More often than I would like, I get pulled into conversations about what Nigeria's issue really is. My take varies depending on the failings under discussion, but our lack of trust consistently seems to be an underlying theme.

What happens to a country's economic prosperity when its citizens cannot trust each other? According to renowned economist Kenneth Arrow, "Virtually every commercial transaction has within itself an element of trust." Meanwhile, in response to the credible World Values Survey question "Would you say that most people can be trusted?", 85% of Nigerians replied "No". 

Trust in society, termed Social Trust, is the most critical element of Social Capital. Social capital can be considered as the links among individuals that foster collaboration within society. Social trust is the belief that other participants in the society are acting in one's best interest, toward a shared common goal. In the context of this discussion, distrust refers to a lack of trust in people's motives, as well as a lack of confidence in people's ability. 


In the Interest of Prosperity

Economic activities are hampered by high transaction costs in low trust societies. I wish I had a dollar for each time I heard a story of diaspora sending money home to relatives to help them build houses, only to return to Nigeria and find nothing. In a low-trust society, apart from the actual cost of getting things done, extra costs have to be incurred to make sure that those getting paid are doing as agreed.

These costs could include legal fees to draw up contracts or take someone to court to force them to uphold their end of the bargain. Or more specifically in the case of our diaspora home buyer, paying a friend to check on the relative.

As if that is not enough, in addition to those costs, further costs need to be incurred to verify people's expertise, because one simply cannot take their word for it. 

Confidence in craftsmanship is a valuable currency in any society as there is little need to expend additional resources to ensure a job was done right the first time. In other words, there would be no need to have two or three different generator repairmen just to make sure one of them doesn't try to pull the wool over your head by over-quoting prices or discreetly removing a part from the machine.


An Integrated Economy 

Two things, in particular, are difficult to trust people with; Life and Money.

Is it so surprising then that insurance companies and banks have had the toughest time reaching out to the uninsured and the unbanked? Or that pension savings within the retirement savings account are so low? 

Information asymmetry, an obstacle for economic activity, is exacerbated by low trust. An uninformed Nigerian reaching out to a professional recognises her position of disadvantage. In a country where the rule of law does not protect the poor in cases of wrongdoing by the rich, how do we expect the majority to trust pensioners or bankers with hard-earned life savings?

Institutions also necessarily must trust the population they serve, most importantly as it has to do with extending personal lending lines that are necessary for promoting growth. Even if credit scoring systems exist within a society like ours, one can still expect reluctance to lend to everyday people. After all, Nigerians have a reputation for cutting corners.


The Un-sharing Economy

We have all encountered companies like Uber and Airbnb. These companies, as well as many others, have made it evident that the sharing economy is "the future of market capitalism".  

But a low trust society like ours introduces frictions to such frictionless systems where one necessarily has to do a double take or take extra precautions.

Although Uber has been relatively successful, other apps require a significant amount of trust for them to work. "TaskRabbit" for instance is an app that could be particularly beneficial to Nigerians. People who need house chores and home projects to be completed can post these online and look through a list of qualified "Taskers". But would Nigerians be comfortable with welcoming strangers into their homes in this way? They would rather hire permanent help – recommended by people they know – even if that alternative is more expensive. This is only one example of how the lack of trust impairs ability (for Taskers) to make money and (posters) to save money.


How We Might Build Trust

Going by research on the subject, social trust is typically built within voluntary organisations i.e. those we opt into. One of the biggest issues in low trust societies is a lack of cohesion, evident in people acting independently and only for the benefit of those close to us. Anyone who is interested in contributing to trust building on the macro level might consider starting an organisation that is recreational, environmental, or professional in nature. 

Social trust will require an ability to truthfully pledge to Nigeria and Nigerians with all our strength, to be faithful loyal and honest.


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