Nigeria: beyond protectionism and import substitution By Seun Kolade

The dramatic fall in oil prices, and the even more dramatic depreciation of the naira, has left Nigerians scampering for answers and searching for ideas on how to arrest the nation’s slide down the precipice. Governments, especially at the state level, are struggling to pay salaries. The private sector has been hit, with thousands losing their jobs. The good thing now is that there is a renewed sense of urgency about the need to address the long-standing problem of the nation’s heavy dependence on crude oil receipts. Amid all the doom and gloom, Nigeria now has a chance to move away, once and for all, from the “crude” economy.

As is often the case with Nigerians, social media has gone on overdrive, with armchair critics and beer parlour “experts” proposing ideas and solutions on how to move the economy forward. Much of the popular rhetoric has centred on protectionism and import substitution. A well known senator of the federal republic has released a lot of posts urging Nigerians to buy Nigerian made products. He is following up his “patriotic” posts with big publicity about his efforts to “lead by example”. He is buying new cars assembled in Nigeria. And so on. Others have pointed out that his own history as a businessman has been about promoting and selling foreign products, not least through his well-known Silverbird Cinemas.

There is merit in some form of temporary protection for local enterprises, and in the idea of a nation producing to cater for its domestic needs. Import substitution is often associated with developing countries, particularly as it occurred during the years of the Cold War, through the 1980s. In reality, even a country like the US has, from time to time, embraced the idea of import substitution as part of a strategy to promote national and regional development. That was the case in the “Buy America” campaigns in the 1970s. Even within the US, states like Oregon (through its Oregon Market Place initiative) and Massachusetts (through its “Community Supported Agriculture”) used import substitution to stimulate local economies and stem the tide of capital outflow to the tune of billions of dollars.

However, the fact is that protectionism and import-substitution are not, on their own, credible economic strategies. Such an approach is spiritless and lacking in vision and ambition. It is not sustainable in the long term. No nation that has the aim of selling its products to the outside world should shut its market to same. The logic is simple and straightforward.

A nation like Nigeria can however kick start its comparative advantage by combining temporal policies of protection, say in in select industries, with a rigorous programme of quality control, promotion of innovation, and development of advanced human capital. Without the latter strands, protection is not only futile, it is ultimately inhibiting. Consumers are fundamentally the same everywhere. The consumer is first and foremost practical, before he is a patriot. He wants to buy a product that is functional, good value for money. It may be a Korean or Tibetan product. His main concern is whether it is at a good price, and does its job.

Take the example of the much-talked about Innoson cars. So far all the talk have been about the fact that it is produced in Nigeria, and little or nothing about the competitiveness of its price and the quality of the product. Yet this is the one area where government can step in, with support for quality assurance, and temporal subsidies for local firms. Industries should be encouraged to embrace a forward-looking approach by which they can look to export their products overseas within some years of local production and sales.

An export-oriented economy is more ambitious and sustainable in the long term. It is, yes, more challenging, as it requires especially high levels of specialised human capital to drive innovation and change, as well as a high level of physical capital, especially in terms of energy and transportation/communication infrastructures. Yet it is the way of the future, for nations aiming to achieve and maintain competitive advantage.

One argument that is often made is that developing countries are at a distinct disadvantage as they struggle to achieve competitive advantage. It is said that because of the weakness of institutions and the derelict state of essential infrastructures, the goal of an export-oriented economy is too ambitious, almost impossible.

Now, while we should not make direct comparisons, the curious fact is that it is the nations that have suffered significant social and economic crises that have, in fact, gone on to achieve competitive advantage within a short time. Until 1989, Germany was divided in half. Japan suffered heavy defeat in the Second World War, as well as South Korea. It is true that other things were at play, like Germany’s historical position in human capital development, or Japan’s water-tight social organisation of production. The inescapable fact is still that these nations emerged from crises to become hosts of world leading, competitive primary industries in manufacturing and services, etc.

