perform an act based on governmental authority can establish an arbitrary toll to be paid before the operation is carried out. In a World Bank study widely reported in the Nigerian media, it is estimated that 80 percent of Nigerian businesses pay bribes to government officers.[5] This study, conducted in 26 of Nigeria’s 36 states, arrived at percentages for the value of contracts that are paid as illicit inducements: formal sector firms paid more than micro-enterprises; manufacturers handed over larger bribes (6.7 percent) than service providers (3.9 percent); and percentages were determined of what these payments added to the balance sheet of firms depending on whether they operated in the formal or informal sector.

At the upper echelon of the toll-gate society, the level of corruption is virtually limitless. Cecilia Ibru, a bank managing director convicted in October 2010 of corrupt practices, had 94 personal properties in Nigeria and other countries confiscated along with numerous bank deposits and other forms of wealth.[6] Former Governor James Ibori of Rivers State, accused of stealing $250 million dollars in public funds, was convicted in April 2012 of money-laundering in the United Kingdom and sentenced to 13 years and fined $79 million. When the federal government decided to remove the subsidy on commercial sales of refined petroleum in January 2012 – much of it imported because of the dilapidated state of Nigeria’s refineries – the national strike that ensued provoked investigations that revealed the extraordinary level of corruption nurtured by this program. A discrepancy of more than $4 billion a year was uncovered between the amount of motor fuel subsidized by the government and actual consumption.[7] Alexandra Gillies of the Revenue Watch Institute reports that “in 2011, the subsidy on gasoline cost the government over $9 billion, more than the entire federal government capital budget and about double the subsidy’s cost in 2010.”[8] Dozens of companies were created just to take advantage of the arbitrage between the imported price of refined petroleum and prices subsidized by the government. On top of its highly inefficient national petroleum company, a bogus industry had emerged devoted solely to dunning the government both for oil delivered to end-users and oil neither bought nor sold.[9]

Much focus on CSR (and CSI) in Nigeria has been devoted to its oil industry. A few notable examples will be mentioned. The U.S. Supreme Court has now issued its ruling on Kiobel vs. Royal Dutch Petroleum regarding the extrajudicial killing, torture and other crimes committed by the Nigerian government in the mid-1990s. Although the Court ruled that the oil company cannot be held liable under the Alien Tort Statute of 1789, the amount of expert attention and litigation elicited by this case has raised the threshold of awareness about CSR.[10] When Albert J. Stanley, the former Head of engineering and construction firm KBR (a subsidiary of Halliburton) was sentenced along with “middleman” Jeffrey Tessler for the payment of bribes, amounting to $180 million to Nigerian government officials to secure $6 billion in contracts for building liquefied natural gas facilities, that case added to a long list of similar revelations involving other multinational firms and their dealings in Nigeria.[11]

On the other side of the ledger, almost all major companies in Nigeria now have CSR programs, many of them involving the delivery of charitable benefits to specific categories of citizens or organizations. Because it has been the target of much criticism, as a consequence of the environmental degradation caused by its activities in the Niger Delta, multinational oil companies have developed the most extensive and sustained ameliorative activities. Large numbers of Nigerians in the affected areas have benefited from education, health, water and other community development projects. Some unique CSR programs have emerged from the modern corporate sector. An important initiative was the creation in 2010 of a CSR Centre in the Lagos Business School (LBS) by Etisalat, a telecommunications company. Since many Nigerian senior executives of the major Nigerian firms are sponsored by their companies to pursue training courses at the LBS, this Centre has the opportunity to refine a CSR methodology appropriate for Nigeria, and also to impart deeper awareness and more effective methods throughout Nigerian public and private institutions

Late Industrialization: Obstacles and Opportunities

The opening up of African economies to greater private sector investments, by local entrepreneurs and multinational companies since the 1980s, has enhanced the importance of making CSR relevant to the transformations underway. Although Nigeria has experienced economic growth over the past decade averaging 7.4 percent, this growth has been accompanied by a steady rise in unemployment and poverty. And while the country has earned $600 billion from petroleum exports since 1973, it “cannot guarantee any of the basic necessities to the citizens: food, water, good roads, electricity, education, health.”[12] According to the African Economic Outlook, a prime reason for growth without development in Nigeria is “the dilapidated state of infrastructure and the over-dependence on the oil and gas industry.”[13] Nigerian businesses must contend with anemic electricity, water, and transportation infrastructure. They are therefore forced to become their own “mini-states” by building roads, supplying their own electricity, and arranging their own security.

