Saturday, 21 June 2014

Constructing the Megacity The Dynamics of State-Building in Lagos, Nigeria, 1999-2013

Constructing the Megacity
The Dynamics of State-Building in Lagos, Nigeria, 1999-2013
Diane de Gramont
April 2014
MPhil Comparative Government Thesis Department of Politics and International Relations Oxford UniversityABSTRACT
This study considers how developing countries with patronage-based politics and weak bureaucracies can build more effective states. It reviews existing scholarship on state-building and developmental governance around the world and examines the specific experience of the Lagos state government between 1999 and 2013 in increasing tax revenue and state regulation. The Lagos case study considers reforms in personal income tax and property tax collection as well as changes in public safety, bus regulation, traffic enforcement, and environmental management. The research is primarily based on eight weeks of fieldwork in Lagos and 85 interviews with government officials, political activists, journalists, scholars, and representatives of civil society and international development agencies.
The thesis makes three central arguments. First, improvements in state capacity rely on a combination of political commitment, state organizational resources (financial, technical, and bureaucratic), and productive state-society relations. None of these three factors alone is sufficient for state-building. Second, political commitment is most likely when leaders confront serious security, political, or socioeconomic threats and have long enough time- horizons to expect that a more effective state will bring them future benefits. Third, state capacity can derive as much from cooperation with social actors as from state dominance of society. Strong societal power holders may occasionally block state penetration but can also crucially assist the state in accessing and monitoring society.
In Lagos, improved tax collection and regulation has relied on high-level political commitment to reform, better use of existing economic resources, bureaucratic reforms within key implementing agencies, and public outreach efforts. Political support for capacity-building is motivated by electoral competition as well as ambitions to transform Lagos into a modern megacity. These interests are paired with relative political stability generated by continuous rule by the same political party. The state’s tax and regulatory efforts have been facilitated by partnerships with important social actors, especially informal sector associations.
This research relied on the generosity of numerous individuals in Lagos who took the time to share their experiences and insights with me and offered suggestions and contacts to take my work forward. I am immensely grateful for their help. I owe a particular debt to the Lagos State Government for their openness to this research and especially to Deputy Chief of Staff Moji Rhodes for her invaluable assistance throughout my fieldwork. In her office, I thank Chinasa, Mr. Rotimi, Chinedu, and Remi for their indispensable logistical support and good company. I am also grateful to Chris Akor for introducing me to many new facets of Lagos.
This thesis owes its existence in large part to my supervisor at Oxford, Dr. Nic Cheeseman, who first got me interested in Lagos and provided critical guidance at every step in the process. My research was made possible by generous support from the Clarendon Fund, the Lagos State Government, the Democracy and Rule of Law Program at the Carnegie Endowment for International Peace, Merton College, and the Oxford University Department of Politics and International Relations. These institutions are in no way responsible for the opinions expressed in this thesis.
Theorizing State Capacity-Building 9
CHAPTER 3 Lagos Political History and State-Building Prospects 29
CHAPTER 4 Building Tax Capacity in Lagos
CHAPTER 5 Regulating the Megacity
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Over the past two decades, governance has taken center stage in discussions of Africa’s future. Convinced of the connection between effective and responsive states and socioeconomic development, foreign donors have spent billions of dollars promoting good governance on the continent. African civil society groups focused on democracy, human rights, and governance have multiplied. Scholars have closely chronicled African state deficiencies and their damaging consequences for the liberty and material well-being of citizens. These problems have become depressingly familiar: personalism, corruption, ethnically-based patronage networks, insufficient economic and technical resources, and above all the absence of meritocratic professional bureaucracies.
Remarkably little is known, however, about how weak states become more effective. The high hopes of democratization in Africa in the early 1990s gave way to a growing recognition that better governance requires not just increased political accountability but also improvements in basic state capacity (Carothers 2002). Yet state-building is no easy task—whether for domestic leaders or outside actors. Aid efforts to transplant Western institutions into African governments largely met with frustration. As a result, scholars and development practitioners increasingly agree on the need to “work with the grain” of domestic structures and search for context-specific “good enough governance” solutions (Booth 2011; Grindle 2007). But positive cases of how this works in practice remain scarce and often limited to specific reforms rather than broader state-building processes.
This study helps address this gap by examining the conditions under which governments can make rapid progress in building state capacity in contexts marked by patronage-based politics, bureaucratic weakness, and high levels of poverty. It emphasizes rapid change because while institutional transformations may take generations, some evidence of early impact is crucial to build public confidence and give leaders a return on their state-building investments. Given the unsettled state of knowledge in this area, this project focuses on theory development rather than theory testing. It does so through a review of existing literature and close examination of the case of Lagos, Nigeria, between 1999 and 2013.
This thesis makes three main arguments. First, prospects for state capacity-building improve with higher levels of political commitment, internal organizational resources (financial, technical, and bureaucratic), and productive state-society relations. The relative significance of these three factors varies across reforms but simultaneous changes on two or more dimensions are often required for
sustainable progress. Deficiencies in each category can undermine conditions for the other two and thus appear to create vicious cycles of state weakness. Leaders faced with weak and illegitimate bureaucracies, for instance, may find it easier to maintain power through predation than public goods provision, further damaging state capacity. Yet low starting capacity can also create opportunities for rapid and mutually reinforcing improvements, particularly if there are low-hanging reforms that can be easily implemented, if significant financial or technical resources have been underexploited, or if popular expectations are so low that even small reform steps can improve state credibility.
Second, political commitment is most likely when leaders face serious threats and have sufficiently long time-horizons to make capacity-building a feasible response. Politicians inevitably confront multiple different threats, from losing political power to possible reductions in economic resources, and some are more immediate than others. Increased political stability should be associated with greater institution-building investments as well as more attention to longer-term threats. Leadership responses are shaped not only by the objective threat environment but also by personal beliefs about the relative importance of these problems and the feasibility of state-building solutions.
Third, state capacity can derive as much from cooperation with social actors as from state dominance of society. Strong societal power holders may occasionally block state penetration but can also crucially facilitate the state’s ability to access and monitor society. State legitimacy among the general public also facilitates capacity-building.
Case Selection
This thesis analyzes the drivers of changing state capacity in the Lagos state government from the transition from military rule in 1999 to 2013. Lagos is a good case study for two main reasons. First, the Lagos state government has significantly improved its extractive and regulatory capacities despite appearing to be a hard case for state-building. Lagos’s politics are dominated by patron-client relations, most of its population lives and works in the informal sector, and rapid population growth is stretching the city’s already overburdened infrastructure. It is also located within a country that epitomizes African state deficiencies. Nigeria is the continent’s largest economy but its budget relies overwhelming on oil revenues rather than internal taxation and
governance is marked by endemic corruption, high poverty rates and large shortfalls in even basic public service and security provision (Jordan Smith 2007; Owen 2012; Salami 2011).
Lagos does have some important advantages compared to other developing country cases but these do not outweigh its relevant challenges. As Nigeria’s commercial capital the city has a substantial formal economy, a middle class, and an active media and civil society. Yet in the 1990s and early 2000s Lagos was prominently presented not as a favorable base for state-building but as a harbinger of the global decline of states. For Kaplan (1994), Lagos’s “crime, pollution, and overcrowding make it the cliché par excellence of Third World urban dysfunction” and a sign of “the coming anarchy” of state decay and widespread social crises. Koolhaas et al. (2001) put a more positive spin on the same idea, presenting Lagos as a forerunner of an urban future where citizens will organize themselves absent state intervention.
Lagos’s experience may not be fully generalizable but it can provide important insights into how state capacity can improve amidst seemingly intractable challenges. State-building success cases tend to be atypical in several ways and Lagos shares more with other African and low-income states than often-cited models such as East Asian developmental states. Its trajectory is also directly relevant to many places with similar background conditions, such as other developing country capitals.
Second, Lagos is intrinsically important. With a population somewhere between 9 and 20 million people, it is one of the world’s largest cities and the commercial center of Africa’s largest country. What happens in Lagos resonates throughout Nigeria and sub-Saharan Africa and directly impacts the lives of millions of residents.
Lagos is not a sovereign country but it is considered a state in this study because it has its own elected state government with significant autonomous extraction, regulation, and public service responsibilities within the Nigerian federal system. Specific conceptualizations of the state and state capacity will be discussed in the following chapter. But to the extent that Lagos’s governors can rely on the federal government for security and fiscal transfers as well as some public goods, they should be even less likely to invest in independent state capacities.
This research analyzes one state unit for several reasons. Given the need for theory development and the fact that state capacity-building is the kind of process that Hall (2003) describes as unlikely to work along clear causal lines, the methodology for studying it must be able to identify complex interactions. Including more cases would require too great a sacrifice of detail and internal validity given the time and space constraints of an MPhil thesis. Moreover, in-depth
case studies are especially useful for theory development because they can point to previously unidentified causal factors (George and Bennett 2005; Van Evera 1997).
A single case study focused on a positive instance of capacity-building does risk several problems, however, including selection bias, insufficient variance on the dependent variable, and an indeterminate design resulting from too many variables and too few observations (King, Keohane and Verba 1994). These issues will be addressed through within-case analysis, which, as even King et al. (1994) acknowledge, can increase the number of observations and the variation on the dependent variable. Within-case analysis also holds many more factors constant than a cross-country study, facilitating controlled comparisons.
This thesis employs two kinds of within-case analysis, across time and across sectors. It examines the evolution of state capacity over two governors and four terms. This approximates a most similar systems design using Mill’s method of difference because most conditions remain constant but several critical drivers change, including leadership, levels of political stability, and state resources (Van Evera 1997). The thesis also employs a most similar systems design to compare the evolution of two fundamental aspects of state capacity—extraction and regulation—and then compare various forms of taxation and regulation and their impact on different social groups. This makes it possible to hold time-variant factors constant while analyzing the effects of variables such as public opinion and social organization. The types of taxation and regulation examined are chosen because they are among the most prominent issues in each category. The dependent variable of state capacity varies both over time, across tax and regulatory issues, and across social groups.
Within-case analysis does not fully resolve problems that come from selecting on the dependent variable because, as Collier and Mahoney (1996) warn, cases of clear success are likely to result from high scores on multiple explanatory variables. This can lead to overestimating the importance of certain factors that vary within-case while underestimating the role of case-wide variables that shape overall success (Collier and Mahoney 1996). Yet since this is a single case study, there is little choice but to pick a case where the outcome of interest has occurred. And as Van Evera (1997) contends, selecting cases with extreme values on the dependent variable is useful to theory development since visible values on the explanatory variable are likely. Collier and Mahoney (1996) note that extreme cases can lead to important insights as long as researchers are aware of how they are expected to be distinctive. As noted above, Lagos departs from the average developing country case in some important ways and these characteristics are detailed in chapter three and referenced when relevant.
Data Gathering
This research is based primarily on eight weeks of field research in Lagos in August through October 2013. I conducted 85 semi-structured interviews with current and former state government officials, political activists, journalists, scholars, and representatives of the private sector, non- governmental organizations, and international development agencies.
As this project is concerned with theory development, interviews had an open-ended component to elicit respondent’s views on the most significant changes in Lagos since 1999 and the key drivers of reform. As Van Evera (1997) and Aberbach and Rockman (2002) suggest, this approach revealed potential drivers that I had not previously considered and helped reveal the priorities and worldviews of different groups of interviewees. This was especially important in understanding elite conceptions of the megacity, an important component of political commitment to capacity-building.
Interviews also had a structured component with questions on general areas expected to be significant based on existing literature—such as bureaucratic reform and relations with social groups—and on particular turning points and consequences of the reform process. Interviews became progressively more structured as I developed a clearer idea of the remaining gaps in my research and sought corroboration of specific claims made by others.
As Tansey (2007) advises, in order to facilitate process-tracing interviewees were selected based on their knowledge of and involvement in reforms rather than random sampling (see also Aberbach and Rockman 2002). The majority of these (51) were government officials since they participated most directly in reforms. Interviewees were selected based on their positions within relevant state agencies and personal involvement in key events.
My research had the support of the Lagos governor’s office and they helped arrange most of my government interviews, greatly facilitating access to high-level officials. The governor’s office did not interfere with my research findings and never asked to see interview notes. Their involvement may have encouraged interviewees to present positive views of state action but government officials can be expected to demonstrate this bias regardless. I did contact several former and current officials independently and found that those interviews proceeded similarly.
I had several aims when contacting non-governmental interviewees. One was to speak with journalists, party activists, and others who could explain the political drivers of reforms, something bureaucrats were often uncomfortable discussing. Another was to corroborate government accounts with other participants in reform processes, including private sector associations and foreign
development agencies. Finally, I wanted to get outside assessments of the impact of state actions from government critics, researchers, civil society groups working on relevant issues, and the private sector. Most interviewees provided insights in more than one of these three areas. To contact these interviewees I reached out directly to organizations or individuals I knew had important perspectives to offer and to people suggested by other researchers. I then employed the snowballing method to ask these interviewees for further contacts.
Interviews inevitably run the risk of bias and memory limitations (Davies 2001; Tansey 2007). I sought to triangulate findings on major issues by speaking with both governmental and non- governmental sources and with officials from both gubernatorial administrations. I also supplemented interviews with other information on reform processes. I used the AllAfrica database to access newspaper articles dating back to 1999 on specific areas of interest. While little secondary literature exists on capacity-building processes in Lagos, I consulted existing academic work on Lagos’s general political context and made use of publications from government and development agencies.
To measure changes in state capacity I used all of the above sources as well as statistics and survey data when available. The government was forthcoming in sharing their statistics and budget information, though this data suffers from weak internal bureaucratic capacity for data collection and potential political interference. Survey data also exists from both state and non-state sources but a lack of panel data, limited and inconsistent time frames, and possible flaws in implementation hinder their ability to provide rigorous evidence of change. These issues are common to research in Africa, however, and data availability in Lagos is comparatively good given the availability of state information and non-state surveys. To compensate for data limitations, combinations of state and non-state sources—and qualitative and quantitative data when possible—were used to establish changes in state capacity. The following chapter will further discuss state capacity measurement.
Data Analysis
In order to examine the effects of specific explanatory variables on capacity-building, I employ congruence procedures and process-tracing in the over-time and cross-issue analyses as well as at the level of the overall case. As George and Bennett (2005) explain, congruence procedures entail observing whether a relationship exists between variance on the explanatory and dependent variables that fits the theory. Process-tracing can complement congruence procedures by reducing
the risk of spurious correlations and providing insight into the causal mechanisms connecting particular drivers and state capacity outcomes.
Process observations provide a different form of analytic leverage than simply increasing the number of cases because they reveal the steps linking particular inputs and results (Collier, Brady, and Seawright 2004). This makes it possible to distinguish the relative impact of different explanatory variables that all covary with the outcome (George and Bennett 2004). If a theory implies specific predictions distinct from other theories and requires the presence of particular intervening variables, then process observations can clearly support or undermine it (Hall 2003; Mahoney 2010). For instance, a theory that predicts financial resources are the main determinant of state capacity would be disproven if evidence exists that capacity-building preceded or contributed to improved finances. Such a distinction would be difficult to establish through congruence alone.
In this thesis, I examine the congruence between different groups of explanatory variables and three key aspects of state capacity-building. First, I consider whether changes in political commitment, organizational resources, and state-society relations are associated with overall capacity-building outcomes. Second, I examine whether increased political stability and three different types of threats are associated with higher political commitment. Third, I analyze whether the state's ability to tax or regulate social sectors varies according to the ways in which social groups are internally organized and their preexisting relations with the state. While I examine numerous explanatory variables, only a few are used in each comparison, diminishing the problem of excessive variables relative to observations (King et al. 1994).
I then employ process-tracing to examine whether evidence exists linking each of the above factors with capacity outcomes and the interactions and relative importance of these explanatory variables. There is a tradeoff between congruence procedures and process-tracing, since increasing the number of cross-issue comparisons diminishes the space for detailed process-tracing. I balance these concerns by combining an in-depth examination of tax reform with shorter descriptions of a larger variety of regulatory issues.
As George and Bennett (2005) emphasize, it is also important to consider alternative explanations. Based on a review of relevant literature and existing anecdotal explanations of the Lagos case I put together a list of possibly important factors before beginning fieldwork and added to it based on information from interviews. Those variables found to best explain the case were incorporated in the main body of the thesis while those that did not are briefly discussed in the conclusion.
PLAN OF THESIS The rest of this thesis proceeds as follows. Chapter two reviews the existing literature on
state capacity, state-building, developmental states, African states, and governance reforms in developing countries. It traces the major factors that have underpinned both state-building and state weakness in the past and considers the likely drivers of political commitment, organizational resources, and state-society bargaining in contemporary developing countries. Chapter three describes the political history of Lagos and evaluates its state-building prospects in light of the previous theoretical discussion.
Chapters four and five constitute the main empirical body of the thesis. Chapter four examines the experience of tax reform in Lagos, including how political commitment was shaped by political competition and megacity ambitions, the trajectory of bureaucratic reforms, and the relationship between tax compliance, public goods provision, and state bargaining with organized social groups. Chapter five compares the evolution of Lagos state regulatory capacity in eight different areas, analyzing the relative influence of different drivers of political commitment over time, the importance of diminishing organizational constraints, and the tradeoffs of social bargaining. The conclusion summarizes the main arguments, reviews potential alternative explanations, and considers the wider implications of the thesis.
Effective states are central to many of the most pressing issues in comparative politics and development studies, from the prospects for state accountability to the relationship between political regimes and development outcomes. Yet we do not have a strong understanding of how and why states develop capacities to collect revenues, provide security, enforce laws, and deliver public goods. State-building is sometimes regarded as a historic phenomenon, evoking images of early European states forged by the necessities of war. Confronted with the reality of contemporary states that cannot carry out basic functions, particularly in Africa, scholars have a much better understanding of the obstacles to state-building than the prospects for escaping cycles of state dysfunction.
The literature on the state and state capacity, state-building and social contracts, developmental states, African states, and policy reform in developing countries nevertheless provide important insights on the drivers and tensions of state capacity-building. Increasing state extraction from and regulation of society is politically costly and likely to provoke social resistance. Existing scholarship points to the central importance of strong elite commitment to state-building, driven by the need for financial resources as well as multiple forms of political pressure and policy ambitions. Given political interest, whether state capacity-building occurs depends on the political and economic costs involved and the likelihood of success, which are in turn influenced by the resources and cohesion of the existing state apparatus and the structure of state-society relations. Both organizational resources and state-society relationships are partially determined by structural factors but can also be significantly shaped by political decisions.
DEFINING THE CAPABLE STATE What is a state and how should its capacity be measured? The extensive scholarship on the
state offers various conceptualizations. The most famous is Weber’s (1957b, p. 78) definition of the state as “a human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory” and his emphasis on the organizational advantages of a meritocratic and rule-bound bureaucracy protected from private interests (Weber 1957a). Yet, as will be elaborated below, this focus on coercive force and modern bureaucracy is an overly narrow base to explore how states build basic capacities.
In order to capture a broader perspective, the state is defined here, following Stepan (1978, p. xii), as “the continuous administrative, legal, bureaucratic and coercive systems that attempt not
only to structure relationships between civil society and public authority in a polity but also to structure many crucial relationships within civil society as well.” Unlike some other views, this definition does not mandate a monopoly on the legitimate use of force or internationally recognized sovereignty (Jackson and Rosberg 1982; Young 1994). The latter requirement is critical for foreign policy but is not necessary to examine the exercise of domestic power. Ziblatt (2006; 2008) and Schensul (2008), for example, both fruitfully discuss subnational state capacities.
The state capacities of primary interest here are those related to internal rather than external strength. These relate to what Mann (1984, p. 189) terms “infrastructural power,” or “the capacity of the state to actually penetrate civil society and to implement logistically political decisions throughout the realm.” More specifically, scholars commonly highlight the state’s ability to extract resources and enforce rules in society (Karl 1997; Migdal 1988; Tilly 1985). King and Lieberman (2009, p. 557), for example, refer to the “things states do—regulate society and the economy, extract revenue, and maintain order.”
Following these views of state capacity, this study focuses on state extraction—particularly taxation—and state regulation, including managing security. Taxation is widely regarded as fundamental to state capacity because it provides resources for state activities and is linked to increased administrative penetration of society (Brautigam 2008; Soares de Oliviera 2007b). Regulation is central to the definition of the state and, like extraction, is one of the most challenging state tasks, as it requires disciplining social actors.
Many treatments of state capacity go beyond extraction and regulation to consider state public goods provision (Evans, Rueschemeyer and Skocpol 1985; Schensul 2008). Public goods are self-evidently important but this study considers them in relation to extractive and regulatory capacities rather than as an independent measure of state capacity. Public goods provision is less theoretically fundamental to state capacity. Extraction is usually required to acquire the resources for public goods provision while regulation is needed to ensure services are well-implemented. The provision of public goods also implies a benevolent orientation of the state toward its citizens that may not exist. While this study considers effective states as necessary for public goods provision, a strong state is by no means sufficient to ensure just or responsive government.
Measuring State Capacity
How can state capacities be identified? Measurement is complicated as capacity relates to potential rather than actually exercised state power (Levi 1988; Mann 2008). State leaders may have the
power to double taxes or impose arbitrary regulations but choose not to. To capture latent capacity many scholars thus focus on the state’s implementing apparatus, namely the existence of a Weberian bureaucracy (Brautigam 2008; Chabal and Daloz 1999; Schensul 2008). The widely used Worldwide Governance Indicators of government effectiveness and regulatory quality emphasize the quality of the civil service and its political independence (Kaufmann, Kraay and Mastruzzi 2010).
