It is most unlikely that you will visit China and not notice its great
industrialisation success. China’s mesmerizing success in creating jobs, lifting
700m people out of extreme poverty, generating overwhelming wealth,
improving living standards and achieved food security for the Chinese people
through industrialisation is remarkable. Her speed and precision in
industrialisation is a modern-day miracle. China overtook the United States in
2011 to become the world’s largest producer of manufactured goods. Though
following different routes, Britain, France, Germany, Japan and the US hitherto
achieved global pre-eminence, economic strength and social stability through
the same path of industrialization. The 20th century also saw the Asian Tiger
countries rapidly industrialize, become manufacturing hub for specific products
consumed world over and grew extensive wealth almost in comparison with
the West.
Industrialization has been acknowledged as a critical engine for growth,
prosperity, job creation and improved living standards. Yet Africa, Nigeria in
particular, is less industrialized today than it was 30 to 40 years ago. Data
from the Nigeria Bureau of Statistics (NBS) indicate that the contribution of
manufacturing to the country’s GDP keeps declining in the past five years.
Meanwhile, manufacturing to GDP ratio is a measure of industrialization. A
quick snapshot. In 2018, manufacturing contributed 9.2% to GDP, 9.06% in
2019, 8.99% in 2020, 8.98% in 2021 and declined to 8.92% in 2022. The
inability to industrialize is at the root of Africa’s poverty. Nigeria, the giant of
Africa, appears left behind, with no plan to industrialize. We seem to be losing
every opportunity to make any meaningful progress. Populous, labour-
abundant economies globally have all anchored on a manufacturing boom to
climb the ladder of economic emancipation. The pertinent questions to ask
are: How did China and other industrialized countries get it right? How did
Nigeria lose it?
Let us start by distilling the common denominator among all the industrialized
nations. First, much priority is placed on education and technological
advancement. Britain focused on new scientific inventions such as developing
the steam engine and using it to the most significant advantage of massive
production of goods and movement of people and goods from one part of
Europe to another. France focused on technical education, establishing
institutions like Ecoles des Arts et Metiers and Ecole Polytechnique. Germany
and Japan emphasized solid engineering, technical and vocational education.
The US invested in education that produced technological innovations. China
followed this path, achieving 98% literacy with an emphasis on technical and
vocational education. Industrialisation anchors on an educated and skilled
workforce. How can a country industrialize with a dominant illiterate
population? Or as the case is with many African countries, a population of
half-baked graduates? People with no vocational and technical skills and an
untrainable labour force with little or no interest in technical knowledge and
capacity?
The second factor is that the industrialised countries laid great emphasis on
innovation, research and development. From her industrialisation phase to this
moment, the US has a strong culture of research and innovation. It developed
an intellectual property framework that rewards creativity and innovation.
Prominent inventions such as the telegraph, telephone and electric power
emerged during the industrialization era. The US has continued to dominate in
innovation. The most impactful innovations in recent history are either
developed by or promoted more by Americans. From the Internet, robotics,
entertainment, social media to Artificial Intelligence, the US has continued to
industrialize; moving away from machine-based manufacturing dominance to
the intellectual and knowledge-based production of the knowledge economy.
Japan invested heavily in Research and Development (R&D) and followed the
US in massive industrialization and production of known brands in the
consumer market globally. France, in her R & D, focused more on specific
industries such as iron, steel, machinery, chemicals and textiles.
The third common factor is that these countries developed adequate
infrastructure and energy to power their industries. Not only did the US and
other industrialized countries build massive infrastructure as the foundation for
their industrialization and economic growth, they went further to secure the
power these industries required to function. It is common knowledge that
electric power and other forms of energy (oil, gas, nuclear, solar and clean
energy) are harnessed extensively for private and industrial use in those
countries. Constant and adequate energy is a sine qua non in the
industrialisation process. This is common sense.
Introductory Physics teaches that energy is neither created nor destroyed and
can only be transformed from one form to another. This principle implies that
the more energy or power in a place, the more excellent the opportunities to
convert it into other states. If materials or products represent condensed
energy, it only means that the more power you have, the more you can
produce. So, how can any country serious with industrialization and economic
development focus on something other than energy creation and
sustainability? How can a country power its industries if it does not have
enough energy for private and industrial use? Or where it has power, it is
unreliable and epileptic?