Compounding these infrastructural challenges are many governance and institutional deficits, such as the unharmonized and often corrupt tax regime. At state and local levels, excess taxes and levies are often imposed without services provided in return. Firms are usually unable to pass the extra cost of maintaining their own “mini-states” onto the consumer because of widespread poverty. Nigerian consumers, therefore, prefer to purchase cheaper Chinese-made goods. When the business community is not effectively engaged in creating an enabling business environment, not just their activities are adversely affected but also their capacity to improve the life-condition of the population.

The share of Africa’s manufacturing in GDP has been practically stagnant since 1960.[14] It is surprising to note that, in the early 1970s, that share was greater in sub-Saharan Africa than in Southeast Asia.[15] Manufacturing, and industrialization generally, is a more powerful engine of economic growth than other sectors.[16] According to Celestin Mongo of the World Bank, “virtually all countries that have achieved sustained growth and moved from low- to middle- and high-income status have gone through industrialization.”[17] Osita Ogbu concurs: “no other sector is more important than manufacturing in developing an economy, providing quality employment and wages, and reducing poverty.”[18] The urgent need for robust and sustained employment-generating growth in Africa must therefore be brought more centrally into the discourse on CSR.

Roughly two-thirds of Africa’s population is under the age of 24 and many are unemployed or underemployed. With population growth expected to be 2.2 percent in the next 25 years, Monga contends that considerable responsibility will fall on the private sector to generate the needed employment opportunities. To accommodate the high rate of population growth, 7 – 10 million jobs must be produced annually in sub-Saharan Africa over an extended period.[19] The chart below captures the limited structural transformation in Africa over four decades, 1965- 2005[20]:

chart1jpeg

The development of a robust manufacturing sector in Nigeria is therefore a social as well as economic imperative. Despite the country’s size and resource endowments, it has a poverty profile little different from that of its neighbors with well over 60% of the population living below the poverty line.[21]  Nigeria is also faced with profound demographic challenges. The fertility rate of 6.4 in 1982 declined in four decades to only 5.7.[22] In the largely Islamic northern states, currently besieged by terrorist and inter-communal violence, the rate is substantially higher. Nigeria’s population, estimated as 160 million, could rise to 430 million by mid-century, the third largest in the world after China and India.[23]  With a population growing by over 300,000 annually, and a pronounced youth bulge, industrialization and rapid job creation in Nigeria is paramount. However, as can be seen in the chart below, the proportion of manufacturing in Nigeria (portrayed in green) approximates the African mean. It is well below the country’s potential considering its extensive financial, energy and human resources.[24]

 chart2jpeg

According to Chukwuma Charles Soludo, a former Chairman of Nigeria’s Central Bank, “the manufacturing sector is largely comatose and declined from a share of 7 percent of GDP in the 1970s to 4 percent currently. Our manufacturers are fighting a losing battle against the armada of imports from cheaper and more productive locations abroad.”[25] For comparison, the share of the manufacturing sector to GDP is 20 percent in Brazil and 34 percent in China. Nigeria’s development failure therefore reflects, to an important degree, a failure to industrialize. The economic growth recently experienced (notably in telecommunications and financial services) does not reflect the structural changes that would alter the composition of its exports (still primarily mineral and agricultural) and generate high-value employment expansion. Nigeria is caught in a dire trap. “As the size of the economy has increased, the share of the workforce in gainful employment has declined.”[26]

Why has Nigeria failed to build an administrative and physical infrastructure that can support the growth of manufacturing, and what roles can businesses play in helping overcome these challenges?  Nigeria has consistently maintained economic policies that encouraged consumption at the expense of production, a tendency that facilitates corruption. A list of obstacles to be overcome includes:

