X Close

The Bartlett Development Planning Unit

Home

Collective reflections about development practice and cities

Menu

Industrial development and business-civic leadership in Nigeria

Naji PMakarem5 July 2016

Why is unemployment and poverty rising in Nigeria, despite over a decade of robust economic growth? According to new research from, Naji P. Makarem, the organized private sector (OPS) has the opportunity to leverage its clout and political influence for urban governance. To do so however, it must strengthen its urban organizational capacity and shift its political attention beyond pure-efficiency to broader conceptions of functional urban agglomerations. A failure to do so risks locking Nigeria into a ‘low-productivity trap’, long after it has overcome its chronic ‘efficiency-crisis’.

 

Since its independence in 1960 Nigeria has been struggling to industrialize and diversify its economy away from low-productivity agricultural employment and dependence on Oil & Gas export revenues.  It has adopted numerous government strategies from import substitution to market liberalization; yet the economy continues to be highly dependent on oil reserves and imports of food and consumer goods from abroad.

 

It is estimated that 70% of households are currently living on less than $2 a day and a similar proportion is employed in the informal economy. Impressive GDP growth and considerable diversification into new sectors such as ICT, Real Estate and Professional, Scientific and Technical services over the past decade have failed to translate into sufficient employment generation, with unemployment rising significantly over the period to well above 20 percent according to government figures.

 

Figure 3 Unemployment in Nigeria, 1999-2010 Source: NBS data.

Figure 3 Unemployment in Nigeria, 1999-2010
Source: NBS data.

 

Jobless growth over the past decade can be attributed to two aspects of Nigeria’s industrial structure: About a third of the growth in output since 1990 has been driven by Oil & Gas, ICT and Real Estate, which together employ a mere 1.4% of formal sector workers. These are highly productive sectors with considerable impact on employment within the cities where they are concentrated, such as Lagos, but they do not generate sufficient employment to absorb Nigeria’s growing labour market.

 

Figure 6 Contribution to Real GDP Growth 1990-2010 Source: Authors’ calculations using NBS data

Figure 6 Contribution to Real GDP Growth 1990-2010
Source: Authors’ calculations using NBS data

 

On the other hand, manufacturing, which suffers from low productivity even compared to countries within the same development club, such as Kenya, India and South Africa, has contributed a mere 5% to GDP growth since 1990. Today Nigerians import the vast majority of the products they consume. They also import the machinery and high value inputs of the few products which they do produce, such as foam, steel pipes and pharmaceutical products. If Nigerians produced more and imported less (or developed favourable terms of trade) more of the money going into tills and ending up in the pockets of investors, entrepreneurs and workers abroad could be going to Nigerian workers, investors, entrepreneurs and the government. Tradable industries in general, and the manufacturing sector in particular, offer Nigerians the opportunity of generating employment, income and public revenues, which are all necessary for poverty reduction.

 

Nigeria’s 55 year struggle to boost its tradable industry is hampered by the country’s chronic ‘low-efficiency’ trap. Consider the following thought experiment to illustrate: take a successful exporting firm in China and place it and its managers and employees in Nigeria. It would not operate anywhere near as efficiently. Here’s why: In Nigeria the same firm would struggle to find serviced industrial land, having to build or fix its own slip roads, dig its own bore hole to access water, build its own sewers system, run its operations on costly diesel generators and hope the land it acquired is not claimed by somebody else, it would have to contend with often negotiated and opaque duplicity of taxes, inconsistent government regulations, a user-unfriendly bureaucracy, competition from counterfeit products produced locally or that enter the market illegally through poorly regulated international borders, an unreliable judiciary, poor quality roads connecting cities across the country with multiple check-points for informal bribes, slow clearing of imported intermediate goods at ports, tariffs on imported inputs which are not locally available, the risk of arbitrary increases in import tariffs for dubious reasons, double-digit interest rates and precarious access to finance and foreign exchange (Although this month, June 2016, the government floated the exchange rate).

 

These dysfunctional aspects of the business climate are well known and well researched by the World Bank’s ‘Doing Business’ reports which in 2016 ranks Nigeria 169 out of 189 countries in terms of ease of doing business. They are substantiated by our 77 interviews with business and civic leaders in Lagos, Kano and Port Harcourt, as part of DPU research for a DFID-funded project called Urbanization Research Nigeria (URN).

