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A thriving capital goods sector is essential to industrialization

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It is sad to remember that after 250 years of the first industrial revolution, Nigeria cannot have a thriving capital goods sector. Nigeria finds it very challenging to build and maintain textile mills, sewing machines and other machines used in the textile industry. Interestingly, most Nigerians wear expensive clothes and enjoy looking smart and good always. The clothes we wear, and machines used in sewing gorgeous and stylishly stitched kaftan, long wrappers and blouses, including agbada/babaringa on our politicians are not being made in Nigeria, and may not be produced in the country soon.

In fact, any country of about 200 million people that prides itself as the seventh most populous country in the world with abundant mineral resources, must have a lot of capital goods in its economy. A thriving capital good sector is imperative to enhance the production of “made-in-Nigeria” goods if the current government meant business. Otherwise, the country will face foreign exchange challenges because it depends solely on imports.

Today, the world is characterized by the fourth industrial revolution. In 2015, a sharp drop in crude oil price took Nigeria’s economy into recession. This writer has heard economic experts say that it was increase in the price of crude oil in the international market that took Nigeria out of recession in the last quarter of 2017. With the price of crude oil oscillating like a pendulum in motion, and dropping like an orange, Nigeria’s dependence on crude oil for its industrialization agenda will not work. If crude oil was to be the determinant for industrialization, Nigeria would have been an industrialized country for more than 40 years. This writer is aware that to be an industrialized nation is complex but not complicated.

Industrialization, according to Wikipedia, is “the period of social and economic change that transforms a human group from an agrarian society into an industrial society, involving extensive re-organization of an economy for the purpose of manufacturing.” For the purpose of manufacturing, Nigeria needs to improve its ease of doing business ranking, develop infrastructure, ensure availability of raw materials locally, reduce management and production bottlenecks, improve industrial linkages, and provide viable investment opportunities for those willing to invest in Nigeria. Until the country is able to ensure these requirements are met and sustained with appropriate legal and regulatory frameworks, no one should be in doubt that Nigeria is not an industrialized nation. Nigeria can best be regarded as an oil producing nation with agrarian ambition. If

Capital goods sector is that sector of the economy which builds machines for all the other sectors. Karl Marx, in his book, “Capita: A Critique of Political Economy,” classified goods into two broad categories namely, producers’ goods and consumers’ goods. The producers’ goods is further subdivided into those proposed for making producers’ goods, that is steel used in making machinery or machine tools; and producers’ goods used for making consumer goods, for example, industrial sewing machines.” Simply put, all machine tools, machines, engines, equipment, plants, aviation, shipbuilding, railways, armament, telecommunications, microelectronics, biotechnology, nanotechnology, 3-D printing, robotics, and other emerging technologies have to be designed and built by the capital goods sector. The capital goods sector when developed has the greatest potential for expanding a nation’s productive capacity and also, accommodating most Nigerian unemployed graduates. The chain of businesses that would have supported a thriving capital good sector is unquantifiable.

A measure of Nigeria’s industrial backwardness can be gleaned from the fact that even to manufacture a safety pin or better still, a made-in-Nigeria pencil, will require the nation importing the capital good for these purposes. That is why the reactivation of steel projects in Nigeria becomes very relevant. Using the nation’s low foreign reserve, coupled with increasing local and domestic debts at state and federal levels, and a double digit inflation, Nigeria cannot sustain the importation of all capital goods required to drive the economy of the seventh most populous country in the world.

I remember a story one uncle “Sam” once told me in Warri in the mid-1990s. Uncle “Sam” said that in the 1980s, if you were a graduate from Warri, Sapele and Benin axes and you did not have the opportunity of working in Delta Steel Complex, then you were regarded as not having a job. Even those working in Shell Petroleum at that time were not given much recognition in the Delta Area.

The iron and steel plants such as the Delta Steel Complex, Ajaokuta Steel complex and all rolling Mills is an assembly of capital goods. All known products loved by Nigerians such as cars, motorcycles, aeroplanes, railways, ship electricity, tractors and military hardware can only be built after the appropriate capital goods have first been manufactured and deployed for use in manufacturing the intermediate and consumer goods. These are products of modern industry which must follow the capital goods sector. That is, to say, if Nigeria wished to be part of the industrialized world as chorused by those in the government then a thriving capital goods sector must first be established and not vice versa. Nigerians generally including those in the government cannot love products of modern industry without first producing the machinery and equipment that are used to produce them.

A vibrant steel sector is the starting point of any industrialization effort in any country and it is the core of economic development. Those who are in favour of the resuscitation and completion of the Ajaokuta Steel Complex are in order. But how to go about reactivating these moribund edifices is the challenge. Nigeria should privatize these steel complexes and their rolling mills. The federal government should not waste money repairing them. This writer subscribes to a public-private-partnership (PPP) in order to reactivate Nigeria’s steel industry. Nigeria must develop machine tool industry to build machines that are of economic significance to the country.

  • The article was first published in this column by BusinessDay on Mar13, 2018.

MA Johnson

Johnson is an author and a retired naval engineer who has passion for African development and good governance

 

2 Comments
  1. […] A thriving capital goods sector is essential to industrialization Tue, 26 Mar 2019 It is sad to remember that after 250 years of the first industrial revolution, Nigeria cannot have a thriving capital goods sector. Nigeria finds it very challenging to build and maintain textile mills, sewing machines and other machines used in the textile industry. Interestingly, most Nigerians wear expensive clothes and enjoy looking smart and good [] read more… […]

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