Unlocking economic potentials for growth through industrialization

Nigeria aims to become an industrialized country in the next decade. This is attainable given the right mix of policies and strategies for trade and industrial promotion, writes ALEXANDER CHIEJINA.

Since becoming independent in 1960, achieving economic development through rapid industrialization has remained a major challenge for Nigeria. How to achieve rapid economic development has also remained a primary focus of successive administrations in the country.

Different economic development policies (with each having a bearing on the industrial sector) were adopted ranging from Import Substitution Strategy (ISS) of 1961 through indigenization to the Structural Adjustment Program (SAP). It however seemed as though none of these policies provided sufficient answers to challenges of the nation’s industries.

With industrialization seen as an increase in the share of manufacturing in the Gross Domestic Product (GDP) and occupation of economically active population, this has become the prime mover of economic development. This is given that it creates employment, enables wealth creation and facilitates poverty alleviation.

Kofi Anan, Former United Nations Secretary General, in his recent message to Africa’s Industrialization Day, highlighted its relevance especially its varied and valuable contribution to the alleviation of poverty. Industrialization, he argued, raises productivity, creates employment, reduces exposure to risk, enhances income-generating assets of the poor and helps to diversify exports.

No matter the leap or spike in the industrial developmental indices, telltale markers have still been clear in their path toward industrialization, especially for emerging economies such as China or the Four Asian Tigers (Hong Kong, Singapore, South Korea, and Taiwan.) These markers served as invaluable keys to fine-tuning the industrial development strategies of these economies—a kind of Global Positioning System (GPS) for industrial development policy formulators.

In a bid to industrialise the country, the Federal Government recently inaugurated an industrial revolution plan aimed at positioning and empowering the nation’s manufacturing sector as key driver of economic growth through job creation and increased contribution to Gross Domestic Product (GDP).

With the Industrial Revolution Plan based on areas where the country had comparative and competitive advantage, industry experts have tasked government to create a synergy between agricultural planning and development and industrial development as well as remove infrastructural bottlenecks that may hinder the nation from attaining full industrialisation.

A leading economist, Doyin Salami, believes that the development of the agricultural sector is important to industrialisation as industrialisation may remain a mirage for any nation that depends on imported raw materials for its industrial operation.

Salami however outlined three approaches to industrialisation to include creating a synergy between Nigeria‘s agricultural planning and development and industrial development, as well as removing infrastructural bottlenecks that come in terms of policy and political inhibitions.

According to Salami, “Nigeria will attain true industrialisation if the government would undertake a programme of massive investment, backed by implementable policies, in human capital development. There has been a sharp decline in the quality of Nigeria‘s human resource, which requires a revamp.

“There are other issues that should be addressed, like the need to de-risk the agricultural and industrial sectors, through the provision of necessary infrastructure, credit facilities and institution of enabling policies.”

Establishing a link between industrialisation and mineral resources development, Peter Onwualu, Director-General, Raw Materials Research and Development Council, revealed that the availability of a large number of minerals should offer the needed leap in building and construction industry, manufacture of glass, ceramic products as well as other manufacturing processes.

For Nigeria to develop on the part of industrialisation, the nation needs to progressively increase local development and industrial use of raw materials from the present rate of between five and 10 percent to at least 70 percent especially to enable Nigeria achieve Vision 2020 dreams.

Onwualu however listed strategies that could move the sector forward to include implementing the new national raw material policy, establishment of a national fund for innovation and competitiveness for industries, establishment of industrial parks in higher learning institutions and adequate funding for engineering applications research in processing raw materials.

For Olusegun Aganga, Minister for Trade and Investment, Africa’s share of the global trade is only three percent due to the fact that Africa exports raw materials rather than exporting finished products.

Aganga stated that if Nigeria is to move from a poor nation to a rich country, industrialisation holds the key as it has the potential for unlocking the wealth of the country.

“If we are going to diversify the economy, then the industrial sector must play the leading role. If we are going to move from a poor nation to a big nation, we must have a strong and vibrant industrial sector,” he added.

