Industrialisation and Development Are Siamese Twins

OUTSIDE THE BOX

BY ALEX OTTI 

 “When you were making excuses someone else was making enterprise.”

― Amit Kalantri, in ‘Wealth of Words’

To set the stage, it is important to understand how the concept of industrialisation came about. One cannot discuss the subject matter without touching on the industrial revolution that started from 1760 and ended around 1840. Wikipedia describes industrial revolution as the transition to new manufacturing processes including “going from hand production methods to machines, new chemical manufacturing and iron production processes, the increasing use of steam power, the development of machine tools and the rise of the factory system.” The industrial revolution started in Great Britain with innovations in the textile sector playing a dominant role. These innovations were not just the first to debut in what we now know as ‘industry’, but also in terms of output, investment and employment. It was also the first sector where ‘modern’ techniques of production were introduced. From the foregoing, it would be out of place to say that the revolution ended in the 1840s. It can be argued that the revolution remains on-going as more modern technology and more efficient ways of solving the needs of human beings continue to be developed till this day. It is on this basis that some analysts have broken industrial revolution into different phases and actually refer to first, second, third and presently, fourth stages of industrial revolution. In essence, what ended in 1840 according to this theory was the first phase of industrial revolution. Developments like robotics, artificial intelligence, 3D printing and augmented, virtual and enhanced realities, are just components of the emerging 4th phase of industrial revolution. Another point I consider important is that what we describe today as the information age, also known as the Information and Technology age, is not designed to take over from the Industrial Age but to further deepen it and make it more efficient. Explaining the Information Age as if it was meant to succeed the Industrial Age is therefore, incorrect as the former is just an enabler for the latter. The world indeed is a continuum.

In a speech delivered at the African Development Bank’s 53rd Annual General Meeting of the Board of Governors, held in South Korea on May 23, 2018, Dr. Akinwunmi Adesina, the President of the Bank, made revealing statements about the state of industrialisation in Africa. In fact, he stated that Africa is currently de-industrialising. According to him, “between 2012 and 2018, Africa’s industrial value-added declined from $702 billion to $630 billion – a loss of $ 72 billion. Industrial value-added dropped sharply in countries with the largest industrial output: by 41% in Nigeria, 26% in South Africa….the deceleration of industrial output in Africa is at the heart of our massive youth unemployment: 11 million youth enter the labour market each year and only 3 million of them get jobs. To create more jobs – and I mean quality, well-paying jobs – Africa must fast-track industrialisation.” These are chilling words from someone who knows the true situation of things.

From the above statement, it is clear that a major part of Nigeria’s problem is our inability to expand the industrial base of the economy. It is not just that we are not growing, but that we are contracting. For Nigeria to lose 41% of its industrial capacity, and therefore productivity, is very worrisome. Until we address this matter squarely, we are going nowhere with development. The unemployment situation will sadly continue to exacerbate. Insecurity and insurgency would never be contained while poverty will remain our close companion and our economy will remain volatile. In every country where the productive base of the economy has been expanded there is a common feature that runs through. This is simply a deliberate effort by its government to create an environment that will attract and encourage local manufacturing which in turn reduces imports and conserves foreign exchange. This is true of old industrialised countries like Britain and Germany and is true of China and the Asian Tigers of today.

There are many challenges militating against the industrialisation of the country. A major one is paucity of people with the requisite knowledge, skills, and competences. There must be people that possess the knowledge required to design, manufacture, operate, repair and manage the machinery and equipment or hardware for industrial production to be contemplated in the first place. The reason for this paucity is largely because of the type of education that we provide in our schools. Like we had argued elsewhere, the type and quality of education we receive in Nigerian schools today do not support the acquisition of relevant knowledge and skills for industrialisation. Besides, little or no serious attention is given the study of Science, Technology Engineering and Mathematics which are relevant to equipping graduates with the skills for innovation and invention. This has left us dependent on other countries to supply machinery, equipment and technology at a fee. The funds needed to bring in these equipment is usually denominated in foreign currency. Because the technology is not local, we also tend to be dependent on the owners of such machinery to maintain and sometimes operate them. As we do this, we wittingly or unwittingly create and maintain jobs in countries other than ours. The benefits of local production seem to be completely lost to Nigeria.

Related to the issue of technology is the lack of deliberate and well-formulated policy to support Research and Development (R&D) in the country. The few research institutes that exist in the country are very poorly funded and in some cases, research results and inventions are not supported through to commercialization and eventual use in industries. There seems to be a silent ideological debate as to whose role it should be to fund R&D and what should happen to harness the inventions from the Research Institutes. This silent debate seems to also extend to whose responsibility it is to industrialise the country. Right wingers who seem to be winning the debate argue that government has no business in business. While I agree with this view to some extent, I am inclined to aligning more with the other divide that insists that government does not only have to provide the enabling environment for industrialisation, but must get more deliberately involved to promote local manufacturing. Why do I say so? First, the economy remains very fragile, even in the face of ostensibly growing GDP numbers of the last couple of years before recession. Second, the private sector remains minuscule in its contribution to GDP. It is also too weak to make the investment required for large scale production. Meanwhile, this is what is necessary to achieve local productivity at the scale that would quicken the pace of industrialisation in line with our requirements. Third, capital accumulation is not only slow, it is also tiny relative to what is required for large scale manufacturing. Again, culturally, Nigerians hardly come together to pull resources for large scale investments that are required to launch into large scale manufacturing. We tend to like such primary set-ups like “Okeke & Sons”, “Aminu & Brothers” “Babatunde & Daughters”. Finally, long term funds don’t seem to be available in our banking environment, given that long term deposits and investments are not accessible to the banks as well.

