By Mike ALADENIKA.
A reknown Nigerian innovation, development scholar and the Senior Special Adviser on Industrialization to the President of the African Development Bank(AfDB) Prof. Banji Oyelaran-Oyeyinka has posited that "central to Nigeria's economic growth crisis is the failure to achieve rapid industrialization; the mis-management of our investment in the acquisition of necessary capital stock. The country’s investment portfolio reveals huge amounts budgeted to purchase plants and equipment; for example, refineries, iron and steel, sugar refining, fertilizers and so on. What has also become clear is that unlike countries where rising capital stock has led to rising living standards and high productivity, we have remained a non-industrialized underdeveloped country."
Prof. Banji Oyelaran-Oyeyinka who started this in his lecture, via zoom, titled "FROM CONSUMPTION TO PRODUCTION: THE ROLE of SPECIAL AGRO-INDUSTRIAL PROCESSING ZONES in NIGERIA” delivered at the Assembly of Fellows For The Nigerian Academy of Engineering recently said "If a society spends one hundred dollars to manufacture a product within its borders, the money that is used to pay for materials, labor, and other costs moves through the economy as each recipient spends it. Due to this multiplier effect, a hundred dollars’ worth of primary production can add several hundred dollars to the Gross National Product (GNP) of that country. If money is spent in another country, circulation of that money is within the exporting country. This is the reason an industrialized product-exporting/commodity-importing country is wealthy and an undeveloped product-importing/commodity-exporting country is poor."
"Developed countries grow rich by selling capital-intensive (thus cheap) products for a high price and buying labor-intensive (thus expensive) products for a low price. This imbalance of trade expands the gap between rich and poor. The wealthy sell products to be consumed, not tools to produce. This maintains the monopolization of the tools of production, and assures a continued market for their product."
The Senior Special Adviser on Industrialization to the President of the African Development Bank(AfDB) who is also a fellow of the Nigerian Academy of Engineering and Professorial Fellow, United Nations University said "What we see manifesting as shortage of foreign exchange and the precipitous decline of the national currency is in large part because we consume high-value products that we do not produce,and export low-value raw materials. Nigerians, especially urban elites, have developed an appetite for imports including expensive luxury goods such as automobiles, foreign drinks, and clothes, electronic and household consumer goods. For example, the country’s top imports are Refined Petroleum ($7.75Billion), Cars ($3.03Billion), Wheat ($2.15B), Packaged Medicaments ($1.38B), Telephones ($771M) and special purpose ships ($4 billion).In contrast, what does Nigeria export? Coconuts, cashews, cocoa beans, rough wood, petroleum gas, and crude petroleum thataccounts for 70.8% of all its exports, among others."
"For a country to sustain economic progress, it must build infrastructure, acquire factory facilities for manufacturing. Such infrastructure includesbridges, railways, highways, power plants, dams, airports and others, which are intermediate, and capital goods. We manufacture almost none locally; all are imported. As demand grows for imports, the more the pressure on foreign exchange. Where does the dollar revenue come from? Crude oil and paltry raw materials export that is not near enough. We are in a situation of accelerating deficit size and where the balance has to be covered by foreign loans, the country then finds itself in an encircling debt crisis. There are two common sources of financing import bills; the first is to attract foreign capital, concessional loans or grants. The second is to earn foreign exchange through export of goods and services, especially manufactured goods. No nation can survive an indefinite foreign exchange crisis. Therefore,the most effective strategy for rapid growth is to promote the sustained expansion of foreign exchange earnings through exports of manufactures. To overcome the BoP in the long run, and grow the economy at a fast rate, we must counter import expansion with faster export earnings. More precisely, export of processed and manufactured products.We have long shortchanged ourselves exporting raw materials that others use as basis for wealth generation."
"The assured way that nations achieved growth in the long run is by either: (a) making its locally manufactured goods competitive in the external markets with attendant foreign exchange earnings (increasing the income elasticity of exports) and (b) making foreign goods less competitive and non-attractive to domestic consumers (decreasing the income elasticity of imports). Currently, Nigeria is not fulfilling either condition due to the weak domestic technological and industrial capabilities of local companies."