  1. Deficient infrastructure of electricity, transportation, and water
  2. Pervasive corruption and rent-seeking
  3. Policies which encourage massive corruption such as the high petroleum subsidy
  4. Duplication of state agencies and government positions with unclear mandates
  5. High inflation and bank-lending rates
  6. Policy inconsistency and insular political party culture
  7. Weak and predatory bureaucracy and collusive regulatory agencies
  8. Inadequate education and worker skills
  9. Pervasive physical insecurity
  10. Popular distrust of public and private sector leaders

What the Nigerian experience has also shown is the interconnection between inadequate economic policies, corruption and state weakness.[27] Without proactive corporate social responsibility practices, and the forging of a long-term vision for the business sector, Nigeria’s entrepreneurs will continue to focus on their activities as traders. This trend contributes to low job growth, the steady expansion of the informal economy, and an undiversified import-based economy. It also deepens poverty and income inequality. The African Economic Outlook Report – compiled by the African Development Bank, the Organization of Economic Cooperation and Development (OECD), and the UN Economic Commission for Africa – has identified the following challenges to resource mobilization for economic growth in Nigeria: the excessive number of institutions involved and the overlap of functions among the three tiers of government; the multiplicity and duplication of taxes; obsolete tax laws; and laborious documentation procedures. Nigeria’s three tiers of government – national, state, and local – have been slow to implement tax reforms that could improve the ease of doing business. They are often unaware how to enact business-friendly tax legislation. The pursuit of short-term gains is further encouraged by an environment that favors opacity and corruption over transparency and accountability.

Business Associations and Corporate Social Responsibility

Business associations can serve as the nexus between business and civil society and as an important arena for dialogues on corporate social responsibility. According to Charlotte Walker Said, business associations are the vehicles through which “business and society interface.” Although Nigerian business associations have a long history, they have acquired little capacity to influence policy and combat the core problems. In many instances at both the national and state level, Nigerian business associations are behind the government curve on reform issues. These associations often focus more on producing trade fairs than listening to their members, responding to their needs, providing member services and policy advocacy, and engaging effectively with the government.

The Manufacturers Association of Nigeria (MAN), established in 1971, is one of the country’s largest business associations. Its mission is to work in close cooperation with the “organized private sector”, the government and other stakeholders to create an enabling environment for industrial development, growth and prosperity. Its current membership of about 2,000 companies is spread throughout the country’s six geopolitical zones. Despite MAN’s size and support, it continues to demonstrate weak institutional capacity, strategic thinking, research and policy advocacy skills. At a crucial point in Nigeria’s manufacturing sector’s history, MAN is insufficiently active in promoting governance reform and conducting advocacy campaigns.

Rather than enlightening the public on the need for wider, deeper and more consistent reforms, MAN has often sought protection from liberalization policies, which either slowed the reforms or created new avenues for corruption. Neither MAN nor any other business association has designed a strategy or program regarding key reform issues: the successful completion of power sector reform and the privatization of government power firms; the liberalization of the opaque and corrupt oil sector through the passage of a Petroleum Industry Bill; and the removal of the petroleum subsidy which has been a source of enormous corruption and fiscal stress.

Manufacturing remains dominated by midsize firms unaccustomed to organizing and investing resources to advance their interests. For most of the 1990s and the current decade, MAN’s advocacy has aligned more with the anti-reform positions of the labor unions and populist media. Manufacturers continue to demand targeted government interventions and palliatives such as tariff protection or import bans. A vision has not been developed regarding the improvement of government economic policy, administrative and political practices, and creating a favorable environment for investment and growth. In 2009, the U.S.-based Center for International Private Enterprise (CIPE) supported MAN in the design and execution of a project on multiple taxation.[28] While the project highlighted the severe limitations of MAN and many other Nigerian business associations, it also illustrated the untapped potential for effecting systemic change.

