They made it that “quick” because not inspite of the infrastructer laid down by their government. Their country has an ecosystem of brands that are willing to pour billions in advertising on those platforms, generating a lotta revenue for them. trust me if they launched in Nija the story will be different
The tech you’re talking about is window dressing. Manufacturing (ie. the ability to combine raw materials, energy, and talent to transform into products) is the bedrock of any industrialized society. All these tech companies leverage existing infrastructure… how on Earth could Apple become so big if there were no manufacturing base that could transform aluminium, lithium, petroleum, silicon, and many other rare materials into the supercomputer called iPhone? Or Alphabet if there were no computers, millions of miles of ethernet cables, rockets (to launch satellites), ships (to deploy undersea cables), hard drives to store data, CPUS to crunch data, LCDs (to see data) and so on. I think you woefully underestimate the primacy of manufacturing.
Sure, it’s not sexy to turn silica sand into CPUs (I personally would not mind owning a foundry, mind you), but these companies employ and feed far greater numbers of people than these tech companies you so admire. Nigeria needs vast numbers of unsexy companies to hire the teaming unemployed and save foreign exchange: frozen chicken, wheat, rice, plastics, small electronics, canning, etc. Once we have this solved, then yes, we can move up the value chain to more hip tech. Till then, we’re trying to do calculus when we have not yet understood plus and minus.
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And yes, you have a few large companies in China as vanguards, but the companies that hire billions of Chinese (and produce the vast majority of wealth) are small 2-20 person shops, relentlessly cranking out one small, unsexy widget. These are what Nigeria needs right now, not a few large companies whose entire existence is based on importing everything.
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A very religious man was once caught in rising floodwaters. He climbed onto the roof of his house and trusted God to rescue him. A neighbour came by in a canoe and said, “The waters will soon be above your house. Hop in and we’ll paddle to safety.”
“No thanks” replied the religious man. “I’ve prayed to God and I’m sure he will save me”
A short time later the police came by in a boat. “The waters will soon be above your house. Hop in and we’ll take you to safety.”
“No thanks” replied the religious man. “I’ve prayed to God and I’m sure he will save me”
A little time later a rescue services helicopter hovered overhead, let down a rope ladder and said. “The waters will soon be above your house. Climb the ladder and we’ll fly you to safety.”
“No thanks” replied the religious man. “I’ve prayed to God and I’m sure he will save me”
All this time the floodwaters continued to rise, until soon they reached above the roof and the religious man drowned. When he arrived at heaven he demanded an audience with God. Ushered into God’s throne room he said, “Lord, why am I here in heaven? I prayed for you to save me, I trusted you to save me from that flood.”
“Yes you did my child” replied the Lord. “And I sent you a canoe, a boat and a helicopter. But you never got in.”
Nobody is calling for the death of manufacturing and nobody is saying we shouldn’t invest in physical infrastructure. Using our imperfect infrastructure as an excuse for our failures in a modern global, knowledge driven economy is weak cop out. Especially so for the under-35s. It’s a rehash of the “let’s blame the government” excuse.
Simply put, we need better infrastructure but we cannot afford it. if you want to build better physical infrastructure, you need dollars. Where do you get said dollars?
Technology has taken more people out of poverty in India than anything ever before. “God” has given us an opportunity to compete on an even footing and you want us to start from the back.
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I’m not exactly sure how prioritising ICT helps without the infrastructure for it to support. Manufacturing is what we should pursue now, while supporting the process with ICT to speed up performance and delivery.
Look at our current ICT ecosystem, while there are a handful of awesome stuff, there’s like x1000 of rubbish and this is highly attributed to the craze of ICT as the next big thing. As an example, there are a lot of SMEs rushing for online presence when it has nothing to do with their business. There’s this blind craze and government’s support AT THIS TIME will worsen it.
When we are producing, we would have PROCESSES to IMPROVE with ICT.
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This is the perennial question in this thread and I’ll try my best to answer it. Hopefully my point will be clearer this time.
- According to PwC, Nigeria needs to increase its infrastructure spending from $23bln to $77bln by 2025 (less than 10 years)
- Due to the oil crash, Nigeria’s oil earnings has skydived to $41bln
Two important questions we need to answer:
- How do you bridge the huge gap between our infrastructural needs and our funding reality?
