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The Many Reasons To Be Pessimistic About Nigeria

By October 31, 2017 No Comments

The many reasons to be pessimistic about Nigeria

 

“I have seen the future and it doesn’t work.”

Zardoz (1974 film)

The Frog in a pot is a very popular anecdote and you probably know it. Still, if you don’t, it is about how if you put a frog into a pot of boiling water, it will jump right out. But if you put it in a pot of nice comfortable water and then turn on the heat, the frog will complacently let himself be boiled.

The story is used as a metaphor to tell a cautionary point about life- the inability or unwillingness of people to react to or be aware of threats that arise gradually.

This anecdote succinctly captures (scientific validity notwithstanding ) Nigeria’s situation right now. Last week, the nation marked its 57th independence anniversary. I think it should have been a day of serious introspection and soul-searching.

For me, I am colossally pessimistic about the future of Nigeria. And I am not alone in my despondency.  Writing in Vanguard newspaper, Ayodele Adio noted:

“I HAVE argued consistently in the last year about Nigeria’s shockingly dismal preparedness for our collective future. Sadly, nothing even attitudinally has changed.  The “Nigerian ship” is obviously lost in the Mediterranean, her captain and crew (largely incompetent) seem however incapable of navigating it to its destination

NIGERIA IS RETROGRESSING

I have a concept I call static impossibility. It means if you are to record any improvement, you need to be constantly getting better. If you are not getting better, then you are invariably falling behind. If you stay as you are, others are going to pass you by.

In the case of Nigeria, the nation is falling behind in competitiveness and innovation which means that our children will not be as well off as we are (yes, even worse off than we are!). Remember our boiling frog anecdote? That is where we’re heading as a country when it comes to technological advances and the threat they pose to our future.

HOW THE WORLD HAS CHANGED

From the way we communicate, to how we go about businesses, technology has changed society. I don’t think there is anyone that will deny that. The problem is our awareness of the quantum of change that is happening

We are living in a world of torrent of innovation that is geometrically revolutionizing life in ways that both expand and shrink economic opportunity.

“Through advances in computing whose rate of acceleration Moore’s Law describes, faster computers are being used to design faster computers.  And these faster computers, in turn, are making it possible to design new forms of energy, smaller and more powerful sensors, artificial-intelligence software that can interpret the massive amounts of information that we are gathering, and robots that can do the mundane work of humans.  It is even becoming possible to redesign human cells and other organisms.  Almost all fields of science are becoming digitized, enabling them to start advancing at exponential rates“.

In other words, we are living in a knowledge-driven world. To buttress this point further, just take a look at the chart below comparing the most valuable companies in the world in 2006 vs. 2016.

largest listed companies by market capitalization

THE DEATH OF OIL, DIVERSIFICATION, INDUSTRIALIZATION, AND AGRICULTURE

 

Obituary for the oil industry

I think every right-thinking person agrees that oil is a dying commodity. Falling green energy costs is accelerating the death of the oil industry.

One respected analyst believes that within a decade and a half, we will have the ability to harness the power of the sun and wind to provide 100% of the planet’s energy needs. The cost of clean energy will fall to the point that it seems free.

DIVERSIFICATION GOSPEL

With the collapse of crude oil price in the international market and the attendant dire economic implication for Nigeria, the imperative of economic diversification from oil has become a major topic of discussion in Nigeria.

So, what are we diversifying into? The prescriptions for economic nirvana for Nigeria (according to government officials) are agriculture and manufacturing:

Agriculture gospel

“Anytime I hear Nigerian presidents, ministers, governors, economists, analysts, and commentators declare that agriculture is the alternative to oil, and that the solution to Nigeria’s economic woes is to return to the farm, I am tempted to jump up and ask at full volume: “Who agriculture alone don epp?” That was Simeon Kolawole, in an incisive article in the Thisday newspaper of August 21, 2016.

He went on to state that:

‘Okay, let us talk about Cote d’Ivoire’s fabled cocoa wealth. Cote d’Ivoire produces 33% of world cocoa and exports to manufacturers such as Hershey’s, Mars Inc. (both in the US) and Nestlé (Switzerland). You know what Cote d’Ivoire earns yearly from exporting raw cocoa? A whopping $2.5bn. I repeat, a whopping $2.5bn! So Mars buys Ivorian cocoa and makes several products from it: Bounty, M&M, Mars and Milky Way, to name a few. You know Mars’ net income from chocolate products alone in 2015? According to the International Cocoa Organisation (ICCO), Mars made a pathetic $18bn, compared to Cote d’Ivoire’s whopping $2.5bn. Agriculture, indeed“.

Already, Approximately 70 percent of the population in Nigeria engages in agricultural production at a subsistence level. Subsistence agriculture is closely linked to a low level of economic development. This is because subsistence agriculture is characterized by a low-external-input level and low productivity (per land and/or per labour). Thus, asking more people to “go back to farming” is invariably asking more people to go back to poverty.

 

Truth is, competitiveness in agriculture like any other industry depends on technology deployment and utilization. The technological revolution in farming led by advances in robotics and sensing technologies is already disrupting modern farming practice. Is Nigeria ready for this? I do not think so.

Ok, maybe manufacturing will save Nigeria.

As manufacturing in China and south East Asia becomes more expensive, companies in search of low-cost manufacturing locations will naturally look for new locations for their manufacturing operations. And since Nigeria has a huge population, then we should be the logical choice? Not going to happen!

A number of factors are key in attracting this type of investment.  First, not only must you have low cost labor, the labor must also be SKILLED.  Second, any country seeking manufacturing investments needs to have an infrastructure that facilitates bringing manufactured goods from the production location to the port, and these ports need to be equipped to have these products shipped abroad as quickly and as cheaply as possible.

Finally, a competitive low-cost manufacturing center will provide a stable and secure location, largely free from both political uncertainty and insecurity.

Nigeria today does not meet any these expectations, making it difficult for manufacturers to set up factories in Nigeria.

Moreover, automation is transforming factories, rendering millions of low-skilled jobs redundant. Fast-spreading technologies like robotics and 3D printing will exacerbate this trend. Just a few days ago (10/10/2017) World Bank chief, Jim Yong Kim raised alarm that “The world is on a “crash course” as people’s hopes collide with a future in which millions of jobs are automated”

Manufacturing output rose even as employment fell

SORRY NIGERIA, YOU CAN’T STOP A MOVING TRAIN WITH PLASTIC

It is inevitable, the majority of jobs that require human labor and low intellectual capability are likely to disappear over the next decade and a half. There will be many new jobs created, but not for the people who have lost them — because they do not have those skills. And this will lead to major social disruption unless we develop sound policies to ease the transition.

It is not the technological change, in and of itself, that poses the great danger. Past technology changes have created new categories of job and an overall improved economy.

The danger is how quickly and extensively the change is happening. People and society are hard-pressed to adjust to the change at the rate it is occurring.

 

SOME SOBERING STATISTICS

The data from the table below was taken from The Global Competitiveness Report

2016–2017. With a score like this, sir, ma, the prognosis is bad for Nigeria!

The Global Competitiveness Report 2016–2017.

As if that is not enough, the country is practically bankrupt!

ANY HOPE,

Yes, it is still possible, albeit unlikely for Nigeria to turn things around.

To position Nigeria for the future, substantial investments are needed in research, infrastructure, and education. The most important of these areas to address is education. Why? Because as this report shows, the overwhelming economic evidence points to education—and human capital investments, generally—as the key drivers of economic competitiveness in the long term.

 

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