Thursday, January 05, 2017 06:44 PM / Olufemi Awoyemi / @TheAnalystNG
The debate started a long way back, from the early indigenization policy shift by the government through the decision to deploy dual rates and up through the self-sufficiency and diversification commentaries we had and still engage in. through it all, the narrative was shaped not by a deliberate strategic imperative to define a national economic plan but as a response to one economic, financial or monetary challenge thus robbing the nation of an early mover advantage.
With 2016 delivering the perfect storm (an event where a rare combination of circumstances aggravated a situation drastically in such a way as to make an economic management issue became the tipping point for a sovereign that was already dealing with security challenges, fiscal mismanagement of dwindling resources, lopsided development on account of wealth inequality, leadership inertia, failing institutions, weakening infrastructures and a glaring disconnect between its growing population and its productivity), 2017 is a great opportunity for a policy reset.
While the policy reset has not materialized, a consensus has been built around the need to adopt a #MakeInNigeria policy to deal with the foreign exchange supply problem as a short term measure which should hopefully provide the pillar upon which a #MadeInNigeria policy is marshaled out to address long term sustainable productivity challenge; one that would be reflected in our fiscal and monetary policy as a strategic national strategy.
This process will be challenging given the obvious competitiveness challenge Nigeria projects through its “factors of production” capacity challenge at this time.
Equally daunting is the cultural, investment and viability gaps between industry and the financial markets to create and build value; leaving a weakened government battling with resource diversification issues acerbated by slowing foreign exchange revenue/reserves, growing foreign currency obligations to correspondent banks, importers and service commitments, increased cost of borrowing, slowed revenue earnings from taxation from a recession inflicted economy, and increased recurrent expenditure from a complex governance structure hit by the strain from social dislocations from security flashpoints, job losses, agitations and rising unemployment.
These realities motivated the organized private sector through the Nigerian Economic Summit Group (NESG) to bring together parties from both the public and private sector at its 22nd Annual summit to discuss on how we can adopt #MadeInNigeria as a wholesome plan to recalibrate the economic structure of the country; especially given the signals sent by the President of the Federal Republic, Muhammed Buhari and the National Assembly, led by Senate President Bukola Saraki.
This consensus on a “rallying cry” offered the nation an uncommon opportunity to do the following:
1. Appreciate that we needed oil money to diversify from oil, within the limitations on price and production;
2. Properly appreciate the gestation/harvest period involved and thus use the MTEF to lay the foundation for the changes required in a fundamental restructuring of the economy;
3. Articulate an economic plan that would form the basis for Fiscal Policy changes that would be backed by legislation (including tax reforms in both the administration and indicative rates);
4. Develop a sense of urgency around the “ease of doing business” issues that experts, the executive and legislators (with support and buy-in from international development agencies) had worked on; converting these into laws to replace obsolete, bureaucratic and self-limiting laws; and
5. Consolidate on ancillary steps taken in the areas of corruption, security and investor confidence by encouraging a “means tested” support for the monetary authorities to take decisions that makes the foreign exchange market and interest rates work for the benefit of the #MadeInNigeria policy.
Needless to add, there would be the need for a comprehensive review of trade agreements within the ECOWAS region, Sub-Saharan Economy, Europe, Asia and the Americas based on our competitive economic interests and advantage(s) parity.
This done, we should be in a situation to attract the much needed funding to bridge not just shortfalls in the economy but investments in energy, rail, sea ports, airports, security, arts & entertainment, tourism, education, healthcare, science & technology, innovation and value-added agriculture investments needed to open the economy and enhance its productivity.
Linkage between Make in Nigeria and Made in Nigeria
At the very base level, “Made in Nigeria” is a label, a tag suggesting home-made goods i.e. goods made where most of the input are cultivated, processed and available in Nigeria with minimal import components. It is logically we start from this premise and quickly ramp up the buy-in, not from a reaction mindset but a strategic response mindset that allows the leadership at all levels – the presidency, national assembly, governors and councilors to recognize the imperative of corporate communication with the citizens and stakeholders; an endeavor that would be made easier with the availability of an unambiguous economic plan in the mould of Saudi Arabia’s 2030 plan (See below - a less than 15 year plan that accommodates transitions, learning curve and fundamental fiscal policy changes).
On the other hand, “Make in Nigeria” reflects a campaign or pay-off line that seeks to deliver an acculturation of ethos that emphasize the opportunities available for both local and foreign investors of the opportunities to leverage the competitiveness our resources and industry offer. It is a direct invitation, with a promise of mouth-watery incentives, to foreign investors and partners to set up manufacturing sets/base in Nigeria and make Nigeria their production hub.
At the heart of the initiative, #MakeInNigeria is a more direct message that we are open for business as a sovereign and that those 5 steps identified above have been addressed. More importantly, it clarifies why our #MadeInNigeria approach, the first step in the process; should not be seen as protectionism or isolationism but a critical bridge to address both the double digit unemployment gap (currently above 13%) and Equity Capital gap needed to boost the industrial and manufacturing base of the country, whilst lowering its foreign currency component (demand) to essentials which its resources can fund. It is, for financially discerning entities, the clearest attempt at leveraging the balance sheet of Nigeria in a very prudent manner.
As mentioned above, part of the comprehensive adoption of this strategic approach will require an overhaul of our subsidy instruments in key sectors of comparative economic advantages and national security interests. The trade-off that would take place may not be as smooth as would have been under a different circumstance but; it should ultimately be time bound to allow for reviews based on metrics that are hinged on the strategic economic plan.
