Introduction
The paradox of privilege in a poor nation, a theme so poignantly captured in the discussion of Femi Otedola’s memoir, is not unique to Nigeria. It is a recurring narrative in many postcolonial states, where the structures of power and wealth inherited from colonial rule have stubbornly refused to give way to systems that serve the many rather than the few. The challenge, as the prior article correctly identifies, is not about the morality of wealth, but about the institutional framework that enables its creation and distribution.
In my earlier reflection on The Privilege Paradox: Wealth, Institutions, and the Price of Prosperity in a Poor Nation, we concluded with a stark but necessary reminder: Nigeria’s challenge is not to lament the privileges of the few, but to restructure its institutions so that success arises from competition, innovation, and merit rather than connections. That call remains urgent.
The question now is how nations like Nigeria, still trapped in the legacies of colonial extraction and postcolonial privilege, can shift toward inclusive leadership that creates prosperity for the many rather than enrichment for the few.
As the great Nobel Laureates, Professors Daron Acemoglu and James Robinson, so meticulously detail in their seminal work, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, the root cause of a nation’s success or failure is its institutions, political and economic. To move from the price of privilege to the promise of prosperity, a nation like Nigeria must undertake a radical and painful pivot from extractive leadership to inclusive leadership.
This piece narrates the necessary journey of dismantling old systems of patronage and building new ones that encourage competition, innovation, and broad-based opportunity for all its citizens.
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The Enduring Legacy of Extractive Institutions
Acemoglu and Robinson’s core argument is that nations fail when their institutions are extractive. Such institutions are designed to “extract” wealth and resources from the majority to benefit a small, powerful elite. This is a direct inheritance from the colonial era, where European powers created institutions in their colonies not to foster development but to facilitate the extraction of raw materials and labor for the benefit of the colonizing power. The native elite who collaborated with the colonizers often inherited these very same extractive structures at independence, simply replacing the colonial masters at the top of the pyramid.
Nigeria’s experience, as the previous article suggests, is a textbook case. The British colonial administration created an institutional framework centered on the extraction of resources—from palm oil to groundnuts and, eventually, crude oil. Political institutions were centralized and authoritarian, designed to control the population and prevent any meaningful challenge to the colonial power. This system, with minor modifications, persisted after independence. As a result, politics in Nigeria became a zero-sum game: a struggle to gain control of the state apparatus in order to control the flow of oil wealth and distribute it among a narrow circle of allies and supporters. This is the very essence of extractive political and economic institutions.
Acemoglu and Robinson write, “Extractive economic institutions are structured to extract resources from the many by the few, and fail to protect the property rights of the majority. They erect barriers to entry and suppress markets so that only a privileged elite can benefit.” This statement perfectly encapsulates the Nigerian business environment. The ability to succeed, as shown in the Otedola case, often hinges not on having a superior product or a better business model, but on securing government licenses, obtaining privileged access to foreign exchange, or receiving lucrative government contracts. This system stifles competition and innovation, as the most profitable avenue for wealth creation is not to build something new, but to capture a slice of the existing, state-controlled economic pie. This is why Nigeria, despite its abundant natural resources and immense human talent, struggles with persistent poverty and underdevelopment. The institutions do not incentivize productivity; they incentivize political connections.
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The Hallmarks of Inclusive Leadership
The alternative to this extractive model, according to Acemoglu and Robinson, is inclusive institutions. These are institutions that allow and encourage participation by the great mass of the people in economic activities that make the best use of their talents and skills. They provide a level playing field, secure private property rights, and enforce the rule of law. Most importantly, they facilitate creative destruction, the process by which new firms, new technologies, and new ways of doing things replace the old ones.
Inclusive institutions are fundamentally democratic and pluralistic. They create a system where political power is not concentrated in the hands of a few but is distributed broadly, making it difficult for any one group to create and maintain extractive economic institutions for their own benefit. As the authors state, “Inclusive institutions are those that allow and encourage participation by the great mass of the people in economic activities, that provide secure property rights, a law-abiding system, and a law-and-order state, and that are open to new businesses and technologies.”
A prime example of a nation that successfully pivoted toward inclusive institutions is Botswana. Unlike many of its resource-rich neighbors that succumbed to the “resource curse,” Botswana’s post-independence leadership, under Seretse Khama, established a pluralistic political system and used diamond revenues to invest in education, infrastructure, and institutions that protected property rights. This allowed for broad-based growth and made Botswana one of the most prosperous nations in Africa. This was not an accident of geography or culture; it was a deliberate choice by a leadership that understood the importance of building inclusive institutions.
