3 August 2014

Nigeria: The Clog in Wheels of Nigeria's Industrialisation, By Egesi, Ex-Nma Boss


Mr. John Egesi is a former director-general, National Maritime Authority (now NIMASA) and President, Nigerian Institute of Shipping (NIS). In this interview, he sheds light on how the peculiarity Nigeria shares with other sub Sahara African countries is both a weakness and a strength.

What do you perceive as dangers in running an import-dependent economy particularly as Nigerian aspires to be one of the world's leading economies?

The term 'import-dependent' is a bit problematic. Most countries are import-dependent. What sets one country apart from the other is what they use their import for. Most developed countries and thriving emerging economies add value to their import before re-exporting the finished products thus giving themselves healthy balance of payment. However, where a country consumes most of her imports without adding value to it through some process of manufacture, then there is definitely a problem. Nigeria is in the position of the latter. Nigeria has avoided bankruptcy all these years because of the great demand for her crude. But as we all know, not only has our crude a limited life span, it is also heavily under pressure from climate change realities and in competition with climate change dedicated technologies like the solar and electric car not to mention improved techniques for the extraction of shale gases in US and Europe.

Every past Nigerian government has been aware of the need to minimize our percentage of import consumption. The establishment of textile factories, vehicle assemblies, Nigerian National Shipping Line, Export Promotion Council, Nigerian Shippers Council, National Maritime Authority and banning of all sorts of imports (e.g. rice, cars, textile, etc), among others, are footprints of genuine efforts at minimizing the outflow of scarce foreign exchange while trying to replace banned items with locally produced ones. While one should commend some of the past efforts of government in trying to improve the balance of payment and job opportunities in Nigeria particularly in the institutions established to improve our foreign exchange earnings (e.g. Export Promotion Council ,NMA etc), the approach to achieving a diversified export-oriented industrialization was at best very unimaginative, crude and most ineffective. If government policies have been effective, Malaysia and Indonesia would have been flocking to Nigeria to purchase our made-in-Nigeria products instead of the other way round. But it failed and failed big!! That is why after some 50 years plus Nigeria is still an industrial toddler.

While corruption must have played a part, the major fault lies with our crude unimaginative and excessive application of protectionist policies. In fact if we had gotten our policies right it might have made some of our corruption tendencies unnecessary. If we had gotten our policies right we would also have prioritized the issue of power long ago and be forced to pay more attention to our road and rail infrastructure.

In the past 50 years our policies to develop our local industries consist mainly of the following general protection formula: To get into poorly assembled car business, we banned all cars and left the country at the mercy of two car manufacturers. To get into the textile industry (wool, cotton), we banned all forms of textile materials and abandoned the country at the mercy of printed rough low-count cotton manufacturers. We banned wheat and rice when the country had no significant wheat and rice farms.

Since most of these policies were made through some form of military fiat and does not take into account the intelligence of an average Nigerian importer, the traders cleverly import the items through the neighboring countries and bring them in through our porous borders. These countries earn the port charges from the ships and collect the duties for the items. Since the items are banned, very little option is left for the Customs, if they are lucky to see them. Most, knowing how important the items are for families (they have their own), simply look the other way to allow the items through. Who loses? The country of course! The banned items command inflationary prices while very poor quality home-made protected ones sell at prices slightly above the imported ones before they were banned. It never occurred to the government that since they started the isolationists' policies, none of the protected industries ever improved its product. They remain at their entry level like the famous made-in-India Ambassador car, whether for those who started 30-40 years ago or those being protected now!! One is not trying to raise arguments for or against protectionist trade policy, since virtually all nations in the world engage in one form of it or the other. One's position is that we should cleverly study the position of Nigeria as some smart nations like Malaysia and modern India etc. did before applying various policies. We should draw not only a list of our strengths and our weaknesses but also our peculiarities before applying those classical economics instruments which are well known to be harmful in the long run.

In my humble opinion, one of our weaknesses is that we tend to confuse arrogance for national pride and may not have consulted beyond our borders before our annual proclamation of litany of banned items. The fact that we are an independent nation does not mean that we should turn our back to advanced countries that could share their historical experiences with us. Yes, our nationals possess PhDs in economics and may even have appellations like professor, but one is sure that the true teachers amongst them will always advise that we seek a second opinion.

