VICTOR OGIEMWONYI
Victor Ogiemwonyi, a retired investment banker, is a former Governing Council member of the Nigerian Stock Exchange (NSE), now Nigerian Exchange Group (NGX Group). He sent this contribution from Ikoyi, Lagos. He can be reached via comment@businessamlive.com
In recent years, the debate, around granting tax waivers and tax holidays to industrialists has intensified. Some hold the view that these policies, promote favouritism and enrich a few individuals, to become stupendously rich, without giving them credit for what they have contributed to our national development that would otherwise not be there.
Is there a case for supporting those who will be our National Industrial champions?
In answering the question above, the following sub – questions will need to be answered first. What is the justification? How do we choose those to be champions? What will be the best way to do it without creating more problems? Are there successful global models to learn from?
The primary justification must be strategic importance .
To support the creation of a National Industrial Champion in any sector we must ask whether it brings us a comparative advantage or solves a national problem. There must be a clear national objective to be achieved. Choosing those to be championed, is the next big question, because of the implications. There must be objective analysis and the rationale must be consistently applied, whenever and in whatever sector of the economy, we make this choice.
In an environment where merit is often ignored, and favoritism is rampant, a rigorous process must be put in place to ensure we do it right.
A clear industrial policy
In order not to put the cart before the horse, we must first have a clear industrial policy that identifies areas where we have comparative advantage and strategic need. A clear industrial policy is imperative. Having a clear industrial policy means there is a vision and a clear plan.
Nigeria’s decline started when we abandoned our development plans. I once read a document, where Chief Phillip Asiodu, a brilliant civil servant, who rose to the position of a permanent secretary and was one of those super permanent secretaries, credited with Nigeria’s development strides before we lost our way, identified all the progress that was made at the time, and linked them to the development plans that were in place. There was co ordination, linkages and clear objectives. We must return to that framework, if we want to make progress. A clear industrial policy will let us focus on what sectors to prioritise, and then entrench the rules of engagement, giving everyone a level playing field, where merit will be clearly identified, pointing to those to be championed.
A National Industrial Council.
If we want this to be really merit based, there must be established, a National Industrial Council, created through legislation and protected from arbitrary dissolution. Its members must be chosen for their expertise and what they can contribute. Nigeria is blessed with talent in every state of the federation, so a careful and meticulous selection process, with sincerity of purpose, will ensure the best emerge. This council would develop and update industrial policy, identify strategic sectors, with longterm coordinated vision.
The aim will be to have a national institution that will meticulously plan our Industrial development and advise government. This council will be responsible for our industrial policy and will be saddled with identifying strategic sectors and putting rules in place for choosing our Industrial National champions to support. They will work with any government in power.
In the recent past, there was an attempt to do this, but in a more broad economic support group as in President Jonathan’s government. This was badly done, because the process of choosing this economic support team was not rigorous and were just assemblage of successful people, who had their own agendas. The group was compromised because of their own self interest that did not necessarily align with national objectives, all the time.
On the other hand, President Obasanjo was more intentional. His targeted intervention, in the cement industry, produced tangible results. You can quarrel with what he did, but he got results. Our cement problem is now solved. There was an incentive policy to give importation licenses to companies who would import cement for a fixed period and encouraged to use the profits to build cement plants. While many in the industry did not do the right thing, those who did, like Dangote Cement, focused on creating the needed plants and solved the problem. Many will forget now, that 20 years ago, Nigeria spent billions importing cement, eating up all our FX reserves and creating even more problems, clogging our ports with cement ships, and negatively impacting other aspects of our economy.
We now export cement, saving on FX from that sector, while creating jobs and supporting the economy with taxes, and has accelerated our building industry and infrastructure development. This model proves that, deliberate, well structured support, can work, especially when tied to measurable performance goals.
When we deliberately decide to create our industrial champions, we can give them support from tax exemptions, grants, longterm loans and purchase guarantees (e.g. how Nigeria buys electricity from power producers ). Power generating companies sell direct into the national grid, as a guaranteed market. The incentives are no different from global best practices.
We must change our mind set.
Let us get away from the current “crab in the barrel” mentality, and stop discouraging those who put in their sweat and resources to help solve Nigeria’s problem.
Creating National Industrial champions is imperative, but must be done right. We must support only those who have the capacity to solve our national problems , bring competitive advantage , align with clearly defined national goals. The policy thrust must be nationalistic and ensure that the favouritism is positive. The results must be clearly seen when achieved. No one can deny that we have solved our cement problem, for instance.
Where we have no comparative advantage, our industrial policy must be beneficial in other ways.
What about foreign investment?
Even foreign companies can be integrated into our industrial strategy. For example, imagine inviting Toyota to build a full manufacturing plant in Nigeria, not just an assembly plant . Offer longterm loan of say $2 billion (two billion dollars) to be repaid over 10 years. Add a tax holiday, in exchange for producing affordable motor vehicles here, with clearly defined goals of what we expect in that period, to create jobs, transfer skills and technology, etc.. this is not a charity, – it is an investment in economic transformation. In fact, the $2 billion could be raised through a bond instrument, backed by a soverign guarantee. The Nigerian investing public could invest, knowing Toyota is the final obliged. It will replace the same money we are already spending importing Toyota vehicles – with zero value added to our economy.
Give them Ajeokuta Steel Mill as a production site, in doing so, we are not only building a motor vehicle industry, but will also revive Nigeria’s dormant iron and steel sector. They get the incentive of our becoming a major market for them, given the large Nigeria population with only about six percent owning cars. A large market that will clearly be worthwhile in the long run, especially with what is happening in the current US administration’s tariffs regime. Companies, like Toyota, with long established brands here, will be glad to find these large markets, like Nigeria. The difference, will be they manufacture here, to sell here.
No country industrialised without strategic protection of its industries. China, India, Brazil and several European nations have supported national champions . We should not pretend to know better. Nigeria must adapt to what works globally, to local realities. Creating national industrial champions is essential for Nigeria’s development. It must be tied to a clear industrial policy, guided by merit and national interest, implemented transparently and sustainably.
With the right structure and accountability, supporting national champions can become a win-win strategy for longterm growth.
