Sunday, 3rd December 2023

Cross River State industrial revolution: a proposed national case study by Princewill Odidi

Nigeria’s greatest National Security challenge to a large extent is the unemployment crisis. Hundred of thousands of young people graduate from tertiary institutions yearly with no corresponding job placement opportunities and corresponding industrial growth. Globalization has made it sometimes cheaper to import goods and services rather than local production. This has greatly affected employment generation…

Nigeria’s greatest National Security challenge to a large extent is the unemployment crisis. Hundred of thousands of young people graduate from tertiary institutions yearly with no corresponding job placement opportunities and corresponding industrial growth. Globalization has made it sometimes cheaper to import goods and services rather than local production. This has greatly affected employment generation as existing local companies increasingly find it difficult to compete with imported goods coming in at lower prices, and manufacturers have no zeal to invest into new production companies because of risk of failure.

Globalization has brought competition to all levels, from production to distribution and even exchange. The after effect for most developing nations who failed to catch up with the symmetry of cheaper mass production, industrial growth, subsidized tariff regimes, and new global workplaces made possible with internet connectivity and technology is massive unemployment. This is where Nigeria finds herself. Now, how did we get here? To be factual, the rise and advent of Business Process Outsourcing (BPO) which is a method of subcontracting various business- related operations to third-party vendors/Countries was not favorable to Nigeria during its advent just like most African Countries.

When BPOs began, it applied chiefly to manufacturing entities, such as soft drink manufacturers that outsourced large segments of their supply chains. However, it is now applicable to the outsourcing of services like tech support, inbound and outbound sales, including trading and marketing. Today it is easy to operate an office in Washington DC and your entire support staff are drawn from Indonesia. Developed nations were able to adapt with new knowledge, new technologies and new skills acquisitions, but for most of Africa, especially Nigeria and our poor educational sector, it meant massive unemployment as our graduates could not fill the new void and the nature and requirements of the new workspace that was not location bound. At the advent, BPO depended on necessary technology/infrastructure that allows external companies to efficiently perform their roles, but Nigeria was less prepared and our major telecommunication company NITEL in the 90s was at its worst shape when these jobs moved to Singapore, Indonesia, Malaysia where most of Asia was better prepared.

So it is easy to trace the root cause of massive unemployment twenty years later in Nigeria and the low rise of an industrial revolution due to poor competition in prices of locally produced secondary products and cheap imported products. The new reasoning amongst most development experts today is that Nigeria must revert to local state sponsored industrialization and investment in Infrastructure and Trade if we must tackle our job creation crisis. While it may be challenging to connect into the new global workplace, we can take advantage of our local population and markets and drive a home-grown industrial revolution. I will use Ben Ayade’s Industrial Projects to drive home my argument. Bill Gates in his recent visit to Nigeria, had opined, that to anchor the economy over the long term, investments in infrastructure and competitiveness must go hand in hand with investment in people. People without roads, ports and factories can’t flourish. And roads, ports and factories without skilled workers to build and manage them can’t sustain an economy, Bill Gates Concludes. This I assume is the reasoning driving Cross River State Industrialization and Proposed Capital Projects. The outstanding question still remain, do we pursue the new industrial revolution by investing directly in Small and Medium Size Enterprises (SMEs) as the World Bank has done in the past decade or rather than SMEs, should State Governments invest directly in Industrial projects, through State run Corporations, source for new markets, build industrial production Capacity before transferring this state owned Industries to the Private Sector?

I would rather argue, given what I would refer to as the Nigerian factor, that for large scale industrialization, the type that can create jobs and reduce unemployment, that state governments should be direct partners if we must have a head way. State involvements in Production relations would not in any way hinder the growth of the private sector, rather, it will strengthen the private sectors delivery capacity through Public Private Partnerships. More question: Has SMEs financing failed to produce desired economic growth results in the past decades? No it hasn’t, but the type of financing often allocated, the type and class of jobs and the type of international competition out there puts too much financial burden on most SMEs, so much that majority of them barely struggle to survive, and as such, SMEs financing has not produced the type of job creation that could drastically affect or reduce unemployment especially among university graduates and skilled trained people.
SMEs over the years funded by world bank has produced artisans, Carpenters, welders, radio mechanics amongst others, professions that created jobs that could not absorb our graduate unemployed youths. This is the core of the problem to the rising graduate unemployment in Nigeria.

It should be noted that virtually all the SMEs programs funded by Nigeria’s CBN, World bank and other Institutions are too economical with financing. Nigeria does not have a credit system that is value or behavior based as found in most countries, our credit system is collateral based, and as such our SMEs are not given the type of facilities that can build medium sized industries, the type that can absorb our teaming graduate unemployed youths and still compete favorably in the international markets. History shows that our institutions are more interested in financing Small Scale Enterprises a way of reducing risk investments. More so, The Government does not have an efficient mechanism to ensure loans are applied to sectors originally designed for, the Banks do not trust the people and no efficient value-based credit mechanism to guarantee repayments or penalties, so to reduce risk, the disbursements are minimal and this has great impact on job creation and employment generation.

