Nigeria’s huge size should be an economic advantage. But to the dismay of watchers, less endowed African countries are better off. Its industrial production value dropped by 41 per cent between 2012 and 2018, according to the African Development Bank (AfDB); Morocco’s expanded by 16 per cent and Ethiopia’s fivefold. At this year’s annual meetings of the AfDB Group in Busan, Korea, experts pushed for Nigeria and other African countries to prioritise value addition, among other viable options, to fast-track industrialisation and create jobs, Assistant Editor CHIKODI OKEREOCHA reports.
Despite Nigeria’s vast human and natural resources, it lags behind less-endowed African countries in the drive for industrialisation.
African Development Bank (AfDB) President Dr. Akinwumi Adesina brought this reality home when he said Nigeria’s industrial production value dropped by 41 per cent between 2012 and last year.
The occasion was the opening ceremony of the 53rd annual meetings of the AfDB Group in Busan, South Korea. The AGMs, which are one of the largest economic gatherings on the continent, had:“Accelerating Africa’s Industrialisation” as its theme.
The meetings brought together thousands of delegates and participants, Heads of State, public and private sector stakeholders, development partners and people in the academia to reflect on Africa’s industrialisation, one of the bank’s High 5 strategic priorities and an avenue to improve the living conditions of Africans.
At the meetings during, which the bank organised a series of knowledge events to generate new ideas for developing and financing Africa’s industrialisation, Adesina said between 2012 and this year, Africa’s industrial value add declined from $702 billion to $630 billion, a loss of $72 billion.
He said among countries with the largest industrial output, industrial value added dropped sharply by 41 per cent in Nigeria, 26 per cent in South Africa, 64 per cent in Egypt and 67 per cent in Algeria. According to him, the loss of industrial production value was responsible for the massive unemployment on the continent.
Curiously, while Nigeria, despite her potential in terms of population and rich agricultural and mineral endowments, was hit by sharp drop in industrial production value, a few other African countries came up strong. For instance, Morocco’s industrial output expanded in the same period by 16 per cent.
Adesina said: “Ethiopia also witnessed a fivefold increase in its industrial value added, driven by its heavy investments in industrial parks, special economic zones, and strategic partnerships with Chinese companies for its leather industry, and with global textile and garment companies.”
However, for Nigeria and indeed, other African countries seeking to fast-track their industrialisation, there appears to be light at the end of the tunnel. For instance, the AfDB, at the meetings, announced that to help reverse the continent’s trend of de-industrialisation, it planned to invest over $35 billion in the continent in the next 10 years.
Adesina said: “Africa must fast-track industrialisation. That is why the AfDB plans to invest $35 billion over the next 10 years in its focus on industrialisation. The bank’s industrialisation strategy hopes to help Africa raise its industrial Gross Domestic Product (GDP) from a little over $700 billion today to over $1.72 trillion by 2030.
“This will allow Africa’s GDP to rise to over $5.6 trillion, while moving GDP per capita to over $3,350.”
This was as the government of South Korea announced at the conclusion of the AfDB Ministerial Meeting in Busan a financial assistance of $5 billion for Africa.
Korean President Moon Jae-in also said the country was committed to sharing its technological and industrial experience with Africa and to help it compete in the Fourth Industrial Revolution.
While noting that Africa is no longer the sleeping lion, Jae-in said the theme of the Annual Meetings was appropriate for the industrial transformation of the continent, and in facilitating the sharing of experiences with Korea and other partners.
Understandably, the AfDB’s planned $35 billion investment and South Korea’s financial and technological assistance were music in the ears of African countries particularly Nigeria. For one, the crash in oil price had plunged Nigeria into a debilitating recession, forcing the authorities to turn to industrialisation as a way of diversifying the economy.
But, of greater importance than the AfDB and South Korea’s heart-warming gestures was the fact that the meetings identified the factors responsible for Nigeria and indeed, Africa’s loss of industrial production value and subsequent long and tortuous road to industrialisation. They also pushed forward a number of robust, strategic options to change the narrative.
Value addition takes centre stage
For Nigeria to fast-track industrialisation and create jobs, experts say that she must prioritise value addition. Adesina put this in perspective when he said: “The formula for the wealth of nations is clear: rich nations add value to all they produce; poor nations simply export raw materials.
“Africa needs to industrialise and add value to everything that it produces – from agriculture, to minerals, to oil, gas and metals. Africa needs to move from the bottom to the top of the global value chains.”
He is right. At present, virtually the basic raw materials to feed the industries in the country are available locally. The snag however, is that they are not available in sufficient quantity and quality. More importantly, most of the available local raw materials are said to be in unusable form, requiring value addition before they can be used by industries.
The value addition, The Nation learnt, is done mostly by Small and Medium scale Enterprises (SMEs) because they are the off-takers, taking the materials from the unusable form to the next intermediate stage. It is the intermediate raw material that industries require for production.
