Hopes and doubts

How do we keep industries alive with idle machines?

Covid-19 has taken its pound of flesh out of the global economy. The IMF has projected a global GDP contraction of 4.4 percent. But The Economist in its Dec 8, 2020 edition writes that the pandemic could give way to an era of rapid “productivity growth.” The prediction for the recovery of the global economy was based on the fact that businesses have adopted new processes and technologies during the pandemic and there are signs they may pay off.

The magazine equally stated that the adoption of technology by businesses could lead to job loss but such firm-level productivity trend could increase economic growth. The IMF sees the global economy rebounding to 5.2 percent GDP growth in 2021. This gives a ray of hope. In the magazine, it was argued that as COVID-19 recedes, technological integration wont just spur the recovery- it would yield a more efficient economy in countries that transform their activities through new ways of doing things.

The prediction notwithstanding, forty countries including the US, South Africa, UK, Nigeria and Canada are currently in recession in the year 2020. China, a country with nearly 20 percent of the world’s population, and Bangladesh with about 250 million people are likely to avoid recession in 2020. Chile, China and Sweden did not report a recession despite the pandemic, according to reports.

It is not today that Nigeria’s economy will be in recession. COVID-19 must not be blamed entirely for Nigeria’s current economic woes. In fact, Nigeria’s economy was in recession in 2016. Nigeria’s current recession is projected to have increased the number of the poor by about 5 million in 2020. Given the negative impact of the pandemic, the recovery of Nigeria’s economy and its sustainability will depend on the response of the government and private sector to various policies and implementation.

But after scanning the real sector of Nigeria’s economy, Odinaka Anudu’s report in BusinessDay 02 Nov 2020 titled: “5 things FG must do to turn Nigeria into industrial economy,” is very relevant here. First he mentioned infrastructure as an essential requirement but argued that “it is impossible to talk about infrastructure without discussing power. He drew our attention to the fact that regulation, insecurity and policy inconsistencies among others are major issues hurting manufacturing in Nigeria. To galvanize Anudu’s treatise, the Financial Times edition of Nov 02, 2020 published an article titled, “Has Nigeria missed the manufacturing bandwagon?” it was aptly stated in the article that “eradicating poverty depends on domestic production, but poor infrastructure is hampering Nigeria.”

Read also: Global economy to suffer worst blow since the 1930s, warns IMF

It is a pity that the country does not encourage manufacturing and perhaps, has lost its vision for industrialization. A consultant once told me that when he conducted a survey of the nation’s manufacturing sector, most production plants lie idle across the length and breadth of the country. What could be the cause of idle machines in most firms? Scarcity of raw materials and foreign exchange, and lack of spare parts, among other problems are responsible for idle machines in most Nigerian firms. Idle machines are now casualties of private-sector led industrialization in Nigeria.

With rising local sourcing of raw material, manufacturers need locally fabricated machines from some of our industrial research institutes according to Anudu in his BusinessDay report of Dec 7, 2020. And I ask: Why has the country’s industrial research institutes not influenced significantly the production of locally fabricated machines in Nigeria despite the acknowledged role of science and technology in economic growth? The answer to this question is complex to explain, a science and technology policy scholar informed me.

You will recall that for many years, Nigeria has continued to depend on foreign technology with all its inappropriateness. And it also, depends on imported raw materials for her industrial activities in spite of abundance of mineral, agricultural and forest resources in the country. The situation was not so worrying when there was adequate foreign exchange earning especially from the sale of crude oil to support importation.

However, with rapid decline in revenue from sale of crude oil for more than three decades and consequential scarcity of foreign exchange for the importation of industrial raw materials and intermediate goods, most manufacturing firms are now producing significantly below installed capacity while many firms have actually closed down. This is one of the reasons responsible for high unemployment.

Nwolisa in his opinion article published by BusinessDay Dec 9, 2020 edition, purged himself of necessary arguments on currency devaluation in a piece titled Rethinking Devaluation. In his view, “Despite the systemic Naira devaluation in the last 40 years, Nigerians are yet to experience the goodies currency devaluation advocates promised.” There are two reasons given: “Nigeria currently has no other significant export product except crude oil; and out of ten containers that come into Nigeria laden, only two or three are taken out with exports.” So, when will Nigeria diversify its economy significantly bearing in mind oil price volatility? “Until Nigeria pursue vigorously its industrialization agenda if any, and ensures that its “market is domiciled by locally produced goods, we are not going to see any gain in devaluation of the national currency.”

Policy inconsistency is a huge problem in our country. The land borders are closed. There are promises by the FG that the land borders will reopen soon. Is the closure of land borders really the problem, or one of the problems behind Nigeria’s economic challenges at this moment?

In fact, some state officials at the highest level of government have said on many occasions that the closure of border will provide security and keep the industries alive. We have less than three weeks to the commencement of the African Continental Free Trade Area (AfCFTA). Our ports in Lagos are not functioning optimally. Port operators find it difficult to either enter or leave the ports at Apapa.

In most countries, before policy statements are released, technocrats define the problems, collect data, analyze available data in a context applicable to the problem and create a set of possible solutions to the problem. Thereafter, recommendations will be proffered to policy decision makers, which in this instance is the government on the basis of a systematic analysis of available data. Did we think through our policy before closing land borders? Was there a cost-benefit analysis conducted on land border closure? Some analysts have argued that Nigerians cannot afford rice despite billions of Naira intervention in the past five years.

When one considers all the issues begging for answers, there are doubts about appreciable economic growth in 2021. But I know there is an opportunity in every crisis. There are hopes and doubts in the mind of most Nigerians. Nigerians want to know what it will take to build a better economy. State governments need to increase transparency and clarity so as to allow investing private sectors to determine what state projects are of interest to them to invest in. I hope this improves the economy in the days ahead. Thank you.