Great comments on the piece on why Nigeria needs to provide assist (as in football) to the Naira, as it dribbles in the global currency field, via warehouses and factories, both traditional and modern, for a goal. Sure, some of our citizens still believe that Nigeria’s future is tied to oil, and if we pump more oil, we will be fine. Last week, in a well received piece in Harvard, I offered how I see it, that the future belongs to young people with modern skills. Why?
Let’s go back to secondary school and examine the computation of GDP. AO Lawal, explaining in his economics textbook, was abundantly clear on comparative advantages of nations as he posited many factors affecting location and localization of industries. In a chapter of that popular textbook, he has explained factors of production and division of labour. Standing digitally on the shoulders of that good economics teacher, I write:
Case A: You sleep in your house, someone pumps oil in your backyard, sells it, and credits you $10 million at the end of the month. The economic activity for the production of the “finished goods”, in this case, crude oil at this phase, is $1 million. That $1m is the GDP – value added, created through the production of goods and services. Few but well paying jobs created.
Case B: Another person cultivates palm trees, employs many people to weed, trim, harvest, and process all to palm oil -and further to soaps, cosmetics, etc. The person credits you $2 million at the end of the month. But the economic activity for that translation is worth $8 million because many things have happened in translating those palm tree seeds into soaps and cosmetics, generating massive economic activities. Here, there are jobs and many jobs.
If you are a policy expert advising a President of a nation, which one would you recommend for the nation?
(Note this: the raw oil has minimal impact in advancing a nation if it is not used to seed new economic vistas in a nation. But just relying on the monetary receipts in New York and London will not help any country. You can replace oil with diamond, gold, etc provided none is refined or processed locally. Simply, a nation could be better off in the long term without oil (or gold or diamond) where its leaders are inherently incapable of doing that refining and processing. But where they are able, great things happen, because oil, diamond, gold, etc have the capacity to stimulate local economic activities just like the palm tree.)
You can say less is better (a paradox) when it comes to sub-Saharan Africa when it comes to commodities since more oil, gold, diamond, etc have not advanced the welfare of the citizens.
Have that in mind as you look at the GDP map of countries. Africa could be making money on natural resources but we are missing a lot on the economic activities. That explains why our GDP remains very small. We belong to Case A and account for a small component of the global economy.
Comment on Feed
Comment 1: Nigeria has the capability and capacity to do both and more. I have previously suggested that Nigeria should redevelop their Palm oil production – focus and be intentional about developing the industry from growth to processing to finished products. Government incentives like land and production grants and loans as well as tax exemptions can be employed to stimulate the industry. After all, where do you think the Asian palm oil giants got their palm oil tree seeds from? Nigeria!
Furthermore, Nigeria could still sell crude oil for export or but domestic consumption should only be from domestic refineries. No domestic petrol, oil, and the various derivatives should be from imports. Only import what simply can’t be produced domestically. But I ask another question: What specialty, with regard to oil production and refinement, does not exist in Nigeria? Within the country, and in the diaspora, experts exist in every field. The incentives I mentioned above could be employed to oil refining as well as palm oil refining. There is no reason, other than political will, that these can’t exist.
I have confidence in Nigeria and Nigerians; there’s nothing they(you) can’t do. Political will is the key.