- What do we need to export to richer countries in order to supplement our falling crude oil revenue?
Is it:
- Agricultural produce - I doubt it because the EU markets have always been hostile to the majority of our produce ostensibly because of our lack of compliance with their standards.
- Manufactured goods - Hardly any industrialized country in the world is able to compete meaningfully with China in the manufacture of a dizzying variety of finished goods. We have a comparative advantage if we move up the value chain in agric and start exporting end user goods such as chocolate instead of cocoa but then we start competing with our customers in the EU in their protectionist markets. It becomes harder to sell into their markets but definitely not impossible.
- Technology - and I mean the exported software and BPO services variant, which has been proven to be a highly profitable FX earner, indeed earning India $82bln last year and taking tens of millions directly out of poverty. For it, we don’t need grandiose government funded roads and bridges. On the contrary, the private sector needs the government to get out of their way as they lay the fibre and training academies that undergird the new digital infrastructure.
I’ll close by saying manufacturing capacity and focusing on infrastructural development are related but orthogonal issues. By considering the funding gap, that relationship quickly becomes a chicken-and-egg one.
You don’t need dollars you need skills for infrastructure construction otherwise you import it from other countries that take it seriously.
Fact is that every human endeavour requires knowledge and expertise. Every industry is tech from farming to delivering a baby The Americans spend billions on agricultural research. That spans everything from seeds to silos to machinery. Nigeria doesn’t even have enough tech to deliver stone free rice talk less blemish free tomatoes. We pump out more babies than Western Europe but how many make it to their fifth birthday or grow up healthy and fully nourished? Our hospitals are in need of tech upgrade from delivery equipment to paediatrics.
The moral of the story is that knowledge is the critocal ingredient for Nigeria to elevate itself and that comes with a strong education system and supportive government.
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On the first question the answer is simple. Enable the free market to do its job. Let the naira fully float and find its equilibrium price. Forex will flow in to serve the millions of undeserved customers in Nigeria. Need proof that risk capital is out there?
THIS, from yesterday
“Long live the credit boom: biggest 10-week inflows to emerging market debt funds ever and inflows to investment grade bond funds in 26 of past 27 weeks, and inflows to high-yield bond funds in 9 of past 10 weeks ….
Emerging market bandwagon continues: 10 straight weeks of EM equity inflows and 10 straight weeks of emerging market debt inflows …
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The premise of the question is wrong. We do not need to export to replace crude revenue. We need to build a tax base. Industrialized nations make the bulk of their income from taxes. That’s a sure sign that they have been successful in developing functioning commercial and capital markets
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The reason we need to build industry is simple. Not everyone in a poorly skilled country can work in tech and we do not have time neither can we afford to to wait for a generation to have a fully educated work force that can code. We need jobs for the boys and girls now. This means working with what we have > an unskilled and semi-skilled majority. Agriculture makes sense on many fronts, food is a necessity and Nigeria imports way too many products we can produce ourselves. A shift from importation to productions will have multiple effects - create jobs, raise wages, increase food and physical security, reduce our dependence on forex to buy everything, accelerate investment, and so on.
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As previously stated we have 170 million mouth in Nigeria, lots of captive folks to feed for days.