Industrial parks/estates

Across the globe, industrial park/estates are set up to reduce the per-business expense of infrastructure such as high-power electric supplies, high-end communication cables, etc. While different industrial parks fulfill these criteria to differing degrees, many small communities have established industrial parks with only access to a nearby highway, and roadways.

Driven by the need to speed up development in the state, the Delta State Government recently launched a business development initiative christened “Warri Industrial Park.” The idea behind the master plan of the park is to provide an exclusively developed industrial community, fitted with infrastructure and facilities that are complementary and promotional of industrial efforts.

Another industrial park is Agbara  in Ogun State, constituting 41.55 percent (188.289 hectares) of the whole estate and provides site for Nestle Nigeria Plc, Reckitt Benckiser Nig. Limited, Evans Medical Nigeria Plc, Unilever Nigeria Plc, GlaxoSmithkline Nigeria Plc, etc, some of which are members of multinational conglomerates, operating some of their most modern purpose built factories in the country.

With major industrial projects are now in place, the estate is planned to become West Africa's biggest industrial park, with facilities for a large number of industrial businesses. Steel-making, key to fast industrial growth has been launched on a nationwide scale to meet growing demand for steel and to exploit the country's iron ore and coal resources.

Among the new installations are a huge integrated steel works at Ajaokuta in Kogi state, blast furnaces at Aladja in Delta state, rolling mills in Oshogbo, Katsina and Jos.

In a similar fashion, as part of efforts to further strengthen its industrial base and create thousands of jobs for Nigerians, Lagos State government recently embarked on the development of two new Agro- Industrial Parks.

The parks, sited at Imota, which sits on a 22 hectares land in Ikorodu and Ilara-Igbonla in Epe Local Government Area of the state, is expected to enjoy the best of infrastructure and aiding facilities.

According to Olusola Oworu, the state Commissioner for Com¬merce and Industry, government was promoting the development of enterprise zones to accommodate mi¬cro and small enterprises with particular focus on artisans and tradesmen like metal fabricators, block moulders and cane weavers, most of who are presently operating in inappropriate and oftentimes unauthorised locations across the state.

“Enterprise zones are expected to provide decent and permanent accommodation for micro and small enterprises which completed. The enterprise zones are expected to accommodate not less than 500 enterprises with employment potentials of over 10,000 people directly and indirectly,” Oworu concluded.

Challenges

With Nigeria naturally endowed with agricultural and mineral resources, these resources have not been fully explored for national economic development and industrialisation.

Babatunde Adewale Adewumi, Professor of Food Engineering, College of Engineering, Federal University of Agriculture, Abeokuta, identified major problems confronting industrialization of agricultural and mineral processing industries in the country to include lack of focus and inconsistent government policies, high bank lending rates, lack of standardized local machines and machinery for processing agricultural and mineral resources.

He added that development of low quality and inadequate personnel, energy and power problems as well as inadequate tools and machinery for manufacturing/fabrication of machine components

Lending his view, Femi Deru, President, Lagos Chamber of Commerce and Industry (LCCI) said the cost of doing business in Nigeria is still very high.

“The cost of funds is currently in the range of 20 and 25 per cent and this is too high to sustain manufacturing enterprise. The manufacturing sector is contributing less than five percent to the country’s GDP. The reality is that the economy has transformed into a trading and consuming economy, not one that produces,” Deru stated.

Commenting on the issue, Obi Iwuagwu, Lecturer, Department of History & Strategic Studies, University of Lagos, Akoka, noted that the problem of industrialisation is the operating environment that creates uncertainties and unmanageable unknowns for entrepreneurs, and industrialists.

“The regulatory and fiscal policy is a major impediment to Nigeria’s industrialisation, which clearly shows a lack of coherence or coordination from the various arms of government,” Iwagwu stated.

Unlocking potentials

With Nigeria’s aim to become an industrialized country in the next two decades and achieve fast sustained and equitable growth not a mirage, the right mix of policies and strategies for trade and industrial promotion are required.

