All over the world, nations are facing stresses from series of challenge – population growth, structural changes in the world economy, rural-urban migration, environmental degradation and rapid social change. One defining feature in all these is that societies with institutions, rules and norms for managing challenges and well established traditions of governance are generally better able to accommodate peacefully to change. Those with weaker governance, fragile social bonds and little consensus on values or traditions, on the other hand, are more likely to buckle.
At the 43rd Annual General Meeting of the Manufacturers Association of Nigeria (MAN) last year, the association discussed “The Future of the Manufacturing Sector” as its theme. The association, before then, had been hammering on the precarious state of the sector for years. Industries were closing shop in droves because of the harsh operating environment and the dearth of critical infrastructure like power. The situation is even direr than it was last year.
Dr. Thabo Mbeki, former President of South Africa was the guest speaker. The choice of Mbeki, according to MAN President, Dr. Frank S. Udemba Jacobs was because “of his antecedents and achievements as President of South Africa.” During Mbeki’s tenure, The South African economy grew at a yearly rate of 4.5%. Similarly, massive employment was created in the middle sector of the economy, leading to the creation of a large pool of middle class, especially with the implementation of Black Economic Empowerment, which led to a high demand for trained professionals. South Africa also attracted enormous foreign direct investment, making it the focal point of African growth.
During his lecture, he pointed out that Africa loses at least $50 billion every year through trade mis-pricing which would make an important and positive contribution to the continent’s development efforts including industrialisation. Mbeki called for “national cooperation” in developing an “Industrial Revolution Plan…to defeat the scourge of illicit financial outflows.” He suggested that MAN and the rest of the corporate sector should take it as one of their tasks in the context of the industrialisation of Nigeria to join hands with the government and civil society to fight against illicit financial outflows.
This “illicit financial outflow” is almost bringing the country to its knees because of the huge demands for billions of dollars to import goods, even goods we have capacity to produce. In times like these, we need our industries now more than ever.
The United Nation (UN) predicts that by 2050 there will be 2.5 billion Africans – a quarter of the world’s population. Because of this and other predictions, Africa has remained the toast of investors who would not want to miss the opportunity of investing in an emerging market with such huge population. But things have started changing the way few predicted. The way things stand presently, four of Africa’s biggest economies are showing strains.
Nigeria, South Africa, Angola and Kenya, the four leading economies, are seriously affected by the fall in oil and commodity prices. Nigeria relies on oil for 70% of government revenue and accounts for 90% of export revenue. That leaves very little room to adjust the country’s budget. From an economic point of view, that can only mean one thing – slower growth. As a result, growth prediction is fixed now at 2.3%, the lowest rate in 15 years, according to the IMF. We have drawn down on our currency reserves and implemented capital controls, making access to dollars very difficult. In an economy that relies on imports, the controls have made life difficult for citizens and companies.
All these point to one thing: the country’s future is in the balance. Whether it bounces back from this commodity slump or slips back into financial impunity of the past will depend on whether our leaders have the will and determination of moving forward.
For me, two things are crucial. The first is to recognise the new reality. Given the decline in our terms of trade, Nigeria’s buying power has gone down. We are not in this boat alone as other governments are being forced to adjust to this reality which is also affecting rich Gulf nations like Saudi Arabia, Qatar, Kuwait and others.
The second is to focus on people, infrastructure and industrialisation. In recent years, the Economist and popular publications alike have argued that Nigeria, and indeed, Africa was on the threshold of an economic boom. Pointing to a decade of high growth and increased foreign investment, this argument held that the continent was finally on track to leave its long years of poverty and under-development behind. Some even said that Africa could become the next global economic powerhouse, following in the footsteps of East Asia.
However, with this new reality, this position is now contentious for one obvious reason: weak or no industrial base. Nigeria’s growth would not be real, lasting, or beneficial until it is based on manufacturing rather than exporting raw commodities. Rather than focusing on the hype of mobile phones, we should ask critical questions and study some basic development indicators: Was manufacturing increasing as a percentage of GDP? Were the goods we exported becoming more valuable – finished products rather than raw materials?
It is instructive to note that a 2011 U.N. report looked into these questions, and found that Nigeria and most African countries are either stagnating or moving backwards when it comes to industrialisation, quite unlike the East Asian experience.