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Not true, China is fast approaching middle income. A lot of manufacturing is moving to Vietnam, Myanmar, Bangladesh etc. Again we can sell our home made chocolate to all the wealthier workers who have gainful employment across the agric value chain and semi-skilled manufacturing firms we invest in
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Economic efficiencyhas a great deal to do with logistic. There will always be a need to move people and products, software will not eat all of that. A lack of functioning infrastructure will always be a drag on productivity. You cannot compete if you have substandard infra. AWS exists because Amazon made money on the back of real things like warehouses, UPS, selling real items etc
If my arguments are still yet unpersuasive, take a look at this image and tell me how much of it is software vs physical things
Source
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Even Microsoft makes half its income from manufactured goods
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I’m sure a great deal of the advertisers on Google make manufactured goods
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Software is only 4% of Apples Revenue
Conclusion: Most of tech is manufacturing. Can’t manufacture any thing without starting with the building blocks of industry > Food, Shelter, Clothing > Agric, Steel/Cement, Cotton/Hemp/Polyester etc
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Yep there is too much capital in the world. Any African country that can deliver 5% return on investment per year or 50% over 8 years is going to be on the radar of big capital. Nigeria has finally woken up to the fact that salvation is gonna come from globalization. They are planning to concession the airports. For a market worth around 5 billion USD in sales it’s going to attract capital. If they can do the same with power and just let vertical monopolies form around cities funds will dump billions into power. Nigeria at just 300 billion GDP is an ant in the scheme of things. One only has to compare Lagos to New York and imagine the transformation of adding a subway to Lagos, thousands of elevated residential buildings, proper drainage and sewage, skyscrapers, malls, power plants. That is enough work to keep millions busy.
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Thanks for your answer. However on the first part, PwC and the AfDB will beg to differ. The second part unfortunately contradicts your first.
I’m not sure if you are agreeing or disagreeing with me. To move the discussion forward, perhaps it will help if discussants can answer these questions in a non chicken-and-egg way:
Thanks for one of the rather rare, well considered, non-emotive answers in this thread.
The article you referred to spoke of two ETFs - MSCI Emerging Market and MSCI Frontier 100. The former is up 16% this year whilst the latter is flat this year. As you know, global fund managers do typically not classify Nigeria as an Emerging Market in the company of Brazil, India, China, South Africa etc. We are seen as a Frontier Market in the company of Vietnam, Malaysia, Kuwait etc. This can be proven by looking at the holdings in the two funds referenced in your link.
##MSCI Emerging Market
Notice the preponderance of IT companies at the top of the weighting?
##MSCI Frontier 100
Notice how transaction-oriented, financial services seem to dominate the top of that list with a 50% weighting? In the full list, their Nigeria weighting is 53% financials and 30% manufacturing (Nigerian Breweries, Dangote, Nestle, and Lafarge), only one of which (Dangote) may be seen as an exporter. Clearly the great manufacturing renaissance is not happening. Rather we are seeing lots of fast money flowing into our money markets, taking advantage of currency arbitrages and misguided monetary polices, then flowing out at the first sign of trouble. Perhaps they are paying some attention to the economic theory of Comparative Advantage, which we seem to want to fight headlong against.
I agree that we need to build a tax base but the premise of the question feeds from the realisation that to build an effective tax base, we need real incomes to rise. Right now, every naira stored in a savings account or a pension fund since 2011 has been subject to double digit YoY inflation, 150% currency devaluation, and if you do a show of hands of the number of people in this forum that have gotten a pay rise since then, the silence will be deafening.
Double digit inflation is nothing new in naira, and we have always been able to manage it for over a decade. However, 150% currency devaluation is a killer. It spooks everybody - creditors, employers, and even consumers, hence the recession we find ourselves in. To fix the problem, we have to re-examine the root cause - rapid depreciation in our foreign reserves caused directly by the fall in crude oil revenues. With huge unemployment and stagnant wages, the tax base is very shallow, and increasing the marginal tax rate will not fix the problem as Arthur Laffer proved 40 years ago in that famous meeting with Dick Cheney and Donald Rumsfeld
I wholeheartedly agree. In industries where we have a comparative advantage, we should double down. Agriculture is the largest. Policy makers realise it and the Lagos and Kebbi leadership are doing great things, so is the inimitable Governor Obiano in Anambra. We do have 170 million mouths to feed and we can save our forex reserves in the process. However, agriculture whilst great for GDP is has limited FX earning potential because as we move up the value chain, it faces the Comparative Advantage problem.
Excellent point. It’s a bit of a conundrum for me and honestly I’m not sure how that tussle in South East Asia will play out. If I was a betting man, I’ll still place my bet on China. If anything, because of this excerpt for a recent Wall Street Journal report:
China’s share of total global manufacturing output was 25% last year, up from 7% in 2000, according to HSBC Ltd. To contain the loss of industries to lower-wage countries, it has offered subsidies and a range of incentives for manufacturers to relocate to cities in western and central China, where wages are as much as 30% lower than in eastern provinces.
