Last week, human capital was discussed as one of the factors shaping a nation’s environment in the innovation endeavour. This week we will be considering the market, business climate and, if space permits, the role of R&D in the innovation endeavour would be examined. Let us take the market in Nigeria which is part of the environment. The demand for locally manufactured goods cannot be met by supply in the market. That is why Nigeria, like many other less developed countries, considers importation of all kinds of finished products either genuine or fake as a way out. Regarding importation of manufactured goods, the CBN was reported to have stated that “about US$7.4 billion, that is about N1.48 trillion, was spent to import toothpicks, fish, milk, textiles, rice and furniture between 2014 and 2015”. This amount is almost equal to the grant of US$10 billion to be given to more than 50 African countries as announced by Prime Minister Modi of India during the just concluded India-Africa Summit.
When demand for goods is in excess of supply that the market can provide, firms are supposed to innovate to cater for the shortfall, but this is not the case in many African countries. From economic theory, however, any nation that imports must export in order to earn foreign exchange and to have balance of trade. Thus, Nigeria must export ideas and goods to earn foreign exchange. For Nigeria to export, the nation must join the league of producing nations to produce goods and services. Ban on some imported items which we can produce locally is good, but are there alternatives to these banned items? This question is raised because Nigeria’s economy is import-dependent while some of our products are not exportable.
On Channels TV on 5 November, 2015, there was a report that beans which Nigeria produces for export to the European Union has been banned till 2016. The ban, according to officials of the European Food Safety Authority, is due to “a high level of unauthorized pesticides”. The newly appointed minister of agriculture and rural development, Audu Ogbeh, has a lot of work to do if agriculture is to play a key role in Nigeria’s plans to diversify its economy. What is National Agency for Food Drug Administration and Control (NAFDAC) doing to ensure that the banned beans allegedly containing between 0.03mg/Kg and 4.6 mg/Kg of dichlorvos pesticide is reduced by farmers and exporters to an acceptable maximum residue limit of 0.01 mg/Kg? Nigerians are patiently waiting to be informed that they are not consuming beans with “high level of unauthorized pesticides”. The DG NAFDAC is certainly not on sabbatical. NAFDAC should please investigate, take steps to compel farmers and exporters to adhere to food safety measures, and make official statements that will allay the fears of people on this matter.
This confirms a Chinese government report which this writer came across in 2009 which says that locally produced fish by some fish farmers in one state in Nigeria contain high level of mercury. According to the report, that is why China at that time did not import fish from some firms in Nigeria. Importantly, issues of poor packaging, non-adherence to food safety measures and non-compliance with administrative procedures are also reported to have characterized export products from Nigeria. It is because of these problems and many others, including low price of crude oil in the international market, that Nigeria with a population of about 180 million has an estimated GDP of US$568.5 billion which is below that of Germany (US$3.852 trillion) with a population of 80.854 million in 2015 (see data.worldbank.org and www.cia.gov).
A good business climate will engender innovation in a globally competitive economy. A good business climate encourages existing businesses to grow, people to start new businesses, while local and foreign investors are pleased to invest in any industry of their choice or that which is permitted by law. In other words, a good business climate should be one of the critical factors influencing the extent to which scientific inventions will reach the innovation stage and also its rate of adoption by other firms in a country.
In a nutshell, a good business climate, according to experts, refers to all factors impinging upon the operation of a business other than the availability of capital and the ability of the businessman himself. In order to have good business climate, basic policies must be put in place to ensure reasonable macroeconomic stability, promote good business climate and reduce the cost of doing business. A nation where in many instances you have to know the governor of a state before plots of land are allotted for industrial purpose and also to obtain the Certificate of Occupancy cannot be said to have a good business climate. These are some of the reasons why the World Bank in its ease of doing business ranking for 2015 ranked Nigeria as the 170th nation out of 189 economies.
If our nation is to improve on this ranking, it has to build its S&T as well as industrial policies in an environment where legal, regulatory, financial, and economic conditions encourage entrepreneurs, farmers, and investors to invest and innovate. How will a farmer in a rural area in Nigeria innovate when hoes and cutlasses are mostly used as tools for farming? How will the same farmer break even when most rural roads in Nigeria are in a state of disrepair? How will an entrepreneur have the capital to further strengthen his or her business when high cost of providing electricity, transportation and multiple taxation are recurring decimal? It is known that the productive capacity of a firm does not develop automatically even when the business climate is favourable. When the business climate is good and the cost of doing business is reduced, it takes time to attain the desired productivity level.
Creating a level playing field, reducing administrative barriers and decreasing the cost of doing business are essential but not sufficient conditions for higher productivity, increased competitiveness, rising standards of living, and economic diversification. Additionally, firms will not be able to exploit the competitive opportunities generated by a good business climate if they have a workforce that does not have requisite skills to perform higher value-added tasks. Talking about value- addition, the role of research and development (R&D) in the innovation endeavour will be examined. Before that is done, we may have to ponder on what Malaysia did to palm seedlings collected from Nigeria in the 1960s that has made the country the second-largest palm oil producer and largest exporter of the commodity in the world today. (To be continued)
MA Johnson
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