Nigeria’s plan for inclusive growth
Nigeria’s Inclusive Development score has been on a downward trend in the past five years. The World Economic Forum’s report on inclusive growth and development presumes that the country has the resources and entrepreneurial environment to build an inclusive economy. Okechukwu Enelamah Nigeria’s Minister for industry Trade and Investment joined CNBC Africa’s Onyi Sunday for an exclusive discussion on how Nigeria plans to achieve inclusive growth.
Only 3 million formal jobs are created annually in Africa despite the fact that 10-12 million young people join the workforce every year. How can this trend be reversed?
First let me say that the question you’re asking is a very important one. I mean if you ask me what the one thing that African leaders, governments and nations have to get right is, it is the employment issue. Solving the unemployment problem. Particularly for the young, but also for everybody. That’s the one thing I know is a benefit that the people desire and deserve. Now in order to solve it, it requires that we think about it in terms of long term, short term and medium term. I’ll use Nigeria as an example.
In the case of Nigeria, this current government recognises the importance of solving the unemployment problem and our view is that the key to solving the problem is to diversify the economy. If you look at where our growth and revenues as a government have come from in the past you will see that it’s been mostly oil, and oil related things and that just has not created enough jobs. So you see us trying to reinvent, restructure and reform the economy and I think it is an effort that’s worth it and most people agree with this. However, some of these efforts that we’re making to solve this problem will not bear results until much later and some of them we can do more immediately. As a government we’re doing things that are targeting the young and unemployment. These are things around technology and SMEs. We’re looking at all the areas that will create employment. We have an industrial strategy that we’re using to try to up our game in terms of infrastructure and to increase manufacturing and industrialisation, because one thing we know is that industrialisation and manufacturing will create jobs.
There is a general saying that African countries consume what they do not produce and produce what they do not consume, do you think there’s a correlation between this trend and a rise in unemployment within the continent, when you take into consideration that these industries that are supposed to absorb the young people joining the work force have to compete with the products that come from outside the continent and outside their countries?
The answer has to be yes. I am not sure that anyone can argue with that. The problem is that when you say that Africans consume what we do not produce you mean that we import finished goods, and when you say that we consume what we do not produce you mean that we export raw materials and my view is that it isn’t even a problem of diagnosis as such. What has been very humbling coming into government is understanding what it actually takes to turn the situation around. I’ll give you three things that I know would work if we did them. None of these things are easy to do but they can be done. If we had to do one thing, without any shadow of doubt, it’s infrastructure.
There’s a strong correlation between industrialised nations and power and infrastructure. Every place that has adequate power is industrialised and every place where you have industrialisation you have power. The reverse is also true. This is one of the reasons why as a government we’ve chosen to address the infrastructure problem. There’s also the question around industrial policy and that’s the choices we make as government in terms of what we produce and where we deploy our resources and how we exercise our comparative advantage. I believe that that strategy has to be deliberate, consistent and it has to work vitally with the private sector. This is why in Nigeria, we have just launched an industrial council which is a high level presidential council that will be a meeting point between the private sector and the government because we’ve already agreed that it has to be a partnership. The government needs to provide the enabling environment and policies and the private sector has to provide the implementation in terms of actual manufacturing concerns, trade, investments and exports. I think that’s absolutely key and that’s what we’re working on. As I said before there are things we can do in the short term and there are other thing that will take longer to happen. I think infrastructure and industrialisation will take time.
Another thing I will say is the issue of macroeconomic policy and the convergence or congruence of macroeconomic policy. Monetary, fiscal, and trade policies have to come together and that’s something we have been working at to ensure that we have some coherence and consistency because manufacturers need to have the sort of policy arrangement that allows them to plan because manufacturing requires long term investment and long term planning.
Going back to what I talked about earlier, the fact that we are an import dependent economy if you’re taking a look at Nigeria and we did hear last year of certain policies that came through from the CBN about the ban on 41 items saying look, if there’s anything we can produce locally let’s not import it. Let’s work with what we have in here and that debate has been on. There’s been the buy Nigeria movement and all what not, what part of it do you expect to turn around and employ the youth that we have in the country? How do we begin to resolve it because you can’t just shut down imports completely. The manufacturing sector is not strong.
There are those who say you have to start first by putting out a ban but we also know the resultant effect on the economy and how much that impacts growth, so if you talk about things we need to do that may not be easy, do you think an outright ban on certain products that can be produced here in Nigeria is the way to go to kickstart manufacturing locally? What do you think should come first?
