…Cite China’s backward integration success
The recent global tariff shocks have prompted a critical reassessment of Nigeria’s industrial strategy, with experts urging the nation to seize the opportunity for industrial rebirth by tapping into the local industrial raw materials manufacturing.
Drawing inspiration from China’s successful backward integration model, they argue that Nigeria must prioritise local sourcing of raw materials to reduce dependency on imports and strengthen its industrial base. They insist that with the right policy shift, the country could transform the current challenges into long-term growth opportunities.
Experts maintain that the global trade tensions could push Africa toward deeper regional trade and less reliance on foreign partners, calling on the government to address the large demand for primary industrial raw materials required by manufacturers. They argue that backward integration is a pivotal tool to reshape Nigeria’s economic future, as reducing reliance on Europe, China, and the US is vital for long-term economic sustainability.
Citing China’s backward integration drive, which saw the growth of the economy, they urged that Nigeria can follow suit. Nigeria’s primary raw materials include both agricultural and mineral resources.
The stakeholders are optimistic that there is hope for Nigeria’s growing domestic manufacturing sector but are empathetic towards the operators’ need to think outside the box going forward.
President of the Calabar Chamber of Commerce and Industry (CALCCIMA), David Etim, believes that Nigerian manufacturers should look inwards for their raw materials, just as China did. “China made a policy: if you want to sell in our market, you must develop raw material inputs from local sources. That was how China was able to develop its own industry because the country backwardly integrated.”
Etim advised that Nigeria should backwardly integrate into everything they produce and sell in the Nigerian market. “There must be local manufacturers producing and supplying them; that is the way to go.”
He also pointed out the need for a deliberate policy by the government and an enabling environment so that manufacturers can begin to evolve. “There’s got to be a deliberate policy by the government for backward industrial raw material manufacturing. We have to start thinking about production and self-sufficiency to some degree; that should be the goal. The government will have to provide the enabling environment and the right policies so that manufacturers will begin to evolve. We’ve got to think about sustainable backward integration.”
The CALCCIMA boss further argued that the solution to the inflationary trends is increased production. “There is no manipulation by the Central Bank of Nigeria (CBN) that will work sustainably. A poor productive base will increase inflation. If you want to bring down inflation, you either reduce the money in circulation, which is what CBN has been trying to do, or you increase production, because the bulk of Nigeria’s trade is in the informal sector.”
He said the fiscal side of the government has a lot of work to do to promote production, whether it is in agriculture, manufacturing, or other sectors. “We have to increase the local production of goods and services in Nigeria. And there is no quick fix to that.”
Lamenting the high exchange rate, which makes importation challenging, he viewed that if manufacturers must stay in business, they’ve got to look for local substitutes for raw material inputs. “Which creates a market for input manufacturers for the raw materials that industries up the production ladder will use. So, there is a huge untapped market for primary industrial raw materials, be it from agricultural produce or solid minerals.”
Emphasizing the need for power, he said, “Now, for industries to work, power is a fundamental issue. The easiest way, and which is the Chinese way, to address power is to cluster industries and create special economic zones. There has to be deliberate policies, not necessarily infrastructure from the government, but the government must create the policy. Nigeria has all it takes to be the industrial base of Africa, the manufacturing hub for Africa; we just need to put a few things in order—our power principally. A lot of people talk of access to finance; it’s not our problem. Once the government stops its addiction to local borrowing, that space will open up, interest rates will drop. What is pushing up the interest rate is government borrowing to finance the budget. It has nothing to do with productivity. It’s fiat money. There is no easy solution to a good economy. We’ve got to work it out. For manufacturers, there is no quick fix to this problem. Manufacturers need to start thinking about import substitution for their raw materials.”
An SMEs expert and member of the Lagos Chamber of Commerce and Industry (LCCI), Daniel Dickson-Okezie, acknowledged that manufacturers and businesses in Nigeria are facing a dire situation with the already existing high rate of inflation and harsh economic conditions in Nigeria, compounded by the tariff war instigated by Donald Trump.
He noted that the implications are that they have to pay more for raw materials with the new high tariffs. “It also means that they are going to sell at a high cost, and this tends to affect patronage. Another problem is that the real cause of the problem is that Nigeria is generally a buying country, not a producing country. Most of the industries operating in the real sector in Nigeria depend on foreign raw materials. What this means is that they will have to face the challenges of the tariff war.”
To solve this problem, he advised that “we go back to the drawing board and try to source our raw materials locally. This involves quite a lot—extensive research, as well as the will to get this situation taken care of.”
Another thing is that, with this situation, the manufacturer will have to look for alternative suppliers of raw materials. “Already, countries like China have, even before now, positioned themselves as alternatives. So, the operators in the real sector have to look to countries like China and the Asian Tigers like Malaysia, Taiwan, Indonesia, and all that, who are eventually ahead of Nigeria. So, Nigeria has to look for alternative sources of raw materials. But over time, the long-term solution is that we must start producing. We must stop importing, we must reduce our imports and increase our production, particularly of raw materials. And in the meantime, the manufacturers have to also come up with as many strategies as possible to stay afloat.”
This is all more necessary because most manufacturers in Nigeria are, to say the least, what one may call infant industries. That means they have not gotten to the point where they can comfortably and fairly compete with similar industries in other parts of the world. So, what that means is that for them to compete, for them to survive, they have to adopt strategies, particularly in the area of success of supply, as well as trying to adopt new measures, research, and all that, to see how they can get their supplies locally. That’s a major thing to do.
So, Nigeria can assist manufacturers with some form of subsidy. Some of them, at least beyond subsidies, might as well grant them manufacturing facilities at low-interest rates, which will help them cushion the effect of these trying times.