Nigeria is a country strongly characterized by
diversity in ethnicity, culture, religion and even in natural resources.
Minerals such as coal, limestone, marble, uranium, lead, iron ore, bitumen,
gold, ruby, topaz, gemstone etc. are embedded in the soils of this country and
this is enough proof of God's blessings (Chinago, et al, 2015). According to Ghaji Bello, the current
Director-General of National Population Commission, NPC, Nigeria has a
population of about 182 million with more than half of its population under 30
years of age (NPC, 2016). This alone is enough potential for the country due to
the large population of youths who are believed to be a vibrant human resource.
Unfortunately, most of this population are unemployed and even most of the
employed live below a dollar a day despite its Agricultural potentials and the
availability of numerous solid minerals (Ogujiuba, 2015). Independence from her
British colonial master was gained on the 1st of October 1960. According to
literature, some scholars are of the view that we were too much in a haste to
gain independence as we were not ready to govern ourselves. This might be true
based on facts of numerous mismanagements of public funds as evident in the
first republic where our leaders were bold enough to be ostentatious and
flaunted their flamboyant lifestyles with no remorse at the expense of the citizens
whom they profess to govern. This indeed brought about the overthrow of
democracy in 1966 by a group of young middle-ranked army officers who sacked
the politicians of the Nigerian First Republic through a bloody coup (Ogbeidi,
2012). Over the years, mismanagement and misappropriation of public funds seem
to be the norm even despite the takeover of military governments that claim to
fight this. Nigeria's major economic woes are rooted in the discovery of crude
oil in Oloibiri in January 15, 1956 after a long period of exploration. The Yom
Kippur war, otherwise known as the Arab-Israeli war or October war in 1973 was
characterized by a massive boom of oil price in the global market when the
Arabs boycotted oil from the Western states because of their support for Israel
(Esekumemu, 2016). Due to this fact, Nigeria who was now an oil producing
country concentrated its forces solely on the exploitation of this commodity.
Other sectors that once created wealth, employment and a good standard of
living for the average Nigerian were abandoned. At this point in Nigeria, we
became mono-cultured as Oil now became the mainstay of the economy with the
export revenue accruing to over 90% and 80% of the government's budget
(Anyaehie and Areji, 2015). Of course, not everyone had the opportunity to work
in the oil sector which further made millions of able bodied Nigerians jobless
as non-oil sector of the economy was abandoned and redundant. Our leaders at
this point were short-sighted, thinking the wealth garnered from oil will
continue to be so. But of course time will tell and in the 21st Century, it
has. Now, Oil prices have collapsed globally, USA, our major consumer of crude
oil has stopped purchasing from us since 2014 due to the discovery of shale oil
and natural gas in commercial quantity which serves as a better substitute for
Nigeria's crude oil since it is cheaper and also due to the fact that they have
a reserve of oil which is believed to last them nearly a hundred years (Obama,
2012). This is trouble for the mono-product Nigerian economy and in solving
this problem, recommendations of diversifying the economy is made (Olaleye, et al, 2013). Various scholars have made
different recommendations but this research introduces a somewhat different
recommendation by contributing a new commodity that will help diversify and
save the ailing economy from the recession it suffers today. The African
Catfish is the most popular species of Nigeria's aquatic life. An average fish
farmer prefers to stock African Catfish due to its ruggedness, high mortality
rate and of course the increased and consistent demand for it (InterAfrican
Bureau for Animal Resources, 2015). Also, the African Catfish is a cheap source
of protein which is needed by everybody in order to function optimally has a
normal human being. The reality of its consumption in various ways of
preparation is also an added advantage to why African Catfish is preferred to
other species. The African Catfish could be boiled and seasoned, it could be
grilled and it could also be dried for the sake of preservation and
exportation.
