Tuesday, January 26, 2016

I Buy Nigerian: Simple Thoughts on Local Manufacturing and the Nigerian Economy

This post was first shared on Medium and The Naked Convos

I love NASCO cornflakes. Eating NASCO for breakfast reminds me of my childhood. I buy NASCO whenever it is available. I don’t mind stares from people who seem to pity my inability to afford pricier brands*.

I was happy to see yesterday that NASCO has overhauled their packaging. I always thought the old packaging sucked, and that it looked out of place beside attractively designed brands like Kelloggs.

The cashier asked if I chose NASCO because it is made in Nigeria. I was surprised. I buy NASCO because I love it, because it brings fond memories. I couldn’t care less where it is made.

His question got me thinking about the concept of ‘buying Nigerian’, so I decided to address some themes that have recently gained traction.

1. We have wrecked Nigeria’s economy by our overwhelming preference for foreign products. This implies we could fix our economy simply by choosing local products over foreign alternatives. Proponents also sometimes argue we should ‘buy Nigerian’ just because it is Nigerian.

Let me be simplistic.

Buying decisions are mostly driven by perceived value for money, excluding status driven purchases and money laundering. The quality of terrestrial TV content is poor and you can afford cable, so you pay for cable. Hair extension A retains its gloss longer than B, so you buy A. Jackets from tailor X lose shape faster than those from Y, so you patronize Y.

It is mostly that simple. In free markets, consumers vote for value with their wallets.

Do Nigerians prefer foreign products because they offer better value than local alternatives? I think so. Would Nigerians choose expensive foreign products if local alternatives offered similar value at competitive prices? I think not.

We must correctly define the problem. Is it one of value, or of the stated country of origin? We would solve the latter by embracing protectionist trade policies, alienating our country and regressing even further. We would solve the former by making it easier to create value - requiring aggressive strides in infrastructure, institutions, human capital, and access to funding for small businesses.

Which would you rather we do?

2. Manufacturers should localize production in Nigeria, or be barred from selling their products here. When people say this, I desperately want to ask one of the following questions, but end up singing ‘kumbaya’.

Do you know how costly it is, in time and money, to clear raw materials or machinery from the port?

Do you know how inefficient it is to transport finished products across Nigeria?

Do you know how stressful it is to find employable talent in Nigeria?

Do you know what it costs to run factories on diesel twenty four hours a day?

Do you know how all these come together to impact the cost of production?

You get the idea.

It is difficult to do business in Nigeria.

Businesses are neither governments nor charities. They exist to make profit. In prudent hands, capital will go where it is most likely to make a profit. With the exception of a few areas, mostly services, Nigeria is not that destination today.

We cannot wish industrialization into being, or legislate it into existence. National pride is not enough. It is a long, choiceful road to industrialization - and we have not even started yet. Nigerians have valid needs for tires, phones, even toothpicks - and will continue to import them as long as it is uneconomical to produce them locally.

There is a reason Apple produces iPhones in China despite being an American company. There is a reason Samsung produces phones in Vietnam despite being South Korean. There is a reason most call centers and IT support centers are located in India. While other countries built competitive advantage, we bickered about oil proceeds.

We must correctly define the problem.

It is difficult to do business and create value in Nigeria.

We will remain a net importer of value as long as this is the case.

Cheers.
Koye.

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