Yet despite their appeal as indicators, meritocratic and autonomous bureaucracies are neither the only path to improved state effectiveness nor the ultimate marker of advanced state capacity. Significant state development in Europe occurred during a period of prebendalism where administrative offices could be purchased (Anderson 1974; Weber 1957a). And, as King and Lieberman (2009) argue, the United States is clearly a capable state despite its significant departures from the Weberian bureaucratic ideal and its apparently weaker central bureaucracy compared to its European counterparts.
Bureaucracies are thus important indicators of state capacity but cannot be taken as sole proxies. Soifer (2008) explains that state capacity can be judged based on both internal national capabilities and the state’s weight on society. Measuring state capacity-building requires some consideration of both these aspects—changes within the state, including but not limited to bureaucratic reforms, and the societal impact of state action. This is difficult to capture with any single indicator but can be established through process tracing. Increased state capacity for extraction would thus require evidence of rising revenues attributable to changes in state collection rather than exogenous factors like economic growth.
Measuring changes in regulatory capacity is more difficult as impact is usually less clear-cut than increased revenues and the absence of regulation often reflects respect for individual rights rather than state weakness. Yet if a particular regulation—such as reducing crime—is clearly expressed as a government priority and internal state changes can be linked to increased achievement of that goal, that is a strong indication of improved state capacity.
COMPARATIVE TRAJECTORIES OF STATE-BUILDING AND STATE WEAKNESS Several bodies of academic literature provide insights on likely drivers of state-building. The
first two draw largely on the European state-building experience, considering the establishment of basic state capacities for extraction and regulation and the relationship between taxation, representation, and social compliance. The third considers state efforts in the developing world to
promote socioeconomic transformation through state regulation. The fourth examines the challenges of African state-building.
Early State-Building
State-building requires social actors to relinquish resources to an independent state structure and submit to its rules. If social actors are unwilling to do so, would-be rulers must deploy coercion. State-building is thus costly for both state and social actors and necessitates strong incentives, often in the form of threats that require collective action to address. Tilly (1992) has influentially argued that the constant danger of war in early modern Europe forced rulers to build extractive capacities to fund militaries. War can unite societies around state strengthening but extraction was nevertheless usually coercive, involving high political costs (Cramer 2006; Tilly 1992).
States can also grow out of internal class conflict. Anderson (1974) and Hechter and Brustein (1980) contend that European aristocrats supported state-building to protect themselves from a rising bourgeoisie. Boone (2006, p. 268) similarly writes that “dominant and ascendant social strata in Latin America and Europe built, rebuilt, and reorganized power within the state apparatus in order to both maintain old forms of social control and guarantee new ones.” Slater (2010) considers combined security threats and class conflict in Southeast Asia, arguing that elites and middle-classes supported state-building when faced with class-based internal unrest.
Once a coalition is motivated around state capacity-building, it needs resources. As Tilly (1975) emphasizes, not all political units survived the persistent warfare of early modern Europe. He considers the availability of extractable resources and coalitions between the central power and major segments of the landed elite as key conditions that seem to have favored success (Tilly 1975). Rich countries are better able to fund armies—and to survive—than poor ones. Yet it is also easier to extract resources from some groups than others. Tilly (1992) outlines the contradictory role of cities; they are important sources of capital but also power centers that can resist state penetration.
States differ from temporary alliances because they involve a permanent apparatus that can discipline social actors, including initial supporters. This requires some autonomy from social forces. Weberian bureaucracies can achieve this but are rarely the first step. Examining global state-building experiences, Fukuyama (2011) describes a common struggle to protect state cohesion from social fragmentation, including by developing special state cadres such as Ottoman janissaries and Chinese eunuchs who were insulated from familial loyalties. Migdal (1988) considers the rise of a strong state in Israel to be the result of not only an existential military threat but also the collapse of the old
social order and the rise of skillful leadership and a group of young “pioneers” freed from attachments to the old world (Migdal 1988).
Taxation and Social Contracts
The above vision of state-building emphasizes crises and coercion. The literature on state- building also points to another aspect of the European experience: increased capacity through social contracts. State extraction began largely coercively but in many countries popular resistance to taxation prompted government concessions and the creation of representative institutions such as parliaments or the French Estates-General (Brautigam 2008; Ross 2004; Tilly 1975). This link was particularly strong in England, explaining the resonance of American revolutionary protests of “no taxation without representation” (Moore 2004).
Democratic mechanisms constrain rulers but can enhance state extraction capacities in the long run. Levi (1988) contrasts the experiences of medieval England and France, contending that a strong Parliament in England limited the discretion of English rulers relative to their French counterparts but the legitimacy of parliamentary approval enabled more effective tax collection in England than in France. She argues this is because tax collection relies on “quasi-voluntary compliance,” when people choose to pay taxes but know non-compliance could bring penalties. This is likely when taxpayers believe that compliance is widespread and that rulers will abide by social contracts to provide public goods in exchange for taxes (Levi 1988). This indicates that representation is most important as a means of ensuring that the state will keep its public goods bargains. In a statistical study of 113 countries Ross (2004, p. 247) concludes that “people do not generally rebel against taxation without representation; rather, they appear to rebel against taxation without commensurate government services.”
State Regulation and Socioeconomic Transformation
Another body of literature with important insights for state capacity-building focuses on modern efforts to extend regulation in pursuit of socioeconomic transformation. This scholarship covers both developmental successes and disasters. Authors emphasize the importance of elite commitment, derived from security threats and ruler ideas, and the combined roles of competent state bureaucracies and social linkages in facilitating implementation.
Leaders faced with security threats may not only intensify extraction efforts but also try to expand their potential resource base through economic development. Much of the theory on
successful developmental states draws on the rapid economic growth of Japan and the East Asian Tigers—Singapore, Taiwan, South Korea, and Hong Kong. Literature on these cases emphasizes strong elite cohesion and commitment to development arising from a common elite ideological background and external security threat perception, a capable bureaucracy, and authoritarian control (Kohli 2004; Onis 1991).
Threats are important motivators of state capacity-building but they are interpreted through the prism of elite beliefs and ambitions. In the East Asian developmental cases leaders recognized the limits of state power and only selectively regulated the market (Evans 1992). Scott (1998) describes the opposite extreme of “high-modernist ideology,” the belief that technical progress and state planning can reorder and modernize society. These views combined with authoritarian control led to extremely ambitious—and often disastrous—initiatives such as China’s Great Leap Forward or Tanzania’s villagization program (Scott 1998). Stepan (1978) describes another approach in 1960s Peru, where military professionals believed that social unrest threatened their corporate survival. Stepan considers the military “organic-statist,” focused less on rapid modernization than on creating social harmony by reorganizing popular sectors into organically integrated and state-guided interest groups.
The implementation of state regulations relies on a delicate balance between the need for state autonomy and state-society linkages. Stepan (1978) and Lucas (1998) note that military regimes are relatively insulated from social pressures and can make autonomous decisions but this also makes it difficult for them to penetrate civil society and institutionalize reforms. Scott (1998) attributes the failures of high-modernism to overly autonomous states that lacked understanding of the societies they sought to transform.
Evans (1992) highlights the “embedded autonomy” of states like Japan and South Korea, arguing their success resulted from the combination of coherent bureaucracies and strong informal relationships between bureaucrats and business leaders. State-society ties helped bureaucrats understand economic needs, limited arbitrary policies and facilitated the implementation of state plans. Lewis (2007) similarly emphasizes the importance of inclusive state-private sector coalitions in Indonesia, going further than Evans in contending that informal guarantees arising out of these relationships can partially compensate for weak formal institutions. He contrasts this with the lack of stable private-public relationships in Nigeria.
Social embeddedness creates some checks on state power but is not inherently democratic or undemocratic. Onis (1991) and Kohli (2004) argue that public-private cooperation in the East Asian
developmental states was premised on selective access to the state that excluded labor interests and other social groups. Latin American corporatist states incorporated labor but in an authoritarian fashion aimed at controlling popular organizations rather than representing their interests (Stepan 1978).
Yet state-society linkages can also be more horizontal and democratic, especially when social actors are independently powerful (Stepan 1978). Evans (1992) contends that contemporary states need to build more inclusive embedded autonomy based on relationships with parties and other popular organizations. Other scholars argue that democratic states can be developmental if they have capable bureaucracies, democratic legitimacy, and mobilized working and middle classes, and lack serious social cleavages (Norris 2012; Robinson and White 1998; Sandbrook et al. 2007).
State Weakness in Africa
The above literature points to a demanding set of conditions for state-building success, including high levels of elite commitment, access to resources, and efficient bureaucracies that are both relatively autonomous from social divisions and capable of productive state-society bargaining. Scholarship on African politics tends to highlight the absence of these factors in the region, particularly the deleterious effects of neopatrimonialism. In contrast to “embedded autonomy,” African states are portrayed as both insufficiently autonomous from social patronage networks—and thus unable to establish coherent bureaucracies—and lacking in the types of social linkage and legitimacy that could facilitate quasi-voluntary compliance with state rules. Rulers have little incentive for state-building and face high costs and a low probability of success if they attempt it.
How capable are African states? There is clearly significant variation within the region but on average regulatory capacity is weak. Soares de Oliveira (2007b, p. 8) reflects many views when he describes the deficiencies of African states as “crumbling bureaucracies, decaying infrastructure, irregular administration, and the virtual abandonment of swathes of their territory.” To take just one sector example, a World Bank study of African urban transport describes widespread problems with road congestion, chaotic buses, and traffic safety, pointing to “ineffective regulation and an almost universal absence of integrated planning” (Kumar and Barnett 2008, p. xiv). African states also have difficulty taxing their populations. Resource taxes make up the largest share of tax revenue on the continent and direct taxation on income—the form of tax most associated with social contract bargaining—relies disproportionately on corporate taxes and income taxes on the small percentage
of people employed in the formal sector (African Economic Outlook 2013; IMF 2011; Moore 2013a).
Neopatrimonialism forms the heart of most explanations of state weakness in Africa. It refers to the simultaneous existence of informal patrimonial and bureaucratic legal-rational forms of rule (Erdmann and Engel 2007). This undercuts the formation of a competent civil service with a clear separation between public and private interests. State resources are instead used to build patrimonial political networks (Chabal and Daloz 2004; Kohli 2004). Leaders rely on these informal networks to remain in power and thus appear to have limited interest in strengthening formal institutions, instead sometimes actively weakening the bureaucracy to distribute patronage jobs and prevent the creation of independent power bases (Fukuyama 2005; Migdal 1988; Young 1994).
Rulers can afford to pursue neopatrimonial strategies because they don’t need capable states to overcome military threats or access revenues. International law protects even weak states from being conquered by their neighbors (Herbst 2000; Jackson and Rosberg 1982). African leaders can access revenues through trade taxes or foreign aid by virtue of controlling the state without building extensive extractive capacities or fostering commercial prosperity (Bayart and Ellis 2000; Cooper 2002). These problems are exacerbated in resource-rich countries, especially oil states, which have secure revenue flows and tend to make especially little internal tax effort (Karl 1997; IMF 2011).
Low reliance on domestic taxation is widely believed to undermine bureaucratic development, centralize power and reduce government responsiveness to the needs of both independent business leaders and the broader public (Boone 2006; Karl 1997; Moore 2004). In a review of the literature on what is known as the resource curse, Ross (2013) finds evidence that oil wealth is associated with more durable authoritarian regimes and increases in certain types of corruption, with many scholars contending this is because low taxation diminishes popular demands for accountability.
Examining African responses to structural adjustment, van de Walle (2001) argues that the substantial autonomy of neopatrimonial leaders from popular demands allowed them to channel scarce resources away from developmental obligations toward elite consumption. Neopatrimonial politics also imply that where public demands are significant, they are often channeled by ethnic or religious groups and focus on private or club goods rather than public goods (Lewis 2007; Lindberg 2010).
Even if leaders have state-building ambitions, they face high costs. Herbst (2000) argues that Africa’s geography and low population density makes projecting state power especially costly. Migdal
(1988) contends there is a problem of “strong societies and weak states,” with African states at a disadvantage relative to societal strongmen who can resist regulation. African economies also tend to be largely agricultural and informal. It is more costly and less lucrative to tax these sectors than urban formal businesses where pay-as-you-go income tax withholding is possible (Hlope and Friedman 2002; Moore 2013a).
Quasi-voluntary compliance is complicated by low state credibility. Englebert (2000) and Ekeh (1975) contend that ordinary Africans do not feel loyalty to the postcolonial state because they consider it a continuation of illegitimate colonial institutions. Taxation is particularly tainted by association with coercive colonial extraction (von Soest 2009). Building state legitimacy based on development performance is a more promising option than drawing on historical legitimacy but is also difficult. Weak bureaucracies and non-programmatic politics hinder leaders from making credible public goods commitments (Keefer 2007; Keefer and Khemani 2005).
Low elite commitment and incompetent and illegitimate states can interact to produce particularly bad state-building prospects. Rulers of weak states may rationally decide to cut deals with strongmen rather than attempt the potentially impossible task of building state capacity to deliver public services (Migdal 1988; Reno 1999). Corruption and poor public services can then undermine trust in government, discourage compliance with taxes or regulation, and further inhibit state capacity (Rothstein 2011). Public perceptions that tax evasion is widespread deters compliance even in the formal sector (Joshi et al. 2013; Moore 2013a). This reasoning suggests high and low equilibriums of state strength, with some states in virtuous cycles of tax compliance, popular demands, public goods provision, and legitimacy and others in vicious cycles of low elite commitment, low tax revenues, low legitimacy, and little capacity to provide public services.
BUILDING STATE CAPACITY IN DIFFICULT PLACES The above literature has several common strands. Increases in state capacity require political
commitment, which is shaped by elite threat perceptions. The difficulty of increasing state extraction and regulation is shaped by resource availability and the capabilities of the preexisting administrative apparatus. Leaders can lower the costs of state-building and enhance their effectiveness by gaining societal buy-in, through generalized legitimacy or specific relationships with important social actors.
These general statements, however, only partially address the prospects for transforming dysfunctional states. The literature on state-building and developmental success draws mainly on European and Asian cases and tends to highlight conditions not present in most African states—or
in many other low-income countries with similarly patronage-based politics. The Africa-focused literature reviewed above has the opposite limitation; it describes obstacles to effective states but provides few clues to potential state-building paths. As Mamdani (1996) observes, this scholarship sometimes reasons by analogy, focusing on how African states differ from European ones rather than starting from local conditions.
Yet states in Africa and elsewhere in the developing world are not static and some scholars have examined successful state reforms in seemingly unfavorable contexts. This section is based on case studies of peace-building in Somaliland, tax reform in Ghana and Zambia, subnational governance reforms in Brazil, Colombia, and India, and cross-country studies in Africa and Latin America. Most of these writings explain particular governance reforms rather than broader state- building processes and many are descriptive accounts without substantial process-tracing or testing of alternative explanations. They nonetheless illuminate how political will, state cohesiveness, and social cooperation can emerge in difficult environments.
Sources of Political Commitment
The literature on successful state reforms is near unanimous in stressing the paramount importance of high-level political will. Authors highlight how security or economic threats provided impetus for reforms. Kelsall (2013) and Booth (2012) argue that Ethiopia and Rwanda display “developmental patrimonialism,” with strong elite discipline and developmental commitment arising out of shared participation in violent struggle. In Bihar, India and Medellín, Colombia, scholars contend that security crises forced leaders to act to reestablish order and promote development (Chand 2010; Maclean 2014). Lal (2010) highlights the role of both fiscal deficits and elite consumer demands in driving power sector reform in West Bengal while Phillips (2013) contends that a lack of external aid to Somaliland forced the president to find resources internally.
The threat of political competition can also motivate state-building reforms that appeal to the public. Borges (2008) contends that education reform was more successful in Brazilian states with higher political competition while Mooij (2007) attributes reformist commitment in Andhra Pradesh, India to the rise of the middle class and more assertive lower caste groups, which convinced leaders they couldn’t depend only on preexisting patronage networks.
Increased taxation is often unpopular but can nevertheless be compatible with political competition. Theoretical literature predicts that democratization would lead to higher taxes since a wealthy minority can be taxed to pay for public services (Boix 2003; Meltzer and Richard 1981).
Nugent (2010) notes that Ghanaians have voted for higher taxes in return for the promise of social services, drawing on a historical expectation that taxes would go to public goods. Leaders in neo- patrimonial systems may also improve tax collection to increase their patronage resources, as von Soest (2009) argues occurred in Zambia.
These security, economic, and political threats usually fall short of the existential threat of war in early modern Europe but the costs of state-building are also lower than in the past. Contemporary states are not starting from scratch and can appeal to international norms around taxation and regulation. And as Moore (2013a) notes, modern taxation methods like income withholding engender less resistance than coercive medieval tax farming.
Political commitment is further shaped by how leaders interpret the threats and opportunities they face. Jones et al. (2013, p. 4) argue that the neo-patrimonial explanation of African politics “ignores the political imaginations of these elites. The very possibility that they may have state-building aspirations is occluded.” Echoing Scott (1998), the authors observe high- modernist ambitions in Ethiopia, Sudan, Rwanda, and Angola, and highlight how these regimes consider economic success key to their external and internal legitimacy (Jones et al. 2013). Grindle (2004) portrays Latin American education reforms as part of elite modernizing projects. Phillips (2013) attributes commitment to state-building in Somaliland to broad social consensus around the need for peace and the ambition of political leaders to earn international recognition of Somaliland’s sovereignty. Many authors also highlight the ideological and moral commitment of leaders to fighting poverty (Kohli 1987; Melo et al. 2012).
Leaders also vary in their creativity and risk calculations. Given the same set of circumstances some may be willing to take large gambles to enhance their power while others may be content with the status quo. Certain politicians are better than others at identifying win-win policies that benefit both entrenched interests and ordinary citizens (Rodrik 2014). Yet it is too simplistic to qualify leaders as either reformist or non-reformist; they are usually balancing different strategies and interests. For example, Chief Minister Naidu in Andhra Pradesh successfully projected an image of good governance to external donors and undertook reforms to modernize state administration but simultaneously tried to solidify his patronage-based political control over the countryside by opposing democratic decentralization and politicizing a program to give rural women access to credit (Manor 2007; Mooij 2007).
Organizing State Resources
If political leaders are committed to state capacity-building, they need resources and an administrative apparatus to implement their decisions. New extractive or regulatory efforts are clearly facilitated by the prior existence of an effective state organization with access to financial and technical resources. But to escape low capacity equilibriums, leaders must find ways to implement reforms even when the civil service is corrupt and incompetent.
One popular response to weak bureaucracies involves setting up technocratic enclaves to implement important initiatives. These are administrative units insulated from the regular civil service, usually with more meritocratic hiring and higher salaries. Leaders in Bangalore and Madhya Pradesh, India set up special organizations directly accountable to them to handle priority programs (Manor 2007; Melo et. al 2012; Srivastava 2005). Countries across Anglophone Africa have established semi-autonomous revenue administrations to professionalize tax collection (Moore 2013b). The independent contribution of these “islands of excellence” to state-building should not be overstated, however. Their insulation and effectiveness depends heavily on continued political commitment and they often coexist with stagnation or decline in other parts of the bureaucracy (Moore 2013b; Soares de Oliveira 2007a; von Soest 2009).
Reformist politicians have also found other ways to compensate for shortcomings in their government’s internal cohesion. Multiple studies highlight how executive leverage over strong parties or the legislature can facilitate reforms (Kohli 1987; Geddes 1994; Manor 2007). Leaders in several Brazilian and Indian states overcame bureaucratic shortcomings by hiring contract workers who brought needed skills and manpower but enjoyed less job security than regular bureaucrats (Chand 2010; Melo et al. 2012; Tendler 1998). Multiple Indian states shifted important services such as employment and land records to electronic systems to facilitate implementation and reduce corruption (Elliott 2011; Manor 2007; Mukherjee 2010).
These strategies for enhancing state cohesiveness rely not just on the structure of the political system but also on the more intangible element of leadership quality. Reformist leaders in both Colombia and India gained legislative support for their priorities through a mix of mobilizing public pressure for reform and convincing lawmakers that reform would enhance their access to rents and their reelection prospects (Devlin and Chaskel 2010a; Melo et al. 2012; Mooij 2007). Tendler (1998) highlights the success of efforts to motivate bureaucrats in the Brazilian state of Ceará by revaluing their role as public servants, a dynamic which Devlin and Chaskel (2010a) also observe in Bogotá.
State-Society Relations
State legitimacy and social ties can lower the costs of capacity-building. This is clearest with regard to taxation. Examining Afrobarometer survey data in 17 African countries, D’Arcy (2011) finds evidence that citizens are more willing to pay tax if they feel the state is providing public services and enforcing tax laws fairly on all citizens—echoing Levi’s conditions for quasi-voluntary compliance. A four-country study by Ali, Fjeldstad, and Sjursen (2013) using the most recent Afrobarometer data finds similar results. Case studies of Bogotá and Medellín, Colombia also claim that increased tax revenues followed public service improvements (Devlin and Chaskal 2010a; 2010b).
Specific agreements with social actors can further facilitate state extraction. Joshi and Ayee (2008) illustrate this in Ghana, where the state partnered with the road transporter’s union to collect taxes. The transport union collected taxes from its members and passed on revenues to the state, keeping a percentage. The authors contend that this model of associational taxation can decrease the costs and increase the legitimacy of informal sector taxation, but note that it has been insufficiently studied (Joshi and Ayee 2008).
The case of Somaliland presents an interesting example of the potential and limitations of building state capacity through bargaining with powerful social groups. Phillips (2013) contends that President Egal used personal ties with business leaders to secure loans for the government in exchange for favorable state treatment. While this deal limited state power over business, it also provided resources to coopt another set of social rivals—clan elders. Phillips (2013) notes that Somaliland state capacity comes less from direct coercive power or an effective administrative apparatus than from the state’s ability to mediate economically, politically, and ideationally among social actors.
