Leo Stan Ekeh
23 April 2008
Lagos — The Industrial age is slowly but inexorably slipping by giving way to the information age with its attendant knowledge economy. Nigeria is not yet among the fully industrialised nations.
We have pockets of manufacturing companies here and there but they are fully dependent imported components. Most nations started that way, but came of age later. They now design and manufacture most components needed locally. We are not yet there, but we can get there provided the enabling environment is provided.
This paper seeks to clarify what government can and should do to support and encourage investors to pursue actions related to the achievement of self sufficiency in the manufacture of ICT tools. It does not pretend to offer a comprehensive overview of all that is needed to achieve the set goals. In keeping with the theme of the conference, the main focus is on the role of government and other related sectors of the economy in providing an enabling environment for improved content development by investors in the ICT industry. This will also encourage investment in research and development efforts geared toward indigenous input into the industry. Government is not the only actor involved; clearly all sectors of the society need to be engaged in order to make progress toward propelling Nigeria into the industrial age. But government has a primary role in structuring and influencing the contributions of the private sectors. The paper begins with a brief introduction on some conceptual issues. Next, the paper examines the factors that affect content development in the ICT industry. This is followed by a discussion of how the negative impacts of such factors can be ameliorated and the roles government and other sectors of the economy can play. The paper closes with a brief recommendation of several implementation issues, and some concluding remarks.Keyword Analysis: Evaluation of Conceptual Issues:In evaluating the issues involved in this paper, we need to get certain issues clarified in terms of usage of words. Else we may have clouded or distorted perception of the issues involved.
Local versus Indigenous Input (content) This is a word that has been misused to the detriment of overall development of indigenous content. Some years back when car and truck assembly plants were still functional in this country, the then national assembly tasked the plants on the need to improve on the input of local content of the vehicles. I remember clearly a particular company touting that they have achieved over 30% local content input. The company then went to list the items supplied locally as cables, car seats, car paints, etc. The company in a sense is right since they sourced those items locally. But the question that needs to be addressed is whether the components were indigenously manufactured in Nigeria ? If the government buys a car assembled in Nigeria , can it rightly say it has bought an indigenously manufactured car?So we must distinguish between local input (content) and indigenous input.
Content Development-
This can be viewed as import substitution when some of the intermediate components that go into the manufacture of a product are now indigenously produced using local resources and technology. Let me clarify this. Most casings of laptop computers and mobile phones are made from the by-product of petrochemical refineries. Nigeria is a major crude oil producing and "refiningâ-ù country, yet these components are still imported. If the downstream sector of the petroleum industry is developed casing and other similar component will produced indigenously.
Enabling Environment-There are many numerous definitions of the enabling environment and they range from all encompassing to narrow. For the purpose of this paper, I shall look at enabling environment as a set of interrelated conditions - such as legal, bureaucratic, fiscal, informational, political, and cultural - that impact on the capacity of investors to engage in investment processes in a sustained, effective and profitable manner.
Introduction:
We were made to understand that after World War II, products from Japan were ridiculed and denigrated by consumers for its presumed sub-standard quality. British made products were preferred. He said they use to derogatorily call it Japanese product: Fabrique au Japan . But today, Japanese products are very much in demand because it is believed to be of the highest quality. If in doubt, take a look through your window and count the number of Japanese cars out there; or do an audit of the household and consumer electronics in your house. If the Japanese government did not put in place favourable policies and create enabling environment that is favourable to investment, the country putative steps into manufacturing could have fizzled out.
The above scenario was recreated with Taiwanese, Korean and Singaporean made goods. Today, these countries are industrial powers, producing products that are competing favourably with, (and even surpassing in quality), products from North America and Europe . China , India , Thailand , Malaysia , Indonesia , Philippines , etc, are not far behind. The Asian Tigers are no longer coming; they are at our door steps!
Let's move half a world away from the Asian Tigers. Nigeria's Defence Industry Corporation, (DIC) was set up in the early 60s. I understand the Brazilian government following in the footsteps of Nigeria , set up her own equivalent 6 months after Nigeria . Today, the Brazilian own is indigenously manufacturing military hardware such as airplanes, warships, missiles, etc. In fact in the early 80s, many of us present here were eye witnesses to the berthing of Brazilian manufactured submarine at Marina when her Navy paid a visit to Nigeria . Compare this to the feat done by our own DIC. Last year it was announced that Nigerian DIC has started the assembling of AK47 rifles which they ingeniously named OBJ-007. Talk of comparing an airplane with bicycle!
