A case for paradigm shift from consumption to production, by David Abu Ozigi

Interview between businessmen

I consider this topic to be very timely, considering the present dual challenge of gross unemployment and diminished revenue being experienced by the Nation. This situation is certainly worrisome considering the fact that statistics has shown that over 60 percent of Nigerian youths are unemployed or underemployed.

Consequently, the army of restive unemployed youth has resulted in increased urban violence, kidnapping and militant insurgency in the country.

This pathetic situation underscores the urgent need for an effective reversal. We certainly cannot continue in the direction of continued decline in national revenue and massive unemployment with its attendant consequences.

PRODUCTION VERSUS CONSUMPTION

Consumption refers to using, buying or eating something. Production on the other hand, is a process of combining various material inputs and immaterial inputs in order to make something for consumption. It is the act of creating an output, a good or service which has value and contributes to the utility of individuals.

The fundamental problem of economic life is how to expand production. Man’s life and well-being depend largely on the production of wealth. Man has a consistent desire to consume; the focus of humanity therefore should be on the ways and means by which production might be increased. Human beings have limitless desire for wealth resulting from the limitless possibilities of improvement in the satisfaction of man’s needs. Simply put, the level of economic development of a nation (quality of life of the citizens) can be described by the difference between the level of local production and the local consumption. It is therefore imperative to consistently ensure that local production far exceeds local consumption.

THE NEED FOR A PARADIGM SHIFT
Nigeria’s pathetic situation of a consumption economy is certainly not sustainable. However, one may be tempted to ask, can we really reverse the situation and how? Fortunately, we seem to have been woken up from consumption-induced coma because, there is a strong belief that Nigeria’s industrial capacity is on the verge of a reversal, especially with some aggressive domestic investment made in cement and sugar manufacturing. The renewed focus on agriculture and the agriculture – value chain, and with new investments in commercial farming, fertilizer plants and food processing plants raise hopes of a renaissance. But, we need to ensure we rebuild a strong economic foundation on which the resurgent productive capacity will anchor and withstand the whirlwind of globalization and international pressures and competition. To drive our quest to become a productive nation that will achieve quantum leap, we need to jettison consumption in favour of production oriented economy.

SOME RECENT EFFORTS

In the recent past, the federal government of Nigeria developed the Nigeria Industrial Revolution Plan (NIRP). The plan was based on four pillars:
a) Agro Allied,
b) Metals and Solid Minerals,
c) Oil & Gas industrial activities and
d) Construction, Light Manufacturing and Services.

The plan further identified 7 enablers thus:
i) Infrastructure
ii) Skills
iii) Investment Climate
iv) Innovation
v) Standards
vi) Local Patronage
vii) Finance

The present administration of President Muhammadu Buhari (Rtd), GCFR, perhaps as a direct response to the economic recession of 2016 developed the Economic Recovery and Growth Plant (ERGP): 2017-2020.

The broad strategic objectives of the ERGP are to:
a. restore growth,
b. invest in human capital and
c. build a globally competitive economy.

The strategic priorities for executing the economic recovery and growth plan include:

i) Stabilizing the macroeconomic environment
ii) Achieving agriculture and food security
iii)Ensuring energy sufficiency (power and petroleum products)
iv) Improving transportation infrastructure
v) Driving industrialization, with a focus on Micro, Small and Medium Enterprises (MSMEs).

The ERGP sets a target of 7 percent real GDP growth by 2020. This initially is driven by the oil sector and then increasingly by strong non-oil sector growth (agriculture, manufacturing and services). This effort must be acknowledged for what it is, a conscious desire to transiting from consumption oriented economy to production oriented economy.

Central to the sustainable economic recovery and growth is the Power Sector Recovery Plan, with strategies to restore financial viability, improve transparency and service delivery.

THE WAY FORWARD
As commendable as the goal of ERGP is, the truth remains that if the foundation is faulty, we cannot make desirable progress. We certainly need to revisit the foundation. In doing so, we need to critically examine the factors militating against our productive capacity and capacity utilization. Here we need the Engineers (along with other professionals) to come to the rescue of the nation. Certainly, the moment we reverse the trend and increase our production, to supply more of our domestic needs and export the surplus, our balance of payments will improve, our foreign reserves will accumulate and the value of our currency will improve, thereby having a further salutary impact on our economy.

What then are the factors to be addressed to ensure that Nigeria embraces manufacturing (which entails high employment generating activities), increase GDP and reduce poverty level. These factors include the following (among others):

(i) Physical Infrastructure Development

To make Nigeria’s Products competitive in a globalized business environment, we must drastically reduce the cost of production. One major way will be the attraction of massive investment in Infrastructure. The government must not only make major investments in Energy, especially Electric Power, Transport infrastructure- Roads, Railways, Seaports and Airports, and Science Engineering Technology infrastructure should be incorporated. The present focus on power should be enhanced and more of the savings from subsidy removal should be channeled to infrastructural development.

Some project sponsors underestimate the quantum of equity required for infrastructure projects and often look for ways to seek short-term returns or save on project developments costs. This usually ends up being detrimental to project viability and project completion timeline. The development of Nigeria’s infrastructure and its positive impact on industrialization, economic empowerment and strength of the Naira cannot be over-emphasized. It is time to translate the much-talked-about economic potential of Nigeria into reality.

