When Africa transitions to knowledge economy (1)

STRATEGIC INTELLIGENCE is one missing ingredient in the thinking of most African leaders. To match the constantly changing demands on the world economy and to remain a continent to reckon with, leaders of African countries need a change of thinking. Those who are confident but complacent about their natural resources endowments miss one essential point: that they are not in a good bargaining position in the global market. As things have turned out, commodities exports have not resulted in any remarkable sustainable economic development of any African country. Beyond the immediate revenues that mostly end up as funds for running public bureaucracies and implementation of some capital projects, revenues from the exports of commodities are yet to distinguish any African country as a country of the future.  Rather, they have created social, political and economic tensions that have led to enduring crises that tend to bog down such countries and retarded their developments in real terms.

Nigeria is a poster child. What some economists describe as “Dutch Disease” has been inflicted on Nigeria and the country seems still far from recovering. Petroleum export on a massive scale brought fame and national pride to Nigeria since the early 1970s economy. It led Nigerians in power to embark on grandiose projects, many of which remained as ‘white elephants’ and neither got completed nor brought any remarkable returns on investment.  It led governments at the national and sub-national levels to spend extravagantly and embark on huge borrowing of foreign loans, many of which went bad. It created a fleeting sense of prosperity, leading to rapid and higher population growth without any corresponding per capita economic growth. It led to decay and a deterioration of expertise in public service, with an attendant shift of emphasis away from many productive sectors. That was when agriculture ceased to be a major foreign exchange earner and Nigeria became a net importer of many commodities it used to export, particularly oil palm. Petroleum economy became the country’s economic and political centre of gravity, as all the three tiers of government became dependent on monthly allocations from the revenues accruing from revenues received from oil exports.

The situation in Nigeria also revealed its soft underbelly. The country had to depend on oil prices centrally fixed by the cartel known as the Organisation of Petroleum Exporting Countries (OPEC) for planning its annual budgets, which turned out unreliable over the years because of the vagaries in global oil price fluctuations. Despite this lack of control on the market prices of oil over these past five decades, Nigeria still remains inward-looking and fixated on oil revenues rather than making and implementing strategic plans towards diversification of its economy. The country has become captive to a cabal of people who care less about competitiveness of a country but more about strengthening the hold on power to the advantage of a section at the expense of total national development. Thus, over 60 per cent of total federal revenues over the years have gone into a region without commensurate development to justify such deployments. Foreign debts kept mounting while external reserves kept diminishing. Most official development projects remain mere wishful thinking as more and more Nigerian intellectuals and experts have emigrated and are better engaged in the diaspora. If Nigeria was expected to lead the way for Africa’s development and transitioning from commodity dependent economy into knowledge-based one, it can now be affirmed that Nigeria has not only failed itself, it has failed the entire continent, which may have to look elsewhere for role models and inspiration. South Africa, a much smaller country in population, has not managed its post-Apartheid years well enough to lead the continent as events since a few years ago have proved. The xenophobic attacks on other Africans and the infighting within the nearly imploding African National Congress (ANC) ruling party is exerting negative influence on South Africa’s economy from governance perspectives.

In the mid-1970s when Nigeria was popular globally on account of its oil wealth, a head of state reportedly said that the problem with Nigeria was not money but how to spend it. That proved true as Nigeria was building its own hubris while the United Arab Emirates (UAE) was building from the ground up about the same time, turning a vast desert into what is today known as a major global economic hub. The year 1966 was particularly remarkable for both countries. Dubai, one of the Emirates’ cities of today, struck oil while the process that led to a three-year bitter war was afoot in Nigeria. Dubai wasted no time with the oil discovery.  The late Sheikh Rashid bin Saeed Al Maktoum began the development and transformation of the city from a small cluster of settlements near Dubai Creek to a modern port, city and commercial hub. Today, Dubai has become a global hub for maritime, aviation, technology, tourism and knowledge-based economy. Nigeria, by contrast, is still struggling, hoping to establish itself in any of these after decades of bureaucratic bottleneck and deployment of billions of dollars in preparation. For instance, the official tourism development agenda in Nigeria moved from a federal department to a full-fledged federal ministry, with nothing to show for all the annual budgetary expenditures and bureaucracies. 