Nigeria’s crisis point is actually a critical moment of opportunity. The next 10 years may decide the subsequent 100, in terms of economic transformation and industrial development. With the right policies, incentives and infrastructures, Nigeria can unleash the productive capacity of its 180 million people, with ambitious, innovative entrepreneurs driving the “Nigerian miracle”. Alternatively, it can unleash hitherto suppressed demons, precipitating a nightmare for which Boko Haram insurgency will be but a dress rehearsal.

There is no middle ground. Given the delicate state of the polity, with millions of youth unemployed – hungry and angry, the option for half measures is now gone for good. Its either an economic miracle. Or a tragic nightmare.

A version of this article was originally published by Premium Times, Nigeria’s foremost online news media, on 23rd February 2016. You can find the version at http://blogs.premiumtimesng.com/nigeria-beyond-protectionism-and-import-substitution-by-seun-kolade/

Can entrepreneurship education stem the tide of poverty and terrorist violence? by Seun Kolade

In April 2014, the Boko Haram terrorist group abducted 234 school girls from the North eastern Nigerian town of Chibok. This tragic episode captured the attention of the international media, with UK prime minister David Cameron, United States First Lady Michelle Obama and Nobel-prize winning school girl Malala Yousafzai joining a host of other celebrities in the international campaign to “Bring Back our Girls”. As at the time of writing, the whereabouts of the girl is still unknown.

The Boko Haram insurgency had started well before 2014. The group, originally known as Jama’atu Ahlus-Sunnah Lidda’AwatiWal Jihad (Arabic for ‘People Committed to the Prophet’s Teachings for Propagation and Jihad’) was formed in 2002 by radical cleric, Mohammed Yusuf. Over the years it came to be known by its core teaching that “western education is forbidden”. Yusuf was extra-judicially executed by security forces in July 2009, and the group became more violent. The bombing in August 2011 of the United Nations Building in the capital city of Abuja confirmed a new dimension of Boko Haram tactic of targeting international buildings, government property and crowded places in series of suicide bombings. Over the years, these attacks have left scores of thousands dead, and millions of people displaced. Internal Displacement Monitoring Group (IDMC) estimates that 3.3 million people have been internally displaced due to conflicts in Nigeria. Of this, 800,000 children have been displaced by Boko Haram violence alone.

The rank of Boko Haram group is filled with the army of uneducated, unemployed and impoverished youth. They have become disillusioned with government, disaffected with the political elite, and are prime targets for Boko Haram recruitment drive. This is the background to the intervention launched in 2011 by the Centre for African Entrepreneurship and Leadership (CAEL), University of Wolverhampton, UK.

Presenting a counter narrative to the Boko Haram propaganda that “western education is forbidden”, CAEL’s project was based around the core idea that entrepreneurship education is the means by which unemployed youths can acquire critical skills to plan and develop their businesses. With these skills, it is hoped that these new ventures could grow and expand to become employers of labour, in the process contributing to national strategy to reduce unemployment and alleviate poverty.

In 2012, CAEL launched its pilot project in partnership with the Centre for Entrepreneurship and Enterprise Development (CEED), University of Maiduguri. 190 people were given intensive entrepreneurship training. At the end of the training, a Business Plan competition was launched, and forty trainees with the best Business Plans were given grants for new start-ups. Four years after, the owners of these enterprises were interviewed to assess the impact of the training provided.

The participants were all emphatic in their assessment that the training contributed significantly to their improved knowledge and skills about business planning, record keeping, innovative advertising and improved approach to customer retention and customer service. Mohammed, one of the participants in the training, commented that:

The training helped me a lot as I gained a lot of knowledge about business strategy. Before the training at the University of Maiduguri I did not have much knowledge about the business. I know better now how to plan, invest my money, and motivate our customers. After the training I know better how to deal with companies who supply our goods. Before then I did not have much knowledge about how to control and manage the business. My business was growing quite well until the insurgency grew worse… The training helped me to advertise my business differently. So I went to the small hamlets and villages to get people to sell and buy my goods. Sometimes I give them my complimentary cards, encouraging them to call me. I also offer discounts for the retailers, to encourage them.

