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Seven governance challenges behind Nigeria’s economic laggardness

By Banji Oyelaran-Oyeyinka
15 November 2022   |   4:20 am
Over fifty years ago the increasing demand for, and government policy of self-sufficiency in food production, necessitated the call for establishment of a local fertilizer production industry.

Nigeria’s economic. (Photo by Florian PLAUCHEUR / AFP)

Over fifty years ago the increasing demand for, and government policy of self-sufficiency in food production, necessitated the call for establishment of a local fertilizer production industry. By the late 1960s and early 1970s, Nigeria established the first fertilizer firm in Nigeria, the Federal Superphosphate Fertilizer Company (FSFC), Limited, Kaduna. The company was a Federal Government project and produced among other products, Single Super Phosphate (SSP) fertilizer. The construction and installation of equipment started in 1974 and was completed in 1976 immediately after which production started.

Between 1985 and 1991, the textile sector in Nigeria recorded an annual growth of 67 per cent and as at 1991; it employed about 25 per cent workers in the manufacturing sector. At the time, 180 textile companies employed about one million people.

As part of its strategic plan for pulp and paper production for domestic and export markets, the Nigerian government commissioned the Nigeria Paper Mill, Jebba, Kwara State, in 1969; Iwopin Pulp and Paper Company (IPPC), Ogun State in 1975 and Nigeria Newsprint Manufacturing Company (NNMC) in Oku-Iboku, Akwa Ibom in 1986. The government’s plan was for the three pulp and paper mills to provide tonnes of different papers in thousands every year and of course, their performance was encouraging and promising. As of 1985, the Jebba mill, which was to be the largest in West Africa, was producing 65, 000 tonnes of Kraft paper, liner and chipboards, sack Kraft, and corrugated cartons per annum. These plants have ceased to exist.

These factories did not break even, not to talk of re-investing their surplus cash and profit in the acquisition of technological capabilities and skills required to adapt, operate, and maintain the imported technology in use. Within ten years, 80 per cent of trained technical staff of FSFC had left. The same fate befell Ajaokuta and Aladja Steel complexes, Nigeria’s Aluminium Company, Aluminium Smelter Company of Nigeria (ALSCON) and several state-owned projects. All are moribund.

The reasons include low plant availability due to a priori poor technical preparation during the investment processes. Other factors include project and financial mismanagement, vested interest and weak bureaucratic capacity. These examples count among the thousands of white elephants that litter the industrial wasteland in Nigeria.

The above sums up the pattern and mechanics of industrial failure in Nigeria. Three points. First, industrial technological capability mastery is a critical factor of success. Nations and firms accumulate this through continuous technological efforts over a long time. Second, it is also clear that technological knowledge is not easily absorbed, imitated or transferred contrary to conventional wisdom. No nation is willing to give another, science and technologies that made them rich. A nation must be deliberate and make explicit investment in acquiring the wide range of technical expertise required in all cycles of the project life. These include the capacity acquisition right from pre-feasibility, investment, operation and maintenance and so on. Third, specialized human capital does not consists only theoretical knowledge; a nation must engage in learning by production, learning by maintenance and learning to innovate by its own citizens. These are imperatives in the technology acquisition process.

State Capacity and Technological Capabilities
The lessons from the collapse of these industrial firms and failures of performance reveal the paucity of State and Bureaucratic capacity. The political and bureaucratic support pillars were absent or weak. Politicians were more interested in skimming rents from the large-scale investments rather than setting goals for completion and performance

To understand the fundamental challenges of industrial failures and slow economic growth, I apply two concepts to anchor the discussion. First is the notion of State Strength and State Scope. The former we define as the capacity of the state to command loyalty—the right to rule legitimately—to extract the resources necessary and provide services, to maintain that essential element of sovereignty, a monopoly over the legitimate use of force within defined geographic boundaries.

All state governments in Nigeria are modeled after the federal government and consist of three branches: executive, legislative, and judicial. Clearly, State capacity (executive, legislative, and judicial) and state institutions exert significant influence on outcomes such as economic development, civil conflict, democratic consolidation, and international security.

The State or Government be it federal or provincial/state has a defined Scope, which are the key functions it performs including education, health and security for example. When a State takes on more than it can handle due to too wide a scope and constrained by necessary resources, it experiences government ineffectiveness; I will briefly discuss this below.

We define a State as either weak/fragile or strong. Fragile states are also known as weak states. A State is Fragile when it is incapable of meeting key needs of their citizens especially their security and economic wellbeing. We code the shortcomings as gaps; with three prominent core gaps: security gap, capacity gap, and legitimacy gap.

The second concept is industrial technology capability. There is a strong connection of science, technology and engineering in any nation’s quest for national security, food security and health sovereignty. I make bold to say that the capstone of national development differences among nations is the difference between industrialized and non-industrialized economies. The capacity to effect changes and to deliver what leaders promise is what separates the weak and strong, the wealthy and poor nations. The quantum of collective productive capabilities that they possess make the all the difference.

According to a study of ‘growth miracles’ by the World Bank in 2008, only 13 countries in the world have been able to sustain an annual growth rate of 7% or higher since 1950. Only two countries, both with small populations and highly idiosyncratic economic structures – Botswana and Oman – are among the group of 13 that have not grown because of industrialization1. Additionally, countries and regions that have de-industrialized or prematurely de-industrialized have experienced a slowdown in economic growth or, at worst, declining economic growth. The faster the rate of manufacturing the faster the rate of economic growth (Kaldor’s Law).
To be continued tomorrow.
Professor Oyelaran-Oyeyinka is senior special adviser to the President on Industrialization, African Development Bank (AfDB)
Professorial Fellow, United Nations University (o.oyelaran-oyeyinka@afdb.or). He delivered this as keynote address to Nigeria Society of Chemical Engineers in Ilorin, recently.