Can Nigeria escape industrialization? In 2014 we did a rebasing of the economy, moved the furniture around a bit, and found to our surprise, that the Nigerian economy was dominated 52% by the services sector. What are we servicing really? The service domination of the economy is in itself an indication of how small the economy is and the potentials for higher growth. But before then, there is need to state that the rest of the economy consists of agriculture, petroleum and little else. Where is manufacturing and industrialization? Who is manufacturing the complex goods that we the people need?
The structure of the Nigerian economy is serious cause for concern. We are on the road to nowhere and seem to be in a hurry. Someone said you will never reach your destination no matter the speed, so long as you are heading in the wrong direction. The services sector has kept growing, and there is daily deemphasis of the industrial/manufacturing sector in spite of pretensions to the contrary. Since the early de-industrialization of the mid-1980s as a result of the adoption of the disastrous policies of the multilateral bodies, we have been stuck in the mud and have failed to launch. Shortly after the structural adjustment fiasco that started in 1986, we joined the World Trade Organization on January 1st 1995 even though a more strategic China only joined in 2001 when the US was distracted by the dastardly incident of September 11. The first attempt at industrialization as evidenced in Sharada, Oshodi, Ikeja, Sango/Otta Ilupeju, Kakuri, Enugu and other industrial estates around Nigeria, simply disappeared under the illusion of capitalism. Devaluation of currency made it untenable for these companies to continue bringing in equipment and raw materials. We also were made to open the economy to imports from everywhere; a death knell for our economy.
But Nigeria cannot hope to short-circuit industrialization. We cannot sidestep it. It is not going to be as easy as ‘porting’ to mobile phones and abandoning landlines. We need now to consider what we shall do ourselves towards fulfilling our people’s needs for manufacture and secondary and tertiary products which we now import from abroad 100%. Our situation is totally precarious. To address perennial unemployment crisis, we cannot continue to delude ourselves by pursuing youth entrepreneurship strategies that are no more than turning millions of Nigerians into more ruthless middlemen for imported sweet nothings from abroad, or deluding ourselves that we are a ‘service’ economy. Servicing what realy? It is true that many imports are cheaper than locally produced alternatives – especially those from China. But for our own sake and those of our children, we must find a way to play our own gambit in the blood sport that is called international trade. Having our ‘sister’ sitting atop the WTO in my view, is no advantage. In fact, it could be a disadvantage as we may be easily coaxed and persuaded from taking the out-of-the-box strategies with which we may be able to save ourselves. Therefore, as I had written elsewhere, trade may not offer us the way forward as a nation, a people, a continent. Trade is something we MUST do IN ADDITION to more serious concerns. But we need a moment to think about:
1. What exactly are we trading?
2. How can we add value to almost everything we trade?
3. How do we ensure we lift our people out of multidimensional poverty so that they can add value to our Gross Domestic Product (GDP), and not be a minus as they fall into crime?
4. How do we develop our people, our nation, our environment, into a formidable fallback which is known as DOMESTIC CONSUMPTION? Because with over 200 million people, there should be a robust market for anything that is produced locally.
5. What can we do to rapidly ramp up the value of our export vis-à-vis our imports (which is probably 20 times our exports, in value).
Indeed, we may have to start local. The frenzied, harried approach to just export anything raw just to ‘mark the register’ as we say here, is futile, suboptimal, myopic, and childish. At least, now that we have ran that strategy for decades now, with disastrous results, it behooves on us to change tack and try another approach. We must find ways to resist and wriggle out of the vice-grip of powerful foreigners who insist that we must remain where we are. In fact, we are doing so woefully in trade presently. We are basically an agricultural commodity exporter, besides the crude oil and gas from which we get less than 30% after the real producers deduct what is due to them. In the agricultural spectrum, we produce and sell less than 20 international commodities out of a possibility of over 1,000. And unfortunately for us, we have a bad reputation in international trade circles, for breaching rules and not meeting standards. We are presently hitting our heads against the wall, insisting that we must export by all means. What is more, we undermine ourselves. Local operatives don’t understand the meaning of regulation and are geared only to frustrate exporters because every one of them is looking to make illegal gains off of the back of struggling farmers and traders. To export anything out of Nigeria is one of the most difficult capers anyone can venture. Perhaps we should turn this inwards; we should deemphasize export and see what we can do to help ourselves locally first. Perhaps we should add value to those things we export so that they are better standardized and no one can easily frustrate them at the ports. Perhaps the African Free Trade Agreement is our last chance. If we cannot penetrate Europe and Asia, why not Africa? This will however take a lot of seriousness. For now, I don’t believe we are very organized or serious about AfCFTA.
