This blog believes in advocating for policies and practices which would truly transform Nigeria. The chronic electric power shortages that has bedeviled Nigeria is a humongous disincentive to the uninhibited flow of Foreign Direct Investment. No one should be fooled that investors would come amidst insoluble and productivity-crippling electric power deficits. Secondly, the simplistic thinking that a return to agriculture alone would salvage Nigeria from the disadvantages of the mono-product economy is also false. This writer argues very robustly in support of the latter thinking. Enjoy our first non-naijaGRAPHITTI written PALAVER TREE COMMENTARY!
Agriculture Alone Not The Answer To Nigeria’s Mono-Product Economy
By Bámidélé Adémólá-Olátéjú
No meaningful development can be achieved without a vibrant power sector and a defined manufacturing base. Sadly, the country’s manufacturing base shrank in the last 10 years and services grew!
Nigeria’s impulse-driven consumerism and complacent solipsism gnaws at me; it is infectious and in the open for everyone to see. It is unsustainable, yet the higher-ups seem unconcerned by it, preferring to import rice from Thailand for distribution in exchange for votes. They tout the rote catechism of lending institutions whose neoliberal ideals only serves to perpetuate poverty.
I begin this piece by giving full disclosure that I am a farmer. My motivation is to call our attention to Nigeria’s race to the bottom, its mono-product economy and the fallacy inherent in touting Agriculture as the solution to our problems. Agriculture alone is NOT the answer. Agriculture is extractionalist. Without a manufacturing base, investments in agriculture, export of commodities and cash crops is a sure way to maintaining dependency and poverty. Nigeria can never be an economic powerhouse even if its agricultural output improves a thousand folds. No meaningful development can be achieved without a vibrant power sector and a defined manufacturing base. Sadly, the country’s manufacturing base shrank in the last 10 years and services grew! Key industries relocated their operations to Ghana – a country with more stable power and political sophistication.
The reason behind my postulation is very simple. If Nigeria spends one hundred Naira to manufacture a product within, the money that is used to pay for materials, and other factors of production like labour moves through the economy as each worker, trader, artisan spends it. The multiplier effect of one hundred Naira worth of primary production of that singular good, will add several hundreds of Naira to the Gross National Product (GNP). If this good is manufactured in America instead of Nigeria, the money will be spent in America and the circulation of that money will be within the American Economy. This is the major reason industrialized product-exporting/commodity-importing nations are wealthier while underdeveloped product-importing/commodity-exporting nations are poor. It does not matter whether the country is the world’s largest producer of a commodity/crop or not. Once the country does not produce finished products from that produce/good, it will remain dependent and poor.
The trend in Africa these days is to leapfrog industrialization into service-based economy, which is largely founded on consumption. Nigeria is particularly notorious the world over for conspicuous consumption and ostentatious living. We are noted for consuming what others produce. In the last three years, many luxury dealerships have opened shop in Nigeria and they are recording unprecedented sales and humongous profits! The incentive is on trade instead of manufacturing because the visit of production (power/diesel cost) is too high. Why should manufacturers go through the rigours of raking in a kobo here and a Naira there when you can simply issue a cheque and take out billions from government coffers? Why produce, when you can bring in a container load of any consumer good from anywhere and sell it in a day with large profits? China is an economic powerhouse today because of its manufacturing base is shored up by cheap labour from its huge population. Nigeria and indeed the whole of Africa can go nowhere with Agriculture alone. If we do, we will only be feeding other people’s affluence and enhancing their living standards while depressing ours. Industrialized countries grow rich by selling capital-intensive products for a high price and buying labour-intensive products for a low price. Capital-intensive enterprise ensures high barriers to entry and cheap products given the economy of scale while labour-intensive products have low entry barriers and are expensive given the scale of operations, which are usually small. This trade imbalance explains the expanding gap between rich countries and poor countries. What it means is that wealthy nations sell products to be consumed and not the tools of production. The result is the monopolization of the tools of production in the hands of the economically strong while the economically poor revel in consuming products whose price is dictated by the seller. Invariably, this lopsided power structure assures a continued market for the product.