One of the women participants, Christiana, highlighted another crucial aspect of the intervention: the training of trainers who can then go on to others, often in the more remote areas. She thinks more investment is needed in this area, especially for women entrepreneurs who have been compelled into micro-enterprise by the necessity of poverty and violence, and are desperately I need of training:

I think we need more women who can train others. It is not enough to just give them money for subsistence. I think women should be given equipment and other support in kind, rather than cash, because if you just give them money, they might be tempted to purchase other things other than what they need for the business.

For these participants, entrepreneurship education is as important as military strategy, if not more so, to stem the tide of terrorists’ recruitment and violence. Mohammed observed that “the reason why Boko Haram has gained a lot of followers is because some people are jobless and others are illiterate.” Another participant, Modu, asserted that “entrepreneurship can help eradicate poverty” by focusing attention on skill training for young people “so that they can do something for themselves”. He, however, suggested that for this to work government need to show more commitment, for example by providing young entrepreneurs with tools and start-up funds, in addition to adequate training. He says it is important to make young people understand that “government cannot employ everybody. If people are made to realise that it is not through government that you must eat. You must do something with your hands. You must do something to sustain your life, and even help sustain the lives of other people.”

The trainees spoke of their struggles and triumphs, and their high ambitions to grow and expand their business, even in the volatile environment of insurgency violence. There is no sense of resignation, or desire to seek quick easy escape from their violent ridden community. They are motivated by the prospect and hope of becoming successful entrepreneurs, not the fear or desire to become refugees. Christina recently won an international award for her fashion design business, and her clothing lines are now being advertised in Malta and Amsterdam. Mohammed speaks of his plans “to expand to other locations where there is good demand for my goods. I want to have new branches in Kano, in Yobe (because Yobe is near Maiduguri). I will have another in maybe Bauchi, which is also near. I hope to employ like 50 people in the next four years.” Modu says that: “For now I have only one branch. I want to have like five branches within my locality. If possible I also want to expand my business to other states within Nigeria. I also want to employ more people. We are currently doing electrical work. We also want to incorporate building and carpentry work. We are hoping that in the future if government for example want to build an estate, we’ll be the one to handle such. By doing this we will be able to employ more workers.”

This intervention has demonstrated that, given the right support in terms of training and tools, people in conflict ridden environment are capable of making things happen in spite of destructive violence unleashed by terrorists.

In a recent interview, The Vice Chancellor of the University of Maiduguri, Professor Ibrahim Njodi singled out the University of Wolverhampton for special praise for their vision and courage to partner with the university at a time other foreign institutions and organisations were scared away because of the insurgency. In one of the earlier visits, Njodi said, the partners from Wolverhampton “…spent about 23 days with us working on Centre for Entrepreneurship and Enterprise Development which is now… coming up so strongly”. Professor Geoff Layer, Vice Chancellor of the University of Wolverhampton, said: “we are actively engaged in communities and societies around the world. This is why we have our Centre for African Entrepreneurship and Leadership, a new centre that we have set up to focus specifically on developments around needs within Africa, around entrepreneurship, how we bring some of our experiences, some of our learning, and share with organisations.”

The University of Wolverhampton through the Centre for African Entrepreneurship and Leadership is currently embarking on a new phase of intervention with the partners at the University of Maiduguri. In addition to Maiduguri, there is an ongoing partnership with the Entrepreneurship Centre at Bayero University, in the Northwest city of Kano, another city affected by the Boko Haram insurgency. The progress has been encouraging, but there is still a lot to be done.

The Centre for African Entrepreneurship and Leadership(CAEL), University of Wolverhampton, will be formally launched on Monday, November 30 2015 at The Lord Swraj Paul Building, City Campus Molineux (North), Wolverhampton For more about this visit CAEL’s news page .

 

Dr Seun Kolade is a postdoctoral research fellow with the Centre for African Entrepreneurship and Leadership, University of Wolverhampton

Between cash transfers and enterprise support by Seun Kolade

Nigeria’s newly elected vice president stated recently that the government need to, as a matter of urgent necessity a “conditional cash transfer” programme by which those without jobs can be given a sum of N5,000 a month to help them to survive and meet their basic needs. Among other things, he stated that “if we have to wait until the industries are functional and the government is able to provide jobs for everyone, most people will be dead by the time we get to that stage”.