Ultimately, in adopting a #MakeInNigeria economic strategic plan, Nigeria is investing in an end game with a win-win outcome; with both the formal and informal private sectors of the economy; which will boost its capital formation base that ensures its financial systems and institutions can grow organically.
The less emphasized point in this engagement is the opportunity it offers for institution building as the premise of such a strategic plan is the role definition it delivers of the government by way of ensuring less dislocations and managed disruptions to current structures but rather builds upon it in such a way that Governments at all levels appreciate that in staying in their roles as facilitators and regulators, they are able to free themselves to focus on innovation and development through the management of sovereign and institutional issues and not meddlesomeness in deciding winners and losers in this new entrepreneurial environment created.
Truth is, government in its bid to appeal to populism ends up crowding out the private sector unintentionally; a trait and attribute that provides the enabling environment for corruption and corrupt practices.
Finally, it must be said that government in adopting the #MadeInNigeria economic model must realize that it is VOTING FOR GROWTH. This decision requires a harmonization of fiscal policy with monetary policy (over a short time as a signaling effect) as indicated in Point 5 above. We would have to make clear choices around the original financial trilemma the central bank is confronted with and the vote will be to take commensurate decisions that support growth plans, not inflation targeting or exchange rate control.
The resulting “quadrilemma” confronting the economy therefore is one that points 1 – 5 above sought to address by describing the heavy lifting necessary to deliver economic recovery and political congruence that should prepare this administration and subsequent ones for an inclusive growth based economy which allows Nigeria to fulfill its potentials.
#MakeInNigeria is therefore a needed response to reverse Nigeria’s current economic situation. It however goes beyond tokenism, symbolism and clichés; it is an actual socio-economic model we can develop fully and leverage on for sovereign prosperity.
This is the Change Nigeria needs and deserves…..in a nutshell.
RECAP: For a Successful Make in Nigeria Economic Strategy, These Elements are Necessary
Make-in-India emerged after its initiation of the programme in 2015 as the top destination globally for foreign direct investment, surpassing the United States of America as well as the People's Republic of China. In 2015, India received US$63 billion in FDI. Current challenges only offers teachable moments about pitfalls in governance and not an indictment of the scheme.
Make it in Great Britain campaign, which aims to transform outdated views of UK manufacturing and dispel the myth that Britain ‘doesn’t make anything anymore’ has delivered growth. Indeed, following Brexit, UK manufacturing activity grew at the fastest pace in more than two years in September, as the weak pound helped the sector to cement its strongest quarter of growth in 2016, according to a closely watched survey.
Made in Nigeria, the first phase of a broad economic plan as described above; describes any product or goods that is wholly produced in Nigeria- it could be products made by local or foreign manufacturers; and it is more than a product label placed on all finished goods or products manufactured by companies in Nigeria- it is basically
· To encourage local manufacturing largely for local consumption ;
· To promote home-made goods as a substitute for imported goods (reduce pressure on FCY demand and ultimately increase capacity and competitiveness for export earnings);
· To reposition Nigeria as a producing economy in the medium to long term (once power and other infrastructural support come on stream);
· To expand capacity for job creation and structured funding of new sectors that have grown without government support such as arts, creative and entertainment industry, fashion and culture, technology, crafts and farming
Avoiding The Symbolism Trap
There is a dearth of specific schemes, legislation and fiscal policy steps that would provide the required impetus, level playing field and incentive to fully aggregate the opportunities apparent in this strategic opening.
The case made above is clear and unambiguous and there is a lot of heavy lifting required of the leadership and influencers to get us going.
To reduce the efforts to necessary but symbolic token steps however reflect the challenge in moving away from a populist approach to one steeped in process, practice and national productivity orientation which such a strategic decision requires.
The challenge and test of the change mantra is how well we transit into the policy realm (not of merely increasing and reducing tariffs but in actually creating a linked solution for the country and its sub-nationals). It is however noteworthy to acknowledge at least four (4) mass sensitization scheme(s)/programs that offer a visual insight into what is possible; viz:
1. Made In Nigerian Goods | …are unique – Dec 16, 2016
2. Learning From Dubai: A Pathway for Nigeria’s Infrastructural Development
3. Another Initiative Against the Economic Recession – Jan 05, 2016
4. FG Initiates Investor Match-Making Platform to Drive FDI, Commends Saraki's Effort on #MadeinNIGERIA – Jan 04, 2016
5. Saraki To Launch “Made in Nigeria” Challenge in January 2017
6. Nigerian Economic Summit Group (NESG) 22nd Summit to Focus on the Theme ‘Made in Nigeria’
7. Reviving Nigeria’s Economy: Experts Set Agenda for 22nd Nigerian Economic Summit (NES22)
8. #NES22:Export-led growth will drive Nigerian economy-Udoma
9. Economic recession: Time to look inward – The Nation Nigeria – The Nation Newspaper
10. Making A Case For Made In Nigeria Goods - Ifeanyi Ubah
11. Mrs Buhari Urges Nigerians To Patronise #MadeinNigeria Goods
12. Made in Nigeria Festival 2016
15. The 30 Bills Nigeria's Senate expects will form the Template for a new Nigeria
16. Moving Saudi Arabia's economy beyond oil | McKinsey & Company
17. Saudi Vision 2030
18. What Does The Next OPEC Meeting Have In Store? – Proshare – May 20, 2016
19. Full text of Saudi Arabia's Vision 2030 - Al Arabiya Apr 27, 2016