I believe other nations have solved the problem. I think it’s important to realise that what you’re describing is not unique and that Nigeria and Africa for that matter would do well to learn from other people’s experiences. I think the first point to touch on is that industrial policy addresses what you are saying. In other words, the question is, what are the policy choices you are making, what are the strategy choices you are pursuing that ultimately lead to industrialisation? Also implicit in that is that we can’t be passive about everything. To answer your question, I’ll say a number of things that can help solve this stubborn problem. First is that one has to be highly selective in the things you choose to do. You should choose things that are sustainable and are competitive in the long term. This means that if we then choose to do these things we have to give them everything that we need to start. This includes the infrastructure, the capital investment and vitally, I would argue that it’s important to be part of a global value chain. It is important to partner with other players so you’re not an island and you’re not working in isolation, so that’s the first thing.
It is not a matter of banning things in isolation. I don’t think that strategy works well. The second point I’ll make is that if you choose to pursue those strategies, you have to protect those industries that are producing the things you need locally, from cheap imports, from unfair competition, from all kinds of dumping that can go on and does go on around the world. How do you do that? There are many ways to do it. It is not necessarily by banning. You can use tariffs to do it. Look at how the rest of the world does it. Basically, you can increase tariffs on imports in a way that is targeted and clinical that would discourage those imports that are competing with young industries. That’s one thing we are working on. Even the world trade organisation and other such institutions accept and recognise those policies. They are called countervailing measures against dumping, against cheap imports and so on, and that’s all part of our trade policy. The final thing I’ll say is that remember, this is all part of our competitiveness in a global era, in a world that has globalised. What this means is that things like infrastructure, where it started before and reducing the cost of doing business become extremely important, because if you look at it, for it to be really sustainable, those strategies have to be competitive. This is why we are focusing on special economic zones and industrial parks where we will make sure that we provide all the infrastructure and the enabling environment that our manufacturers need so that they will be competitive and they can produce at affordable prices and still run on a sustainable basis.
What policies are needed to transform the structure of African economies with respect to West Africa and Nigeria?
I’ll tell you the specific interventions and policies that will make the most difference in terms of impact. By far the most important and this bears repeating is providing the infrastructure, manufacturers need. Power, logistics, rail, access to the kind of transportation that they need to move the good so market and so on. These things sound ordinary because when they’re there you don’t even notice them but when they’re not there they are extremely punitive on the manufacturers and that’s why we as a government are very focused on battling the infrastructure deficit in Nigeria and that’s something Africa as a whole has to do. Secondly, it’s very important that we plug into the global value chains. And what I mean by this is that it’s important to identify where we have advantages and invite investors and other players to work with us so we’ll know what we produce and we do it in a way that encourages exports because I do believe that we will always need to import some things. We can’t be competitive in all things, but the key is to export in the areas where we are competitive and import in the areas that we’re not competitive. We have to make sure that net net one is doing it on a sustainable basis. What we had before was where we exported raw materials – primarily crude – and imported everything else. Clearly that was never going to be sustainable. So the fall in crude oil prices just exposed our underbelly. This is why we’re trying to solve it this time around on a fundamental basis. Those are the kind of things we need to do, and we are doing them, but they take time.
By 2060, Africa’s middle class is expected to grow to 1.1 billion people from 123 million today. Of course with the rise of the middle class we have what they call the consumption boom. The question now is how can the poor get into that circle. How can they become more sustainable consumers?
I think the 2060 question is an interesting one for several reasons. First it calls for long range planning and if there is one thing we need to do as we begin to borrow from other countries or regions that have done well is to plan for the long term, so that’s like a 40-50 year horizon. The second thing to say is that it’s not automatic. You know at times it’s the way people equate demographics to wealth. Rising demographics mean that rising population numbers can ultimately lead to wealth creation, but it’s not automatic because it can also be a ticking time bomb if you don’t employ your people, educate them and make them useful, and so I’m glad that Africa is looking at that question and Africa is focused on it both at the summit level with the African Union and at all the subsidiary levels all the way to the private sector. My view is that that’s why it’s so important to go back to the fundamentals and do those things that will educate our people and make them productive which is how they earn, and that’s what will make them effective consumers. You know, consumers that have an effective demand, and I believe that it can be done but we need to stay focused on pursuing these policies, some of which will involve short term trade offs that will lead to those outcomes that we desire for 2060, or even 2020 which is 3 years away.