Ethnic discrimination constantly poses a serious hindrance to the social and economic growth of Nigeria. In many instances, ethnicity plays a rather significant role in many economic decisions we make. Such decisions drive a wedge between the efficiency/productivity of the nation and the supply of productive individuals – especially in the public sector. In Nigeria, the ethnicity of the Minister or Permanent Secretary typically determines the ethnicity of a majority of the employees within that ministry. Unfortunately, most Government employees have no real incentive to ensure that Government functions. Instead, most engage in rent-seeking and patrimonialism.

Good institutions aid in curbing inefficiencies in Government that might arise due to such ethnic discrimination. However, what happens when the needed institutions are inadequate? William Easterly’s (1999) work on the effect of ethnic diversity finds that it adversely affects economic policy and growth when a government’s institutions are poor. Faced with poor institutions, diversity becomes a burden. Conversely, in countries with sufficiently good institutions, ethnic diversity does not lower growth or worsen economic policies. Easterly concludes that ethnically diverse nations that wish to endure in peace and prosperity must build good institutions.

For Nigeria, building good institutions might require reducing the size of our constantly bloating, ineffective and overly bureaucratic public sector. El Rufai currently emphasized that on a macroeconomic level, the government needs to be pruned for it to become more efficient. Reducing government activities in sectors where the private sector can perform better spurs growth and could possibly help tackle the issue of ethnic discrimination.

Why would private institutions be better at handling ethnic discrimination? The private sector requires an effective workforce and simply cannot afford to engage in the same sort of ethnic discrimination. In competitive markets, companies cannot afford to make decisions solely based on ethnicity considering such an approach encourages inefficiency and incompetence. These are costly and hence act as great disincentives to bigotry.  Inversely, quite a number of studies point out that ethnic diversity is beneficial to the innovation and growth of workplaces. Similar consensus exists outside of academia. Forbes’ surveyed 321 executives at large global enterprises that overwhelmingly agreed that a diverse and inclusive workforce brings the different perspectives that a company needs to power its innovation strategy.

If diversity clearly works, why do a number of private sector firms continue to discriminate?  Might be anecdotal, but quite a number of Nigerian firms that take on the ethnicity of their boss – down to the gateman. While irrational on a firm level, discrimination might be rational to an individual focused on his/her self-interest. Hence, the boss or HR head might still pick a lesser skilled applicant from the same ethnicity because he or she assumes they are more trustworthy than ‘outsiders’. Is it then up to folks in both public and private sector to decide if the pleasure and feeling of security gained from speaking their local language in the office trump the gains of productivity and growth? and how do we ensure that they make the right decisions? It comes back to establishing proper institutions, and in the case of the private sector, processes and systems that minimize personal judgments. These are not easy tasks, but no one said curbing our misbehaviors was a walk in the park.