By Ashimi Jamiu Adewale
I have followed the ongoing debate on the exit of GlaxoSmithKline company from Nigeria and the attempts to blame an administration that is less than eight months for the exit of the company.
Background
In order to have a proper understanding of my perspective on this issue, I need to provide a background so that the issues at stake will be well understood.
The white race is a very adventurous and enterprising race. The economic relationship between them and us in Africa was established firmly at a stage they needed raw materials for their industries.
They established a system of governance and provided infrastructures to extract and transport the raw materials to their industries.
In exchange, they sold finished products to us. They established companies like Glaxosmithkline to distribute their products in the country.
We sell cocoa to industries in the western countries and they use it to produce several finished products, Bournvita, Ovaltine, Milo, several chocolates etc. Thus, an unequal economic relationship was established.
This relationship was sustained for many years, but rapid urbanisation led to more and more demands for finished products from these countries. The situation encouraged big multinational companies to establish companies in the country to market their products in Nigeria. In some cases, it was convenient for them to establish industries to assemble their products here for distribution.
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The impact of this unequal economic relationship started being felt in the early 1980s. We initially resorted to taking loans at very exploitative conditions so that we can continue to buy finished products for our use. However, repayments became a problem because the raw materials we sold could not pay for imported items and service loans. So we could not import enough to meet our needs, hence we resorted to rationing. This gave rise to the era of queuing for essential commodities and the attendant hardships.
To eliminate queuing for essential commodities, the foreign exchange market mechanism was introduced by the experts from the World Bank.
The way it works is that if we have Nigerians demanding foreign products to the tune of N2 million and we have $1 million in the market; the exchange rate would be N2 to $1. However, because our demand continued to increase, it became N200 million to $1 million. The exchange rate became N200 to $1. Today, it is over N1000 to $1.
The implication of this steady decline in the purchasing power of the naira is the reduction in standard of living in Nigeria, inability of the import oriented multinational companies to expand and create jobs, massive unemployment and brain drain of our skilled manpower. The rapid decline in purchasing power led to a situation where so many people could not purchase expensive items but look for cheap products.
Where industries transform raw materials into finished products, there are, usually, massive investments in research. The research activities lead to the creation of new products, and the establishment of more industries. Even when some companies are closing down, new ones are being created to provide better services. These types of opportunities are lacking in countries where multinational companies only engage in the distribution of finished products or assemblies and distribution of products.
Exit of GlaxoSmithKline and other companies
The major reason for the exit of GlaxoSmithKline Company and others is not because of the policies of a government that is less than eight months old. Rather, the companies leaving are reacting to unfavourable situations in the very competitive international market. In a situation where several companies from other countries now sell similar products at relatively cheaper prices in the same Nigerian market, the consumers are rational, and they will prefer to pay less to get the same service.
The mistake, therefore, was made by these companies. They should have invested massively in research activities in our universities to develop more new and better products, continuously establish new companies and employ more Nigerians (because the cost of labour in Nigeria is several times less than what they pay their countrymen). This strategy would have made it possible for them to produce at globally competitive prices. It would have been difficult for competitors from other countries to drive them out of Nigeria. They would have created jobs for our youths, reduce unemployment and poverty.
However, we Nigerians are also to be blamed because we did not provide the critical infrastructures such as electricity and effective transportation network and enabling environment to attract genuine investors who could invest in research; use our raw materials to produce finished goods for our internal consumption and possible export of excess products.
If they had done that, they would not be folding up due to competition from other foreign companies.
Way forward
Given this background, the government should focus more on provision of infrastructures and creating an investment-friendly environment for companies that are interested in investing in research and processing our raw materials into finished products for internal consumption and export. These are the lessons we should all learn from their exit.
