Industrialisation and Nigeria's 2020 Goals

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Just days after the announcement and even before the survey could be launched, the Manufacturers Association of Nigeria came out with a startling report identifying 37 companies that had closed down across the country over a space of just two weeks. The report once again confirms the bitter state of affairs of the Nigerian economy, where closures are a frequent and constant refrain. A complete account of contemporary Nigerian industry is in fact impossible without a mention of the de-industrialisation that continues to plague it. Just another point of irony in the great ‘Nigerian Paradox’ of acute economic backwardness in a situation of abundant natural and human resources!

The collapse of world oil markets in the early 1980s skewered Nigeria’s foreign exchange reserves and practically stalled economic growth. The cumulative effect of years of incoherent policies further upset the country’s fragile international and domestic fiscal condition, causing massive inflation, unemployment and poverty. Nigeria’s standing as a middle-income country was thoroughly humiliated, and by the 1990s, it was confirmed as one of the poorest in the world. An even more demeaning fall in average living standards accompanied the loss of national fortunes.

The economic downslide proved especially harsh on the manufacturing sector, partly at least due to the over-dependence on oil exports that thwarted economic diversification. With local sourcing of raw material confined to all but a few industries, capacity utilisation plunged dramatically in import-dependent operations. Nigerian manufacturing is predominantly about isolated assembly-line functions with very limited or no backward connections to the economy. These and other factors combined to bring the total GDP contribution from manufacturing down from a little over 9% in 1981 to 6% by the end of the last century.

The renewal of democratic governance in 1999 was followed by an enthusiastic redirection of development policies. Abuja quickly announced multiple programmes to achieve a stable and globally aggressive economy that is not critically dependent on the oil and gas sector. The crux of the government’s new ambitions were outlined with the adoption of the 2020 goals, a radical vision document that foresees Nigeria as one of the 20 top world economies by that year. While there are no comprehensive progress reports yet, some international aid and monitoring agencies are ambiguous about the eventual fate of this grand scheme. Others, like the IMF, are confident that Nigeria will not only achieve its goals, but will do so despite the current global financial crisis. In July, a visiting IMF team reaffirmed optimism about rapid growth and economic diversification, insisting however on the importance of a macroeconomic policy conducive to private sector growth.

What Nigeria effectively needs are policies fostering rapid business development across sectors: In other words, an enterprise revolution that accelerates sustainable growth while simultaneously helping alleviate poverty and improve living standards. The complex socio-economic realities in this corner of West Africa often defy the best laid development plans, and it is no surprise that initiatives like the Nigerian Industrial Development Bank (established 1964) or the structural Adjustment Programme of 1986 have consistently failed to deliver as far as improving Nigeria’s industrial scenario goes. The severity of challenges facing it in this regard can hardly be overstated:

o Poor industrial performance and an unfavourable tax regime make the cost of manufacturing abnormally high, curtailing demand and reducing profitability.
o Most industrial activity is linked directly to foreign markets in terms of both inputs and delivery, with very few industries being rooted to the local economy.
o Underutilisation of resources – brought about by a plethora of causes including labour and security problems, falling demand and low liquidity – is a major industrial constraint.
o The infrastructure deficit, especially in power, is acute and inhibitive to viable industrialisation. Additionally, road and rail networks need massive overhaul.
o Trained manpower shortage in both technical and non-technical fields is a crucial shortcoming that affects productivity and optimisation in industrial operations.
o Low standards of education are deepening the already critical unemployment problem by turning out graduates who are unemployable in new or existing businesses.
o Socio-economic disparities and ethnic divides have provoked militancy and armed extremism to uncontrollable levels, especially in the oil-rich Niger Delta region.
o Official indifference, lax administration and ingrained corruption all combine to frustrate existing enterprises and deter the emergence of new ones.

Beyond just correcting these deficiencies however, Nigeria needs significant additional impetus to take industrial development into overdrive.

The present government under President UM Yar’Adua is pursuing a “cluster-concept” strategy to drive non-oil growth through the creation of industrial parks and special economic zones. Such clusters, often located near the coast or an international airport, offer lucrative investment options and tax breaks for new industries. The Nigerian Investment Promotion Commission, a single-window investment centre, is also actively involved in implementing policies and incentives that attract foreign industrial investors. The thrust of these initiatives has primarily been on encouraging public-private partnerships as a vehicle for rapid economic growth.

A central obstacle to industrialisation arises from the spatial distribution of existing plants and infrastructure. The fact that industrial growth has been traditionally restricted to a few geographic locations is not so much alarming as the fact that there is virtually no inter-linking between locations and their respective industries. Widening the industrial distribution pattern remains a fundamental issue, one that can be intelligently resolved through industrial linkages. The keyword here is production subcontracting.

History demonstrates adequately the fact that industrial expansion is inseparably linked to rapid job creation, enterprise development and viable economic growth. Nigeria’s goals would be well-nigh impossible to achieve without the active involvement of entrepreneurs in a regulated atmosphere of industrial networking and subcontracting.

The question, once again, is whether Nigeria manages to discern the opportunity hidden within the challenge!