The F.O.O.D Wars

Understanding what is at stake in Nigeria's economy

Feyi and I were recently on an economic policy X (formerly Twitter) Spaces to talk about the F.O.O.D series of essays and some other recurring themes of this publication. What Feyi has done with the F.O.O.D is an invaluable public service, for which I cannot claim any credit. The essays are a good reference for anyone looking to understand Nigeria's political economy. What I want to do in this essay is to address some of the talking points that came up in the online conversation and set out the contours of the discussion.

Welfare and F.O.O.D

This was how Feyi described F.O.O.D in the original essay;

Someone somewhere outside of Nigeria comes up with an idea, innovation or invention

That idea, innovation or invention turns out to be something that Nigerians find useful because it solves an extant problem for them.

Nigerians then begin to import a product that is the embodiment of that idea, innovation or invention, proving that there is a market for it in the country.

At this point, the well connected Nigerian “entrepreneur” spots an “opportunity” and gets to work on “import substitution.”

The case is made that this thing that was invented elsewhere and has proven to be a solution to a problem Nigerians had, is costing the nation “scarce foreign exchange” and “exporting jobs” while at the same time “importing poverty” (to be fair to the entrepreneur, Nigerians also fall for this argument and even amplify it themselves).

The “opportunity” is straightforward - since the thing being imported is already proven to have a market, the goal is to ban or tariff the imports while replacing it with your own “locally manufactured” version.

If all goes well (especially if the product is not easy to smuggle), you will make a lot of money because the price of the imported product plus the high tariffs you’ve lobbied government to place on them will determine the price of the local version of the product i.e. price of local version = price of foreign version + import tariffs and duties. In other words, Nigerians will see no benefit from the product being manufactured close to them at home other than some nebulous “foreign exchange savings” or local pride.

This is a very familiar description, and it did not start with Nigeria. However, one of the challenges of discussing it is that the true social costs (or welfare loss in economics) are never fully grasped. When firms collude with the government to entrench a monopoly, they are not only making money by stealing it from the rest of society, but also wasting resources. In the 1960s, the American economist Gordon Tullock compared this equilibrium to theft.¹ For example, when a community becomes a target for robbers, what is lost to the households is not just the value of what is stolen; the community will also incur great cost in providing security against future theft. When a commodity costs more because of a monopoly, the cost to households and the economy is not just restricted to that commodity; the overall expense of households goes up, especially when the commodity is a basic human essential like food.

There are also costs that come from misallocation and underutilisation. When the cement industry is sustained by the monopoly of a few firms, many people defend this by saying that they create jobs. However, this monopoly is costing the economy many more thousands of jobs because cheaper cement prices would have created a boom in the construction industry. Households spend more on housing because a constrained construction industry cannot supply housing demands. The economy also experiences losses from public infrastructure that remains unbuilt because of high construction costs. These are some examples of costs due to underutilisation that result from state-enabled monopolies.

Firms do not just expend resources to capture the state. They also misuse resources in other ways. After years of bumper profits, our cement monopolist might decide to pursue an expansion plan by building more plants. Again, this is often defended by job creation. But it is good to remember that the profits financing the expansion are not from innovation or production efficiency, rather they are from state protection from competition by restricting or outrightly forbidding imports. There is no technological upgrading, even after decades of making this product. Hence, it is important to ponder the real value of the jobs created from such expansions when there are no productivity gains to the economy from efficiency or innovation, and the workforce is not imbued with new skills from learning on the job.

The investments made in the expansion could have had a greater impact in other sectors. Perhaps a farming-intensive state could have benefited from an agro-processing plant for a local crop rather than another cement plant. Perhaps the extra hundreds or thousands of cement trucks could have been useful for cold storage or improved logistics in the agriculture value chain. Who knows? The important point here is that firms that thrive through state-backed monopoly are also prone to misallocation of resources by investing in low-value activities to keep protecting their profits. This is what Tullock called "resource waste in the pursuit of unproductive gains". The welfare losses to the population from an economy that works this way are significant. And it leads to a deeper problem - the creation of a rent-seeking society.

The Landless Landlords

In economics, a "rent" is any excess return above what is necessary to keep a resource in its current use. It is unearned income — a surplus that arises not from production or innovation, but from privilege, restriction, or luck. A rent-seeking society is one in which individuals and firms devote time, capital, and ingenuity not to creating new value, but to capturing existing value through government-granted advantages, such as licences, quotas, monopolies, or regulatory forbearance. Identifying and describing how rent-seeking works might seem obvious today, but this was not always the case.

By the 1970s, it became clear that many developing countries were facing a contradiction. Many of them had adopted protectionist and interventionist policies to promote industrialisation, yet their growth rates remained chronically poor. While economists could measure the welfare losses from these failed policies, it remained puzzling why entire bureaucracies and social classes seemed to form around these distortions. It was the economist Anne Krueger who provided the missing link.² What she showed, in a famous paper, was that the pursuit of rents, and not just their mere existence, consumes real resources. In plain language, what this means is that it is not only tariffs, quotas or bans that hurt an economy, but also the competitive struggle to obtain the privileges those policies create.

Krueger warned that rent-seeking corrodes the social legitimacy of markets. When people see wealth arising not from innovation or hard work, but from access and favour, they lose faith in the fairness of the system. This perception fuels public resentment and can trigger a vicious circle, in which distrust of markets leads to more intervention, which creates more rents, which in turn produce more rent-seeking, which deepens distrust. What the F.O.O.D series of essays shows is that Nigeria is in a "rentier trap". The rent-seeking society it has created is familiar to all of us. A society where political privilege is more profitable than productivity, and energy is always diverted from creating wealth to contesting for its distribution.