The government’s proposal as articulated by the vice president is well intended, but it is wrong headed all the same.  The idea of social protection is in itself a noble one. The state has a duty to protect the most vulnerable in society, and that includes the infirm, the sick, the children and the destitute. For the poor who are able bodied and often possessing basic skills, the goal of the state is to empower them so they can get out of poverty. That approach achieves several goals in one move: it raises the overall productivity of the nation, promotes the welfare of citizens, and advances the cause of human dignity.

Alright, let’s take a step back to further examine the “conditional cash transfer” plan. By several estimates the number of Nigerians living in abject poverty is in tens of millions, some say 70 million. N5,000 a month is pittance, but let’s work with that. In fact let’s assume that the very poor among the poor are 20 million, the government will still require 100 billion naira a month just to give out N5,000, which is really not enough to keep people alive with food and stuff. That is 1.2 trillion naira for the year. The big question is not so much in the amount of money, but in the sustainability of such a plan. How long can government keep up such a programme of handouts.

The essential nature of handout is that it is incapable of, or at the very best has weak capacity for, regeneration. You spend it on consumables, and it is gone forever. It can be argued, albeit tamely, that the money is serving some economic purpose since it is being circulated within the national economy. However, if you are to put in on the productivity scale of 1 to 10, the money cannot possibly achieve more than a score of 2, because it is achieving much less than a small fraction of its potential. One, because it is not given in bulk, there is little the poor recipients can do with it by way of profitable investments. Two, because the poor are disadvantaged with regard to access to information and opportunities, the potential for investment is significantly hindered.

Consider, then, an alternative plan where governments organise the poor in groups of five each, say. Each group, assisted by a dedicated team of advisors, come up with a business plan in selected sectors of the economy- agriculture, light industries and basic services. The sectors are chosen to reflect appropriate skill sets of the poor. The government then provide each group with, say low to 0% interest loan of N500,000 to N1million each, an equivalent of less than N10,000 each for every member of the group. The fund can be released in batches as incentive for progress and performance of the enterprise, and the group can be given up to two years or so to repay the loan. Ideally then, in two years, the government recovers the fund to use for another cycle of the enterprise funding, or indeed for one or the other intervention programme.

This sketchy idea is of course not without its challenges and pitfalls, the biggest of which is the problem of default.  Even with these potential pitfalls, there is no good excuse to refuse to try, and you only need bits of imagination and creativity to anticipate and mitigate potential challenges. One obvious example is to use a public-private platform to disburse the funds.

The truth is, an enterprise funding initiative is a million times better than a free cash transfer programme. Where a cash transfer diminishes and condescends to the poor, an enterprise funding programme empowers and elevates them. Where cash transfer cultivates dependency, enterprise funding stimulates productivity. Cash transfer is parasitic, enterprise support is catalytic. The one consumes capital, the other generates capital.

Finally, let’s consider the political logic. In terms of impact, cash transfer is short term and short sighted. Enterprise funding is long term and far reaching. Cash transfer is unsustainable, especially in a less developed economy like Nigeria. It is also problematic in terms of the politics of selecting recipients and disbursing funds. As past experiences have shown, the process is a fertile ground for corruption, fraud and waste. On the other hand, enterprise funding is less problematic, and the challenges of implementation are easier to fix. Moreover it impacts the lives of more people in a real and lasting way.

It is not, as vice president Osibanjo suggests, the role of government to create jobs. It is rather their responsibility to create the environment and provide necessary supports and resources for businesses to flourish and for citizens to make positive contribution to the economy and to society. There is much the government can do. I hope they get it right.

 

 

“Go hungry, break the law, or create wealth”: thoughts on poverty, conflict and entrepreneurship activities in Nigeria By Paschal Anosike

 Nigeria is amongst the top ten largest countries by population, and more than half of the world’s 7.2 billion population is under 35 years old. About twenty-four per cent of nearly 170 million Nigerians are today either under-employed or unemployed. Of this percentage, the youth sector is the worst hit. Youths (ages 15-35) account for nearly sixty per cent of the Nigerian population, which represents thirty per cent of the Nigerian workforce – yet, thirty-eight per cent of them remain unemployed. One obvious implication of this is that most Nigerian youths who are either underemployed or unemployed have little or no chance of competing globally. A more worrying implication is that by 2020 and beyond, most Nigerian youths will become parents themselves with little or no means of sustenance – therefore, it is doubtful how they would contribute to achieving the Vision 2020 goal.

