TECHNONOMIX: Toothpick Alert – A cue for software industry development in Nigeria

InternetProductivity growth, however it occurs, has a disruptive side to it. In the short term, most things that contribute to productivity growth are very painful.

Recent happenings in the economy have been very hard to ignore. Especially with different renditions and interpretations in the media, by which public opinions are shaped. Of particular interest is the June 23rd, 2015 circular of the Central Bank of Nigeria (CBN), wherein importers of some goods and services were excluded from accessing foreign exchange at the Nigerian foreign exchange market. In the days that followed, specifically on July 4th 2015, “The Economist” published an article titled, “Nigeria’s Currency Toothpick Alert: Desperate measures from the bank”. In this piece, it was insinuated that the apex bank is bewildered by the shock the country suffered from the fall in the price oil. And as a result, discombobulated, it randomly issues vain policies to safe face rather than the economy.

The CBN, effectively, responded to this cheeky rendition in an article titled, “Nigeria’s Economic Management: Toothpick Alert redux”. Also published in the same magazine on July 9th 2015. However, following a number of calls that I have received, it has become imperative to add my little voice to the ongoing debate – for or against. But in order to bring forth my conclusion even before you start reading my submissions, I have to express my utter disappointment by the quality and standard of that cheeky first shot by “The Economist”, which is bereaved of sound analysis. I was an ardent believer in The Economist. But I have since, graciously, weaned myself of such narrow-minded perceptions of the economic dynamics of a country so endowed like Nigeria.

Before my submissions, find below a disclaimer:

“The opinions expressed in this article are solely mine and do not represent the positions of the Federal Government of Nigeria and all its agencies; including the Central Bank of Nigeria. They also do not represent the positions of the publisher of this article. I have made these submissions under no pressure and/or special conditions.”

It is no longer news that Nigeria is a country heavily dependent on its proceeds from oil. Although globally acclaimed for her rarely matched endowments amongst the committee of nations, Nigeria is a country that we know is not even close to achieving a half of her full and natural potentials in all ramifications. With an approximated population of one hundred and eighty million people (180, 000, 000 approx.), my country is the most populous black nation on earth. Thus, amassing the highest probability for human capital potential amongst the black race. For every seven black people on the planet, one is a Nigerian.

Of natural resources, Nigeria is blessed with over one hundred different items. The non-exhaustive list include: tin, coal, lignite, coke, gold, columbite wolframite, tantalite, lead, bitumen, iron ore and uranium. Did you notice the non-appearance of our sweet crude and natural gas? Now, add those to the lists and ask, “How many countries in this world are so richly blessed?”

Of agricultural resources, how do I even begin to express the richness of our land? The confluence of two of West Africa’s great rivers are situated in our beloved country, which in turn has blessed us with some of the richest alluvial soil in the world. Nigeria has the capacity to feed Africa; if not the world. The question is “why are we not fulfilling this potentials?” I will answer this in a jiffy but let us quickly run through the list of some of our abundant agricultural produces: Yam, cassava, rice, palm oil, tomato, sorghum, millet, maize, cocoyam, sweet potatoes, peanuts, sugar cane, soybeans, cotton lint, beans, melon, fruits (oranges, mangoes, apple etc.), rubber, and so on. All these, we are capable of producing in exportable quantities. Did you also notice the non-appearance of Cocoa?

It is important at this juncture to also conduct a quick review of our historic agricultural throughputs in the years that preceded our independence, and shortly after. I will focus on only one of the items that has been excluded from the official foreign exchange window by the CBN – Palm Oil!

Do you know that, under the British rule, Nigeria accounted for approximately 100% of global supply? Yes, approximately 100%! Before this statement is hijacked and misinterpreted, let me buttress it. In the global market of palm oil, very few countries partook, and Nigeria was the sole player that determined market fluctuation and price stability of palm oil. This was not simply because other countries were not interested. We effectively produced more than all countries put together. This position was maintained for more than half of a century as the largest producer of palm oil in the world. Although countries like Malaysia joined the trade, the foremost spot was our preserve. Our capacity to sustain this leadership waned as we curtailed our production due to whatever reasons, which resulted in the loss of significant market share. Thereafter, we have continued to play catch-up to countries that have none other than Nigeria to thank for their emergence into the lucrative palm oil sector.

The same narrative goes for cotton and the textile industry. How does one explain that with our abundant capacity in the production of cocoa, we import chocolate? We import toothpicks despite the abundance of broomsticks that could serve as an alternative; needing only to be well processed and packaged. This viral misfortune that bedevils these aforementioned sectors is currently obliterating all the vital areas of our economy, thus undermining and constituting both economic and political insecurity. Take a cursory look at the oil and gas sector. It is a travesty that Nigeria is endowed with approximately five trillion, one hundred billion cubic meters (5, 100, 000,000,000 m3) in natural gas reserves and we have no power. How cynical is it that we have chosen to flare? With a thirty-seven-billion barrel in crude oil reserve, we import petrol and all other petroleum products. Thus, plunging ourselves into socioeconomic disaster to the benefit of a few.