Whither Nigeria? Where lies the problem? The ICT industry is unique in that we are now in the Information Age with attendant dependence on the Internet for most transactions. Information Societies are emerging changing the ways business is conducted. Under this present scenario, the use of ICT product is pervasive affecting all sectors of a country. Anything that affects the ICT industry affects the entire human society. Any business that refuses to adapt becomes history. This being so, the manufacturers and producers of this business and productivity tool (ICT tool) need to be encouraged to make these tools available to the vast majority of the populace at affordable rate in order to empower the new e-work force. For MDG to be achieved, as many citizens as possible need to be empowered to function optimally in the new Information Society, if Nigeria is to achieve her desire of being among the top 20 economies in the world by the year 2020).
What factors impact Content Development?
From my experience, Nigeria is not an investor friendly country. What is prodding some of us on is the faith that things may get better; that generation unborn will be spared the anomaly that we have experienced; and finally to make a difference in this generation. Business practices in global markets are changing because of international competition and Nigeria has to key into it or risk remaining in the back waters of development. The Nigerian private sector, which consists of small, medium, and micro-sized enterprises (SMMEs) and the informal sector, is widely regarded as a potential engine of growth in the information economy. Government favourable policies will provide opportunities for competent ones to increase their markets and trading potential well beyond the Nigerian borders. This will in turn provide capital that will aid research into indigenous inputs and content development.
Factors that Affect Content Development-
Businesses thrive when products and services are produced and finished products marketed profitably. This ensures stock movement, as more goods will be produced and hence healthy return on investment. When the volume of sales is large, then more profit could be made, and some of it ploughed back to research. The product of research into indigenous content, affects content development. Thus any factor that limits the production and profitable marketing of finished goods will impact content development not only in ICT industry but also in other industries. Some of these factors are very apparent while some are opaque. I shall try to list some of them here.
Inconsistent Policy: A policy an investor considers favourable for particular industry may lead him to raise capital and invest resources into bringing such industry to fruition after a comprehensive feasibility studies. And in Nigeria , this could be expensive as he has to also invest in so many ancillary sectors that are not directly related to the industry. Any policy reversal may put all in the investment in jeopardy. Leading to great loss. Such an investor will need a lot of convincing to ever venture into any project again in the country.
Lack of Continuity:
We are all aware of the reversal of some policies of the previous administration. Though we applaud some of them, especially were some of the transactions were done fraudulently in the first place; but a wrong signal has been sent to both local and foreign investors - your investment in this country may not be safe.
Infrastructure Development:
The decay in the infrastructure in the country is mind bugling. We have to sink our own borehole, generate our own power, bear the brunt of impassable roads with the attendant accelerated wear and tear to vehicles, provide our own security, etc. The list is enormous. Under such conditions our products cannot compete in pricing with products from countries where infrastructure is better.
Staffing: We are yet to attain e-workforce hence skills of new employees need to be updated as our institutions do not produce products with requisite skills compatible with the knowledge economy. Considerable resource has to be ploughed into equipping them to be functional.Finance: Most financial institutions in Nigeria encourage trade financing instead of investing in the productive sector of the economy " hence they tend toward financing LPOs. Manufacturing industries have long gestation period and thus require long term financing which is rarely available.Multiple Taxation: Multiple taxation from all the tiers of government is stifling return on investment and scaring potential investors. The case of MR. BIGGS and Lagos State Government LAASA is a case in point. Collection of advertisement and Signage fees is constitutionally vested on the Local Governments, but LASG Assembly in her wisdom last year passed a new law vesting it on LAASA's" presto the fee became convoluted and quadrupled.Dumping: Dumping of subsidised and therefore cheap foreign ICT tools impacts the local ICT industry negatively as a level playing field is lacking.Lack of Transparency in Government: Nigeria is a largely a government driven economy, so any hiccup in government affects the ICT industry. A case in point is the ongoing tussle over the over the signing into law the 2008 budget. The country is in a state of economic standstill. This negatively affects all sectors of the economy. Also transparency and accountability in all dealings with government reduces the cost of doing business.
Negative Effects of Such Factors-Labour: No need rehashing that the industry needs skilled force. Educational institutions as presently represented cannot produce the manpower needed in the knowledge economy. So resources are expended to skill these staff. We at Zinox are contributing our own quota in this direction. Zinox:Has entered into partnership with Kansas State University in the US to streamline the curricula of two departments in the University of Lagos in line with what obtains in the knowledge economy. The partnership also involves the updating of lecturers skills so that they positively impact their students.
