Nigeria can learn a number of lessons from India’s industrial journey. The Asian country is world’s seventh-largest economy by nominal growth domestic product (GDP) and the third-largest by purchasing power parity. Poverty rate is 22 percent, but unemployment rate is 6 percent. The country has since overtaken China as world’s fastest growing economy. All these achievements happened because the country followed a particular industrial path. In the late 90s, the Indian government flagged off economic policy reforms in the business, manufacturing and financial services industries, targeted at boosting economic growth.
The reform was encoded in a model referred to as Liberalisation, Privatisation and Globalisation (LPG). The major aim of the LPG model was to remove government regulations hurting the growth of investments in the country. The government opened up economy for investments by removing unnecessary subsidies, entrenching market policies that would allow the private sector to invest and make money.
State-owned assets were privatised and handed to competent companies with financial and technical capabilities.
Companies were assisted to export to other markets to earn foreign exchange.
With the reforms, the Indian economy grew the overall amount of overseas investment to $5.3 billion from a microscopic $132 million in four years.
Today, the country is ranked the second highest destination for investment in the world, according to data from the United Nations Conference on Trade and Development (UNCTAD).
India started by leveraging its areas of comparative and competitive advantage. India had always been known for silks and cotton. In fact, there was vast exchange of Indian silks with the western countries for spices in the era of barter system. Hence the country knew it had a comparative advantage in fabrics and textiles.
In 2000, the India government came up with the National Textile Policy (NTP), targeted at manufacturing textiles for global export.
The policy was also aimed at injecting competition through the liberalisation of stringent controls and encouragement of Foreign Direct Investment in the sector.
The Ministry of Agriculture and the Ministry of Textiles were given responsibilities to ensure that cotton and textiles exported reached global standards.
Multiple taxes were removed and incentives were given to investors. Less than two decades after the policy, the industry has made a lot of impacts already on the economy.
The country’s textiles industry is estimated at $108 billion, contributing five per cent to Gross Domestic Product (GDP) and 14 per cent to overall Index of Industrial Production (IIP), according to India Brand Equity Foundation.
The industry attracted Foreign Direct Investment (FDI) valued at $2.41 billion between April 2000 and December 2016, creating 100 million direct and indirect jobs with over 350 textile mills working as against Nigeria’s three or four.
There is cheap labour in India and it is easier for companies to get electricity as evidenced by the World Bank Doing Business index, which places the country at 26th position in Getting Electricity as against Nigeria’s 180 (out of 189).
The Indian Government set up over 20 textiles parks where companies enjoyed economies of scale and brought 52 textile mills through nine subsidiary companies under the functional National Textile Corporation Ltd, the single largest Textile Central Public Sector Enterprise with headquarters at New Delhi.
The Government of India provides assistance for creation of infrastructure in the parks to the extent of 40 per cent with a limit up to $ 6 million as well as subsidies for manufacturers of textile machinery.
There is equally a 100 percent FDI allowed in the textile sector under the automatic route.
“What we need is the enabling environment. We cannot compete with the level of smuggling and counterfeiting going on now. We used to have about 127 textile firms in Nigeria but that has come down to two or three now,” said Grace Adereti, president of the Nigerian Textile Manufacturers Association (NTMA) in Lagos at a Made-in-Nigeria stakeholders’ meeting in Lagos in 2018.
More so, India’s pharmaceutical industry holds lessons for Nigeria. A work done by Shewalkar, Mukesh and Padmakar of Dr. Babasaheb Ambedkar Marathwada University, India, shows that the Industrial Policy Resolution of 1956 classified industries in the country into three categories based on their priorities. ‘Schedule A’ industries were reserved for the public sector while ‘Schedule B’ was made up of industries where the public sector was expected to play a leading role and the private sector a supplementary one. Also, ‘Schedule C’ comprised firms whose future development was left to the private initiatives. The pharmaceutical industry fell under Schedule B.
