RENEWED FOCUS ON MANUFACTURING, NOT JUST MINING, TOWARDS SUSTAINABLE ECONOMIC GROWTH January 25, 2016Posted by seunfakze in CHANGE, POLITICS.
On 29th December 2015 I made frantic calls home to reassess the true dollar exchange rate to the Nigerian Naira. When I left Nigeria in July 2015, the dollar: naira exchange was $1: N157 and in the black market, it was N196.
On the 29th of December, it was N300 at the Black market (varied prices) and the official rate a little over N200. Needless to say, this halted my effort at finalizing an international transaction initially quoted at reduced exchange rates.
The impact of oil on Nigeria’s economy has volumes of articles written on it. The impact could not be more noticeable than now. Nigeria’s Muhammadu Buhari faces a multi-pronged challenge in resolving the economic decline in Nigeria. Besides diversifying the economy, commitment to providing social infrastructure, corporate policies (taxes and reliefs) and recreating a business friendly environment that encourages investment are not only crucial but necessary in reinvigorating the struggling economy and sustaining it.
Nigeria has huge challenges ahead especially seeing the volume of public and social infrastructure requiring attention. These were a core part of the President’s campaign as the candidate of the All Progressives Congress (APC). The President canvassed and campaigned on increased infrastructure and social welfare. I am not convinced of the need for a salary for the unemployed and it remains to be seen how viable or realistic or sustainable the program will be.
The economic focus and emphasis of President Muhammadu Buhari rest on wealth creation; from job creation and diversification of the revenue base while securing its borders and ensuring the country is viable for foreign investment. The belief is that economic growth premised on the successes of businesses, will hopefully spur economic growth and create mass employment. However, the ease of doing business in Nigeria still remains a difficulty given the challenging and prevailing socio-economic and political factors.
He also emphasized on a diversification of the economy (revenue base) during his campaign. However, while being the first President to embark on a non-oil budget, it is unclear, for instance, how much of the revenue accruing from taxes or this diversified economy will go to establish or rebuilding the manufacturing sectors (if at all.); manufacturing (and exports) represents a significant economic activity spurring economic development. The need to reassess and reevaluate industrial and trade policies or the focus of manufacturing has never been more important.
One important priority should be on export. Export will drive economic growth, both from efficient production capacity and mass employment. By export, I mean the export of finished products/ commodities and not raw materials. Increased government expenditure on infrastructure (roads, energy, customs, and others), improved ease of doing business or policy reform on tax incentives and other sustainable practices will lead to expansionary growth. To achieve this growth, clear direction on these parameters need to be communicated.
Many facts from UNECA point Africa in the direction of where it is missing (missed) the true opportunity to drive iconic economic growth: manufacturing. 16% of global cotton exports in 2012 came from Africa. Of this 16%, only 1% were finished cotton products: only 1% of the global export were already manufactured/processed from raw materials into final products.
Take Nigeria for instance. According to ECA, crude oil exports were $89billion in 2012 and, in turn, Nigeria spent $5billion importing refined oil back. Why? Nigeria’s comatose oil refineries.
Also, export of finished products from manufacturing of raw materials in Africa rather than export of raw materials will truly improve the rise of African economies. Truly, Nigeria’s renewed commitment to a diversifying source of economic growth is a welcome development but will it be enough?
Mining other resources will add the much-needed boost to economic growth. However, will Nigeria export the mined raw materials or start developing specific industries to turn them into final products for export?
Unfortunately, skewed Trade policies and African leaders’ handling of economic growth (lopsided policies, lack of will to fight for better trade policies, improve capacity for manufacturing, etc) and even institutionalized stealing (corruption) amongst other things; has led to the stagnation or in most cases, the decline of growth of African economies. I must salute the resilience of the government however in the pursuit of true justice especially on recent corruption cases that crippled the Nigerian state.
What trade policies will restrict Nigeria’s commitment to the export of finished products? If any, does the President have the necessary political will and leadership grit required to push an African trade (industrial) policy review that favours African export of finished products? Or will Nigeria (Africa) continually become the prey grounds for developed countries or dumping grounds of processed foreign exports?
Faced with pressing public concerns, some of the promises made could be delayed in order of priority. Nigeria’s economic realities require its leaders to be forthright, pragmatic, honest in helping to shape public opinion on its promised programs while employing precision-driven policies to address national challenges. In reassessing his promises, President Buhari needs to employ more direct communication strategies in speaking to Nigerians.
If Nigeria will truly rise, every citizen has a stake in making it so. It is, however, hard to make already frustrated citizens to participate or sacrifice in any rebuilding effort if they have no feeling of shared responsibilities. What Nigeria needs now are necessary reforms that will payoff on the long-term, accompanied by clear communication strategy from leadership; even if these reforms will attract intense criticism and derisory bipartisan attacks, rather than embarking on unsustainable populistic measures.
Lee Kuan Yew School of Public Policy,
National University of Singapore
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