(ii) Research & Development
Global competitiveness in industrial and Agricultural production is driven by creativity and innovation. To drive these, our investment in Research and development must escalate steeply.

Unfortunately as at date, R&D is poorly funded in Nigeria. In fact, many companies in the MSME sector are unable or do I say incapable of investing in any meaningful research work. And so they remain copycats and lag behind. What is worse, access to modern Technology and cutting edge production innovations are lacking and therefore we produce using aged and archaic machinery, equipment and technology. Major governmental intervention is needed to help support our productive activities especially in the MSME sector. Private sector involvement in research and development should be promoted, with scientists and engineers playing the leading role.

iii). Skilled Manpower

From comparative global experience, it has been established that skilled productive manpower can become a competitive advantage. This was the major factor that helped turn China into the world’s factory. Now wages are growing in China and the skilled workers are moving to higher paying technology- driven jobs. Africa and indeed Nigeria is the last low wage region and therefore presents great opportunity to become destination for off-shoring and replacing China as the world’s Industrial centre. But this requires a well-honed strategy to rapidly skill up, so that we do not lose the opportunity to other smaller African Countries.

To accomplish this strategy we need to fully reorientate our education to be need driven, hands-on and problem solving.

iv) Access to Credit

It is right to say that nothing will promote productive activities in Nigeria, especially in the Agro related production than the liberal access to credit at single digit interest rate. Here the current effort of the federal government through the Central bank to subsidise interest rates need to be intensified. There is the urgent need to expand the quantum and scope of these interventions.

THE ROLE OF ENGINEERS
While engineers may be said not to have a visible role in ensuring a liberal access to credit, the place of engineering in addressing the first three factors (Physical Infrastructure development, Research & Development and Skilled Manpower) outlined above, is immediately obvious. The engineers are in the driver’s seat to pilot physical infrastructural development, construction works, machine building/fabrication and the likes.
Engineers are well positioned to start technology-based enterprises, by acknowledging the societal needs and applying their skills and practices to meet the needs. By their privileged training and creative skills, engineers are expected to embrace techno entrepreneurship. They can start by initiating the establishment of small manufacturing outfits; I mean basic cottage industries such as Coat Hangers, Hair pins, Shoe Tacks, Wire Nails, Machine Screws, Rivets, Steel Bolts and Buckle Hooks & Allied products, among others.

SUSTAINABLE AND INCLUSIVE GROWTH
An expanding economy does not mean that everyone benefits equally, hence the need to ensure inclusive economic growth for poverty alleviation. In other words economic growth has to be inclusive to ensure the wellbeing of the entire population. Creating enabling conditions for inclusive growth helps bridge economic, social and environmental gaps for sustainable development.
Some fundamentals for accelerated growth include:

• Skills development
• Supportive policies towards micro, small, and medium enterprises
• The capacity to innovate and absorb new technologies
• The ability to produce a higher quality and greater range of products
• Infrastructure and other investments

Nigeria must (of necessity) establish a stable environment that enables business to flourish. Business wants a level playing field and to be connected to major markets. It also wants a simple regulatory framework that makes it easy to start, operate, and close a business. MSMEs that employ the most people are especially restricted by complicated regulations that can breed corruption.

Furthermore, in order to bring new prosperity and new opportunities, growth must also usher in new ways to support sustainable consumption and production. It must also enable sustainable development.

This presentation will be inconclusive without a discussion of the gender perspective of inclusive growth. Sections A and B of the Beijing Platform for Action recognize women’s lack of access to productive resources and limited access to economic power-sharing as being major causes of poverty. Gender disparities in access to economic resources, including credit, land and economic power-sharing, directly affect women’s potential for achieving the kind of economic autonomy they need to provide a better quality of life for themselves and their dependents.

The female gender in Nigeria constitutes about half of its population; any policy or action of government, organisations, communities or individuals that consciously or unconsciously excludes (or discriminates) against the female gender breeds underdevelopment, as the aggregate output(production) is diminished while the consumption (of the entire population) remains high. This remains a factor contributing to Nigeria’s development limitations, and cannot be ignored.

CONCLUDING REMARKS
Manufacturing remains the sure pathway to higher productivity and increased living standards. An economy with poor manufacturing base will generate little opportunity for employment and consequently increased poverty. In order to create a strong, growing, solid national economy the role of industry as a contributor to national income should reach about 40 percent of GDP, at which level we would see ample production from domestic manufacturers.

Many challenges confront the development of industry: poor infrastructure, limited financing schemes, a rigid bureaucracy, difficulty in accessing land/work space and a shortage of human resources with competency in engineering that can boost creativity and innovation.

The conservation among constituent segments of the Nigerian nation should seize to focus on how to share the ‘’national cake’’. The cake needs to be baked before it can be shared. The focus therefore should be how to consistently increase the quantum of cake being produced and sustainable too. Here, I dare to conclude that industrialization remains the best policy option for sustainable economic growth and development and Nigeria cannot be an exception.

Engr. David Abu Ozigi is
Director (Engineering, Technology, Innovation & Infrastructure)
SMEDAN, Abuja, presented this paper at the Installation Ceremony of the 16th Chairman of the Kaduna Branch of Nigerian Society of Engineers, Kaduna

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