When individuals lack the economic means to sustain their wellbeing or that of their families, two things become inevitable – they either go hungry or they break the law. This situation presents a very serious challenge for Nigeria. Entrepreneurship development could mitigate this challenge.

Although the actual size of entrepreneurship activity in Nigeria may never be accurately estimated, entrepreneurial activity in Nigeria is not only triggered by a desperate need for an individual to obtain means of subsistence for his or her family, evidence suggests that entrepreneurship activity have been recreated and expanded under diverse economic circumstances. In particular, entrepreneurial activity in Nigeria has evolved from agriculture, manufacturing to embrace entertainment, retailing and more recently the provision of repair and maintenance services in mobile telecommunications sector. Religion also plays a significant role in the expansion of entrepreneurial activity in Nigeria. Through the growing influence of “prosperity gospel”, a significant swathe of the Nigerian unemployed has resorted to evangelism as a means of achieving economic prosperity. To better understand the dominant form of entrepreneurial activity in Nigeria, I divide entrepreneurship into two types   – opportunity-based entrepreneurship and necessity-based entrepreneurship.

With opportunity-based entrepreneurship, an individual seeks out opportunities and chooses to pursue them in order to improve his or her wellbeing and the community. Necessity-based entrepreneurship is a situation in which one is left with no other viable option to earn a living, not as a choice, but out of compulsion seeks out any means of survival in order to avoid starvation and criminality. The distinguishing characters of these two entrepreneurship forms are the disposition or orientation of the individual at a particular moment in time as a result of specific trigger to act vs a deep-rooted desire for greater self-satisfaction and autonomy. Sadly, the dominant feature of entrepreneurship in Nigeria today gravitates towards necessity based entrepreneurship. The challenge is therefore to encourage an opportunity-based entrepreneurship to take a firm root in Nigeria.

As an idea, entrepreneurship is synonymous with personal and behavioural attributes namely, creativity, innovation, experimentation and risk- taking behaviours. These attributes are manifest through the individual because of a desire to achieve self-satisfaction and autonomy. Autonomy as a dimension of entrepreneurship is a state of independence that influences an individual to follow through a conceived idea. Creativity and innovativeness explain the individual’s propensity to orchestrate a novel or uniquely demanding achievements. Experimentation and risk-taking connotes the individual’s willingness to seek and seize opportunities even in the face of uncertainty. A tolerance for uncertainty is part of entrepreneurship and is manifest through willingness to do something and the commitment to see it through without a guaranteed outcome.

Sadly, the situation that emerges in Nigeria suggests that the individual as an “entrepreneur” has yet to exhibit the above attributes. This is not to say there are no examples in the Nigerian society where these attributes have been manifest. Indeed, there are. The likes of Aliko Dangotes, the Wale Adenugas and the Pascal Dozies are only few examples. These examples are a testament that given the right conditions, Nigerians possess and can exhibit the much-needed opportunity-based entrepreneurial mind-set. The key question, of course, is whether we are a society of individuals willing to seek out opportunities in order to enhance our wellbeing and that of our communities without relying on the State.

Responding to this call will force us to think about the host of other pertinent but problematic challenges in the relationship between the Nigerian individual and the State. The issue of a perennially lack of the investment climate and the poor infrastructure remain a moral conundrum for the Nigerian State and a dilemma for the Nigerian entrepreneur. In this, perhaps, the enduring words of former American President – John F. Kennedy offer a hint for a reflection: “Man holds in his mortal hands the power to abolish all forms of human poverty”, he went on: “ask not what your country can do for you – ask what you can do for your country”. To these I add – what will make Nigeria great is not so much as what it can give to the individual, rather, as an individual what we are willing to sacrifice and give for the good of Nigeria.

