Capital investment and an economy
All Nigerian governments have always yearned for foreign investments and various agencies monitor the quantity of foreign investments that flow into Nigeria each year. All Nigerian governments have always emphasised the erection of complex infrastructure. Nigeria and more than 30 other African nations adopted the African Structural Adjustment Programmes (SAPs) introduced to the continent in the early 1980s by the World Bank and IMF, so that domestic and foreign investors and the private sector can invest huge amounts of capital in African economies and promote rapid growth in the continent. The International Oil Companies (IOCs) in Nigeria are products of Foreign Direct Investments (FDIs). Will capital investment facilitate the transformation of Nigeria’s artisanal economy into an industrialised one? No.
I am appealing to those in government to stop believing that inflow of FDIs into Nigeria and the erection of complex infrastructure promote capability-building growth and industrialisation (CBGI), and focus attention on things that promote true growth and increase a nation’s manufacturing capabilities – education, adequate training, acquisition of relevant capabilities and promoting industrialisation.
First, all Nigerian national plans since 1960 including SAPs, NEEDS, Visions 2010 and 20:2020, have all been based on the assumption that mere capital investments promote CBGI. Second, Nigerians believe that technology transfer is central to Nigeria’s industrialisation. Third, Nigerians believe very strongly that foreign investments will enable Nigeria to realise maximum benefits from the Oil and Gas Industry (OGI). Fourth, most Nigerians believe that Nigeria can establish a reliable infrastructural network including a regular electricity supply system through mere capital investments. Fifth, Nigerians believe that the private sector is the engine of growth because it has a lot of capital to invest. These beliefs have no scientific basis.
The Nigerian government and Shell Petroleum Development Company assessed 50 years of the Oil and Gas Industry (OGI) in 2006, after investing over $10 billion every year, and concluded that there was nothing to show for it. Nigerians know the state of the Nigerian economy and its infrastructure. Do Nigerians now have the knowledge, skills and competences for exploiting the OGI after FDIs have flowed into it for over 50 years? No! What is the benefit of the OGI to most Nigerians today? Is it very high prices of petroleum products and gas? Does our experience support the belief that mere capital investment promotes CBGI? No! Why are Nigerian leaders still campaign for capital investments especially FDIs?
Perhaps, it is for them to get richer and richer while the nation dies. The World Bank (1998), in its World Development Report, observed that technological knowledge means know-how; those countries which possess less of it are caught in the poverty bracket. Poor countries, the bank continued, and indeed poor people are not able to compete in the global system not because they do not have capital, or other material resources, but because they have less knowledge. I agree with the bank that the difference between the agricultural-economies in Africa on the one hand and the technologically advanced economies in Europe, America and Asia on the other hand, is a matter of difference in the level of knowledge, skills and competences. The pertinent question here therefore is: What did Europeans and Asians do to possess the knowledge that is the basis of their highly competitive positions?
Europeans and Asians, our curiosity-driven research revealed, had agricultural economies for thousands of years. During the period of almost 2000 (two thousand) years, the productivity of the people in Britain was characterised by primitive tools like hoe, axe and draught oxen (Davies, 1969). The productivity was very low and seemed unchanging. Adam Smith (1776), in his book, The Nature and Sources of Wealth of Nations, had described England as a nation of shop-keepers, because virtually everyone sold one thing or the other but no one manufactured anything. The population of England was seven million in 1700, government revenue was £7million a year, and London was then the only city in Great Britain to which all goods were shipped (Trevelyan, 1948). Britain, however, achieved the first modern Industrial Revolution (IR) in the period of 1770-1850 (Gregg, 1971). By 1900, England had become industrialised and most people worked for weekly wages. Population had become 36 million, about 80 per cent of the population lived in towns – 20 per cent lived in rural areas – the reverse of the situation in 1700. Government revenue had risen to £770 million by 1931.
England was the most progressive nation in Europe before the industrial age. Other European nations achieved industrialisation after England did. Industrialisation took Asian nations more than 2000 years. This means that it took both the capitalistic nations of the West and the non-capitalistic nations of Asia 2000 years and longer to achieve industrialisation, suggesting that capital is not the primary factor in industrialisation.
The research works of Charles Cobb (a mathematician) and Paul Douglas (economist) in 1928, Douglas (1948), Abramowitz (1956) and Solow (1957) showed that capital contributes very little to achieving industrialisation. Gerschenkron (1966) examined the Western industrialisation experience and concluded that capital investment was not a prerequisite to it. Scientific research at Obafemi Awolowo University revealed that all persons are born as crying babies. The baby soon begins to babble (learns how to talk), acquires the competences to talk and talks (Ogbimi, 1990). The baby who could not babble grows up to be a dumb adult. Talking or speaking is a skill (Hurlock, 1972). The child must also learn how to read and write, otherwise, it grows up to be an illiterate. One who wishes to be a good dancer must learn how to dance. No one or nation is born with the skills to produce. All knowledge, skills and competences are acquired through learning. A nation which hopes to manufacture many products must develop the people to manufacture them. Wise nations, therefore, develop the people through learning – education, training and employment, achieve industrialisation and economic diversification, and build the relevant infrastructure. Investing on infrastructure is tantamount to investing in Depreciating Assets (DAs) because all capital assets depreciate in intrinsic value with usage and time. Educating and training citizens on the other hand, create Appreciating Assets (AAs), because the learning people appreciate in intrinsic values and acquire increasing competence for solving problems.
Our scientific theory suggests that the five variables which determine the level of industrialisation are: 1) N – the number of people involved in productive work or employment in a nation; 2) M – the level of education/training of those involved in productive activities in the economy and of the people of the nation; 3) L – the linkages among the knowledge, skills, competences and sectors of an economy; 4) r – the learning rates or intensity in the economy and especially among the workforce; and 5) n – the experience of the workforce and the learning history of the society. All the variables are related to the learning-man and learning-woman. Moreover, the higher are the values of the variables, the better is the economy. The private sector has the objective of making profit; it does not develop the relevant variables that determine the manufacturing strength of a nation – M, N, L, n and r. Hence, the private sector cannot be the engine of growth of an economy.
Let Nigeria initiate a rapid industrialisation process by setting up the framework for training all graduates of educational institutions, especially the university graduate scientists and engineers, to acquire complementary practical skills in the economy outside educational campuses. The educated and trained graduates should be challenged to build and maintain the infrastructure Nigeria needs.
Ogbimi is a professor at the Obafemi Awolowo University, Ile Ife.
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