There is no doubt that several businesses have been impacted by the COVID-19 crisis globally. In Nigeria, the impact is further compounded by the declining oil prices. This has already led to job losses across all sectors including the banking, travel, entertainment and services sectors.
Professor Yemi Osinbajo, the Vice President of Nigeria, citing a recent data from the National Bureau of Statistics (NBS), said that about 39.4 million Nigerians in the working population might be affected. This represents over 20% of the entire Nigerian population. VP Osinbajo mentioned that some of the measures introduced to curtail the spread of the COVID-19 are resulting in significant negative impacts on farms and factories, as well as on trade, transport and tourism. He was reported to have concluded that this looming rise in unemployment can be ameliorated by focusing on local production, local services, local innovation and emphasizing the use of local raw materials.
The above focus is not new from the Federal Government of Nigeria. This is essentially the thrust of the “local content” policy and guidelines that was first piloted with the oil and gas sector. Unfortunately, the Federal Government itself is known for its chronic dependency on foreign products and services, including supplies for use at Aso Rock (the seat of the Nigerian government) and healthcare. The President himself has spent a cumulative period of over six months attending to his healthcare outside of Nigeria. The Presidency itself does not have any confidence in any of its public hospitals (including the clinic at the Presidency). Not one across the country was adequately resourced to handle the President’s healthcare despite the millions of dollars budgeted for those clinics on an annual basis.
The President Buhari administration needs to lead this drive for “local content” by example. Government procurements should prioritise local supplies. There should be public disclosures of the local content achieved by the various levels of government. This can also encourage businesses to patronise local content and further improve the capability of local producers in a bid to achieve reasonable import substitution. Foreign procurements should be published with a justification as to why local producers are not being patronised. This would also challenge the local producers to improve their processes to meet or exceed the required specifications. In the walk towards a strong import substitution policy, there should be additional measures to consistently discourage imports.
I have frequently canvassed for the creation of 36 industrial parks across the 36 States in Nigeria, with each cluster focusing on products and services that they have significant competitive advantage on. The clusters should be provided with 24-hours power supply (which is a rare commodity in Nigeria), adequate security and strong dedicated data infrastructure by participating telecom providers. The goal could be to have 3,600 SME businesses in each of the clusters. With a possible average of 36 employees per SME, this effort has the potential to keep over 5 million Nigerians engaged and productive. The Federal Government could also offer 100% tax waiver for all SMEs working from the clusters.
The proposed industrial parks would help in addressing some of the major challenges of SMEs in Nigeria – absence of patronage (market), and access to quality infrastructure at reasonable costs. The only other key challenge is that of funding. The participating SMEs could be required to form “product based” cooperative societies in their clusters through which customers would be able to buy their products and negotiate good deals for the SMEs. This helps to de-risk the SMEs so that banks are encouraged to grant SME loans through the cooperative societies. The Federal Government could offer tax waivers on the interest income that is earned by the banks from the participating SMEs.
The above import substitution policies and strategies would have far reaching impacts on the country beyond the 3,600 SMEs in each of the 36 clusters. Businesses would be able to target specific clusters for their procurement while partnering with the relevant clusters to improve the quality of their processes and products. On the social impact, this would also help to keep people out of the “black market” of burglars, armed robbers, kidnappers and political jobbers.
This could be a win for Nigeria, Nigerians and the businesses in Nigeria if the government has the political will to make this happen. However, time will tell.