 

Yet the dysfunctionality of Nigeria’s economic development context runs much deeper than these ‘efficiency-related’ aspects of its urban and national contexts. Economic development theory highlights agglomeration economies, the home market effect (local demand) and productivity drivers as engines of industrial development and productivity growth, the essential conditions for income growth and quality jobs. Efficiency, while extremely important especially in contexts of cost-based competition, is just one of many development drivers urban regions and countries produce, and which firms draw on to compete.

 

The question is how can Nigeria break out of its chronic ‘low-efficiency trap’? While conventional wisdom would point to the need for good governance, this is not very useful advice in and of its own (it’s too obvious). Our research takes a different approach. Drawing from economic sociology, we argue that business-civic leadership has the potential of influencing policy and governance. Moreover, the perceptions and world views of the business community and business civic leadership can shape the formal institutions that govern them (see Figure 1). So we investigate the degree to which the private sector in Nigeria is organized, and the scope of their political attention.

 

Source: Authors’ calculations using NBS data

Source: Authors’ calculations using NBS data

 

Our research found the Nigerian business community, from small to large firms across different industries, to be highly organized. The peak business association which has been gaining power and influence since independence is the Manufacturing Association of Nigeria – MAN. The political attention of the organized private sector (OPS) focuses almost exclusively on efficiency-related aspects of the business climate. However, they overlook aspects of the urban context related to agglomeration economies and non-efficiency related productivity drivers; both indispensable features of functional cities for people and businesses.

 

These overlooked urban features include access to affordable, secure and serviced housing which are essential for human capital development; public transport which is indispensable for worker access to work places; education and skills development which are essential for human capital development and innovation; public R&D in related industries to support knowledge creation; firm- and industry-level support strategies for facilitating coordination and knowledge sharing; public space and cultural amenities to enable interaction, identity formation and innovation; and initiatives designed to bridge fragmented communities and develop appropriate and widely shared perceptions and world views in pursuit of social capital.

A failure to focus political attention on investing in functional cities risks locking Nigeria into a ‘low-productivity trap’, long after it has overcome its chronic ‘efficiency-crisis’.

 

 

This is a Blog about a recently submitted URN report to DFID. It will be publicly disseminated soon.


Naji P. Makarem is co-director of the Msc. Urban Economic Development at the Bartlett School’s Development Planning Unit (DPU) at UCL, and a lecturer in Political Economy of Development.

 

Integrating Women in Economic Development through the Mitreeki Network

DaljeetKaur31 March 2016

Mitreeki : A combination of Maitreyi in Hindi and Urafiki in Swahili symbolising Indo-Africa friendship beyond boundaries

Mitreeki : A combination of Maitreyi in Hindi and Urafiki in Swahili symbolising Indo-Africa friendship beyond boundaries

Right when we decided to hold our regional conference in Nairobi, Kenya around integrating women in economic development, the Lions from the Nairobi National Park decided to visit the city. Amidst the friendly carnivores, we held a successful conference and agreed to come together as the Mitreeki 2016 Network and committed to work tirelessly to promote and protect the rights and integrity of all women and girls. We also pledged to:

  • guide and sustain knowledge based partnerships for economic empowerment of women across developing countries (especially from India and Africa);
    • Share experiences on empowerment of women and girls that have brought results and have generated interest regionally and globally;
    • Invite like-minded organizations and individuals to join the network; and
    • Call upon international community and national governments to support this initiative and promote empowerment of women and girls at local, national and regional levels.
Photo: Indian High Commissioner to Kenya, Suchitra Durai inaugurated the Mitreeki 2016 Conference on the 3rd of March’16 in Nairobi, Kenya.

Photo: Indian High Commissioner to Kenya, Suchitra Durai inaugurated the Mitreeki 2016 Conference on the 3rd of March’16 in Nairobi, Kenya.

 

Why is Women Economic Empowerment needed?

UN Secretary General Ban Ki-Moon said “if the world is to achieve the Sustainable Development Goals (SDG), we need a quantum leap in women’s economic empowerment” while announcing the formation of the first ever high-level panel on Women’s Economic Empowerment in Davos (2016).

Women are the most deprived and marginalized across countries and cultures – a concern captured in the UN SDG 5 that urges equality and empowerment of all women and girls. Representing half of world’s population, women should ideally comprise 50% of world’s labour force, but in reality they only comprise around 30-40% of the total work force in developing countries (according to World Bank, globally 40% of all world workers are women). Issues such as persisting lack of voice and social status, education, skill sets, security at work place and equal opportunities are reasons for their low participation. And because of unequal opportunity and related reasons just 18% of firms globally have women at the top management level.