For Patrick Kormawa, Resident Representative and Director, Regional Office, United Nations Industrial Development Organisation’s (UNIDO), Nigeria, there is no single key or bullet to unlocking the potential. 

What Nigeria urgently needed, Kormawa believes, are policies and institutions to foster rapid business development across key priority sectors

“Nigeria needs a major structural change for industrialisation. By structural change, I mean implementing actions that constantly lead to improving existing activities and generating new ones, moving from one sector to another and absorbing surplus labour, increasing the contribution of individual workers, and promoting the integration of production sectors within the domestic economy. That is, strengthening domestic economic linkages. Investment, technological change and innovation are key determinants for structural change.

“We need to look at old products and non-performing industries and replace them by new or better ones supported by novel technologies, fresh marketing approaches or efficient organizational structures or processes. In this process, technologies from established producers abroad are acquired or learned and adapted to domestic conditions by local entrepreneurs,” Kormawa explained.

He however stated that while he was not advocating for a protectionist policy, it is only sensible to craft new industrial development policies within the context of the present realities in the global economy and adapt or support local industries in the face of crisis as was done in the United States of America, during the so called financial crisis.

For Erik Reinert, a Norwegian economist, industrialized countries of today, achieved their goal of industrialization, because for decades, they set up, subsidized, and protected dynamic industries and services, as national policy.

Developing economies

In the last four decades, Japan, Taiwan, South Korea, Hong Kong and Singapore-which together constitute less than four percent of the world's population, have become with Europe and North America one of the three pillars of the modern industrial world order.

Described as the “Asian Tigers”, they share the characteristics of being an increasing exporter to the world market, usually by copying existing products and then re-producing them for a much cheaper price.

Rapid growth in the manufacturing sector has however resulted in far more exports and a rapidly rising Gross Domestic Product (GDP). The advantages of Asia for industrial location include cheap labour compared to world standards, transport access to the main shipping lanes, as well as governments move to discourage the import of manufactured goods and encourage the import of capital and technology to establish factories and provide employment.

The Asia Tigers promote their own industries and operates a strict regime of trade tariffs and high taxes for any similar products being imported into the country. This is aimed at protecting their own companies whilst they grow. Example of such industries include car manufacture, computer and electrical manufacturing

Once the new companies have become established in their own country they are unleashed upon the world market. These industries are now capital intensive, using high technology and aimed at making a big profit. The GDP of the country starts to rocket, often growing at well over 5% per year, and now described as Newly Industrialised Countries (NIC)

Some lessons from industrial development history show that structural change in Malaysia was driven by strong political commitment. The vision for agriculture-led industrialization has been consistently and rigorously applied by successive governments for three decades.

Of critical importance was the government’s determination to experiment and craft whole reform packages instead of single sequential policies. Interestingly, targeted policies promoted the transformation of an economy dependent on natural resources into a diversified economic structure based on processed natural resources, high value manufacturing industries such as consumer electronics, industrial automation and heavy industries and services.

The story of Nigeria and Malaysia regarding palm oil value chain development is not new to Nigerians familiar with history. How 30-35 years ago the Malaysians came to Nigeria - looking for new products. They took some oil palm seeds, and applied science and technology to it.

At that time, Nigeria, Ghana and Côte d’Ivoire were among the top five palm oil exporters in the world. With science and technology, and sound management, today the Malaysians produce more than 30 products from oil palm and tree, and are exporting a refined version of palm oil as bio-fuel.

Mauritius, a tiny Island country, has made admirable progress in intra-industry structural change – upgrading within the same industry and improving the industry’s domestic and international position.

Other countries have also been trailblazers in building on what they have and moving up the value chain – the difference between simple, low-value textiles and Egyptian organic cotton fibre is another example.

Furthermore, Brazil and Thailand are among the largest producers of Cassava in the world, but Nigeria tops them. However, Nigeria and the rest of Africa consume 90 to 95 percent cassava production in semi-processed or raw form. In Thailand and Brazil, it is used for industrial purposes with only about 10 to 20 percent for immediate consumption.