However, because of the low capacity of the SMEs to add value to available local raw materials, coupled with lack of access to capital to set up processing facilities, process technology and techniques, and spare parts, among others, they have not been able to fill this gap.
The Nigeria Export Promotion Council (NEPC) has been consistent in its position that local raw materials in their natural forms do not have any value and would not attract any market demand hence, there is need to process them to meet internationally accepted quality and standards for use by manufacturers.
Most of the local raw materials are being exported and later imported back in the country as finished products with the addition of certain additives at great cost. The Council, therefore, said there is the need to encourage the local supply of raw materials to halt the huge foreign exchange spent on raw materials importation when they can be sourced locally.
Interestingly, Nigeria’s potential for production of a wide range of raw materials and products has never been in doubt. The country boosts human and natural resource endowments as well as good climatic conditions to support the production of agro-raw materials and products required by industries.
The country is also blessed with abundant solid mineral deposits awaiting exploitation as well as huge market. This must be why Manufacturers Association of Nigeria (MAN) President, Dr Frank Jacobs, has been calling for continued support for resource-based industrialisation programme.
He explained that resource-based industrialisation involved the utilisation of the country’s abundant natural resources in producing goods needed in the country. “This is a more sustainable and enduring form of industrialisation, compared with the import-dependent industrialisation, which has been practised in Nigeria for long,” Jacobs said, in Lagos.
The MAN chief, who said it would also save the country a lot of foreign exchange currently used in importing raw materials and free funds for development projects, called for the deepening of the ongoing backward integration efforts in the agric sector to catalyse more industrial input supply from the sector.
The performance of the manufacturing sector is said to have improved in recent times. The National Bureau of Statistics (NBS), for instance, put the real GDP growth in the sector in the first quarter of the year at 3.39 per cent (year on year).
The figure is higher than that of the first quarter of last year, which was 2.03 per cent and the one for the last quarter of the same year, which was 3.26 per cent.
Jacobs noted that the growth strategies were initiated when the sector’s performance dipped to 2.85 per cent in the third quarter of last year. The sector’s performance dip prompted government to offer the necessary stimulus required for the sector’s survival.
The sector’s improved performance, according Jacobs, was also driven in part by MAN’s sustained advocacy, resilience and ingenuity to drive economic rebound.
He, however, said to sustain the positive growth trajectory as enunciated in the 2018 budget that has a growth target of 3.5 per cent, government needed to effectively synthesise monetary and fiscal policies.
Experts also say the government must address the constraints holding the manufacturing sector and the economy down such as lack of infrastructure, especially electricity supply, weak bureaucratic institutions and corruption, among other factors that impinge on national competitiveness.
To them, therefore, the AfDB meetings, apart from putting these issues on the front burner, they drew attention to the need to force a paradigm shift from over dependence on imported raw materials and products to local raw materials utilisation and backward integration in areas where Nigeria has comparative and competitive advantages namely, agric and solid minerals.
The Emir of Kano and former Governor, Central Bank of Nigeria (CBN), Muhammadu Sanusi II, traced Nigeria and Africa’s post-colonial economic woes to fiscal indiscipline and endemic disregard for its competitive advantages. He said this was why development was stunted and the continent’s global trade ties lopsided in favour of offshore trading partners.
Sanusi, who participated at the AfDB meetings in Busan, pointed out that nine out of every 10 countries in Africa have huge trade deficits with China, for instance. He said Asia developed mostly on domestic investments and resources, noting that this underscored the need for Nigeria and other African governments to invest in and promote creativity and indigenous enterprise.
The economist and financial risk expert also advocated a series of structural reforms, including strategic investments in key sectors such as agriculture, infrastructure, education, and SMEs. He also called for deliberate industrial diversification, noting that China has begun to move its mega-sized manufacturing capabilities out of low-cost industries.
That was not all. Sanusi also said there was the need to eradicate constitutional provisions and structures that increase the cost of governance at national and sub-national levels, manage demographic growth, and revamp and harmonise moribund and ineffective customs and excise duties that promote cross-border smuggling and revenue losses to governments.
“Africa’s economic transformation will be best achieved through fast-tracking regional cooperation and the execution of hard-nosed structural reforms that focus on the development of the continent’s human capital and material resources,” the Emir added.
For the Deputy Prime Minister and Minister of Strategy and Finance, Republic of Korea, Dong Yeon Kim, a new approach was urgently needed, one that encourages innovative industrialisation to translate Africa’s potential into economic prosperity.
“Industrialisation policy should take into account the unique conditions of each country. New technologies can provide leapfrogging opportunities by speeding up the industrialisation process and creating new value,” he said, noting that smart infrastructure presents a promising area for Korea’s contribution.
“Smart infrastructure can provide a new solution to Africa’s shortage in roads, airports and harbours. It allows optimal use of resources and can even replace traditional infrastructure.
“Africa is already producing substantial outcomes in this area. Going forward, Korea is strongly committed to sharing its rich expertise and experience as Africa’s close partner,” Kim said.