Will it be out of place, therefore, for Nigeria to curtail the importation of petroleum product in efforts to develop its refineries? I do not and will not think so. By curtailing, I do not suggest an abrupt and outright ban of these products. I understand the immediate shortfall that would be created in the economy and the attendant hardship to all and sundry. A gradual and commensurate reduction of importation of petroleum products to augment the steady rise in the local production of same would be the appropriate approach, should we decide to develop our oil and gas industry today. This is my belief!

It is time to take a look at the items on the excluded list by the CBN. The list, which The Economist suggested to have been drawn up by someone wandering around a house and a building site and randomly pointing at items. The initial “hit list” contain forty items, which include rice, cement, margarine, palm kernel/palm oil products/vegetable oil, meat/processed meat products, vegetable/vegetable products, poultry (chicken, egg, turkey), private airplanes/jets, Indian incense, Tinned fish in sauce(Geisha)/sardine, Cold rolled steel sheets, roofing sheets, wheelbarrows, head pans, metal boxes and containers, enamelware, steel drum, steel pipe, wire rods, iron rods and reinforcing bars, wire mesh, steel nails, security and razor wire and wood particle boards and panels.

Other items on the list are wood fiber boards and panels, plywoods boards and panel, wooden doors, toothpicks, glass and glassware, kitchen utensils, tableware, tiles (vitrified and ceramic), textiles, woven fabrics, clothes, plastic and rubber products (polypropylene granules, cellophane wrappers), soaps and cosmetics, Tomatoes/tomato paste and euro bond/Foreign currency bond/share purchases. All of these items can either be locally produced or simply constitute preposterous wastage of our foreign reserve. Take vegetables for example. Except they are ones imported from the paradise promised in the religious texts, I will not support such wastage of our national reserve.

In any case, the CBN did not ban the importation of any of these items. Let us begin to clear the facts from this point. The apex bank has no such jurisdiction to determine what items are imported into the country and those, which are not. However, as the statutory custodian of the economy responsible for ensuring monetary and price stability, as well as maintaining external reserves to safeguard the international value of the legal tender currency, it reserves the right to review and determine the criteria for foreign exchange qualifications in its official window. What this means is that, should anyone decides to import vegetable or any item on the exclusion list, the parallel market (otherwise known as the black market) is available. The CBN would not be part or promote such economic bedevilment.

The adverse effects of unabated importation of everything in a clambering economy are severely detrimental. While I agree that there is no country in this world that is totally self-sufficient, there is also no country, with optimal economic independence, that imports what it already has in abundance or have capacity to produce adequately. Just imagine a Saudi Arabia importing petroleum products. Or Britain importing skilled labour. Even in football, the English Football Association (FA) ensures that foreign players are not unabatedly signed on by football clubs to the detriment of local talents. Therefore, it totally not out of place, the nationalistic fervour of the CBN, to defend the economy in this manner. It is time to educate “The Economist” that, “for a country with the potential and/or the capacity to sufficiently produce a specific product locally, importation of same, if necessary, must be temporary, measured and curtailed. And this only when there is an evident shortage in the market supply of that product.

In a previous article, titled “Nigeria: Taking Advantages of Software Development Economic Dynamics” and published in the Guardian Newspaper of July 2nd 2015, I stated some of the economic downsides of unabated importation of goods and services; especially those that we have exportable capacity for. Restating the facts, these downsides include, but not limited to losses of potential revenue, depreciation in the value of our national currency – our Naira in this case, transfer of employment to foreign lands – thereby increasing domestic unemployment, contagion economic effect, increase in the dearth of skilled resources, rising level of poverty, and exposure to both financial and economic espionage.

“The Economist” opined that the CBN should have responded in a different manner to the free-falling value of the naira when it stated that Central banks usually prop up their currencies if they are worried about inflation, or allow them to devalue to depress imports and stimulate exports”. What exactly does “The Economist” mean by their propositions? I sincerely do not understand the economist logic behind them. I suppose that by “propping up the Naira”, The Economist did not imply the mopping up (i.e. buying) of excess naira in circulation using our already dwindling foreign reserve. For a country that has about a quarter of its labour force unemployed, the offered opinion of our “August advisor” will encourage the importation of everything; including pure water maybe. And this will further drive up the rate of unemployment and send more people into the labour market in search of unavailable jobs, which have been consumed by unabated importation.

The second option is even more questionable. It portrays “The Economist” as a body that has either tuned itself out of sync with on going global economic events and dynamics, or acting as an agent in the hands of faceless enemies of the economic growth of Nigeria. By suggesting that the devaluation of the Naira will stimulate export is a further proof that “The Economist” is not abreast of recent happenstances in Nigeria and therefore, do not qualify to advise us. A systemic devaluation of the Naira already happened to depress importation and ease the rising pressure on our foreign reserves. This was achieved in February 2015 by the closure of the Dutch auction windows, wholesale and retail, of the foreign exchange. By allowing market forces to determine the value of the Naira, exchange rate fell from 168 naira to 197 naira per US dollar.  With our biggest customers, US, India and China, cutting their crude oil imports, how did “The Economist” arrive at its postulation of stimulated export? Especially with the on going tussle for market share between OPEC nations and Shale revolutionists.

