By Omoh Gabriel, Business Editor
Chief Rasheed Gbadamosi is an Economist, Industrialist, administrator, novelist and an art collector. He has been in and out of Lagos State and Federal Government. He is on the board of several companies. In this interview he bears his mind on both current and past national economic issues.
Looking at Nigeriaâ€™s environment, are you happy with what is going on?
I refrain from being overtly judgmental. I have only one life and have not spent quite a number of years. I am now looking into getting to the seventies in about four years or so. Then going back to my teenage combative years, in the beginning of this middle age when I was fighting around with Fela, chanting revolution, how would you want me to respond to that.
Looking at those years when you were growing up and now in terms of infrastructure, social life and so on what would you say?
There is a considerable amount of frustration. Principally from the perspective of unrealised dreams, in 1960 when I stood with lots of school children on Tafawa Balewa Square,Â that was my final year in secondary school waving the flag as the Union Jack was lowered down and Nigeria’s flag went up.
The atmosphere was pregnant with high expectation that the nation will just take off once the British depart. And that we would see the beginning of transformation. According to the clichÃ© of the moment, I went in search of the Golden Fleece because it was a thing to travel abroad to add to ones educational knowledge.
But the promise was there, perhaps exaggerated, perhaps the successor politicians and nation builders got it totally wrong. Then somehow we were able to attain some landmarks. There was the civil war interruption across boardÂ early in our economic and political history. It must have set us back a little bit but then I came back at the tail end of that civil war, one found oneself among those making decisions where the new rhetoric then was money is not the object, it is how to apply the funds to development that was the challenge.
Then one participated in the second national development plan. Again that was the vogue to galvanise our collective energies to development plan and implementation and then interruptions also emanated from the political instability and the changing of batons, the military interventions and I saw renewed vigour and economic nationalism which gave birth to theÂ indigenisation decree and division of the country into 12 states at that time.
This played a lot in ensuring that development got to several areas of the country and not restricted to the four regional structure that we had prior to the civil war and then the great blessing or bane of our lives today-hydrocarbon, sprouted from our land and within two or four years after the civil war and the engendering of discontinuity of policy formulation and implementation.
I am not sure that we have come out of the woods yet. So, in a way, if we had the kind of stability, continuity of policy and economic management like all other countries which stood on the development line to say on your mark, get set, go, we would have had a different story to tell. Sadly, that is not the case and when you go on to talk about industrialisation, in a sense, things I saw in my childhood days about basic health, in my elementary school when we all walked to neighbourhood schools, 60 per cent of the kids would have skin diseases. They were terrifically malnourished and there was high mortality rate and kwashiorkor as we came to know it after the civil war.
So, the general population was poor but we have seen things changed. Houses at least in the urban areas, allow my prejudice being a Lagosian has improved some what. The health care service delivery, with Dr. Majekodunmiâ€™s fabulous distribution of health centres, taking Lagos as a great experiment, therefore access to medical care and the beat about not paying for health care until you are 18 years, the pipe ran water and incidents of water borne diseases diminished. Then of course the down side, there was population explosion and rural urban migration, which was fostering the race to catch up and racing to outrun facilities.
But I am being historical here, the first wave of execution of development plan meant that Nigerians cut their teeth and can-do philosophy reigned and a lot of Nigerians were turning to expert. Then foreign investments were not that much hindered. So, textile mills sprouted, areas of comparative advantage like the cotton mills in the north and the central part of the country and the Action Group government of the old western region based on infrastructural emplacement, that the industrial estate of Ilupeju, a bit of Apapa, a bit of Ikeja.
And they too were promoting industrial development, they were partnering with big names in industries like Dunlop, Cadbury and Joint ventures, having industries established, well, some how the advent of the Structural Adjustment Programme (SAP) meant that we could no longer pay for the tentative incursion into industrial development that we knew just around the time the civil war came to an end and here pride and arrogance of the indigenisation decree took off. So, the industrial policy was wrong.
Industries predicted their existence on imported inputs rather than developing the countryâ€™s industrial take off from the heart land of raw materials produced locally. Then off course you have the foreign exchange crunch and we could no longer sustain that philosophy of industrial development, then I think perhaps because of slightly the arrogance of the indigenisation decree, foreign investors also did an about turn or they were not coming in as robustly as they were before.
Where would you say then that Nigeria went wrong with the indigenisation decree?