Why the focus on taxation? For the manufacturing sector, tax policy plays a crucial role in the ability of manufacturers to thrive and effectively compete in a global economy.[29] In Nigeria, overly complex and poorly harmonized tax policies and collection mechanisms have been a major constraint on the country’s growth. Businesses are often forced to pay more in taxes than they should because of a corrupt and redundant system. A well-structured and transparent taxation system would contribute to democratic governance. Unfortunately, most government officials at state and local levels in Nigeria do not understand the benefits of harmonizing taxation policies and tax-collecting mechanisms. As the Commissioner of Economic Planning and Budgets of Lagos State, Ben Akabueze, stated: “Every once in a while, local government just wakes up and decides to introduce new taxes without regard to whether or not they already exist.” Multiple taxation has therefore made the cost of doing business in Nigeria prohibitive. It also serves as a major disincentive to both local and foreign investors, inducing firms to relocate to more business-friendly countries such as Ghana. Since 2006, a tax reform bill intended to streamline the list of collectible taxes of the different tiers of government has not advanced in the National Assembly.

In the project with CIPE, MAN conducted research on taxes and levies at the national, state and local levels to identify which taxes were being imposed multiple times; researched illegal tax collection practices; and surveyed and interviewed local and state government officials and business leaders to acquire a better understanding of multiple taxation and how it affects businesses in various parts of the country.[30] Based on their research, MAN also drafted a policy paper that outlined a) taxation laws in each state and the specific taxes that each level of government has the legal authority to collect; b) the practical application of taxation policy detailing the incidence of illegal taxes, modes of collection and revenue lost from corrupt collection practices; and c) the impact of multiple taxation on businesses and how it discourages local and foreign investment. Finally, MAN educated the business community on how to properly pay taxes so that local tax collectors do not use coercion and physical threats to collect illegal taxes. MAN’s efforts are enhancing the capacity of local and state-level government officials to understand tax policies and how they affect the business community. While there were limitations in MAN’s capacity as well as that of many government officials to effect systemic change, this type of initiative is an example of how business, government and other actors can be brought together to improve economic growth and governmental accountability.

State Level Private Sector Coalition Building

chart3jpeg Corporate social responsibility, when implemented through business associations, can assume different forms and yield a variety of results. In the case of Nigeria, they operate at all levels of the federal government. Nigeria’s states receive monthly financial allocations from the Consolidated Revenue Fund. Despite this, state governments “often act as if they have no responsibility for any economic activity at the state level.”[31] In addition, state legislators usually display little understanding of how to craft policies that will improve manufacturing and business in their states, and also about the policymaking process in general.  Few legislators have any experience in business.  In seeking to advance their industries’ growth and promote job creation and poverty alleviation, Nigerian manufacturers and business associations must contend with these realities. They consequently need to engage state and local legislators more effectively in efforts to improve industrialization and poverty reduction policies.

Despite the fact that much of Nigeria’s industry is located in the Lagos-Ibadan Corridor [Lagos, Ogun and Oyo states in map above], there are pockets of manufacturing elsewhere in the country. In addition, there are several free trade zones operated by the government, private entities, and public-private partnerships.  They host companies engaged in manufacturing, trading, oil and gas distribution, and other industries. These companies benefit from special taxation rules and duty-free imports. These zones are hampered by the same infrastructural challenges mentioned above. Manufacturing and business must be expanded throughout the country to generate jobs and economic development in the poorer regions of the country.

To achieve such objectives, both public and private sectors must be made aware of the necessary policies. This can only take place if the business community is able to effectively communicate to state and local governments what is needed to expand growth and job creation. In addition, state and local governments must be receptive to private sector policy recommendations and willing to engage in dialogue. The project activities discussed below show the concrete steps pursued to improve the operating environment for manufacturers, businesses, and ordinary citizens alike.
We will briefly summarize specific experiences in one of Nigeria’s six geopolitical zones, that of north central. Manufacturers’ associations have created coalitions with other business and professional associations in the six states in this zone: the Plateau Coalition of Business and Professional Associations (PLACOBPA), the Benue Coalition of Business and Professional Associations (BENCOBPA), the Nassarawa Coalition of Business and Professional Associations (NACOBPA), the Kogi Coalition of Business and Professional Associations (KOCOBPA), Kwara Coalition of Business and Professional Associations (KWACOBPA), and the Niger Coalition of Business and Professional Association (NICOBPA). Prior to the creation of these coalitions, the business community was fragmented . Each business or sector approached legislators separately in search of favors. Once established and trained, each coalition was encouraged to shape its advocacy work to the particular challenges in their states. In some states, legislators never convene public hearings and have even allowed the printing presses that produce public hansards to fall into disrepair. As a result, in many states there has been no dialogue between the public and the business sectors on improving industrialization and job creation. State and local legislators are often unaware of the struggles of the private sector, while the private sector has had little experience crafting its messages and advocacy strategies.