We are here because oil and commodity prices are plunging, China’s purchases are slowing, and GDP growth rates are in steep decline. Reflecting these trends, the IMF cut its 2016 projection for growth from 4.5 to 3.75 percent, concluding that the decade-long commodity cycle that had raised export revenues “seems to have come to an end.” With a population boom on the horizon, experts now worry about how Nigeria will produce enough jobs for its people.
Without commensurate oil revenue, Nigeria’s flanks have now been laid bare. In November 2015, the Economist noted that “many African countries are de-industrialising while they are still poor, raising the worrying prospect that they will miss out on the chance to grow rich by shifting workers from farms to higher-paying factory jobs.” Nigeria’s import substitution industrialization (ISI) initiative that was expected to set the framework for the takeoff of most industries’ largely derailed because of lack of focus.
But with the gains made in the cement sector, this appears to be our best bet for now. ISI is a trade and economic policy that advocates replacing foreign imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialised products.
Nigeria has made several attempts at building a virile industrial base through import substitution. The concept depended on importing processed materials for assembling. The strategy bequeathed to the nation a number of assembly plants that were dependent on completely knocked down (CKD) components imported from industrialised nations. Volkswagen and Peugeot readily come to mind but soon fizzled out.
The Obasanjo administration reawakened the initiative with the backward integration policy for the cement sector in 2002. The policy was designed to encourage local players to set up production plants with a view to making the nation self-reliant. Right now, local manufacturers of cement say they now have capacity that far exceeds demand.
Dangote Group, which is the main driver of this revolution, changed the story when it ventured into local manufacture of cement, taking advantage of the enabling environment that the government had put in place to encourage local players. Dangote Cement Plc currently operates three cement plants located at Obajana, Kogi State, Gboko, Benue State and Ibese, Ogun State.
It is quite possible that this can be replicated in other areas of the manufacturing sector. We can key into the Economic Commission for Africa (ECA) call for “smart protectionism,” suggesting that trade policy in Africa should be “highly selective,” with special treatment for certain sectors to advance national development goals.
This is right thinking. For Nigeria, job creation will continue to remain elusive if we do not make concerted efforts to bring back the in ll over the world, nations are facing stresses from series of challenge – population growth, structural changes in the world economy, rural-urban migration, environmental degradation and rapid social change. One defining feature in all these is that societies with institutions, rules and norms for managing challenges and well established traditions of governance are generally better able to accommodate peacefully to change. Those with weaker governance, fragile social bonds and little consensus on values or traditions, on the other hand, are more likely to buckle.
At the 43rd Annual General Meeting of the Manufacturers Association of Nigeria (MAN) last year, the association discussed “The Future of the Manufacturing Sector” as its theme. The association, before then, had been hammering on the precarious state of the sector for years. Industries were closing shop in droves because of the harsh operating environment and the dearth of critical infrastructure like power. The situation is even direr than it was last year.
Dr. Thabo Mbeki, former President of South Africa was the guest speaker. The choice of Mbeki, according to MAN President, Dr. Frank S. Udemba Jacobs was because “of his antecedents and achievements as President of South Africa.” During Mbeki’s tenure, The South African economy grew at a yearly rate of 4.5%. Similarly, massive employment was created in the middle sector of the economy, leading to the creation of a large pool of middle class, especially with the implementation of Black Economic Empowerment, which led to a high demand for trained professionals. South Africa also attracted enormous foreign direct investment, making it the focal point of African growth.
During his lecture, he pointed out that Africa loses at least $50 billion every year through trade mis-pricing which would make an important and positive contribution to the continent’s development efforts including industrialisation. Mbeki called for “national cooperation” in developing an “Industrial Revolution Plan…to defeat the scourge of illicit financial outflows.” He suggested that MAN and the rest of the corporate sector should take it as one of their tasks in the context of the industrialisation of Nigeria to join hands with the government and civil society to fight against illicit financial outflows.
This “illicit financial outflow” is almost bringing the country to its knees because of the huge demands for billions of dollars to import goods, even goods we have capacity to produce. In times like these, we need our industries now more than ever.
The United Nation (UN) predicts that by 2050 there will be 2.5 billion Africans – a quarter of the world’s population. Because of this and other predictions, Africa has remained the toast of investors who would not want to miss the opportunity of investing in an emerging market with such huge population. But things have started changing the way few predicted. The way things stand presently, four of Africa’s biggest economies are showing strains.
