Nigeria ranks 17th on The Economist’s 2023 crony-capitalism index

The Economist, a British weekly magazine has ranked Nigeria 17th out of 43 countries in its latest 2023 crony-capitalism index.

Crony capitalism, sometimes called cronyism, is a system based on the close relationships between the state and business people, where companies flourish not necessarily because of free enterprise but because of connections with government officials.

According to the index which was published on Tuesday, crony capitalists’ wealth has risen to $3 trillion or to nearly three percent of global Gross Domestic Product (GDP) from $315 billion, or one percent of global GDP, 25 years ago.

“Some 65 percent of the increase are from America, China, India and Russia. Overall 40 percent of crony-capitalist wealth derives from autocratic countries and amounts to nine percent of their GDP,” the index reported.

The index used data from Forbes and International Monetary Fund (IMF) but it is silent on the details of its calculation of Nigeria’s ranking.

It showed that there are hundreds of billionaires around the world whose riches are largely believed to derive from sectors which often feature chummy dealings with the state.

“The way we estimate all this is to start with data from Forbes,” the index showed.

The magazine has published an annual stock of the world’s wealthy people for nearly four decades.

“In 1998, it said that there were 209 billionaires with a total worth of one trillion dollars, equivalent to three percent of global GDP,” it said.

“This year the publication details 2,640 billionaires worth $12 trillion or 12 percent of GDP. Most of those listed do not operate in rent-seeking sectors.

“Adjusting for rising prices—one trillion dollars in 1998 is now equivalent to $3.3 billion—there are 877 billionaires (at 1998 prices) with a collective worth of nine trillion dollars.”

The index revealed that Russia was once again, the most crony-capitalist country despite the decline in its wealth from $456 billion in 2021 to $387 billion this year.

“Only one-fifth of Russian billionaires’ wealth was derived from non-crony sectors, which showed just how distorted the economy was,” it said.

It added that Chinese billionaires continued to struggle with the vagaries of their government.

Since Chinese President Xi Jinping launched a crackdown on private capital, crony wealth has fallen sharply, from a peak of 4.4 percent of GDP in 2018 to 2.5 percent now, according to The Economist.

It said tycoons of all stripes operate only with the consent of the state.

“In 1998, there were just eight billionaires in the republic (including Hong Kong and Macau) with a total worth of $50 billion. Now, there are 562 billionaires commanding two trillion.”

The Economist classifies the source of wealth into rent-seeking and non-rent-seeking sectors. “An economic rent is the surplus remaining once capital and labour have been paid which, with perfect competition, tends towards zero.”