The creation of coalitions in each of the six states and subsequent public-private dialogue has had positive outcomes. The Benue House of Assembly sought the input of the Benue Chamber of Commerce and passed a bill to privatize defunct state-owned enterprises. In Nassarawa State, NACOBPA’s efforts led to a 7.5 million naira intervention [$47,468 USD] by the Nassarawa state government to improve the power and water supply to the largest rice processing plant in the state and also purchased and installed transformers in rice milling areas throughout the state capital, Lafia. This project has generated more reliable work for hundreds of workers. In Kogi State, the Kogi Coalition of Business and Professional Associations (KOCOBPA) created a forum for dialogue with public sector leaders to discuss economic growth. A central issue was the poor condition of infrastructure. The Coalition also worked with government officials representing the Ministries of Works, Housing, and Water Resources, and the Power Holding Company of Nigeria to discuss solutions to infrastructural challenges of limited power supply, bad roads and poor water supply.

In both Kogi and Kwara States, the coalitions have begun regular meetings with key ministries from each of the state’s executive branches. In these meetings, the participants seek to identify the factors that hinder the state’s economic development, as well as those that restrict cooperation between the public and private sectors. The two sectors have since made commitments to work more closely together to enact the necessary reforms, such as the liberalization of land administration, reforming the state-wide process of tax administration, and computerizing the land acquisition process.

In southeastern Nigeria, progress has been made in crafting CSR practices that allow “business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large”[32] This has been achieved through coalition building among manufacturers associations, business, and professional associations. With the Enugu Chamber of Commerce playing the role of catalyst, the Enugu Coalition of Business and Professional Associations (ECOBPA) was formed. ECOBPA drew up a list of issues affecting the business environment in which insecurity and unharmonized taxation were again at the top. To tackle these issues, ECOBPA launched a state-wide advocacy campaign on the issue of multiple taxation, and a regional advocacy campaign to address the negative impact of poor security on businesses. A series of high-level meetings took place in Enugu with a public-private dialogue roundtable involving the Enugu State Speaker of the House and other high-level state government representatives. The meetings and roundtable helped the government better understand the factors that hindered the business community in Enugu; and informed ECOBPA members about the steps that the government was taking to streamline the state’s taxation processes such as developing an electronic system for administering taxes. As a result of ECOBPA’s advocacy efforts, the Enugu State Government announced that it will create a taxation commission and invited ECOBPA to have a seat on it.

In the course of these reviews, it was discovered that close to 80 percent of the taxes that the local governments were collecting were illegal. The Enugu Government decided to publish a list of taxes and implement a sensitization program to inform people what they should be paying. Businesses were encouraged to question tax collectors about the taxes they were collecting. The government also promised to freeze the tax rate for two years and allow businesses to pay in installments. As a result of these efforts, there was a 400 % increase in tax revenues for the Government after eight months. In addition, ECOBPA turned its attention to security, hosting a summit that attracted over 250 participants from seven Nigerian states in the south east and south south zones. The summit addressed topics such as the challenges of investing in an insecure environment, sustaining business operations in southeastern Nigeria, the high crime rate, and combating armed robbery and kidnapping.

Representatives of the Coalition took the issue to the national level, meeting with the Nigerian National Inspector General of Police regarding the opportunities for bribery caused by roadblocks in the area. As a result of these efforts, the police roadblocks that are often used more for collecting bribes than enforcing security, were reduced from 65 to 15 along the 100 kilometer trading corridor between Enugu and Onitsha, thereby allowing over 1,000 businesses and manufacturers to move their goods more efficiently and securely and at a lower price. In addition, police patrols have increased, reducing the possibility of kidnapping and robbery of prominent businessmen in the area. What these initiatives demonstrate is the painstaking work that must be done in Nigeria at state and local government levels to overcome the obstacles to building an efficient manufacturing sector and one that also advances measures to improve the physical security of citizens.

