By Victor Ogiemwonyi
In recent years the debate around granting Tax Waivers and Tax Holidays to industrialists has intensified. Some hold the view that these policies promote favouritism and enrich a few individuals, making them stupendously rich without giving them credit for what they have contributed to our National development that would otherwise not be there.
Is there a case for supporting those who will be our National Industrial champions?
In answering the question above the following sub-questions, will need to be answered first. What is the justification? How do we choose those to be championed? What will be the best way to do it without creating more problems? Are there successful global models to learn from?
The primary justification must be strategic importance. To support the creation of a National Industrial Champion in any sector we must ask whether it brings us a comparative advantage or solves a national problem. There must be a clear national objective to be achieved. Choosing those to be championed is the next big question because of the implications. There must be an objective analysis and the rationale must be consistently applied whenever and in whatever sector of the economy we make this choice.
In an environment, where merit is often ignored and favoritism is rampant a rigorous process must be put in place to ensure we get it right.
A Clear Industrial Policy
So as not to put the cart before the horse the Federal Government must first envision a clear industrial policy that identifies areas where the country enjoys comparative advantage, and which is of strategic dimension. A clear industrial policy is imperative. Having a clear industrial policy, means there is a vision and a clear plan.
Nigeria’s decline started when we abandoned our development plans. I once read a document, where Chief Phillip Asiodu, a brilliant civil servant, who rose to the position of a Permanent Secretary, and was one of those super Permanent Secretaries credited with Nigeria’s development strides before we lost our way identified all the progress made at the time and linked them to the development plans put in place. There was coordination, linkages and clear objectives.
Nigeria as a country must return to that framework to make any meaningful progress. A clear industrial policy will let us focus on what sectors to prioritise, and then entrench the rules of engagement giving everyone a level playing field. Here, merit will be clearly identified pointing to those to be championed.
A National Industrial Council
If we want this to be really merit based, a National Industrial Council must be created through an Act of Parliament and protected from arbitrary dissolution, or wanting political manipulation.
Members must be chosen for their expertise and what they can contribute. Nigeria is blessed with talent in every state of the federation. As such a careful and meticulous selection process with sincerity of purpose will ensure the best emerge. This council would develop and update the industrial policy, and identify strategic sectors with a long-term coordinated vision.
The aim will be to have a national institution that will meticulously plan our Industrial development and advise government. This council will be responsible for our Industrial policy and will be saddled with identifying strategic sectors and putting rules in place for choosing which Industrial National champions to support. They will work with any government in power.
In the recent past, there was an attempt to do this but in a more broad economic support group as in President Jonathan’s government. Unfortunately, this was badly done as the process of choosing this economic support team was not rigorous. This reduced the team to just an assemblage of successful people with their own individual agendas that did not necessarily align with National objectives all the time. As if that was not enough, members of the group were compromised because of self interests.
On the other hand, President Olusegun Obasanjo was more intentional with targeted intervention in key sector of the economy such as cement produced tangible results. You can quarrel with what he did, but he achieved results, following which the country’s cement problem is now solved. There was an incentive policy of giving import licenses to cement manufacturing companies for a fixed period which was to encourage them to use the profits to build cement plants.
While many in the industry did not do the right thing, those who did, like Dangote Cement, focused on creating the needed plants and solved the problem. Many will forget now, that 20 years ago, Nigeria spent billions importing cement, eating up, all our FX Reserves and creating even more problems, clogging our Ports with cement ships, and negatively impacting other aspects of our economy.
Nigeria now exports cement saving the country FX, while creating jobs and supporting the economy with Taxes , and has accelerated our building industry and infrastructure development. This model proves that, deliberate, well structured support, can work, especially when tied to measurable performance goals.
When we deliberately decide to create our industrial Champions we can give them support by way of Tax exemptions, grants, long-term-loans and purchase guarantees (e.g how Nigeria buys electricity from power producers) Power Generating companies, sell direct into the National Grid, as a guaranteed market ) The incentives are no different from global best practices.
We must change our mind set.
Let us get away from the current “crab in the barrel” mentality and stop discouraging those who put in their resources to help solve Nigeria’s challenges.
Creating National Industrial champions is imperative. But it must be done right. We must support only those who have the capacity to solve our national problems, bring competitive advantage, and are ready to align with clearly defined national goals. The policy thrust must be nationalistic in outlook, besides ensuring that favouritism whenever it exists is positive. The results must be clearly seen when achieved. No one can deny that we have solved our cement problem, for instance.
Where we have no comparative advantage, our industrial policy must be beneficial in other ways.
What About Foreign Investment?
Even foreign companies can be integrated into Nigeria’s industrial strategy. For example, imagine inviting Toyota to build a full-fledged manufacturing facility in Nigeria, instead of just an assembly plant. The government can offer a long-term loan of say $2bn repayable over a period of 10 years, in addition to a Tax holiday in exchange for producing affordable motor vehicles here with clearly defined goals of what we expect to achieve in that period such as jobs creation, skills and technology transfer, among others. This is not charity, it is an investment in economic transformation.
In fact, the $2bn could be raised through the issuance of a bond backed by a Sovereign guarantee which Nigeria’s investing public could patronise knowing that Toyota is the final obligor. It will replace the same money we are already spending importing Toyota vehicles over the years with zero value added to our economy.
Under this arrangement, for example, Toyota can be given the Ajeokuta Steel Mill complex as a production site. In this way, we are not only building a motor vehicle industry but also reviving Nigeria’s dormant Iron and Steel sector. Also, Toyota, or any other brand name at that gets the incentive of Nigeria becoming a major market, given the large population with only about 6% owning cars, as well as offering a link to the vast African market. A large market that will clearly be worthwhile in the long run, especially with what is happening in the current US Administration’s Tariffs regime.
Global giants like Toyota with its long established brands here will be glad to have large markets like Nigeria. The difference, will be they manufacture here, to sell here.
No country becomes industrialised without strategic protection of its industries. China, India, Brazil and several European nations have supported national champions. We should not pretend to know better. Nigeria must adapt what works globally to her local realities. Creating national industrial champions is essential for Nigeria’s development. It must be tied to a clear industrial policy, guided by merit and national interest, and implemented transparently and sustainably.
With the right structure and accountability supporting, champions can become a win-win strategy for long-term growth.
Ogiemwonyi, a retired Investment Banker writes from Ikoyi, Lagos