MANEUVERING THE TENSIONS OF STATE-BUILDING These examples of governance progress highlight important potential drivers of capacity-
building in contemporary developing countries. But they provide limited insight on the other conditions necessary for these factors to have positive effects. Why do security threats and political competition motivate state-building in some cases and contribute to state decay in others? When do social bargains assist more than they constrain states?
State-building doesn’t result from maximizing any single driver—it is instead the product of a dynamic tension between crisis and stability, coercion and consent, and autonomy and social
linkage. Political commitment requires both serious threats and relatively long time horizons. Powerful social actors can simultaneously serve as strong allies and rivals of the state. Low capacity states are not necessarily trapped in vicious cycles but capacity-building likely requires concurrent movement on political commitment, organizational resources, and state-society relations.
Threats and Stability
Existing literature indicates that leaders are most likely to commit to capacity-building when they face security, economic, or political threats that require a more effective state. Yet state-building reforms only serve the interests of rulers if they believe they will be in power long enough to benefit from them. Levi (1988) thus identifies discount rates, or time horizons, as one of the most important constraints shaping ruler decisions. Olson (1993) illustrates this point through the idea of stationary and roving bandits; both are predatory but the stationary bandit expects to continue exploiting one territory and thus has an interest in encouraging economic prosperity to increase his future returns. Lewis (2007) and Kelsall (2013) similarly argue that well-organized and long-term oriented rent-seeking can be compatible with developmental policies.
Within this framework, democratic elections and especially term limits can inevitably limit long-term planning (Levi 1988). But many autocratic regimes are also unstable. Dictators can face serious threats of coups or rebellions while lower-level officials are often in danger of being fired or moved. The shift toward African leaders leaving power by legal and electoral means rather than violent overthrow thus does not necessarily shorten time-horizons (Posner and Young 2007).
And, as we have seen, threats are also central to political commitment. Too much security undermines reform incentives and can entrench predatory governance and weak institutions. In these cases political competition may force leaders to improve their performance (Carothers 2007; Ermakoff 2011). While Kelsall (2013) decries the short-termism of competitive clientelist politics, he acknowledges that centralized rent-seeking without developmental commitments can result in kleptocracy. The stationary bandits analogy fails if political rents are independent from broad-based domestic taxation.
The most promising formula for political commitment is thus a serious threat combined with sufficient organizational resources and time-horizons to make state-building an appealing investment. Both threats and long time-horizons can come from multiple sources. This resonates with the historical literature. In Anderson’s (1974) interpretation, for instance, European aristocrats felt threatened by a rising bourgeoisie but nevertheless retained sufficient economic and political
advantages to plan for the long-term. East Asian developmental states perceived security threats but their strong bureaucracies and political continuity enabled a capacity-building response (Onis 1991).
Social Partners and Rivals
Do organized societies help or hurt state-building? Migdal (1988) argues that social dislocation facilitates strong states by undermining potential rivals like traditional authorities. King and Lieberman (2009, p. 558) present a different view, contending that “American state building came about not to the exclusion of other social and political structures but in conjunction with a set of partners both in the polity and in civil society.”
Both perspectives are partly valid. Social power holders can both block and facilitate state penetration. Their dual role arises out of a tension Levi (1988) identifies between transaction costs and bargaining power. Social organizations capable of centralizing state-society negotiations and delivering member compliance can reduce the costs of capacity-building. They make society legible to the state. Yet these actors also usually have high bargaining power to challenge state decisions. Their role depends on their organizational strength and relationship and level of shared interests with the state.
Existing literature already provides useful frameworks to compare state-society relationships. Two are especially relevant here. Examining variation in state penetration in rural Africa, Boone (2003) contends that rural elites with hierarchical social control have high bargaining power relative to the state and become strong allies or strong rivals depending on their level of economic dependence on the center. Elites without social control are weak rivals or allies. Joshi and Ayee (2008) focus on a different issue—informal sector taxation through social associations—but similarly categorize social actors based on their level of organization and relationship with the state. They emphasize institutionalized channels of state-society negotiation rather than dependence.
These typologies can be combined and adjusted in two ways to apply to a broader set of state-building activities. First, social actors are often neither fully autonomous nor fully dependent on the state but can have important preexisting relationships with state actors. Second, social groups vary not only in organization but also in the characteristics of their members. A social leader is a gatekeeper if circumventing them and reaching individual members directly involves prohibitively high costs. Joshi and Ayee (2008) implicitly focus only on gatekeeper organizations—the informal sector is highly costly to tax directly. But other actors are organized enough to be strong partners or
opponents of the state but cannot block state penetration. Boone (2003) presents state circumvention of even powerful rural rivals as an option.
Table 2.1 outlines these different possibilities. The transaction costs of state-society bargaining are lower as social groups are more organized and closer to the state. The bargaining power of social actors depends on autonomy from the state and levels of organization.
Table 2.1
Where social groups are both organized and dependent, they have low bargaining power and are strong allies. This would include corporatist arrangements with state-controlled social organizations. These could be gatekeepers such as state-organized slum associations that Stepan (1978) analyzes in Peru or non-gatekeepers like formal sector trade unions.
Organized groups with structured relationships with the state are easier to reach than independent groups but have sufficient independence to resist policies they dislike. Such relationships could involve formal institutional ties as well as informal relationships. Political alliances between social groups and a political party can constitute a structured relationship while that party remains in power. Joshi and Ayee’s (2008) Ghanaian transport union is a gatekeeper organization whose tax role was enabled by close political ties to the ruling party, though its role faded after the ruling party lost power. It constitutes a critical constituency because the government would not move forward with this policy without its consent and is likely to consult it early on.
costs=transaction costs
Organized gatekeeper
Organized non- gatekeeper
Strong partners
Low bargaining power Low costs
Strong partners
Low bargaining power Low costs
Weak partners
Low bargaining power Medium-high costs
Structured Relationship
Critical constituency
High bargaining power Low costs if partner Prohibitively high costs if circumvent
Likely strong partners, potential rivals Medium bargaining power Low costs if partner
High costs if circumvent
Weak partners
Low bargaining power Medium-high costs
Critical bargaining partners High bargaining power Medium costs if partner Prohibitively high costs if circumvent
Strong partners or rivals Medium bargaining power Medium costs if partner High costs if circumvent
Weak rivals
Low bargaining power High costs
Evans’s (1992) Korean businessmen are non-gatekeepers with strong informal relationships with bureaucrats. Their cooperation is immensely helpful to state regulation of the economy but they cannot block regulation altogether.
Organized social groups without state ties are more costly to reach but may still partner with the state on issues of mutual interest. They would include non-politically affiliated informal sector associations as gatekeepers and independent business groups as non-gatekeepers. Gatekeepers are critical bargaining partners for the state since it cannot implement policies without their agreement, but given a lack of preexisting relationship they might not be involved in early parts of policy formulation.
Diffuse groups have low bargaining power but are also generally costly for the state to monitor. Organization should be viewed as a continuum; some groups—such as businesses—are easier to locate than individuals even if they are not organized in associations.
This typology indicates likely dynamics of state-society bargaining given different types of social groups but provides only partial predictions of capacity-building patterns. Where both rivalry and partnership are possible, alliances depends on whether state policies can serve shared interests. Outcomes also depend on leadership commitment to bear the costs of bargaining with independent organizations or of circumventing rivals through coercion. This is in turn influenced by the political importance of particular constituencies. Diffuse citizens cannot necessarily facilitate or directly block state activities but they can punish politicians at the polls.
Escaping Low Equilibriums
Weak states face numerous overlapping challenges and addressing just one obstacle is unlikely to spark durable progress. As foreign donors have learned the hard way, providing governments with financing and technical advice absent political commitment usually has little state- building impact. Technocratic enclaves are similarly dependent on political support. Strong ties to social organizations without administrative coherence or political commitment may further fragment the state. And a committed leader with no coherent implementing apparatus or productive social linkages is highly constrained, and as noted above, may not have the incentive to attempt capacity- building.
State capacity-building is clearly a multifaceted process but it does not necessarily involve vicious cycles. In addition to the very large disadvantage of lacking a competent bureaucracy, low starting capacity can bring certain opportunities. One is that there are likely to be some win-win
reform possibilities. As the literature on governance reform suggests, when bureaucratic performance is very low even hiring more contract workers or improving morale among civil servants can lead to substantial improvements. Another potential opportunity relates to expectations. Expectations are central to the vicious cycle idea that low state credibility breeds low legitimacy and low social compliance. But low expectations are also easier to exceed, implying that a government that performs better than average can gain a chance at legitimacy.
Taxation provides one of the best opportunities to simultaneously address multiple constraints to capacity-building. Increased tax revenues increase state organizational resources, both through direct financing and potentially by contributing to enhanced administrative penetration of society (Brautigam 2008). The link between quasi-voluntary compliance and public services may further motivate leaders to improve their capacity to provide public goods (Tilly 1992). These are appealing ideas but have not been adequately tested, particularly in terms of the specific causal mechanisms that link taxation with more capable government. Tax revenues have increased in some African countries tax revenues without positive externalities for other parts of the state administration or a sufficiently broad tax net to spark widespread state-society bargaining and pressure for public goods (Fjeldstad 2013; Moore 2013b; von Soest 2009).
CONCLUSION The varied literature on state-building and developmental governance does not point to a
single path toward state capacity-building but does provide guidance on the conditions under which state extractive and regulatory capacities are likely to improve. Existing scholarship points to three crucial bundles of factors in evaluating prospects for state-building: political commitment, state organizational resources, and productive state-society ties.
Political commitment derives from the perception that more effective states are needed to address serious threats and that capacity-building is possible. Three factors are particularly important to state-building in contemporary developing countries: revenue sources, political competition, and elite ideas. One of the clearest conclusions from the literature on oil states and Western state- building is that rulers who depend on domestic extraction rather than international rents are more likely to make state-building efforts.
Alongside fiscal needs, political competition is more likely than inter-state war to present a potent threat to contemporary politicians. Political competition per se does not have predictable effects on capacity-building efforts. It supports political commitment only if leaders believe a more
effective state will help them maintain power and that capacity-building will yield results in time to be politically relevant. Politicians could have strong motivations to enhance state capacity to maintain law and order before an election but equally powerful disincentives to raise taxes in the same period. Finally, the ideas and ambitions of leaders play an important role in shaping their interpretation of the threats they face, what responses are needed, and their expected probability of success. Elite beliefs that their interests are tied to state-led socioeconomic modernization are a particularly common and important driver of capacity-building.
Where political commitment exists, extending extraction or regulation is clearly easier if the state has access to resources and a coherent administrative apparatus. Socioeconomic structure helps determine the financial and technical resources available to the state and the costs of state penetration. In addition, a meritocratic bureaucracy able to implement reforms greatly facilitates capacity-building efforts. Yet establishing such a bureaucracy in the first place is one of the most difficult state-building challenges. In its absence, political leaders can enhance state cohesion and capacity through technocratic enclaves, efforts to enhance the commitment of civil servants, executive leverage over the rest of the political system, and savvy political leadership.
The resources required for state capacity-building and its likelihood of success depend in large part on the state’s relationship with society. This includes both the general public image of the state and specific linkages between state and societal actors. Existing literature supports the idea that extraction and regulation are less costly if the state enjoys public legitimacy, though it is less clear whether legitimacy is historically determined or if it can be increased through government performance. Tax compliance is particularly tied to state public service delivery, though scholarship on quasi-voluntary compliance also implies that this must be paired with credible enforcement mechanisms.
The state’s ability to bargain with specific social interest groups may be an even more important determinant of the success of any given initiative. While some authors see social power holders as a threat to state-building, much of the literature suggests that structured relationships between the state and important social groups can crucially facilitate state penetration of society. These range from informal ties between senior bureaucrats and businesspeople to political deals between the state and informal unions. The most useful social partners are those that can substantially reduce the costs of extraction or regulation by centralizing state-society bargaining and delivering societal compliance.
Political commitment, organizational coherence, and social cooperation can derive from multiple sources and it is unnecessary—and unlikely—for the same factors to drive state-building across all countries. Yet not all specific drivers are created equal. The threat of war has greater potential to mobilize whole societies around state-building than a budget deficit. Organizational coherence can be enhanced by a technocratic enclave but a coherent Weberian bureaucracy is nevertheless preferable.
State capacity-building is a complex process but it is not entirely unpredictable. Sustainable progress depends on political commitment, organizational resources, and productive relations with society. Moreover, certain specific factors appear to improve capacity-building prospects across contexts, including a reliance on domestic revenues, modernization ideas, a prosperous formal economy, competent bureaucracies, an internally cohesive political system, and state legitimacy. Others, such as political competition and social organization, have significant but sometimes contradictory effects. To understand how these different drivers fit together in practice, the following chapters will consider the dynamics of state-building in Lagos.
Lagos in 1999 seemed an unlikely candidate for state-building. It appeared instead as a prime example of the obstacles to effective governance in developing world cities grappling with rapid migration, overburdened infrastructure, and weak and illegitimate states. Nigeria’s reputation for corrupt and arbitrary rule and its reliance on oil revenues compounded the city’s challenges. Yet beneath the surface of this pessimistic picture Lagos had access to important historical, political and socioeconomic resources for state-building.
The city’s political history has diverged in important ways from that of Nigeria. Its previous civilian rulers have left a dual legacy of public goods and patronage provision. Political elites have reasons to believe that improving urban management serves their interests, both to maintain political power and to transform Lagos into a respected global megacity. Lagos’s economy concentrates significant technical and material resources while its organized society could facilitate state-building efforts.
Nigeria at a Glance
Nigeria’s history has been marked by frequent democratic interruptions and state incapacity and corruption. After independence in 1960 Nigeria experienced two coups in 1966, followed by a civil war from 1967-1970, a brief return to civilian rule from 1979-1983, and another coup. A 1990s democratization program failed after the 1993 presidential elections were annulled. Military leader Abacha’s death prompted a transition to the current period of civilian rule in 1999. Nigeria’s federation began with three strong regions but now has 36 states and greater centralization of power.
Nigeria is Africa’s largest oil producer and exemplifies the problems of oil states. 80% of government revenues derive from oil and leaders see little need to invest in extensive extractive or regulatory capacities (IMF 2011). Corruption has long existed but Lewis (1996) contends that the 1980s and 1990s marked a shift from relatively widespread distribution of benefits through patron- client relationships toward centralized predation by the national executive, facilitated by oil rents. This situation has persisted. Kohli (2004) and Soares de Oliveira (2007b) describe how Nigerian elites focus on accessing oil revenues to the detriment of broader economic prosperity. The country struggles with severe civil unrest and endemic poverty. UNDP’s (2013) 2012 Human Development
Index ranks Nigeria 153rd of 186 countries while Transparency International’s (2013) Corruption Perceptions Index ranks Nigeria 144th of 177.
Politics in Lagos and Southwest Nigeria, 1951-1999
Multiparty politics in Lagos have been repeatedly interrupted by coups but nevertheless demonstrate striking continuities from the late colonial era. The current ruling party in Lagos traces its lineage to the Action Group (AG), founded in 1951 by Chief Obafemi Awolowo. The AG and its successors have long dominated civilian politics in southwestern Nigeria, where Lagos is located. Their success results from a combination of public service promises, patronage, and association with the region’s main ethnic group, the Yoruba. These political parties have consistently opposed the central government.
The AG and its heirs profess social-democratic ideas and have been linked to public service advances. In Lagos politics the two most important reference points are Awolowo and Lateef Jakande. As Western Region Premier in the 1950s, Awolowo established universal primary education—the first Nigerian region to do so—and extended health and agricultural services (Nwagwu 1978; Mackintosh 1963). These policies burnished Awolowo’s reputation as a social democrat and Falola (2004, p. 159) notes that his time in office “is now regarded by his admirers as the ‘golden age’ of the Yoruba in their modern history.” Jakande, an Awolowo ally, served as the first elected governor of Lagos state from 1979-1983. By this time the Action Group had become the Unity Party of Nigeria, which proclaimed a similar welfarist orientation in proposing a program of free education, free health care, full employment, and integrated rural development (Diamond 1982; Joseph 1978). Jakande developed a strategic plan for Lagos and undertook large municipal investments in housing, schools, and transportation, including plans for an urban rail system (Fourchard 2010; Gandy 2006).
The AG’s enduring appeal draws on this governance record as well as strategic distribution of patronage and ties to Yoruba groups. The party emerged out of a Yoruba cultural organization and established ties with economic elites and traditional monarchs across southwestern Nigeria (Hodgkin 1971; Lloyd 1955; Mackintosh 1963). Once in power it cemented support by directing state resources to supportive business leaders, local governments and traditional rulers (Baker 1974; Mackintosh 1963).
Southwest Nigeria also has a history of grievances against the central government (Mustapha 2004). Awolowo failed to win national elections and was imprisoned for treason in 1963-1966
(Baker 1974; Falola 2004). Jakande’s plans for Lagos were suspended after the 1983 coup and his rail project cancelled. Awolowo’s successors believed they would finally gain national power when Yoruba businessman MKO Abiola won the 1993 presidential elections, only to see the results annulled.
After this annulment the southwest became the center of opposition to the military regime. The party elders who served under Awolowo and Jakande were organized in a Yoruba cultural organization called the Afenifere and became the leaders of a new opposition movement, the National Democratic Coalition (NADECO). The prestige of these individuals combined with regional anger at once again being excluded from national power made the movement very popular in the southwest (Falola 2004). NADECO formed the base for the Alliance for Democracy (AD) political party. The AD lost the 1999 presidential election to People’s Democratic Party (PDP) candidate Obasanjo. But its candidate earned nearly 80% of the southwestern vote and AD won six southwestern governorships, including in Lagos (Mustapha 2004).
Lagos Party Politics Since 1999
Lagos’s new governor was Bola Ahmed Tinubu. Tinubu was a former Mobil executive with strong grassroots ties through his mother, the leader of the influential market trader’s association. Tinubu was elected Senator during the aborted 1990s democratization process and later lived in exile due to his political activism, serving as a prominent leader of NADECO abroad. He returned in 1998 and narrowly won the AD gubernatorial nomination.
Tinubu and other governors soon clashed with party elders in their states over political control. Tinubu first drew their anger by appointing party outsiders to ministerial positions. Tinubu’s critics say he installed his personal clique but most interviewees highlight the high professional qualifications of top appointees, including a respected law professor as Attorney General and a Citibank executive as Commissioner for Economic Planning and Budget. One Tinubu adviser explained that “Tinubu’s position was that you could award contracts to politicians, but for governance to be effective you needed technocrats” in appointed positions. Tinubu also sought to dominate the party itself and by all accounts gained the upper hand over party elders by virtue of his control over state resources.
In the 2003 elections, the AD was internally divided and President Obasanjo’s PDP made a major effort to capture the southwest. Tinubu was the only AD governor to Nwagwube reelected, with 911,613 votes to the PDP’s 740,506 (Nwabuko 2003). This allowed Tinubu to establish himself
as the region’s preeminent political leader and in 2006 he formed a new party, the Action Congress (later Action Congress of Nigeria, ACN).
Tinubu’s relationship with Obasanjo was hostile. Tinubu sued the central government demanding increased state powers while Obasanjo blocked numerous Lagos projects ranging from independent power generation to traffic control, claiming they exceeded state authority. The highest- profile dispute came in 2004 when Lagos created 37 additional local governments. Obasanjo declared this illegal and froze federal funding for Lagos local governments. These conflicts hindered some initiatives but also burnished Tinubu’s popularity, drawing on historic feelings of unfair federal treatment.
Tinubu established an increasingly dominant role in Lagos politics. In addition to influencing state appointments and contracts he built relationships with key social groups like informal sector associations and traditional leaders. Tinubu is also widely believed to have substantial real estate and business interests in Lagos and offer employment and financing to supporters. In contrast to Lewis’s (1996) depiction of centralized predation, Lagos politics remain quite distributional. Echoing the views of many interviewees, former AD activist Yinka Odumakin contends that Tinubu “would drain his own blood to have his way. He has stolen a lot of money but he distributes it, uses it to build a network.”1
Tinubu chose his chief of staff, Babatunde Fashola, as his successor. Fashola was a respected lawyer without political experience and his appointment drew strong intra-party opposition. Some disappointed prospective candidates defected to other parties (Momoh 2011). Fashola’s selection reflected Tinubu’s confidence that he had sufficient political and financial clout to get even a relatively unknown technocrat elected governor. Fashola won the 2007 election with 828,484 votes to the PDP’s 389,088.
Fashola is commonly described as “handling governance while Tinubu handles politics” and
has developed a strong reputation for efficient urban management and public goods provision.
Tinubu likely chose Fashola partly because his technocratic background and managerial skills
burnish the party’s image while making him an unlikely rival for party control. Fashola retained
many of Tinubu’s appointees in government. In 2009/2010 Fashola clashed with the Lagos House
of Assembly, an episode widely believed to represent a proxy fight between Fashola and Tinubu,
with the latter worried that Fashola was gaining too much power and popularity. The AD/ACN has
overwhelmingly dominated the Lagos assembly since 1999 (Lagos State Government 2013). Tinubu
1 Interview with author, Lagos, 1 October 2013 2 Lagos’s GDP is very difficult to calculate but according to World Bank (2011b) estimates, state tax revenue rose
and Fashola appear to have resolved their differences, however, and Fashola was re-nominated by the ACN in 2011. He won over 1.5 million votes to the PDP’s 300,450 (Momoh 2013).