Having said that, there is some hope in Nigeria potentially becoming a regional manufacturing hub, albeit one with strong Chinese influences.
There are many ways to interpret that chart especially when you consider that hardware is often a loss leader (for everyone apart from Apple), and because they have the comparative advantage of being rich and credit worthy enough able to fund loss making R&D, and we unfortunately do not share that advantage, and even if we did, it’s a stretch to think we can produce cheaper and better than the South East Asians in any reasonable period of time.
Thanks again for your well-thought-out response.
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You make a lot of solid points. Love the debate.
“But uh, back to the lecture at hand. Perfection is perfected, so I’ma let 'em understand”
This happens because we have let external interests dictate our internal policy and also not had leadership that has cared enough to flip the script. Nigeria has comparative advantage in location, people, and untapped resources. There are a lot of policies that would encourage long term capital investment if we are serious about it
- Completely liberalise the economy, accelerate privatization of state assets in a transparent manner
- Tax holidays, free trade zones etc. Tax consumption not production
- Encourage competition. Nigeria is too addicted to picking winners.
- Limit regulation of nascent industries, the growing talk about IGR is a bit of putting the cart before the horse
No argument here. We are in the stone age in Africa in terms of allocating investment capital. There is a reason why pension funds are powerful in the USA. They sit at the top of the financial markets and drive growth across every asset class. This also helps manage inflation because investments create jobs and raise productivity and incomes across all sectors.
China’s share of output is rising because they are moving up the quality scale. Encroaching on Japan and Korea in terms of quality. They have the benefit of various levels of development depending on region, so they are truly leveraging central control with regional mandates. Something Nigeria should think about seriously. It would be hard for China to pull of a “eat your cake and have it” scenario as wages rise. This chart from the WSJ articles says it all:
[quote=“niyi, post:31, topic:8284”]
There are many ways to interpret that chart especially when you consider that hardware is often a loss leader (for everyone apart from Apple), and because they have the comparative advantage of being rich and credit worthy enough able to fund loss making R&D, and we unfortunately do not share that advantage, and even if we did, it’s a stretch to think we can produce cheaper and better than the South East Asians in any reasonable period of time.
[/quote]
Hardware is a loss leader for Apple not Foxconn. And I’m sure 10 years ago no one though Vietnam and Bangladesh would be cheaper at producing certain good than China. We have to start somewhere. Nigeria also has better access to all of West and Central Africa, the US East coast for distribution. We could be mass producing clothing and exporting to other countries.
We need to seriously take advantage of AGOA.
Nice conversation.
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How do we bridge the huge gap between our infrastructural needs and our funding reality
To me when Nigeria is serious about infrastructure it will show. Roadwork is a 1,000 year old technology. If countries like Switzerland with a smaller population than Lagos state can construct long winding roads in their mountains without looking for Julius Berger then we should question ourselves.
Same goes for railroads. The rail line that connected the American west (California, Nevada, etc.) to the midwest was built by hand by American secondary school leavers and immigrants through tough territory like the Rockies. Today in Nigeria with a population of over 100 million able bodied young men and women we need the Chinese to show us how to lay rail lines from Lagos to Kano and elsewhere.
You don’t need dollars to dig and lay sewage and public water lines, something no Nigerian city can boast of in 2016. Indeed it tells you something that the telcos have laid over 40,000 kilometers of fibre cables in the space of 10 years using local contractors and illiterate manual labor all paid in naira.
Now when it comes to power which truly requires billions, the Nigerian government should stop sabotaging the public. Let the private sector run it the way they know how. If you are gonna fork out a billion dollars to construct power plants you better be able to corner and milk consumers for a good 20 years at a price that meets your needs and fits their pocket not what the Nigerian government says people should pay. You should distribute power as you see fit not through a grid the Nigerian government do not want to maintain.
What do we need to export to richer countries in order to supplement our falling crude oil revenue?
