• ‘Hubs Need $10bn Investments To Grow’
• Govt Must Partner VCs To Fund Start-ups, Says Ekekwe
THE rhetoric of Nigeria’s development has, for decades, been punctuated by the paucity of indigenous technology. Blessed with a talented artisanal population, sprinkled across its cities amid industries surviving on epileptic energy, Africa’s biggest economy is still largely indebted to innovations from the global North and the Asian tigers, particularly China.
Over the years, very little has been done to stimulate local manufacturing, and Research and Development (R&D) activities by public and private firms chiefly suffering from limited baseline data and unreliable statistics. Universities, particularly, are short of funds for research, depriving students and companies of required empirical input to transfer practical knowledge and drive growth.
But Nigeria may not get out of the sorry morass if she does not develop a concerted, holistic approach to stimulating desired industrial growth across several sectors that have shown promise overtime, particularly manufacturing, IT-driven industries, medical care and agriculture, even as experts argue that government support as regards to favourable policies, infrastructure, funding and training is critically lacking.
Many argue that the problem, really, has not been lack of capacity by local researchers and technologist to develop indigenous scientific models and prototypes, but that the combined strain of prevailing social, economic and political issues have handicapped local innovation.
For example, the Nigerian prize for science, which birthed in 2004 under the auspices of the Nigerian Liquefied Natural Gas (NLNG) Limited, has seen very few winners after Professor Akpoveta Susu and his then doctoral student (now doctor) Kingsley Abhulimen, both of the University of Lagos, won the maiden edition.
The last winner of the prize, Prof. Akii Ibhadode of the University of Benin, said he had to contend with epileptic power in perfecting processes for a new method in Die Design, a breakthrough mathematical design for producing body parts of vehicles, aircrafts and many others.
After Prof. Ibhadode’s outing, NLNG said it was working on repositioning the science prize even as it has continued to award the literature arm of the award.
However, for the first time, the Nigeria Innovation Cluster Mapping Project has provided a template for spotting and developing hubs that can drive close-knit, integrated industrial growth in resource and talent-rich cities across the country.
Prepared by the African Institution of Technology Inc., the study was authored by entrepreneur and scientist, Dr. Ndubuisi Ekekwe, and is aimed to serve as a talisman for driving regional competitiveness and “to reveal similar companies that co-exist within pockets of industry, science and technology clusters and give government and the business community data and tools that will allow them to understand what drives clustering and how they can become more efficient in business processes and policy.”
The Tony Elumelu Foundation (TEF), to examine how Science & Technology (S&T) innovation clusters can drive economic growth, funded the project.
The study revealed, among other things, that Nigeria lacked a plan to groom companies within clusters, as there was no particular policy in place, and showed that, where they exist, “clusters experience infrastructural challenges, whether they have grown up organically or due to policy mandates, as in export processing zones (EPZs).”
The main findings were that, “The quality of infrastructure affects the density of clusters, which explains why Lagos has some of the most vibrant cluster- firms. Abuja will be extremely competitive as its serene environment favours more creative entrepreneurs. It will likely benefit because it is drawing talent that is fleeing other parts of northern Nigeria. Most of the clusters function without research and development (R&D). At the moment, there is no vital relationship between what happens in clusters and what government-funded labs are doing, which means government R&D is not an essential ingredient of growth in clusters.
“There are weak partnerships between universities, companies, government labs and researchers in most clusters in Nigeria. When government labs or universities strike, clusters do not immediately suffer setbacks. Relationships among universities, industries and governments should be structured and schools must show more influence in local economies by working together to nurture innovation.”
However, in an email conversation with The Guardian, the author, Ekekwe, said the development of natural clusters cannot be decoupled from the overall challenge of building infrastructure in Nigeria.
According to him, “From electricity to good access road, we think more than $10 billion will be required to get these clusters to the first phase of cluster readiness. We are not talking about smart cities; we are simply focusing on providing basic things companies need to operate and function. It may not be obvious, but an operational postal service in Nigeria may be catalytic than any policy the government can have on trade and commerce. Without a Post Office, the nation’s ecommerce will not blossom.”
The project sponsor, Tony Elumelu Foundation (TEF), recently launched its TEEP programme, with which it funded 1000 entrepreneurs across Africa, but there have been calls ever since for many rich Nigerians and corporate bodies to provide more seed capital for small companies. Though the Central Bank of Nigeria (CBN), a handful of banks, and venture capitalists funds run mostly by investment bankers, have stepped in to fund SMEs, the clamour for a robust funding landscape across the country with less stringent requirements have been on the rise.
For Ekekwe, there is no venture capital industry in Nigeria, and even if there are some companies in Lagos that claim that they provide such services, “their requirements are so huge, irrespective of the idea, for a typical young Nigerian graduate to have access to their funds.”
“They are not taking risks because most are growth funds, which wait until you have a business model that is working, but needs capital to scale. The problem with that is that you must have sourced the seed capital to even validate the idea. My proposal has been that government needs to copy Israel. In Israel, the government puts money into Funds that invest in Israeli startups. By putting that money, the Funds have more liquidity and can take more risks.