The Nigerian economy continues to suffer recession due
to its mono-cultured nature. This stems from the discovery of Oil in Oloibori
in 1956 and the period of oil boom price in the global market in early 1970's
due to the Arab-Israeli war of that period (Esekumemu, 2016). The huge gains
from crude oil export were enough temptation for the Nigerian government to
abandon other sectors of the economy. Prior to this period, other sectors of
the economy were up and running, the wealth of the country was to some extent
fairly distributed among the working class of these sectors. Suddenly, Nigeria
fell into the Oil boom temptation and abandoned other sectors of the economy
for Oil. Oil became the mainstay of the economy. Due to the fact that the Oil
industry could not employ every able bodied citizen, jobs were lost in their
thousands due to the collapse of other sectors. Policies to cater for this
problem were expected to be promulgated by our policy makers as other oil
producing countries had policies that catered for their common citizens such as
Libya before the overthrow of Gaddafi and the United Arab Emirates that caters
for her citizens from the wealth garnered from oil export but Nigeria's case is
different. Instead, the gains from crude oil export were shared amongst a few
ratio of the large population which were mostly politicians. This apparently
had a negative effect on the economy which in turn brought about abject poverty
to majority of the Nigerian citizens. According to statistics provided by CBN, non-oil
export in the country’s total export revenue was 1% in 2008 (CBN, 2008), and
4.8% in 2013 (CBN, 2013) then it dropped to an all-time low of 0.8% in 2015
(CBN 2015). As at the time
of this research, the exchange rate is nothing to write home about as the
fluctuation of the Naira to the dollar is alarming and has hit an all-time high
which has never been experienced or recorded before. The Naira keeps dwindling
as against the almighty dollar which is over 500 Naira to a dollar as of the
time of this research. This problem is largely due to the mono-cultured nature
of the economy as Oil prices have collapsed globally due to the fact that our
biggest crude oil customer, US has landed alternatives to Nigeria's crude oil
such as the shale oil which she discovered in commercial quantity and also the
fact that they have a reserve which is believed to last them almost a century
(Obama, 2012). This of course has left the Nigerian economy on its knees and
various solutions have been proffered to get her out of this economic crisis.
The research is framed according to the following
questions:
1. What are the economic implications of a
mono-cultural economy?
2. What is the influence of non-oil export trade on
economic growth and sustainable development?
3. What are the challenges to effective African catfish
export in Nigeria?
4. How can the African Catfish contribute to the
diversification of the mono-cultural Nigerian economy?
1.4. Objectives of the Study
Specifically, the objectives of this research are to:
1. Examine the economic implications of a
mono-cultural economy.
2. Determine the influence of non-oil export trade on
economic growth and sustainable development.
3. Determine the challenges to effective African
Catfish export in Nigeria.
4. Recommend the African Catfish as a valuable
commodity that can contribute to the diversification of the Nigerian
mono-cultural economy.
1.
A mono-cultural economy has no economic implications.
2.
The non-oil export trade has no influence on economic growth and sustainable
development.
3.
There are no challenges to the effective export of the African Catfish.
4.
The African Catfish cannot contribute to the diversification of the
mono-cultural Nigerian economy.
This research will benefit mankind particularly the
average Nigerian citizen who is being ravaged with poverty due to the on-going
economic recession that keeps coming back in every administration. It will also
help policy makers promulgate sound policies that support economy diversification
and condemn the mono-cultural nature of the economy. Since Nigeria leads the production
of African Catfish on the continent of Africa according to (InterAfrican Bureau
for Animal Resources, 2015), this research should make the government see sense
in investing in the production of African Catfish on a large scale which in
turn will generate massive employment and contribute to the diversification of
the economy leading to economic wealth and sustainable development instead of
spending $700 million USD on importing fish every year (The Guardian, 2016). Lastly,
it will help future researchers in the field of international trade and economy
since the motive is to add to the growing body of academic knowledge.
This study is focused on changing the culture of
Nigeria's economy from a mono-product oil based economy to a diversified
economy. Although, the non-oil sector of Nigeria's economy is a vast one, this
study focuses on the African catfish aquaculture industry because of its huge
lucrative potentials of contributing to the diversification of Nigeria's
economy.
The study is faced with certain limitations such as
the lack of ample time to effectively engage more stake-holders of this
industry in an in-depth interview and the impossibility of reaching every
catfish farm in Nigeria.
This study is divided into 5 chapters.
Chapter
One is an
introduction to the study. It provides the background of the study and states
the problems as to why the study is being conducted. It also reflects the
importance of the study. Propositions are provided in this chapter to guide the
actualization of the objectives of the research. A scope and limitations are
also discussed in this part of the work.
