The Nigerian industries are facing hard times from both internal hardships and lack of global competitiveness. The government is expected to provide a conducive environment for the sector to produce goods with competitive quality and quantity. A conducive environment is more than enabling laws, physical infrastructure and tax relief. It has more to do with the quality of inputs in terms of social and financial infrastructure.
The starting point of the enabling environment has to do with the registration of businesses. Ease of doing business used to be one of the factors considered by the World Bank and its allies in appreciating countries desirous of growing investments and businesses until an independent report found that it has been corrupted through some misinformation by some countries including Nigeria. Albeit, some states of the federation have actually improved on the ease-of-doing-business, but other environmental factors are harsh. Nigeria as a country failed woefully in this aspect due to glaring entrenched corruption in the civil and public service. Ease-of-doing business is the major entrance to industrial competitiveness and failure to address the problems will keep genuine local and foreign businesses at bay or consign them to small and medium-scale levels.
The next point is physical infrastructure. Costs of production continue to rise due to the inability of the government to provide some basic needs for industrial operations. A major one, in this case, is electricity. The alternative sources of electricity cannot be as cost-effective as one generated via hydro, gas, thermal, or nuclear. Unfortunately, the major alternative is the use of diesel generators to power machines and it is not as efficient as the power from the national grid. For now, the electricity from the grid is the standby for most big companies. They change to the national grid when they want to refill the generators. The cost of diesel is rising uncontrollably, possibly with the hope that there will be an outcry and the government will start considering subsidy and another unholy source of income for the portfolio businessmen. It should not happen. Rather, let our refineries work or let us have new ones.
Often, there are reports that the country generates more than what can be distributed. That inefficiency in the distribution has to be eliminated quickly. Actually, the quantity so produced is about 10,000 megawatts when we need a minimum of 40,000 megawatts to become an industrialised nation. As of 2001, South Africa was already producing 40,000 megawatts, supplying its neighbours’ homes and industries. So, there is nothing to be proud of with 10,000 megawatts. There is a need for decentralisation of power generation and distribution without going through the national grid. The kind of decentralisation in the telecommunication industry should be encouraged with obnoxious laws preventing such decentralisation repealed and substituted. Of course, the need to widen the sources of energy to include nuclear and small/medium scale or state-owned direct power generations should be encouraged.
Another physical infrastructure is in the area of transportation. Cargo flights and trains for the movement of raw materials and finished products can be encouraged even at the private sector level. There are many states with underutilised airports. These can be used for cargo to the state and neighbouring states, making transportation easier and faster but invariably reducing heavy loads on the roads, accidents and attacks on trailers and other road transports.
The social infrastructure has to do with quality education. The country has to deliberately promote STEM through well-furnished laboratories for science, technology and engineering. A situation where students in public universities in particular are engaged in what we call “theories of practical” cannot promote industrialisation. A specified proportion of TETFund must be devoted to laboratory equipment just as it is done for libraries. Actually, some designated institutions, including polytechnics and universities, can be funded for manufacturing laboratory equipment rather than relying on the importation of common equipment. It is not enough to be promoting entrepreneurship in starting and managing businesses but also promoting creative thinking and manufacturing. Well-trained and equipped graduates from polytechnics and universities will be ready-made for industrial engagement.
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The financial infrastructure is of course a major backbone of industrial development. A growing business requires funds beyond the entrepreneur. Credit availability in terms of affordability is key. The monetary and fiscal policies have not been fair to the private sector. The government’s huge budget deficits that depend on both local and external sources, particularly the former, are injurious to the private sector from two angles. Government borrowing heavily from the domestic market crowds out the private sector as the banks and public would prefer to lend to the government than private businesses for the fact that the latter can go bankrupt while the government remains. The crowding out also results in an increase in nominal and real interest rates because of the ensuing shortage of funds. Besides these, the industries face all forms of taxes and levies from the state governments. These are from the fiscal side.
The Central Bank of Nigeria has been raising the monetary policy rates, which is a signal to the banks to also raise their lending rates. So, businesses are faced with high interest rates from the CBN policy and from the crowding-out effects. In addition, the shortage and misuse of available foreign exchange with devaluation have pushed the value of the domestic currency in relation to the key currencies to the brink and the industries to the black market where massive depreciation of the naira has implications for the quantity of inputs they can import to meet production needs. All these lead to production constraints and high cost per unit. Economics teaches us that the larger the quantity produced the lower the unit cost. One can check this out with printers. The unit cost of 500 pamphlets is always higher than the unit cost of 1000. All these high costs of production affect the competitiveness of Nigerian producers and Nigerian products. The major beneficiary of the competitiveness of the Nigerian industries is the government itself.
How does the government benefit from the growth of private sector businesses? If private businesses are growing or expanding, the government is relieved of the pressure of finding jobs for the citizens. Expanding businesses will of necessity employ more hands, thereby raising the incomes of the people. Industries have both forward and backward linkages that other sectors of the economy do not have. It draws raw materials and other inputs from the primary sector like the extractive businesses, agriculture and mining; thus causing production and expansion in those subsectors, with employment outcomes.
From the tertiary sector, it requires, among others, services of accounting and auditing firms, finance from the banking sector. The transport subsector provides services of moving inputs into the firms and output or products from the firms to the market and the ultimate consumers. The resulting expansion in the subsectors of this sector also results in the employment of experts and unskilled labour. The government directly benefits through the collection of taxes from businesses in the primary, secondary and tertiary sectors as well as income taxes from new and old employees.
Aside from the employment and the revenue to government, such growth and development present additional spillover benefit in that the image of the country among the comity of nations is enhanced. Today, when there is a meeting of the G20, which are the 20 most industrialised countries in the world, Nigeria cannot attend. South Africa, which is also a member of the BRICS, is the only country counted in Africa and she has to watch it too with the growing level of corruption and deindustrialisation gradually emerging in the country. If we group the counties into G7, G13 or together G20 and ‘the rest of the world’, where do you place Nigeria? Definitely, an improvement in ranking will put us where we should ordinarily belong. G20 is for recognized industrial countries in the world. Only deliberate policies and efforts can take us there.
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