SME’s in Nigeria are entitled to basic infrastructure

It’s easy for one to reside in a developed country and make summary judgements on the performance of SME’s in Nigeria or for one not actively involved in manufacturing in Nigeria to do so. While some smart people are armed with just a data point or two, without context, others are just misinformed.

The most dangerous conclusion about a market like Nigeria, is to argue that the mass market is not an addressable market, because the cost of local manufacturing and distribution is high or because the average Nigerian folk lives on less than a dollar a day, and wouldn’t be able to afford a locally manufactured product. Yes, the mass market can't afford most locally made products, while they are poor, but this changes the moment we are able to produce things cheaply and inadvertently create jobs. The poverty of the masses plus the high cost of production and distribution share the same prognosis. An infrastructural deficit across board.

The proponents of this logic, go ahead to make a case for the export market, arguing that Nigerian businesses should simply export,because that’s the only way to promote learning. This they do, by ignoring the reasons why the local cost of production and distribution is high and the fact that most Nigerian businesses cannot compete on price and quality globally.

I am going to argue for finished products not for raw materials, because even something as basic as a raw produce, we do not have the systems in place to do something as basic as grading, for majority of our cash crops. We basically export something like cocoa to Ghana, where its graded and then mixed with Ghana produce and then exported out from there.

The same group of people would then argue for importation to supply this non addressable market, because it's simply cheaper to produce the same things elsewhere and ship them in, whilst forgetting that this same producers elsewhere would always be able to produce cheaper, better and be able to compete in the markets they are advocating we export to. The bill for our imports is just staggering high and makes one question the logic behind not addressing the local issues that makes local manufacturers uncompetitive. The issue is not the cheap imports, but the issue again is infrastructural deficit. We simply don’t have the capacity to produce cheap.

The argument for export is flawed because we cannot produce cheaply, distribute cheaply, and we do not have capacity to produce at scale, which brings us to context. Most of the case studies being quoted are for markets where the basics are in place. There are many of this basic requirements, but I would just list down a few, some of which would address our own pain points as a manufacturer in Nigeria today.

  1. Good transportation networks across the country.
  2. Reliable source of Energy. Be it reliable access to fuel or the grid at predictable prices.
  3. Access to credit at affordable rates without red tapes and insane requirements. Turnover and PO’s, should be able to grant one access to cheap credit.
  4. Educated local technicians that can actually fix and fabricate cutting edge machines. Invest in technical schools, and collaborate with countries like china, for knowledge transfer
  5. Year round farming belts for raw materials. Find a way to finance irrigation and provide technical support and machinery for farmers willing to irrigate their farms. This can be done by allowing private enterprises that are willing to do so and are able to do so through say a tax incentive and subsidised interest rates. Its one thing to say its a free market, its another to make it insanely hard to execute on one's ideas.
  6. Grading centers and commodity trade counters for raw produce.
  7. Friendly local manufacturing policies. This does not mean banning imports. It means tax incentives, access to low interest rates, promoting nigerian businesses through expos etc.

We cannot run away from many of this basic infrastructural problems, just by trying to export. We cannot be competitive globally, just because we make a conscious decision to do so.

If we believe that we would learn through exporting, and this basic infrastructural issues would just miraculously disappear because there is demand for our products, then we are in for a surprise.

The fact remains that there is a high demand for Nigerian “raw products”, that we can't even meet, yet that has not provoked the government into doing anything about it. But yet somehow, we believe that active participation in the export market, is the way to go.

I am for export, only if Nigerians can produce competitively locally. There is a large number of poor Nigerians that can be easily uplifted to afford locally made products when we have industries. The question is do we have the capacity to produce and the basic infrastructure in place? The truth is we don’t, and that is why I am for local competency first, before export. Fix infrastructural issues, and everything would fall in place.

Yes Nigerian SME’s are entitled to basic infrastructure.

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