Seven governance challenges behind Nigeria’s economic laggardness ( 3)

Tand countries like South Korea, Malaysia and Indonesia? What should Nigeria and indeed Africa do to recover, rebuild and revitalize? Urgently, pursue an active industrial strategy taking agri- business as its base while continuing to HIS is three times the total 2021 federal promote other industrial sectors, and the servbudget, projected at $ 34.51 billion. Clearly, one ices sector that ha ve driven most African of the most significant barriers to industrializaeconomies. While the countr y is challenged tion, value addition and competitiveness of with infrastructure such poor power supply, use Nigerian firms is poor infrastructure. According the strategy of localization of industrial zones such to a recent Financial Times ( FT) report: “The conas the AFDB’S Special Agro- Industrial Processing gestion at the port in Lagos has become so bad Zones ( SAPZS) to driver faster economic growth. that it can cost more than $ 4,000 to truck a con( 4). Intensify Economic Diversification in deeds tainer 20km to the Nigerian mainland these not words: The lessons of the last 50 years of days, almost as much as it costs t o s hip one Africa post- independence show clearly that 12,000 nautical miles from China”. The estiNigeria continues to lag far behind in technomated loss in economic activities is $ 55 million logical capacity to diversify its economy. The per day. economy is poorly diversified in its technologi

Industrial development depends on a wide vacal production base and export basket. The riety of hard, soft and advanced infrastructure. country routinely experiences disproportionElectric power, water/ sanitation, roads, railways, ately large volatility and huge swings in fundaports and airports propel all modern production mental economic variables. This is especially so structures such as factories and agricultural as the country is resource- dependent and vulvalue chains. Think about how global productive nerable to external shocks. The recent nexus of agricultural economies work: they are hea vy pandemic and the resulting global financial criusers of chemicals, fertilizers, pesticides and agrisis is illustrative. Poor diversification results in cultural machinery. Look at the world’s most proshortage of foreign exchange. The precipitous ductive service economies: they rely on top- tier decline of the national currency is in large part computer technology, transport equipment and, because we consume high- value products in some instances, mechanized warehouses. that we do not produce, and export low- value

( 3). Redouble efforts on industrialization and raw materials which value is fixed by importers.

to building technological innovation capacity Nigerians, especially urban elites, have develThis is critical for several reasons. First, the recent oped an appetite for imports including expenCovid- 19 pandemic and the Ukraine- Russia consive luxur y goods such as automobiles, foreign flict with its aftermath of soaring food inflation, drinks, and clothes, electronic and household show that countries with weak domestic capacconsumer goods. ity to manufacture basic products are extremely For example, the country’s top imports are revulnerable to not just economic shocks; they face fined petroleum ($ 75.75Billion), cars ($ 3.03Bilreal health and food securities. Therefore, the lion), Wheat ($ 2.15B), packaged medicaments most effective strategy for rapid growth is to pro($ 1.38B), telephones ($ 771M) and special purpose mote the sustained expansion of foreign ex - ships ($ 4 billion). In contrast, what does Nigeria change earnings through exports of export? Coconuts, cashews, cocoa beans, rough manufactures. wood, petroleum gas, and crude petroleum that

To overcome the BOP in the end, and grow the accounts for 70.8% of all its exports, among otheconomy at a fast rate, we must counter import ers. expansion with faster export earnings. More pre5. Prioritize Security of Agricultural and Induscisely, export of processed and manufactured trial Assets: To the cocktail of challenge of rural products. We have long shortchanged ourselves and urban insecurity that has disrupted agriexporting raw materials that others use as basis culture production is the massive crude oil theft for wealth generation. taking place in plain sight. According to wideRecommendation: what distinguishes Nigeria spread reports, Nigeria’s crude oil production

crashed by 2 4 .73 percent in September 2022 to 937,766 barrels per day, compared to 1.246 million barrels per day recorded over the corresponding month in 2021, the latest data from the Federal Government has shown. Quoting the NNPC CEO: “Today our production is around 1.23 million barrels per day. We have a proven production capacity of 2.49mbpd.

we can easily produce 2.49 mbpd but we cannot do it because of acts of vandals, as we speak, all our major trunk lines are shut down, which means we are not flowing crude oil in these lines”. Nigeria has lost nothing less than 120 million barrels of crude oil from January and September this year amidst revenue crisis. The level of crude oil loss in production translates to $ 12.6 billion going by crude oil production data obtained from the Nigerian Upstream Petroleum Regulator y Commission ( NUPRC).

6. Respect the Social Compact with Citizens There is zero credibility of the Government’s Commitment to Visions and Industrial policies. This speaks to State Strength and Bureaucratic Capacity. Industrialization and economic growth thrive on a strong and effective state capacity as the case of thousands of abandoned projects in Nigeria illustrate. Several years ago, the federal Government appointed a former minister of Works, General Kotangora to lead an assessment of abandoned projects. According to his report1 , at the time there were an estimated 4,000 uncompleted or abandoned projects belonging to the F ederal Government with an estimated cost of N300 billion, which would take 30 years to complete, given the execution capacity of government.

The impact of these failed projects has been clearly irreversible in terms industrial and financial losses and human resources irretrievably wasted. Almost t wo d ecades after this report, in 2011, the report of the Presidential Projects Assessment Committee ( PPAC) showed that the Federal Government had spent over N7.78 trillion on 11,886 ongoing and abandoned projects nationwide as at June 2011. The report singled out Ajaokuta Steel complex started over 30 years earlier, on the sum of US$ 4.5 billion was spent. This is a classical White Elephant, lying waste.

The ability of a government to initiate an investment project, implement and manage it,

separate countries that made rapid progress in “catching up” and those that tend to be “falling behind.”

Let me illustrate. In the 1970s, India initiated the critical steps that led to a Green Revolution and one that has made it a pharmaceutical powerhouse today.

Two key historical events, in India’s agricultural and pharmaceutical sectors, altered the country’s trajectory. In 1963, following a famine, India imported 250 tons of high- yielding Mexican dwarf wheat seed varieties to test on farms on a wide scale. Positive results led to the importation of a further 18,000 tons through the following year, which transformed its wheat production dramatically. Three harvests later, the sector had added $ 1.4 billion to the nation’s GDP and there was a subsequent rise in production of rice and other key commodities as well. Ultimately, this Green Revolution had a transformative impact on India’s economic prospects.

Then in 1972, the Indian government passed the Product Patents Act, which transformed the country’s pharmaceutical sector by enabling domestic firms to replicate patented drugs by multinational corporations. Indian pharmaceutical companies went on to dominate the global business for reverse- engineered generic medicines that sold far more cheaply than their patented counterparts did. India’s domestic pharmaceutical market was $ 42 billion in 2021 and likely to reach $ 65 billion by 2024 and further expand to reach ~$ 120- 130 billion by 2030. For the period 2021- 22, export of drugs and pharma products stood at $ 24.6 billion. Without functioning laboratories and R& D capabilities, these could not have happened.

( 7) Bridge the Trust Deficit between Government and Citizens

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 Nigerian Society of Chemical Engineers in Ilorin recently.