On this one, “The Economist” goofed!

And to answer the question about how we found ourselves at the cesspit of importations dump, in hindsight, economic ill-advises, such as these offerings by The Economists, cannot be exonerated. We have been misled in the past. And the time has come that we must avoid such mountebankery. We must look inwards for our solutions after due, in-depth and sincere considerations of our situation.

Following the intricate anatomy of the position of the CBN above, which I strongly believe is geared towards (re)industrialization of Nigeria, the Federal Government has a responsibility to ensure that there are no conflict of interests in the agenda and objectives of all its agencies and parastatals. As we have seen in the past, it would be counterproductive for example, if after this lofty position of the CBN, the Ministry of Agriculture supports certain interest groups to import rice into the country through “presidential waivers”. This must not be allowed to happen. No exceptional rules must be applied to give undue advantages to certain interests in the country above others. Equity and justice must be offered to all stakeholders on a level playing ground.

Envious of the forecasted growth in the local production of items on the exclusion list, except for private airplanes/jets, it is my opinion that certain software solutions should be included. Unabated importation of all manners of software solutions also has an adverse effect on our economy. This is the fundamental reason for the dearth of skilled personnel in that sector of the IT industry. The Ministry of Information and Communication Technology therefore, as well as other regulatory agencies such as the National Information Technology Development Agency (NITDA) and the National Office for Technology Acquisition and Promotion (NOTAP), like the CBN, should institutionalise a policy that ensures that only software solutions that cannot be developed locally are imported.

In furtherance of the foregoing, a policy caveat should be included such that, any institution, public and private alike, which might be granted a waiver for the importation of particular software solution for whatever reason, is enjoined to immediately, upon go-live of the solution, make an investment in the local production of that software before its expiration. Such investments and software productions should, of course be managed by NITDA, NOTAP and any other agency or vehicle that might be empowered to do so.

This singular act, if properly executed and managed, I believe strongly, has the potential of driving up our throughput in software production, addressing the dearth of skill personnel in the industry, reducing unemployment and thus, alleviating poverty. It will also assist in the diversification of the economy from one that is heavily reliant on crude oil proceeds. Considering the value chain in the software industry vis-à-vis the humungous software solution appetite of the country, I have no doubts that more than 5 million jobs would be created in the early phases of this initiative.

 

From Business Analysts to Enterprise Architects, Quality Testers to Solution Developers, Security Experts to Network Engineers, Database Administrators to Data Analysts, Nigeria will not only satisfy its needs for IT Resources, it will begin to export software solutions as well as human expertise. Operational spinoff jobs such as Service Desk and Facility management roles, will attract Foreign Direct Investments (FDIs) as Nigeria grows into the technology hub for Africa. The possibilities are endless. Our IT educational standards will rise as a result of ensuing linkages with our industries. This alone will become a major source of forex savings and in fact, earn considerable FDI.

 

The same concept should be adopted and adapted for every single facet of the economy. And as we move from one stage of development to the other, detractors such as The Economist, at least can begin to update their curricula and skills in assessing the potentials of developing countries with tremendous economic dynamics like Nigeria.

“Ayodeji Odusote is a Solution Analyst with the Central Bank of Nigeria. He is a blogger and a social commentator, focused majorly on Technology and its Economic Impact; using Nigeria as a Case Study. He can be reached via email: aareago@gmail.com. His social media handles are as follows: twitter: @aareago, facebook: Aare Ago, and aareago.blogspot.com.”



1 Comment
  • Alex Ehi’s Anthony

    @aareago, this is a lovely piece of work, with in-depth analysis of the nation’s economic situation, supported with facts and recommendations. i agree with you on everything, and i am surprise that Nigeria as a country, with vast land that can be used for farming, will stoop so low to be importing items such as tooth pick. I remember a long time ago, the nation used to be the highest producer of Palm. According to IndexMundi “http://www.indexmundi.com/agriculture/?commodity=palm-oil”Now the nation ranks 5th in the world with a meager 930 (1000 MT) behind nations like Indonesia (33,000), Malaysia (19,800), Thailand (2,000) and Columbia (1,108). Everybody knows that the Malaysians came to Nigeria to get seeds and learn how to grow the cash crop. In your words “Our capacity to sustain this leadership waned as we curtailed our production due to whatever reasons, which resulted in the loss of significant market share.” Thereafter, we have continued to play catch-up to countries that have none other than Nigeria to thank for their emergence into the lucrative palm oil sector.

    This is woeful, and i think we as a nation should trace our step back home to Agriculture. That is the source of our popularity and future of our economy. Alternatives for oil and gas (source of energy) are being researched everywhere, but there will never be an alternative for food and agriculture.

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