Pat Utomi: The Burden And Joys Of Manufacturing

They rose from nowhere, having been formed in the womb of the brains of politicians who desired progress for their people through job creation and wealth increase. In imitation of colleagues like Chief Obafemi Awolowo who birthed the Ikeja Industrial Estate, estates of manufacturing arose in Aba, Port Harcourt, Kaduna and Kano. But the prospects of manufacturing have been shaken off the trees like fruits dropping from the tree under the power of gale force winds, and many of the former factories have become churches or night clubs.

Manufacturing which leapt from total neglect, and near zero contribution to GDP, in colonial times, to nearly 13 percent of GDP two decades after independence, profited from reserves built up by the regional produce marketing boards, by the time self government was firmly in place in 1957. As Pius Okigbo points out in his Nigerian Public Accounts, and his later reflections on the public philosophy of development, the significant reserves had been drawn down between 1957 and independence in 1960 to nearly zero. Most of the reserves were used to create infrastructure and enabling environment for manufacturing.

Paradoxically, government policies would be the death of manufacturing. Poor implementation of the import substitution strategy, frequent changes in policy, poor exchange rate management and ultimately poor power brought down the house of supply. Few of those troubling sources of the challenge for manufacturing have been as damaging as inconsistency in government policies and faulty institutional memory in the policy arena.

Let us point to some examples. Government reacting to policy debates led mainly by ABU lecturers writing in the New Nigerian on the Great Wheat Trap, banned the importation of wheat, negatively impacting the flour milling sector. A few years later, after some local substitutes were being developed, the policy was reversed. With brewing, the ban on imported malted Barley was also reversed, resulting in the abandonment of imported machinery to process local grains like sorghum.

The more virulent problem for the policy environment is indeed the tendency to forget yesterday’s strategy. When the Government recently announced the Nigerian Industrial Revolution Plan as Nigeria’s first industrialization road map, many were flabbergasted. Beside the Rasheed Gbadamosi led industrial Policy initiative during the early 1990s, the Development plans of the 1960s and 70s involved considerably advanced road maps on industrialization. Unfortunately the incumbents either did not know the history or were afflicted by the Nigerian disease of superlatives: First, greatest, biggest etc.

Could the boardrooms have saved manufacturing in Nigeria? Can the board rooms influence the effort to save manufacturing in Nigeria? What do we do to enable institutions emerge that can reduce the amount of uncertainty afflicting manufacturing here?

Kandeh Yumkellah, the immediate past Director – General of the United Nations Industrial Development Organization (UNIDO) was the UNIDO country representative in Nigeria for several years. While here he fought to get Nigerian policy makers to learn some lessons from their Asian counterparts. He was so passionate an advocate that in the first year of Patito’s Gang he was one of the regulars on the Gang.

In one of his efforts to inspire new thinking he arranged a policy visit to Malaysia. Among those on the tour were then Industries Minister Chief Kola Jamodu, Science and Technology Minister of State, Pauline Tallen, Permanent Secretaries, the Senate and House committee Chairmen for Industry, Senator Fidelis Okoro and Hamisu Shira, and myself. One of the learning points from that trip was my long trumpeted view that it was all about competiveness and not remaining infant industries forever, behind tariff barriers.

In that sense, one of my more enduring arguments is that we demarcate the country into zones of development based on factor endowments and plot the global value chain of endowments in each domain. This will include manufacturing points of the chain. Education and the curriculum at all levels should then be aligned to skills required to be more competitive.

The importance of endowments and competitiveness is evident in the fact that the manufacturing ventures that have survived the de-industrialization that hit Nigeria have been in such sectors in which Nigeria has strong endowments as the food and beverages sector.

Endowments assure greater competitiveness. That competitiveness can, however, be threatened by other factors like those that come up in the case of doing business surveys such as the World Bank group Private Sector Assessment (PSA). To reinvent manufacturing will therefore involve looking at factors that make doing business easier, from licenses, to infrastructure such as power, transport and water and a fiscal regime that stimulates production rather than act as a disincentive.

Manufacturing will surely profit from the idea of enclaves where concentration can allow for the provision of the entire infrastructure required for effectiveness within the industrial park. From government approvals to ease of distribution and quality of human capital available for employment the ability of manufacturing requires a variety of factors to be got right.

Governance can help firms on the right track because one of the duties of directors is to interpret the environment and help shape strategy.

In the same vain directors can constitute a pressure group to push policy in the direction that makes the environment more conducive for performance and helps the leadership team of ventures scan the environment for opportunity. For example it remains puzzle to me than Nigeria’s benefit from US government policy to ease market access for Africa was lost completely by Nigeria, while countries like Mauritius profited phenomenally from garment exports into the United States. In one classic case an Indian Textile manufacturer who was so frustrated in Lagos crated his machines and moved to Kenya. That same factory supplies Walmart tens of thousands of jeans every month from Nairobi. Imagine the jobs that could have been created here if we got in through the AGOA opportunity window.

We must hold out more hope for manufacturing because it is between it and Agriculture that the bourgeoning population will find productive work. But we must begin again but with greater humility and more audacity. And those are not counter points.

I have argued that a better approach is to divide up the country into zones of development and map the factor endowments of the zones from which value chains are constructed into global markets. This thinking is seen in the success of China’s manufacturing as captured in the UNIDO Commissioned study of Oxford University Economics Professor, Paul Collier. Same point can be made of value of focusing on local endowments with the fact that the food and beverages manufacturing sector has better survived Nigeria’s collapse into de-industrialization even before we became fully industrialized.

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Pat Utomi, Political Economist and Professor of Entrepreneurship is founder of the Centre for Values in Leadership.

 

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