Lagos remains in opposition to the central government but in 2007 Fashola and newly elected President Yar’Adua deescalated the hostilities of the Tinubu/Obasanjo period and the federal government released Lagos’s frozen local government funding. Intergovernmental relations have not returned to previous levels of animosity. At the same time, the ACN is bidding for national power. Tinubu has financed gubernatorial campaigns and court challenges to PDP victories and the party now controls five other southwestern states. In 2013 the ACN merged with several other parties to form the All Progressives Congress (APC), currently the main national opposition party.
VISIONS OF LAGOS Lagos inspires extreme views. For some observers it is an irremediably anarchic city, pairing
population explosion and urban decay. But many Lagosians—particularly elites—believe it can become a modern and orderly megacity.
The Ungovernable City?
To say Lagos has a bad image is likely an understatement. Gandy (2006, p. 371) explains that in the 1990s it was considered “one of the worst cities in the world” while Lewis (2009, p. 116) writes that “it is tempting to regard Lagos as a stationary crisis, a chaotic mixture of poverty, decay, violence, and self-dealing.” Today most Lagos residents live in slums and work in informal jobs. The Lagos State Government (2011) estimates that 45% live under USD $1 a day. The city is religiously and ethnically diverse and has had problems with communal violence. Transit in the city is synonymous with “go-slows,” traffic jams that make commutes over three hours common.
Lagos’s infrastructure and housing deficits, environmental degradation, informal economy and unplanned urban growth predate independent Nigeria. Colonial and early Nigerian authorities rhetorically emphasized hygiene but sanitation infrastructure was limited to wealthy enclaves while public health discourses helped justify slum clearances and crackdowns on street traders (Fourchard 2012; Gandy 2006; Lawal 2004). In the 1960s a United Nations delegation visited Lagos and identified a long list of problems from housing shortages and extreme congestion to slum growth and lack of sanitation, as well as a general lack of city planning, but these were not meaningfully addressed by city authorities (Fourchard 2010; Gandy 2006).
A brief attempt at city planning under Jakande was cut short by the 1983 coup, whose leader, General Buhari, famously declared a War Against Indiscipline across Nigeria, targeting everything from disorderly queuing to illegal market stalls (Fourchard and Olukoju 2007). This put the burden on citizens to follow rules, not on government to provide public goods and employment options.
Lagos’s difficulties were exacerbated by rapid population growth. UN-Habitat (2014) estimates that Lagos’s population was 3.5 million in 1985, reached 7.3 million in 2000, and will top 13 million in 2015. The state government’s census claims the population already exceeds 20 million. Economic crisis and industrial decline in the 1980s combined with the federal capital’s move from Lagos to Abuja contributed to decreased economic opportunities, infrastructural decay, and declines in basic services and living standards in the 1990s (Fourchard 2010; Gandy 2006).
Architect Rem Koolhaas has argued that the fact that Lagos continues to function despite the absence of basic elements of city planning reveals a self-regulating system where informal actors govern themselves (Koolhaas et al. 2001). Scholars have criticized this view, arguing that Koolhaas romanticizes the informal sector—neglecting its hierarchical and coercive organization and political linkages—and discounts the need for government to address problems informal actors cannot resolve alone (Fourchard 2010; Gandy 2005; Lewis 2009). As Packer (2006) observes, “as a picture of the urban future, Lagos is fascinating only if you’re able to leave it.” All these authors nevertheless agree on one point: Lagos has grown and operates largely outside formal state planning.
The Megacity
Far from sharing in Koolhaas’s appreciation of creative chaos, many Lagosians see it as an acute threat to their vision of the city. By UN standards a megacity signifies a population over ten million but in Lagos the term has acquired broader symbolic connotations. It is part challenge and part aspiration, reflecting awareness that population growth will overwhelm the city absent government intervention and ambitions that Lagos can use its megacity status to become a modern, clean, orderly, and globally respected commercial capital.
The megacity vision combines elements of Scott’s (1998) description of high-modernist ideology and Stepan’s (1978) explanation of organic-statism. Both concepts stress state-driven transformation and a hierarchical relationship with civil society. Like the high-modernists, Lagos leaders consider large public infrastructure investments fundamental to transforming the megacity, though they are less blindly confident in technical solutions. Like organic-statists, megacity ideas emphasize order and social harmony. Officials often refer to “carrying along” civil society with state
plans, though some groups—such as street traders—are considered incompatible with a modern megacity. This has echoes of Buhari-era views on discipline and sanitation.
Megacity ideas are shared by significant segments of the political leadership, bureaucracy, and socioeconomic elites. A better business environment benefits economic elites as well as the state through increased tax revenues. Lagos’s biennual economic summits have repeatedly stressed the idea of building a model megacity, with the 2008 summit recommending that the state government “articulate bankable investment projects for the development of Lagos megacity, as well as develop Lagos Megacity as a brand to facilitate the attraction of investments” (LESG 2010). Whiteman (2012, p. 252) links this to environmental concerns, noting Fashola’s worries that “capital will not come in to a ‘dirty economy.’ ”
Unlike national leaders sheltered in a capital, Lagos elites also live in the city and have personal incentives to deal with problems such as traffic and crime. Megacity ambitions further reflect the international orientation of economic and political elites and concerns with Lagos’s global reputation. A large proportion have studied or worked abroad and the reference points they cite for how Lagos should function are not Cairo and Johannesburg but London and Dubai. Their concerns are captured in the title of a 2010 debate hosted by Bukka (2010) at SOAS in London, “Lagos: Mega City or Crisis City?”
STATE-BUILDING PROSPECTS Given the previous chapter’s discussion, where did Lagos stand on drivers of state capacity-
building in 1999 and in subsequent gubernatorial terms? At first glance its prospects seemed dire. In addition to the numerous problems cited above, military rule had hollowed out the state administration and diminished state legitimacy. Yet Lagos’s political context also had some promising features. Revenue needs, political competition, and megacity concerns each constituted threats to Lagos’s leaders. Political continuity provided relatively stable conditions for capacity- building. The city’s commercial base offered organizational resources while its organized society provided a basis for state-society bargaining.
Drivers of Political Commitment
Lagos’s political elites faced threats both from electoral competition and urban decay. They also had larger ambitions—to gain national power and transform Lagos into a model megacity. Addressing these issues required resources. Lagos’s federal funding is insufficient to run the city and
the government in 1999 and in 2013 had few good revenue sources apart from internal taxation. The AD/ACN’s growing political dominance in Lagos created space to address megacity as well as political challenges and made institutional reform a feasible response.
Electoral defeat is the most pressing threat to politicians and Lagosians are relatively empowered to make political demands. Southwestern Nigeria and Lagos in particular have historically had greater access to education than other parts of Nigeria and Lagos has a substantial middle class and is the center of national civil society and media activity (Mustapha 2004). The legacies of Awolowo, Jakande and opposition to military rule heighten public expectations that elected governments will deliver both public services and patronage. The risk of electoral loss was highest in Tinubu’s 2003 reelection but party leaders believe that preserving power depends on continued good performance. Fashola’s resounding 2011 reelection victory was closely connected to his first term improvements in road infrastructure and other public goods projects (Momoh 2013). Electoral threats should motivate increased tax effort to finance public goods and patronage but have mixed effects on commitment to regulation.
The threats and aspirations stirred by megacity ideas are longer-term and can be expected to gain priority relative to electoral concerns as political stability increased. Fashola’s selection as a gubernatorial candidate could be seen as one manifestation; Tinubu would not have risked nominating a technocrat without a political base if he was unsure of winning. Fashola’s election brought new prominence to megacity ideas. This reflected the governor’s personal convictions and appears a rational political choice. Given his outsider status in 2007, Fashola faced high barriers to challenging Tinubu for control of the party. Yet his position and technocratic inclinations gave him the opportunity to gain popularity and domestic and international prestige by transforming and modernizing Lagos. Fashola has been invited to speak at prominent universities in the U.S. and UK and gained favorable international press coverage. The state slogan under Fashola is Eko O Ni Baje, roughly translated as “Lagos Must Not Spoil.” Every aspect of the megacity vision requires not only significant financial resources but also expanded state regulation.
Organizational Resources
Lagos has access to important organizational resources: a diversified economy, skilled professionals, and a strong executive with a dominant party. But it lacks the factor usually considered most critical to state capacity, a meritocratic bureaucracy. As Nigeria’s commercial capital, Lagos has a significant fiscal base for taxation. While most residents are informally
employed, the city has a vibrant formal sector. It serves as a base for oil firms, banks, manufacturers, and other key economic sectors. In the 2000s Lagos likely contributed around 20% of Nigeria’s total GDP and half its non-oil GDP (Collier 2010; Fitch Ratings 2013; World Bank 2011b).
Lagos state can also draw on skilled personnel to serve in government; these come from the private sector, Nigerian diaspora, and well-educated youth. Lagos’s importance makes it an appealing employer for top professionals who often already live in the city and would hesitate to work for other state governments. These elites represent a small proportion of political appointees and bureaucrats but can have large impact. Lagos state can also access advice from foreign donors and external consultants.
Lagos leaders have significant leverage over the rest of the political system. The executive dominates policy formulation and controls large patronage resources. The House of Assembly has little independent policy role and approves almost everything the executive presents. Single party dominance at state and local levels further enables internal coordination. This is a mixed blessing for Fashola since Tinubu wields more influence among legislators and many political appointees. But it provides a focal point for negotiation—if the two men agree on something it is likely to go through.
Implementing high-level decisions involves greater organizational constraints. The state bureaucracy is permeated by corruption and unqualified staff. Modest civil service reform efforts to clarify mandates and professionalize human resources have proceeded slowly. Megacity ideas are shared by many bureaucrats but commitment to this vision remains uneven and is far from an all- consuming common purpose. Fashola by all accounts has strong management skills and closely supervises and coordinates government agencies but there are limits to how much he can do personally.
State-Society Relations
Lagos state in 1999 faced serious obstacles in earning quasi-voluntary compliance with taxation and regulation. Nigeria’s history of low reliance on taxation and strong opposition to taxes in the Southwest as well as widespread public beliefs that politicians use revenues for corruption rather than services create unfavorable starting conditions for a taxpaying ethic (Guyer 1992; Lloyd 1955). Military rule also accustomed citizens to a predatory state that provided little in return. Democratization may have improved state legitimacy somewhat but Gandy still argued in 2006 that in Lagos “the association of the state with force or the threat of violence...has denuded the prospects for building a workable relationship between state institutions and other social networks”
(2006, p. 382-383). Compounding these issues, the large population of recent migrants do not necessarily identify with the city, much less its government.
While the state at the time of the transition from civilian rule had low generalized public legitimacy, it had pathways to society through social organizations. As Koolhaas et al. (2001) and their critics both recognize, Lagos’s informal sector appears chaotic but is in fact relatively organized, including through trade associations in large sectors such as market trading or transport. These groups are hierarchical and have patron-client relationships with the ruling party. Such ties can exacerbate governance problems by discouraging state regulation of association activities but these organizations can also provide the state with access to informal workers. Lagos also has formal business associations that can centralize bargaining with the state. The city nevertheless includes a substantial population of unorganized informal workers, such as street traders and domestic workers, who can be expected to be more difficult to reach.
CONCLUSION Lagos is not an easy city to govern. The depth of its social and infrastructural problems
combined with its large and ever-increasing informally employed population can create the impression that attempting to bring the city under state control is a futile effort and any infrastructure or public service investments a drop in the bucket of overwhelming needs.
At the same time, Lagos’s multifaceted challenges in 1999 created threats conducive to political commitment. The state government had acute revenue needs and an underexploited economic base, making tax reform an appealing option. Leaders confronted high expectations for increased public goods and patronage distribution and the threat of losing power in the next election. They also grappled with the dangers and possibilities of Lagos’s megacity status.
Political competition and megacity ambitions can both be expected to encourage extraction efforts, while megacity ideas in particular should promote regulatory commitment. As Lagos’s ruling party solidified its hold on power, leaders could be expected to lengthen their time-horizons. This should encourage greater long-term institution-building as well as more attention to megacity concerns in addition to political competition.
Given political commitment, what were the prospects for successful expansion of taxation and regulation? Lagos’s largest organizational challenge is its non-meritocratic bureaucracy, which can be expected to complicate reforms at every level. But the state’s available economic resources and ability to attract high-quality professional staff should facilitate capacity-building efforts. The
state government in 1999 lacked substantial popular legitimacy and faced an organized society able to resist state penetration. These same social organizations, however, could also negotiate state access to the informal sector.
Over the past decade, the Lagos state government has dramatically increased its tax collection capacity. In 1999 the state received about USD $190 million in annual tax revenue from 500,000 taxpayers; by 2011 it took in USD $1.2 billion from almost 4 million taxpayers. This rise cannot be fully explained by economic growth or increases in tax rates.2 It has instead resulted from a combination of strong political commitment, more professional tax collection, and social cooperation.
Governors Tinubu and Fashola both made tax reform a top priority. They were driven by a basic fiscal reality: Lagos state has few other sources of revenue and leaders faced with political competition needed more resources to meet public demands and patronage expectations. As the ruling party solidified its control over Lagos, the finances required for national political ambitions and megacity construction further motivated tax effort. Party dominance lengthened time-horizons and helped motivate lasting organizational changes.
Increased tax collection has relied on internal bureaucratic reforms and public outreach. State officials initially tried to compensate for weak capacity by hiring private tax consultants and later created a semi-autonomous revenue service. Leaders have also worked to improve citizen perceptions of taxation by portraying it as a universally applicable duty and linking tax payment to public service delivery. Evidence suggests that both enforcement capabilities and public legitimacy are central to tax compliance but neither applies equally to all social groups. Formal businesses are easier to monitor and bargain with than individual workers, who are very costly to reach. Partnerships with informal sector associations have further enabled the state to extend taxation beyond the formal sector.
SOURCES OF POLITICAL COMMITMENT Increasing tax collection is not usually considered a recipe for winning popular support. In
Lagos, however, political competition constituted a strong push for revenue generation because politicians had few other sources of revenue to provide public services and distribute patronage. In addition, the government’s efforts to address threats to Lagos’s sustainability and promote its megacity vision require large financial investments. Political competition and megacity ambitions
2 Lagos’s GDP is very difficult to calculate but according to World Bank (2011b) estimates, state tax revenue rose from about 1.6% of GDP in 2005 to 2.7% in 2010. Personal income tax rates have not increased in this period.
generated a pressing need for resources while political continuity created the conditions for long- term tax reform. The most significant institution-building efforts came not in 1999 when resource gaps were most acute but in 2005 when persistent fiscal needs were matched with relative political security.
Fiscal Needs
Lagos state lacks easy access to oil revenue and other external rents available to sovereign states and has few alternatives to internal extraction. The state government receives a statutory allocation from the federal government and a share of the federally collected value added tax (VAT) but these revenues are far from sufficient to run a city of its size (see Chart 4.1). In 2002 the state’s personnel costs alone exceeded its federal allocation (Lagos Central Office of Statistics 2007). The state has access to capital but cannot take out loans indefinitely without proving an ability to repay. Lagos also receives some foreign aid but this has not exceeded 10 billion naira in any year (Lagos State Government 2011).
Chart 4.1 Sources of Lagos State Revenue
600 500 400 300 200 100 Generated
2004 2005 2006 2007 2008 2009 2010 2011
Source: Lagos Bureau of Statistics 2012a p. 7-9. All inflation adjustments use World Bank WDI Consumer Price Index.
Political Competition
Given these fiscal realities, why was taxation not a central priority before 1999? There was clearly a more cooperative relationship between the central and state governments under the military regime, with the state governor an appointed official rather than a political rival. But this did not
Other Revenue VAT Federal Allocation Loans and Bonds Other Internally Tax
Billions Naira (2012 prices)
translate into robust federal financial support for Lagos and the city’s infrastructure and services deteriorated during this period. The more significant difference was that military governors were concerned with order rather than popularity and considered raising taxes more risky than failing to deliver services. The military lacked legitimacy in Lagos and multiple interviewees argued they could not have significantly increased tax effort without provoking strong societal opposition.
With the advent of political competition, this threat calculus changed. Tinubu and his party needed to prove they could deliver to their supporters or risk losing the next election. While taxation could be unpopular, the new government had more credibility than the military to argue that tax revenues would be used for public services. Moreover, the tax burden initially fell on formal businesses while Tinubu’s political support relied more on the informal sector.
Participants in Tinubu’s first administration all reported that they felt strong pressure from the media and citizens to start addressing the city’s problems as soon as they took office, despite very limited state resources. Tinubu promised to follow in Awolowo’s footsteps and put an early focus on building schools and extending free health services. Fashola became very popular in his own first term as a result of public goods projects even as he increased tax revenues.
The government also needs to distribute patronage. This was especially urgent before the 2003 election as the PDP invested substantial financial resources in attempting to unseat Tinubu. Former NADECO leader Ayo Opadokun framed this in self-defense terms, noting that if “the government cannot provide jobs for the young people, it provides a platform for those opposed to the government to recruit discontented people and use them as they wish.”3 Tinubu’s political security improved after his reelection but his party’s continued success relies on maintaining patronage networks and public support. State officials universally report that public demands have increased over time.
As will be detailed below, Tinubu initiated tax reform efforts at the beginning of his tenure but the most important bureaucratic changes began in 2005. This was partly a natural continuation of previous reforms but the timing was also influenced by political considerations. After 2003 Tinubu had good reason to believe he would have lasting influence in Lagos, making institution- building a better investment. The 2004 suspension of federal allocations to Lagos local governments also put added financial pressure on the state. Many observers consider this incident the primary driver of tax reform in Lagos. Officials directly involved in tax policy, however, insist it was just an
3 Interview with author, Lagos, 17 September 2013
additional push to an existing process. Tax efforts accelerated even after the local government funding issue was resolved, indicating that other motivations were also at stake.
Political Opportunities of Taxation
The ruling party in Lagos is competing not only to maintain power in the state but also to expand its national reach. It is eager to demonstrate that it can deliver more benefits to its constituents than the PDP, reinforcing incentives to raise revenues for public services and patronage. Party-building also requires direct financing. Taxes provide the state with resources that to some extent can be channeled at the governor’s discretion. The structure of tax collection in Lagos also opens up opportunities for more direct appropriation of revenue.
In 2000 the Lagos state government contracted a private company, Alpha Beta Consulting (ABC), to manage its tax payment system. As will be discussed below, ABC helped the Lagos government resolve a technical problem at a time when internal state capacity and access to technology was very weak. Its current contribution is more ambiguous, however, as state bureaucratic capabilities have increased. Yet ABC continues to receive an increasingly lucrative commission on revenues.
This has contributed to widespread belief in Lagos that Tinubu owns or profits from ABC. There is no concrete evidence of this but the lack of transparency around ABC’s contract has fostered suspicion. Its commission is not public. Some critics claim it is 25% of revenues but government officials say the commission to all tax consultants never exceeds 10% (Daily Independent 2011). A World Bank (2004) financial assessment stated ABC’s commission was 7.5% of revenue over 700 million naira a month in 2003, though it may have changed since then. Moreover, it is unclear whether the government can monitor how much money ABC receives in the first place. State tax officials say they rely on ABC to provide them with information on revenue collection. The same World Bank (2004) assessment called the state’s supervision of ABC’s systems inadequate.
ABC became an issue in the 2011 election, with Fashola’s opponents accusing the company of facilitating political corruption (Momoh 2013). At the time Special Adviser on Tax and Revenue Bola Shodipo said ABC would be phased out, but this has not occurred (Akinsanmi 2011). Senior Lagos tax and finance officials did not provide convincing reasons for why ABC remains necessary, with many referring to it as a political decision. Former Commissioner of Finance Akin Doherty, for instance, said that during his tenure from 2005 to 2007 the state revenue agency “couldn't ask Alpha
Beta to stop because they didn't have their feet on the ground” but insisted that “I am a technocrat, I was not involved.”4
If speculation around Tinubu’s role in ABC is correct, it would provide an important stream of revenue for his party-building efforts and give him a powerful incentive to ensure continued increases in tax collection.
Taxation and the Megacity
Fashola has intensified the government’s tax efforts as part of his broader focus on megacity transformation. As the next chapter will discuss, reforms to improve security, regulate transport, and manage the environment have all relied on increased financing. As Chart 4.2 shows, the government has rapidly increased state capital expenditures since 2007. Infrastructure investments still fall far short of Lagos’s needs, however, and Fashola estimates that Lagos still requires USD $50 billion (about 8 trillion naira) in infrastructure investments over the next ten years (Chima 2013). The state has begun building a light-rail system, which symbolizes both a modern Lagos and the realization of Jakande’s cancelled rail project. This is estimated to cost over USD $1 billion for the first two lines and USD $8 billion for full implementation (LAMATA 2009). Fashola has begun work on the first rail line even before securing international or private financing.
500 450 400 350 300 250 200 150 100
50 0
Chart 4.2 Lagos State Expenditures (Actuals)
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Capital Expenditure Recurrent Expenditure
Source: Lagos Central Office of Statistics 2007, p. 6-7 & Lagos Bureau of Statistics 2012a, p. 9
4 Interview with author, 22 September 2013
Billions Naira (2012 prices)
Taxation also makes a non-financial contribution to the megacity vision. State officials believe that encouraging widespread tax payment furthers their information about citizens and megacity interests in an orderly law-abiding society. As one tax officer noted, “you need to regularize people with the government.”5 The state’s interest in such regularization is also demonstrated by a recent effort to register all residents through the Lagos State Residents Registration Agency. Tax officials argue that tax payment by informal sector workers increases their sense of belonging in Lagos and their identification with the state government. It is unclear how much this reflects the views of ordinary citizens, however. Interviews of market traders by Gatt (2012) indicate that most still feel distant and powerless before the state.
