As I was thinking about how to conclude this article, I got an information that a friend travelled to a country in Europe to buy machines that would be used to process cashew nuts in Nigeria. From an entrepreneurial angle, buying any machine from abroad looks good. One can safely say that an entrepreneur is born. The importation of a foreign machine into Nigeria creates jobs for the citizens of the country from where the machine was imported.
One can only hope that the cashew nuts to be processed and the materials for packaging the product will not be imported from either Turkey or Malaysia. It is regrettable to note that our country imports more than we export, thus, creating a trade deficit. A rising level of imports and a growing trade deficit fuels inflation, depletion of foreign reserve, displaced local production and propels unemployment.
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Rising inflation in the country cannot create wealth for citizens. The rising inflation we experience today, is as a result of both monetary and fiscal policies of government. These are also, responsible for weak purchasing power of citizens. When Value Added Tax (VAT) was increased from 5 percent to 7.5 percent what was the government expecting? Inflation! Devaluation of the Naira would have yielded positive returns, if Nigeria was an exporting nation. But Nigeria is mostly an importing nation. Accordingly, devaluation of the Naira has caused an increase in the cost of importation with a corresponding increase in the prices of imported goods. Increase in fuel price, and reduction in food production as a result of insecurity are some of the causes of inflation. As 2023 is fast approaching, pre-election and campaign spending by politicians will bring more money into the polity and this will further increase inflation. We have a situation where there is much funds in circulation chasing fewer goods because production level is low.
Frankly, Nigeria does not lack entrepreneurs – formal and informal. But rather the orientation of most entrepreneurs is commercial instead of technological
To reduce unemployment in our nation, we must focus our attention more on developing the capital goods sector. The uniqueness of the capital goods sector is seen in its ability to fill all areas of the nation’s industry. And it is therefore, to be considered as a vital component of the nation’s debate on entrepreneurship. Public intellectuals and scholars are of the view that the questions to ask include the following: What type of entrepreneurship is critical for economic development? What skills and attributes are needed for it? How are those skills and attributes developed? Some nations with high unemployment figures have revived the debate and steps have been taken to address these questions.
The report of a study conducted more than three decades ago, however, shows that economies that have active capital goods sector have more technological entrepreneurs than those where the sector is weak. Frankly, Nigeria does not lack entrepreneurs – formal and informal. But rather the orientation of most entrepreneurs is commercial instead of technological.
In Nigeria, for instance, commerce, trading, dealership, banditry, kidnapping, contracting, politics, government patronage, and the founding of religious organizations constitute a large chunk of entrepreneurship. We have less than 1000 fin-tech startups and a few investors in capital goods led by some of our promising youths.
But as a result of the economic challenges faced by Nigeria at the moment, it is very likely that most of our people involved in trading may object to the proposition that the capital goods sector should be singled out for promotion. Why, you may ask? To this group of individuals, it does not matter whether you produce capital goods or primary commodities – raw materials and agricultural goods- which will provide foreign exchange to import capital goods for the local industry.
There is nothing wrong in governments playing the leading entrepreneurial role in technological development and economic growth. Although, the approach and focus are different from one country to the other. In Germany, Russia, USA, Japan and others, the role of the state in the industrialization endeavour have been very direct.
One of the countries that understood the capital goods – led growth strategy is the former Soviet Union. Archival records show that Soviet planners were not in doubt that technological progress was critical for economic development. As they rightly envisaged, resources were allocated to the sector of the economy that builds machinery for all other sectors which have the greatest potential for expanding the productive capacity of the economy. So, one can only imagine the benefits accruable to Nigeria in terms of employment, if most of the machines needed in the manufacturing, agricultural, construction and other sectors of the economy are built in the country. You may argue that if this strategy was responsible for growth, why did the Soviet Union collapse? The collapse of the Soviet Union was occasioned by ideological and organizational bankruptcy.
I tend to agree with technology policy scholars who believe that Nigeria’s successive development plans have mistaken iron and steel producing plants as the totality of the capital goods sector and the missing ingredient for industrialization. That is why a lot of resources have been expended on reactivating the iron and steel industry in Nigeria at the expense of the more dynamic branches of the capital goods sector. All machine tools are typically “machines that help people to make things,” but all factory machines are not machine tools.
In order to stimulate economic growth, we need to first develop the machine tool and machine building branches. These are branches that will serve as the market for iron and steel plants and they should have been developed early in the investment cycle. Another important reason why the machine tool and machine building branches ought to start early is because they require less investment resources to set up and being broadly labour intensive will maximize employment opportunities.
If we revive our iron and steel plants today, the final products will be so costly that they cannot compete with those from say the USA, China, Germany and Russia to mention a few countries. What could be responsible? The relatively small size of the market, poor industrial linkage, underdeveloped technical infrastructure as well as the common management and production bottlenecks associated with manufacturing in Nigeria are responsible. So, if we want to reverse the brain drain currently experienced and reduce unemployment, the machine tool and machine building branches are vital to the growth of the economy. Thank you (Concluded)
MA Johnson is an author and retired naval engineer who has a passion for African Development and Good Governance.
