Until Nigeria's federal system evolves from administrative competition to genuine economic competition among its states, international trade openness will produce dependency rather than industrial transformation.
Yet, Nigeria's federal competition has largely been administrative rather than economic. Political rivalry is intense, but genuine competition to build productive economies, attract investment, and develop industrial capacity remains limited. A federation designed to function as a multilevel and multiparty system has gradually constricted into one that increasingly resembles a unitary structure dominated by a single political tendency, where states jostle for federal government attention rather than the reverse.
As the global economy undergoes profound structural change, disparities in development and access to capital have become increasingly stark. These gaps are now shaping not only the economic futures of nations but also the prospects for global sustainability itself. While economic interdependence has deepened, partly under the open economy paradigm promoted by the Bretton Woods Institutions, access to capital, technology, and other critical productive resources remains deeply uneven.
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Many economies in the Global South are therefore struggling to compete within a global trading system built on the principle of non-discrimination. In theory, the concept of an open global market is economically sound. In practice, however, it assumes that all participants enter the system on roughly equal footing. The reality is very different. Vast asymmetries in capital, technology, infrastructure, and institutional capacity mean that competition often favours those already positioned to produce, innovate, and scale up.
In hindsight, the historical evolution of industrial economies in the Global North, combined with contemporary global economic dynamics, has made it increasingly difficult for many countries in the Global South to compete on equal terms. In such a system, openness alone does not guarantee inclusion; it can just as easily reinforce existing inequalities.
It is therefore unsurprising that many countries in the Global South remain disadvantaged in global value chains. The structure and governance of the international trading system play a significant role in shaping this outcome. Although there have been deliberate efforts to build human and economic capital in developing economies, many of these initiatives have been externally driven and narrowly structured; they are often more captive than adaptive to local economic realities. As a result, they have struggled to become embedded within domestic productive systems. Rather than generating sustained industrial capability, they have frequently produced short-lived and fragmented gains.
This dynamic is particularly evident across Africa. Nigeria, one of the continent's largest economies and among its most resource-endowed countries, has long pursued policies consistent with economic openness; liberalising trade regimes, encouraging foreign investment, and participating actively in regional and global economic institutions. Yet despite these reforms, Nigeria's participation in global value chains remains limited and concentrated largely in the export of crude oil and other primary commodities.
Clearly, the Nigerian Constitution recognises the possibility of differing political philosophies across parties and anticipates that these differences will shape socio-economic policy choices across the federation. In doing so, it creates space for diverse development pathways across states, and expands economic opportunities for citizens, while reducing the expectation of uniform regional outcomes.
This raises an important question: Are Nigeria's limited gains from global economic openness primarily a result of the external policy framework, or do they reflect deeper challenges within domestic institutional systems, particularly in areas such as industrial policy coordination, infrastructure development, investment facilitation, and governance capacity?
Nigeria operates a federal system with three tiers of government - federal, state, and local - within a multiparty democratic framework anchored on the Constitution. The constitutional arrangement deliberately devolves authority across different levels of government, assigning responsibilities for governance and economic management among the constituent units of the federation. In principle, this design anticipates a system of effective coordination in which national policy direction is complemented by subnational initiatives that respond to local economic opportunities.
Clearly, the Nigerian Constitution recognises the possibility of differing political philosophies across parties and anticipates that these differences will shape socio-economic policy choices across the federation. In doing so, it creates space for diverse development pathways across states, and expands economic opportunities for citizens, while reducing the expectation of uniform regional outcomes.
The federal design, therefore, envisages subnational governments as semi-autonomous economic actors, capable of pursuing distinct economic priorities, strategies, and growth trajectories. Ideally, this structure should encourage healthy competition among states, with each seeking to attract investment, expand productive capacity, and create employment.
For this model to function effectively, however, states must engage strategically with federal institutions to mediate external economic opportunities. This requires deliberately filtering external investments and policies, embedding them within local political and economic systems, and aligning them with subnational productive structures. Where such coordination occurs, openness can translate into real economic transformation at the subnational level, with the aggregate effect improving the economic realities and well-being of citizens across the country.
More worrisome is the increasing tension whereby the survival of political actors overrides the constitutional objectives of federalism. This also finds expression in the contest among states revolving more around the control of public resources than the creation of new economic value. As a result, a federal system meant to drive economic dynamism among the states has instead evolved into one marked by administrative dependence, rather than economic competition.
Yet, Nigeria's federal competition has largely been administrative rather than economic. Political rivalry is intense, but genuine competition to build productive economies, attract investment, and develop industrial capacity remains limited. A federation designed to function as a multilevel and multiparty system has gradually constricted into one that increasingly resembles a unitary structure dominated by a single political tendency, where states jostle for federal government attention rather than the reverse. More worrisome is the increasing tension whereby the survival of political actors overrides the constitutional objectives of federalism. This also finds expression in the contest among states revolving more around the control of public resources than the creation of new economic value. As a result, a federal system meant to drive economic dynamism among the states has instead evolved into one marked by administrative dependence, rather than economic competition.
This outcome is not necessarily due to a lack of external economic opportunities or insufficient engagement from domestic investors. Rather, it reflects deeper political-economic weaknesses that have significantly weakened the once vibrant civil service that historically provided continuity, coordination, and policy discipline within government. Today, the civil service has become increasingly subordinated to the political system, reducing its ability to perform its coordinating and developmental roles. Across the tiers of government, the civil service has become both structurally constrained and institutionally demoralised, weakening the public administration that should ordinarily drive policy implementation and economic coordination. In such an environment, policy coherence suffers, and economic initiatives lose the continuity necessary for long-term transformation.
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The consequence is poor coordination across the different tiers of government. In such an environment, foreign investors often operate within captive industrial arrangements that remain weakly connected to domestic productive systems, limiting opportunities for broader industrial development and value creation within the country.
In recent years, there have been growing debates about the lived realities of Nigerians, in contrast to the macroeconomic performance indicators often cited by the government. While the Federal Government is undertaking various reforms aimed at repositioning the economy for improved performance, its impact will remain limited without proactive and economically strategic engagement from subnational governments. It must be acknowledged that a few states have begun to establish structures for more effective economic engagement and structural transformation. However, the impact of these initiatives will remain marginal as long as the majority of states remain passive in responding to emerging economic opportunities.
Until Nigeria's federal system evolves from administrative competition to genuine economic competition among its states, international trade openness will produce dependency rather than industrial transformation.
Dipo Baruwa is a business climate development analyst.
