Nigeria’s prosperous future can only be assured by supporting the private sector to unlock wealth that will lift the populace, President, Africa Development Bank Group, Dr. Akinwumi Adesina has said.

Speaking during the BusinessDay CEO Forum in Lagos at the weekend, he said the rejuvenation of the moribund manufacturing sector and fixing the perennial power problems were key in engineering an industrial revolution for the country.

Adesina, who spoke on the theme: “The Day the Lion Roared! Making Nigeria a Global Industrial and Economic Giant”, lamented that Nigeria, despite her potential, still lags behind other contemporary economies.

He made serious case for speedy and systematic development of the economy through private sector-led initiatives.

Adesina said Nigeria must learn that simply using foreign exchange reserves to back and overvalue the naira is not a sustainable policy.

“To grow Nigeria’s economy in a transformational way, there is an urgent need to move away from solely depending on “managing a demand for forex” to “expanding the supply and availability of forex” through greater export-oriented manufacturing,” he advocated.

He said such move would extricate Nigeria from relying only on the export of crude oil for access to forex and the instability that arises from the shocks to global oil prices.

He commended the bold decision of President Bola Tinubu in removing the distortions in the multiple foreign exchange windows, which he said, would help turn the tide on foreign direct investment flows into Nigeria.

He said: “While the share of manufacturing in Nigeria’s Gross Domestic Product (GDP) has hovered around seven per cent for decades, the nation has not been able to extricate itself from a comatose industrial manufacturing sector, in sharp contrast to the dynamic and rapid performance of manufacturing in Asian countries such as Singapore, Malaysia, India, and China”.

He said Nigeria’s manufacturing sector represents only three per cent of the total revenue from exports, but accounts for 50 per cent of imports.

“Instead of being forward-looking in expanding the share of manufactured goods in its total export revenue, Nigeria focuses on an unsustainable model of import substitution. Import substitution, while important, is a very restrictive vision. It is focused primarily on survival, instead of looking to create wealth through greater export markets and value diversification. The result is a manufacturing sector that cannot even develop to reach its full potential nor compete globally. Rather, it is limited to a “survival mode,” and not a “global manufacturing growth mode,” he stated.

Adesina advocated Nigeria shifting toward being integrated into and moving up global and regional value chains, in areas of comparative advantage, specialisation and competitiveness.

“A well-developed and policy-enabled manufacturing sector, with export orientation will spur greater innovation, accelerate business and investment-friendly industrial policies to drive export market development and structural transformations of the economy,” he said.

“For instance, while Vietnam raked in $348 billion in 2020 from export and the export-led growth, Malaysia’s exports was valued at $234 billion while by contrast, Nigeria’s exports were valued at $29.7 billion. Nigeria’s total export value was a mere $33.5 billion,” he added.

He said African countries, including Nigeria, have had policies, templates and programs for industrialisation and expanding industrial manufacturing for decades.

But there is a huge gap between policy ideas and actions.

“Today, capacity utilization of factories hovers around 40 per cent compared to a desired 70 per cent. The reality, in view of several challenges facing the industrial manufacturing sector, is that firms are moving to other neighboring countries, where there is greater macroeconomic stability, more supportive enabling environments, and a better ease of doing business. To be a manufacturer in Nigeria is not an easy venture. You succeed not because of ease of doing business, but by surmounting several constraints that limit industrial manufacturing,” he said.

Adesina said major challenge facing the industry in Nigeria is the very high cost and unreliability of supply of electricity.

“Load shedding and unreliable power have made the cost of manufacturing extremely high and uncompetitive. Most of the manufacturing companies self-provide energy through a reliance on cost-prohibitive generators and diesel and heavy fuel oil. The polluting emissions, make them brown industries, not green industries,”he said.

He said that unless Nigeria decisively tackles its energy deficiency and reliability, its industries will remain uncompetitive.

“There should be massive investments in gas to provide power and to ensure stable base load power for industries, hydropower resources, large-scale solar systems, direct power preferentially to industries, and to support industrial mini grids that concentrate power in industrial zones. In addition, we should develop more efficient utilities, reducing technical and non-technical losses in power generation, transmission, and distribution systems,” he said.

Adesina said Nigeria’s industrial development is constrained by a poor state of transport, ports, and logistic infrastructure. “It costs $35,000 to export 100 tons of produce from Nigeria compared to just $4,000 in Ghana. About 90% of passenger and freight movements in Nigeria rely on roads but only 18% of the roads are paved.”

He said the Africa Continental Free Trade Area, with a collective GDP of $3.3 trillion, presents a huge opportunity for Nigeria to drive an export-driven industrial manufacturing pathway.

“Nigeria can unlock its industrial manufacturing capacities by taking advantage of duty-free exports within the zone. Doing so requires decisively tackling infrastructure and logistics bottlenecks that hamper industrial capacity and competitiveness; establishing and enforcing quality, grades, and product standards; ensuring the access of industries to land and providing investment relations management to attract and maintain investors and trade facilitation,” he said.

He also stated that the future of manufacturing will be digital. “The global digital economy is estimated to be worth over $16 trillion. The Internet of Things will raise productivity of labor in manufacturing, deploy smart machines, manufacturing platforms and systems, connecting machines and people, and using machine learning and artificial intelligence to improve speed and efficiencies of complex manufacturing processes,” he said.

In fixing the problems, Adesina recommended that Nigeria establishes Skills Enhancement Zones––new zones in partnership with industries, dedicated exclusively to skilling up Nigeria’s workforce.

“Students can be supported to be exposed to skills delivered by different industries. This will build up their vertical skills in such industries and horizontally across different industries. This will reduce the labor market skills mismatch that several industries face and allow feedback by private sector industries into the curriculum of universities and colleges,” he said.

Nigeria must also make agriculture a major wealth creating sector. It is time to take bold policy measures to drive the structural transformation of agriculture, with infrastructure and spatial economic policies that will help turn the rural economies of Nigeria away from being zones of economic misery to new zones of economic prosperity.

He said a perennial binding constraint facing manufacturers in Nigeria is the unpredictability and availability of foreign exchange.

“It also triggered a major decline in foreign direct investment inflows into Nigeria. The World Investment Report (2023) showed that foreign direct investment inflows into Nigeria declined precipitously from $3.3 billion in 2021 to a negative $187 million in 2022 ––the largest decline on the continent,” he said.