“Mr. Elumelu’s TEEP program is a pioneering concept in that it is giving opportunities to people that may not even get their emails replied by typical VCs. Others need to emulate that gesture. But beyond the investors, our entrepreneurs must elevate their games. I do think we may not have a funding problem, but rather, an idea problem, in Nigeria. There are many rich people in Nigeria.
“I am confident if someone had figured out how to solve some of the big challenges in the world, we have people that can write the cheques. So, we need to task our schools and graduates to dream bigger. Diamond Bank, Standard Trust Bank, GTBank, etc, were not started with foreign capital; some of the funds were raised within Nigeria. Compared to today’s Nigeria, in GDP, we are fairly better to seed and fund great ideas,” he added.
The prospective clusters, as captured by the study are: in Aba, where different shoe-making businesses should find ways to become one brand, which will push for a higher quality through better tools and training and will lead to more collaboration. In Kano/Bauchi/Kaduna, there are opportunities in food processing (especially beverages, packaged food products), textile and garments and leather products, but the challenge is risking capital in a region where security is a problem.
In Abuja, the report suggested that a commodity exchange should be established to take advantage of the agro-allied sector and agriculture in the northern part of Nigeria. For Lagos, it said there is need for an early-stage venture capital fund and that an early- stage fund in the ICT sector will help take some of the ideas around Yaba to the market. And since there are top-notch universities in Ibadan/Ife/Calabar, chemical processing (especially typhoid, HIV, vaccine plants, etc.) should be established, as long as power and other amenities are readily available, just as an ICT service subsector is also attractive.
In Nnewi/Awka, an auto parts light factory or general light manufacturing will tap into the manufacturing and makers ecosystem and an electronics PCB plant to serve the whole nation can link up with the government-owned Electronics Development Lab in Awka.
But how best can the teeming unemployed youths be co-opted into these clusters; do they need re-training?
To this, Ekekwe said that the brightest graduates in Nigeria are not given sufficient motivation while in school to create businesses to absolve their colleagues in the ever-saturated job market, making a case for an entrepreneurial ecosystem.
He said, “They (graduates) need to have ambitions. We need to change the constructs that everyone needs to be employed by a bank, a telecommunication company or in the oil and gas sector. Once the brightest young people in Nigeria begin to see the value of entrepreneurship, we will see great wealth creation.
“This goes beyond unemployed youth. My focus is how can we you get the top 10 per cent of each graduating class from our main universities to think of creating the companies of the future. Those smart ones are always employed and they never have the opportunities to build anything. Until we can get them into the entrepreneurial ecosystem, we may not have good numbers.”
However, many start-up companies complain that they fail to get funding because traditional sources of capital do not have sufficient faith in their businesses, especially if they are a technology-focused businesses, which is the latest fad. And since the number of success stories is not so encouraging, many have are stuck at the ideation stage of their business ideas.
Acknowledging the negative impact of the trend, Ekekwe said few people in the country have made money through technology and that it is still hard to sell the idea that people should invest and develop technology, adding, “Because we are in the first generation of technology entrepreneurs, we do not have lots of records. I am confident this generation will succeed. In coming years, their experiences and wealth will be used to support and mentor younger ones. Until then, government will not take technology as a serious sector.
“We need rock starts in the sector with demonstrated record of success that can get government to work on areas that will help technology thrive. I am not talking of technology consumerism, where we just import and buy. I mean developing capabilities that will help Nigeria create and innovate.”
He noted that all the clusters are doing well based on the ingenuities of people, and the fact that the businesses survive despite several challenges in the immediate environment goes to prove that Nigerians are super-talented.
For the clusters to become world-class centers of innovation, he said they needed to be redesigned, as they “do not have facilities and infrastructure to attract companies that can transform this nation.”
The federal government has severally promised to pay attention to
exploiting solid minerals and one wonders how the clusters can tap into the plan, as most companies in the hub would need locally sourced inputs to production.
Ekekwe said the implementation of such plans is long overdue, but that the strategy should not be to export the raw materials but develop local capacity to make end products from the tapped resources.
“The irony is that Nigeria has deposits of silica, which is one of the starting materials in the semiconductor industry. You use silica to make silicon wafers, which are used in making microprocessors and electronics. Nigeria can become a leader in that industry. We can build a vertical integrated market that connects the silica mining to the printed circuit board sector. I do hope government does not make the mistake of exporting silica just as we are exporting crude oil to import kerosene and gasoline.
“We need to have a strategy to process our silica and feed them into our microelectronics plants and make integrated circuits right in the country. In our works, we have developed a roadmap, which government can consider to ensure Nigeria’s microelectronics industry is totally creative by making sure we have a system in which more things are made at home.”
He said there was need for a regional coalition as against leaving state governments to independently facilitate the growth of the clusters, noting “Our recommendation in the report is that regions have higher probability of success than states. With the small state budgets, they will not have the scale to do meaningful things. But if they come together as a region, they will accomplish more.
“For example, in South East, all the states can make Aba the hub for leather sector production and invest in making sure the cluster is world class, providing logistics, automation, training, among others, that the city needs. It can then select Nnewi for automobile and light manufacturing. But all the regional states need to work together because Abia or Anambra states will not have the scale to execute these projects alone. Over time, they will pick more locations.”