CSR and Effective Policy Intervention

The most severe weakness of Nigerian business organizations is the lack of a strategy that clearly defines policy and governance impediments to investment and economic growth, and the design of programs with impact assessment tools to address them. Who, it could be asked, would provide the leadership of a more effective and coherent CSR approach, as outlined in this chapter? The most obvious candidate is MAN given the central importance of industrialization in Nigeria. MAN has branches in almost every state and local government area which would enable it to pursue, and coordinate, CSR initiatives at all levels of the federation. Another organization that could contribute to new CSR thinking would be the Nigerian Economic Support Group (NESG). With appropriate leadership, MAN and NESG can play complementary roles in the formulating and implementing of a comprehensive CSR agenda in Nigeria.

The NESG was founded during the prolonged era of renewed military rule, December 1983 to May 1999. The main driver, Ernest Shonekan, served for many years as the CEO of a leading conglomerate, the United Africa Company, whose existence dates back a century. In the mid-1980s, Shonekan attended a conference in Nairobi, Kenya, on Tripartite Partnership for Development (public and private sectors and NGOs) sponsored by the Agha Khan Foundation. Perceiving the need for business engagement with the government on policy issues, he created the Enabling Environment Forum (EEF) in 1987 with other Nigerians who had attended the conference such as Alhaji Abubakar Alhaji, Secretary to the Government and former Finance Minister. The EEF marked the beginning of more assertive policy engagement by the private sector. It evolved into the Nigerian Economic Summit Group in 1994, the first Nigerian think-tank that includes membership from the private sector. Its flagship event is the annual Nigerian Economic Summit.

Despite the wide range of financial resources on which it draws, the NESG, similar to MAN, suffers from low institutional capacity. Its central mandate is to conduct policy dialogues with the government. The President of the Nigerian Federation and several ministers attend its annual summit. Ministers also tap it for ideas on reforms. Ministers with a reformist agenda can partner with the NESG to promote their views in the hope of swaying the government. The NESG contends that its dialogue with successive governments has resulted in key reforms such as the repeal of the Nigerian Enterprises Promotion Decree and the Exchange Control Act 1962. These were replaced by the Nigerian Enterprises Promotion Act, 1995 and the Foreign Exchange Act, 1995, both of which eliminated controls on foreign investment and liberalized the foreign exchange market. The NESG also attributes the telecommunications sector liberalization and the setting up of the Infrastructure Concession Regulatory Commission to its advocacy.

The limitation of this “dialogue” is underlined by the discontinuation of key reforms such as the power sector liberalization by the President Yar’ Adua administration (2007-2010). The NESG lacks effective influence. The reforms it advocates are not rooted in wider social networks and are often little understood by the media. It lacks a plan for follow-up action when reforms are reversed or are poorly implemented. Nigerian governments are often willing to make use of the NESG to burnish their pro-reform credentials. Because the NESG maintains close ties with the government, it rarely voices critical opinions. Moreover, the fact that senior NESG officials often move on to government posts tempers their willingness to challenge and pressure governments.

Another limitation is that manufacturers are often distrustful of the NESG. When it was founded, it was regarded as a lobby that served the interests of the multinationals. Its policy commission on manufacturing is inactive because manufacturers have refused to join it. Another criticism of the NESG is that it is too close to the government to be effective. Many high-ranking founding members no longer participate in its programs. Another key weakness the NESG shares with other organizations such as MAN is that its publications and research output are poorly disseminated. Unlike the products of foreign think-tanks, they seldom become the basis for public debate. What this review suggests is that Nigeria is endowed with associations that can lead the robust and dual-tracked CSR initiatives described in this chapter. NESG’s comparative advantage is that it can focus on big-picture policy changes that can have a systemic effect, e.g. petroleum industry regulation, power sector reform, and fiscal reforms, while MAN has the presence throughout the federation to advance their implementation. Moving from potentiality to actuality, however, remains to be realized.

