By NKIRUKA NNOROM

Nigeria should embark on an export-oriented strategy to manufacturing if economies of scale are to be reconciled with the relatively small domestic markets, says Fabian Ajogwu, a Senior Advocate of Nigeria, SAN, and Managing Partner, Kenna & Associates.

He made the remark while presenting a paper themed, ‘Doing Business in Nigeria: Fiscal, Legislative and Judicial Challenges’, at the just concluded 42nd Annual Conference of the Institute of Chartered Accountants of Nigeria, ICAN.

He noted that in creating the balance, “government’s intervention, if at all needed, ought not to be directed towards protectionism, but aimed at export niches.”

He stated that with adequate infrastructure and policies in place, production costs would invariably be reduced and economies of scale achieved.

Ajogwu stated that with relatively very little manufacturing activity going on in Nigeria, it was difficult to reap economies of scale in production, adding that apart from rising costs of production as a result of lack of adequate infrastructure, the anti-trade policies of the government may have raised international transport costs compared to the declining trend in Asia and other parts of the world.

“In addition to the above problems, is the perception of Africa’s investment environment as being relatively a high-risk area, especially when compared with Asia. Africa is prone to two types of risks – policy changes and shock.  Successive governments have changed policies with almost a zero degree of predictability and confidence among businessmen, mostly in response to donor conditionalities seen as the price for relying on aid.

African economies are also more susceptible to economic shock arising from the terms of trade and climate than other economies, mostly because of its trade restrictions and also over-reliance on export of primary commodities whose prices are often affected by international events, for instance cocoa, rubber or oil price decline in the international market.

“Nigeria being an oil dependent economy is therefore more vulnerable to these external shocks. Both shocks and policy changes alter relative prices, and volatility of prices discourages irreversible investment in favour of liquidity,” he said.

He, however, remarked that the history of policy failures and economic collapse do not necessarily mean that country’s ailing economy could be revamped, saying that countries like Uganda and Indonesia have been through worse economic crises, yet had managed to embark on reforms armed at scaling the hurdles necessary for economic recovery or growth.

According to him, Nigeria can get things right by creating a minimum adequate economic environment for economic recovery. This, it can do by stabilizing the macroeconomic environment, and then getting the prices and other incentive policies right.