Nigeria must have greater ambition for its manufacturing sector, by integrating and rapidly moving up global and regional value chains in areas of comparative advantage by driving greater specialization and competitiveness. These it must do to compete with nations like Korea, Morocco, and Malaysia among others that earn revenue from export.
This was disclosed by the President, African Development Bank Group, Dr. Akinwumi Adesina during his lecture at the annual meeting of the Manufacturers Association of Nigeria on Tuesday.
According to Adesina, a well-developed and policy-enabled manufacturing sector, with an export orientation will spur greater innovation, industrial policies for export market development, and structural transformation of the economy.
What the AfDB boss said about the real sector
Adesina said, instead of being consumed with the conservation of foreign exchange, the focus should shift to expanding foreign exchange through enhanced export value diversification.
“Let us take the example of Vietnam, a nation at war for twenty years, from the American War, to the Second Indochina War. Despite its challenges, it quickly mimicked successful Asian countries such as South Korea by pushing into relatively complex product categories, and horizontal diversification with the processing of agricultural products.
“Vietnam’s exports in 2020 were very well diversified, with electrical machinery and equipment earning it $153 billion; machinery including computers, $23.9 billion; Footwear $23.8 billion; clothing and accessories $15.5 billion, among others. In total, Vietnam’s exports in 2020 was $348 billion.
“Malaysia achieved vertical diversification from its agricultural base, of rubber and palm oil, investing heavily in high tech sectors such as electronics. In 2020, its biggest exports by value were in electronic integrated circuits, refined petroleum oils, palm oil, vulcanized rubber and accessories, and solar power diodes or semi-conductors. Malaysia’s export values in 2020 depended on electrical machinery and equipment $86.6 billion; mineral fuels including oil $25.5 billion; machinery, including computers $20.2 billion; animal, vegetable oils, waxes $13.5 billion; and rubber and rubber articles $11.2 billion, among others. In total Malaysia’s export in 2020 was valued at $234 billion,” he said.
By contrast, he stated that Nigeria’s exports in 2020 were dominated by mineral fuels, including oil valued at $29.7 billion, which accounted for 89% of the exports. Nigeria’s total export value was a mere $33.5 billion. That dollar amount represents a -3.6% decrease since 2016 and a drop of -37.5% from 2019 to 2020. Interestingly, Nigeria’s imports were dominated by machinery, including computers, mineral fuels including oil, vehicles, electrical machinery and equipment, pharmaceuticals, plastics etc.
Lessons from Vietnam, Malaysia
Adesina stated that “By contrast, most of these imports are what Vietnam and Malaysia export in abundance. And worse, Nigeria imports mineral fuels, which it should be producing as a leading crude oil exporting nation. It exports crude, it imports refined products — a befuddling irony.
“While Nigeria’s export basket has hardly changed, Malaysia and Vietnam have used aggressive horizontal and vertical industrial manufacturing diversification to move from low-value products to high-value market products. The result is seen in the comparative wealth of the three countries.
“While export value per capita is $7,100 for Malaysia and $3,600 for Vietnam, it is only $160 for Nigeria. While Malaysia and Vietnam moved to “global manufacturing growth” creating massive wealth and jobs for themselves, Nigeria remains in a “survival” mode, still unable to substitute the imports of its petroleum products, while being one of the largest exporters of crude oil.
“African countries, including Nigeria, have had policies, templates and programs for industrialization and expanding industrial manufacturing for decades. Nigeria’s first National Development Plan emphasized industrialization. There was the National Economic Empowerment Development Strategy (NEEDS) in the 1990s and the Nigerian Industrial Revolution Plan (NIRP) in 2015. They were all good policies. But there is need to close the huge gap between policy ideas and implementation.”
What you should know
To be a manufacturer in Nigeria is not an easy business. Here, businesses do not survive based on ease of doing business, but by surmounting several constraints that limit industrial manufacturing.
Today, the major challenge facing Nigeria’s manufacturing sector is the very high cost and unreliability of electricity supply. Load shedding and the inconsistent availability of electrical power have resulted in high and uncompetitive manufacturing costs.
Most Nigerian manufacturing companies self-provide their own energy, with a high dependence on generators, diesel and heavy fuel. Their emissions contributions, make them brown industries, not green industries.
It has been estimated by the IMF that Nigeria loses $29 billion annually, 5.8% of its GDP, due to a lack of reliable power supply. The global financial institution also stated that Nigerians spend $14 billion per year on generators and fuel.