Though the case studies discussed above focused on specific issues, they demonstrate the role that business organizations could play in addressing policy and governance issues. Success in tackling concrete issues such as multiple taxations can encourage their members of these groups[33] to continue reforms of benefit to their businesses and society as a whole. Their impact would be even greater if civil society organizations (CSO) and the media, which tend to have greater reach and social support but are mostly anti-reform, are incorporated in evidence-based strategic advocacy programs. Nigeria has a vibrant CSO community, which emerged as human/civil rights groups during the period of renewed military rule. The media could partner with the coalitions to educate and inform the government of the reforms needed to effect poverty alleviation and economic growth. According to a CSO activist, however, “manufacturers have not reached out to civil society organizations and have done little to mainstream their issues.”[34]

Conclusion

Nigerian businesses, including manufacturers, engage in a constant struggle for survival and to advance their short-term interests. The advancement of human rights, democracy, rule of law and economic development through policy advocacy is therefore not given high priority. In this regard, they differ little from their counterparts in other countries.[35] What we have suggested throughout this chapter is that CSR should be an important component of the new wave of economic activity in Africa. Others are alluding to new thinking on CSR, as reflected in a statement by a South African entrepreneur, Nicholas Maweni. He called attention to the efforts of a “number of large international companies to help the small business sector”. “It’s almost become,” he stated, “like corporate social responsibility. It is happening in countries that are going through a second wave of economic transformation. It’s happening in Ghana, Kenya and Uganda for example.”[36] We would respond that it is not “like CSR” but is an essential component of CSR in latecomer industrialization in Nigeria and other African countries.

Greater success will depend on the ability of the relevant organizations and their leadership to combine strategies based on “elite knowledge sharing” and those based on “popular knowledge dissemination”. The latter refers to the “dialogue” approach favored by business associations while the former refers to an approach that concentrates on educating the media, civil society organizations, and the wider public on reform issues. The CIPE-supported case studies demonstrated the possibility of combining an elite knowledge-sharing strategy with a knowledge-dissemination approach. The Enugu Chamber of Commerce case showed that business policy interventions could assist governments in monitoring the activities of their own staff, while also serving as a means through which the government could gain greater understanding of the needs of businesses. The achievements of the Enugu Chamber of Commerce demonstrate the potential for enlisting business organizations in such interventions.

This chapter has dealt with a number of paradoxes in Nigeria, a situation familiar to observers and students of Nigeria in virtually every context. While it is the arena of much corporate social irresponsibility, it is also a country in which important efforts are being made to design appropriate, and sometimes pioneering, CSR programs. We also drew on the work of a U.S.-based organization, CIPE, to show the efforts being made, in partnership with Nigerian associations and government institutions, to confront the persistent impediments faced by business enterprises in local contexts.

The central paradox to be confronted, as stated at the outset, is that Nigeria’s high levels of income from mineral exports, and even the upswing in foreign direct investment, are not reflected in either employment growth or poverty reduction. Bridging that gap must be an essential component of CSR and pursued along two tracks: assisting businesses to be effective, productive and globally competitive; and also encouraging them to work with government and civil society organizations to reduce the country’s governance and social problems. It is easy to be cynical and even pessimistic about Nigeria. But cynicism and pessimism can be costly if it means that a country destined to be the third largest in the world remains stuck in a poverty track. While elucidating the immense challenges, we hope to have shown how CSR is implicated in the pursuit of economic and social progress in this complex nation.


[1] Charlotte Walker Said, Introduction to Corporate Social Responsibility: Power/Knowledge/Profit (forthcoming)

[2] See Akbar Noman and Joseph E. Stiglitz, “Strategies for African Development ” in Akbar Noman et al., Good Growth and Governance in Africa: Rethinking Development Strategies (Oxford and New York: Oxford University Press, 2012), pp. 3-47.

[3] On extractive versus inclusive and productive political economies, see Daron Acemoglu and James A. Robinson, Why Nations Fail: The Origins of Power, Prosperity and Poverty (New York: Crown Publishers, 2012).

[4] This notion was introduced in the inaugural Scholars in Society lecture by Richard Joseph for BusinessDay, Lagos, Nigeria, May 21, 2009:  http://www.brookings.edu/research/speeches/2009/05/21-nigeria-joseph. It was taken up by Abimbola Agboluaje in a series of essays including, “Toll-Gate Nation: Why small civil servants can keep selling sovereign services, BusinessDay, 29 June 2009.