The rancour and distractions within Nigeria have drained much time, energy and resources and prevented it from focusing on externalities and outlooks beyond its territory. The new democratic rule that resumed in 1999 has exerted further frictional force on Nigeria’s development outlook as the system of government has proved rather expensive and capital intensive for a struggling economy. The reality here is that no African country can truly hope to make any real progress in any strategic area under such a system of governance that heavily rewards and enriches political actors, more especially through corruption, and sets off secular stagnation for the rest of the populace by creating wider gaps between the rich and the poor. For decades, the quality of education has dropped precipitously, particularly in the public schools from elementary to tertiary institutions. This has increased the production of poorly trained and unemployable graduates, most of which are ill-equipped to make any impact on knowledge-intensive areas of the economy. There has been an exponential growth in the number of universities from six in the 1970s to 170 in 2023. Of these, public universities are 91, including 43 federal universities and 48 state universities. The private universities are now 79. Yet, the outputs in terms of intellectuals and intellectual products from most of them are anything but competitive.

Knowledge products expected to be churned out annually locally are near absent or substandard as Nigeria imports most of those in use. In the US, a total of 382,559 patents were granted in fiscal 2022, including 325,445 utility patents, 34,370 design patents, and 1,138 plant patents. How may Nigeria compete in this knowledge-based economy without any dependable or functional, established and enabling legal framework, trained professionals, official policies to boost competitiveness and visibility?  Where are the software, legal documents, trademarks, relevant books, journals and other publications on new discoveries? Other than Nollywood films and TV programmes, what other major knowledge products has Nigeria produced in recent years that are exportable and are creating wealth and employment for many people? Where are the outputs of Research and Development (R&D) and how many are gainfully employed in these endeavours? To underscore Nigeria’s relevance, South Africa that has taken a lead in the satellite television and entertainment services in Sub-Saharan Africa has its largest customer base in Nigeria.

With the Fourth Industrial Revolution (4IR), the major world economies have embarked on a major transition from the manufacturing to the service sector, as the latter tends to now employ more than the former.  China proves an exception as its manufacturing sector still tops the rest of the world as a major employer of labour, even though its service sector is undergoing significant growth in employment generation.  The broader and faster impact of the 4IR on the world economy is putting developing countries at a great competitive disadvantage. Africa is particularly negatively affected as it depends more on foreign sources of modern services. Apart from the banking industry in Nigeria, not too many service industry operators are visible, either in terms of employment or contribution to the wider economy. The visibility of the insurance industry is limited by the dearth of productive sector operators that would have depended on insurance products. Small scale commercial operations remain mostly in the informal sector and outside the radar of the authorities despite their huge contributions to the economy on the aggregate. 

While countries, such as South Korea, have transitioned from agriculture to manufacturing and now to service industry, Nigeria is yet to get it right in agriculture and industrialisation, despite the year-on-year reduction in the number of those engaged in agriculture. Rather Nigeria has deteriorated in agriculture, manufacturing and services as it has become a perennial net food importer and depends more on importation of products of technology, including those it used to produce during the pre-IMF loan years. The result is that, from a combination of poorly trained school leavers and a dysfunctional economy, chances of Nigeria to participate in the knowledge- based economy – particularly in the services industry – remain slim. Even those who recognise the need for intangible products and services avoid them, thus rendering the operators irrelevant. Imported versions or those available online become their last resort. The dysfunctional economy has affected the fortunes of investors in commercial agriculture and driven many small scale operators out of business for lack of competitiveness with cheaper imported food products. Same thing applies to manufacturing, in which case more and more established foreign investments in manufacturing in Nigeria are closing down their operations and leaving Nigeria.

Of the many challenges to manufacturing in Nigeria are poorly operated legal system, unpredictable exchange rates, high cost of electricity for operations, extra layers of operators in critical areas such as ports, which increase clearance times and cost of importation for imported raw materials and useful finished products – all of which add to the cost of the final outputs, which ultimately become more expensive and uncompetitive in price.  As long as Nigeria continues to grapple with the task of fixing the problems of agriculture and manufacturing, the opportunities in the knowledge-based economy, particularly in the service sector, will continue to elude the country. The experience of Nigeria is of great significance for the whole of Africa and the immediate West African region. Proportionately, Nigeria is about one-sixth of all of Africa’s population as currently estimated and its population is more than half the total population of all the other ECOWAS countries put together. It is expected to serve as the economic hub from which other countries draw strength. But, with Nigeria’s failure to live up to that expectation, Africa is faced with a great problem of whose shoulder to lean upon within the continent.

Nearly three years of the commencement of trading on the platform of African Continental Free Trade Area (AfCFTA) have proved rather uninspiring because, apart from the delay in the coordination and harmonisation of countries’ enabling legal systems, the products to trade in still remain poor in volume, values and degree of sophistication. Their place in the global value chain still remains at the lowest rung. With Nigeria’s persistently slow development, Africa’s transition into the knowledge economy may take very long to materialise. The place of Africa in the emerging economies might remain at the rear. Very much has to be done, first on Nigeria, for many countries to benefit from. That is why Nigeria cannot afford to continue to handle its own economic development wrongly – not only for its own sake, but for the sake of other countries in Africa.

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