Deindustrialization through policy inconsistency
Since the early 1980s when Nigeria attempted to join the league of steel producing countries, much has not been achieved in the nation’s quest for industrialization. Bearing in mind, the importance of steel across industries, Nigerian governments have spoken for several years in unison that Nigeria must be the twentieth most industrialized nation in the world by the year 2020. But three years to the due date, Nigeria is still struggling to Industrialize in the midst of policy inconsistency. Even with agriculture, there is no doubt that Nigeria is yet to be recognized as an agrarian society. This is due to low total production in agriculture as we have not fully mechanized farming, and apply appropriate technology in food production.
Experts have theoretically stressed that the developmental impact of transferred technology in all sectors of a nation’s economy is likely to be constrained by some set of societal variables. Society and its various sub-structures, values and motivation systems delimit not only the institutionalization of foreign technology, but also impede general economic development. The society’s socio-economic factors that impede technology acquisition at the macroeconomic level include inadequate infrastructure and poor absorptive capacity, provision of unskilled manpower, socio-political barrier, cultural barrier, and market imperfections amongst others. These factors will form the theme of another article in this column in weeks ahead.
However, if one carefully studies and analyze economic activities in most industrialized nations, you will observe that they all bear a resemblance to each other in several respects. This is largely due to the fact that despite observable differences between countries- values, culture, history, religion, population, resource endowments, etcetera, the techno-economic development of industrialized nations is driven by the same “motive force.” It is worth stressing here that trade was not the “motive force” behind economic development as some scholars would want us to believe. The strategic determinants of the “motive force” behind economic development include human and natural resources, culture, education, industrial development strategy and historical background, amongst others.
Nigeria’s extreme technological backwardness spiced with insincerity of governments and policy inconsistency is perhaps responsible for firm’s inability to design and build power stations, transmit sufficient electricity, build refineries, and efficiently run the four refineries that were built abroad, as well as develop a functional rail system. That is why the level of unemployment is high, the oil industry is foreign dependent, while the agricultural sector is moribund despite the nation’s abundant mineral resources. As I write, all electrical transformers and associated gears are imported from abroad with huge foreign exchange implications to the nation. Many local and foreign investors who would have loved to invest in Nigeria to design and manufacture electrical transformers, as well as other sophisticated production equipment, are not encouraged to invest because of policy flip flop.
It is a known fact that steel plants and rolling mills produce critical inputs for the machine tool branch and the machine building industry which are necessary but remain at the periphery of a capital goods sector. Nigeria is recognized as one of the nations that have a challenge to be an industrialized nation due largely to inconsistent policies. You will recall that the steel industry in Nigeria has been prostrate for several years as most of the steel plants in the country were either moribund or operating under designed capacity.
Recent developments in the country gives an impression that government does not understand that policy inconsistency can contribute to reindustrialising a nation, while discouraging private investors from investing in the steel and rolling mill sectors of the nation’s economy. Let’s consider an example of policy inconsistency in resuscitating the country’s cold rolling mills. Several policy statements have been made under the Nigerian Industrial Revolution Plan, and manufacturers have gone to banks to borrow substantial funds to be part of the increased capacity policy in the cold rolling mill projects.
In fact, the immediate past minister of trade, Olusegun Aganga, believes that the cold rolling mill “is considered a vibrant steel sector which generates economic activities in downstream industries, creates job opportunities, and acquisition of technical skills, and helps in the transfer of technology, and provision of machine parts and tools. This project is being executed with 100 percent locally-sourced raw materials.” With this brilliant objective, the sector hasn’t significantly achieved any of its lofty goals stated by the former minister. Why? It is due to lack of understanding of the development process, particularly the complex interactions of strategic determinants which constitute the “motive force.”
About two years ago, the federal government placed a high tariff of about 45 percent on imported cold roll products in order to encourage local manufacturing of cold roll steel products. As at February 2015, Nigeria had 21 functional steel mills. Currently, the Federal Government according to reports, has come up with ECOWAS tariff which has reduced the duties on imported cold roll from 45 to 15 percent. Thus, the industry is no more protected as it is cheaper to import than to manufacture cold rolls in Nigeria. May be, the federal government forgot that there was a policy placing 45 percent tariff on imported cold rolls in order to encourage local production. Some manufacturers are now asking: “what is the survival strategy for those investors who took loans from banks to set up cold rolling mills in Nigeria?”
Government must develop a culture of discussing with those who have invested their hard-earned money into any sector of the economy before policies are reversed. As along as government officials and policy makers don’t meet with Organized Private Sector (OPS) to work out policies that would be in the interest of both parties, there would always be policy flip flop by government. The capital outlay of establishing production lines by firms is huge, and most times the foreign exchange component is high for the importation of equipment and raw materials. The local manufacturers are complaining, saying “the FG has a responsibility to assist them to survive, while banks should make loans assessable to genuine manufacturers and find ways of reducing interest rates on loans.”
MA Johnson