Among the many responsibilities of a government, when you isolate security of life and property, is the provision of an adequate environment for citizens to thrive economically. This includes provision of infrastructure to boost trade and investment, strengthening of fiscal policies like taxation and easing the various bureaucratic bottlenecks involved in doing business in the country, exploiting the natural resources to boost balance of payment receipts and so on.
In the 1970s and 80s, Nigeria stood a good stead, what happened to our economy at the turn of the millennium? In a recent Mid-Term Ministerial Performance Review Retreat of the federal administration, a roadmap was presented for Nigeria’s economic recovery.
Among the many recommendations, the need for the Federal Government to significantly boost productivity and revenues from its non-oil sector, with appropriate fiscal and macroeconomic policies that will enhance international competitiveness was particularly instructive, especially that “significant support should be directed toward boosting industrial manufacturing capacities.”
According to data from the Nigerian Export Promotion Council, some of Nigeria’s major non-oil export products include cocoa beans, sesame seeds, cigarettes, cashew nuts, finished leather, soya bean meal, cocoa butter, among others.
A critical look at the above list, which aligns with similar data from the National Bureau of Statistics and the Central Bank of Nigeria, shows that Nigeria’s major non-oil exports comprise mostly of raw agricultural produce.
In the last three years, only one manufacturer and exporter of finished goods has consistently remained among the top three non-oil exporters in Nigeria. This company, British American Tobacco Nigeria, manufactures and exports cigarettes from Nigeria to Liberia, Guinea, Ghana, Cote d’Ivoire, Niger Republic and other countries in the West Africa sub region. Consequently, this company has been chosen as a reference company to demonstrate the benefits that accrue to a country when it establishes manufacturing capacities for the export of finished goods.
An assessment of the additional benefits that have accrued to Nigeria on account of BAT’s investments in a manufacturing plant in Nigeria, as elucidated herewith, evidently substantiates the position that the success of Nigeria’s economic diversification and growth is pivoted on integration to the production and export of finished goods.
Investment in manufacturing for the production and export of finished goods drives economic development and opens up a nation’s economy in several ways. Such investment is also a major driver of foreign direct investment and also engenders the activation of idle local capital into more productive use. Our reference company, BAT Nigeria, has fetched Nigeria about $185 million to date (including the initial investment of $150m in 2001) through the building and expansion of a state-of-the-art factory in Ibadan.
More so, the establishment of manufacturing/processing facilities attracts further investments and capital inflows as other industries are often established at different stages of the value chain to provide inputs to the manufacturer. In the case of BAT’s factory in Ibadan, this has attracted further FDI of over $30 million through A.R Packaging Nigeria Limited (formerly NAMPAK Cartons), established essentially to provide packaging services to BAT. This company too has created new jobs and built capacities, in its own right, for the benefit of Nigeria.
The job creation opportunities that result from the establishment of value-adding industries are immense. These occur simultaneously with the development of new competencies and capacities among citizens of the polity including both technical and managerial skills.
Governments earn revenues through various taxes, duties and levies that corporations pay into their coffers. But the amounts paid are in turn dependent on the revenues that accrue to the taxpaying entities. Companies that produce value-added products earn far higher revenues than those at the primary raw material stages. Such companies are able to earn a premium for their expertise along with earnings that accrue from processing operations.
Therefore, a country’s earnings from taxes and levies are bolstered by the level of industrialization and the volume of value-added products it produces and, very importantly, exports. Our reference company demonstrates this as Nigeria has earned over $900 million in direct and indirect taxes from BATN since the company began manufacturing and exporting finished goods from Nigeria.
We think that industrialized economies are also able to compete better in international trade. A country like Nigeria in dire need of foreign exchange earnings will only achieve it through improved returns on repatriated export earnings.
