Low Industrialisation as Price for Nigeria’s Policy Inconsistencies

Experts and operators of the Nigerian industrial sector went done memory lane to recall how policy inconsistencies and poor industrial strategy combined to consign the country on the list of lowly industrialised and poverty ridden nations, writes Dike Onwuamaeze

The immediate past President of the Lagos Chamber of Commerce (LCCI), Mrs. Toki Mabogunje, on December 2 made a scathing remark on the waning confidence of international and local investors on the Nigerian economy. Mabogunje stated that the country recorded an aggregate of $2.78 billion capital importation in the first half of 2021.

A breakdown of this figure showed that only $232.74 million, representing 8.4 per cent of the total capital importation during the period under review, came via foreign direct investments (FDIs) while $1.53 billion, representing 54.8 per cent, came via portfolio investments and $1.03 billion came through other investments channels.

She laid the blame for the declining FDI on the doorsteps of government. “The low FDI component of aggregate capital inflows reflects weak investors’ confidence in the Nigerian economy, particularly the real sector on the back of policy inconsistencies, harsh operating environment, FX uncertainties, and inadequate public infrastructures among others,” Mabogunje said.

Policy inconsistency has remained the bane of industrial development in the country and was recently the subject matter that was discussed by some veterans of the Nigerian industrial sector and economic policy gurus in an event that was orgnised by the Founder of the Centre for Value in Leadership (CVL), Professor Pat Utomi.

Utomi stated that inconsistent industrial policies and strategies, especially import substitution, have retarded Nigeria’s industrial growth and ensured that Asian economies that were at par with the country in the 1960s have today grown to become industrialised exported oriented economies while Nigeria has remained import dependent. For instance, the country’s import bill grew from $36 billion to $47 billion between 2018 and 2019. Today, Nigeria has one of world’s highest unemployment and poverty rates.

The veterans were a Former Managing Director of Nigeria Breweries Plc, Mr. Felix Ohiwerei; The President of the Pharmaceutical Society of Nigeria and founding Managing Director of Neimeth International Pharmaceuticals Plc, Mr. Sam Ohuabunwa; former Minister of National Planning and a Professor of Economics at the University of Nigeria, Professor Osita M. Ogbu, and former Executive Director of Raw Materials Research and Development Council (RMRDC), Dr. Remi Aribisala.

Ohiwerei recalled how government’s ban on the importation of malted barley jolted the brewery industry. Following the ban, breweries were given two years to comply by using locally sourced maize and sorghum to make their drinks.

He added rolled out a backward integration policy that ordered breweries to grow the maize and sorghum by themselves.

Ohiwerei said that he took the policy as a challenge to reformate and brew Gulder, Star and Maltina with maize and sorghum that had the same taste as the ones brewed with malted barley without the consumers noticing the difference.

He said: “We succeeded in using local raw materials to produce our brands and everything was going well. Then, suddenly somebody rushed into my office one afternoon and said ‘have you heard?’ I said: ‘heard what?’ That the government has unbanned malted bailey without any discussion with us in the industry. We just heard that announcement that came with a bang.

“At the same time the government said that we will go into backward integration, which meant we had to produce the basic raw materials. We were forced into having a big maize farm in Makurdi. We told government that we are not farmers but will like to help farmers to produce the right quantity in the correct quality. But the government said no, insisting on its backward integration policy. What happened? We were producing maize at a price much higher than the local people were doing.

“We were forced into a situation that we didn’t understand, which we didn’t have any expertise and the experiment did not work. Then we went to encourage the out growers and that scheme worked very well.
“We got to the stage where we had reformulated with the sorghum and maize at a great cost as we have to retool our brewery. But the government, without any consultation, changed the policy and unbanned the importation of barley.

“That was not a good experience. It did not even give us the chance to reap the benefits of the changes we brought in the industry. But rather than capitilise on that and made it something for the world to copy the government changed the policy. The change did not only affect us, it also affected local farmers and everybody else.

“I do not understand how after encouraging local people to go into farming, there was a policy summersault.”
Ohuabunwa also recounted similar experience that took place in 1990 when he was the managing director of Pfizer Nigeria Plc. Those were the days when General Ibrahim Babangida was the country’s military Head of State and his Minister of Health was Professor Olikoye Ransome Kuti.

