Last weekend, Isa Ali Pantami, Nigeria’s minister of communications and digital economy, flew to Cairo, the Egyptian capital, to meet with his counterpart Amr Talaat, Egyptian minister of communications and information technology. The objective of the visit was to cement collaboration that will strengthen the African Union.
But it could have been more. If Pantami had taken a tour to Egypt’s manufacturing clusters scattered all over Cairo he would have seen first-hand the workings of an industry that contributes over 16 percent to the GDP compared to the sector’s 8.78 percent in Nigeria.
He would have also observed the high use of technology to drive operations in the industries.
Manufactured goods make up 72 percent of total merchandise exports in Egypt where Nigeria only sees 7.8 percent from the sector, a figure that is almost 7 times below the African average at 48.9 percent, according to data from UNIDO.
Egypt’s manufacturing success lies in the ubiquitous use of technology. For some context, Egypt surpasses the African averages for use of high, medium, and low technologies in manufacturing, whereas Nigeria fails in all three.
High technology or frontier technology, which describes technology that is at the cutting edge, the most advanced technology available is a familiar playground for manufacturers in Egypt as it contributes 34 percent to the manufacturing process, higher than the 26.5 percent African average.
For low technology – a new technology that is designed to be as simple as possible or old technology – Egypt’s manufacturers integrate 30 percent as against Nigeria’s 17 percent.
Interestingly, while Egypt’s use of technology in manufacturing industries is almost evenly distributed, in Nigeria the oil and gas sector dominates. Unsurprisingly, the sector has dominated the Nigerian economy since the 1970s. The industry accounts for 66.8 percent of the total manufactured exports.
The food and beverages sector accounts for 10.6 percent of exports while transport contributes 7.4 percent.
At a conference in 2020, Fran Onyebu, chairman, Manufacturing Association of Nigeria, Apapa chapter, suggested that fear of the unknown and lack of capital was to be blamed for the poor use of technology in manufacturing processes in Nigeria.
“Manufacturers are struggling with inefficient production system because of lack of capital to automate their process as well as fear of the unknown. With African Continental Free Trade Area agreement coming, where we will be competing with the more positioned manufacturing sectors we must embrace technology or we play catch-up,” Onyebu said.
Unlike Nigeria, Egypt is not importing nearly 99 percent of its technology infrastructure and losing billions of dollars doing so. While the oldest civilisation in Africa may not have reached the global 1 percent mark on research and development (R&D) it beats Nigeria on every metric.
The country has a base in science and technology. In one benchmark, maintained by the World Economic Forum (WEF) the country’s ranking in innovation performance has climbed 13 places since 2017, ranking 92 in the world last year, and Nigeria ranked 125.
According to Egypt Vision 2030, a sustainable development strategy launched in 2016, the government is aiming to climb to rank 60 in 2030.
The Nigerian government had in the 2020 Finance Bill attempted to encourage increased use of technology in the manufacturing sector with the amendment of the Second Schedule of the Company Income Tax Act (CITA) to expand the definition of Qualifying Capital Expenditure (QCE) to include capital expenditure on the development and acquisition of software or other electronic applications. The implication, according to experts at Andersen Tax, is that capital allowance claims on software are now permissible.
“This aligns with the government’s desire to encourage investment in technology, which is a vital tool for production in the manufacturing industry, particularly with increased automation in production processes,” the experts said in a document analysing the amendment.
The experts however noted that the Financial Act 2020 does not indicate the applicable capital allowance rates for software; neither does it clarify whether or not investment allowance on qualifying assets is claimable on software-related expenses.
Beyond clarifying the Financial Act intervention, Nigeria can also learn from the symbiotic relationship that exists between Egypt’s manufacturing and education sectors. A 2016 research titled ‘Innovation Magnitude of Manufacturing Industry in Egypt with Particular Focus on SMEs found that 2.1 percent of innovative SMEs firms in Egypt depend on universities, government, and public research institutions as main sources of information to developing their product or process innovation.