Nigeria, South Africa, Angola and Kenya, the four leading economies, are seriously affected by the fall in oil and commodity prices. Nigeria relies on oil for 70% of government revenue and accounts for 90% of export revenue. That leaves very little room to adjust the country’s budget. From an economic point of view, that can only mean one thing – slower growth. As a result, growth prediction is fixed now at 2.3%, the lowest rate in 15 years, according to the IMF. We have drawn down on our currency reserves and implemented capital controls, making access to dollars very difficult. In an economy that relies on imports, the controls have made life difficult for citizens and companies.
All these point to one thing: the country’s future is in the balance. Whether it bounces back from this commodity slump or slips back into financial impunity of the past will depend on whether our leaders have the will and determination of moving forward.
For me, two things are crucial. The first is to recognise the new reality. Given the decline in our terms of trade, Nigeria’s buying power has gone down. We are not in this boat alone as other governments are being forced to adjust to this reality which is also affecting rich Gulf nations like Saudi Arabia, Qatar, Kuwait and others.
The second is to focus on people, infrastructure and industrialisation. In recent years, the Economist and popular publications alike have argued that Nigeria, and indeed, Africa was on the threshold of an economic boom. Pointing to a decade of high growth and increased foreign investment, this argument held that the continent was finally on track to leave its long years of poverty and under-development behind. Some even said that Africa could become the next global economic powerhouse, following in the footsteps of East Asia.
However, with this new reality, this position is now contentious for one obvious reason: weak or no industrial base. Nigeria’s growth would not be real, lasting, or beneficial until it is based on manufacturing rather than exporting raw commodities. Rather than focusing on the hype of mobile phones, we should ask critical questions and study some basic development indicators: Was manufacturing increasing as a percentage of GDP? Were the goods we exported becoming more valuable – finished products rather than raw materials?
It is instructive to note that a 2011 U.N. report looked into these questions, and found that Nigeria and most African countries are either stagnating or moving backwards when it comes to industrialisation, quite unlike the East Asian experience.
We are here because oil and commodity prices are plunging, China’s purchases are slowing, and GDP growth rates are in steep decline. Reflecting these trends, the IMF cut its 2016 projection for growth from 4.5 to 3.75 percent, concluding that the decade-long commodity cycle that had raised export revenues “seems to have come to an end.” With a population boom on the horizon, experts now worry about how Nigeria will produce enough jobs for its people.
Without commensurate oil revenue, Nigeria’s flanks have now been laid bare. In November 2015, the Economist noted that “many African countries are de-industrialising while they are still poor, raising the worrying prospect that they will miss out on the chance to grow rich by shifting workers from farms to higher-paying factory jobs.” Nigeria’s import substitution industrialization (ISI) initiative that was expected to set the framework for the takeoff of most industries’ largely derailed because of lack of focus.
But with the gains made in the cement sector, this appears to be our best bet for now. ISI is a trade and economic policy that advocates replacing foreign imports with domestic production. It is based on the premise that a country should attempt to reduce its foreign dependency through the local production of industrialised products.
Nigeria has made several attempts at building a virile industrial base through import substitution. The concept depended on importing processed materials for assembling. The strategy bequeathed to the nation a number of assembly plants that were dependent on completely knocked down (CKD) components imported from industrialised nations. Volkswagen and Peugeot readily come to mind but soon fizzled out.
The Obasanjo administration reawakened the initiative with the backward integration policy for the cement sector in 2002. The policy was designed to encourage local players to set up production plants with a view to making the nation self-reliant. Right now, local manufacturers of cement say they now have capacity that far exceeds demand.
Dangote Group, which is the main driver of this revolution, changed the story when it ventured into local manufacture of cement, taking advantage of the enabling environment that the government had put in place to encourage local players. Dangote Cement Plc currently operates three cement plants located at Obajana, Kogi State, Gboko, Benue State and Ibese, Ogun State.
It is quite possible that this can be replicated in other areas of the manufacturing sector. We can key into the Economic Commission for Africa (ECA) call for “smart protectionism,” suggesting that trade policy in Africa should be “highly selective,” with special treatment for certain sectors to advance national development goals.
This is right thinking. For Nigeria, job creation will continue to remain elusive if we do not make concerted efforts to bring back the industries that defined Lagos, Aba, Port-Harcourt, Kano, Kaduna and other urban centres in the past.
