Beyond the rentier state : crises and political coalitions in Nigeria and Indonesia’s divergent fiscal trajectory

Abstract

This research investigate why two resource-rich post-colonial countries which share similar structural attributes including extensive period of authoritarian governance, economic shocks such as the 1970s oil boom, the 1980s oil price collapse, and democratization in the late 1990s, ended up following sharply divergent fiscal paths. While Nigeria has remained heavily dependent on oil rents and also developed comparatively weak fiscal institutions, Indonesia on the other hand has been able to gradually diversify its revenue base and strengthen taxation as an alternative source of government revenue. Existing rentier-state and resource-curse theories popularly used to explain the behavior of resource-rich countries have provided important insights into the ramifications of resource dependence. However, these theories have failed to adequately explain puzzling divergences such as the one identified in this study. Therefore, this thesis aims to address this inadequacy by developing the Political Coalition Incentive Model (PCIM), a framework which brings insights from rational choice theory and historical institutionalism. Through the lens of this framework, I argue that economic crisis function as a critical juncture which disrupts existing rentier political arrangements, thereby creating a fiscal choice-point. However, fiscal policy decision during these periods ultimately rest on the incentives and constraints facing the ruling political coalition. Using a comparative historical analysis, the findings of this study reveal that Indonesia’s patronage-technocratic coalition under Suharto responded to crisis by diversifying the economy and establishing broad-based tax system beginning with the 1983 tax reform. While Nigeria’s patronage-based coalition resorted to external borrowing and diverting of oil rents to preserve existing patronage networks. These findings challenge the deterministic core of rentier state theory by proving that resource wealth alone does not determine fiscal outcomes. Rather, entrenchment or escape from rentier-trap is solely contingent on how political elites interpret and respond to crisis within the constraints of historically inherited institutions. By introducing the PCIM, this thesis provides a more plausible explanation for variation in the fiscal trajectories among resource-rich states and also advances broader debates on taxation, state capacity, and institutional change.