Chapter
two provides a
literature review and a theoretical framework. It sheds light on key concepts
pertaining to this study and identifies the gap it sets out to fill.
Chapter
three provides the
method employed in the study. That is, the method engaged in sourcing data and
information.
Chapter
four provides the
research findings that is, the data retrieved from the field work.
Chapter
five which is the
last part of the study summarizes the study, provides recommendations and then
concludes.
Chapter Two
This
chapter is divided into 3 sections. The first section provides insight into
certain key terms particular to this work. These terms include; Export trade,
Economy, Mono-cultured economy, Economy diversification and African Catfish and
also reviews further concepts emanating from these key terms. The review covers
the following areas: previous works on export trade, economic growth and
sustainable development.
The
second section provides a theoretical review then goes ahead to pick the most
suitable theoretical framework for this study.
Lastly,
the third section suggests a commodity that could serve as a contribution to
the diversification of the Nigerian economy. It also identified the gap in
development literature and makes a unique contribution to the ever growing body
of academic knowledge.
First
and for most, it is paramount to have a vivid understanding of what trade means
before the term export-trade could be comprehended. Trade in its simplest
explanation means the action of buying and selling. That is, a business transaction
between a seller and a buyer. This transaction is characterized by mutual
benefits. The seller is involved for the sole benefit of making profit while
the buyer on the other hand is involved for the benefit of satisfaction. It is
expedient to also state that trade between two traders is referred to as a
bi-lateral trade while the trade that transpires between more than two entities
is called multi-lateral trade. It is paramount to note that trade exists due to
the reality of specialization and division of labor. The output from this
reality is used in trade for the purpose of meeting needs and acquiring other
commodities (Dollar and Kraay, 2004). Having understood the meaning of trade,
the term export trade connotes those goods and services provided by an entity
(Seller/Producer), be it an individual, a company or even a state (country) to
another entity(buyer/consumer) be it an individual, a company or even a state
(country) outside its geographical location or better still, outside its
borders. Since export simply means an outward movement, export trade therefore
refers to those goods and services shipped or flown out of a country to
consumer destinations. It is characterized by the provision of goods and
services to consumers beyond suppliers' borders (Joshi, 2005).
International
trade refers to the processes of importation and exportation that is, those
trades that transcends borders.
According
to Azeez, et al (2014),
International trade can be
interchangeably referred to as ‘foreign trade’ or ‘global trade’. It
encompasses the inflow (import) and outflow (export) of goods and services in a
country. A country’s imports and exports represent a significant share of her
gross domestic product (GDP); thus, international trade is correlated to
economic growth. In an open economy, development of foreign trade greatly
impacts GDP growth (Li, Chen & San, 2010 cited in Azeez et al, 2014).
The citation
above gives credit to the positive impact International trade has on a
country’s economy.
According
to Paul, et al (2015), “The
economic[sic] is defined as a social domain that emphasizes the practices,
discourses, and material expressions associated with the production, use, and
management of resources” (p. 53). That is, the management of resources in all
its ramifications such as production, exchange and transfer, accounting and
regulation, consumption and use, labour and welfare, technology and
infrastructure, wealth and distribution. Economy in the simplest form refers to
the general well-being of a country. That explains why some countries
experience recession and why others experience boom (Paul, et al, 2015).
This
position of the Nigerian economy is mostly blamed on the oil boom factor
between the period of 1973-1983 based on a consensus in literature but it is
also important to observe a different view of one Ammani (2011) whose work
statistically proves that there was a significant increase in the capital
expenditure allocated to the agriculture sector during the oil boom period. His
study also finds out that more capital expenditure was allocated to the
agriculture sector than in any other sector of the economy at that period (Ammani, 2011) . The questions to
ask are what then happened to the agriculture sector that boomed prior to the
oil boom era? And if according to Ammani, funds were disbursed to this sector,
what then happened to the funds? There is only one simple and straight forward
answer to the questions- the funds allocated were mismanaged due to a
distraction by the oil boom period. The revenue the oil sector was generating
was enough temptation for the federal government to overlook the
misappropriation of funds disbursed to the agriculture sector hence, the
agriculture sector was abandoned whether huge funds were disbursed or not.