Map depicting percentage of women workforce across the globe

Map depicting percentage of women workforce across the globe Source: http://fortune.com/2015/03/05/women-in-the-workforce/

Map depicting percentage of women workforce across the globe
Source: http://fortune.com/2015/03/05/women-in-the-workforce/

Despite grim statistics, it is believed that women’s economic empowerment is essential for any country’s development. It not only promises to increase a country’s GDP but also ensures a secure and a sustainable future for its citizens. Recently Hillary Clinton as Secretary of State repeatedly made an economic case for improving the status of women, citing research showing the benefits to a country’s GDP. Quoting the No Ceilings Report (Gates Foundation, 2015) she said “Closing the gap in women’s labor force participation across OECD countries is estimated to lead to average GDP gains of 12% by 2030, including almost 20% in Japan and Korea, about 10% in the United States, and more than 22% in Italy.”

 

India and Africa Connect

Both in India and Africa the gender divide, especially in rural areas, is quite intense and women are openly subjected to various kinds of discrimination and denial of rights. Women bear a disproportionate brunt of poverty which forces them into increasing drudgery, longer hours of work under conditions of poor nutrition, food insecurity and falling health. The entrenched socioeconomic prejudices results in progressive marginalisation of womenʹs role in the household, neighbourhood, and in the community. However, despite these limitations, India and Africa have achieved some noteworthy success in women empowerment and poverty reduction.

 

India, where only 27% of women work in the formal sector has a long way to go in meeting gender parity. At the same time, several indicators of human development and gender parity reflect that India compared to other Low Income Countries (LICs) has achieved success over the years. In 2013, India fell under the Medium Human Development category, while a majority of the countries in Africa fell under the Low Human Development category, with the Gender Inequality Index value ranging from as low as 0.410 to 0.591 demonstrating that a lot can be done to empower women in Africa who face high levels of inequality and discrimination. (source: http://www.ipekpp.com/knowledge_p.php)

 

Women face common challenges in India and Africa and the Mitreeki 2016 conference organized under the Knowledge Partnership Programme (KPP), funded by Government of UK’s Department for International Development (DFID), managed by IPE Global Limited, impressed upon the need to come together and address such issues to meet the Sustainable Development Goals. Many experts at the Nairobi conference, organized under the KPP in association with Kenya Association of Women Business Owners (KAWBO), felt that engendering development goals will supplement efforts individually made towards achieving the 17 SDGs by 2030.

Mitreeki Resolution: Signed by practitioners from India, Ethiopia, Kenya, Rwanda, Tanzania, Malawi and Uganda.

Mitreeki Resolution: Signed by practitioners from India, Ethiopia, Kenya, Rwanda, Tanzania, Malawi and Uganda.

The conference discussed key challenges faced by women in the two continents, especially pertaining to – access to education; access to credits & loans; access to markets; access to safe work places; etc. Day one of the conference focused on plenary discussions while day two facilitated a dialogue between practitioners to understand the good practices in more details and how these could be applied in their respective contexts. The panelists relayed success stories around financial inclusion; market linkages; opportunities in the emerging sectors from their own countries and deliberated on the social norms that impede women’s economic participation. Each session reflected on policies; programmes and models from the participating countries (Kenya, Ethiopia, Rwanda, Uganda, Tanzania, Malawi, and India) that have addressed these barriers.

The conference culminated in the signing of a resolution and a mutual agreement to create a ‘Mitreeki Network’ housed in either of its facilitators (IPE Global or/and DFID) which will further the women economic empowerment agenda by sharing, learning, linking and advocating for a gender just world. The network will have representatives from Local Governments, Organizations, Academia, Women Entrepreneurs, Private Sector, Donors, Women Beneficiaries, etc. from across Africa, Asia & UK and individually they would help identify and showcase initiatives that have succeeded in achieving targets of women empowerment and collectively imbibe learnings in their own context.


 

Daljeet Kaur has a double Master’s degree in Environment and Sustainable Development from the DPU and Environmental Planning from School of Planning and Architecture, New Delhi. She has worked as a qualified planner and an architect for more than eight years at IPE Global Limited. Her interest lies in urban planning; urban reforms, environmental management; climate change and its mitigation & adaptation; knowledge management.

At present she is working as a Senior Programme Manager for the DFID funded Knowledge Partnership Programme (KPP), implemented by IPE Global. The programme has established more than 50 partnerships to date with a wide range of partners in a number of sectors, including IDS (Sussex), UNDP, FAO, and Governments of Ethiopia, Nepal, Bangladesh, Kenya and Malawi. For more information about the programme please visit www.ipekpp.com.