I think so based on the fact that a lot of these enterprises were been taken over which saw the emergence of the capital market, when Nigerians were now buying these shares, most of these enterprisesâ€™ shares owned by foreign interests were being sold as they were bent on taking their capital out.
As soon as they were able to accomplish that, quite a number of them closed shops. So, a lot of the joint venture partners, once they were able to take advantage of the generous terms on the sale of shares, they made their exit and took their capital out and the incentives regime did not encourage them to re-invest or even to retain some reasonable shares in the enterprises they were divesting from. So foreign investment faded away and they continue to fade away. But other countries that did sensible economic policy had the reverse, there was an influx of foreign investors.
Recently, Gowon who promulgated this indigenisation decree said that Nigeria went out of the way when we stopped planning. He did not blame it on the indigenisation decree but said when we stopped planning. As a former Minister of National Planning where did we go wrong, when exactly did we stop planning?
You see, we are not alone in this world, when we look to external support for the articulation of development plans, we are prisoners of changing rhetoric of development philosophy. At one time, the issue of planned economics had an influence on the global economy and so planned economic policies, economic development strategy blew the waves especially in international institutions like the World Bank and IMF.
Then came the collapse of centrally planned economies, and the ascendancy of monetary economists at the World Bank with Margaret Thatcher and Reagan and small government and policy of privatisation.
The philosophy of planning was thrown out of the window because no one believed in it and development planning was no more and they were to leave everything to market forces and the market was better at channelling areas of investment of need into areas requiring growth and just leave everything without things being guarded by sovereign government into the needs of the country and so we were asked then to embrace the usual terrorist of liberalised economy to balance budgeting. Do not go into debt, sometimes you have to finance growth through deficit financing so long as it is a productive investment which will help you to pay off the whole debt. So, everything about planning just went topsy turvy the economic philosophy overtime and the repercussions on us in our thinking. So, it jettisoned the idea of development planning.
I took part in the second and third National Development Plans and by the time we did the third one, most of the officials that participated in it have gone out of the window. There was a new rhetoric of perspective planning, whatever that means that was substituted. But recently, I read about Chief Phillip Asiodu .making the case yet again saying that you want to achieve Vision 20;2020, how do you want to go there without any plan and then people just woke up to say you are right we must have a road map, a target which are the whole indices of development planning.
It was development planning that led to sometimes the nefarious takeover of commanding heights of the economy by government. The development plan could have as its objective sometimes one university in every state, it could be a steel plant dotting the three corners of Nigeria. Some of these things were embedded in plans carefully articulated and drawn up but then public sector moved away from all that and was expecting the private sector to champion the course of economic development. ButÂ given the relatively weak position of the Nigerian private sector, the right responses were just not coming.
Donâ€™t you think that at this point a hybrid of free market forces as well as guided control is needed to determine the flow of resources and investment
The world has sharpened up its understanding of how economic forces interplay,Â even the East European communist regimes that believed in heavy centralised planning (of steel mills, ship building, of missile manufacture etc) stopped for a while and said in terms of allocation of resources something has gone wrong. The market could be the best in the allocation of resources because those products will be answering consumer needs because you cannot decide it from somewhere either from the National Planning Commission or anywhere. You will need to test whatever you think the public ought to have or what they actually will spend their earnings on.Â So, market will help in allocating imperatives of resources, market too will also be a vote to say do more of a particular activity and less of another activity.
Any way, in the last 20 years, the world has gotten wiser even in terms of philosophy and opinion, the economics of it. We were wiser because we have seen that certain rhetoric were not dependable in the long run and what then has emerged is the financial crisis. Nobody could have ever anticipated that suddenly the issue of money will come to dominate and confront us even if we are heading towards public-private sector partnership saying that the ideal thing is for government to provide an enabling environment but suddenly there was an eruption financial downturn, what do you do in such a case? Only the public sector (government) can regulate the issue of money by way of policies that are backed by the prejudice of entrustment. The private sector cannot regulate to make sure that we do not devalueÂ the currency.
Being an industrialist and one that has actually been in the system, how will you access the current policy regime guiding industrialisation in the country?
Frankly, there is no industrial regime in place in the country. We have been consumed too much by politics that we are not giving enough requirements to basic economic and industrial policies. Right now we are battling with monetary policy. What has emerged now is the ascendancy of the Governor of Central Bank almost taking over all the functions of financial regulations in the country. He is the only one articulating choices. There will always be options generated by the dynamics of the economy and then you as a policy maker and implementer will be taking options in the best given particular sector, this only has happened in the last three to four years or so.
