Wednesday , 3 June 2020
Home > Articles > Buying made in Nigeria is not enough
Made in Nigeria Innoson SUVs

Buying made in Nigeria is not enough

With the fall in oil prices hitting Nigeria where it hurts the most (90% of foreign exchange earnings come from oil), the country has been forced to seek alternative forms of revenue and wean itself from the overreliance on imports funded by oil exports.

The government has backed a “Buy Nigeria” campaign, which has gained a lot of support on social media. Senate President Bukola Saraki also recently expressed support for local goods manufactured in Aba. While Senator Ben Murray-Bruce, mocked as the “Senator for Twitter”, has been a strong advocate for buying made in Nigeria goods and claims to lead by example by ordering locally manufactured Innoson vehicles for himself and his company.

Senate President Saraki admiring Aba-made goods
Senate President Saraki admiring Aba-made goods

Murray-Bruce started the hashtag #BuyNaijaToGrowTheNaira and tweeted earlier today: “I’m not here to demand that you buy Naija. I’m here to inspire #BuyNaijaToGrowTheNaira by buying and using made in Nigeria products myself.”

This is all very well and feeds off the perception that Nigerian products and local industries have failed and not attracted Nigerian patronage because Nigerians are programmed to prefer all things foreign. While many Nigerians may have such a “colonial mentality”, the reality is that it was failures of government policy that led to the destruction of local manufacturing.

Senator Bruce test-driving an Innoson car
Senator Bruce test-driving an Innoson car

For centuries, Kano was known for its textile manufactures. But rather than support this industry, successive governments allowed it to be destroyed by cheap imports, first from the UK, and then from China and India. It was the same story for Bata Shoes and others.

The key to development is through building 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 most of the West did in the early stages of their development.

When your production base starts off with less complex manufactured goods, it acts as a spur for the development of more complex production techniques and industries, for example, the machinery to support production, the spare parts, etc.

Sadly, successive Nigerian governments bought into the myth that “free trade” was the route to development.

British activist George Monbiot wrote that the opposite is the case: “The founding myth of the dominant nations is that they achieved their industrial and technological superiority through free trade. Nations which are poor today are told that if they want to follow our path to riches, they must open their economies to foreign competition. They are being conned.

“Almost every rich nation has industrialised with the help of one of two mechanisms now prohibited by the global trade rules. The first is ‘infant industry protection’: defending new industries from foreign competition until they are big enough to compete on equal terms. The second is the theft of intellectual property. History suggests that technological development may be impossible without one or both.

“The three nations which have developed most spectacularly over the past 60 years – Japan, Taiwan and South Korea – all did so not through free trade but through land reform, the protection and funding of key industries and the active promotion of exports by the state. All these nations imposed strict controls on foreign companies seeking to establish factories. Their governments invested massively in infrastructure, research and education. In South Korea and Taiwan, the state owned all the major commercial banks, which permitted it to make the major decisions about investment. In Japan, the Ministry of International Trade and Industry exercised the same control by legal means.

“They used tariffs and a number of clever legal ruses to shut out foreign products which threatened the development of their new industries. They granted major subsidies for exports. They did, in other words, everything that the World Trade Organisation, the World Bank and the IMF forbid or discourage today.”

Korean development economist Ha-Joon Chang argued that: “There is a respectable historical case for tariff protection for industries that are not yet profitable, especially in developing countries. By contrast, free trade works well only in the fantasy theoretical world of perfect competition.”

Monbiot added: “Going right back to the mid-18th century, … Pitt the Elder’s view was that the American colonists were not to be allowed to manufacture so much as a horseshoe nail. Adam Smith agreed. It would be better all round if the Americans concentrated on agricultural goods and left manufacturing to Britain.

“Alexander Hamilton, the first US Treasury secretary, dissented from this view. In a package presented to Congress in 1791, he proposed measures to protect America’s infant industries. America went with Hamilton rather than Smith. For the next century and a half, the US economy grew behind high tariff walls, with an industrial tariff that tended to be above 40% and rarely slipped below 25%. This level of support is far higher than the US is prepared to tolerate in the trade negotiations now under way.

Alexander Hamilton, the first US Treasury Secretary, advocated protecting infant industries in the 18th century
Alexander Hamilton, the first US Treasury Secretary, advocated protecting infant industries in the 18th century

“The lesson is clear, … South Korea would still be exporting wigs made from human hair if it had liberalised its trade in line with current thinking. Those countries that did liberalise prematurely under international pressure – Senegal, for example – saw their manufacturing firms wiped out by foreign competition.”

Chang is quite clear on this: “In the same way that we protect our children until they grow up and are able to compete with adults in the labour market, developing country governments need to protect their newly emerging industries until they go through a period of learning and become able to compete with the producers from more advanced countries.

“Just as failures in the world of parental protection are hardly an argument against parenting itself, so cases of failures of infant industry protection do not constitute an argument against infant industry protection per se – especially when history shows that with startlingly few exceptions, successful countries in the past and in the present have used infant industry protection”.

So we need to “buy Nigeria”, but for this to lead to sustainable growth of a domestic industrial capacity, we need a competent government that would protect the domestic market from cheap imports, provide targeted support for key local industries, and develop a coherent and disciplined industrial strategy that ensures that the firms in receipt of government support are held to account in terms of delivering for the greater good.

Download PDF

Check Also

We’ve raised concerns to Buhari about rising levels of violence in Nigeria – British minister

7 February 2020 Heather Wheeler, the Foreign and Commonwealth Affairs minister, said yesterday that: “We …