Last week we considered the role of R&D in the innovation endeavour and concluded that its cost constitutes a very significant proportion in the process. Albeit, R&D is only one out of several elements in the innovation process. One major issue that is, however, bothering policymakers and scholars of technology policy is how best to plan R&D as an economic activity in order to meet the technological needs of industry. Put differently, how best can government bring scientific research and industry together so that the resources committed to R&D can be regarded as an investment item? And what kind of innovation policy do we need to bridge the gap between research institutes and the productive sector of the economy?
These are mind-boggling questions begging for answers because of one major policy decision of government which is most likely to alter the business environment for several months to come, with its attendant consequences on industry. One government policy that readily comes to mind is the Central Bank of Nigeria (CBN)’s recent ban of some imported items from the official foreign exchange market.
In the past, when the price of crude oil was high and Nigeria’s economy was rated as “booming”, R&D was not directed to providing solution to technological gap in the nation’s manufacturing industry. That is, technological gaps in the manufacturing industry did not guide the focus of research institutes. The usual practice has been that research institutes did not pay significant attention to problems of manufacturing industry in the choice of their R&D projects. This explains the irrelevance of their so-called “research breakthroughs” to manufacturing industry in Nigeria. As the ban on some items by the CBN continues, this will force firms to look inward in order to substitute local raw materials for imported ones in the face of scarce foreign exchange. This is the time industrial research institutes would have been able to assist manufacturing firms in sourcing appropriate raw materials and bridging the technological gap in industry. If research institutes had strong linkages with the industry over a long period of time, they would have provided inputs for adoption and adaption now that there is scarcity of foreign exchange. And as long as economic and industrial policies are not in consonance with technology policies of government, if any, local firms in this country will not innovate. It is not a curse; it is a fact!
At this point in time in our national life, the dilemma of manufacturers in this country is hereby acknowledged, but it is regrettable. This is because they have been operating their businesses in an environment that is inadvertently or deliberately designed to be “business unfriendly” as a result of insufficient understanding of the complex nature of the innovation process. You will recall that it was mentioned in one of the series on this topic that you cannot ban importation of rice in public during the day and go behind at night to surreptitiously issue import licences to political cronies and lackeys. This is very damaging to manufacturing sector in particular and the economy in general. We should not think that Nigerian manufacturing firms cannot innovate. It is the lack of adequate integrative innovative policies and existence of incompatible policies on other sectors of the economy that have disabled necessary demand by manufacturing firms for innovation in our nation. Please permit me to make an aside briefly.
You must be aware that Nigeria abhors smuggling but it is unofficially permitted and encouraged when the nation cannot provide necessary tools to enable appropriate agencies to protect its land, sea and air borders. Smuggling leads to unemployment, cripples manufacturing industry and ultimately destroys the nation’s economy. Smuggling thrives in an economy where imported products are cheaper and perhaps better than those manufactured locally. Smuggling of cheap imported goods coupled with high interest rates, multiple taxation and incessant power supply crippled, for instance, the textile industry in Nigeria.
In the year 2000, this writer conducted a brief study into why firms in the textile industry of the organized private sector did not show any appreciable improvement in their performance despite “relative stability in the macroeconomic environment at that time”. I seek your indulgence to share with you an abridged portion of my research paper as follows:
“The financial statement of the firm aptly mirrors the parlous state of Nigeria’s industry, particularly the textile sub-sector. The company’s result for the period which ended 31 March 2000 showed after tax loss of N141.5 million. The company which paid 15 Kobo dividend in 1999 did not pay anything to shareholders in the year 2000. The company, which invested over N3.0 billion into manufacturing, uses 90% local raw materials, provided direct and indirect jobs for 2,800 people in Nigeria for more than 40 years, had challenges operating profitably”.
Currently, Nigeria’s manufacturing industry’s contribution to GDP lags behind that of some countries including South Africa. If manufacturing industry thrives, the narrative of Nigeria regarding innovation, employment and economic growth would have been different from what Nigerians read daily either in print or on electronic media. The textile company, however, had to close down at that time due to inconsistent policies of government which resulted in influx of cheaper textile materials that are daily entering the nation from countries that are innovating constantly in a globalized world. It is not sufficient to ban the importation of selected commodities. What will be the policies for innovation that will enable industry to cope with this ban? The ministries, departments and agencies that must be involved to ensure that the ban does not cripple the economy as envisaged have to be clearly mentioned and tasked. The era of applying “intelligent guesses” on the part of policymakers and industry to solve economic problems is gone. There are so many companies with similar profiles as that reflected above struggling to survive the harsh economic realities of our times. The survival of 180 million people will depend on how we articulate innovation policies and strategies adopted for implementation. (To be continued next week)
MA Johnson