It has not been the case in the past. I have the joy and pleasure of being asked to chair an attempt by the Buhari regime to have an industrial policy, Chief Ogunbanjo chaired the committee to say that we cannot continue to be in the dark but at that time the issue mitigating against credible industrial policies were: import license regime,Â tight regulation of foreign exchange, all the things that SAP attempted to address were predominating and impeding the realisation of probable industrial regime.
So, what we counselled in that 1984 exercise was to say slow down and calm down, do like other countries have done. Fast forward two years, there was a Minister of Industry who said perhaps the country needed an industrial master plan, but I am sorry I find myself involved in all these things because I was asked to be the Chairman of a financial committee on industrial development which was to draw out an industrial master plan.
We worked on it for almost six years. It was housed at the energy secretariat where I happened to be the Chairman and it was again emphasising the high tested philosophy of industrial development through a consultative process. In other words, we now recognise the entire industrial sector, the systemic approach and that a map of a nation that has got it right in terms of industrialisation is one in which when you look at the tapestry of the industrial profile of the country, you see a glossaryÂ of industries slowly interlinking.
The raw materials manufacturing outfits are feeding into those who are now exporting the product. Then of course the peripherals like electricity, gas, road network and railway and so on will be falling in line to support that endeavour. And when you subject this to intellectual analysis you have an input-output profile where producers in one sector are providing raw material for producers in another sector in a linked process in inter-industry synergy.
It is when you have a dense profile where we cut it into cells that you are getting it right industrially. If there are many of what we call zero cells, one portion of it will just die suddenly and there will be nothing to fall back on. Take an example; Cocoa as a potential industrial product that can do wonders and Rubber too. In our own system we are still at low level of industrial development whereby agro allied industries should be making a difference. What you have to do is to carry out an analysis of who is doing what on the commodity; Rubber for example.
Of course those who grow the trees, those who tap it, those who do the basic processing and then make the rubber available for those who are going to make tyres, condoms, gloves and other industrial products or things that are going to be used by heavy engineering and what you then do as policy designers is to see where the impediments are.
That Crump rubber having been obtained from raw rubber can now be targeted on those other industries requiring rubber products as inputs. Now, the most beautiful thing that could have happened to this country would have been to use hydrocarbon as a product which can then have a chain link for real sector development.
From a barrel of oil you get 2,000 products. That is a master piece around which we can build an industrial policy. This can be an opportunity of linking the various aspects of manufacturing. If you can do that the restiveness in the Niger Delta area will become history because you will be able to employ all those kids in several hundreds and hundreds of industries, which utilise this raw material- Hydrocarbon.
What were the issues addressed in the attempt to have an industrial master plan?
It is to establish a chain link of industries. Whereas producers â€˜Aâ€™ will be making the raw materials to the next level of processing, producers â€˜Bâ€™ will add more value to the product and so on.
Take petroleum for example. From petroleum you can make plastics, fertilizers, all the oils for cosmetics, all the additives for medicines a lot of which is chalk and you can get it from petroleum, paints. If the shirt I am wearing has some fibre then it is a product of petroleum, the desk I am using has been polished with varnishes which are produced from petroleum. When you make glass you need binders and this is a product of petroleum, the carpet on which we stand now is made from fibre which is a product of oil. Look around you and you will see that almost everything has an input from petroleum.
So, if we had a comprehensive industrial policy, saying to yourselves that we want to exploit to the maximum the gains of utilising our basic raw materials industrially you will be amazed how much progress we can make. Then you can get a lot of our chemical engineering graduates, a lot of our chemistry graduates, who the nation will then identify as potential investors in these areas. Alas, all we talk about is politics. Who will get what? Who will be senator? Who will be in the House of Reps?
You were for many years the chairman of NIDB and NIDB has the mandate to promote mostly small and medium industries and from the summary of what you have said now, the development of SMEs along the chain of production processes will help to grow the economy. What did NIDB do in this regard or what did it not do?
The most fundamental issue is that the entrepreneurs must first proclaim his being. There are no two ways about it. Industries will not just sprout from the ground. Individuals like you and I will say I am educated and I want to manufacture, maybe chalk for use in schools. I want to manufacture yarn to be used to weave cloth, so on and so forth. A lot of the ingredients for the manufacture of all these things are petroleum based. But you need someone who will stand out to say this is my calling of life. It is not impossible that at the state level and the educational level we are galvanizing the challenges of our young stars because industry is about youth. You work and you work very hard, there are no two ways to it. It is just as good as breaking your back working in a farm.
