Lagos’ state governor was dismayed to read about a new hospital opening in Ghana’s capital Accra last year. The name was familiar: the investors had come to his city — Africa’s largest — first, but looked elsewhere when it could not deliver the tax holidays and visa-free entry they wanted.
“These were some difficult moments for us, because all of the things they were asking at that time . . . [were] deliverables that were only at the federal level,” said Babajide Sanwo-Olu in an interview with the Financial Times. “Ghana said, we have this, we have this, we can give this. So there was a national conversation against a subnational conversation.”
As Nigeria reels from its second recession in less than five years and confronts a deadly coronavirus second wave, Mr Sanwo-Olu wants greater autonomy for the country’s commercial capital to allow it to better compete for investment with an African state with a far smaller economy than the megacity.
On paper, Lagos, home to telecoms group MTN, the country’s largest banks and with a population of 22m, appears more attractive to investors. Lagos state’s gross domestic product of $84bn compares with Ghana’s $67bn, Rwanda’s $10.4bn and Kenya’s $95.5bn. “We're selling the numbers,” Mr Sanwo-Olu said. “We're selling the fact that our market has a huge population.”
But in the first three quarters of 2020, the latest data available, foreign direct investment into Nigeria trailed Ghana, which has an economy and population roughly seven times smaller. Nigeria ranks 131st on the World Bank’s ease of doing business list, compared to Rwanda at 38, Kenya at 56 and Ghana at 118.
In contrast to the government in its much smaller neighbour, Abuja is less focused on individual projects in Nigeria’s vast territory. As a result, Lagos is hamstrung by Nigeria’s centralised power structure, said Mr Sanwo-Olu. “We need to have true federalism,” including a state police force, he said.
Nigeria’s governance is highly centralised, with the federal government effectively controlling everything from tax to natural resources and the power sector. States have limited authority over their governance, and policymakers have advocated restructuring that would devolve more power.
Since independence in 1960 and even after democracy returned in 1999, Nigeria’s federal government has accrued ever greater powers, according to Nkasi Wodu, a Nigerian lawyer. This is in part due to the country’s dependence on oil, which is controlled by the national government and which provides the majority of federal and state revenues — with oil receipts allocated by Abuja to states.
“The result has been the creation of a gargantuan political entity with a concentration of powers at the centre and underdeveloped states,” Mr Wodu wrote for the Council on Foreign Relations last month.
Mr Sanwo-Olu and other state governors have long complained about a lack of autonomy and he argues that he has tried to improve the business environment where he can.
Lagos had brought down costs and waiting times for construction permits and built a stronger contract dispute resolution system, he said. But the city cannot grant businesses tax waivers or even issue its own driver’s licences, and the police are centrally controlled, he complained, adding: “We would certainly have done a lot of things quicker, faster, better.”
Nigeria’s centralised policing system has come under scrutiny. Last autumn anti-police brutality protests swept the country under the banner of #EndSars — a reference to the notorious federal Special Anti-Robbery Squad — culminating in a violent crackdown on demonstrators in Lagos.
National Assembly leaders said last year they would consider an amended constitution that would give greater autonomy to Nigeria’s 36 states. Progress has been slow — a series of bills were given second readings in 2020 — but the proposed changes are expected to be ready for consideration by this summer.
However, responsibility for much of the dysfunction in Lagos, such as endemic gridlock at its ports, lay with both state and federal governments, while problems with public transport were a matter for state authorities, said Cheta Nwanze, partner at consultancy SBM Intel.
“More autonomy is a necessary discussion,” he said. “But to blame that for the many issues in the state is very wide of the mark, because even with the powers [the governor] does have, there isn’t a lot to show for it.”
Some moves by the state government had discouraged investment, Mr Nwanze said, such as new fees and licences for ride-hailing companies.
But Mr Sanwo-Olu said his administration was trying to bolster the Lagos start-up scene, which in recent years has become Africa’s best-funded, drawing hundreds of millions of dollars in venture capital annually. Deals include Silicon Valley giant Stripe’s $200m acquisition of local payments company Paystack in October, and nearly $400m into three fintech start-ups in a single week in 2019.
There are some big projects under construction in Lagos, including billionaire Aliko Dangote’s mega oil refinery and a nearby deep seaport. All were started before the 2015 recession, when Nigeria’s crude-driven economy was benefiting from the oil price boom.
Babatunde Fashola, now federal minister of works and infrastructure, was Lagos governor at the time. Lagos could still win out, he said: “Because Lagos has the population, it has the market, it has the elite core who travel abroad and live in the best homes, best hotels, fly first and business class, buy the best labels and host the best parties and drink the best wine.”
Mr Sanwo-Olu said he would “continue to sell the city”. “We’re selling the fact that this is a market with a huge population” of customers, he said.