Thirty-five years ago, China was nothing on the world stage. Today, China is rubbing shoulders with the world super powers, and even challenging them in many areas of leadership. In order to achieve that status, China had transformed its economy into the world’s manufacturing center.
We believe the time has come for Nigeria to project itself as a future world superpower by taking decisions and actions necessary to transform the country economy into the manufacturing center for Africa, and beyond.
Currently, manufacturing represents 15% of Nigerian economy. Over 80% of the country’s 53 billion dollar import is made of manufactured goods. The country’s 94 billion dollar export is made of almost 0% of manufactured goods, while oil and gas represent up to 91%, complemented by other raw commodities like cocoa, cotton, etc.
The purpose of this post is to outline ten principles for a “purchase-driven industrialization” policy in Nigeria. We suggest Lagos to take the leadership of the Nigerian industrial revolution, as the state is the biggest economy of the country, and its SDP (State Development Plan) wish to move local manufacturing from 4% to 43% of GDP during the next decade (2025).
Countries like China, which had succeeded in their industrial revolution, luckily got leaders who committed themselves to goals like below:
– in 10 years, I’ll not drive a car that is not produced in this country,
– in two years, I’ll not sleep on a bed that is not entirely made here,
– in a year, I’ll not wear any cloth that is not produced here,
– in 25 years, no student from this country should be obliged to go abroad to study because our universities don’t offer the same course with quality,
– in 50 years, my country will be politically and economically affluent in the world, with my citizenship respected and admired all over the world.
With the following ten industrialization principles, we wish the Lagos state leaders to stand by similar patriotic values, and commit to them for the long term.
1) Select 10 low-tech industrial, high-volume consumption products to be manufactured locally
Here, a research team would identify the top ten, high volume consumption, products that Nigerian people and companies needs and use, which could be locally produced, requiring just low-tech skills. For example, here is the list of the top 100 products imported by Nigeria in 2014:
The target products don’t have to be on the list of the top imported products.
Another best approach is to focus on the economic sector like real estate and construction materials, and encourage the creation of a series of small to medium local manufacturing firms, which collectively would produce over 90% of the materials needed for construction and house furniture in Nigeria. For example, it’s shameful for Nigeria to continue import things like wheelbarrows, shovels, tiles, etc.
2) Identify local craftshops capable of producing the low-tech identified products
Once the top ten high-volume consumption products identified, the next best step is to identity the top 1000 craftshops in the country which have the potential to produce the identified products.
For a low tech, low manufacturing country like Nigeria, the level of its craftsmanship represents the highest level of the country real manufacturing capability. Without widespread craftsmanship in a society, there is no red bed for a technology-driven economy to emerge. Industrialization always starts from upgrading country’s craftsmanship which is then moved into semi-automated production firms, and slowly pushed to high volume, large-scale production.
Building the technological confidence in Nigerians would start with recognizing the potential of the country’s craftsmanship and use it as industrialization springboard.
3) Place big quantity orders for low-tech products from local craftshops
The industrial policy we are recommending is a “purchase-driven industrialization,” which means using the purchase power of the state to compel the country craftshops to industrialize their production. Placing big order of products to local craft shops would force them to leap into to mini-factories, and, slowly, to medium to big scale factories.
Imagine the scenario: a small crasftshop in Lagos which is used to produce only 1000 shovels a year, would receive from the Lagos construction board an order of 10,000 shovels. The small craftshop in order to fulfill the order would have to upgrade its tools, introduce automation, introduce new work procedures, and require management skills, which the owner would seek.
For the success of Lagos industrialization policy, the state should use public procurement to initialize the process. Here are three types of industrialization-friendly procurement policies the state could adopt:
– when the state looks to buy products, instead of buying “on-the-shelf” ones, they would place orders to pre-selected craftshops and require them to produce these products locally,
– the state would include in their procurement system a R&D fund with the purpose to help local craftshop access resources for pre-production and pre-commercial R&D activities. This fund would subsidize tools upgrade, training, and any other activities necessary before the craftshop would be in position to fulfill the order with satisfaction,
– the state would also actively acts as launch customer for local goods intended to be diffused more widely – role model buyer, reference account for innovative products and companies.
4) Provide hands-on on demand coaching, mentorship and training to the craftshop managers and employees
The state should fund a productivity institute which would research and develop a program to help the new industrialists succeed in their new position. This should not be carried out by speaking heads or consultants, but trusted to fellow industrialists from around the country and the world who would come to support, train, and guide.
5) Establish an industry bank or fund
This should be a state-funded bank, or a fund that would provide loans or grants which could be used for the following:
– acquisition of licenses, patents, and machine-tools,
– building demonstration prototypes,
– trial production,
– improving with existing products,
– innovation for operational and informational capabilities,
– grants for prototyping labs,
– grants for R&D and prototyping.
In summary, the fund will be limited to funding the following four categories of activities:
– building prototypes, doing trial and demonstration,
– funding entry to market of promising prototypes/seeding funds,
– innovation for operational and informational capabilities,
– support and funding for patenting, acquisition of licenses, patents, machine tools.
6) Create a manufacturing institute
Manufacturing currently makes only 4% of the Lagos state GDP. It means that a lot needs to be done in term of practical skills, training, and familiarity with industrial activities.
The state should create an institute for manufacturing R&D and training. The institute should be made of real factories and labs where managers, employees and floor supervisors are trained.
Visiting professors and practitioners would make the core staff of the institute, which should continually prove itself by the number of spinoffs and manufacturing companies they have successfuly assisted.
7) Encourage public administration and private business to use locally-manufactured goods
A list of top local purchasers would be published quarterly, and an incentive/award system would be put into place to encourage purchase of locally-manufactured goods.
8) Propaganda for local consumption, making industrialists the new role models and spread their stories
The first products manufactured by the local craftshops won’t necessary match the quality of those made by foreign firms. The state should step in here to educate the Nigerian population about the necessity of welcoming local products regardless of their current weaknesses. Clever propaganda would usually be enough to make Nigerian endorse local product either out of patriotism, pride, incentive, or necessity.
9) Encourage and sponsor export of local products
What is needed in Nigeria is likely to be needed in Congo, Senegal, Côte d’Ivoire, Angola, etc. An aggressive export strategy should be put into place as soon as a national firm would demonstrate capability for export.
An export fund should be set up to help the local manufacturer do market exploration, cover export financial risk, but also facilitate the connection with foreign buyers trough local fair, and taking part in international fairs.
10) Develop packaging industries
A product’s packaging often creates in the buyer’s mind a feeling of better quality. Our local products often lack the final touch to command high price and better quality perception. The state should help develop a packaging industry and culture in order to facilitate market adoption and export.
Fortunately, the Lagos state is awakening to above challenges, and has set ambitious goals to create during the next 10 years enough wealth to end poverty and bring widespread benefit to all the citizens of the state:
– reduce unemployment rate to 5% or less,
– bring formal paid job rate to 60% of total workforce in the state (from the current 30% rate),
– bring the manufacturing sector from 4% to 43% in the state’s GDP,
– elevate the state annual GDP growth to 7 – 10%.
To achieve those goals, an industrial revolution would be required. Nigeria has the potential to become the next China, if our leaders have enough will and commitment.
source: Silicon Africa