Dennett's Crutches

The philosopher Dan Dennett is one of my favourite thinkers, and his book Intuition Pumps and Other Tools for Thinking is my favourite of his works. Dennett describes "intuition pumps" as thought experiments, ideas, or analogies that help us understand complex concepts. Just as certain ways of explaining things aid understanding, there are also other tools of thinking whose main purpose is to obfuscate and confuse. These are what Dennett called "boom crutches". In my years of debating Nigeria's political economy, I have grown familiar with a few of these ideas that simply muddy the waters. Here are a few of them

• The Giant Infant - whenever the rent-seeking structure of Nigeria's meagre industrial base comes, and the unearned and unproductive dominance of the few, a certain section of the intellectual class rolls back the 1960s and pulls out "infant industry protection". For decades, developing countries protected their new industries behind tariffs and import bans, arguing that these industries were "infants". The belief was that, given time and protection, these firms would learn, grow, and eventually become strong enough to compete globally. The idea traces back to the 19th century and was popularised by German political economist Friedrich List.

  The empirical foundations of the infant industry argument were seriously shaken by none other than Anne Krueger in the 1980s. A study she conducted on Turkey found no systematic relationship between the level of protection and efficiency gains. In some cases, protected industries actually performed worse than traditional, unprotected ones. The infant industry argument assumes that learning-by-doing will happen automatically once protection is in place. But Krueger’s data showed that without the right incentives, firms do not learn. Instead, they adapt to protection, become comfortable, and remain uncompetitive.

  However, the infant industry argument remains politically popular. Nigeria's cement industry is a twenty-five-year-old infant that has spawned billionaires, yet we are constantly made to believe it needs to be nurtured. Despite the lack of theoretical and empirical support, proponents of the infant industry argument still expect debates to be shut down by merely summoning it. Perhaps what they are really proposing is the "infantile industry" argument, because often they are defending infants who never grow up. In Krueger's words, "the infant industry argument only holds if the baby eventually learns to walk. In most cases, [as the empirical study shows] it simply stayed in the crib, living off the state."

• Saving FX

  Another familiar justification for protectionism is the claim that it helps Nigeria “save scarce foreign exchange”. The logic presented is usually that if the country is spending large amounts of dollars importing a particular commodity, then restricting those imports and supporting a domestic producer is a prudent response. But this rests on a mistaken understanding of how countries resolve foreign exchange scarcity.

  Limiting imports while relying on an inefficient protected producer does not improve Nigeria’s FX position in any meaningful sense. Even if fewer dollars leave the country, households and firms face prices that are often far higher than international levels. The supposed saving of foreign exchange is offset by the higher domestic costs imposed across the economy. Nothing about this arrangement increases national productivity, reduces costs, or strengthens competitiveness.

  Countries do not overcome chronic foreign exchange shortages by closing themselves off. They do so by building sectors that can earn foreign exchange at scale. They support firms that can compete globally, and they create the conditions in which export capacity can grow. FX scarcity is resolved through the ability to earn more, not through the attempt to spend less.

  Here, Nigeria’s protected “local champions” have contributed little. If they truly wished to address the country’s FX constraints, the most valuable thing they could do is export in large volumes. Yet Nigeria finds itself in a strange position. The firms that have benefited from years of preferential treatment, high domestic prices, and insulation from competition often take their excess profits and invest in other markets rather than exporting to them. A country that has endured high construction costs and a constrained housing sector might reasonably expect its cement producers to become major exporters to places like Zambia or the Caribbean. Instead, Nigeria has carried the burden of protection, while the gains are deployed elsewhere.

  This is why the FX-saving argument rarely holds up under scrutiny. It functions more as a convenient slogan than as a serious economic rationale. Genuine improvement in the foreign exchange position depends on productivity, competition, and exports, not on shielding domestic monopolies from global markets.

• The Average Nigerian

  The last "boom crutch" I want to highlight is the claim that protectionist policies endure because "the average Nigerian" supposedly supports them. This argument is weak on several fronts. Those who make it rarely have any evidence beyond a biased sampling of their social media feeds. It is impossible to generalise national preferences from such a narrow and self-selected sample, yet the assertion is made with remarkable confidence.

  There is also a basic misunderstanding of how policymaking works. While democratic consent confers legitimacy on governments, policy design is usually treated as an expert domain, shaped by specialised knowledge of the sectors involved. I do not pretend that this is how it works in every country; Nigeria’s own policymaking institutions severely fall short in many respects. But it does not follow that policy is therefore made by popular referendum. In fact, protectionist policies, by their nature and susceptibility to capture, sit at the opposite end of the spectrum from policy by popular will. They are often opaque and heavily influenced by those with the access and incentives to shape them.

  There is also a subtle misdirection in this argument. Even if we assume that most Nigerians would prefer local production of the goods they consume, it does not follow that they prefer the outcomes produced by the current model of protection. If asked whether they would favour competitive domestic production that lowers prices, improves quality, and expands choice, most Nigerians would almost certainly say yes. What they get instead is a monopolised market structure that raises prices and the cost of living. To present this as an expression of popular preference is so strange as to be only interpretable as a deep error of judgment or a clever attempt at deceit.

In the end, what the F.O.O.D essays and the debates around them reveal is a political economy trapped in patterns that reward access rather than ability. The familiar defences of protectionism dissolve when examined closely. What remains is a system in which policy is routinely bent towards creating advantages for a few at the expense of many. The welfare losses are not abstract; they show up in higher costs of living for households, hunger, poverty, stagnant industries, and lost productivity. If Nigeria is to move beyond this pattern, then the foundations of the ideas that created it must be uprooted. And the rentier society that has been built on it must be dismantled.

1. The Welfare Costs of Tariffs, Monopolies, and Theft - Gordon Tullock

2. The Political Economy of the Rent-Seeking Society - Anne Krueger