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Published On: Tue, Jul 29th, 2014

Solution to Nigeria’s crisis of mono-economy

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By Bamidele Ademola-Olateju

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 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 then underdeveloped product-importing/commodity-exporting nations.

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.

One of the biggest problems Nigeria faces 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 come 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.

Last word

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!

 

Bamidele Ademola-Olateju is on Twitter: @olufunmilayo and olufunmilayo@gmail.com

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