STATE RESOURCES AND ORGANIZATIONAL REFORM Translating political commitment into increased revenues required reforming state tax
systems. In 1999 Lagos had a fiscal and legal base for extraction but lacked any effective bureaucratic capacity to collect taxes. In response, state leaders initially contracted out essential tax functions to private consultants. Private contractors remain but over time the government has built internal capacity through a semi-autonomous revenue agency. These technocratic reforms were driven by and closely connected to continued high-level political support for revenue generation.
Starting Capacity
As Nigeria’s commercial capital, Lagos has a diversified economy and a critical mass of salaried staff employed by formal businesses that can be subject to income tax withholding, giving it an advantage over other Nigerian states in terms of revenue generation possibilities. Personal income tax is the most important source of tax revenue but the state also collects property tax. Property tax is split among state and local levels, with the state collecting a neighborhood improvement charge as well as ground rent on the value of the land and the local governments collecting tenement rates on the value of the buildings. The Tinubu administration in 2001 consolidated these three taxes into a single land use charge, to be collected by the state government and redistributed to local governments according to a fixed formula.
Under the military the Bureau of Internal Revenue (BIR) was marked by endemic corruption and outdated collection mechanisms. Taxes were paid directly to tax collectors, forgery of tax
5 Interview with author, Lagos, September 2013
receipts and diversion of funds were common, and the state lost track of payments in its bank accounts. Moreover, the poorly resourced BIR staff could not compete with well-paid accountants hired by private firms. A World Bank (2004) financial assessment noted that in 2003, only 13 of 1400 BIR staff were professional accountants and only 6 chartered tax practitioners. One long- serving tax official observed that “before 1999 tax administration was characterized by under- assessment, arbitrary assessment, non-assessment and inconsistencies in the application of enforcement standards.”6
The last military governor of Lagos contracted tax collection to private accountants, Adekanola & Co, who received a commission on revenues. This helped increase tax collection but revenues remained low relative to Lagos’s potential. The arrangement also perpetuated rather than resolved problems of corruption and arbitrary enforcement.
First Steps: Tackling Leakages and Semi-Privatized Collection
Governor Tinubu began a review of tax collection shortly after his 1999 election. Former Finance Commissioner Olawale Edun reports that internal revenue was the Tinubu government’s first finance priority and a cross-agency working group was created to consider ways to eliminate leakages in the collection process.7 The state government simultaneously undertook a project to introduce computers into ministries and begin use of Oracle financial management systems. The agreement with Adekanola was terminated, reportedly because they were not using technology and said they could not increase revenue.8
The finance ministry decided it needed to computerize the tax payment process. This involved shifting collection from cash payments to direct payments into state bank accounts, the introduction of online banking, and a move to electronic receipts issued only after funds were confirmed to have reached state accounts. The state government initially hired Citibank to manage the collection system but according to Edun their systems had trouble issuing receipts in a timely manner.9 As noted earlier, at this point the state government turned to Alpha Beta Consulting, who developed software to monitor payments from banks and to issue electronic receipts and tax clearance certificates to taxpayers. This helped ensure more tax payments reached state coffers,
6 Bicci Alli, Deputy Director, Personal Income Tax, LIRS, interview with author, Lagos, 13 September 2013 7 Interview with author, Lagos, 4 September 2013 8 Ayo Opadokun, Interview with author, Lagos, 17 September 2013 9 Interview with author, Lagos, 4 September 2013
though it took several years to phase out manual revenue collection. During this time many BIR officials continued to issue fraudulent tax clearance certificates (Ipaye 2009).
Once systems were in place to ensure that existing tax payments were not diverted during the collection process, the government moved to increase the number of businesses paying taxes. ABC maintained a database of companies and tracked their payments. In 2003 it had records on about 250,000 companies but only 15,000 of these were reporting their income (World Bank 2004). In 2001 the state hired private auditors to audit companies in exchange for a commission on liabilities. But current and former officials report that hiring standards were lax and the BIR could not effectively monitor auditor quality or prevent them from cutting side deals with companies.
The state contracted another company—LRC Nigeria Ltd—to collect its land use charge, also on commission. LRC began surveying properties in 2000 but due to limited resources only focused on high-worth commercial properties. They enumerated 7,000 properties in the first year but faced strong resistance to collecting the tax, as will be detailed below.
Building Bureaucratic Capacity
These reforms substantially improved the tax collection process and revenue nearly doubled in real terms between 1999 and 2003. But electronic payments and private contractors could only take the state so far. In Tinubu’s second term the state government moved to create a semi- autonomous tax authority, the Lagos State Internal Revenue Service (LIRS). Governor Fashola has taken a close personal interest in supervising tax collection, including chairing regular meetings with revenue generating agencies, and he has strongly backed LIRS as well as the LRC land use charge office. Both organizations have improved their performance.
In 2005 the management of the existing internal revenue board was retired and replaced with a new team led by Babatunde Fowler, a former bank executive. Tax officials describe a rapid improvement in planning, professionalism, and morale under the new management. Fowler was given increased status and autonomy within the civil service and the state began crafting legislation to establish LIRS as a formally semi-autonomous agency outside the Ministry of Finance. This law passed in 2006 and came into full force in 2007. LIRS reports directly to the governor and has greater flexibility in hiring, salaries, and internal management. The agency receives a percentage of tax revenues back into its budget every year and has gained more resources over time. This has allowed it to attract more qualified people and the agency now requires audit staff to pass professional examinations.
Since 2005 Lagos’s revenue service has become more proactive in reaching out directly to taxpayers. This work is led by the Department of Special Duties, which was created in 2005 with 31 employees and now has 1,000 staff members. 600 are dedicated to the formal sector and go street by street to identify new companies, explain the tax process and check for tax payment certificates. The other 400 work with the informal sector.10 Efforts to bring informal sector workers into the tax net began around 2006 but intensified following Fashola’s election. Given the difficulty of assessing income of informal workers, most pay a flat tax of 2500 naira a year (about $16). This rate was negotiated with informal association leaders. LIRS also set up 38 mini tax offices within informal markets to facilitate tax payment. The reasons for taxing the informal sector and the outreach process will be reviewed in more detail in the following section on state-society relations.
LIRS has also stepped up enforcement efforts. In 2005 the revenue agency instituted external reviews to better monitor the quality of private auditors and put in place new procedures to ensure auditing contractors were paid on time, in the hopes of diminishing incentives for corruption. Audits increased markedly, with 1,500 audits in 2006, 4,000 in 2008, and over 6,000 in 2011 (Fowler 2013b). LIRS has also recently moved to increase its in-house audit capacity. It currently employs 1,100 audit staff, up from 500 in 2011. They accompany private auditors on visits and now directly audit smaller firms that private contractors are not interested in due to the low potential commissions. Auditors also coordinate with the LIRS outreach team and with other state agencies to monitor tax compliance. If a car is impounded, for example, its owner is supposed to show a tax certificate to get it released.
Chairman Fowler and LIRS audit officials report that tax compliance among large companies is now over 80%, up from about 30-40% in 2005.11 Contrary to common perceptions that domestic tax authorities have difficulty taxing multinational corporations, LIRS figures indicate that multinationals are the most compliant group (Fowler 2013a). Officials attribute this to the fact that these companies are more used to paying income tax and that LIRS can complain to their home embassies if they do not.
LIRS officials and private sector representatives emphasize that compliance relies on strong political commitment to enforcement, including distraining (sealing) non-compliant companies. Director of Special Duties Kunle Oseni claimed that other Nigerian states have sought to replicate Lagos’s reforms but struggle because “in other states if someone is friends with the governor he will
10 Kunle Oseni, Director of Special Duties, Interview with author, Lagos, 2 October 2013 11 Interview with author, Lagos, 6 September 2013
not let them get distrained. Here [in Lagos] it is I don't care, pay your tax before you talk to me.”12 Timothy Olawale of the private sector Nigeria Employers’ Consultative Association (NECA) noted that “non-compliance is fishing in troubled waters...even with those that are politically connected the government says, we provide services to the people and survive as institutions on this money, thus you have to pay.”13
Land Use Charge
The land use charge office is run by a private contractor, LRC Nigeria Ltd, but its reform dynamics are more similar to LIRS than to other consultants. Unlike ABC and private auditors, it is in charge of the entire revenue generation process, from enumerating properties to issuing bills to collection. LRC has always been outside the civil service but demonstrates the dependence of enclaves on political commitment. Under Tinubu it was not a central priority and the land use charge office was under-resourced and had difficulty enforcing payment or increasing its reach. Fashola decided to reprioritize the land use charge and gave LRC a grant to inventory all the properties in the state, contributing to a rise from 45,000 enumerated properties in 2007 to 635,000 in 2010 (see Chart 4.3).
700,000 600,000 500,000 400,000 300,000 200,000 100,000
Chart 4.3 Properties Enumerated
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2013
Source: LRC Nigeria Ltd officials LRC now has an electronic database of these properties with pictures, value assessments,
property id numbers, and information on tax payment. This means a greater proportion of residences receive property tax bills. This property database also indicates how tax reform can have broader capacity-building impacts; it constitutes an extensive source of information about Lagos residents and where they live.
12 Interview with author, Lagos, 2 October 2013 13 Interview with author, Lagos, 25 September 2013
Like LIRS, the land use charge office has extended its outreach and undergone internal reforms. It now has 348 staff members in 18 zonal offices. Staff claim that internal management reforms in the past several years have contributed to a clearer sense of corporate purpose, increased staff benefits, and improved overall morale and commitment. According to land use charge managing director Dele Ibrahim, their inflation-adjusted (2012 prices) annual revenue increased from 2.7 billion naira in 2008 to 6.6 billion in 2013.14 Compliance rates have risen steadily as enforcement has increased and payments are now around 66% of expected revenue; compliance is better among high-end properties where most enforcement is concentrated.15
Revenue Results
These organizational reforms have been associated with significant jumps in tax collection. In constant 2012 prices, tax revenue increased from about 48.8 billion naira in 2003 to 117 billion naira in 2007 to 189 billion naira in 2011 (see Chart 4.4).16 Both revenues and tax audit penalties increased markedly after the 2005 overhaul of management at the revenue agency. The vast majority of tax revenues come from pay-as-you-earn (PAYE) personal income tax withholding from the formal sector. Informal sector taxation only brings in a small fraction of state income, though officials hope it can provide the basis for future revenue. LIRS (2012) reports that its 38 mini tax offices within markets—the center of its informal sector outreach—collected 161.85 million naira in 2010 and 72.85 million naira in 2011.
200 150 100
50 0
Chart 4.4 Lagos State Tax Revenue by Source
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Other Penalties/Tax Audit Direct Assessment PAYE
14 Nominal collection was 1.72 billion naira in 2008 and 7.13 billion naira in 2013. 15 Dele Ibrahim, Interview with author, Lagos, 12 September 2013 16 Reflecting capacity shortcomings within the Board of Internal Revenue and the state government generally in the early 2000s, the pre-2006 revenue numbers are somewhat inconsistent between different official sources. The general trend is nevertheless clear.
Billions Naira (2012 prices)
180 160 140 120 100
80 60 40 20
Chart 4.5 Lagos State Tax Revenue by Source
Nominal Prices
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Other Penalties/Tax Audit Direct Assessment PAYE
Sources: Data from Lagos Central Office of Statistics 2007 pg. 16, Lagos Bureau of Statistics 2012 pg. 5 and Lagos state budgets 2007-2013.
BRIDGES TO SOCIETY: LEGITIMACY AND LEGIBILITY The internal reforms reviewed above greatly enhanced Lagos state’s ability to keep track of
revenues, identify taxpayers, and create a credible threat of enforcement. But the government nevertheless has scarce financial and human resources and the logistical and political costs of purely coercive taxation are high. Lagos officials have thus given substantial attention to the other two conditions of Levi’s (1988) conception of quasi-voluntary compliance: a bargain between state and citizens over collective goods and assurances that other citizens are also paying taxes. Survey evidence in Lagos suggests that willingness to pay taxes is linked to citizen perceptions of whether the state is making good use of revenues and that this connection helps explain recent rises in compliance. The government complements these general appeals with bargains with specific social organizations. These social linkages help explain not only increased tax revenue over time but also variation in compliance among different groups.
Legitimizing Taxation
Lagos leaders have closely linked taxation to improved public goods provision and presented tax payment as a universal duty. In the early 2000s the government had yet to convince taxpayers it could use revenues wisely—in part because it lacked the resources to make initial investments. The Tinubu administration tried to enhance its credibility with the private sector by using loans to finance infrastructure in business areas, such as the rehabilitation of Awolowo Road in upscale Ikoyi. But businesses still had grievances related to the tax collection process and persistent infrastructure
Billions Naira
and security deficits. Tax officials say social contract arguments only began to resonate with taxpayers around 2005 and 2006 when state performance had improved.
Fashola has been especially successful in linking taxation with public goods provision. From the beginning of his tenure he presented a more technocratic face to governance and promised to be accountable for the use of tax revenues. He convened a tax stakeholder forum in 2007 with representatives from the private sector as well as traditional and religious leaders, labor unions, civil society, and informal sector associations to discuss tax payment and address each group’s expectations from government. This outreach coincided with the rollout of multiple infrastructure and transport projects, giving the impression that the government was immediately delivering on its promises.
Fashola gives public addresses every 100 days to report on state government activities. The governor has also published his phone number and that of other top officials and urged citizens to contact them directly with their concerns. While practically it is not possible for the governor to respond to all citizen messages, multiple interviewees noted that this policy has strengthened the general impression of government responsiveness and the sense among citizens that they have the right to contact top officials with their problems.
Tax stakeholder meetings have been held regularly since 2007 and LIRS has enlisted religious leaders and other public figures to record messages about the importance of tax payment. They also speak to schools about tax compliance and run a tax essay competition for youth, in the hopes of building a taxpaying ethic early on. Public works projects display large signs urging people to pay tax (see Figure 4.1). Reflecting the views of many tax officials, LIRS deputy director of personal income tax Bicci Alli explained that “all this success [in organizational reform], if you have a government that is not delivering on projects, a government that people don’t trust, then forget it, this would be an exercise in futility.”17
17 Interview with author, Lagos, 13 September 2013
Figure 4.1
Source: Picture by author, Lagos
Surveys and interviews indicate that the link between government performance and taxation does influence taxpayers. In a 2010 survey of 620 Lagosians of diverse socioeconomic backgrounds, Cheeseman and LeBas found that satisfaction with state use of tax revenues and actual receipt of public goods were both significantly correlated with expressed willingness to pay tax. 72% of individuals who were satisfied with revenue use and received many public goods expressed increased willingness to pay tax under Fashola, compared to 16% of those who were dissatisfied with revenue use and did not receive many public goods. Satisfaction with revenue use was particularly important and had a larger effect on expressed willingness to pay than other factors such as political knowledge, education levels, ethnicity, and poverty (Cheeseman 2013).
There is further evidence that Lagosians feel government use of tax revenues has improved under Fashola. In the above survey 74% of respondents reported being somewhat or very satisfied with Fashola’s use of tax revenues (Alemika, Cheeseman, and LeBas 2011). In more in-depth interviews with 13 self-employed professionals, 10 informal market traders, and 11 other workers in Lagos, Gatt (2012) found that all groups expressed increased willingness to pay tax under Fashola due to the state government’s performance. Bodea and LeBas (2013) find that the relationship between satisfaction with government use of tax revenue and willingness to pay taxes holds across other Nigerian cities and Lagosians express the highest support among Nigerian urban residents for the state’s right to tax and the highest levels of self-reported tax payment.
In parallel to stressing their commitment to public goods, Lagos officials have sought to improve the legitimacy of the tax process. The state government set up a Revenue Complaints Centre in 2008 at Fashola’s request and is currently expanding it with help from the UK Department for International Development (DFID). The land use charge office also has complaints procedures and introduced an online complaints system in 2011. Tax officials portray these complaint mechanisms as crucial to enhancing the legitimacy and effectiveness of tax collection. Many complaints relate to local government taxation, which continues to be coercive and sometimes illegal or duplicative of state taxes. Following longstanding demands from the private sector to reign in these practices, the state government in 2010 published a list of taxes that the local governments are legally empowered to collect, though private sector representatives report that illegal local government tax collection continues.
Another important part of legitimizing tax collection is widening the tax net to demonstrate that all residents must pay their fair share. Business representatives complain that they bear a disproportionate tax burden and that private auditors only target large companies that can yield high commissions. The extension of LIRS auditing to smaller firms can be understood within the context of projecting a more equitable tax policy. The land use charge office is also planning to begin enforcement in lower-income areas to demonstrate that nobody is immune from property tax.18
Informal sector taxation does not bring in large revenues but it provides a powerful argument that everyone has an obligation to pay personal income tax. Special Adviser Shodipo noted, for example, that in outreach to wealthier citizens, “we say that it is immoral to drive a Rolls Royce on a road that market women paid for” without paying taxes.19 LIRS gives out awards to taxpayers in both the formal and informal sectors to publicly highlight tax compliance.
Social contract rhetoric and an expanded tax net can improve compliance but also opens up the government to criticism that it is not providing enough. State officials universally report that citizen demands have steadily increased, because, as the Deputy Speaker of the Lagos House of Assembly noted, “they see it as their money, not oil money. That has put us on our toes.”20 Civil society activists say that people increasingly want to know how their money is being spent and in recent years there have been more complaints that tax money is misused and concerns over ABC’s
18 Dele Ibrahim, Managing Director, Office of Land Use Charge, Lagos, 12 September 2013 19 Interview with author, Lagos, 27 August 2013 20 Musibau Kolawole Taiwo Interview with author, Lagos, 3 October 2013
commission. The PDP often frames its criticisms of the government in terms of wasted taxpayer money.
Reaching Taxpayers Through Social Associations
Lagos state’s improved bureaucratic tax capacity and social contract messages have contributed to an overall increase in tax compliance. But these general trends do not fall equally on all citizens and are mediated by social organizations. As discussed in chapter two, the costs of reaching social groups and their bargaining power depend on their level of organization and ties to the state. Table 4.1 charts the position of some key groups in Lagos.
Table 4.1 Social Organizations and Taxation
These groups have different tax compliance rates, demonstrating that social contract-based legitimacy is insufficient without enforcement capabilities. Compliance is lowest in diffuse social groups such as domestic workers that are very costly for the state to monitor. Compliance is highest among civil servants, who have taxes deducted directly from their salaries and little choice but to pay. Compliance is also high among formal businesses, many of which belong to private sector associations. Private sector organizations have served as both obstacles and allies to state taxation but they are not gatekeepers—the state is able to audit and seal businesses with or without their cooperation. Compliance in the informal sector, on the other hand, relies heavily on informal sector organizations such as the market trader’s association. These groups have control over their members and preexisting political ties to Lagos leader, making them very useful allies.
LIRS Chairman Fowler estimates that around 4 million eligible taxpayers remain outside the income tax net and 2.5 million of these are domestic employees like maids and private drivers. These
Organized gatekeeper
Organized non- gatekeeper
Civil servants
Structured Relationship
Market association
Organized private sector
Formal Businesses
Domestic workers Self-employed professionals
individuals are difficult to reach and their salaries are too low to make this effort worthwhile.21 Without credible enforcement capacity, social contract-related messages are insufficient to motivate voluntary payment. There are signs that informal sector workers are wary of the state’s expanding tax net. The Lagos State Residents Registration Agency, for instance, feels the need to stress in its public communications that registration is being done for planning rather than tax purposes.
The non-compliant taxpayers LIRS are most concerned with are self-employed professionals like doctors and lawyers. They have relatively high incomes but are difficult to monitor. They are smaller than formal companies, more dispersed and usually do not keep good accounts (or are not willing to share them). They have professional associations and so are closer to the “organized” category than domestic workers. But while these associations facilitate LIRS outreach efforts they can’t easily monitor member tax compliance. Fowler estimates that around 800,000 self-employed professionals pay some tax but not enough. He notes that LIRS has only just begun cracking down on this sector because it is the toughest to enforce against and they cannot fight all battles at once.22
The organized private sector (OPS) consists of associations representing formal businesses. These associations influence their members and can organize resistance to tax policies or facilitate state outreach. But individual formal businesses are already more organized than diffuse individuals and their revenues are larger, making it feasible for the state to tax them even absent association cooperation. In Lagos the OPS has served as an antagonist and ally depending on the perceived legitimacy of state taxation and government responsiveness to private sector concerns.
The private sector has strongly opposed taxes it considers illegal. The most prominent battle came over the Lagos state sales tax imposed in 2000. The Manufacturer’s Association and Eko Hotel separately sued the Tinubu government over this tax, arguing that it duplicated the existing federally- collected VAT. Compliance with the tax was low and the government sued some companies over non-payment. These legal issues have not been fully resolved but the Fashola administration withdrew the sales tax and replaced it in 2009 with a consumption tax on hotels and restaurants, which has been subject to new challenges.
The private sector also initially resisted the 2001 land use charge, condemning it as double taxation because many local governments continued to collect tenement rates. Former Finance Commissioner Edun explained that after the charge was introduced “all hell broke loose. The great and the good of Lagos said no way, people went to the boat club, nobody talked to me,
21 Babatunde Fowler, Interview with author, Lagos, 6 September 2013 22 Babatunde Fowler, Interview with author, Lagos, 6 September 2013
when I came to the bar everyone turned their back.”23 Many businesses refused to pay. Resistance was strong enough that state officials negotiated with OPS representatives and in 2003 agreed to significantly decrease tax rates, reducing the charge on commercial property from 1.75% of property value to 0.375% (Ehigiator 2003). The state also promised additional infrastructure investments, though private sector representatives say that this promise was not regarded as credible at the time. This deal reduced organized opposition to the tax but, as noted earlier, the land use charge office remained unable to efficiently enforce payment until Fashola’s administration. The OPS does not appear to have assisted with collection.
