Daily Independent (Lagos)
3 August 2009
editorial
We do not, as patriots, intend to be spoil sports. Nevertheless, the Federal Government's N500 billion intervention fund, in collaboration with the Bank of Industry (BOI), to revive ailing industries in the country must be treated with sceptism. The initiative is belated coming after more than 144 textile firms have shut down and manufacturing plants have fled across the border into neighbouring West African countries.
The proposal appears like the classic instance of good money chasing after bad. Everyone knows what ails Nigeria's industrial base or what is left of the latter: a massive infrastructural deficit, debilitating interest rate regime, unstable exchange rates, excruciating scarcity of job skills at all levels, as well as an unpredictable policy terrain. Deploying a N500bn stimulus package without first tackling these debilitating factors is akin to putting the proverbial cart before the horse. It must be added that the N500bn stimuli is aside from another N100bn intervention fund being packaged by the government.
It is difficult to work out the exact methodology by which this figure was arrived at. It is to be hoped that the FG did not conjure it out of a hat. (What does N500bn covert to in foreign exchange?) There is also the inconvenient matter that there is no known budgetary provision for the package. Therefore constitutionally the government could find itself in a pickle. The entire initiative smacks sadly of a hurried, ill thought-out reaction to the country's de-industrialisation trauma. The government 's perceived need to react is understandable; however, as has been aptly observed elsewhere, the road to hell is paved with good intentions. Good intentions alone cannot and will not camouflage the absence of a well thought-out, coordinated plan for the revival, re-establishment and rebuilding of Nigeria's collapsed industrial base. The nightmarish scenario entailed is that this new fund will go the way of others before it. We may of course care to re-call the current tragi-comedy over the N200bn agricultural intervention fund. Obviously, the less said about that unfolding debacle and memento to non-strategic planning, the better.
What has to be done is pretty much straightforward. A self sustaining industrial sector can only work within the framework of macro-economic stability predicated on low interest rates. There is no evidence of any country at any point in history, from the onset of the industrial revolution, which has developed an industrial base on the basis of double digit interest rates. Frankly, there is no basis to suggest that Nigeria will buck an historical trend. In addition, fluctuating and unpredictable exchange rates will continue to be a terrible debility. We are aware of the positive role that bold, radical cuts in interest rates have had in countering the world-wide 'economic meltdown.' There are valuable lessons to be learnt from this. The first decisive step is therefore policies that will help to achieve and sustain low interest rates.
In addition, the irony of using the Bank of Industry (BOI) as an intermediary agency to facilitate the stimulus package should not be lost. In its original form as the Nigerian Industrial Development Bank (NIDB) the institution was conceived as an instrument to provide long term finance to the country's nascent industrial sector. Leaving aside the problems entailed with the now (sensibly) discarded import substitution strategy, the Structural Adjustment Programme (SAP) of the middle 1980s simply knocked the initial objective of establishing the bank aside. The result was as predictable as it was devastating. The anglo-Saxon banking model, with its emphasis on short-termism, was to lay the basis for the wholesale destruction of the manufacturing base.
The original objective must be brought back into play. BOI must be massively recapitalized. In this way, with adequate Tier-A capital base it can and should serve as the long term credit facilitator and engine room to resuscitate the nation's industries. Luckily, the new pensions policy should provide a solid instrument to provide long term capital to be intermediated for the use of industry. The absence of linkages in the economy must also be urgently addressed. The mentality involved in running a rentier state is corrosive and corruptive. It has ensured that the basic industries needed for long-term development - such as steel, petrochemicals and electric power - are absent. This must be tackled.
In addition, there is an acute lack of skills. The under investment in skill acquisition will continue to hamper the development of a self-sustaining industrial base. In the context of a globalised knowledge economy, this is absurd. Therefore, massive unprecedented investment must be made in education, skills acquisition and intellectual capital development. We note with approval the initial 'cluster' strategy initiated by a former Commerce Minister, Mr. Charles Ugwu. This strategy should be revised as a way of getting around the infrastructure deficit, in the short-term. Clusters in the six geo-political zones based on the enterprise zone model can at least provide the infrastructure - power, energy, water, roads, security - to keep industries running at a competitive rate. The policy should be revised and pursued.
Overall, it is sad to note that the new initiative does not even begin to tackle the question of de-industralisation. There is an urgent to get to the drawing board.
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