Index
Mundi (2016) has this to say about Nigeria’s economy:
Following an April 2014
statistical "rebasing" exercise, Nigeria has emerged as Africa's largest
economy, with 2015 GDP estimated at $1.1 trillion. Oil has been a dominant
source of income and government revenues since the 1970s. Following the 2008-9
global financial crises, the banking sector was effectively recapitalized and
regulation enhanced. Nigeria’s economic growth over the last five years has
been driven by growth in agriculture, telecommunications, and services.
Economic diversification and strong growth have not translated into a
significant decline in poverty levels, however - over 62% of Nigeria's 170
million people still live in extreme poverty.
Despite its strong fundamentals, oil-rich Nigeria has been hobbled by inadequate power supply, lack of infrastructure, delays in the passage of legislative reforms, an inefficient property registration system, restrictive trade policies, an inconsistent regulatory environment, a slow and ineffective judicial system, unreliable dispute resolution mechanisms, insecurity, and pervasive corruption. Regulatory constraints and security risks have limited new investment in oil and natural gas, and Nigeria's oil production has contracted every year since 2012.
Because of lower oil prices, GDP growth in 2015 fell to around 3%, and government revenues declined, while the nonoil sector also contracted due to economic policy uncertainty. President BUHARI, elected in March 2015, has established a cabinet of economic ministers that includes several technocrats, and he has announced plans to increase transparency, diversify the economy away from oil, and improve fiscal management. The government is working to develop stronger public-private partnerships for roads, agriculture, and power. The medium-term outlook for Nigeria is positive, assuming oil output stabilizes and oil prices recover (Index Mundi, 2016).
Despite its strong fundamentals, oil-rich Nigeria has been hobbled by inadequate power supply, lack of infrastructure, delays in the passage of legislative reforms, an inefficient property registration system, restrictive trade policies, an inconsistent regulatory environment, a slow and ineffective judicial system, unreliable dispute resolution mechanisms, insecurity, and pervasive corruption. Regulatory constraints and security risks have limited new investment in oil and natural gas, and Nigeria's oil production has contracted every year since 2012.
Because of lower oil prices, GDP growth in 2015 fell to around 3%, and government revenues declined, while the nonoil sector also contracted due to economic policy uncertainty. President BUHARI, elected in March 2015, has established a cabinet of economic ministers that includes several technocrats, and he has announced plans to increase transparency, diversify the economy away from oil, and improve fiscal management. The government is working to develop stronger public-private partnerships for roads, agriculture, and power. The medium-term outlook for Nigeria is positive, assuming oil output stabilizes and oil prices recover (Index Mundi, 2016).
The
impact of the oil price fall is felt all over the world and affected the
world’s financial market. Nigeria miraculous financial survival during the
financial crisis was due to the dependence on the protection offered by its
huge and enormous oil resources which was the source of its major wealth for
foreign exchange earnings and revenue.1 This came at a time when the oil price
was lucrative at the international market, as against subprime mortgages which
some countries largely engaged upon on which led to the financial burst.
Conversely, the nondiversification of the Nigeria economy was also a reason
while the aftermath of the financial crisis touched the Nigeria banking sector.
In this recent time of falling oil prices, the impact is felt on the Nigerian
economy through inflation, job loss and Naira depreciation. This is because;
Nigeria is a mono economy, dependent on oil importation and exportation for its
survival (Ogochukwu, 2016).
His stand reflects the implication
of a mono-cultural economy in that when the price of the single exported and
heavily depended upon product starts collapsing, the adverse effect is
reflected in the economy of such country such as Nigeria.
He further explains these adverse
effects that-
The
impact of the oil price fall spills over to the banks in such a fluid manner,
because activities in the oil sector are financed by the banks and a
well-developed banking sector contributes to economic growth by mobilizing
savings and efficiently allocating them among the competing investment projects
and other demands for funds (Chris and Onyinye). 3 The falling oil prices cause
serious financial problem for the oil sector and the capital market due to
their link to the financial world and the Nigerian banks. Since, banks sit at a
vantage position in the economy, failure to repay the loans advanced to the oil
marketers left a bad effect on the banks’ balance sheet, and such loans became
bad loans, which is a strain on banks’ capital adequacy. Hence, the oil price
fall calls for several regulatory measures to be adopted to cushion the effect
on the economy because, only a sustained and stable macroeconomic environment
and a sound and vibrant financial system can propel the economy to achieve our
national desire to become one of the 20 largest economies in the world by the
year 2020 (Soludo 2007 in Ogochukwu, 2016).