 

Higher education in Nigeria: is more less? By Seun Kolade

On Tuesday 14th July 2015, the body responsible for coordinating entry examinations to higher institutions in Nigeria announced its decision to lower the minimum score for university entry to 180 marks. This is arguably the lowest it has been for decades, and the announcement has been met with strong criticisms by Nigerians on social media, many lamenting falling standards and lack of adequate attention and commitment from government.

In spite of the increasing level of graduate turn out in Nigeria, unemployment and poverty have remained very high, and graduate unemployment in particular has worsened in recent years. According to official statistics, unemployment rate increased from 11% in 2006, to 24% in 2011, and a great number of those employed are under-employed (World Bank 2013). The group mostly affected by the unemployment crisis is the youth, with one report estimating that the unemployment rate among the Nigerian youth is at least three times the national composite average, and three times the average rate for other sub-Saharan African countries. Moreover, it has been estimated that about 71% of the Nigerian population are living in relative poverty .

Graduate unemployment constitute a significant part of overall youth unemployment in Nigeria, and it is an especially disturbing statistics considering one of the key objectives of universities is to produce graduates with requisite knowledge and skills to fill the manpower needs of the national economy (Federal Ministry of Education 2008). A recent assessment of the quality assurance process in Nigerian universities has revealed significant, sometimes drastic, reduction in quality of student recruitment processes, examinations, and staff appointment and promotion, among others. These were especially noticeable from the 1990s, and some have attributed the trend to governments’ reduced attention and investment on education, and the associated phenomenon of “brain drain”, with many academics leaving Nigeria for greener pastures overseas. Increasingly in recent years, employers have complained about troubling un-employability of Nigerian graduates. Investigators have reported that a growing number of the Nigerian university graduates are weak in analytical and communication skills, and are especially deficient in entrepreneurial skills standards of higher education in the country. Already, many stakeholders in the higher education sector and industry have expressed concerns about the quality and relevance of higher education to requirements and needs of the national economy.

Since the start of the fourth republic in 1999, the number of higher institutions, and the number of students enrolled in them, has increased significantly. This is partly due to government’s liberalisation of the higher education sector, and the attendant licensing of private universities. This report for example indicates that, between 2003 and 2007 alone, the number of universities in Nigeria grew from 53 in 2003 to 128 in 2013 accordingly, student enrolment and graduate turnout have grown considerably over the years, with university enrolment increasing from 780,001 in 2005 to 1,013,337 in 2009.

It may be a little simplistic to attribute the problem of graduate unemployment mainly or solely to lower quality of higher education and turnout, in terms of analytical and communication skills. The current structure of the Nigerian economy is such that there exists limited opportunities for graduate jobs. The national economy is dominated by heavy reliance on crude oil, and successive governments have given very little attention to other sectors of the economy. In recent years there have been some growth in the services sector, but the manufacturing sector is severely under-developed, and there has been no progress in Agriculture, among others. As such, even highly academically gifted graduates are often faced with the challenge of very limited opportunities for employment.

In the light of the foregoing, a key part of on-going debate and recent policy intervention is the renewed emphasis on entrepreneurship education. It is suggested that stakeholders in the higher education sector need to embrace a paradigm shift that reflects the peculiarity of the Nigerian experience. There is, it is said, need to put greater emphasis on prospects for new small-scale business start-ups across the whole spectrum of the nation’s economy. Instead of waiting for employment opportunities, graduates can actively explore opportunities to be employers of labour.

In order to achieve this paradigm shift, there is the need to revamp the structure and content of curricula in the universities. Specifically, there is a critical need to invest resources and personnel in to integrate entrepreneurship content into university courses, among other strategies to emphasize entrepreneurship in the curricula.

Welcome to CAEL’s blog!

This blog features contributions and viewpoints about on-going research and various intervention programmes being run by the Centre for African Entrepreneurship and Leadership (CAEL).

CAEL coordinates capacity building activities that focus on entrepreneurship and leadership, and provides opportunity for evidenced-based research and policy for Africa.

CAEL serves the wider African communities in a programme of Africa-based entrepreneurship, connecting groups and institutions with Faculties and business support units within the University for the purpose of developing sustainable schemes for SMEs growth, graduate and youth employment and women empowerment.

 

 

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