Still talking about the public sector, it is the only sector that has monopolized receipts from crude oil sales. I know someone would ask what happens in countries that do not have oil. While this question would be answered momentarily, the reality is that we have oil and sell same to earn revenue. Instead of sitting in Abuja and sharing oil money monthly during FAAC meetings, which then is further shared in the states, I am of the firm belief that government should dedicate a certain percentage of our revenue to building a strong and independent economy by investing in R&D activities, creating industrial parks and special economic zones to encourage industrial production. This would go a long way in supporting local manufacturing in the country. The Special Economic Zones; those already established and others being contemplated, should be so equipped in terms of infrastructure and shared services to drastically bring down cost of production. They should be designed to help generate employment in the country. Beyond that, the government should also introduce tax and tariff incentives to attract investors and reduce costs further. Ethiopia which is now a model for local production in Africa did this not too long ago and investors are rushing into that hitherto very poor and backward country. Rwanda which emerged from a civil war recently has also done the same and the results are very well documented. To be successful, there has to be a deliberate policy, backed by a clear strategy articulated in a plan document with specific targets and timelines and to be implemented by knowledgeable people and deliverables would have to be measured periodically. We can start from the known to the unknown, the known being refining crude oil even with crude refining techniques as done, though illegally, in the Niger Delta today. If those folks in the Niger Delta can use local techniques to refine crude, we should invite them and put them in a room with experts, understand what they do. We could refine the ideas with a view to doing refining locally on a large scale. Having done that, we should then look at other commodities that we export today. These would include agricultural products and solid minerals. As we make progress, we can also make a policy that outlaws export of such commodities.

I am yet to see any country that industrialised without power, roads, railways and other components of infrastructure. This is where successive governments in Nigeria have failed the country. Expecting that industrialists would provide their own infrastructure and still produce profitably is just a pipe dream. I believe that part of the explanation for the de-industrialisation of the country is the almost nonexistent infrastructure, particularly power. For a successful policy, government must play its role here no matter what the constraints may seem to be.

The next area of constraint is Capital. Industrial production requires capital as a major factor of production. Capital accumulation requires a lot of time and planning. Capital can either be local or foreign. While I do not have problems with policies aimed at encouraging the inflow of foreign Capital, I consider it a misplaced priority and sometimes an absolute waste of time for government functionaries to be junketing abroad in the guise of looking for foreign investors. Some of them, especially governors do not understand that capital does not respond to begging. If you have not done the right thing or created the right environment, foreign capital would not be attracted, no matter how many visits you make to the owner. Second, some of the governors go and paint a very rosy picture of the investment climate in their states, while on the contrary, there is nothing on the ground to support their beautifully packaged PowerPoint presentations. Little do they know that Capital is so smart that it sees what others cannot see, hears what others cannot hear and even if it makes the mistake of entering a wrong territory, which it hardly does, it is quick to vote with its feet, before the bubble bursts. So, while foreign Capital is important, it would be misleading for anyone to believe that industrialisation as a policy would be driven by foreign capital. A lot of times, because of unstable macroeconomic environment including exchange and interest rate policies, what we may end up with is what is called “hot money”. Hot money which is aimed at buying stock in companies quoted on the stock market, or taking advantage of short term interest rate gains, just like its name, disappears once there is any sign that things may head in the wrong direction. So, planning on the basis of that type of foreign investment would leave whoever is relying on it prostrate when it flies out.

Now, to the question of what would have happened if we did not have oil? That is exactly the point of this intervention. We have seen countries without resources develop on the back of industrialisation. Our thesis here applies both to crude oil and agrarian economies. It is about making that transitioning from a commodity economy to an economy that adds value to its primary products, right from processing to storage and sale to the ultimate consumer. In any case, I believe that with the imminent phasing out of hydrocarbon-fired vehicles in Europe and America and with the possibility of oil drying up in the next few decades, we face a clear and potential danger if we do not begin to think of changing our macro-economic business model as quickly as possible.

The fulcrum of one’s argument is to place the task of Industrialisation of the economy where it rightly belongs. This may challenge conventional wisdom and economic theories of free market and competition. Mainstream economists would also not be happy with the role that I insist government must play to achieve an industrial Nigeria. Experience, however, shows that no country industrialises by allowing market forces entirely to allocate resources without government intervention. Government must therefore take the lead in terms of policy, equitable allocation of resources, active participation either directly or through public private partnership and robust regulation. The key to all this, however, remains leadership. We must therefore hold leadership to account and if need be, insist that this be done.

As the opening quote reveals, the other economies and societies are not standing still, waiting for us to catch up with them. Check and see that even those we consider advanced economies are not satisfied and are frantically searching for how to improve on what they have. Several of the economies that were at the same level with Nigeria half a century ago, have left her behind. Even some African countries that used to come to Nigeria in a beggarly fashion are now on the verge of major economic transformation and boom. In fact, Nigeria is sometimes used as the butt of jokes for missed opportunities. The dangers are real and present. The time for remedial action was yesterday.