The Economics of Diversification Versus Specialisation in Nigeria

Economics of Diversification

By Oremade Oyedeji

Comparative Advantage as an Alternative Strategy

A few days after I published my opinion piece, The Economics of Nigerians Destroying Nigeria, in which I referred to a well-told story of economics still being recycled, alluding to one former chief of the Central Bank of Nigeria (CBN), who repeatedly stressed that Nigerians were eating up the country’s GDP like they consume ponmo, my good friend sent a clip from Channels TV about the Kaduna Investment Forum (KADINVEST) organised annually by “an Obasanjo Boy”, Governor Nasir El Rufai, and there was Lamido Sanusi Lamido, his childhood friend, delivering a speech as the guest speaker.

I smiled when I watched a part of the video and decided to save the rest for later and somehow, I forgot to and didn’t think about it again until after two days when I saw my friends who enquired if I watched the clip. I told them I hadn’t so the one who sent it to me narrated.

The conversation went something like this (* not real names):

Kadri*: You won’t believe this, I listened to Lamido’s speech at KADINVEST this year, and for the first time at an event like this, he didn’t mention ponmo or any Nigerian eating the GDP.

Me: Really? It is not possible, especially at a forum like KADINVEST?

Malik*: what then did he talk about to shore up state revenue, address unemployment or to revive the dead leather, cotton or groundnut industry in Kaduna and its suburbs?

Kadri: Robotics, use of smartphones and smartphone production.

Malik: What are you saying? Has Kaduna started producing smartphones, and even if we plan to start one now, when are we gaining a comparative advantage in smartphone production to attract consumers from Kaduna or Kano talk less of selling to Lagos?

My friend’s use of the word “comparative advantage” really got me intrigued and it spurred this piece because I then went to watch Sanusi’s speech at KADINVEST 2020.

In his introductory remark, he joked about how his speech has always been a marker for new troubles. Indeed!  According to Sanusi, Nigeria has to take economic diversification more seriously. He said that over-reliance on oil has left the country unproductive. He referenced Malaysia to Nigeria (Typically), giving a breakdown of the economic growth of both countries within a 30-year period (using GDP index).

In his words, we were growing but we did not diversify and that explained the huge levels of poverty in the country. He said that was what exposed Nigeria to huge levels of inequality within the country and vulnerability of the economy to shocks.

When Malaysia started, according to him, they started from a GDP per capita level lower than Nigeria’s GDP per capita in 1985. It started from $310 to $4,045 while Nigeria started from $345 to $2,055.

Sanusi said “One way to look at it is to understand the difference between production and consumption,” urging the youths to explore the endless possibilities of their smartphones.

How do we understand technology or electricity? He said, “are we consumers or are we producers?” challenging the state to “Produce young men who know that they are worth more than just using their phones to import a pair of shoes.”

Sanusi also believes that the groundnut pyramids do not impress the world any more, adding that he wants Kaduna to focus on robotics instead of production of cotton, groundnut, and leather.

That, in my opinion, is very confusing; I am not sure if there will ever be any programmer that that will write an app to produce food at least not like the one which Kaduna State already has in terms of comparative advantage in trading.

Meanwhile, President Muhammadu Buhari, in his October 1 speech, called for a sincere process of national healing as the nation marked the 60th anniversary of its independence from Great Britain.

The President said Nigeria’s biggest asset is its human capital asset, the most important any nation requires. KADINVEST forum is a good forum to discuss real economic healing, and in my opinion, Governor El-Rufai has a better idea.

In an article, The Nigerian Context in Emerging New World Order & The Pandemic (Part II), published May 25, 2020, where I mentioned the likely benefits of COVID-19 in Northern Nigeria after many economic analysts challenged Northern states in Nigeria to take advantage of the pandemic in understanding and realigning its economy, El-Rufai simply “hit the nail on the head” then, without mincing words when he spoke then as the head of Northern States Governors’ Forum, said he was determined to end the Almajiris’ system of education in the north, amidst the spread of COVID-19 among the children.

El-Rufai said the COVID-19 pandemic, which is still pretty much on the ravage today, provided the opportunity to determine the state of Almajiri education. Almajiri is ideally a system of Islamic education practised in northern Nigeria, where young children leave their homes to live with Islamic scholars and learn about religion.

Almajiri has over the years been corrupted with thousands of such children roaming the streets of Northern Nigeria as beggars and without any form of education, contributing to the over 10 million out of school children in Northern Nigeria alone. That is 10 million human capital assets, the most important any nation requires, according to the president speech on October 1.

A focus on Human capital asset development, a 10-year strategy to integrate millions of Almajiri children on the street of Kaduna into taxpayers in the next few years will thereby be increasing state’s capacity to generate revenue from personal income tax geometrically.

Let me conclude this article by mentioning trending calls for true federalism, understandable economics and restructuring in Nigeria among many senior citizens recently.

For example, the Guardian and Thisday newspapers headline some days ago noted: We either restructure or breakup – Pastor Adeboye. Likewise, Former President Olusegun Obasanjo was also accused and called Divider-in-Chief recently for the same course, to mention a few.

According to the United Nation document titled 50 years together for a sustainable future, “the necessity of specialisation according to comparative advantage for economic development should continue to be an integral part of policy advice to every state.

“The argument is that every state should develop a comparative advantage in commodities that demand skills and assets it readily has a comparative advantage in trading.”

Nigeria may yet produce the first Female Director-General (Dr Ngozi Okonjo-Iweala) of the World Trade Organization (WTO). This may prove that Nigeria can position herself for trading with the world in goods and services she has a comparative advantage in.

%d bloggers like this: