The last three articles on the series have clearly shown that Nigerian cannot continue to do the same thing over and over and expect a different result. They have dwelt upon some of the development errats that have stymied Nigeria’s industrial prosperity. Issues such as inappropriate application of funds, protectionism and policy flip-flops have been discussed and tapped as factors that have caged Africa’s most populous nation’s industrialisation.
This week’s piece centres on two other critical issues that have been clogs in the wheel of Nigeria’s industrial progress. This article focuses on the wrong use of waivers and lack of a clear understanding of value chains as critical challenges that have dogged the country’s economy over time.
Let’s start by looking at waivers. All countries in the world use import waivers to encourage local manufacturers and make them competitive. In an article entitled ‘Economics of Waivers in Nigeria,’ Nkechi Anyadike and Okechukwu Eme spelt out the objectives of import waivers to include boosting local industries, making essential inputs or goods available in the short-term and generating employment.
Several countries have deployed waivers to achieve these objectives. India has waived import duties on open cell panel, which is the most important input used in the production of televisions. The component accounts for almost 70 percent of the entire production cost of TV manufacturers. Before the coronavirus invasion, Indian government had planned to extend this waiver to support Samsung and LG that are producing TVs in India and exporting to countries around the world. Also, Malaysia, in September 2015, announced five to 30 percent import duty exemptions on 90 raw materials used by manufacturers in the country. Import waivers are indubitably tools for supporting local investors to ensure they are competitive in both local and international markets.
Nigeria has also deployed import waivers in pursuit of its development targets. Perhaps, one of the most prominent of all the import waivers in Nigeria was that of the cement industry during the time of President Olusegun Obasanjo. The method of deploying the waivers was novel. The Obasanjo administration in 2005/2006 announced intentions to grant all investors who set up local cement plants import waivers up to a certain quantity and year. This meant that local investors in the cement industry were allowed to import certain quantities of cement without paying duties up to a certain year. The policy produced Dangote Cement. It yielded fruit owing to discipline in the monitoring process and sincerity of the investors. The success of the cement industry today could be attributed partly to this innovative waiver process.
However, this same policy was tried in 2012/2013 by the Goodluck Jonathan’s administration on rice production, where local investors were given limited quotas and the maximum period in which they could import rice. However, this generated a lot of controversies as the then Minister of Agriculture and now president of the African Development Bank, Akinwunmi Adesina, accused the beneficiary companies, particularly Asian firms in Nigeria, of sabotaging the policy.
More than N20 billion fine was imposed on about seven companies for breaching the waiver agreement, with the Customs fighting to recover the money. No one knows whether the money was eventually paid by the companies or not, but this singular event destroyed a policy that had earlier worked on cement.
It must be admitted that some Nigerian businesses, including foreign companies and their accomplices in the civil service, have always connived to abuse waivers. Perhaps, one sector where import waivers were handsomely abused was in the steel sector with respect to cold rolled coils. A group was granted import waivers to bring in raw materials for making cold-rolled steel during the Jonathan’s administration. This group was to produce cold-rolled steel and supply to another group of local manufacturers who would use it directly to produce drums and other aluminium-related products. The upstream group that was granted waivers, according to allegations, resorted to importing full-fledged cold-rolled steel and supplying to the downstream group—contrary to the agreement earlier reached. Of course, such would not be possible without accomplices in the Federal Ministry of Industry, Trade and Investment and the Customs. In fact, there were allegations that waivers granted to manufacturers and local investors were sold to full-fledged portfolio importers who then dubiously used them to bring all sort of illegal goods into the country. In some instances in the past, waivers were provided to one company to the detriment of other players in the same industry. This is why the Manufacturers Association of Nigeria (MAN) during the Obasanjo, Yar’Adua and Jonathan’s administrations canvassed that import waivers should be given to all players in an industry, rather than one or two players connected to the powers-that-be. More so, there were allegations that some businesspeople got certificates from government officials and presented them to the Customs as waivers. The Customs eventually honoured same.
Hence waivers have proved to work when the players are few—perhaps one to three. This, perhaps, ensures easy monitoring. But it is also dangerous as it can lead to monopoly, duopoly or oligopoly.
Apart from waivers, Nigeria’s industrialisation framework is also devoid of proper value chain intellectus. This may sound simplistic but it is one of the biggest reasons why Nigeria is making little headway on its industrial drive. In the cassava value chain, for example, anyone interested in cassava flour needs to consider the quality of seed, inputs, the farmer, the labour, harvesting, processing, logistics, marketing, sales, and industries, among others. Any time a government looks at cassava as a mere product or an end in itself, it will end up repeating past mistakes. This accounts for why the Cassava Bread Policy failed. The policy was made with the mere belief that Nigeria was (and is still) world’s largest producer of the tuber. Less attention was paid to the fact that for bakers to use cassava flour, they must get high quality cassava flour, which should first of all start with the quality of seed planted by the farmer. But mere lip service was paid to research institutes, which should convey high quality seeds to the farmer. In all countries of the world, research institutes are funded with billions of dollars. In the United States and China, universities are well-funded and they serve as research institutes where farmers can get such high quality seeds. But this is not so in Africa’s most populous country, where lawmakers are better funded than universities and research institutes. Nigeria may not have billions of dollars like the US and China, but how it is allocating its scarce resources is questionable and regressive.
“We have a total of 13,000,000 staff members and 90 percent of the yearly allocation goes into salaries and emoluments. Only 10 percent goes into research. This is why the institutes have not been able to improve farmers’ output,” Baba Yusuf Abubakar, former executive secretary of the Nigerian Agricultural Research Council (ARCN), told BusinessDay in February this year.
“We cannot conduct effective research with such stipends. Research plays a pivotal role in transforming the agricultural sector and that is why we must take it very seriously,” Abubakar further said.
Apart from research institutes, think about other issues in our case crop, which is cassava. To produce cassava bread, farmers must process cassava into flour. Only very few farmers can afford good processing equipment for flour, added to the fact that the process is technical. How many Nigerian smallholder cassava farmers can afford equipment that costs above N5 million to N10 million? Assuming that big-ticket processors are involved in cassava processing, will they be guaranteed quality cassava crops? Will they even make profits from their ventures, considering the cost of energy to power their machines?
Also, consider the logistics. Should bakers move their trucks to the farm or will farmers hire trucks to move the cassava to the bakery? These are many questions which are often unanswered. Unfortunately, they end up hurting industrial policies in Nigeria. In other countries of the world, cassava is used to produce beer. In tiny Mozanbique, cassava is used to produce Impala beer by SABMiller, which is also in Nigeria. Diageo is also producing beer from cassava. Why then is it difficult for brewers to produce beer from cassava, especially when Nigeria is world’s largest cassava producer? The simple answer has been highlighted, and except issues around the value chain are tackled with policies, Nigeria’s industrialisation dream may continue to drag.