Has under the Computerise Nigeria Initiative, provided ICT tools to teachers and lecturers of institutions of learning at subsidised prices and favourable payment terms.Under the Computerise Nigeria Initiative, the Zinox-Student Computer Ownership Project (Z-Scope) project was conceived to catch the work force young. Under it students are encouraged to own and use computers by providing them with subsidised ICT tools at favourable payment terms.Has also under the Computerise Nigeria Initiative been impacting the already employed workforce with by also extending ownership of ICT tools at subsidised rates and favourable payment terms.We are also encouraging professional associations like NBA, NMA, ICAN, etc to encourage their members to own ICT systems under the terms explained above.All these initiatives of Zinox involves much expenditure of resources, but the most saddening thing is that we are not encouraged by people defaulting after the ionitial deposit. Marketing: Pricing of our goods is affected by the volatility of the foreign exchange. So prices cannot be maintained. Credit Policy: Nigerians are yet to come to terms with credit purchase. The Central Bank of Nigeria is coming up with many policies to encourage the use of credit cards. The unfortunate thing is that even in this early stage many people are already defaulting in meeting their payment obligations. Infrastructure: These have already been highlighted earlier, but permit me to share some experience. Freighting is an essential part of goods distribution and contributes to marketing. In November 2007, Zinox lost a whole truck conveying goods to Yola through fire. This incident is avoidable where the roads in order. Airlines in Nigeria do not operate cargo flights to some airports in Nigeria , hence insist on cargos being accompanied with the attendant increase in cost. Purchasing Power: The amount of disposable income available to majority of Nigerians is so low due to wide spread unemployment and poverty. This affects the ownership of this all important ICT tool.
Local Content: The strangle hold the foreign companies have on the upstream sector of the oil industry and the profit they are scooping out of this country, is not making them develop the downstream sector. And most local investors do not have the capacity to go into the sector. Thus certain products from petrochemical plants that would have impacted the development of local content are still being imported. In the ICT industry, only cardboard cartons are produced locally. Power: Power generation, transmission and distribution in Nigeria right now are tottering in miserable obscurity or virtually non-existent. There is no need flogging a dying horse. For solution we should look at cost effective form of generation - nuclear energy.Discrimination against Nigerian made Goods: Nigerian psyche has been steeped in the notion that foreign products are preferable even when there alternative high quality and cheaper local products. Even the government officials for some selfish or pecuniary reason also think this way. Bulk Purchasers: People saddled with bulk purchase of products for their organisations prefer buying from abroad (even where local and equally good substitutes are available), thereby depleting our foreign currency because of the kick back they get in hard currency.Security: The agencies saddled with security of lives and properties in the country appear helpless to the prevailing state of insecurity in the country.
What role can government and other relevant agencies play?Most of these factors that negatively impact industries are within the purview of government to remedy. Having said that, we believe that Government needs to:Improve policy, legal, and regulatory frameworks; Build institutional capacity across sectors and at various levels; Seek out and respond to industry needs and preferences;Establish and maintain a range of oversight, accountability, and feedback mechanisms; and Mobilize and allocate public resources and investments.
Conclusions and Recommendations-We want to conclude that the ICT industry in its present embryo stage needs government partnership. Partnership between government and the private sector engenders trust. Industries have recently seen a significant increase in various forms of partnering. The intent of these relationships is to improve competitive advantage through collaboration and the best use of talents, working toward a common goal. This commitment forms the foundation for an environment of trust and cooperation that benefits everyone. The Japanese model supervised by the Ministry of International Trade immediately after World War II wrought the economic miracle that catapulted Japan into one of the most industrialised countries in the world today. Government should have a look at how that model can be adapted to suit our environment. We are not asking to be spoon fed, we only want a level playing field to enable us compete.
Based on the foregoing, we would like to see the following recommendations implemented, Policy consistency, Pioneer status incentives,Investment in infrastructure provision and maintenance, human capital development vis a vis empowering educational institutions to be ambient to current global trends. Long term Capital provision at rates that compete with international financial institutions,Welfare of citizens including social safety net and Legislation against dumping.
-Ekeh, Chairman. Zinox Technologies Ltd presented the paper at ATCON's Stakeholders Summit on Nigerian Content Development in the ICT Sector, recently, at Golden Gate Paradise Restaurant, Ikoyi, Lagos.)
Be the first to Write a Comment!
Copyright © 2008 This Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
