African Development Bank (AfDB) President Dr Akinwunmi Adesina said there is an urgent need for Africa to rapidly diversify its economies and add value to everything it produces.
Adesina said this during the Adeola Odutola conference, the annual meeting of the Manufacturers Association of Nigeria, during a presentation titled: “Overcoming the Constraints on Competitive Manufacturing for Intra-Regional Trade”.
The AfDB President stressed that Africa exporting its raw materials had only led to vulnerabilities, adding that no nation or region had succeeded to raw materials.
“Africa’s development trajectory has been based on the export of raw materials and natural resources. The continent is teeming with abundant natural resources, oil, gas, minerals, metals, agricultural and forestry products and the blue economy. Estimated at $ 30 trillion in potential wealth, Africa’s natural resources are sufficient to make it one of the richest places on the planet (Craig Arnold, 2019).
“The reason is simple: a dependence on the export of raw materials, with very little or no added value. African countries export natural resources and import manufactured goods.
He pointed out that the economic and wealth divergence between rich developed countries and low income developing countries arose from their differential levels of industrial manufacturing.
“Rich countries export value-added manufactures, while poor or low-income countries export products with little or no added value. No wonder Africa’s share in the global value chain is a miserly 1.9%, leaving a continent of 1.3 billion people and their economies stuck at the bottom of global value chains,” he reiterated.
Adesina said Nigeria’s manufacturing gross domestic product has hovered around 7% for decades and has not been able to reclaim its industrial manufacturing sector to unleash its full potential, adding that “the performance of the manufacturing sector over the past five years has been poor. Between 2015 and 2017, the sector fell by -1.5%, -4.3% and -0.2%.
He said Nigeria’s approach had been on import substitution with the manufacturing sector accounting for only three percent of total export earnings, but accounting for 50 percent of imports.
He further explained that import substitution, although important, was a very restrictive view. “It aims for survival, instead of seeking to create wealth through a larger export market and diversification of value. The end result is a manufacturing sector that cannot grow or compete globally, but is limited to ‘survival mode’, not ‘global manufacturing growth mode,” he said. .
He said, however, that Nigeria had greater ambition for its manufacturing sector which was rapidly moving up global and regional value chains in areas of comparative advantage
He also said the country should promote increased specialization and competitiveness.
“A well-developed and policy-oriented manufacturing sector with an export orientation will stimulate greater innovation, industrial policies for the development of export markets and the structural transformation of the economy. “
He further stressed that the country should focus on expanding foreign exchange through better diversification of export value and be proactive.
He said African countries, including Nigeria, have had decades of industrialization and industrial manufacturing expansion policies, models and programs.
The AfDB President, however, stressed the need to bridge the huge gap between political ideas and their implementation.
Another point insisted that Nigeria decisively tackle its lack of energy and reliability so that its industries do not remain uncompetitive.
“There should be massive investments in variable energy bundles, including gas, hydropower resources and large-scale solar systems to provide stable baseline power to industries to direct electricity preferably to industries, and to support industrial mini-grids to concentrate energy in industrial areas.
“In addition, we should develop more efficient utilities, reducing technical and non-technical losses in power generation, transmission and distribution systems,” he added.
He further reiterated that Nigerian ports were not intended for income generation centers but should support industrial manufacturing.
“We should move away from the usual Gestapo approaches of raiding ports, or deploying soldiers to decongest ports, or even vehicle traffic to ports.
“We shouldn’t decongest the ports in Nigeria, we should transform the ports. It must start by removing administrative bottlenecks. Most of which are unnecessary with multiple government agencies in ports, high transaction costs, or even simple illegal tax extortions, which do not fit into government coffers,” he said.
He added that the African Continental Free Trade Area (AfCFTA) offers a huge opportunity for Nigeria to drive an export-oriented industrial manufacturing path.
He said Nigeria should respect the rule of law so that illegal imports do not occur, adding that “the size of the free trade area, with a collective GDP of 3.3 trillion dollars, makes it the largest free trade area of any country in the world. We have to be ready to seize the opportunity and become a key player based on our enormous potential.”
According to him, Nigeria needs to unlock its industrial manufacturing capacities to take advantage of duty-free exports within the zone. “To do this, we need to decisively tackle the infrastructure and logistics bottlenecks that hamper industrial capacity and competitiveness. It also requires establishing and enforcing the quality, grades and standards of products, ensuring industries’ access to land, ensuring the management of investment relationships to attract investors and trade facilitation,” he emphasised.
He also praised the willingness of the federal and state governments to create export processing zones, advising that these areas become special economic zones, to allow better clustering of businesses, production sharing and learning platforms, for multiple industries.
“With the African Continental Free Trade Area, Nigeria will face stiffer competition for the establishment of industrial manufacturing platforms,” he said, adding that that for the full impact of the zones to be felt, they would need to go beyond simply being duty-free trading zones between African countries.
“The African Continental Free Trade Area should therefore be a manufacturing area, not just a trade area. Otherwise, we would have succeeded in creating a well-organized consumption zone for raw materials, machinery and equipment imported from others,“ Adesina explained.
In addition, Adesina added that more efforts would be needed in Nigeria to improve coordination failures, inter-agency cooperation, ensure the stability of the political environment and avoid policy reversals to reassure investors. He also said Nigeria is strengthening its readiness to transition to digital and smart manufacturing.
“The future of manufacturing will be digital. The global digital economy is estimated at over $ 16 trillion. Using the Internet of Things (IoT) will increase labor productivity in manufacturing, deploy smart machines, manufacturing platforms and systems, connect machines and people, and use machine learning and artificial intelligence to improve the speed and efficiency of complex manufacturing processes.
“This future is already here. It’s time to re-imagine industrial manufacturing in Nigeria,” he said, urging the Nigeria Manufacturers Association to create “Industrial Digital Skills Academies” and link them to universities and technology innovation hubs as “it will help workers retrain and retool to prepare for the jobs of tomorrow.”
He urged federal and state governments to invest heavily in digital infrastructure.
(NAN)