[9] Nigeria seems trapped in webs of kleptocracy described in such studies as J. F. Bayart et al., The Criminalization of the State in Africa (Oxford: James Currey; Indiana University Press, 1999), and Ricardo Soares de Oliveira, Oil and Politics in the Gulf of Guinea (Columbia University Press, 2007).

[10] This historic case is presented by Susan Farbstein and Tyler Giannini in  Corporate Social Responsibility: Power/Knowledge/Profit.

[12] Chukwuma Charles Soludo, “Nigeria: Where is the New Economy?” ThisDay (Nigeria), 20 August 2012.

[13] African Economic Outlook 2012.

[14] Matsuo Watanabe and Atsushi Hanatani, ”Issues in Africa’s Industrial Policy Process” in Good Governance and Growth, p. 376.

[15] Ibid.

[16] “Robert H. Wade, “How can Low-Income Countries Accelerate their Catch-Up with High-Income Countries? The Case for Open-Economy Industrial Policy” in Good Governance and Growth, p. 255.

[17] Op. cit.

[18] Osita Ogbu, “Toward Inclusive Growth in Nigeria.” The Brookings Institution.

[19] These arguments and statistics were provided by Celestin Monga in his presentation, “Implications and Opportunities of increasing wage costs in Asia for African reindustrialization,” Roundtable on “New Thinking on Industrial Policy: Implications for Africa,” International Economic Association, the World Bank, and the United Nations Industrial Development Organization, Pretoria, South Africa, July 3-4, 2012.

[20] The two charts are reprinted here with the permission of Celestin Monga.

[21] In fact, the poverty rate has been increasing in Nigeria while dropping on average in sub-Saharan Africa. According to Nigeria’s National Bureau of Statistics, 61 percent of Nigerians earn less than $1 per day. In Febraury 2012, the World Bank announced that, for the first time, poverty in Africa had declined below 50%, using the $ 1.25 per day rate. See http://www.reuters.com/article/2012/02/13/us-nigeria-poverty-idUSTRE81C0KR20120213 and http://www.nytimes.com/2012/03/07/world/extreme-poverty-down-despite-recession-world-bank-data-show.html

[22] Xan Rice, op. cit.

[23] Xan Rice, “Stymied by Culture and Faith,” The Financial Times (July 9, 2012).

[24] Both charts are reproduced, with permission, from C. Monga, op. cit.

[25] Soludo, op. cit.

[26] Festus Akanbi, citing a report of Renaissance Capital, a financial services firm, “Telecoms, Banking are Slower at Creating Jobs,” ThisDay, 1 April 2012.

[27] Businesses are also implicated in many acts of government corruption and some of their practices have negative externalities for economic growth and governance.

[28] All views expressed here are those of the authors and do not represent those of CIPE.

[30] MAN also received funding from the World Bank’s Small Medium Enterprise Department to conduct a study of Nigeria’s energy and transport infrastructure, to build capacity to improve non-subscription, fee-based membership services, and the creation of a resource center.  It has also received grants from the International Finance Corporation (IFC) and collaborated with other international organizations such as the United Nations Development Program (UNDP) and the United Nations Industrial Development Organization (UNIDO).

[31] Osita Ogbu, “Toward Inclusive Growth in Nigeria.” The Brookings Institution.

[32] Charlotte Walker Said, Introduction to Corporate Social Responsibility: Power/Knowledge/Profit.

[33] This is especially so given the perception of ineffectiveness and exploitation for personal and political purposes.

[34] Interview, Coordinator, Centre for Constitutionalism and De-Militarisation, Dr. Sylvester Akhiane.

[35] According to Pat Utomi, a political economist, a civic activist and politician, Nigerian businesses engage in hypocrisy by refusing to support social initiatives promoting good governance because they do not want to be seen as political.Yet they eagerly support individuals in government and exploit relationships with them for profit. Many businesses tred carefully, however, because they are involved in infractions which can be used against them if they are seen as too critical of government.

[36] Russell Hotten, “Africa: Where everyone wants to be an entrepreneur”, BBC News, http://www.bbc.co.uk/news/business-16723791.

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