Someone once described President Muhammadu Buhari as operating on analogue in a digital age. The president confirmed his archaic thinking in Saudi Arabia when he said to potential “investors”: “With the downturn in the global prices of oil, we now have to prospect our solid minerals. We have to return to agriculture. Mining and agriculture are our hopes now. We will welcome investments in these areas. We will appreciate an in-flow of more resources and expertise to help us achieve our objective of economic diversification.”
Buhari seems to be hankering for a return to the “golden age” when there were coal and tin mines in Nigeria. When there were cocoa, palm oil and groundnut plantations in the West, East and North of the country. The simplistic diversification of an economy that is mainly dependent on oil to agriculture and mining looks good on the surface. But that sort of thinking falls apart when subjected to scrutiny.
Nigeria, before oil took over as the main source of government revenue in the mid 1970s, was no great shakes. A return to cash crop farming and mining is not the route to economic development. Those primary commodities are subject to the same pressures, usually downward, as oil. Most Third World countries are dependent on such primary commodities and are not much better off than Nigeria. So it is really not sensible to be seeking to emulate a country like Zambia, for example, with decades of experience in exporting copper and maize, and yet remains among the poorest countries in the world.
In fact, organising the economy purely on the basis of the production for export of primary commodities is one of the most significant factors in creating underdevelopment. This type of production leads to food scarcity, balance of payments deficits – as the tendency is for prices of primary products to go down while processed goods go up in value. Korean development economist Ha-Joon Chang argued in 2012: “Worryingly, over the past decade many African countries have increased, rather than reduced, their reliance on primary commodities, whose notoriously large price fluctuations make sustained growth difficult.”
The way out of underdevelopment and proper diversification is not found in exporting more primary goods in addition to, or as a substitute to oil. It is through investing in the domestic manufacturing of goods. It is by having a domestic growth strategy based on domestic needs, domestic investors and domestic institutions. It is in creating a domestic industrial capacity and protecting domestic infant industries. This domestic strategy has to be in line with massive investment in infrastructure, healthcare, education and research, including intellectual property theft – just like the Japanese, South Koreans, and the West did.
Chang pointed out that ‘industrial development through more active industrial policy – similar to what we saw in the east Asian “miracle” economies, like Japan and Korea, between the 1950s and the 1980s’, would lead to more sustainable growth for African countries. The rise in commodity prices a few years ago was due to demand fuelled by the Chinese economic boom. And this boom was generated, according to Chang, by China’s industrial policy.
Chang also stressed that: “Most western countries, including Britain and the United States, aggressively used industrial policy in the earlier stages of their developments”.
The “industrial policy” of a country according to Wikipedia is “its official strategic effort to encourage the development and growth of part or all of the manufacturing sector as well as other sectors of the economy”. Part of this should include how domestic industries should be nurtured and protected through tariffs on imports, subsidies and investment.
Nigeria would be placed on the path to genuine progress if Buhari’s government concentrated on developing an industrial policy, getting it right and putting in place the conditions for its successful implementation. Taking the country back to the 1960s is not an option.