Diversification or competitiveness, which is Nigeria’s problem?

It is at best unfair to say that the Obasanjo, Yar’Adua and Jonathan administrations did nothing to diversify the Nigerian economy. The structure of the Nigerian economy has in fact changed remarkably since 1999.

In the last four years, the agric and oil sectors which used to occupy commanding heights in the Nigerian economy shrank relative to other sectors.

In the last two years agric sector contributed an average of 22% of GDP; industries and services contributed 24% and 53% of GDP respectively (oil and gas contributed much less). The reality is that the process of diversification has no end, it only has a beginning.

The economy becomes more and more diversified as it receives the breath of innovation, fresh investment and new thinking. The animal spirit of businessmen has a big role to play in the whole process.

There is physical evidence that some sectors of the economy which were hitherto almost nonexistent now occupy strong positions. The telecoms industry is one of such. Number of active phone lines has snowballed from less than 2 million in 1999 to 152 million in November 2015. The cement and entertainment industries are bright example of how far we have come. 

Also agro allied processing has received renewed vigour in the last 15 years. Reforms in fertilizer distribution and loans to farmers (both in form of seeds and farming equipment) were all geared at deepening the agric sector.

What those pushing the diversification mantra should be saying is that we need to diversify our export mix, because increase in domestic output has not translated to a better export mix.
But why do we have challenges with export diversification? It is because our export is not competitive internationally. 

Simple!
At present, Nigeria ranks 99 out of 140 countries on the Global Competitiveness Index, beaten by Benin Republic, Cameroon, Egypt, Iran, Islamic Rep., Cape Verde and Greece. Finland, Switzerland, United Kingdom, Singapore ranked first, second, third and fourth respectively.

Diagnosing the problem

There have been reports in Business Day that have categorically stated that some agric outputs which can be produced in Nigeria are being imported and sold on the shelves of Nigerian supermarkets. And the mind blowing part is they those foreign produce are often CHEAPER and of BETTER QUALITY than those grown in Nigeria! That is competitiveness!

To be able to grow crops hundreds of miles away and deliver them to Nigerian shelves at costs that are lower than those grown in Nigeria? That is the miracle of competitiveness and that is what Nigeria should aim to do, not just in agric but across other sectors.
Wherein lies Nigeria’s challenge? We lack the ability to produce at the lowest cost around. Why? Because we lack the infrastructure to do so. So will we remain this way in the short to medium term? Yes.

According to the World Bank, “an environment that fosters private-sector growth is vital to firms’ ability to compete on international markets.” Where roads are bad, electricity supply is poor, and the cost of finance is ‘fantastically’ high, output suffers the peril low quality and high cost.
In the new world of global competition, the market is more sophisticated, the logistics, packaging, marketing strategy etc have to be done in the most efficient way for products from any country (or brand) to be preferred among its international rivals.

Last week, the Federal Government announced that it was making effort to strengthen Nigeria’s ties with some members of the EU in terms of trade. Some of the European Union export rejects from Nigeria include Sesame seeds, Melon seeds, dried fish, meat, Peanut, chips and Palm oil, a government source said. 

The reasons given for rejecting them include the inability of exporters to adhere to global standards, poor packaging, and high level of chemicals. According to European Food Safety Authority beans is expected to have a maximum residue limit of 0.01mg/kg but the ones from Nigeria contain between 0.03mg and 4.6mg/kg of dichlorvos pesticides. These are issues we must look into to better compete.

Obodo Ejiro