• Friday, March 01, 2024
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BusinessDay

Reduce the cost of production to generate millions of jobs

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Many paradoxes at the heart of Nigeria confound. Their resolution would lead to significant progress in the country and deliver superior value and benefits to its many stakeholders. One of the most confounding is the matter of the cost of production versus the inherent value available for extraction from Nigeria and her resources.

Nigeria today grows more cassava than any other country in the world. Nigeria also grows more maize as well as yams than any other nation. Same Nigeria still imports starch, a by-product of these crops and tubers.

Why is this so? Barriers to value-added production are the main inhibitors to the extraction of higher value. The chief impediment is the high cost of the factors of production in the country. Name the element, and it cost five to ten times more in Nigeria than anywhere else in the world.
Poor infrastructure is number one. We speak of road, rail and waterways networks that are in poor shape or inexistent. In the Information Age now moving to the age of Artificial Intelligence, power is a given in any severe economy. Power drives all the technologies and machinery of today. Energy drives the processes and systems of modern production. Nigeria suffers a drought of power.

The cost of production in Nigeria is high due to poor infrastructure, insufficient power and lack of transportation access. Manufacturers spend excessive amounts to generate energy, build water systems and road networks to their factories, yet pay official and unofficial taxes and levies.

Something must give. Nigeria must now explore all the available options for increasing the stock of infrastructure, starting with power. The Nigerian Electricity Regulatory Commission has unveiled a few changes to their laws allowing greater private sector participation in power generation. They need to do more, and then to create awareness about the regulations so more groups, communities and investors take them up. Power is the oxygen of the modern world without which no one can breathe. We are sub-optimising in Nigeria because of the absence of power.

States and the Federal Government must think drastic measures to tackle the extreme situation of the poor state of roads and other infrastructures such as rail and waterways. The Infrastructure Concession and Regulatory Commission should do more than wait for prospects who seek to concession facilities. How about creating awareness about what is available for concession? How about moving for more items to be placed on the agenda including major intra- and inter-state roads?

Why are the railways still a federal preserve in this age? Time is now to consider allowing more significant participation in rail infrastructure provision and running by players other than the federal government. Consider the state governments and consortia of private firms. Unbundle. Efficient and effective rail transportation would enable more cost-effective movement of industrial goods and agricultural products. It would open and link more towns in our regions.

News of interest in water transportation in Lagos by better organised private sector operators with deep pockets is heartening. It would make a difference. Nigeria needs more creativity to bring down costs and employ more people.

There are many ways, and we applaud those working on doing so already. Optimise value chain.In the food supply chain, manufacturers could empower another company (farmer) to grow certain crops needed for production. Example, barley, which is necessary for brewing, is no longer imported because Nigerian Breweries (NB) empowered Psaltry International to grow raw materials (cassava, etc.) needed for brewing.

Finance is imperative. The development finance institutions should review their roles and structure. They certainly would benefit the economy and society better given for the tasks ahead. Bank of Industry, Bank of Agriculture and the Development Bank of Nigeria all need an infusion of more funds and expertise.

There is also the matter of sundry levies, dues, taxes and all manner of extortionate charges at federal and local government levels. They deter investors. They add so much to the production costs of goods and services.

Stakeholders of all types and descriptions must come together to ensure that we reduce the cost of production in Nigeria. It is not only strategic but imperative for sustainability. Costs must come down to ensure we can produce optimally.