Private sector associations accept the state’s right to collect personal income tax but did not cooperate extensively with the Tinubu government because they did not feel the collection process was legitimate. One private sector representative noted that tax collection in the early 2000s was “like a war zone, you closed businesses, embarrassed customers,” while another said the process was “crude and violent, the police and touts were mounting roadblocks, confiscating vehicles and sealing factories without due process.”
Under Fashola the OPS have become useful partners in income tax collection. Business association representatives praise LIRS and Fashola for being more responsive to private sector concerns. LIRS has invited OPS representatives to participate in meetings with noncompliant businesses and, according to Olawale of NECA, LIRS allows the association to intervene and mediate settlements before members have their premises sealed.24 OPS groups also facilitate LIRS discussions with their members on tax payment. Both state and private sector representatives say this cooperation has increased voluntary compliance in the formal sector. The state’s relationship with the OPS, however, is still limited to communicating the law and asking for feedback rather than the close informal ties that characterize Evans’s (1992) “embedded autonomy.” On their end, private sector associations cooperate in large part because they know that their members are likely to face sanctions if they do not pay their taxes.
The facilitating role of social organizations is especially clear in the informal sector. The state has an interest in taxing this sector in order to widen the tax net and increase tax-paying ethics, its information about citizens, and potential future tax returns. But given the relatively low potential revenues from the informal sector there is a limit to the costs the state is willing to bear in this
23 Interview with author, Lagos, 4 September 2013 24 Interview with author, Lagos, 25 September 2013
effort. Informal sector taxation has thus been greatly facilitated by organized and hierarchical associations with political ties to the government.
The state market trader’s association is the clearest example of this relationship. It organizes traders operating out of what are usually known as informal traditional markets (as opposed to modern shopping complexes) and is one of the most important and encompassing social organizations in Lagos, with leaders at the market, local government, and state levels. The association has served as a key source of grassroots support for the ruling party in Lagos since the 1960s and market leaders are in a good position to negotiate patronage from the state (Baker 1974; Fourchard 2010). These political ties are supplemented by personal ones. Tinubu’s mother was the association’s longtime top leader in Lagos. After her death in 2013 she was replaced by Tinubu’s daughter, a choice widely criticized as politically imposed.
The close relationship between state actors and market leaders has facilitated a partnership on taxation. Tax officials focused their initial informal sector outreach on market association leaders, negotiated the tax rate with them, and agreed to open tax offices within markets to make payment more convenient. Market-level leaders have taken on much of the state’s monitoring role, providing LIRS with lists of traders within their market and keeping track of who has paid tax. Tax officials emphasize that their partnership with market associations and the support of Tinubu’s mother greatly facilitated market taxation. Reflecting the value of these ties, LIRS outreach director Oseni said that his staff actively encourages markets without an association to form one and newly- organized traders “realize now that they can talk to the government and the government needs them, especially during elections.”25
While cooperation with market traders is most prominent, the state also works with associations of informal artisans, bus drivers, and others. These groups also have political ties to the state and tax compliance is one way of demonstrating loyalty to the government. For instance, one bus union official, when asked about the bus park’s relationship with the government, replied that “the Lagos state government has no problem with us, we follow laws, we pay dues, and we pay tax.”26 A private bus park had “Pay Your Tax” painted on their walls.
25 Interview with author, Lagos, 2 October 2013 26 Interview with author, Lagos, 21 September 2013
CONCLUSION Lagos’s success in increasing tax revenue and expanding the tax net has resulted from a
combination of high-level political support, internal reforms to improve the efficacy of the tax collection process, and more productive relations with society. Political commitment is founded in necessity—leaders have few alternative revenues sources and must deliver both public and private goods to their supporters to maintain power. Both governors have also embraced taxation as a means of furthering other interests, including the megacity vision of Lagos and likely patronage party-building. While political competition and disputes with the federal government highlighted the necessity of taxation, reforms accelerated in the relative political stability following Tinubu’s reelection and under Fashola’s tenure.
Parallel improvements in organizational resources and state-society relations promoted increased tax payment. Enhanced state auditing, monitoring, and enforcement capabilities increased the costs of noncompliance while government efforts to link tax payment with public goods and expand the tax net improved the perceived legitimacy of tax collection. Both changes were crucial. Where social contract messages were present but enforcement threats were low, such as among self- employed professionals, compliance is also low. But state, private sector representatives, and ordinary citizens all say that evidence of state public goods provision is critical to encouraging tax compliance. Purely coercive taxation would also be politically infeasible. Visible signs of public goods progress, on the other hand, have allowed Fashola to build popularity while simultaneously raising revenues.
The state’s revenue success has also been closely tied to Lagos’s socioeconomic organization. The presence of a large number of formal businesses is clearly beneficial to tax collection and PAYE continues to make up the vast majority of revenues. The fact that many of these businesses are organized into associations also provides the state with a bargaining partner and potential collaborator in ensuring tax collection. Taxation outside the formal sector has been made possible by organized informal sector associations with political relationships to the government.
As Lagos state transformed tax collection, it also undertook multiple efforts to extend state regulation in the lives of ordinary citizens. This chapter will address eight regulatory issues in four sectors: crime, bus regulation, traffic enforcement, and environmental management. Each of these is a fundamental task of urban governance and directly affects the lives of most residents. It is difficult to consider any city government capable if it cannot protect citizen security, manage public transportation, control traffic, or collect waste.
The government has had varying regulatory success across issue areas and gubernatorial terms. These disparities derive from different constraints and illustrate the interdependence between political commitment, organizational resources, and state-society relations. Certain regulations were held back primarily by a lack of political commitment while others enjoyed high-level political support but lacked internal resources or social cooperation. Several changes have facilitated improvements in regulatory capacity over time. Political commitment is a major constraint where regulations challenge patronage constituencies, and to a lesser extent when they hurt public opinion. Regulatory efforts increased in some areas as greater political stability allowed for more attention to threats to the megacity in addition to political threats of losing power.
Regulations more commonly mixed patronage, public opinion, and megacity interests and enjoyed considerable political support. In these cases, regulatory capacity increased as the state acquired greater technical, financial, and other resources and built more productive state-society relations. Like taxation, regulation has relied on the collaboration of informal sector associations as well as general state legitimacy and engagement with the private sector.
Political and implementation challenges cannot be easily separated and patronage motivations central to political commitment have sometimes undermined organizational resources and state-society relations. Yet improvement has nevertheless been possible in all three areas as a result of increasing financial and technical resources and the potential for expanding bureaucratic employment.
DRIVERS OF REGULATORY REFORM This chapter will focus on two issues within each main sector. These are all declared
regulatory priorities of the state government and based on interviews appear to be the most prominent concerns in each sector. In the area of criminality, they include police quality and the
problem of unemployed youth who engage in petty crime, known as area boys. Bus regulation involves reducing illegal fee collection in motor parks and establishing high-capacity buses. Traffic enforcement relates to the creation of a traffic police and restrictions on motorcycle taxis, known as okadas. Environmental management involves waste collection and the environmental police.
These regulations have distinct implications for public opinion, patronage concerns, and megacity ambitions and in turn for political commitment. Regulations that support all three of these interests have garnered strong political support across gubernatorial administrations. Most regulatory initiatives balanced patronage and megacity interests but some inevitably challenged important patronage constituencies. In these cases, patronage was the predominant consideration under Tinubu but megacity ideas gained leverage (though not clear supremacy) under Fashola. This evolution is linked to personal leadership but also to increased political stability, with patronage concerns closely tied to elections and megacity ideas to political security. Public opinion has also significantly shaped the political advantages and costs of regulation.
In addition to political commitment, regulatory efforts have been shaped by levels of financial and technical resources, bureaucratic discipline, and in many cases relations with the federal government. Organizational resources have improved over time, particularly as rising tax revenues enabled larger state budgets. Lagos has had access to technical resources—both due to international assistance and highly qualified Nigerian professionals—and technical capacity gradually increased as staff were hired and plans developed. As explained in chapter three, cooperation with the federal government improved after Fashola’s election. Bureaucratic discipline has proved to be a more persistent challenge. Fashola’s hands-on style and organizational skills have improved overall state management but serious administrative weaknesses continue to hamper regulatory efforts.
Regulation is often controversial and in some cases poses a more direct threat to important social groups than taxation. The government has backed up regulations with force but coercion alone is an unsustainable strategy as state agents cannot monitor everyone and politicians are eager to avoid widespread popular discontent. For this reason state regulatory efforts have been accompanied with public relations campaigns to educate citizens about new policies and urge compliance. Fashola’s personal credibility with Lagosians also appears to have eased regulatory efforts. Where possible the state has also bargained directly with social organizations. Relevant actors are shown in Table 5.1.
Table 5.1 Social Actors and Regulation
The bus driver’s union is the clearest gatekeeper because it controls motor parks and bus drivers and its opposition to bus reforms would make state regulation extremely costly. The union has blocked regulations that threaten its interests but also reached an agreement with the state and private investors on creating high-capacity buses. Other organizations exercise less social control but have nonetheless been useful allies for the state. The market association is not as crucial to state waste management efforts as it is to personal income taxation of traders since the state could collect market waste even without its cooperation. But it can nevertheless play a useful facilitating role. The private sector has provided support for police reforms. Diffuse groups like street traders and car users are less able to actively resist state regulation but are also harder to monitor. Actors such as area boys and large companies fall somewhere in between as they are not formal associations but are organized enough to be more accessible than scattered individuals.
Differences in political commitment, organizational resources, and state-society relations have shaped regulatory outcomes. Following the discussion in chapter two, state regulatory capacity is considered to have increased only if state actions are linked to evidence of social impact. The subsequent sections will detail how state capacity has changed in each of the issue areas of focus, though the general trend is of increasing regulation. Political commitment, organizational resources, and state-society relations all increased over time and improved regulatory capacity in itself thus does
Organized gatekeeper
Organized non- gatekeeper
Structured Relationship
Bus driver union
Okada drivers Market associations Community associations
Area Boys
Organized private sector
Large companies
Street traders Car drivers Okada passengers Armed robbers Residents
not provide much insight into its causes. But closer examination of different regulatory efforts can point to the primary drivers and constraints in each case.
SEARCHING FOR POLITICAL WILL: MOTOR PARKS, AREA BOYS, AND OKADAS Organizational resources and societal cooperation are always helpful for regulation but they
only become relevant if political commitment already exists. Where reforms challenge important patronage constituencies, as is the case with motor park fees, area boys, and okadas, political commitment has been the major constraint to extending regulation. The bus union, area boys, and okada drivers are at the center of regulatory problems in Lagos but are also important political mobilizers for the ruling party. Political will to take on area boys and okadas increased over time, reflecting a larger emphasis on megacity over patronage motivations. The bus union, however, remains too important to challenge.
Motor Park Fees
Public transport in Lagos is dominated by small private buses run out of motor parks, known as danfos. These buses are usually owned by small proprietors and function with minimal state supervision. The Lagos transport authority estimates that 83,000 buses operated in Lagos in 2008, accounting for 69% of motorized trips in the city and serving 7.25 million passengers each weekday (LAMATA 2009). Motor parks are legally under local government control but de facto run by the bus driver’s union, the National Union of Road Transport Workers (NURTW). Often described as more of a mafia than a union, the NURTW is hierarchical and leaders make large profits by charging fees to private buses to use their motor parks (Albert 2007; Fourchard 2012). This fee collection is officially considered illegal and a recent state publication on traffic issues warned that the “government will not allow the collection of union membership dues and levies within motor parks” (Lagos State Government 2012, p. 8).
NURTW fee collection is unpopular as it raises costs for commuters and drivers. But stopping it hurts patronage interests. Fourchard (2010) contends that the NURTW offers drivers as political thugs to the ruling party in exchange for government non-interference in motor parks. Many interviewees express similar opinions, noting the importance of the NURTW’s organizations, resources, and membership to political leaders and arguing that it is impossible to win elections in Lagos without NURTW support.
Motor park fees are also peripheral to megacity concerns. The government’s long-term objective is to phase out danfos altogether and install high-capacity buses. The Tinubu and Fashola administrations have interceded when roadside fee collection disrupts traffic or when intra-union power struggles devolve into violence (Albert 2007).27 But orderly extortion confined to motor parks is not a pressing threat to the megacity. In these circumstances public opinion alone has been insufficient to motivate regulation.
Motor park regulation also involves serious implementation challenges. The costs of taking over motor parks in Lagos and preventing the NURTW from operating there would be very high. But even if implementation costs were lower, no interviewees believed the state government would take the political risk of challenging the NURTW’s control over motor parks. Newspaper accounts describe some state attempts to crack down on motor park touts in 2002/2003 but these were suspended prior to the 2003 election, suggesting that state intervention is logistically possible but politically difficult (Anucha 2002; Daily Trust 2003).
It is difficult to detect any improvement in state capacity to regulate fee collection in motor parks. Efforts to enforce the prohibition on union due collection have been scattered and by all accounts ineffective over all four gubernatorial terms. Top state officials acknowledge that union collection within motor parks continues.
Area Boys
Area boys loiter in public places and engage in extortion in exchange for services such as watching cars or simply safe passage. They are concentrated in commercial areas and often target traders and businesspeople (Fourchard 2006). They are generally not tied to armed crimes but have been involved in riots and general disorder.
Area boys are unpopular and a threat to the megacity vision, but politicians have also used them as political enforcers for the past several decades (Fourchard 2012; Momoh 2000). They are not formally organized but different groups are said to report to specific political bosses. The Daily Trust newspaper quoted an area boy after the 2003 election complaining that “I am tired of being used as thug. Area boys are also human beings, they have parents. But those big men especially politicians use us as thugs while their children are overseas living good life” (Bajulaiye 2003a).
The political utility of area boys has complicated efforts to reign in their activities. Tinubu was sometimes called the “area boy governor” for his patronage of these groups and Whiteman
27 Kayode Opeifa, interview with author, 25 September 2013
quotes Tinubu as saying that “They are my boys: I care for them” (2012, p. 207). Fashola has been more willing to take coercive actions against area boys, reflecting increased political security and megacity ambitions. One senior Tinubu adviser explained this in the context of the need to defend Lagos from a takeover by the national PDP, noting that “I don’t think Tinubu was able to concentrate on area boys, that was not his priority. Actually those area boys helped in one way or another, helped him in containing the Obasanjo onslaught. But because Fashola is not faced with such problems, he has been able to [address area boys].”28
Under Tinubu state policies toward area boys focused on training and employment efforts, some of which are discussed below. But with Lagos’s population growth, employment guarantees are not sustainable, even assuming that all area boys want jobs. By some accounts Tinubu also made deals with area boys to reduce activities in central business districts. Fashola has taken a harder line, occasionally cracking down on area boy strongholds with force. The highest-profile attack was the 2009 clearance of Oshodi, a large Lagos market and bus park notorious for area boy extortion and violent crime. This clearance was also aimed at reducing traffic congestion caused by illegal market stalls. After the raid the police and other enforcement agencies established permanent posts in Oshodi.
Area boy hangouts across Lagos, such as highway underpasses, have been converted into well-lit parks as part of a larger state beautification effort, with the idea of diminishing their ability to use these areas as hiding spots and bases (see Figure 5.1). Fashola has also continued Tinubu’s policy of offering jobs to area boys, including by some accounts looking after the new parks.
State efforts to contain area boys faced organizational constraints in addition to political commitment issues, notably the fact that both employment programs and beautification require financial resources. The central government also reportedly blocked similar efforts to create parks under federal highways under Tinubu.29 But most interviewees nevertheless attribute increased enforcement under Fashola primarily to shifting political priorities.
28 Interview with author, Lagos, September 2013 29 Adeola Ipaye, Attorney General, Interview with author (by email), 9 October 2013
Figure 5.1: Beautification
Source: Lagos State Ministry of the Environment (2011)
State capacity to regulate area boys has increased over time. Tinubu’s record was mixed. Employment efforts and deals with area boys by some accounts reduced their activities in central business districts. Others, however, claim that Tinubu’s patronage intensified area boy problems. Area boys remain a concern today but state and non-state interviewees report that the situation has improved substantially over Fashola’s two terms. Raphael Mbaegbu of the CLEEN Foundation—a justice sector NGO—said their studies of crime hot spots indicate that park creation appears to have improved safety, though there is insufficient data to clearly attribute causation.30 Bus operators provided support for this idea, with one noting that “with floodlights and flowers all the area boys give way” and an Oshodi-based union official saying that security improved after the clearance.31
30 Interview with author, Lagos, 10 September 2013 31 Interviews with author, Lagos, 7 September 2013 and 21 September 2013
Okada Restrictions
Motorcycle taxis are an appealing means of transport for many Lagosians. They are relatively cheap and can maneuver through thick traffic. The Lagos transport authority estimates that in 2008 okadas made about 1 million trips a day, or 9% of motorized trips in the city (LAMATA 2009). But okada drivers are also well known for speeding, hitting other vehicles and injuring their passengers. A national CLEEN Foundation (2012) survey found that okada accidents were responsible for 42% of traffic accidents in Nigeria, the largest single source.
Restrictions on okada activities serve megacity ideas. Lagos officials repeatedly emphasize that okadas are a public menace and incompatible with a megacity. They claim that motorcycle taxis do not exist in Western capitals, that most robberies involve okadas as the getaway vehicle, and that okadas are responsible for a large proportion of traffic accidents. Transport Commissioner Opeifa said that he met with okada associations twice a month before 2012 in order to try to reform their behavior but “we saw that the kind of people who do that business cannot be organized for anything except chaos.”32 But okada restrictions face strong opposition from citizens who rely on motorcycle taxis to get around. They also directly threaten okada drivers, who like bus drivers and area boys have been useful to the ruling party as political enforcers.
The state government made various efforts over the years to restrict okada but only recently cracked down seriously. Toward the end of Tinubu’s second term okada were banned from operating at night, mainly for crime-prevention reasons. Tinubu’s former media adviser noted that it would have been very politically risky for Tinubu to take stronger actions against okada.33 Starting in 2010 the Fashola government attempted to restrict okada from certain roads. But there was no clear legal basis for these restrictions and enforcement flagged. Fashola avoided alienating okada drivers too much during his first term and courted their support for his 2011 reelection, including distributing helmets to them (P.M. News 2012; Odueme 2011; Okpi 2012).
After Fashola’s reelection the government began work on passing a stricter traffic law, which in 2012 banned okadas from major roads and bridges. Cracking down on okada drivers is politically easier than challenging the NURTW because okada unions are less centralized and financially powerful. Okada drivers are also widely believed to be primarily immigrants and not as well- entrenched in Lagos political structures. Other Nigerian states such as Abuja and Rivers also restricted okadas. But multiple state officials nevertheless cite the 2012 okada ban as the
32 Interview with author, Lagos, 25 September 2013 33 Segun Ayobolu, Interview with author, Lagos, 19 September 2013
government’s most difficult political decision and many people believe that anger from both okada drivers and the general public will hurt the party in future elections.
Okada restrictions are the clearest example of the importance of political constraints relative to implementation challenges. Fashola only instituted the ban as a second term governor who did not need to face reelection. The restriction is relatively easy to implement. Violations are visible and the punishment—impounding motorcycles—does not require significant police discretion.
Successful implementation of the law has nevertheless relied on cooperation with the federal police and to some extent on public acceptance. State cooperation with the police improved after 2007, as will be explained below. Public outreach efforts began after the okada ban and have been somewhat successful in linking the restrictions to reduced traffic casualties (Omparaocha 2013). Fashola is popularly considered very credible and many non-state interviewees said that they trust him when he says that okada restrictions are about saving lives.
State capacity to regulate okadas made mixed progress in Tinubu’s second term and Fashola’s first term. The state imposed some restrictions on their activities with some indications that this reduced okada activity at night and on certain roads but a lack of clear evidence of substantial impact. Tinubu does not appear to have restricted okadas in his first term.
State regulatory capacity over okadas has substantially increased in Fashola’s second term. State officials and civil society representatives report that the 2012 ban has been vigorously enforced and the number of okadas on prohibited routes has dropped dramatically. One bus operator used the okada ban as an example of why he expects the state government will be able to further extend regulation in the bus sector and phase out danfos, noting that “okada are now so low compared to before, so who says it is not possible?”34
OVERCOMING IMPLEMENTATION CONSTRAINTS: WASTE, BUSES AND POLICING Waste management, high-capacity buses, and improved policing are all regulatory issues
because they involve formalizing unregulated activities and improving state monitoring capacities. But they are also public services and broadly popular. They can benefit patronage, public opinion, and megacity ambitions and as a result have enjoyed consistently high political support. State capacity improvements in these areas are thus more tied to improved organizational resources and social cooperation than changes in political commitment. Each of these sectors has made use of at
34 Interview with author, Lagos, 21 September 2013
least partial bureaucratic enclaves led by respected managers and benefited from Lagos’s rising revenues and ability to attract highly qualified Nigerian professionals. Waste and buses have also benefited from international support. But in no case was an enclave sufficient to control the entire regulatory process, making public outreach and societal cooperation critical.
Waste management presents the clearest example of win-win regulation in Lagos: it responded to public demands, created patronage jobs, and cleaned up the megacity. Lagos’s rulers emphasized sanitation since colonial times but this did not translate into effective municipal systems to control waste and protect the environment. Population growth exacerbated these problems. The Lagos Waste Management Authority (LAWMA) fell into disarray under military rule and by 1999 most waste was being dumped illegally, often on the side of the road. The BBC noted at the time that “the realities of Lagos may thwart Mr. Tinubu’s ambitious plans; the city is collapsing as fast as it grows, disappearing under a mountain of rubbish” (Phillips 1999).