"The pathology of oil-dependency and the periodic crash of oil prices transmit its impact through slow economic growth, constrained fiscal space and through direct effects on prices and activity for both importers and exporters. It channels its indirect effects via trade and other commodity markets; monetary and fiscal policy responses; and investment uncertainty. Through these channels, oil prices have immediate repercussions. For example, the damaging inflation Nigeria is experiencing began and increased steadily throughout 2020. It accelerated from 15.7% year-on-year in December to 17.3% in February 2021—its highest level since April 2017. According to the NBS, urban inflation rose to 19.09% and rural inflation hit 18.13% in June 2022. The surge in food prices persisted ever since the pandemic compounded by domestic security problems, the country’s lack of food securityand was capped by the Ukraine-Russia War.
Meanwhile the "national currency weakens leading to foreign exchange restrictions.Nigeria has relied on the trading and export of crude petroleum and agricultural raw materials for decades. However, the reliance on the easy path, or “easy money”—has proven to be a disastrous strategy. Nigeria’s production and export structure has remained less diversified relative to comparators."
According to Prof. Banji Oyelaran -Oyeyinka "Forty-four years ago, China’s per capita income was only one-third of that of sub-Saharan Africa. Today, China is the world’s largest manufacturing powerhouse. It is a Production not a Consumption Nation. This is why China’s yearly exports $3.3 Trillion, 2021), mostly manufactures surpassed the combined GDP of all African nations ($2.7 Trillion, 2021). It produces nearly 50% of the world’s major industrial goods, including crude steel (50% of global supply); cement (60% of the world’s production), coal (50% of the world’s production), vehicles (more than 25% of global supply) and industrial patent applications (about 150% of the U.S. level). China is also the world’s largest producer of ships, high-speed trains, robots, tunnels, bridges, highways, chemical fibers, machine tools, computers, and cellphones, among others.
"The remarkable rise of China follows that of other successful Asian manufacturing powerhouses such as South Korea. Their growth evolution showed that economic growth happens on the back of expanded manufactured exports. Exports is prerequisite for a sustainable current account balance compatible with the fast rate of economic growth. The trends for primary commodity prices and their low-income elasticities of demand suggest that African countries, including Nigeria, will not achieve prosperity from export earnings from these goods as they have done for decades."
Even as the Nigerian economy remains agrarian in nature; it continues to face heavy barriers, including those within international systems, in achieving industrialization. The promotion of long‐term economic growth requires industrialization; the faster the expansion of industry in a country, the greater its long‐run growth.
" The textile and ready-made garments industry in Nigeria tells a story of arrested development and of lost glory. Once a vibrant and dynamic sector in Nigeria, the sector exported to countries in the African region. It achieved an annual growth rate of about 70 percent, and constituted 25% of the manufacturing sector’s labor force of over one million workers between 1960 and the late 1980s. There were around 115 factories across the Cotton Textile and Garments (CTG) value chain, which engaged in several stages of the value chain such as spinning, weaving, and garment production in 1980. The Nigerian textile manufacturing capacity was valued at N420 billion and investment worth of US$3 billion in 1999."
"By 2007, Nigeria had only 26 textile and ready-made garment (RMG) companies in operation with employment of roughly only 24,000 people. The near demise of the industry in Nigeria coincided with the rise of Asian producers, including China. China’s export value of RMG was approximately US$266.41 billion in 2020. Specifically, a dual process occurred: the growth of Chinese imports combined with massive influx of Chinese company representatives to Nigeria, while Nigerian traders flocked to China to import garments and textiles into Nigeria. There were by 2008, 50,000 Chinese textiles personnel in Nigeria and 20,000 Nigerians in China.
"In 1972, the World Bank approximated the gross domestic product (GDP) of Bangladesh at US$6.29 billion. It grew to US$368 billion by 2021, with US$46 billion of that generated by exports, and 82% of which was ready-made garments.[3] In the year 2016-2017, the RMG industry generated US$28.14 billion, which was 80.7% of the total export earnings in exports and 12.36 percent of the GDP; the industry.[6]
"Nigeria swapped its RMG Production Nation status for a Consumption Nation status. The country engaged in a race to the bottom ladder of poor nations when it’s reliance on crude oil became a pathology.
The don then recommends that for the nation to regain its economic growth status in comparison with other contemporary countries, the leadership question must be well addressed with a view to changing the policy drive towards production and improved infrastructure aimed at improved foreign exchange revenue for the country.
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