In global trade, poor countries lose when they export commodities. Why? Commodities, as expected, are a lot cheaper than finished products. This unequal trade is historic given the extrationist ideology under colonial rule. Unequal trade continues today and it spells intergenerational poverty for third world countries. This nation must wake up from its slumber and miseducation by its elites who has refused to propound sound policies that will advance the country fortunes. On the surface, it may seem that investment in agriculture to fuel export in goods such as cocoa, cotton, peanuts, cassava, soybean, gum arabic, sesame seed would be beneficial to Nigeria because it will generate foreign exchange. Nothing is more deceptive. Unequal trade constitutes unequal yoke and unequal exchange. Nigeria may gain currency from the sale of these agricultural products (same goes for mining), but lose when beverage companies brings in processed beverages like chocolate milk and repackage it here, when we buy brocade and lace from Switzerland and so on.
The reason is that processed goods require additional labour and are thus more costly. Another sad example lies in our deforested tropical rainforest. All the Irokos, Mahoganys and other hardwoods that were in the forest for over 300 years were sold for at most N15,000 each! That is roughly $100. Of course we buy back furniture made of hardwood veneers (yes, veneers not the real thing) for over $1,000. Particleboards and plywood are sold back to us at astronomical rates because we do not have the capacity to process timber. We export timber and import it back in the form of finished lumber products, at a cost that is greater than the price we got for the timber.
One of the biggest problem Nigeria faces as a nation is its rent taking mentality. It has rendered everyone lazy and materially aggressive. Apart from this, Nigeria has not been able to unleash the entrepreneurial spirit in its citizens, given its prostrate power sector. Without stable power we can’t achieve anything! The government should stop mouthing the IMF/World Bank slogan of export more commodities for a better future and a buoyant economy because it won’t happen. Falling prices in commodities trade in the past have met with large increases in export volume by commodity producers, yet it has not translated into higher export revenues. The result is a declining terms of trade for many commodity-exporting countries. This lopsided trade causes steep declines in the purchasing power of commodity dependent countries. As exports declines, they are unable to purchase imported goods and services necessary for their survival and for developing and maintaining critical infrastructure. Agricultural products export cannot help fight poverty. Nigeria needs to start processing its own produce if it wants to escape the poverty trap otherwise it will always feed factories in industrialized nations and help provide jobs for their citizens.
We cannot wallow in sin and ask for God’s bountiful grace. A local example can be found in the expansion of Shoprite – a South African chain that is fast growing and reaping bountiful profit for its home country. Over 80 percent of Shoprite’s revenue comes from the sale of groceries. Before Shoprite came into Nigeria through its local partners, no rich Nigerian thought it worthwhile to invest in the changing taste of the emergent middle class who wants a better, neater and more organized shopping experience. They prefer to loot, stack and spend than to invest in real sectors of the economy. The South African chain came in and found new markets for their agricultural produce and finished products. Today, about 90 percent of its groceries comes from South Africa where stringent conditions of quality and packaging are adhered to. The chain has since expanded to more than five stores in five years. The lesson therein is; when it comes to commodities, “the importer decides and controls the quantity and prices, making an unstable market,” as opposed to what obtains with manufactured goods. While commodities generate low-grade jobs, manufacturing employs skilled labour for higher wages. The chain of production in manufacturing is longer, it creates a multiplier effect on employment and causes the expansion of the domestic market.
While we are killing ourselves, and cursing each other out over crude oil, the Chinese are here grabbing our land, growing cassava and exporting everything to China, including the peels. I know because I see them. They are everywhere farming our lands, doing makeshift/just-in-time-manufacturing and sending the goods back to their country. No one will stop them after they have bribed their way in. The re-colonization of Africa has started. If in doubt, look at us from within. Look at how other African countries have sold their land to foreign interests. Very soon we will be workers on plantations owned by foreigners in our fatherland. You heard it here!
This blog originally appeared in the PREMIUM TIMES.