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The Path to Inclusive Institutions in Nigeria
So, how does a nation like Nigeria, entrenched in extractive patterns for decades, make this pivot? The journey is complex and multi-faceted, requiring a fundamental shift in both political and economic systems.
1. Electoral Integrity and Political Accountability
At the heart of inclusive institutions is accountability. As the Nobel Laureates remind us: “Political power is the foundation. It shapes whether institutions are inclusive or extractive.” Nigeria’s elections too often become contests for access to state resources rather than mechanisms of accountability. The following, among other things, are suggested:
• Independent electoral bodies must be insulated from political capture. Appointments to the Independent National Electoral Commission (INEC) should be transparent and multi-stakeholder, rather than being made by the President alone.
• Technology-enabled transparency (biometrics, blockchain-backed verification) can reduce ballot manipulation.
• Campaign financing reforms can limit the stranglehold of money politics, ensuring that ideas, not patronage, decide leadership contests.
Without credible elections, inclusive policies cannot emerge. Electoral integrity is the gatekeeper reform.
2. Judicial Independence and the Rule of Law
Acemoglu and Robinson stress that inclusive institutions protect property rights and apply the rule of law evenly. In Nigeria, the judiciary too often bends to executive influence or elite capture. So, we advocate for:
• Reform judicial appointments to strengthen merit over politics.
• Financial autonomy of courts must be safeguarded to prevent executive pressure.
• Speedy and transparent adjudication of corruption cases will send the message that elites are not above the law.
A judiciary that disciplines privilege is essential to breaking extraction.
3. Energy Sector Restructuring: From Monopolies to Competition
The energy sector epitomizes Nigeria’s extractive trap: a resource-rich nation with unreliable power. Otedola’s memoir revealed how privilege allowed diesel monopolies to flourish while households and small businesses paid crushing costs. Hence, there is an urgent need to institute the following:
• Liberalize and decentralize the electricity market to allow private and community players to compete.
• Transparent oil block allocation through open bidding, eliminating patronage-based awards.
• Investment in renewables and mini-grids, particularly solar, to democratize energy access.
Inclusive energy systems broaden opportunity: they reduce costs for small firms, improve household welfare, and undercut elite monopolies.
4. Investment in Human Capital: Education and Health as Equalizers
Inclusive leadership invests in people. Nigeria’s demographic dividend will become a curse if education and healthcare remain neglected.
• Universal basic education with emphasis on digital literacy, vocational training, and entrepreneurship.
• Health financing reform to expand affordable care, reducing out-of-pocket costs that drive families into poverty.
• Technical and Vocational education to become the pivot of the nation to resolve job creation and unemployment.
• Merit-based funding of universities to end politicization and boost research capacity.
As Acemoglu and Robinson argue, “Inclusive institutions create the conditions for innovation and prosperity.” Human capital is the bedrock of those conditions.
5. Expanding Financial Access for SMEs
Small and medium enterprises (SMEs) are the backbone of inclusive growth, yet in Nigeria, they face financing deserts. It is recommended that we:
• Strengthen development finance institutions with a mandate to serve SMEs rather than connected conglomerates.
• Credit guarantee schemes to de-risk lending to small businesses.
• Digital finance ecosystems (mobile money, fintech) that broaden access, especially for women and youth.
Breaking the extractive hold on finance ensures that innovation is not confined to the privileged.
6. Decentralization and Local Accountability
One lesson from Why Nations Fail is that concentrated power breeds extraction. Nigeria’s over-centralized federalism fuels corruption and elite capture. My thoughts is that:
• True fiscal federalism would allow states to raise and spend more of their revenues, reducing dependence on Abuja’s oil rents.
• Strengthen local governance by empowering municipalities to deliver basic services, making them accountable directly to citizens.
By dispersing power, decentralization dilutes extraction.
7. Creative Destruction: Embracing Innovation
Extractive elites fear disruption. Yet prosperity depends on allowing innovation to replace old monopolies. Let us work together to enact:
• Policy frameworks that protect startups from elite strangulation in sectors like fintech, e-commerce, and renewable energy.
• Public procurement reforms that open contracts to competitive bidding rather than entrenched firms.
• Support for research and development to foster indigenous solutions.
As Acemoglu and Robinson warn, “When elites fear creative destruction, they block it—and nations remain poor.” Nigeria must unleash its innovators.
