Thursday, 28th March 2024
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Take Banana?

An all too familiar story was reported in the Nigerian papers last week. In 2012, the then Rivers state governor, Rotimi Amaechi, acquired 2,000 hectares of land in Ogoni land to setup a banana plantation.
Banana trees plantation. AFP PHOTO / ISSOUF SANOGO

Banana trees plantation.<br />AFP PHOTO / ISSOUF SANOGO

An all too familiar story was reported in the Nigerian papers last week. In 2012, the then Rivers state governor, Rotimi Amaechi, acquired 2,000 hectares of land in Ogoni land to setup a banana plantation. The entire project was to cost $45m and 6,000,000 boxes of banana were to be produced annually when completed. Today, after spending $6m on the project and cultivating only 500 hectares, the plantation lies vandalised and abandoned.

There is something this sad and familiar story tells us about one of the most common words in Nigeria today – diversification. We can safely say the project was conceived by the government with the best of intentions. And yet, good intentions were not enough. Why? Let’s consider some points

Psychological Dutch Disease
We all know what Dutch Disease is – when a country starts exporting natural resources, foreign exchange starts to flow heavily into its economy. This makes the local currency stronger and as a consequence, it becomes easier and cheaper to just import stuff than to produce them locally. As a result, local industry gradually withers.

But there is a psychological aspect to Dutch Disease, too. Once people have been exposed to the oil business, almost everything else looks inferior by comparison. After doing the hard work of looking for the oil and spending money to get it out of the ground, the rest is relatively easy. You pump it and sell it for years. This partly explains why you can spend $500m to build a deepwater oil platform and need less than 200 people to operate it.

Compare that to the banana – you have to harvest them while they are green then wash them with soap and water (if for exports). This is important because once the banana starts to ripen, the process cannot be halted or reversed. They also have to be shipped at exactly 14 degrees centigrade in special refrigerated ships to stop them from ripening during the journey. Timing is so important so that they start to ripen as they get to the supermarket. Then, after all this wahala and hard work, a banana costs only 18 pence (less than N100) at a Tesco supermarket in the UK. If you’ve once enjoyed oil money, one way or the other, you are going to look at this banana business and conclude there must be easier ways to make money in life.
Oil is unique

The people who were selling oil for $100/barrel in 2014 are the same people who sold it for $40/barrel this year. Why did they continue selling even when the price dropped by more than half? Because at both prices – $100 and $40 – selling the oil was profitable. This is the weird thing about oil which makes it unique. Oil that costs $11 to extract from the ground can sell for $100. Do you know many products in the market where the price can drop by more than half and the seller will continue making a profit? I can only think of cocaine and perhaps Dangote Cement.

This should make us think soberly about attempts to diversify the economy away from oil. If the plan is to replace lost oil revenues with some other commodity or product, you’re on a very long thing as they say on social media. This is why the very few countries that managed to diversify away from oil (China and Dubai) did so by simply taking the oil money and spraying it across the rest of the economy in the hope that something will germinate from it. In that sense, oil has no replacement. It is a fertiliser for the rest of the economy. It is not even possible to know in advance what might grow out of an economy fertilised by oil.

In short, any attempt by Abuja to try to diversify the economy away from oil to mining or agriculture with the hope of replacing lost oil revenues will ultimately be a wild goose chase.

What do the people want?
This is perhaps the most important lesson here. It is incredibly hard to make anything succeed without the people wanting it. The newspaper story talked about how the youths were far more interested in getting compensation for the land from the government and employed violence to get their way.

But most revealing was a quote from a ‘prominent indigene’ of Ogoniland who said ‘we the Ogonis are wiser and need a better project than banana. We are not monkeys that someone should come and plant banana for us to eat’. This is pretty much the summary of why $6m was wasted on this project. A top down approach where someone in government decides on a project and then foists it on people for their own good is hardly ever going to work. Of course, the prominent indigene was wrong to denigrate bananas as he did but he has created an obstacle that cannot be overcome unless it is addressed.

This is why government should learn to lead from behind. First, allow private effort and initiatives to flourish then step in to provide the necessary encouragement to boost things. It sounds easy to say but sometimes, the matter is not more complicated than we make it. The people clearly do not want bananas but there might be something else they (or it might be just one guy out there) want.

Nigeria needs a lot more economic freedom for people to try out different things to see what works and what doesn’t, backed by a government that encourages them as opposed to ordering them to ‘take banana’. Only when we encourage economic freedom will we discover some really interesting things about the Nigerian economy.

8 Comments

  • Author’s gravatar

    Lack of continuity and excessive greed are the two evils frustrating the rise of Nigeria. Nigerians lack the will to make positive changes because everybody who is supposed to uplift Nigeria sabotages it. What stops the present government from stepping in and revamping the banana plantation? After all pound for pound, banana costs more than oil, just as cashew nuts does in the international export market.

    • Author’s gravatar

      I’m no economist but ask, how many people consume cashew nuts or bananas on a scale that would rival the consumption of oil?
      The problem is also that these some of these replacement products are still exported in an unprocessed state or natural state. We are trying to compete with countries like Colombia and Brazil which are the biggest exporters of bananas. Brazil manufactures many other products as well. Colombia has a thriving meat industry that exports within South America and of course we all know that other notorious commodity Colombia is famous for.

      • Author’s gravatar

        In the west, everybody consumes banana almost daily, we buy them and they rot in the fridge, who cares once they are sold. But the point here is not producing bananas or cashew nuts but about diversifying our economy. Of the countries you have mentioned, Brazil I think, produces oil too. Why can’t we diversify. Why can’t we compete with Colombia and Brazil since we have better quality coffee in western Nigeria than they? Let me tell you, my friend, a kilo of bananas cost from 2 to 3.5 dollars. So, which is cheaper crude oil or banana?

  • Author’s gravatar

    Well written article with many relevant points.

  • Author’s gravatar

    I think the writer got his premise wrong. Am not sure anyone in government or else where would be clamoring for diversifying the economy “away” from oil. Diversifying the economy away from “dependence” on oil is not same as diversifying the economy “away” from oil. No matter how easy and dependable oil revenue is, it will always prove a disaster to allow it account for more than 50% of your earnings. The point is, Nigeria needs to urgently look and develop other means of foreign earnings. We shouldn’t be catch cold each time oil price shifts downwards.

  • Author’s gravatar

    Problem is we don’t even know how the oil is ‘mined.’ All we get is the money! A very lazy way of making money if you ask me. It is almost like free money. If you get free money and you lack the discipline to know that this is the blood of your country, then all is lost.