Each year, the Nobel Prize emerges as a global celebration of human achievement, recognising exceptional contributions to progress across various fields such as Literature, Science, and Economics. It also celebrates the promotion and advancement of peace. The prestigious award symbolises the potential to advance knowledge and solve some of the world?s most pressing challenges. In 2024, the Nobel Prize in Economics was awarded to Daron Acemoglu, Simon Johnson, and James Robinson for their groundbreaking research into how political and economic institutions shape nations? prosperity ? or failure. Their work, particularly in the influential book ?Why Nations Fail?, emphasises that the quality of their institutions largely determines the success of nations. This year?s award, a significant event in economics, brings to light the critical role institutions play in shaping the trajectory of nations, highlighting both the opportunities and challenges facing countries like Nigeria.

The research of Acemoglu, Johnson, and Robinson underscores the importance of inclusive institutions ? those that provide broad access to resources and opportunities ? for ensuring long-term economic success. In contrast, extractive institutions, which concentrate power and wealth in the hands of a few, often result in inequality, stagnation, and eventual collapse. This insight is particularly relevant to countries like Nigeria, where, despite abundant natural resources and a population of over 220 million, most live in poverty. According to the World Bank, more than 40% of Nigerians (about 110 million people) live below the poverty line, and another 25% are vulnerable to falling into poverty due to economic shocks. The Nobel Prize in Economics serves as a reminder that institutional reform is critical if Nigeria is to unlock its full potential.

The 2024 Nobel Prize highlights Nigeria?s unrealised potential and lack of global recognition in key areas like economics and science. Despite its vast oil wealth, the country remains impoverished and underdeveloped. In 2023, the petroleum industry accounts for about 5.5 percent of Nigeria?s GDP and for around 92 percent of the value of all exports, yet it has failed to translate into broad-based prosperity. According to the Nigerian National Bureau of Statistics (NBS), unemployment reached an all-time high of 33.3% in 2023, and youth unemployment stands at nearly 43%. These figures paint a picture of a country struggling to convert its immense natural wealth into tangible benefits for its people.

The 2024 Nobel Prize in Economics inadvertently draws attention to Nigeria?s institutional failures by focusing on institutions. In the book ?Why Nations Fail?, Acemoglu, Johnson, and Robinson highlight Nigeria as an example of a country with immense potential but remains impoverished due to weak governance and ineffective institutions. However, their research also points out that if managed through effective institutions and good leadership, Nigeria?s resource wealth could lead to prosperity for the majority. This potential for change in Nigeria?s institutional landscape should inspire hope and optimism, as it suggests that with the right reforms, Nigeria can unlock its full potential. In a post-award interview on CNN, James Robinson, one of the three laureates, echoed these sentiments, emphasising Nigeria?s inability to create the institutional conditions necessary for development. He noted that Nigeria is not poor because of a lack of resources or talent but because of a lack of institutions and leadership capable of harnessing these resources for the benefit of all citizens. This critique places Nigeria under the global spotlight, prompting difficult questions about why a country with such potential remains economically stagnant.

One of the key lessons from the work of the 2024 Nobel laureates is the importance of the rule of law and the detrimental effects of corruption on national development. Societies with weak rule of law and corrupt institutions struggle to generate long-term economic growth because these systems prioritise the interests of elites over the broader population. This insight is particularly relevant to Nigeria, where corruption is deeply entrenched. According to Transparency International?s 2023 Corruption Perceptions Index (CPI), Nigeria ranks about 145th out of 180 countries, indicating widespread corruption across various levels of government and society.

Corruption in Nigeria has created a wealthy elite that thrives on exploiting the country?s resources for personal gain. In 2020, Nigeria lost approximately $18 billion to corruption in the oil sector alone, according to a report by the Nigeria Extractive Industries Transparency Initiative (NEITI). This staggering figure underscores the potential of Nigeria?s resources and the missed opportunities due to corruption. Instead of using oil revenues to improve infrastructure, education, or healthcare, a significant portion of Nigeria?s wealth is diverted to the pockets of corrupt officials. The pervasive nature of corruption has stifled innovation and entrepreneurship, preventing Nigeria from achieving the broad-based, sustainable economic growth needed to lift millions out of poverty.