8. Building Broad Coalitions for Reform
Extractive elites will not dismantle their privileges voluntarily. Reform requires a coalition broad enough to challenge entrenched interests. A Yoruba adage says, “Ojuboro ko la fin gba omo lowo ekuro”, which translates (It is with strength and power that you break/crack palm kernel to retrieve its fruit), so we suggest the following:
• Civil society mobilization to demand accountability and transparency.
• Youth movements leveraging Nigeria’s demographic weight to push inclusive reforms.
• Private sector alliances that recognize long-term stability require inclusive growth.
• International partners offering incentives (aid, investment, market access) tied to governance reforms.
Breaking the cycle means aligning multiple stakeholders around a common agenda.
9. Tackling Corruption as Structural, Not Personal
Corruption is not simply a matter of “bad people” but of bad institutions. Extractive systems incentivize corruption in Nigeria, as we can see from the scenes and acts being played out over the years by the institutions with the mandate. Inclusive reforms reduce the opportunities and rewards for rent-seeking. Therefore, we suggest that we put in place the following with sincerity of purpose:
• Digitize public services to cut face-to-face rent-seeking.
• Mandatory asset declarations and public registers for politicians.
• Whistleblower protections to safeguard those who expose graft.
The fight against corruption is not moralistic; it is institutional, and it must not be fought against the people but with those people who are leeches on the nation’s commonwealth.
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The Nigerian Context: A Call for Leadership
Ultimately, the transition from extractive to inclusive leadership is a matter of political will. It requires a new generation of leaders who are not beholden to the old system of patronage and who have a genuine vision for a prosperous Nigeria. It requires leaders who understand, as Acemoglu and Robinson do, that “Nations fail not because of ignorance, but because those who control power design institutions to enrich themselves at the expense of society.”
The challenge for Nigeria is to create a political movement that can champion institutional reform and make the difficult choices necessary to dismantle the old, extractive networks. This is not just a call for better governance; it is a call for a fundamental restructuring of the social contract. The promise of prosperity can only be fulfilled when the institutions of the nation serve all its citizens, not just a privileged few.
This is the central lesson from Why Nations Fail. The future of Nigeria, and of many other nations in a similar position, depends on whether its leaders can move beyond the short-term gains of extractive power and commit to building the inclusive institutions that will secure long-term prosperity for generations to come. The path forward lies not in lamenting the Otedolas of the world but in creating a system where their story would be one of competition and innovation, not of privileged access and political rescue. Only then can the price of privilege truly give way to the promise of prosperity.
The Path Forward: From Extractive Legacy to Inclusive Future
The Nigerian paradox, of immense wealth existing alongside widespread poverty, is not an accident. It is, as the insights of Acemoglu and Robinson so clearly illustrate, a direct and tragic consequence of a persistent extractive institutional framework. The tale of one man’s success, however inspiring, is also a stark reflection of a system that rewards political connections over productive competition, and that insulates a privileged elite from the risks and consequences that discipline the majority. This system, a vestige of colonial rule, stifles innovation and perpetuates inequality by concentrating both political and economic power in the hands of a few.
The journey toward genuine prosperity for Nigeria, and for any nation in a similar predicament, is not a simple one. It requires a fundamental break from the past, a conscious and deliberate pivot from extractive to inclusive institutions. This transition demands more than just policy changes; it necessitates a complete re-engineering of the social contract. It calls for the establishment of a robust rule of law, the protection of property rights for all citizens, and the creation of a level playing field where merit, not patronage, determines success. It requires a political class willing to embrace creative destruction, allowing new ideas and businesses to flourish even if it means disrupting the old order.
Ultimately, the choice facing Nigeria is not merely economic; it is a choice about its very identity. Can it shed the legacy of an extractive past to build a future where the promise of prosperity is a reality for every citizen? This shift hinges on the political will to dismantle the barriers that have long protected a privileged few and to build a society where opportunity is truly open to all. Only when the price of privilege gives way to the discipline of competition can the nation finally unlock its vast potential and build a future of shared, sustainable prosperity.
Oyewole Sarumi is the Chief Strategic Officer, LMS Consulting, and professor of strategic leadership and digital transformation, and writes from Lagos, Nigeria. He is also a consultant in TVET and indigenous education systems, affiliated with the Global Adaptive Apprenticeship Model (GAAM) research consortium. Tel. 234 803 304 1421, Email: leadershipmgtservice@gmail.com.