Knowledge helps in production and Nigerians being the great entrepreneurs that we are will find the markets to export. But if you can’t produce you can’t export and that is Nigeria’s present predicament. Like Akin said you start with what you have. Nigeria has great agricultural resources. Start there. We have lots of water. Do shrimp and tuna farming. We have great weather for pineapple, mango. Start making export-grade pineapple and mango juice. Invest in R&D for agricultural machinery. There is a market for agricultural machinery. The Brazilians make paper from elephant grass. The Ethiopians and Chinese make flooring and wood products from bamboo. The egyptians and pakistanis make some of the best cotton products. All of this can be done now.
Oil has enriched nobody but those in government or related contractors. I don’t see any evidence of an oil economy in a government that deliberately sabotaged its refineries so friends and family could make a margin importing petrol and kerosine and diesel. Where is oil revenue when Nigerian government spends more on salaries and houses abroad than on roads and what not.
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This seems like a positive development?
I think we can go a few steps further to actually invite companies in to prospect for minerals and resources by letting them write-off any investments related to exploration.
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I think I’m finally seeing your point: we currently have few viable short-to-medium-term alternatives for earning forex (to fund infrastructure, among others), but investing in ICT is the least encumbered way.
So you have my attention: how do we do it? I’m not asking to see if you’ll stumble in your reply, I’m genuinely interested:
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what software can we specifically write and sell? biz apps? health apps? ecommerce? Games? What can we “own” in the way we currently own entertainment on the continent? Do we need to get into European markets or can we concentrate on capturing Africa?
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can we leverage software into services? (we have the likes of irokotv, paga), but are there any other services in Africa that can be met with Nigerian software? For instance, I’ve had a dream of a nation-wide paid database of patients that hospitals and doctors can subscribe to, but will they pay? Does subscription model of SW work in African countries?
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What about outsourced programming (e.g. Andela)? How does one go about securing talent, training them, and securing contracts?
How well can these scale, and how would one convince the moneyed investor to invest their time, advice, and cash?
Personally, ICT parks should be build (organically?) around one or two tech Universities in a small, inexpensive college town (i.e. not in Lagos or Abuja)
I agree we have all the resources you mentioned plus a fantastic coast line and Y-shaped inland waterways that does wonders for trade. However, you haven’t mentioned the greatest natural resource of all - our aptitude for STEM, which had revealed itself during the war, and still manifests itself in Nigeria’s over representation in the great brain drain of Africa. Nurtured locally, I think it has the greatest export potential of all, hence the existence of this thread. Unless you think we don’t or no longer have that aptitude or it will take too long or cost too much to nurture it.
Another thing that’s worth noting is that the overwhelming trend in manufacturing is to increase automation and reliance on robots, and require less manual labour. Adidas’ move from Asia back to Germany comes to mind. It increases quality and reduces end-user costs. A double whammy that undermines the theory that a manufacturing renaissance in Nigeria will create a lot of jobs. If anything, it might kill more jobs. Food for thought.
I would look for a problem that a great number of people and find a cost efficient way to solve it. In the majority of cases the technology would be a background process.
Here is one example:
Problem:
There are a number entities across Africa that have challenges with conducting market research and due diligence on markets, investments, etc
Possible solution 1:
A SaaS platform that I can sell to companies where they can access great reports and interesting insights to support their efforts
Possible solution 2:
Provide consulting services to clients leveraging your “internal platform” to provide on demand research and insights
Possible solution 3:
Collaborate with consulting firms to offer your services as a new offering they can provide to their clients
These are three ways to approach the same problem. In solutions 2 and 3 your client do not even have to interact with your platform. They just need to know your process is fact and data driven.
African markets are a lot less tech savvy that some of the approaches we are taking.
By the way, The example above is a process I went through with Market Atlas. A company I stated 2 years ago. We led with solution 1 and quickly realized even US based clients wanted consulting services not a SaaS platform. So we pivoted. We keep in blackbox internal, all I clients care for are nice bespoke reports and insights they can print out and take with them anywhere.
Lesson learned: Lead with research and keep leveraging research to iterate.
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Thank you. I guess I didn’t make the point clear enough early in the thread.
I think it’s a mixture of macro policies. I’ll start with three.
