Leaders from the private and public sectors who converged on Lagos Thursday to chart a course to growth and development in Nigeria have outlined measures that must be taken for the country to become an economic giant.
The 14th edition of the BusinessDay CEO Forum brought together decision-makers in the country’s private and public sectors to discuss emerging opportunities and prevailing challenges they encounter in running their organisations.
Akinwumi Adesina, president of African Development Bank Group, who delivered the keynote lecture titled ‘The Day the Lion Roared: Making Nigeria a global industrial and economic giant’, said the forum happened at a very important time, with a new government, and “the palpable yearnings of Nigerians for a prosperous future”.
“And that prosperous future can only be assured by strongly supporting the private sector to unlock wealth that will lift everyone in Nigeria,” he said.
“The number of Nigerians living in extreme poverty is increasing at an alarming rate,” he said, citing the World Poverty Clock for 2023 that put the number of Nigerians living in extreme poverty at 71 million.
Adesina said the key to unleashing “Nigeria’s lionhood is engineering an industrial revolution”.
He said while the share of manufacturing in Nigeria’s GDP has hovered around 7 percent for decades, the nation has not been able to extricate itself from “a comatose industrial manufacturing sector”.
He described the performance of the manufacturing sector in the past five years as poor, saying the sector declined by -1.5 percent, -4.3 percent and -0.2 percent between 2015 and 2017.
“This is in sharp contrast to the dynamic and rapid performance of manufacturing in Asian countries, such as Singapore, Malaysia, India, and China,” Adesina said.
He said while the Asian countries focused on export of manufactured products, Nigeria’s approach has been on import substitution.
He said: “The manufacturing sector of Nigeria represents only 3 percent of the total revenue from exports, but accounts for 50 percent of imports in the country. Instead of being forward-looking in expanding the share of manufactured goods in its total export revenue, Nigeria focuses on an unsustainable model of import substitution.
“Import substitution, while important, is a very restrictive vision. It is focused primarily on survival, instead of looking to create wealth through greater export markets and value diversification. The result is a manufacturing sector that cannot even develop to reach its full potential nor compete globally.”
Adesina said a well-developed and policy-enabled manufacturing sector, with export orientation, would spur greater innovation, accelerate business and investment-friendly industrial policies to drive export market development and structural transformations of the economy.
He highlighted the need for Nigeria to its cue from Vietnam and Malaysia.
“While Nigeria’s export basket has hardly changed, Malaysia and Vietnam have used aggressive horizontal and vertical industrial manufacturing diversification to move from low-value products to high-value market products,” he said. “The result is seen in the comparative wealth of the three countries. While export value per capita is $7,100 for Malaysia and $3,600 for Vietnam, it is only $160 for Nigeria.”
According to him, Nigeria’s exports are still dominated by mineral fuels, including oil, while Vietnam and Malaysia’s are mostly machinery including computers, mineral fuels including oil, vehicles, electrical machinery and equipment, pharmaceuticals, plastics, among others.
“While Malaysia and Vietnam moved to ‘global manufacturing growth’ creating massive wealth and jobs for themselves, Nigeria remains in a ‘survival’ mode, still unable to substitute the imports of its petroleum products, while being one of the largest exporters of crude oil,” Adesina said.
The major challenge facing the industry in Nigeria, according to him, is the very high cost and unreliability of supply of electricity. “Load shedding and unreliable power have made the cost of manufacturing extremely high and uncompetitive”.
He said the country can unlock its industrial manufacturing capacities by “decisively tackling infrastructure and logistics bottlenecks that hamper industrial capacity and competitiveness; establishing and enforcing quality, grades, and product standards; ensuring the access of industries to land and providing investment relations management to attract and maintain investors and trade facilitation”.
He said the unpredictability and unavailability of foreign exchange, which he described as “a perennial binding constraint facing manufacturers”, has triggered a major decline in foreign direct investment inflows into Nigeria.
“To grow Nigeria’s economy in a transformational way, there is an urgent need to move away from solely depending on ‘managing a demand for forex’ to ‘expanding the supply and availability of forex’ through greater export-oriented manufacturing,” Adesina said.
He said the country must also make agriculture a major wealth-creating sector. It is time to take bold policy measures to drive the structural transformation of agriculture, with infrastructure and spatial economic policies that will help turn the rural economies of Nigeria away from being zones of economic misery to new zones of economic prosperity.
Ralph Mupita, group president and CEO of MTN, spoke on the need to build a digital economy that would drive inclusion and growth across all sectors.
He said education, health, agriculture, e-commerce and financial and marketplace services would be key digitisation focus sectors.
“Nigeria is forecasted to become the 10th largest economy in the world by 2050 and the 5th largest by 2075. Building a sustainable digital economy is key for this to be achieved,” Mupita said.
He said Nigeria has made significant improvements in digital penetration, with 170 million mobile users, 55 percent internet penetration, with 37 active mobile-broadband and 0.03 fixed broadband subscriptions per 100 inhabitants.
“Digital economy is a sector with strong opportunities in Nigeria with an iGDP of 6 percent, which is expected to double by 2050 to reach $145 billion and 12 percent (vs. 4 to 15 percent globally). There is significant headroom for Nigeria’s growth given Africa still accounts for only about 1 percent of the global digital economy compared to 3.6 percent in Europe, 22 percent in China, 27 percent in Asia, and 68 percent in the United States,” he added.
The MTN boss said about $12 billion-$15 billion of infrastructure investment would be needed in the next five years to drive growth of Nigeria’s digital economy.
He said: “Digital skills development is a significant area for Nigeria to advance development of the digital economy. Digital literacy and affordability remain key barriers to mobile internet adoption and use within Nigeria even though the number of smartphone users has increased.
“A conducive policy and regulatory environment is critical for the building of a sustainable digital economy for Nigeria’s future.”
Godwin Obaseki, the governor of Edo State, said Nigeria’s biggest challenge “is a dysfunctional education system”.
“Twenty-five years ago, we changed our educational policy, which was a 6-3-3-4 system but we did not align that change to the realities,” he said.
He said Edo State has set up parameters to play its part in closing the 50 percent education gap in the country.
“For us, it’s about people, focusing on developing talent and our emphasis over the last six years is to strengthen foundational learning,” he added.
Osagie Okunbor, country chairman of Shell Companies in Nigeria and managing director Shell Petroleum Development Company, described Nigeria as energy-rich, citing fossil fuels, solar, wind and hydro.
He said oil and gas would remain a key component of the energy mix for the foreseeable future.
“Making Nigeria a stronger, more compelling investment case is therefore non-negotiable and requires the resolution of the lingering challenges and further building on the Petroleum Industry Act (PIA),” he said.
Read also: 71% of serving CEOs expect Nigeria’s economic growth – Adeyemi
Okunbor said evolving an integrated energy strategy that includes the strategic and efficient development and exploitation of the country’s various energy sources would be a game changer.
He stressed the need to resolve security and crude theft challenges, saying a fresh approach to security and community engagement would be required.
He said PIA implementation and fiscal challenges should be tackled. “Fix unattractive fiscal incentives for deepwater and non-associated gas projects. Fix regulatory overlaps, multiple levies and the overall ease of doing business,” he added.
On project delivery challenges, he highlighted the complexity and duration of the contracting process, among others.
“The funding regime is improving. Crucial that this continues,” Okunbor said.
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