2.1.3.
Mono-cultural Economy
This
simply refers to an economy characterized by a single trade-commodity. That is,
in a case of a country with a mono-cultural economy, a chunk of revenue
generated in that country is derived from just one commodity such as the case
of Nigeria, a chunk load of her revenue is derived from crude oil proceeds. Itumo
(2016) captures a mono-cultural economy as-
an economy mainly dependent on a
single product or resource for economic growth and development. The concept
could further be referred to a case where any country depends on a single
product sales or exports for its budget funding especially to the tune of 70%
of revenue. Mono-cultural economy could also refer to the situation when any
country depends on a basic product resource for overall higher percentage of
national earnings and contribution to the Gross Domestic Product (Itumo, 2016).
It is important
to note that a mono-product economy is the same as a mono-cultural economy.
Dode (2012) has
this to say about a mono-product economy-
A mono-product economy, from the
fore-going, implies an economic system that is essentially based on the
existence of only one major economic product; depended upon for the economic
sustenance of that economy. The implication is that the economic life and
existence of that economy revolves around the existence, relevance and currency
of that product. That economy remains a potentially buoyant one only if such
product does fine in the international market. The reverse though would be the
case, if it’s showing at that level is poor (Dode, 2012).
All the
citations point to the fact that a mono-cultural economy is characterized by deriving
most of the revenue from one single exportable product and Dode (2012) provides
the synonym of a mono-cultural economy which is the mono-product economy. This
synonym in itself is self-explanatory of what the term entails.
Economy
diversification as it implies is the process of redeeming a mono-cultured
economy by re-focusing on other sectors of the economy for the sake of growth,
development and fortification in times of economic woes
such as recession.
2.1.5.
African Catfish
African
catfish also known as Claria gariepinus
is a type of fish with whiskers like that of a cat. It has a tendency to weigh
from 8kgs to 59kgs and can grow to between 1.4 and 2 meters long. According to
statistics provided by Food and Agriculture Organization, Nigeria is seen to be
the largest producer of African Catfish in the world (FAO Fishery Statistics,
2006).
According
to dictionary.com (2017), catfish refers to “any of the numerous fishes of the
order or sub order Nematognathi (or Siluroidei), characterized by barbels
around the mouth and the absence of scales.”
It
is called the African catfish simply because 40 African catfish gotten from the
wild waters of Central African Republic served as the first brood stock that
were introduced to Europe in 1976. It is worthy of note that African catfish in
Europe originated from Africa and that there is also the American catfish. The
point proves that catfish has its origin from the African waters.
2.2.1.
International trade in Nigeria since 1960
Adeleye,
et al (2015) examined the impact of
international trade on economic growth in Nigeria from 1988 to 2012. They used
net export and Balance of Payment as proxies for international trade while
Gross Domestic Product represented economic growth. The study employed
regression analysis as the method of analysis using co-integration and error
correction modeling techniques to find the long-run relationship between
economic performance and international trade. It was discovered that only Total
Export (TEX) remained positive and significant while others remained
insignificant, which connotes that Nigeria is running a monoculture economy
where only oil act as the sole income generator of the economy without
substantial support from other sectors (Adeleye, et al, 2015). In the same vein, Sanusi (2010) observed that
“successive governments in Nigeria have since independence in 1960, pursued the
goal of structural changes without much success”. He further says that these past leaders
engaged economic policies which were supposed to result to economic growth but
that the growth dynamics have been propelled by the existence and exploitation
of natural resources and primary products. At the beginning, the agricultural
sector, driven by the demand for food and cash crops production was the main
stay of the economy standing at the centre of the growth process, contributing
54.7 per cent to the GDP during the 1960s. Then suddenly, the 1970s witnessed
the boom of the oil industry as the main driver of growth. Agriculture was relegated
to the background and out rightly abandoned. Since then, the economy has
wallowed in the comfort of falling into the temptations and gyrating within the
boom-burst cycles of the oil industry. This is evident in government
expenditure as it majorly focuses its revenue generation solely on oil which
dictates the pace of growth of the economy. Taking a keen look at the past, it
is apparent that the economy has not performed to its full potential especially
with the rate of the growing population. Sanusi points out to the fact that
there is almost no gap between economic growth and population growth rates that
the margin cannot induce the required structural transformation and economic
diversification. This simply means that a reasonable gap between economic
growth and population growth rate enhances the possibilities of economy
diversification which in turn will need to a healthy economy reflecting in the
lives of her numerous citizens. As at 2010, Nigeria had the 6th largest gas
reserves and the 8th largest crude oil reserves in the world (Sanusi, 2010). It
is endowed in commercial quantities with about 37 solid mineral types and has a
population of over 150 million persons (Sanusi, 2010). Yet, economic
performance has been rather woeful and does not reflect these endowments.
