Monday, 20 May 2013

Nigeria’s Middle Class Revolution

This is the final installment of my series on the Nigerian middle class. I ended the last part with a vision of millions of Nigerians “marching determinedly away from poverty, towards solid middle class prospects.”

It is self-evident that turning agriculture into – to quote the Minister of Agriculture, Akinwunmi Adesina – “a business that makes money, with a focus on investment, as opposed to aid and development” will transform Nigeria. It will create jobs, and it will also feed a country that desperately needs to feed itself

From available estimates, we spend more than $2bn annually importing rice, $4bn on wheat, more than $700mn on fish, and $1m daily importing milk. That’s billions of dollars that could potentially stay and circulate within our economy.

Regarding manufacturing, the possibilities are just as immense, if we get the basics – electricity being number one – right. Try to imagine how much small industries are spending on providing power; money that should be going towards expansion and hiring and R & D. A clothes manufacturer in Aba recently told me that a lot of the manufacturing for which the city is famed has since collapsed under the weight of petrol and diesel costs.

Think of the difference a sustained flowering of manufacturing ventures would make in Nigeria. The possibilities of an outsourcing revolution taking root, considering the abundance of inexpensive youthful labour: there are more young people in Nigeria than anywhere else in Africa; armies of youths who are unable to get into universities or polytechnics but who can be made to learn the dignity of manufacturing.

Listen to what the scientist Philip Emeagwali said about the magic of cutting-edge manufacturing: “A $100 bar of raw iron is worth $200 when forged into drinking cups in Africa, $65,000 when forged into needles in Asia, $5m when forged into watch springs in Europe.”

Let’s turn to Brazil, as an example. That’s a country that knows a thing or two about setting ambitious goals and doing all that is necessary to hit them. Today, Brazil successfully produces everything we can’t; from steel (Hello, Ajaokuta?) to cars to aircraft. It is also one of the world’s largest producers of hydroelectric power (its current capacity makes even our long-term targets seem like a joke), as well as the go-to country for ethanol fuel innovation.

The Embraer jets reportedly favoured by the Nigerian government in its planned intervention in the aviation industry are Brazilian in origin. Meanwhile, that same government appears obsessed with embarrassing a recalcitrant governor over the purchase and use of a private jet whose tyres we don’t even have the capacity to manufacture. Making aircraft tyres is going a bit far, actually – we aren’t even making car tyres anymore.

In 2008, Dunlop, Nigeria’s – and West Africa’s – last surviving tyre manufacturer (Michelin reportedly left in 2006), closed its Nigeria operations. It could no longer cope with the influx of imported tyres, fuelled by a reduction in tariffs by the same Nigerian government that had encouraged it to invest tens of millions of dollars in expanding its factories.

The story of Dunlop is especially interesting because of how it illustrates the close connections between manufacturing and agriculture. Last year, the CEO of Dunlop Nigeria, (after closing its factory, the company simply joined the importation scramble) Mohammed Yunusa, told TELL magazine: “Between Michelin and ourselves, we had very heavy investments in natural rubber plantations. On the whole, we had about 15 hectares in Cross River, Delta and Edo states. We still have them up till now. Michelin had their own plantations too in Ogun State, Edo states and others.”

Those plantations and factories, Yunusa said, employed not less than 6,000 persons, excluding the “indirect” employment. There we have it: Thousands of jobs killed because of stupid government policies. Sometimes, you get the feeling that Nigerian policymakers deserve to be hauled before a war crimes tribunal. Because it is hard to convince me that the obstacles persistently thrown at entrepreneurial ambition and job creation in Nigeria do not qualify to be labelled “Acts of War”.

Back to Brazil. The numbers speak for themselves: Manufacturing and industry contribute almost 30 per cent of Brazil’s GDP, compared to three per cent in Nigeria (South Africa and Mexico have figures close to 20 per cent). Brazil is a Top 10 car manufacturing nation, with more than three million cars made/assembled annually, mostly by foreign brands investing billions of dollars in building and expanding plants. The auto industry alone has generated more than a million jobs.

Now, that sort of news – the revenues, the jobs, the investments, the technology transfer – is more significant than all the noise we’re currently making about Nigeria overtaking South Africa to become Africa’s largest economy, on the basis of a “rebasing” of our economy, or gaining “promotion” to “middle income” status on the basis of a World Bank pronouncement. One is tangible engineering progress, the others are simply the false sheen of statistical engineering.

A government with not much tangible progress to show will increasingly resort to meaningless statistical engineering. Let me tell you my biggest fear about the immediate future of Nigeria. It is that the President is going to spend the second half of this four-year term fighting Boko Haram as well as an array of real and imagined “2015” political enemies, and will not be available to give the needed support to the reformist elements in his government – the ones who can truly see envision a new Nigeria and are fighting against all odds and vested interests to lay the foundation for that transformation.

But for all we know, Nigeria’s political class is aware of just what needs to be done to create a middle class revolution, and is only hesitant to do it because they’re terrified of the potential consequences. Perhaps, the Nigeria we have today is actually the Nigeria they envisioned, and still do, for us – a country full of impoverished people, and aborted middle class dreams – in which case we’d have to apologise for thinking them visionless.

The relationship between good governance and the middle class is well-documented. Last year, I interviewed the economist, Dambisa Moyo, prior to her visit to Lagos as a keynote speaker at the Kuramo Conference. She pointed out that a number of academic studies have established a $10,000 GDP per-capita threshold for countries, below which true democracy – i.e. a representative government that is built on and that respects the wishes of the people – is a myth.

While in my opinion no one should put too much faith in per capita numbers (the benefits of a rise in per capita GDP can easily be offset by rising inequality, in which case it’s the rich who keep getting richer), it is generally accepted that per capita figures can tell us a thing or two about national prosperity and the size/strength of a country’s middle class. So that generally when countries push up their GDP per capita, there’s an associated evident effect in the size of the middle class.

And where does Nigeria lie on the per capita scale? Around $1,500. Where does Brazil lie? Around $11,000. The numbers speak for themselves.

A larger middle class will spend more in disposable incomes, pay higher taxes, and demand more in efficient services from the government. With a sizeable middle class I doubt a Governor Chibuike Amaechi would be able to spend $45m of government funds on a private jet without having to answer tough questions from the “owners” of the money. President Goodluck Jonathan himself would never have been able to ask for $150m to spend on three presidential jets, as he did only months into his presidency in 2010 (in case we’ve all forgotten).

We all saw what happened with the Occupy Nigeria protests – it is my feeling that the unprecedented scale (the organisation of “Ojota” comes to mind) provided a glimpse of the power of a middle class-led activism.

“Ultimately, you need to have a middle class that is able to hold the government accountable,” Moyo told me.

It definitely starts with a middle class. And herein lies the truth of one of the most vicious cycles of development. The government fails to create a sizable middle class. There is therefore no one to hold the government accountable. And that way the oppression creates and maintains the conditions for its own perpetuation.

Where are those Nigerian leaders who will stand up boldly to break that cycle? Your guess is as good as mine.


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