MY PROPOSAL – THESE THREE STRATEGIES
I believe Nigeria should urgently and seriously focus on these three strategies and remove all our usual ego-tripping by which the best ideas are drowned in the usual scramble to grab and kill. A serious president should:
1. FOCUS ON VALUE ADDITION TO AGRIC PRODUCTS.
Now, this is very important, immediate and imperative, for the chief reason that Nigeria is an agricultural country for now. Below data of our largest imports and exports show that whereas we import (indeed yearly) billions of dollars worth of technological goods, petrol and even food, apart from our export of crude oil and gas, all the other things we export are agricultural products. Whereas the first 15 imports into Nigeria are in the billions of dollars, after crude oil and gas – and the occasional sales of scrapped vessels or planes (which we don’t manufacture), our third/fourth highest export is just a few hundred millions and it goes down like that. This shows that without changing strategy we will NEVER get out of the negative Balance of Trade and Balance of Payment situation.
Figure 1: Nigeria’s main imports for year 2020
Figure 2: Nigeria’s top exports for 2020. Note that we are entitled to at most 30% of crude oil and gas
Therefore, one thing we should do is try and see just how we can get more dollars from our exports and for the reasons adduced above, we should perhaps pause and not just join the frenzy of exporting for export sake. Again, we should be reminded that there are hundreds of other agric products that we can grow as we haven’t utilized more than 30% of our arable land (some sources say we have used much less). So, a mass attack of agriculture with a view to adding value (canning, processing, packaging, etc), which represents secondary products, should be encouraged. Unfortunately, rather than take advantage of our vast arable lands, I am hearing Gov. El Rufai saying we should carpet-bomb these ‘ungoverned’ spaces in order to kill terrorists. Does it not make sense to ‘govern’ those places by increasing our agricultural outputs?
As I rounded up this article, news came out that the African Development Bank headed by Dr Akinwunmi Adesina is putting together $540 million for Nigeria to establish Special Agro-Industrial Processing Zones, specifically to see how we could add value to our agric products. This is great news and very timely. We should note that there is little government incentive going into the products that we presently dominate in the international market – sorghum, sesame seed, shea nuts and shea butter, cassava, yam, and to a lesser extent, products like Okra, Cocoa (over which we have lost vast grounds), Hibiscus flower (zobo), and the rest. Also, due to the romance with traditional ways of doing things, collapsed national infrastructure and extortion, a lot of grains escape from Nigeria unaccounted through northern Nigeria into other African nations – sometimes for further value addition and export. For one, our predilection for sharp practices has led to our hibiscus flowers, cassava, and yam being exported from Ghana where the rest of the world is more comfortable with their standards. What is more? Our pharmaceutical companies and food processing farms that need starch say they import 100% of their needs from abroad, when Nigeria is the largest producer of Cassava and Yam in the world! Permit me to say that we must be crazy. Anyhow, this strategy may be driven with further decentralization of electricity generation in Nigeria. The current structure is unsustainable and collapsing. Electricity generation and transmission is no longer a big deal around the world. More investors are needed in this area who can carve niches to provide electricity around the country, leaving some essential parts for government to worry about.
2. ENCOURAGE LOCAL PRODUCTION OF MANUFACTURES AND TERTIARY PRODUCTS
This strategy flows from the reality that we need to begin to move from being a primary product producer. Primary products are those to which we don’t add any value, like the agricultural ones mentioned above. That we have remained in one spot for 62 years since we got independence is a shame to all of us but while we have the time on our hands, we should start moving fast. This strategy echoes the ideas of Ricardo Hausmann and Joseph Stiglitz, both top global economists. Hausmann pushes the concept of economic complexity and together with Stiglitz, they believe that the idea of ‘comparative advantage’ still being pushed in some liberal economics quarters, is long dead. Indeed, it was promulgated in 1820 by David Ricardo and so is quite dated. What a country like Nigeria needs, to put it in Nigerian football parlance, is MASS ATTACK. Yes, mass attack in productivity in all sectors and innovation everywhere. We would notice that very good football teams are such that it looks like everyone can play attack and defense at the same time. You find a full back scoring sometimes and an attacker preventing a goal. In short, it is all about hard work, high work rates, high productivity by all. Nigeria, with 210 million people or thereabouts, cannot afford to sit on her backside, waiting for the rest of the world to provide for her. We have to be everywhere. At least we have to push. We have sat on our behinds for so long, that the rest of the world has stopped taking us seriously at all.
So, I propose that when it comes to agricultural products, we give it our all and ratchet up our cultivated land to at least 80% of arable land. I propose that we understand that for at least 500 different products, we could never produce too much and so, we should go all out like the world will end, and produce a whole lot more, for feeding our people by making food cheap, exporting some and processing and preserving the majority. I propose we get into crops that are good for our land but which we may not have been producing. I propose we go back to crops that we used to do well in but where we have slipped, like cocoa and palm oil. I also propose that we should not stop at the secondary level of production where we add value to agricultural products, but we start to powerfully move to the next level by beginning to forcefully deploy everything that we’ve learnt to begin to produce for ourselves those tertiary products that we usually buy from abroad. As we can see, year on year, our largest import and what really sucks out our dollars is not necessarily petrol (as much as every dollar spent on that is unacceptable), but technology. We all use laptops and phones and buy the most expensive of gadgets that no one will dare buy abroad. We buy cars and all that, wantonly like there is no tomorrow and spend heavily on apps and software of all kinds without which our lives will no longer have much joy. Government MUST heavily incentivize our youths to try their hands on some of these locally. Mistakes will be made, but a learning curve will emerge and be mastered. We should also go back to what they are doing in the South-East of Nigeria where we have seen the beginnings of such innovations. But rather than also think only the South East can perform, every state in Nigeria should challenge themselves. This is the real restructuring we have clamored for.
One last word on secondary products – especially value addition to agricultural products. My proposal is for government to encourage aggregators of agricultural/food products in the areas where they occur (including new crops that will be planted), so that they are preserved, processed, canned right there. We have suffered too much post-harvest losses in time and that must be ended urgently. We should see the rash of such standard companies that will spring up around the country as the next phase of our industrialization. This is also millions of jobs for our engineers, food scientists, microbiologists, chemists, administrators, accountants and so many more. Is it not a shame, that we spent $2.3 billion on cereals and $1.3 billion on fish and other crustaceans, while we could only manage barely $400 million and $300 million on oil seeds and cocoa respectively, our two top non-oil and gas exports? It is a disservice to all of us that this is happening. It is the condemnation of our future generations to lives of servitude.
3. LARGE COMPANIES
My third simple strategy is that we should start to think of encouraging large companies in Nigeria. We have too few of them and too many of micro, small, and medium enterprises (MSMEs). By the records provided by the agency in charge of MSMEs, we have 41 million of them by 2020. I have preached that this cannot be the way forward because the 41 million small companies have not had much impact on our unemployment numbers which is at embarrassing 33% presently. We may not continue to push for sheer increases in this number lest every adult in Nigeria opens a MSME. We probably need to look keenly at those 41 million companies and ask what they are producing and if they are even productive. I think we have too many small companies when what we need are large companies that can compete at the global level, or even more urgently, at the African free trade level. What is our strategy for the AfCFTA for example? Which markets are we targeting and how do we ensure we are not generally lounging here, waiting for other smaller African countries to again use us as dumping ground like the western world and now China has for too long? How do we ensure that our endemic corruption does not get in the way of our dreams in this respect too? The South Koreans showed the world the essence of supporting large companies which they called the Chaebols. This was how Daewoo, Samsung, Hyundai, LG Electronics and others became global players. Stiglitz reminds us in his book Making Globalization Work, that if South Korea had listened to the Comparative Advantage gospel, it would have remained a rice producing country today, with little else to show for it. We must thus mass attack our developmental challenges and also promote companies that can compete. The thing with larger organizations is that they can invest more in research and development, do large volumes, and take on the world. The MSMEs we have today (with most of them being micro businesses), are meant just for survival. We see them everyday, often looking rather hopeless in their small shops. Very few are successful, but their presence takes the eyes of the government off the unemployment challenge, and offers very temporary and unenduring reprieve. It keeps the ‘entrepreneurs’ under an illusion of success, until hyper competition unravels their business strategy and devaluation of currency chokes them out. This is not a strategy that targets growth and development.
4. PPP on railway – One last strategy. I have cause to recall the story of how the USA expanded west after the acquisition of Florida from Spain and Louisiana from France. The rail system was very instrumental to the full takeover of the vast territory that is known today as the United States of America. When the acquisitions of Florida and Lousiana were made, the leaders of the US then did not know just what the limits of their territory were. In time, they would discover that they had hit jackpot, having acquired the territories at relatively low bargains. The moguls who built the railtracks (such as ‘Commodore’ Vanderbilt and Andrew Carnegie), were incentivized to cover much territory because the Federal Government offered then free land on either side of their railtracks, sometimes up to 6 miles. If Nigeria wanted her rail system to explode – with the concomitant positive effect on commerce, logistics, supply chains, tourism, travel, and less pressure on our roads, perhaps the Federal Government could look at a similar deal in cooperation with our private sector. It may sound tangential though.
Adoption of these three ideas could actually kickstart our own industrial revolution which the Jonathan government had started to toy with in 2014. Also, some of the ideas here are similar to those put together for India by McKinsey and co. India is targeting 8% for their $3t trillion economy in 2022. These ideas should cause enough shakeup and get us all working till we get tired. It should also deliver 15% GDP yearly growth for the next ten years, thus tripling our economy. No less.