Are we saying there are no entrepreneurs?
There are. I am amazed these days that I see youngsters in their thirties and that is the best time of their lives, getting together and trying to build a factory or one enterprise and the other. That is how nations are built. They are our future. Some of the decisions I took, I took in my thirties. To say I like to produce this or that. In my time the big boys were the textile boys.
They were predominant. They were the once who will take what ever was available. And since the banks had to post performance, they had to give them funds. There were also some green field projects that were financed too. But due to some secondary happenings in the economy they probably did not have a chance of success. A lot of them failed.
These secondary happenings include import regimes, tariff regime, one time you protect them, another time you open the gates and the Chinese will come in and strangle them. Some times you have interest rates regimes that favour local manufacturers and other time the condition is very harsh and industrialists will just find that they are unable to continue with their projects and they return to their village and that is the end of their projects.
It takes the consultative process of the articulation of an industrial master plan, where seating around the table weâ€™ll all be arguing and giving statistical support as to the havoc being risked by misplaced policies decisions. This is the glory that assisted the Japanese and Koreans. Japan Incorporated was a function of the Japanese seating round the table. Policy designers and policy implementer, in fact, in the business schools of Japan when 100 students are graduating in a particular year, 50 will go to the private sector and the other 50 will go to the public sector.
They had the same kind of background training. They understand the issues, so when they now come to persuade each other, as to the right policy approach they will be speaking the same language from different sides of the divide. So, Japan Incorporated is the pasture that captures them to now pursue national economic growth.
The major focus of the present administration in respect of industrialisation is the setting up of industrial parks
That is not exclusive. In fact, industrial parks are just a continuation of the development of infrastructure. Awoâ€™s regime in the Western region and that ofÂ Okpara in the East followed the same line of reasoning, it was all about industrial parks. When you build industrial layouts you are spending public funds creating access roads, power lines and so on, that is what industrial parks are about. It is just that it is a lot more sophisticated now with the coming on of computers.
In countries like Taiwan I have visited industrial parks which you can practically take your bed to. There is no smoke, no discomfort. Nice layout. All you need to do is to come into the park and just screw on your equipment and begin production.
The government has been planning this in the last 6 to 7 years and we have not seen anything yet?
The government has gargantuan plans. It is unfortunate. We dream and we pontificate and we really mean well but when you do the budget, there is the proportion that should go into industrial parks as a definite policy of emplacement of infrastructural facilities but the minister will get there, he does not know his left from his right, he will not implement it. And there is no fanatical national leadership, which will say I have put that as a plank of my policy, who will help me establish these industrial parks? and then energy should be galvanized and some people will be establishing those parks. Unfortunately, all they are worried about is who succeeds them. Who is the fellow from their villages that will take the position after them. We are not serious.
Sorry to take you back but you talked about Japan Incorporated and that it saw Japan to where it is. I do know that during your time as minister of National Planning there was Nigeria Incorporated set up by IBB where government people and private sector will meet pre and post budget. Why did we not succeed with it?
You know we have a disease in this country. The disease is the incapacity to take a particular endeavour and devote the totality of out hearts and minds to that endeavour. As minister of National Planning, we sat at post annual budgets to review things with the private sector. To say we have now done the budget in the implementation you gentlemen what would you want? And of course there will be a shopping list and they will be serious and they and then government will say oh, budgetary constraints, we canâ€™t accede to your request.
That is too tough an area we cannot go into that now. First year will go by, second year will go by and then the budget cycle will have to be started again. A serious nation does not look at the immediate or the short term. You are saying you want to be sure that all those textile companies are revived.Â That is one sector we once had a comparative advantage in and have now been ruined by vicious competition from imported products. We are going to do a policy to get our people to now start producing and displacing imported products.
Then what do you do, it is like what they are trying to do now, a fund for industrial revival then you will find out if they have not all committed suicide and sent to jail by their banks. You find those who had established those enterprises and say go and just talk, go and re-technologise, go and retool, start all over again, we are going to support you and here is the support. That is the mark of a serious government. From my political economy, this is where I tolerate politics intruding into economic policy; where by there would be a policy of, it is about our country and not about petty squabbles.
And if it is about our country I donâ€™t care who the entrepreneur is. Once it is a man of credibility and proven integrity and he could be diligent let us hold him up as an example. Let him have the wherewithal financially and in terms of national policy support so that he can get on with it. After all, he alone cannot run the factories, cannot keep the book, and cannot market the product. He will just be there as the motivator the higher cling to get hundreds of potential employees to do work. Now it doesnâ€™t happen and I am amazed that year on year on year we are singing the same tune and nothing seem to be improving.