Tinubu administration officials report that waste became a top priority as soon as they took office because of intense popular pressure. Former Finance Commissioner Olawale Edun explained that “this was the first crisis of government...people said tell the governor to stop talking, collect the waste. There is no longer freedom fighters, no longer fighting for democracy, go collect the waste.”35 Public pressure continued as the Tinubu administration struggled to reform waste management in their first term. LAWMA Managing Director Oresanya attributes political support for his agency by both governors to the fact that waste management is a visible barometer of government commitment to citizens.36 Clearing waste is also a basic requirement of projecting a modern image of Lagos.
Waste management provides additional opportunities to create jobs and distribute contracts. The state government under Tinubu and especially Fashola employed thousands of street sweepers in a program that Oresanya explains is about job creation as well as waste disposal. Journalists note that these workers are an important source of political support for the government. About 23,000 people now work in waste management directly and through contractors, up from 1,400 in 2005 (LAWMA 2013).37 LAWMA also employs over 300 private waste contractors.
35 Interview with author, Lagos, 4 September 2013 36 Interview with author, Lagos, 27 September 2013 37 Ola Oresanya, Interview with author, Lagos, 27 September 2013
Despite its clear political appeal, waste management in Lagos is technically difficult and resource-intensive. LAWMA officials say that Tinubu’s first term focused on stopgap measures to clear refuse while the government and outside consultants put together a long-term waste management plan. Similarly to the use of private auditors in taxation, the state initially compensated for low internal capacity by contracting out to private waste collectors but had trouble ensuring their reliability. Also parallel to tax efforts, serious institutional reforms began in Tinubu’s second term when levels of political stability increased.
Tinubu replaced the LAWMA management in 2005 and appointed Oresanya—a longtime LAWMA official—as managing director. LAWMA is a parastatal and Oresanya was given the flexibility to hire some better-paid professional advisers and revamp internal management. LAWMA improved staff morale by ensuring salaries were paid on time and introducing performance rewards, as well as other staff benefits like day care. Private contractors were required to upgrade their waste vehicles and LAWMA monitoring of their performance improved (see Figure 5.2). These contracts were likely patronage-related but LAWMA officials report high political commitment from Tinubu and Fashola to ensure they met higher standards, reflecting public opinion and megacity concerns.
These reforms were facilitated by increased resources. State capital spending on LAWMA rose from about 1.5 billion naira in 2004 to 2.8 billion in 2006 to 11 billion in 2008 (in 2012 prices). LAWMA has also received support from development agencies such as the World Bank, Clinton Foundation and USAID. LAWMA increased the number of refuse transport vehicles from 63 in 2005 to 763 in 2009 to over 1,000 in 2012 (Oresanya 2013).
Figure 5.2 Waste Trucks Before and After 2005
Source: Oresanya (2013)
LAWMA also relies on public outreach, both to specific organizations and the general public. Individuals and businesses are supposed to pay fees for waste collection. As with tax collection, officials report that it is much easier to collect fees from companies and market associations than individuals. But they say that individual payments are increasing as people see their waste being collected. Oresanya says that bill payment compliance has increased and cost recovery is now about 65%, compared to zero in 2005.38
LAWMA meets with organized social actors, from private sector groups to market associations to community associations, to negotiate rates, determine their needs, and get feedback on whether private contractors are doing their jobs. LAWMA also holds radio programs and community meetings on proper disposal of waste to reach the general public. In the past several years it has offered free waste collection to low income areas in an effort to build demand for formal waste services.
Multiple non-state interviewees mentioned waste reduction as one of the most significant and visible changes in Lagos since 1999. While waste has been a longstanding priority, even state officials acknowledge that they achieved only mixed results in Tinubu’s first term. But there is considerable evidence of substantial and steady progress since 2005. LAWMA and other state officials report rising public embrace of formal waste disposal and heightened expectations. Commissioner of Economic Planning and Budget Ben Akabueze, for instance, noted that “the problem here used to be refuse all over the place, now it is taken for granted that there are no piles of refuse. Now people want the refuse trucks to come at night so they don’t disrupt traffic.”39
State household surveys report that 72% of the population used a government-regulated waste disposal service in 2012, up from 42% in 2005 (Lagos State Bureau of Statistics 2012b; Lagos Central Office of Statistics 2006).40 About 71,000 tons of waste were deposited in public landfills in the first quarter of 2004, growing to about 423,000 tons in Q1 of 2007 and over 1 million tons by Q1 of 2013 (Lagos Central Office of Statistics 2007; LAWMA 2013; Oresanya 2010).
38 Interview with author, Lagos, 27 September 2013 39 Interview with author, Lagos, 21 August 2013 40 The 2005 survey included 6,000 households, the 2012 survey 10,000 households.
Until recently Lagos was the largest city in the world without any state-organized mass transport (Mobereola 2009). As noted earlier, most motorized trips in the state occur on small danfos. These buses are poorly maintained and contribute significantly to traffic and safety problems. They are also relatively expensive compared to similar cities in Africa and elsewhere in the developing world, costing about $0.80 per ride (Kumar and Barnett 2008; LAMATA 2009). In response, Lagos has created two new state-regulated high-capacity bus systems. One is a Bus Rapid Transit (BRT) that operates with a dedicated lane for the majority of its 22km route. Another, LAGBUS, is a state- owned company that leases large buses and franchises bus routes. It does not have a dedicated lane but offers more route options.
Figure 5.3: Danfos in Motor Park and BRT Bus Stop
Source: Pictures by author
Both Tinubu and Fashola have strongly supported these new bus systems. They serve the megacity by reducing congestion and dangerous driving by danfos. High-capacity buses have also come to serve patronage interests and public opinion, though both were initially in doubt. The new
buses were intended to at least partially replace the old motor park-based system, implicitly challenging the control and profits of the NURTW. This was politically perilous given the NURTW’s importance to the ruling party. But the government managed to resolve the issue by engaging the union as partners in new bus developments.
Public opinion initially served as an obstacle to the BRT, which faced strong protests when it was first introduced in 2007 and 2008 from car users who opposed dedicating an entire highway lane to buses. Its potential beneficiaries—bus users—did not yet have experience with high-capacity buses and were less vocal. But both Tinubu and Fashola reportedly insisted that the system would gain public support after it was introduced, and the BRT and LAGBUS proved popular. Both services were soon overwhelmed with more passengers than they could accommodate. LAGBUS does not have a dedicated lane and did not inspire the same public opposition.
The fact that these systems were not introduced until 2007/2008 is mainly due to organizational challenges and the time required for societal bargaining. After taking office Tinubu discovered an existing World Bank plan to reform urban transport in Lagos—which had been ignored by the military—and asked the Bank to implement it. The Bank program, the Lagos Urban Transport Project (LUTP) was approved in 2002 and resulted in the creation of the Lagos Metropolitan Area Transport Authority (LAMATA). LAMATA was created to work on mass transit but initially focused on road rehabilitation on major transit corridors because large buses could not run on existing dilapidated roads. Work then began on the BRT, which was the suggestion of World Bank managers.
Planning for the BRT—the first in sub-Saharan Africa—and negotiations with the NURTW took several years. Even aside patronage concerns, the NURTW was in a gatekeeper position to block state intervention. LAMATA wanted to avoid problems experienced in South Africa where existing operators violently attacked new public buses. The state government wanted to secure private financing for the BRT and NURTW cooperation was also critical to creating a conducive investment environment. LAMATA Managing Director Dayo Mobereola said that the private sector initially resisted investing in buses due to concerns about going up against the union.41
LAMATA sponsored trips for union leaders to Latin America to see how BRT systems work
in other places and how other informal operators were incorporated. A NURTW-affiliated
cooperative was then given the concession to operate the BRT line in Lagos. The centralized power
of the NURTW facilitated state bargaining with bus operators; it would have been more difficult to
41 Interview with author, Lagos, 26 September 2013
prevent violent backlash by diffuse informal bus drivers. Yet even with union consent and state loan guarantees, LAMATA also took time to convince commercial banks to finance the purchase of BRT buses.
Once the groundwork was laid for the BRT it was relatively easier to set up LAGBUS. LAGBUS franchises are less clearly union-controlled but usually involve consortiums of private investors and NURTW leaders. Transport Commissioner Opeifa explained that “the investors find it difficult to get a license if the transport operators are not part of the consortium.”42 LAGBUS franchises do not have state loan guarantees and private financing remains a major constraint to further expansion of bus routes but the BRT example convinced some banks that public buses could be a profitable endeavor.
LAMATA is one of Lagos’s clearest technocratic enclaves. It is able to offer high salaries and hire Nigerian diaspora professionals with public transport experience. Many of its top staff worked for Transport for London and they say they were attracted by LAMATA’s resources and the sense that Lagos was led by a reformist government and presented unique opportunities for urban transport development. This has been indispensable to LAMATA’s broader strategic planning for coordinated urban transport in Lagos. But LAMATA’s enclave status alone is insufficient to ensure success as it relies on the NURTW to run day-to-day operations. LAMATA officials acknowledge that NURTW mismanagement has contributed to reduced service quality and maintenance on the BRT. Union leaders do not have the experience or particular inclination to run an efficient customer-friendly public bus service. LAMATA is looking to include more private sector partners in the next phase of BRT expansion.
LAMATA also relies heavily on the governor for political support. The World Bank completion report of the Lagos urban transport project rated the government’s performance as “highly satisfactory” and said that “the state government’s commitment to successful implementation of the project accounted for a great part of the success” (World Bank 2011a, p. 36). The Bank project lead Ajay Kumar said the World Bank has had difficulty implementing similar urban transport projects elsewhere in the world because they lack the high-level political commitment present in Lagos.43
Both the BRT and LAGBUS represent substantial increases in the state’s capacity to regulate buses. While most of the planning occurred under Tinubu’s administration, they did not come into
42 Interview with author, Lagos, 25 September 2013 43 Interview with author, Washington, DC, 17 December 2013
full force until Fashola’s tenure. The BRT line now serves about 200,000 passengers per day (LAMATA 2009; World Bank 2011a). The state government estimates LAGBUS carried 51 million passengers in 2012, averaging about 140,000 a day (Olusina 2013). Both services use large buses and charge lower fares than danfos. Both have had trouble keeping up with passenger demand and ensuring adequate levels of vehicle maintenance and service, though LAGBUS is considered somewhat better quality (Akinkuotu 2012; Balogun 2012; Odukoya 2013)
Lagos is widely viewed as a dangerous city and every recent government has pledged to improve law and order. Fighting crime is popular and central to the megacity vision, fostering strong political commitment. It doesn’t have clear positive or negative patronage implications. But state efforts to improve policing are complicated by the fact that the Nigerian police are centrally controlled and primarily accountable to Abuja. State governors are officially the chief security officers of their states but this distinction gives them responsibility without command authority.
The Nigerian police are also chronically underfunded and were purposefully weakened under military rule because they were viewed as a potential threat (Owen 2012). In 2013 the total budget for police commands in all of Nigeria was 311 billion naira; 287 billion of this went to personnel costs, leaving police stations very short of resources to do anything except pay salaries (National Assembly 2013). As Owen (2012, p. 204) observes, “Nigeria’s police operate without fingerprinting equipment or patrol cars, let alone forensic labs or criminal databases.”
One of the few ways for the state government to influence policing is to set up special financing for elite police units. This was called Operation Sweep under the last military governor and renamed the Rapid Response Squad by Tinubu. But Tinubu’s administration did not have the resources to make large investments in the police. Cooperation with the police was also hampered by extremely poor intergovernmental relations. The Tinubu administration sometimes accused the federal government of deliberately withholding police support in order to encourage unrest in Lagos and provide a pretext for a declaration of emergency. Tinubu called for the creation of state police forces and even considered lending official support to a vigilante group.
Both federal and financial constraints diminished when Fashola took office. The governor reached out to the police and created the Lagos State Security Trust Fund (LSSTF) in 2007 to channel resources to the police and other security forces. In 2012 the Fund received 400 million naira in total cash donations and about 2.5 billion naira worth of in-kind donations, mainly in basic
tools like patrol vehicles and fuel (LSSTF 2012). Fashola claims that the LSSTF is now responsible for 85% of the assets used by security agencies in Lagos (LSSTF 2012).
LSSTF’s effectiveness relies not only on increased financial resources but also on its commitment and credibility. The state government still lacks formal control over the police but Fashola chairs monthly meetings with security forces in the state and by all accounts closely tracks security developments in the state, demanding that the police account for their use of state resources. The state government is the largest contributor to the LSSTF but the Trust Fund also receives private contributions, especially from banks that were frequent targets of robberies. Kunmi Adio-Moses, who assisted the creation of the LSSTF, emphasized that Fashola’s personal credibility and public perceptions of political stability were critical to convincing the private sector to contribute.44
The LSSTF has a mixed private and public sector board of trustees and its operational chief, Fola Arthur-Worrey, is broadly respected. Okechukwu Nwanguma of the Network on Police Reform in Nigeria notes that the federal government tried to set up a similar security trust fund with private sector donations but it was squandered in corruption, whereas “to the best of our knowledge Arthur-Worrey invests the resources well.”45 According to Arthur-Worrey, eleven other Nigerian states have established similar trust funds in an attempt to emulate Lagos.46
State officials, civil society groups focused on policing, and other non-state actors report a marked improvement in security and police effectiveness since 2007, pointing especially to the impact of the LSSTF. The police are still widely considered corrupt but they started out at such a low level of effectiveness than an influx of material resources contributed to substantial progress. Several interviewees mentioned they left Lagos in the mid-2000s and returned after 2008 to a much more secure city. Bank robberies, which used to be a common occurrence, are now infrequent and according to newspaper reports attract a heavy police response. Tinubu’s administration, on the other hand, is usually portrayed as a period of increasing crime. Nigeria experienced a general increase in violence and criminality following the transition away from military rule and Lagos was no exception, with serious communal riots and vigilante violence in the early 2000s. Brazen daylight armed robberies remained common at the end of Tinubu’s term.
44 Interview with author, Lagos, 23 September 2013 45 Interview with author, Lagos, 19 September 2013 46 Interview with author, Lagos, 12 September 2013
Official police statistics are unreliable due to underreporting but survey data indicates improvements in policing and security since 2007. A 2009 survey of 2,000 Lagosians by the CLEEN Foundation found that 79% of respondents believed that crime had decreased in the previous year and 75.5% expressed satisfaction with state government crime control (Alemika and Omotosho 2010). A similar study in 2004 found that only 38% believed crime had decreased in the previous five years, corresponding with Tinubu’s first term (Alemika and Chukwuma 2005). In a sign of progress as well as serious continued challenges in police responsiveness, state household surveys indicate that 27% of households reported having access to government police in 2012, up from 11% in 2005 (Lagos State Bureau of Statistics 2012b; Lagos Central Office of Statistics 2006). Several interviewees claimed that crime has once again increased since 2011 but it has not reached pre-2007 levels.
BALANCING INTERESTS: LASTMA AND KAI When revenues are expanding and starting regulatory capacity is very low, it is possible to
simultaneously serve patronage interests, public opinion, and megacity ambitions. But this combination is not cost-free, especially when patronage motivations undermine the effectiveness and public legitimacy of new initiatives. These tradeoffs are clearest with regard to two state police forces created to enforce traffic laws and environmental regulations: the Lagos State Traffic Management Authority (LASTMA) and the Kick Against Indiscipline (KAI) Brigade. Both were also created in part to distribute patronage jobs and poorly qualified and undisciplined officers have made these agencies unpopular and harmed their ability to accomplish their stated mandates. This is especially true at KAI, which is somewhat less essential to the megacity project. Both agencies have improved their effectiveness due to a combination of increased megacity commitment and organizational resources, but serious problems remain.
Political Commitment
Both LASTMA and KAI address threats to the megacity. Dangerous driving and a general disregard for traffic laws compound Lagos’s already severe congestion and road safety problems. As LASTMA chief Babatunde Edu explained, “Lagos is a megacity and in a megacity we are bound to have [traffic] legislation.”47 Lagos state also considers a large array of activities as damaging to the
47 Interview with author, Lagos, 22 August 2013
environment, including illegal refuse dumping, informal construction, and street trading. KAI is one element of a wider state effort to enforce environmental cleanliness, which also includes monthly state-wide sanitation days. It reflects the ideas of General Buhari’s 1980s War Against Indiscipline.
Just as importantly, LASTMA and KAI provided employment opportunities. Transport Commissioner Opeifa stressed that Tinubu “decided to use the traffic problem to solve two things. Address the traffic issue while at the same time addressing the issue of unemployment, youthful unemployment, restiveness of the young people. That was the genesis of LASTMA.”48 Both agencies were created shortly after Tinubu’s elections—LASTMA in 2000 and KAI in 2003—and many people assert they served as rewards for those who assisted in campaigns. Employment in LASTMA and KAI has expanded under Fashola. Multiple government, party, and non-state interviewees said that area boys were recruited into both agencies. Government supporters and some civil society representatives present this as a way of engaging area boys in more productive employment. Critics argue that it gives them legal authority to continue extortion and violent behavior.
Of the two agencies LASTMA more clearly serves a megacity mission in addition to job creation. Its purpose was more defined from the beginning and the consequences of it not doing its job are more visible. Both state and civil society interviewees commented that if LASTMA disappeared from the streets there would be no one to direct traffic, whereas nobody except KAI officials claimed that the disappearance of KAI would hurt the environment. Both agencies are broadly distrusted by the public due to their reputation for extortion, though there is more public ambivalence about LASTMA given its useful role in managing traffic (Awoyinfa 2012; Okojie 2011).
Organizational Resources
LASTMA and KAI have benefited from increased state resources. KAI began with just 170 officers and now has about 1,000 (Bajulaiye 2003b). LASTMA was created with 500 officers. It expanded under Fashola and now has 3000 officers working on three shifts across the state. Under Fashola LASTMA also acquired towing equipment and now has a tow unit operating all night, allowing it to clear accidents before the morning rush hour.49 LASTMA’s effectiveness also improved as tensions with the federal government thawed. During Tinubu’s administration the federal government forbade LASTMA from operating on federal roads and federal officers and
48 Interview with author, Lagos, 25 September 2013 49 Babatunde Edu, GM LASTMA, Interview with author, 22 August 2013
LASTMA engaged in violent clashes. Some tensions remain but LASTMA and its federal traffic management counterpart have improved cooperation and sometimes conduct joint activities.
These developments have not resolved many of the most serious organizational constraints at both agencies, however. Patronage hiring helped motivate the creation of LASTMA and KAI but even state officials acknowledge that the lack of standard recruitment procedures in either agency has reduced internal competence. KAI officers are not ordinary civil servants and are paid below regular salaries, without promotion prospects. Low salaries at both agencies are widely considered to provide additional motivations for extortion.
In his second term Fashola has promoted organizational reforms and improved training at KAI and LASTMA, reflecting an increased emphasis on their megacity missions. Both agencies have taken steps to reduce extortion. LASTMA announced junior officers can no longer make arrests while KAI officers are no longer allowed to operate at night or serve abatement notices (Akoni and Olowoopejo 2012). KAI is in the midst of a restructuring and the permanent secretary in charge reports they are working to integrate officers into the regular civil service, standardize recruitment, and replace the management.50 Special Assistant on Transport Education Mariam Masha says that LASTMA is also working to “standardize recruitment and ensure leadership that can provide ethical and professional services.”51 New joint training for KAI and LASTMA was introduced in 2011 and emphasizes improving officers’ problem-solving skills and sense of professional responsibility.
Societal Relations
LASTMA and KAI have poor public reputations and are widely considered to abuse their positions. Fashola established a complaints center in the Ministry of Transport in 2007 and the ministry received large numbers of complaints about LASTMA behavior. Transport officials report that the new training program for LASTMA and KAI was introduced as much in response to these public complaints as concerns about organizational effectiveness. The training emphasizes improving officer engagement with the public and senior KAI officers note that it is about being more polite, friendly, and respectful of human rights.52 It includes a community service component as well as outreach efforts to relevant social associations, such as market associations and bus
50 Engr. Ogunbambi, with author, Lagos, 3 October 2013 51 Interview with author, Lagos, 20 September 2013 52 Interview with author, Lagos, 28 August 2013
unions, to discuss their concerns and try to win their cooperation with environmental and traffic regulations. Market associations also facilitate state-mandated weekly sanitation exercises in markets.
The new training program reveals an interesting dimension to the debate around the employment of area boys as traffic and environmental officers. Formal employment gives area boys more power but it also transforms these formerly informal actors into state agents subject to public accountability pressures. Someone exposed to area boy extortion has little room for appeal whereas citizens subject to LASTMA extortion can complain to the government. Accumulating abuses can threaten the popularity of political leaders and prompt reformist responses. Yet for the moment in Lagos citizen complaints have had only limited impact. New training has not been accompanied by strict anticorruption procedures and civil society representatives report that it remains very hard to hold officers accountable for abuses. Felix Morka, Executive Director of the NGO SERAC, notes that the state government has made some improvements in third party dispute resolution but “if you have been beaten by LASTMA or demolished by KAI you are on your own.”53
The megacity vision also limits how much the state is willing to bargain or engage with social actors. For instance, KAI officers portray street traders as illegal miscreants who need to be eliminated rather than negotiated with. Federal environmental officers summed up the balance between the Lagos government’s regulatory zeal and responsiveness to public opinion as: “This government is like half military, half civilian. Before it was just force. Now we also have town hall meetings.”54
State and civil society interviewees as well as bus operators broadly agree that LASTMA has improved driver compliance with traffic regulations, if only by focusing their extortion on drivers who have violated the law. This impact is usually traced to the beginning of Fashola’s administration and has improved over both his terms. LASTMA was less active under Tinubu but still appears to have had some at least mixed success in improving traffic management. State household surveys back the impression of progress under Fashola, with 48% of respondents saying that poor traffic control was a severe problem in 2012, down from 72% in 2005 (Lagos State Bureau of Statistics 2012b; Lagos Central Office of Statistics 2006).
