• Saturday, December 09, 2023
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Is Nigeria too big to fail?


During the global financial crisis of 2008, the American and British governments faced severe political backlash for their decision to bail out certain banks. Public opinion was that the banks in question, which were largely responsible for the entire crisis in the first place, were effectively being rewarded for their role in the crisis. The sentiment was that these bankers should be allowed to face the consequences of their irresponsibility in the same way that a plumber or a teacher would if they messed up on the job. To Gordon Brown and Barack Obama however, the picture was not even close to being that simple.

For one thing, while “let the irresponsible bankers suffer” might have played well as a political slogan, letting some of the world’s biggest banks collapse in practise, would mean the closest thing to armageddon since the Cuban missile crisis. It would have meant throwing hundreds of billions of dollars worth of consumer deposits into the fire, effectively destroying the lives of tens of millions of people around the world overnight. More importantly, the financial contagion resulting from such huge collapses would have taken down the entire global financial system with it.

In other words, the choice was either to recognise these banks as too big to be allowed to fail, or to risk taking the financial world back to the Stone Age.

Read Also: Nigeria’s democracy: Rule of law and implications to national growth

“Too big to fail” doesn’t mean “Can’t fail”

The question about whether Africa’s most populous country should be classified in the “too big to fail” category often falls into the trap of examining whether it is possible for Nigeria to fail. This in my opinion is a moot point. There is no such thing as a country that fundamentally cannot fail, regardless of whatever population or land mass or economic heft it possesses. Nigeria absolutely CAN fail and in fact, some argue that it is already significantly advanced in the long and tortuous process of total state failure. In terms of internal stability, economic viability and geopolitical factors, Nigeria is clearly on the road to failure.

The bigger point to my mind however, is whether the world can afford a failed Nigeria. Bearing in mind that a failed Nigerian state effectively means a completely and thoroughly destabilised West African sub-region with spill over effects stretching through the Sahel and the Sahara, what are the risk factors at play here? The first, from a European/American point of view is the heightened risk of transnational terrorism via the Sahel-Sahara funnel. The second is the almost certain flood of irregular migrants who will flood across the Sahara from West Africa to Libya and eventually Europe, via Agadez and other as-yet undiscovered migrant transit hotspots.

The third risk factor is contagion from a Nigerian state failure in an African neighbourhood that is not exactly renowned for its strong, stable, prosperous, functional and well-defined states. Like in 2008 when the stability of a handful of banks could severely threaten the existence of the entire international financial system as we know it, the chaotic failure of Nigeria could set off a domino sequence of revolutions, coups, secessions and civil conflicts across West, East and Central Africa. This could further worsen the existing terrorism and migration problem, dramatically increase the world’s foreign aid burden and have a detrimental effect on the parts of global supply chains that are exposed to Africa’s stability risks, such as global shipping, which is heavily reliant on the Gulf of Aden.

Will the world let Nigeria fail?

Given the existence of these risk factors which many prominent Western politicians and diplomats have clearly signposted as unacceptable, is there a scenario where the world sees Nigeria slide even further into impending anarchy and allows the country to carry out its richly-deserved national suicide a la Somalia in the 1980s? Ultimately, the only people who can answer this question are the diplomats and politicians in question themselves, but based on my interactions with a few of them and deductions from available data, my conclusions and projections are as follows.

First of all, I fully expect Nigeria’s most powerful and influential foreign partners to maintain their short-term approach to dealing with this impossibly chaotic country. Horse-trading will continue to be the dominant theme of these diplomatic relationships, with minimisation of illegal migration and suppression of terrorism making up the bulk of engagement. This does not necessarily mean that Nigeria will NOT be allowed to fail internally, but it does however mean that whatever such a failure would look like is unlikely to resemble the Armageddon scenario that many have long feared or even looked forward to.

During an interaction with someone with links to the EU delegation to Nigeria earlier this year, it was made clear to me that engaging with brutal regimes such as that of Major General Buhari would prioritise “stability” over any purported human rights and related issues. In other words, if it came down to a choice between taking action to prevent outright failure by protecting Nigerian citizens against a hostile regime, the choice taken would be to support the regime instead – which would guarantee a short term “stability.” Thus, the internal state failure could very well still happen, but as long as it satisfies the international definition of “stability”, i.e, “no refugee”, it will be permitted to happen.

It’s not pretty, but that is our prognosis.