Capitalism, according to Investopedia, is a system of economics based on the private ownership of capital and production inputs, and on the production of goods and services for profit. This Adam Smith’s doctrine, Aynrand adds, is a social system based on the recognition of individual rights, including property rights.
Nigeria was incorporated into the free market economy system by imperial Britain. Because of his experience of the colonial times, Obafemi Awolowo in his 1940 memorandum to the Nigerian Youth Movement advocated a gradualist approach to the entrenchment of capitalism as the economic policy of Nigeria. He believed the cooperative option will be beneficial for the Nigerian entrepreneur who is stifled by the domineering presence of foreign economic players. Nigeria’s approach to capitalism, termed nurture-capitalism by Sayre P. Schatz, changed in 1949, with the colonial government’s new policy to “provide all possible opportunities for the Nigerian businessman to take an increasing share in the trade of the country.” The inability of indigenous companies to meet the technological and managerial advantage of foreign corporations led the government to involving itself in ventures which were supposed to be profit-oriented. The frustration of indigenous capitalists and poor performance of public corporations made the reliance on foreign businesses inevitable. Post-Civil War prosperity permitted a more promising resumption of emphasis on welfare.
The growing indigenization sentiment was accentuated with the 1972 Indigenization Decree. By the next two years, a windfall had begun to come for a few fortunate Nigerians. With indigenous businessmen financing acquisition by credit and other similar means, capital shortage would naturally become the excuse for poor performance. Schatz alleged false demand for capital was widespread in Nigeria. Reinvestment of profit was a major source of capital for Nigerian firms, as it is for firms in many developed countries, says John R. Harris in his Industrial entrepreneurship in Nigeria book. Bank loans were difficult to get for understandable reasons on the part of the banks. Harris, agreed that the lack of capital was not the problem of many businesspersons, but of viable investments. In all, it appeared in Sayre’s account that the Nigerian capitalist slacked in their duty to modernize the economy in the ways and at the levels envisaged in national development policies. Public ownership again became the response to this market failure. Equity transfers of 1974 had seen shares from foreign companies passing into State hands too. Although the State Owned Enterprises filled a gap that was necessary to fill, they were wasteful and paid no attention to making profit.
From the early 1980s it had become clear that many public enterprise need to be privatised. While the military government of General Buhari exercised restraints in changing the economic order, his successor, President Babangida, went all the way to adopt the privatization program. President Babangida’s Structural Adjustment Programme was designed among other things, to reduce the dominance of unproductive investment in the public sector. This, in a joint paper by Olanrewaju Olutayo and Jimo Hamzat of the Ibadan and Sokoto Universities was described as a typical journey into the mainstream capitalism and glaring effort that destroyed the failing economy. The paper also posits that there is embedded inequity in Nigerian ‘grafted’ capitalist system. One of the major focus of Obasanjo’s reform, under the National Economic Empowerment and Development Strategy (NEEDS), was to promoting private enterprise as the engine of growth of the economy. Government is only to serve as an enabler, a facilitator and a regulator.