According to the president of the Africa Development Bank Group, Dr. Akinwumi Adesina, Nigeria’s future prosperity can only be ensured by assisting the private sector in releasing wealth that will benefit the populace.
Speaking at the BusinessDay CEO Forum in Lagos over the weekend, he said the country’s industrial revolution would be facilitated by revitalizing the country’s ailing manufacturing sector and addressing its ongoing power issues.
Adesina lamented that, despite her potential, Nigeria still lags behind other modern economies in her speech on the topic of “The Day the Lion Roared! Making Nigeria a Global Industrial and Economic Giant.”.
He presented a compelling argument for the economy’s rapid and methodical growth through initiatives spearheaded by the private sector.
Nigeria, according to Adesina, needs to understand that overvaluing the naira by merely using foreign exchange reserves as support is not a long-term strategy.
He argued that greater export-oriented manufacturing was necessary to “expand the supply and availability of forex” rather than solely relying on “managing a demand for forex” to grow Nigeria’s economy.
He claimed that such a move would free Nigeria from its dependence on the export of crude oil as its sole source of foreign exchange and the instability brought on by changes in the price of oil around the world.
He applauded President Bola Tinubu for making the courageous decision to remove the distortions in the various foreign exchange windows, which, in his opinion, would help reverse the trend of FDI inflows into Nigeria.
In sharp contrast to the dynamic and quick growth of manufacturing in Asian nations like Singapore, Malaysia, India, and China, he said: “While the share of manufacturing in Nigeria’s Gross Domestic Product (GDP) has hovered around seven percent for decades.
He claimed that while manufacturing only contributes 3% of Nigeria’s total export revenue, it accounts for 50% of imports.
“Instead of taking a proactive approach to raising the proportion of manufactured goods in its total export revenue, Nigeria focuses on an unsustainable model of import substitution. Although important, import substitution has a very constrained outlook. Instead of trying to increase export markets and diversify values in order to make money, it is primarily concerned with surviving. As a result, the manufacturing industry is unable to compete on a global scale or even develop to its full potential. It is instead restricted to a “survival mode,” not a “global manufacturing growth mode,” he said.
Adesina promoted Nigeria’s transition toward integration into and ascent through regional and global value chains in areas of comparative advantage, specialization, and competitiveness.
“A well-developed and policy-enabled manufacturing sector, with export orientation, will spur greater innovation, accelerate business- and investment-friendly industrial policies to drive export market development and structural transformations of the economy,” he said.
For instance, Malaysia’s exports were valued at $234 billion, while Nigeria’s exports were valued at $29.7 billion, whereas Vietnam earned $348 billion in 2020 from exports and export-led growth.
Only $33.5 billion worth of Nigeria’s exports were made overall, he continued.
He claimed that for many years, Nigeria and other African nations had policies, models, and programs in place for industrialization and the expansion of industrial manufacturing.
The gap between policy ideas and implementation, however, is very wide.
“Today, factory capacity utilization is around 40%, which is below the desired 70%. The fact is that businesses are moving to other nearby countries where there is more macroeconomic stability, more supportive enabling environments, and a better ease of doing business due to the numerous challenges the industrial manufacturing sector is facing. Being a manufacturer in Nigeria is a difficult endeavor. You succeed by overcoming a number of obstacles that restrict industrial manufacturing, not by the ease with which you conduct business, the man said.
The very high cost and unstable supply of electricity, according to Adesina, are the main problems the industry in Nigeria is facing.
“Load shedding and unstable electricity have made manufacturing costs extremely high and uncompetitive. By relying on expensive generators, diesel, and heavy fuel oil, the majority of manufacturing companies supply their own energy. They are not green industries, but brown because of the pollution they emit, he claimed.
Nigeria’s industries won’t become competitive, he claimed, unless it takes decisive action to address its energy reliability and deficiency.
“There should be significant investments made in gas to supply energy and ensure stable base load power for industries, hydropower resources, sizable solar arrays, direct power preference to industries, and support for industrial mini grids that concentrate power in industrial zones. Additionally, we should create utilities that are more effective, minimizing technical and non-technical losses in the systems for power generation, transmission, and distribution, the official added.
According to Adesina, Nigeria’s industrial growth is hampered by a lackluster transportation, port, and logistical infrastructure. “In Ghana, exporting 100 tons of goods only costs $4,000, but in Nigeria, it costs $35,000. In Nigeria, roads are used for about 90% of passenger and freight transportation, but only 18% of those roads are paved. ”.
According to him, Nigeria has a significant opportunity to lead an industrial manufacturing pathway that is export-driven given the Africa Continental Free Trade Area’s $3 point 3 trillion GDP.
“By utilizing duty-free exports within the zone, Nigeria can unleash its industrial manufacturing capabilities. To achieve this, it is necessary to take decisive action to address the infrastructure and logistics bottlenecks that limit industrial capacity and competitiveness, establish and enforce quality, grade, and product standards, ensure that industries have access to land, and offer investment relations management to draw in and keep investors while facilitating trade, the official said.
He added that digital manufacturing would be the way of the future. “More than $16 trillion is thought to be the value of the global digital economy. The deployment of smart machines, manufacturing platforms, and systems, connecting machines and people, and using machine learning and artificial intelligence to improve speed and efficiencies of complex manufacturing processes are all aspects of how the Internet of Things will increase labor productivity in manufacturing, according to the expert.
In order to address the issues, Adesina suggested that Nigeria create new zones called Skills Enhancement Zones, which would be partnered with industries and solely focused on enhancing the workforce’s skill level in Nigeria.
“Students can be encouraged to gain exposure to the skills provided by various industries.
They will develop their horizontal and vertical skills across various industries as well as in these particular industries.
This will lessen the skill gap in the labor market that exists across a number of industries and enable input from private sector businesses into university and college curricula, he said.
Nigeria must also make agriculture a significant sector for wealth creation. It is time to implement audacious policy changes to promote the structural transformation of agriculture, with infrastructure and spatial economic policies that will help transform Nigeria’s rural economies from being areas of economic misery to new areas of economic prosperity.
The unpredictability and availability of foreign exchange, according to him, is a persistently significant obstacle for Nigerian manufacturers.
“It also resulted in a significant decrease in Nigeria’s inflow of foreign direct investment. The largest decline on the continent, according to the World Investment Report (2023), was seen in Nigeria’s foreign direct investment inflows, which plunged from $3 point 3 billion in 2021 to a negative $187 million in 2022.