He said that Kuti, out of his own personal fancies and without proper consultations, decided that any pharmaceutical product that was not on the ‘essential drug list’ was fake and, therefore, illegitimate. The essential drugs as designated by the World Health Organisation contained specific number of medicines that were commonly used and affect the generality of the people, which the public sector health institutions must always have for the good of the people.

“But one man working with uninformed principal caused a decree to be issued to the effect that ‘if you did not have products on essential drug list your drugs were fake.’ I was running a multi-national company then, Pfizer, and most of our products were branded. We had moved from making essential products to making innovative products that treat illness at different levels.

“So all of a sudden we didn’t have business anymore. Our business was gone, likewise those of many multinationals that have invested in research and products for treating present and emergent diseases. Pharmaceutical industry lives on innovation.

“We tried to bring a change but Kuti wouldn’t budge until Mr. Julius Adelusi-Adeluyi replaced him at the ministry and changed that policy within six months.

“But before this many multinationals has made decisions to pull out from Nigeria, reduce their investments and stop employment. This was the genesis of the decline of the pharmaceutical industry that reduced Nigeria to importing finished goods from China and India,” Ohuabunwa said.

He stated that Nigeria needed people who understand the interaction between investment and wealth creation.
“We do not have the political leadership that understands the relationship between input and output; between supply and distribution; relationship between production and wealth creation and; relationship between providing and attracting investment and enthroning a regime of law and order.

“We needed a well thought stable policy environment and all those kind of things that will attract people to make investments in our environment. It is investment that brings resources; resources bring businesses; businesses create jobs; jobs create wealth and wealth drives away poverty. The truth is that we are going round in a circle, sometimes one step forward and at another time many steps backward,” he said.

Utomi used one act by Babangida on the day he commissioned the Bendel Feed and Flour Mill Limited in 1986 to illustrate how damning a shallow government policy could be on businesses.

He said: “In 1986, President Babangida was traveling to commission the Bendel Feed and Flour Mills and on his way he used his own pencil to add a line to speech he was given to read. That line said that from January 1987 the importation of wheat into the country would be banned.

“The original import substitution policy said that instead of importing flour, we can import wheat and mill it to produce flour. But suddenly in August 1986 there was an announcement that banned importation of wheat by January 1987. This, in a sense, was a death sentence on the factory he was commissioning.”

Sadly, successive governments in the country have been going round the circle banning and unbanning the import of wheat. The last ban was placed few years ago by the current administration of President Muhammed Buhari, which it later lifted but still threatening to end its importation by 2023. That is.
Ugwu has identified the absence of a sense of nationhood as the root cause of policy inconsistencies that have stymied the Nigeria’s industrial and economic growth.

The professor of Economics posited that the tragedy of Nigeria was that it relapsed from knowledge independence to knowledge dependence; from planning to lack of planning and from an industrial policy to no industrial policy.

Ugwu said: “Let us be honest. We don’t know of any nation that has industrialised without certain degrees of protection for their emerging industrial sector with consistent industrial policy that is lead from the top (government).

“So, we moved from strategy to no strategy, which came because we drank the idea that the free market can allocate and direct resources to the most efficient sector. But that is not correct. In every nation that has developed the state has directed in a very strong way the investment pattern, the FDIs flow and the policies that guided them.

But not only did we weaken the state, we abandoned planning as a whole. The point is that there is no way a nation as backward as we are can have a strategy of complete open market.

“Even when we have a strategy, we keep moving up and down. Recently we wanted to encourage the manufacture of locally made cars. But within a few years we reduced import tariffs from 35 per cent to 10 per cent. We keep moving up down because we cannot take the pains. There has to be plan that is followed to the letter. Malaysia is now in its 13th plan or so.

“But what we have here is a political leadership that does not know that industrialisation does not just happen but is caused to happen. We can only diversify by doing and not by saying. You take steps to diversify and stay the course when it appears to be painful because you know where you are going and that the outcome is real.
“Policies must be based on knowledge and facts and must be in the interest of the nation. Government must insist on national interest. We have a country but barely a nation. Building requires effort. Nigeria must create a cohesive nation to make progress.”