Time to hone the Nigerian industrial strategy
24 March 2022 |
2:43 am
The rapid rise of misery in Nigeria in the aftermath of petroleum scarcity and rising inflation have hastened the adoption of a new industrial strategy for Nigerian economic growth
The rapid rise of misery in Nigeria in the aftermath of petroleum scarcity and rising inflation have hastened the adoption of a new industrial strategy for Nigerian economic growth and prosperity. Moreover, the Debt Management Office (DMO) says that as of December 2021, Nigeria’s debt has grown to N39.55 trillion.
Nigerian Industries
The Director-General of the DMO, Patience Oniha, said that was our total external and domestic debt. These borrowings are from several sources including the Eurobond, Sovereign Sukuk and the federal government bonds.
Our total debt-to-GDP ratio is 22.47 per cent. The debt ratio still remains below Nigeria’s limit of 40 per cent. Meanwhile, campaigning has begun for the presidential election, which in February 2023 will draw the curtain on eight years of Buhari’s nepotism, on whose somnolent watch Nigeria has sleepwalked closer to banditry-induced disaster. President Buhari had overseen two economic slumps, skyrocketing debt and a calamitous increase in kidnapping, banditry—the one thing you might have thought a former general could control.
We desperately need a leader whose energies go not into preserving its own privileges, but into providing public goods—resolving the impasse in education through paying debts owed the Academic Staff Union of Universities, health and social welfare; rule of law through freeing Nnamdi Kanu and Sunday Igboho. Other problems waiting to be solved include terrorism, uninterrupted power supply, roads and digital infrastructure. We need a leader to remove distortions in the salary structure and the removal of subsidies that disturb entrepreneurial activity.
Large scale unemployment is one of the reasons why our moribund industrial strategy needs to be honed. Industrialisation is the process by which an economy is transformed from agrarian production to manufacturing. As a country is transformed into an industrial society manual labour is replaced by mechanised mass production. Like the advanced societies of today, we need to break the vicious cycle of underdevelopment.
Before Nigeria’s oil boom, we thrived on agricultural commodities which were exported for foreign exchange. It contributed more than 57 per cent of our GDP; while solid minerals like coal, iron, tin and columbite contributed more than 15 per cent to the Gross Domestic Product. Sadly, the discovery of oil changed that as minerals were neglected in favour of oil and gas. Consequently, the Nigerian economy became volatile due to fluctuations in the price of crude oil. In fact, the recessions experienced in Nigeria are attributable to the fall in oil prices.
In 1986, we were forced to borrow money from the International Monetary Fund (IMF) owing to the fall in oil prices in the world oil market. Also by 2014, the continuous decline in crude oil prices led Nigeria to experience yet another economic recession, largely caused by the slow growth of China, which is the largest importer of crude oil in the world. Yet in 2016, the start of the most recent economic recession, which was as a result of the mining of shale oil in the United States as the largest buyer of Nigeria’s crude oil.
Since 2020 after the outbreak of the COVID-19 pandemic, crude oil prices sold below $40 per barrel. Nigeria’s economy has been in a coma, with the galloping inflation on the rampage, this was further worsened by the scarcity of foreign exchange, worrisome debt and mass unemployment. All these have garnered clamours for the diversification of the economy and the honing of an industrial strategy to cater for the teeming unemployed.
Presently, the media is agog with reports that Nigeria’s main oil companies are leaving Nigeria on the account of divestment for cleaner energy. In the words of the Group Managing Director of the NNPC, Mele Kyari, “Oil companies are leaving because they want to shift their portfolios to where they can add value and also add towards carbon net-zero commitment.”
The Paris climate accord has set a climate goal that by the year 2050, global warming should have been reduced to 1.5C while Columbia Climate School reported that keeping global warming to below 2’C from industrial levels means that an estimated one-third of oil reserves and 80 percent of coal reserves need to remain unused by 2050. In another report, the International Energy Agency has declared that no fossil fuel cars should be sold beyond 2035. This means that a country like Nigeria whose economy depends on oil faces more economic burdens due to its specialised economic structure.
Sadly, the Russia/Ukraine war spells doom for Nigeria if appropriate measures are not taken. Nigeria maintains good bilateral relations with Russia with trade to the tune of N994 billion. Reports show Nigeria is a major importer of various agricultural and mechanical products from both Russia and Ukraine. According to Bloomberg, Russia is set to ban certain exports following sanctions she receives from other nations over her invasion of Ukraine.
The implication of this is that there will be a reduced supply of many commodities to Nigeria increasing the rate of inflation in Nigeria. The new industrial strategy preferred is triple faced. Instead of wasteful and unrecoverable loans presently churned out by Central Bank of Nigeria such as trader money; there should be an N50 billion SME loans scheme without collateral, without interest. Secondly, another N50 billion loans scheme should be set aside for import substitution industries. Finally, the Nigerian Enterprise Board should be empanelled to register, monitor and implement government policies regarding the recovery of these loans.
It has been observed that the bulk of Nigeria’s manufacturing takes place in consumables such as food, beverage and tobacco. This corroborates the London School of Economics recommendation that Nigeria should adopt a new industrial strategy if she hopes to meet the necessity of creating an additional five million jobs per year for the next 10 years. Without these preferred measures Nigeria is threatened with disintegration in the near future.
Nigeria needs import substitution industries more than ever before, for importation stokes unemployment. Lack of diversification of the economy has put the Nigerian economy in danger. Let the states exploit the resources within their territory for their own survival. The onus lies on the states and the federation to exploit its opportunities for industrialisation by promoting a value-based economy, which drives the conversion of raw materials to finished goods before exportation. Nigeria needs a working manufacturing strategy that can absorb our teeming unemployed to prepare the country for the high-quality skills that are needed in this modern age.
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