How doÂ we actually kickoff industrialisation in Nigeria?
Where to start is to get the infrastructure right. Energy. We lost it. I had the opportunity of being a member of the board of National Electric Power Authority at a time during Obasanjoâ€™s first coming as president when he believed in the erection of infrastructural facilities. We will seat at board meetings there, take decisions as we did and Afam power plant, Delta power plant, Shiroro, and finally in Egbin. Tthe day Egbin as proposal was brought to the board I threw my support to the 1,320 megawatts plant in a corner of Lagos state. At the time Lagos was consuming 60 percent of the entire nationâ€™s power consumption. And this project was to isolate Lagos consumption from the other plants.
Gas would be channelled all the way from Delta to Lagos. But the policy was sound because it was either you put the plant near its source of power or close to the market. So the consumption argument won the debate. The secondary investment in distribution will be minimal. So it was decided. At every turn of decision, Obasanjo will write the cheque for implementation. It was not that NEPA had the money they had bright people who took these decisions until 1979.
At every turn, Obasanjo as head of state was providing funds but since then, until I returned back to be minister of National Planning only one additional plant was added. Yet graduates are coming out to the market, people were having homes built, sticking in air conditioners, industries were having additions so it was not any surprise then that everything went down in terms of electricity supply and industry started to cascade down. No energy, no continuous investment, whereby if we had adhered to tenets of the industrial master plan signals would have been sent early enough.
What informed the decision for the new investment in cassava processing?
Again, I keep referring to Obasanjo because he has been a practitioner in all these things. He went abroad once, he came back and said the Chinese are asking for Cassava pallets. Because for several months of the year large parts of their land is covered with snow and yet they want to breed cattle and eat meat, they needed our cassava. Since Nigeria is the largest producer of cassava in the world, they naturally wanted to buy from us.
So, Obasanjo came and said there is money in our backyards. He encouraged us to plant cassava. Many treated it as one of Obasanjoâ€™s jokes. But some of us were listening at that time some friends of mine and I have tried to obtain molasses from sugarcane and distill alcohol from it. Under an industrial master plan these things would have been clear to us.
Intermediate investment in all these things up to the final product. Ethanol is used in paint manufacture. In paint for ladies lip sticks, it is used in foods, medicaments, and so on. And you could distil ethanol from the waste of sugarcane called molasses. But you could also get your ethanol from cassava. It is fermentation. So I took a trip with my friend to China to look for equipment because equipment from Europe is always sophisticated and too expensive for business here. How much can I sell my product for to make profit if I process with expensive European equipment? So I went to China and I was surprised.
We saw how cassava pellets were used to make ethanol. Outside of that factory must have been about a hundred trucks laden with cassava pellets.
In other words in some parts of China they have a sub-tropical zone where they can grow cassava, but it was not enough. Also there is competition between the use of cassava for distillation products and its use as animal feed. So they wanted our own cassava. Then I said to myself that there is wisdom in this. About the same time the rhetoric started that from a tuber of cassava you could produce fufu, garri, additives for paints, starch, blend with wheat flour to make confectioneries.
A national policy was proclaimed for 10 per cent of cassava input into wheat flour for baking bread and other confectioneries. So I said well that might be another investment. It is a known fact that the western part of the country has the largest growers of cassava.
So some friends from Thailand thought that it would be a good idea. An agro allied, local resource based industry would make sense. So we set up Thai Farms International Limited and we built at first a 40 tonnes, then 50 and then 100 tonnes per day cassava processing plant.
We have already persuaded flour miller to add our cassava flour to their product to the tune of 10 percent. All those into baking have also began to make demands.
Surprisingly also people who make adhesives have also approached us and they use our cassava to produce the adhesives for glass. What we are doing is to get farmers into an out growers scheme we have done it with tobacco. You bring these farmers together they produce and you weigh and pay for it.
The factory is located in Ososa, Ogun State, which is a major cassava belt in Nigeria.
We produce some of our cassava ourselves and get our remaining input from contract farmers. The idea is to encourage the local farmers. We guarantee the market for them if they donâ€™t get greedy they can be assured of demand. Why kill yourself doing industry on inputs and raw materials which you have to import. We are now pleading with policy makers to focus on initiatives like these.