Another harmful weakness we have is in the field of education. Building more universities does not mean that we are improving our standard of education. The FGN should treat the issue of standards in most of our universities as a national emergency. If we are to advance industrially as a nation we must have a well trained manpower to do so. Like most post-colonial African countries, Nigeria has very little modern industrial background - say like China or India who might need a temporal protection of their old position to catch up with the new. This peculiarity which Nigeria shares with other sub Sahara African countries is both a weakness and a strength. It is a weakness in the sense that we do not have the industries but it becomes a strength when our position gives us an opportunity to choose between reinventing the wheel technology or going for the very best. Nigeria has consistently gone for the former. For example when the Federal Military Government banned the importation of lace materials (the best of which were imported from Switzerland) to protect the new local manufacturers none of the very low quality replacement came from traditional lace making industries that Nigerians were used to. They came from Asian countries that have neither the technology nor the proper art of high quality lace making.

When the government invited Peugeot of France to assemble their cars in Nigeria, I believe the government never gave them the required standard of the quality of car it wanted or they were told to produce anything that can sit between four tyres, because none of the cars produced in Nigeria can pass the quality test in France. This kind of attitude with regard to national industrialization makes one wonder whether there was clear thinking on what we hope to achieve. If the national objectives are not clear how can we know when we have achieved them?Another major strength of Nigeria is our large population which all thing considered should be a bait for attracting major companies like GE, GM, Toyota, Sony and some cell phone manufacturers to name but a few provided that we offer the companies a fair deal that will not compromise our interest like employment, dealership, training etc. to start with. The agreements should ensure that goods produced in Nigeria should not be distinguishable from those produced by the same company all over the world and if possible better.

As for the field of agriculture, the government should encourage interested companies or people to produce crops that can compete with imported ones. Subsidies or cheap loans (as the government is presently doing) are the right approach. When we produce enough competing crops we will not need to bother about high import tariff or banning because the generality of Nigerians will not need them.

As a Maritime Economist, what is your understanding of the term cabotage which to many is more of a shipping term?

Believe it or not, the first time I heard of cabotage was when I was studying the development of Air Transport in England. Most aviation experts are quite familiar with the term. Even private aircraft operators who have to fly beyond their own country are aware. It is roughly defined "as the transport of goods and passengers between two points in the same country by an aircraft registered in another country."Application of Air cabotage varies from one country to the other and violation are heavily punished. Most informed Nigerians could be forgiven for thinking that it is exclusively for the maritime industry, given the noises made when the cabotage Act was enacted in 2003.

As the president of the Nigerian institute of shipping what do you think should be done to make the maritime sector more attractive to attract growth to the economy?

One of the greatest impetus to the growth of the maritime industry is the recent commissioning of a shipbuilding yard at Okerenkoko in Delta state by the President. Anything that creates avenue for manpower improvement is good for the economy. I must however warn, that ships are built for their own sake. It is important that even at the construction stage the managers of the shipyard should be looking for business not only in Nigeria and West African sub-region but beyond Africa. With proper financial regime the yard could focus on the cabotage market where serious Nigerian operators would be granted 80percent loan after doing a down payment of 20percent. One must point out that our present business culture of one man and his briefcase will not help. There is need for serious contenders to come together to build vessels. Banks and financial institution could join in this venture. Shipping is not for jokers and pretenders.

If they delivers on its transformational objectives through the PPP principles with minimum leakages through corruption while holding its nerves in removing costly subsidies from the market price of petrol and diverting the excess funds to laying proper infrastructure for the development of a modern economy, Nigeria will be unrecognizable in 5 years.

Looking at the dynamics of trade, how in your view can the country achieve speedy clearance of goods at the ports?

I recall the financial target given by the Federal Government to the Customs. While I fully appreciate the motive of the FGN in setting income objective for the Customs, I was disappointed that a volume/tonnage objective was not included. You see the income objective will do three things. That is, Motivate the Customs to over-value items through higher classification and jacking up of tariff, concentration of Customs attention on high-value import and export and also lead to extortionist tendency and corruption

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