53 Interview with author, Lagos, 17 September 2013 54 Interview with author, Lagos, 3 October 2013
Ike Okonkwo, Executive Secretary of the Arrive Alive Road Safety Initiative, said that Lagos performs better than most other Nigerian states in traffic management because of LASTMA and this has been especially true in the past few years.55 He and others point out that it used to be common to see people driving against traffic in Lagos but this hardly happens anymore. Other Nigerian states have sought to replicate LASTMA, though both LASTMA General Manager Babatunde Edu and Okonkwo note that other states have had trouble garnering the same political commitment to traffic control as Lagos (Yafugborhi 2013).56
KAI’s impact is more difficult to measure. By all accounts it had very low visibility and impact under Tinubu, with some interviewees claiming it was Fashola that created KAI. Its presence has increased under Fashola but the group still finds it difficult to cover the whole state, especially given its broad mandate. KAI Marshal-General Maigeri claims large reductions in street trading but this activity remains very common in Lagos, especially as more and more migrants enter the city without other employment.57 Non-state interviewees report an increase in general environmental enforcement, but this is not solely attributable to KAI as the police and other state agencies are also involved. But KAI officers are clearly useful in targeted state actions such as the 2009 clearance of Oshodi described above.
CONCLUSION Since Fashola’s election in 2007, Lagosians have experienced a wide range of more assertive
state regulation. The timing of these changes means they are often attributed to Fashola’s personal intervention and reformist leadership. This is true to some extent. Fashola brought a more managerial personal style and a clearer commitment to the megacity vision of Lagos. But a closer examination of specific initiatives reveals more continuity than sharp breaks since 1999. Rather than a technocratic leader plowing forward regardless of obstacles, a more complex picture emerges of a government weighing multiple interests, battling organizational constraints, and trying to win social cooperation. In comparison to taxation, regulatory initiatives more clearly illustrate the tensions and tradeoffs of state-capacity building.
Political commitment required balancing megacity ambitions, patronage pressures, and public opinion. The eight initiatives reviewed here shed light on the relative importance of these
55 Interview with author, Lagos, 3 September 2013 56 Interviews with author, Lagos, 22 August 2013 and 3 September 2013, respectively. 57 Interview with author, Lagos, 28 August 2013
forces in driving state capacity-building. Megacity ambitions gained leverage over patronage concerns as political stability increased, but in only one case—okada restrictions—did megacity ideas clearly triumph over both patronage and public opinion. This involved an unusually large expenditure of political capital unlikely to be repeated often.
Most regulations instead combined patronage and megacity interests, though the relative weight of megacity ideas increased over time. Popular opinion was not the sole driver of regulation in any of the eight cases but provided important additional incentives for regulation in sectors like waste, increased the political costs of okada regulation, and contributed to reforms in agencies such as KAI and LASTMA.
Where political will existed, regulatory capacity improved with increased organizational resources and societal cooperation. Waste management and high-capacity buses in particular were early Tinubu priorities and began major institutional reforms prior to 2007 but had their most visible impacts under Fashola. Increased financial resources have significantly eased the tensions of balancing megacity and patronage interests.
Social groups usefully facilitated state-society bargaining in several cases but this has involved clear tradeoffs. Engaging the NURTW to run the BRT, for instance, undermined the quality and effectiveness of this system. Hiring area boys into KAI and LASTMA could similarly be seen as a societal bargain to reign in their previous informal activities, but has also contributed to internal organizational challenges. These problems may nevertheless be less severe than if the state had to grapple with discontented but diffuse bus drivers and had no ties to area boys.
The Lagos state government faces immense challenges in reforming Africa’s largest metropolis but its accomplishments over the past fifteen years have been striking. Tax revenues have multiplied, enabling increased spending on infrastructure and public services. The city remains unruly but now has a better-resourced police force, basic traffic enforcement, formal waste management, and an incipient public bus system.
This progress reflects multiple interrelated processes, including leadership commitment driven by both political competition and megacity interests, increases in financial resources and bureaucratic competence, and more productive relations with the general public and important social organizations. Lagos state has far from overcome all obstacles to state-building and it will face new hurdles as it enters the next stages of capacity development. Its experience nonetheless provides important insights on the prospects for state capacity-building in other developing countries, lending further support to some existing theories and illustrating how leaders can maneuver the tensions inherent in low starting capacity, political competition, and strong societies.
FOUNDATIONS OF POLITICAL COMMITMENT IN LAGOS Why do some leaders stake their political capital on building state capacity while others
appear indifferent to state decay? Answers to this question range from voluntarist explanations focused on visionary politicians to structural accounts of rulers rationally maximizing their power and rents in response to their environment. In Lagos capacity-building was a logical response to serious and persistent political and socioeconomic threats paired with the relatively long time- horizons provided by one-party dominance. But political commitment was neither obvious nor inevitable and reform efforts have been importantly shaped by the personal creativity and ambitions of Lagos leaders.
As Tilly (1992) would expect, threats have been important motivators for state building in Lagos. Yet these dangers were not military. Instead, state leaders faced the looming threat of losing power in elections and the longer-term risk that Lagos’s unchecked population growth and decaying infrastructure would undermine urban sustainability and thwart ambitions for a commercially attractive modern megacity. Megacity ambitions share important characteristics with high-modernist visions associated with state-building projects elsewhere in the developing world (Jones et al. 2013; Scott 1998).
Both political competition and megacity ambitions encouraged extraction. Megacity investments are extremely costly while the political risks of taxation pale in the face of the need to finance patronage and public services. Echoing findings from scholarship on European history and oil states, Lagos state’s scarce non-tax revenues drove leaders to intensify domestic tax efforts (Karl 1997; Ross 2013; Soares de Oliveira 2007; Tilly 1992).
Public demands, patronage requirements, and megacity ambitions sometimes had conflicting effects on political commitment, particularly with regard to regulation. On an issue like okada restrictions, the megacity focus on orderly driving is in direct tension with the interests of an important patronage constituency. Both megacity-driven okada restrictions and patronage-based KAI staffing are unpopular with the public. The megacity vision draws on general elite interests in an orderly city but it sometimes conflicts with immediate elite demands. In the case of the BRT, for instance, megacity interests in a modern bus system sparked opposition from car drivers unwilling to sacrifice a traffic lane. Similarly, the state’s tax efforts were at least initially unpopular with the private sector.
Most capacity-building efforts have nevertheless managed to serve multiple political interests. While Tinubu is considered to be more of a politician and Fashola more of a technocrat, both leaders attempted to design reforms that could simultaneously serve political and megacity ends. If patronage were the only consideration, for instance, politicians could have just channeled resources to area boys in return for their services as political enforcers. Instead the government also reduced their harassment of businesspeople and improved traffic management by giving them jobs in LASTMA. This created other problems but on balance benefited state regulatory capacity.
The political returns of capacity-building further rely on the fact that Lagos in 1999 had very low capacity given its potential. The almost complete lack of preexisting taxation combined with a substantial fiscal base meant that significant revenues could be raised even if private consultants took commissions. An expanding revenue environment allowed for simultaneous investments in public goods, patronage distribution, and megacity projects. Very low levels of preexisting regulation or state presence meant that even if street sweepers or state enforcement agents were employed through patronage, they could still perform capacity-building roles.
Political commitment to state-building is influenced by ruler time-horizons as well as political needs (Levi 1988). Even leaders in dire need of revenue are unlikely to build tax institutions if they could lose power tomorrow, whereas those who expect to stay in power might have an interest in institution-building even with lower fiscal needs. The role of tax consultants in Lagos
illustrates the potential of Olson’s (1993) stationary bandit theory. Whether or not Alpha Beta is associated with Tinubu, their role in managing state revenues demonstrates that it is theoretically possible for a political leader to gain direct rents from tax collection, thus creating a strong motivation to not only collect taxes but also build a conducive environment for economic prosperity and tax compliance. This also fits with Kelsall (2013) and Lewis’s (2007) contentions that rent- seeking can be compatible with development progress if it is sufficiently long term-oriented.
Political attention to bureaucratic reform increased during Tinubu’s second term as his party gained a more secure hold on Lagos, enabling the creation of a semi-autonomous revenue agency to lead tax reform efforts and helping motivate internal managerial changes in other agencies. Political stability also provided more space for megacity ideas, first by allowing Fashola to be elected despite his lack of political experience and then by enabling his subsequent tax and regulatory efforts. Political competition and megacity concerns influenced both Tinubu and Fashola but political survival and national party-building were particularly important to Tinubu while the megacity has been a central priority under Fashola.
STATE AND SOCIETY IN REFORM IMPLEMENTATION Political commitment is a crucial determinant of capacity-building but it is only the first step.
The implementation of extractive and regulatory initiatives in Lagos was made possible by bureaucratic reforms and societal outreach. Military rule left Lagos with a weak and endemically corrupt state administration. As a result, reform initiatives in areas like taxation and waste management initially turned to private contractors. Yet these contractors generally performed poorly without competent state agencies to supervise their work. Later capacity-building efforts focused on overhauling implementation organizations. Technocratic enclaves like LIRS and LAMATA have played key roles in improving organizational efficiency but—as much scholarship predicts—are heavily reliant on sustained political commitment (Soares de Oliveira 2007a; Moore 2013b).
Organizations such as the land use charge office, LIRS, and LAWMA have also undertaken reforms designed to increase the commitment of even lower-level civil servants by fostering a sense of professional mission and improving staff benefits and performance rewards. These efforts resemble the findings of other case studies, most notably Tendler’s (1998) analysis of Brazil. The new training for KAI and LASTMA similarly aims to encourage officers to see themselves as public servants.
Tax capacity-building in Lagos closely fits the predictions of Levi’s (1988) conditions for quasi-voluntary compliance, including the importance of a credible threat of enforcement, a contract between taxpayers and government around public goods provision, and assurances that other people are also paying taxes. Improved state enforcement capacity has been closely tied to increasing compliance. Tax officials have also made substantial efforts to broaden the tax net and link tax payment to public goods provision. As Brautigam (2008) and Moore (2004) envisage, increased taxation has in turn contributed to higher public expectations, greater political commitment to providing public services, and improved bureaucratic penetration of society.
Available survey evidence suggests that individual willingness to pay taxes is influenced by whether people approve of how the state uses tax revenue and that taxpayer satisfaction has increased since Fashola took office (Alemika et al. 2011; Bodea and LeBas 2013; Cheeseman 2013). The apparent rapid improvement in taxpaying morale in Lagos implies that colonial legacies and government corruption are not as insurmountable obstacles to state legitimacy as Englebert (2000) and Rothstein (2011) might suggest. The connection between state legitimacy and voluntary compliance with regulation is less clear-cut but there are some indications that Fashola’s personal credibility has helped ease regulatory efforts.
Just as importantly, state capacity-building in Lagos has been shaped by structured relationships with organized social actors. Informal sector taxation depends almost entirely on the cooperation of market associations and other similar informal sector groups with preexisting ties to politicians. This provides support for Joshi and Ayee’s (2008) proposition that associational taxation can be a pathway to tax the informal sector. Business associations have also eased the costs of taxing the formal sector by cooperating with state income tax efforts. Social interlocutors have similarly been important to regulatory initiatives. Market associations have assisted environmental efforts while the private sector has been an important partner in policing and bus reforms.
State-society bargaining can also involve substantial tradeoffs. State negotiations with both formal and informal associations reduced the transaction costs of tax collection but it also placed limits on tax revenue. State-private sector negotiations over the land use charge resulted in substantial reductions in property tax rates while discussions with informal sector associations also resulted in a relatively low minimum flat tax for informal workers. In the regulatory arena, the NURTW bus union usefully centralized bargaining between the state and existing bus operators over new bus systems. But the resulting deal to allow it to manage the BRT undermined service quality. Despite these costs, state capacity would probably not have been well-served by a complete lack of
social interlocutors. Lagos’s organized society and political ties between government and informal associations appear to be at least as much state-building assets as obstacles.
FUTURE PROSPECTS What do these developments suggest about Lagos’s future trajectory? On the one hand,
expanding state extractive and regulatory capacities is likely to become increasingly difficult. The low-hanging fruit of formal sector income tax withholding has largely been exploited and new sources of tax revenue will be harder to extract. Further improvements in regulatory quality will require grappling with largely unaddressed dilemmas around patronage hiring and corruption and could be blocked by social gatekeepers such as the NURTW.
Yet there is also room for a more positive cycle. A broader tax base and evidence of improved state capabilities have heightened public expectations and demands. This could increase the degree to which political leaders rely on public goods commitments rather than patronage to stay in power. Moreover, the reformist reputation of state leaders may continue to draw higher-quality professionals to work in government. If the megacity vision proves successful, increased investment could lead to higher tax revenues. Lagos’s future is likely to combine elements of both these scenarios, with difficult political choices ahead but also a sense that turning back would be equally costly.
LIMITATIONS AND ALTERNATIVE EXPLANATIONS State capacity-building is a multifaceted process and this study has inevitably only partially
captured the political dynamics of Lagos. This results from limitations in data collection as well as space constraints. Due to the focus on understanding internal reform processes, interviews concentrated on government officials and other elites, with less extensive coverage of informal sector groups and the general public. Survey data and government statistics filled some of these gaps but fell short of ideal standards of coverage and reliability.
It was also not possible to gain detailed information on all possible variables that could have impacted state-building dynamics. Open-ended interview questions did provide space for respondents to explain events in their own terms, however, and significant commonalities emerged among the factors that state and non-state interviewees identified as important. It is thus unlikely that major drivers were ignored.
Some explanations considered as potentially important before field research were found not to have significant explanatory power. These included the possibility that state capacity-building was primarily externally driven. The World Bank and other development agencies provided valuable technical and other support to the Lagos state government. Yet outside assistance was uneven across reform areas and did not constitute a necessary condition for capacity-building. Aid officials say they facilitated reforms but attribute successes primarily to domestic government commitment. The Nigerian federal government mainly obstructed rather than assisted Lagos state reforms—except indirectly through fiscal threats.
Many outside observers attribute Lagos’s recent progress to a rising middle class. This is partially valid. Megacity ideas reflect many middle class priorities and the presence of a substantial middle class has improved tax revenues and provided professional staff for government. It is also associated with stronger public demands. But there is little evidence of the middle class as a group directly driving state capacity-building. Multiple interviewees noted that the middle class is not a substantial source of votes and tends to be politically apathetic. It is easier to see the influence of elite ideas or patron-client relations with the poor on capacity outcomes and the state’s key bargaining partners are informal sector associations and business leaders.
What about ethnic differences? Lagos politics are dominated by the Yoruba but Lagos is often referred to as a microcosm of Nigeria because it includes residents from all over the country. Ethnic diversity clearly impacts Lagos politics and its role in state-building could be an object of further study. But ethnicity did not come up in interviews as either a key enabler or obstacle to capacity-building initiatives. It could be possible that Fashola’s success has come from sympathy among Yoruba supporters, but Lagos is too diverse for that to be sufficient. Survey results indicate that increased citizen satisfaction with government use of revenues and willingness to pay taxes extends across ethnic groups (Alemika et al. 2011). The one place where ethnicity did seem significant was in bargaining with social organizations. The government had a more difficult relationship with ethnic Igbo market associations than Yoruba ones, though they too eventually cooperated with taxation. This is tied not only to ethnic differences per se but also the greater level of preexisting ties and trust between Yoruba associations and the state
WIDER IMPLICATIONS How can Lagos contribute to our understanding of the prospects for state capacity-building
in other low-income countries? In some respects it appears an exceptional case. Lagos has relatively
favorable access to human resources as well as a formal tax base and in 1999 it was clearly underperforming relative to its potential. Its political history and cosmopolitan population encourage popular demands for public services while its elites find it difficult to insulate themselves from the city’s problems.
Lagos’s experience is thus not easily generalizable and its capacity-building strategies are likely to be more difficult in contexts with fewer resources. But it shares many of the above characteristics with other large developing country cities where a growing number of the world’s population reside. Moreover, relative to the most frequently cited models of developing country success—such as Singapore or Korea—Lagos’s starting conditions and challenges are closer to those of other low-income countries.
The dynamics of tax and regulatory reform in Lagos can provide a number of important insights on the practical realities of state capacity-building in difficult contexts. The abovementioned similarities between developments in Lagos and the findings of other studies on governance reforms across the developing world suggest that Lagos’s experience has relevance beyond its borders. In particular, this thesis has highlighted how some key factors often regarded as obstacles to state- building—including low starting capacity, political competition, and strong societies—can simultaneously be among its most important drivers.
State capacity involves crucial interrelationships between political commitment, organizational resources, and state-society relations and there are good reasons to believe that deficiencies in each category can undermine the others. Weak bureaucracies reduce the likelihood that reform efforts will yield political returns, low political commitment hurts bureaucratic capacity and undermines public trust, and public cynicism is likely to discourage the election of public goods- oriented candidates and tax compliance (Reno 1999; Keefer 2007; Rothstein 2011). However, Lagos’s trajectory demonstrates that such a vicious cycle is not the inevitable result of low starting capacity. Where the state has significant underexploited organizational resources—such as low tax collection—it is possible to increase capacity fairly quickly. An expanding revenue environment allows for capacity-building reforms that serve multiple political interests. Even relatively modest increases in state effectiveness can build confidence among citizens used to receiving very little, benefiting leaders politically.
This positive cycle is clearly more difficult in place where fiscal bases are already saturated and the bureaucracy overdeveloped. Yet given low tax effort in many developing countries, Lagos’s state-building opportunities might not be exceptional. Other Nigerian states with smaller economies
have replicated some of Lagos’s reforms, such as shifting to electronic tax collection, and increased revenues. Low hanging reform opportunities created by low starting capacity are dependent on both timing and leadership. If previously untapped resources are exploited and then squandered, states have many fewer options going forward.
Lagos’s trajectory also illustrates the conflicting effects of political competition on state- building prospects. On the one hand, Lagos’s most significant advances in taxation and regulation relied on the political stability afforded by dominant-party rule, lending support to arguments by Kelsall (2013) and others that competitive politics undermine long-term planning necessary for capacity-building. On the other hand, democratization in 1999 was the single most important driver of reform in Lagos as military rulers who had presided over state decay were replaced by elected politicians who felt strong political pressure to increase state effectiveness.
These tensions help explain why neither democracy nor authoritarianism per se leads to effective states. Political commitment depends instead on serious threats paired with relatively long time-horizons. The literature on developmental states suggests that the most stable combination of these elements is a serious security threat and a stable, cohesive authoritarian state. Yet it is neither possible nor desirable to create such security threats where they do not already exist. In contemporary developing countries elections are often the most powerful political threat to leaders and can be indispensable to creating political commitment for reform. Elections also shorten time- horizons, but they are not the only source of political instability. Authoritarian regimes can sometimes experience even greater uncertainty and challenges in long-term planning, especially if lower-level officials are dependent on changing ruler whims. LAWMA MD Ola Oresanya, for instance, observed that even Tinubu’s tumultuous first term allowed bureaucrats to plan for four years, whereas “under the military it was just day by day, the longest you could plan for was a few months because no military guy was sure of tomorrow.”58
Political competition also presents an important check on government discretion. State
capacity is a critical prerequisite for government responsiveness and thus for functioning democracy;
politicians have a very hard time delivering on their promises to constituents when they lack an
effective state apparatus. Yet a stronger state by itself does not guarantee that the government will
use its power wisely or justly. The consequences of state capacity-building for the welfare of Lagos’s
population are beyond the scope of this thesis but it is important to keep in mind that they are
subject to active debate. While public goods advances under Fashola are widely acknowledged, the
58 Interview with author, Lagos, 27 September 2013
Lagos government has also come under strong criticism from parts of civil society that claim the megacity vision is coercive and leaves little room for the poor. Unrestrained implementation of megacity ambitions would undoubtedly increase state regulatory capacity but would impose harsh consequences on many vulnerable sectors of society. Similarly, government efforts to extend the tax net and increase state information about citizens are valuable from the perspective of improving taxpaying ethics and incorporating citizens into state systems but could also provide a pretext for repressive state intrusion into people’s lives.
Finally, Lagos’s experience highlights the importance of social legibility in addition to state power over society. While Migdal (1988) presents strong social power holders as one of the most significant obstacles to strong states, these actors should be considered potential allies as well as rivals. State and society do not necessarily have opposing interests and certain state reforms can benefit both sets of actors. Multiple authors have highlighted the advantages of close state-society relationships for state capacity, from Evan’s (1992) examination of embedded autonomy to Boone’s (2003) comparison of state relationships with African rural elites to King and Lieberman’s (2009) review of American state-building. This thesis drew on existing scholarship to propose a more general framework to analyze how social actors are likely to impact capacity-building dynamics in contemporary developing countries, based on their levels of organization, gatekeeper roles, and relationships with the state.
The Lagos case suggests that encompassing and hierarchically organized social organizations with preexisting relationships with the state are both potential veto players and the most useful facilitators of capacity-building. Informal sector associations are likely to serve as gatekeepers for state taxation and regulation because they can offer political leaders access to informally employed individuals who are ordinarily very difficult to reach. State-society bargaining with these social organizations is often exclusive and draws on patronage ties, differing in key respects from the more frequent focus—especially among foreign donors—on non-governmental organizations as good governance partners. As the literature on neopatrimonialism suggests, politically connected social actors can also block capacity-building reforms that threaten their interests and create perverse incentives for politicians. But their potential state-enabling role should not be ignored.
State reform in Lagos has not always been smooth and is by no measure complete. But it is the complications as much as the achievements of Lagos’s reform process that make it an informative case for other places whose capacity-building prospects are likely to be similarly uneven and fraught with tradeoffs.
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