The Country is eager to build an industrial based economy, yet loans released to prospective SMEs can only start up small investments and trades, never enough to invest and build medium or large Industrial Projects capable of mass production with sufficient capacity to create jobs at a meaningful scale. These has been the pattern for over three decades. No nation develops this way. So State direct involvements in Large scale industrial projects remains one of the only meaningful options left, and should be encouraged as a pathway to sustainability and massive job creation. Let us now take a look at the Cross River State Industrial Initiative as a case study. Ben Ayades Industrial Model Since 2015, Ben Ayade’s government has initiated an Industrialization model which I think other Nigerian States should follow and Donor Partners should use as a test case for future investments and donor support. The strategy combines industrialization, Production management, value chain upgrades and employment generation. If properly planned and managed with the right human Capacity, technical component and the right market engagement, local and international, the strategy has the ability to turn around the fortune of the state and create sufficient graduate employment within the next decade. To achieve this goal, the Cross River State government initiated industrial projects in some local governments that produced raw materials that can be used to feed the new industries.

Ongoing installation of Equipment at the Cocoa factory in Ikom,CRS
In the Ikom/Boki axis of the State, Cocoa is predominantly produced. Over the years, merchants purchase these products and cart them to other areas for Processing thus destroying the production value-chain. In addition, farmers from neighboring villages in Southern Cameroun bring their Cocoa products to Ikom to sell. Now, processing Cocoa from Primary to secondary and tertiary consumables requires massive investments. The problem is the type of financing readily available to SMEs by both the World Bank and Central Bank of Nigeria would not finance most of these secondary production lines. At this stage, the state government intervened. Presently, the state is building a Cocoa Processing Plant in Ikom to fill the void. The plant is near completion. Again as I argued above, getting it right would require putting in place the right technical capacity and markets.

In Yakurr local government, the state government is building a “Tooth Pick” factory. Last year it was reported on “world top exports” that Nigeria spent a whooping 1.3 million dollars on toothpick imports. How then do we create jobs for our teaming population if we continue to import little consumables like tooth pick?

The toothpick factory in Ekori, Yakurr is already in production
Import data shows we import wooden doors, we import steel nails, Candle, furniture and even kitchen utensils. How can we address the unemployment crisis when we are so import dependent?

The imposing structure of the 5000 sqm floor space garment factory

Generally, it is a common phenomenon for countries to import products they cannot produce, but poor financing of SMEs, the Nigerian factor where production loans are diverted to other use, and the petty craftsman financing we are used to makes it practically impossible to fill in the void, another reason why direct State involvement in industrialization remains our only way out.It is in this light.the Cross River State governments initiative to build a toothpick factory is intended to fill this gap and take advantage of the markets in Nigeria and the West Africa sub region.

It is in this light, The Cross-river State governments initiative to build a toothpick factory is intended to fill this gap and take advantage of the markets in Nigeria and the West Africa sub region. In Calabar Municipality, The State government built a State-of-the-art garment factory, capable of mass production and capable of providing employment to hundreds of unemployed people.This garment factory comes in handy. Rather than our Military and paramilitary establishments patronizing foreign designers, we can attract and save our economy that foreign exchange. The ability of the state government to key into garment production on large scale, servicing the military and Paramilitary agencies in Nigeria or seeking to key into international garment production chains as found in Indonesia, Malaysia and Singapore, supporting western Merchant stores would determine the success of this venture. The State government is presently making some efforts to key into the international garment trade. With the right technical capacity and markets, this would create desired jobs for our teaming unemployed populations.

In addition, the State government is said to be building a Rice seedling organo plant at Calabar industrial park to provide improved disease

Pharmaceutical Equipment
Above, the President Muhammadu Buhari admiring the drone propelled irrigation at the rice city at the Ayade Industrial Park, the rice seed/seedling factory and His Excellency Senator Prof Ben Ayade, the Executive Governor demonstrating with the rice planter.
resistant rice seedlings for increased vitaminized rice production. Now, these are the type of small and medium scale production that can kick-start a local economy, create a sustained market and boost job creation. The Cross River State template should be emulated by other state governments and should be supported by donor agencies as a test case for Africa west of the sahara.

It is worth noting that, another State owned industrial project on the works is Calabar Pharmaceutical Company, said to be designed with about 30 production lines to serve as a drug bank serving the state and the country at large. Recently as published by Punch news media, The President of the Pharmaceutical society of Nigeria, Ahmmed Yakasai is quoted to have said over 70% of drugs used in Nigeria are imported. Now, how can a country whose youth populations in their millions are unemployed rely on imported drugs when we can invest in Pharmaceutical plants and create jobs locally? To meet the demands of the industrial strategy, the state government is intervening in this sector.Getting it right may not be easy, but it is a step in the right direction. The key argument here is that If SMEs cannot fill the void in enabling industrial projects, create jobs for our teaming unemployed populations, then state governments should get into direct production relations and financing of large scale production enterprises.