Other factors that support growth are right and consistency policies, access to
capital, macroeconomic stability anchored on good governance and strong
leadership. The Asian Tigers industrialized on the backbone of
macroeconomic stability and stable governance .
A critical analysis of the Nigerian situation shows that we are not meeting
these three primary common denominators of industrialisation and are not
making any meaningful progress. It is even heart-rending that instead of
marching towards industrialization, we are faced with de-industrialization in
Nigeria. This refers to the decline or shrinking of the little progress made in the
industrial sector of the economy. This process typically involves reducing the
share of industrial output and employment in the overall economy. De-
industrialization has significant economic and social consequences; been a
concern in Nigeria for several decades and has become alarming in recent
times. It is an evil wind that blows Nigeria no good.
Several manufacturing companies have left Nigeria recently. A few more are
planning to go. These companies cut across several sectors, including oil and
gas, retail industry and pharmaceuticals. A few notable companies sold their
assets and left Nigeria. Etisalat, ExxonMobil, Tiger Brands, HSBC, UBS, Mr
Price Group Ltd, Shoprite, Game, Brunel Services Plc, Intercontinental Hotel
Group, etc have all left. The recent announcement by GSK PLC that it plans to
exit Nigeria has sent shock waves to the system. At a time when we
desperately need more companies to produce goods and services and
provide employment, the few we have are leaving our country. This is very
sad!
The reasons these companies are leaving are many and varied. Some of
these companies cited an unfavorable business ecosystem and foreign
exchange inconsistency as the remote and immediate causes of their
decision to leave Nigeria. Most companies struggle to get Dollars or other
foreign currencies to import goods or machinery. Even after ‘successfully’
doing business in Nigeria, repatriation of proceeds to their home countries is a
huge challenge.
Besides these immediate negative business factors forcing companies to
leave and stalling Nigeria’s industrialization, major macro issues are fuelling
our de-industrialisation. First, Nigeria’s economy for many years is heavily
dependent on oil exports. The discovery of oil in the 1950s and the
subsequent boom in the oil sector led to a neglect of other sectors, including
manufacturing. As a result, Nigeria’s industrial base was not adequately
developed, and the country became overly reliant on oil revenue.
Second, insufficient investment in infrastructure such as power, transportation
and logistics has hindered the growth of the manufacturing sector. Frequent
power outages and inadequate transportation networks constitute challenges
to operate industries efficiently and competitively. Third, the influx of cheaper
foreign products has adversely affected domestic industries, leading to further
decline in manufacturing. Some degree of protectionist approach is needed to
arrest the last therefore.
Fourth, many Nigerian industries face challenges accessing affordable
financing for expansion and modernisation, thereby hampering ability to invest
in new technologies, improve productivity and compete globally. Access to
loans for importation is more plausible than securing one for building and
developing a manufacturing facility. Fifth, inconsistent government policies
discourage investments and make it difficult for industries to plan for the long
term. Lastly, insecurity, corruption and lack of skilled labour fosters de-
industrialization. Poor economic management at home has deprived local
industries of effective demand.
To address de-industrialization and promote industrial growth, Nigeria needs
comprehensive economic reforms to stimulate investments in critical
infrastructure; stable and supportive government policies; some degree of
creative protectionism to protect local industries; access to affordable capital;
and efforts to diversify the economy from the heavy reliance on oil.
Encouraging the growth of the manufacturing sector is vital for job creation,
reducing import dependency and achieving sustainable economic
development in the country. The path to industrialisation is not impossible.
Other countries with worse conditions than Nigeria’s have walked that path
and got it right. All we need is to emulate them. It is only human to study
others, learn therefrom and adapt the lessons to fit our peculiar
circumstances.
Nigeria has no option but to industrialize. Production is the key to progress.
Local production and consumption of our products as well as supply of goods
and services to the rest of the world would address problems caused by
poverty and unemployment.
De-industrialization is an existential crisis and we must do everything possible
to stem the tide and usher in massive industrialization. We must critically
examine the best ways to industrialize and all hands must be on deck to
accomplish this.