Private industry was invited to invest, though strictly regulated through industrial licensing. In pursuit of these policies, the government of India established five public sector companies in India of which two played very important roles—Hindustan Antibiotics Ltd.(HAL)and Indian Drugs and Pharmaceuticals Ltd(IDPL) in 1954 and 1961 respectively. IDPL was established in with technical assistance from USSR, and HAL with the technical assistance of World Health Organisation (WHO)and United Nations International Children’s Emergency Fund (UNICEF). The two firms played a major role in building up technical competence in the industry as well in establishing a strong bulk drug industry in the country
These two companies adapted technologies supplied by their sponsors to meet Indian requirements.
Subsidies and infrastructural facilities were given by the government to enable them expand.
As a result, a large number of new products in cardiovascular, neuro, psycho-somatic, gastrorenal, antifungal and anti-inflammatory segments came up .The sector started more exports of drugs to several markets
Many more organisations were able to get USFDA and WHO certification that would enable them to compete better at the global market.
By 2010, 70 percent of the country’s demand for bulk medicines was fulfilled by Indian pharmaceutical companies.
Due to an adoption of new technologies and modern scientific approach, the Indian pharmaceutical sector was ranked 3rd rank in the world in terms of volume and 14th in terms of value.
A PriceWaterhouseCooper’s(PWC) report estimated that the value of the sector would reach $74 billion by 2020.
“After 1991, however, the licensing of industries was abolished and movement of international capital was liberalised,” said Shikha Chauhan and Indra Giri of Project Guru, India.
In Nigeria, the textile industry is almost comatose while the pharmaceutical industry is shrinking. Only three or four firms are doing real textile production in Nigeria today.
In the pharma industry, Evans Medical Plc has gone under, having been taken over by the defunct Skye Bank and the tier-one First Bank in 2017.
Swiss Pharma sold its assets to Biogaran-Servier in March 2017. Those familiar with the company before its exit said the sale to the French company was based on financial crisis.
In 2014, companies like Emzor, GSK, and a number of others earned $7.708 million from export of medicines to the African market, according to the International Trade Centre (ITC). Four years later, however, the companies made only $708,000. Naira has weakened from N199/$ in 2014 to N360/$ in 2018 (80.9 percent), but export earnings fell by a whopping 91 percent.
“Local companies in the pharmaceutical industry are struggling to remain in business and some have gone into extinction. And to meet the shortfall in demand, import is increasing,” Gbolahan Ologunro, a research analyst at Lagos-based CSL Stockbrokers, said.
Drug imports into Nigeria stood at $513.9 million in 2018, as against $397.8 million in 2014 and $492 million in 2016.
Okey Akpa, chief executive of SKG Pharma Limited, recently said that Nigeria can adopt smart manufacturing to protect the pharmaceutical industry, especially in areas of medicines where Nigeria already has enough production capacity to satisfy market needs.
“This industry is yet to be competitive. If it’s not competitive, then it is set to face challenges when you throw it open to initiatives such as the African Continental Free Trade Area (AfCFTA), which is going to enlarge the market a lot more,”, said in an interview with BusinessDay in Lagos.
He said the biggest issues in the sector are absence of petrochemical industry and poor infrastructure.
“We need to have a petrochemical industry that will substitute what we are presently importing. It is a sector with a big potential, but this is largely unrealised because of lack of petrochemical industry,” he said.
Ike Ibeabuchi, CEO of MD Services Limited, a manufacturing and services firm, said Nigeria has a lot to learn from India.
“We have a lot to learn from India, China and Bangladesh,” he said.
“Imagine that Bangladesh, as poor as they are, earn over $30 billion from export of fabrics and textiles, something we do not earn from all non-oil exports put together. We need to ask, what are they doing right that we can copy? We need to ask, why are we still relying on crude, when we can go back to palm oil, cocoa and other cash crops that are in high demand today?”
ODINAKA ANUDU, MICHAEL ANI & GBEMI FAMINU
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
