Local Content, Jobs And Economic Development

Recently, it was widely reported that the Federal Government had hired a Malaysian firm to review the Economic Recovery and Growth Plan. The firm is to, inter alia, set up focused labs in agriculture, transport, power, gas, manufacturing and processing. The Minister for Budget and National Planning, Udo Udo-Udoma, stated that the firm would “help us and bring their international connections, reach and give it credibility. It is for $500,000 per lab”. This intervention, coming at a time of a presidential executive order on mainstreaming local content in public expenditure and procurement, domestic preferences as stipulated in the Public Procurement Act,  scarce national resources and the abundant national human resources on the subject, questions the appropriateness of such expenditure on a foreign firm.

Every good economy is hallmarked by the jobs it delivers to the people. Economic growth that fails to deliver jobs is labelled a jobless growth which is viewed as paper growth and a growth disconnected from the very people it is supposed to benefit. Thus, reforms that create sustainable jobs are deemed people-centric. Such reforms are the preferred route to development. Government, being the highest single spender in the economy, must therefore use the process of public procurement to drive jobs, economic growth and development. Starting the process of job creation and local value addition from the crafting and reviewing of the foundation economic document of the administration will be a step in the right direction.

It is imperative to recall that Nigerians crafted Vision 20:2020, the National Economic Empowerment and Development Strategy of the Olusegun Obasanjo administration, and the Transformation Agenda of the Goodluck Jonathan administration. Also, we were made to believe that the Economic Recovery and Growth Plan of the Muhammadu Buhari administration was drafted by Nigerians. Indeed, before these development strategies, long term development planning under the Rolling Plans had been anchored by Nigerian professionals. Thus, the manpower, expertise, experience and capacity to review the ERGP are not lacking in Nigeria. From economists, accountants, lawyers, engineers, statisticians, development experts, etc., Nigeria has abundant expertise to plan its development. Previous development plans did not fail because they were poorly conceptualised and crafted. Most of them did not achieve their objectives because of the failure of implementation, inertia and tardiness and lack of sincerity on the part of managers of public resources.

For the Malaysian firm to review the ERGP, it will need weeks to understudy available Nigerian development and economic literature. It will also likely engage local experts who will do the main bulk of the job whilst the firm takes that fattest part of fee. Coming at a time Nigeria is emerging from recession, there is the need to conserve available foreign exchange and resources to further boost the economy. The local content policy and idea is to encourage local production of goods, value addition, capacity development and increase; and domestic delivery of services through the public and private procurement processes. In essence, local content application creates jobs, enhances government taxation and is a win-win scenario for all.

Every nation that has developed or is in the process of developing engages its human and material resources for that purpose. Development has never been a process that a nation or a people do for another. It is a people’s work in progress. While free movement of goods and services and trade should be encouraged, it should not be at the expense of domestic qualified firms and individuals. There must be a value proposition which is not locally available that propels the engagement of foreign firms. The presidential executive order on “Support for Local Content in Public Procurement by the Federal Government” states that: “All Ministries, Departments and Agencies of the Federal Government of Nigeria shall grant preference to local manufacturers of goods and service providers in their procurement of goods and services”. Further: “Any document issued by any MDA of the Federal Government of Nigeria for the solicitation of offers, bids, proposals or quotations for the supply or provision of goods and services (Solicitation Document), in accordance with (1) above, shall expressly indicate the preference to be granted to domestic manufacturers, contractors and service providers and the information required to establish the eligibility of a bid for such preference”.

The foregoing thus raises the poser: Did the solicitation process that brought the Malaysian firm on board follow the dictates of this Executive Order?

Coming to specifics, the presidential executive order did not go far enough. It merely states inter alia that: “Made-in-Nigeria products shall be given preference in the procurement of the following items and at least 40 per cent of the procurement expenditure on these items in all MDAs of the Federal Government of Nigeria shall be locally manufactured goods or local service providers”. The items are uniforms and footwear; food and beverages; furniture and fittings; stationery; motor vehicles; pharmaceuticals; construction materials; and information and communication technology. What is so special in the production of uniforms and footwear; food and beverages; furniture and fittings; stationery that the Federal Government of Nigeria cannot insist on at least 80 per cent of local manufacture? Nothing special! Should the Central Bank of Nigeria continue making scarce foreign exchange available at the official window for these items?

Again for vehicles, a lot of noise was made about local production, assembly and value added in the automobile industry. But the noise seems to be fizzling out. Many MDAs are still buying vehicles fully produced abroad with no local content at a time when there are equivalent locally produced vehicles. The heavens would not fall if we adopt a locally produced vehicle as the official vehicle and promote the same to new and higher production and profitability levels.

The storyline about the costs of local production of goods and services which evidently are higher than what obtains internationally should not take forever to change. Even though we are a nation of apologies and excuses for failure, time has come to go beyond these excuses and start creating oasis of successful businesses which can compete in terms of costs and quality. It takes the imagination and innovation of leadership to work beyond the national electricity grid to deliver uninterrupted electricity to business hubs; provide cheap or subsidised land, water and infrastructure facilities in such hubs. This will reduce the cost of production in existing firms and encourage startups.

Beyond the policies to improve the ease of doing business and create infrastructure, each sector should be under obligation enforced by the sectoral regulatory agency or apex government agency to develop a sector specific local content policy which should be enforced to the letter. The example of the formulation and implementation of local content in the oil and gas sector, even though it has not produced dramatic results, shows that this is doable across board. The development of a local content policy is ongoing and has indeed reached an advanced stage in the electricity industry. It would produce great results when concluded and implemented.

The Federal Government, states and local governments need to use policies to drive job creation in the private sector. We do not need any foreign firm to review the ERGP. Mainstreaming the development and implementation of local content policies across the sectors is the way forward.

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