Acemoglu, Johnson, and Robinson?s work also emphasises the stark difference between extractive and inclusive institutions. Extractive institutions, like those in Nigeria, concentrate wealth and power in the hands of a few, often leading to short-term economic growth but long-term instability and inequality. This has been particularly evident in Nigeria?s reliance on oil and how oil wealth has been mismanaged over the years. While oil has brought enormous wealth to a small group of elites, it has failed to create a diversified economy that can provide jobs and opportunities for the broader population. Nigeria?s over-reliance on oil has also made it vulnerable to fluctuations in global oil prices, leading to economic crises when prices fall.

On the other hand, inclusive institutions promote broad participation in economic and political life, creating opportunities for citizens to prosper. Countries with inclusive institutions, like Norway or South Korea, tend to experience sustained economic growth and political stability. In South Korea, for instance, a country with few natural resources, inclusive institutions have fostered innovation, resulting in its transformation into one of the world?s leading economies. Nigeria?s institutional failures, however, have left it unable to replicate such success.

Leadership is crucial in determining whether a country?s institutions are inclusive or extractive. Unfortunately, Nigeria?s leadership has often failed to build the institutions necessary for sustained growth. Instead, political leaders have prioritised their interests over the country?s long-term development. According to a 2019 report by the World Bank, the mismanagement of resources and poor governance have cost Nigeria over $300 billion in revenue losses over the past 30 years. This staggering figure, detailed in the report, which analysed the economic and political decisions made by Nigerian leaders, illustrates the impact of poor leadership on the nation?s development trajectory.

In addition to mismanagement, Nigeria?s colonial history and ethnic fragmentation further complicate its development path. The political and economic institutions established during colonial rule were designed for exploitation, not the benefit of the local population. These extractive systems continue influencing Nigerian governance today, with political elites using their positions to extract wealth from the economy. Nigeria?s ethnic diversity, while a potential strength, has often been manipulated by elites to fuel division and maintain control.

Rent-seeking behaviour, where individuals or groups extract wealth from the economy without contributing to productivity, has become entrenched in Nigeria?s political culture. There is a heavy reliance on rent-seeking in the oil sector rather than productive economic activities. This system discourages hard work and innovation, leaving the country stuck in a cycle of underdevelopment.

Another significant challenge facing Nigeria is the absence of a unifying national ideology. Without a cohesive vision for the future, political and business leaders have been able to exploit religious and ethnic divisions for their benefit. This lack of national unity weakens social cohesion and makes building the inclusive institutions necessary for sustained development difficult. Instead of working toward a common goal, Nigerian elites often use religion and ethnicity to maintain power, perpetuating inequality and deepening poverty. According to a 2021 report by the Brookings Institution, religious and ethnic divisions in Nigeria have been a significant driver of political violence and instability, further hindering the country?s development.

Good economic institutions protect property rights and guarantee the sanctity of contracts, which are key prerequisites for private sector investment and entrepreneurship. This lack of respect for the sanctity of contracts is one big gap in Nigeria, and the quality of our judiciary has not helped matters. One consequential service our democratic leaders can do to our country is to reform and strengthen the judiciary. Without it, all other reforms would be like pouring water on a duck?s back.

The Insights provided by Acemoglu, Johnson, and Robinson offer Nigeria a way forward: institutional reform. By strengthening the rule of law, improving accountability, and fostering inclusive growth, Nigeria can reverse its course of underdevelopment and build a more prosperous and equitable society. The 2024 Nobel Prize critiques Nigeria?s current trajectory and a call to action for its leaders to implement the necessary reforms to unlock the country?s potential.

Summarily, the fate of nations, as highlighted by the 2024 Nobel laureates, is not determined by geography or culture but by the quality of their institutions and leadership. Nigeria?s persistent underdevelopment is not an inevitable outcome but a result of weak, extractive institutions. However, with the right leadership and a commitment to reform, Nigeria can break free from its vicious cycle of poverty and build a brighter future. Ultimately, the rapid development of Nigeria must be driven by its citizens and institutions, with leaders facilitating good governance and inclusive growth. Our country cannot continue to operate a political framework that often prioritises selfish personal, parochial and pecuniary interests over broader economic goals, limiting effective governance and implementation of growth strategies. The Nobel Prize in Economics reminds us that institutional change is possible ? and that the time for Nigeria to act is now.

?Dr. Dakuku Peterside is a Public Sector Turnaround Expert, Leadership Coach, Public Policy Analyst and Columnist.

Update news