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BPO Clusters / Parks: Business Process Outsourcing is the low hanging fruit at the bottom of the pyramid. By leveraging on our rather unique attribute of being a large, literate Anglophone country, similar to India, we can provide Customer Support Services, Telemarketing Services, Data Entry & Processing Service, Web Designing and Development, Bookkeeping and Accounting Services, etc. All the government needs to do here is provide tax breaks for private organisations that want to setup the technology parks that will cluster these BPO services together. Something similar to the 3-year tax break for mining companies will do nicely. If we don’t do it, Ghana will do it and the opportunity will be lost possibly forever.
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Biotechnology R & D: There are many uniquely African diseases or global diseases that can possibly be solved by synthesising African plants and compounds. We need a lot more government funded (or tax breaks) on research focused on malaria, HIV, viral haemorrhagic fevers such as Ebola and Lassa, and the multitude of epidemics that stunt our agricultural capacity.
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Digital Infrastructure Expansion: We need to increase the penetration of inland broadband links. Think South Korea level of saturation. Coupled with the establishment of physical and digital libraries in all the disused government buildings that litter the country, we will lay the framework for increased literacy and collaboration.
Regarding what software to write, think of how in compsci course in foreign universities, they don’t teach you a specific language, but rather they focus teaching you how to think logically. I don’t think we need to focus on a specific type of software. We just need to build the macro platform upon which the software driven solutions to Nigeria, Africa, and the world’s problems will evolve naturally.
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In addition to this. There needs to be a focus on subsidizing quality education and training for top talent. I also think we need to rethink the 4 year University model and create 18 - 24 month technical programs focus on all aspects of the software technology stack. (I value my 4 liberal arts econ degree but I would have not having to take the extra literature classes, sociology etc). A model like General Assembly with rigor around graduation and a certificate that means something.
Love the bias towards solving local problems. If malaria was still a 1st world problem it would have been cured by now.
I would farm out all these solutions to the private sector. The government should just subsidize the costs for those who cannot afford it. Get all those development funds to also underwrite if they are really in it to “help” us.
Small tangential rant
We need to drive our own agenda. Nigeria should have displaced France by now in French West Africa, talk about an under invested and neglected market. (Really not a fan of France and how they have pillaged french West Africa and made them her dependents).
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Niyi, development is a process. It took the Koreans 20 years from when they began to conquer electronics, it took Singapore 15 years to attract enough multinationals to use the place as a free trade area. It took the Japanese 35 years to dominate autos. These things take time because there is a process of first education, next training and then the feedback learning of industry and finance. The same goes for R&D whether its software and hardware. The Taiwanese that are manufacturing components for Apple and others were training at Stanford, Berkeley and the rest in the 1960s. Their companies only took off in the 1980s.
I don’t doubt Nigeria has brainpower but not enough. We have a few bright eggs in the western world but a sprinkling compared to other countries. All of you guys in the Silicon Valley area can attest to this. Go to Oracle, Intel, Microsoft, Google there are thousands of Indian engineers. There are a few hundred Nigerians. We don’t have CRITICAL MASS in STEM. The Indians do. The Israelis do. The Taiwanese do. The Chinese do. We need to do what those countries did and invest seriously in education. This means basics. From secondary school all the way to universities. Then you will see critical mass of brains that industry can use in 18-25 years.
For now, Nigeria has to start where it has an advantage. It has land, water, sunshine, cheap labor. We need to expand agriculture, textiles and in manufacturing anything assembly. I mentioned areas in agriculture and aquaculture let me mention manufacturing. Bangladesh has a garments industry that employs 4 million people and produces $19 billion worth of exports. Where is Nigeria? Brazil has a footwear industry that employs around 400,000 people and produces 81 million pairs of shoes. Where is Nigeria? South Africa’s auto industry exports over 300,000 cars worldwide and employs over 115,000 people directly. Where is Nigeria? We are importing junk accident-damaged cars from the USA.
Don’t get me wrong I am not saying those who can startup STEM should not do so. I am saying that before Nigeria becomes a global player there must be strong and sustained government support. And irrespective of what the US government says about “freedom” and private initiative, the fact is that the Number 1 investor in R&D in the United States is the US government. We are enjoying the internet, satellites, GPS, agricultural machinery, various medicines thanks to the US government’s support of university research via the National Science Foundation.