Industrialization according to the thinking of government will be meaningless without Power and electricity. In this wise, the state government is building a 21MGW power plant designed as backup to drive her industrialization initiatives and supply uninterrupted power to Calabar Metropolis and is considering a Solar Voltaic alternative power to support the gas fired plants.

The thinking of government is that since Power has continued to be a challenge to Nigeria for over four decades, if the state must achieve her industrialization drive, she must put in place alternative power supply and back ups.All these projects are being built simultaneously.

Above is a section of ongoing dualization of the 148km Mfom-Yala- Ogoja-Bekwarra-Obudu-Obanliku-Ranch road.

Finally, we cannot talk about Cross River State without mentioning the Calabar carnival, The Obudu Ranch Resorts, and Tinapa. Other new projects initiated by the current administration is said to include the dualization of Yala -Obanliku roads leading to the Ranch. Industrialization to be successful goes hand in hand with infrastructural development. More so, preliminary work on a state sponsored Expressway called “Superhighway” and the preliminary work on a proposed deep seaport close to Bakassi are also said to be underway. Without dispute, the State government has very big dreams as it work to actualize her industrialization drive towards job creation, but with very lean financial resources. These capital infrastructure initiatives would require Federal and donor support to achieve its key objectives.

Ongoing preliminary dredging at the site of the Deep Bakassi Seaport
In my thinking, what is happening in Cross River State only portrays a government with a big dream that needs help to succeed. It is our prayer that International donor agencies, including the World bank, DFID and other Countries with development budgets for Africa support these initiatives, let us drive the Cross River Industrial revolution to employment generation as a test drive for development in Africa going forward.
We would appeal to the federal government to relieve the state and take on the deep seaport and Expressways, the state’s outstanding loans of previous projects in past administrations be renegotiated or written off by the federal government. For this Industrialization program to be successful, the state would need some financial breathing space. It is common sense, when a state is putting in so much to get it right, they should be given relief.

The motorized rig for rural water supply and below the Ogoja rice mill It should also be noted that, when President Muhammadu Buhari visited Calabar he was stunned, he endorsed the work of the Governor, The Vice President Visited and was impressed, the military chiefs, The American Ambassador and other international dignitaries upon visiting Calabar have all been impressed with industrial development work in Cross River State. We cannot all be wrong, State Sponsored industrialization is the way going forward, if we must make any meaningful progress.

Now, from all indications, investing the States lean resources into new industrial projects would mean other sectors will be starved of funding. This would also imply that local people who do not understand the importance of these investments at this time will be dissatisfied and would complain of other sectorial neglect. More reasons why the federal government and donor partners should come on board on these industrial platform initiated by the state government.

Exit Strategy: The biggest question out there would be, how do you contain theft and corruption since virtually every state-owned industry in Nigeria has underperformed over the years. The answer is simple. Political- will and Institutional development.

While corruption is a major concern, however, you cannot shut down your family business because your children steal from the proceeds, what you do is to carve out an exit strategy with the lowest risk possible. The Ben Ayade government may want to understudy and adopt any of the following Chinese exit models which all proved successful in the past. China to an extent has shown remarkable success in states involvement in productions relations.
It should be observed here, that State ownership of enterprises is not a China specific phenomenon, it is common and popular in most Eastern European Nations. Upon eventual Completion, these companies would be leased out to management firms who will manage and share profits with the state, some will be sold outrightly to the private sector, or the state will adopt the Chinese type “Corporatization policy”.

This is a policy designed to separate ownership from management so that the companies can be run on a commercial basis while ownership of the company could be diversified or otherwise changed by trading shares in the company. The end goal in whatever option is adopted is to gradually reduce the diminishing role of the state in the economy, improve on the human Capacity of the States indigenes, a policy the present government has exceeded expectations. More so, develop a well-trained workforce, and gradually within a 20 to 30 year plan, the state would revert to playing her traditional role of providing an enabling environment to sustain private sector dominance in production relations.

It is important to point out that State-owned companies are often touted as necessary tools for development in emerging economies. This is because they can be directed by governments to achieve development ends. The model has been a success in some countries, but it’s been an epic failure in others. But given what I described above as the unique Nigerian problem, I will assume it is a policy in the right direction. In summary, Whoever ends up owning and managing the industries may not be a too serious concern if the end goal of job creation, profit generation and project sustainability is achieved.

For lack of a better heading to capture our message, I would title this piece: Cross River State Industrial Revolution: a proposed National Case study
Princewill Odidi is a United States based Development/Advisory and Strategic Communications Consultant.