Compared with the emerging Asian countries, notably, Thailand, Malaysia ,
China, India and Indonesia that were far behind Nigeria in terms of GDP per
capita in 1970, these countries have transformed their economies and are not
only miles ahead of Nigeria, but are also major players on the global economic
arena. Indeed, Nigeria’s poor economic performance, particularly in the last
forty years, is better illustrated when compared with China which now occupies
an enviable position as the second largest economy in the world. In 1970, while
Nigeria had a GDP per capita of US$233.35 and was ranked 88th in the world,
China was ranked 114th with a GDP per capita of US$111.82 (Sanusi, 2010).
According
to Nigeria Bureau of Statistics (2016),
Nigeria’s economy has over the
years remained a mono-cultural economy heavily dependent on crude oil export
for economic development. With this scenario, crude oil exports account for
Nigeria’s major source of foreign exchange earnings representing about 90% of
export products. The value of oil export rose from below 1% in 1958 to about
97% in 1984 and to less than 90% since then. Oil was[sic] produced about 1.8
million bpd accounting for over 95% of exports and contributing 25 to 30% to
the GDP. Nigeria has since moved to become the sixth largest producer of oil at
the global level. Unequivocally, crude oil export dominated the greater
percentage volume of the Nigeria’s export product and accounts for over 95% of
total value of merchandise exports (Nigerian Bureau of Statistics, 2016 cited
in Itumo, 2016).
Emeka, Frederick
and Peter (2012) in Azeez, et al
(2014)
evaluated the role of trade on
Nigeria’s economy for the period 1970 to 2008. By applying a combination of
bi-variate and multivariate models, the relationships between the selected
macroeconomic variables was estimated. \The findings indicated that exports and
foreign direct investment inflows have positive and significant impact on
economic growth. The study suggested that there should be congruence of exports
and fiscal policies, towards a greater diversification of non-oil exports by
the Nigerian government in order to attain the desired growth prospects of
external trade (Azeez et al, 2014).
Adenugba
and Sotubo (2013) provide a satisfactory explanation of exportation as a tool
for economic growth. It is implied that exportation is a crucial requirement
for the assurance of sustainable growth and economic development of an economy.
Any country that intends to generate huge wealth and revenue therefore needs to
implement policies that help support and encourage exportation for the sole
sake of economic growth and development since exportation is unarguably a
catalyst for economic development in all its ramifications (Abou-Strait, 2005
in Adenugba and Sotubo, 2013). Literature has also proven the fact that foreign
trade is an essential ingredient in generating inflow of foreign capital which
definitely has a drastic impact on an economy (Ricardo, 1817 in Adenugba and Sotubo, 2013). This foreign capital inflow leads to an
increase in a country’s earnings thus, improving the national income of a
country. Exportation has immense significances such as creating avenues for
employment since an economy that highly demands exportation requires more
output which definitely brings about an immense creation of employments.
Another apparent benefit is the reality of a reasonable equilibrium between
import and export which is known as balance of trade and also the position of
payment provided the country in question engages more exports than importation.
Export trade literature has proven the fact that developing economies such as
Nigeria needs foreign capital to bring about rapid development. Therefore,
measures must be put in place to attract foreign capital. Such measures must
provide a blue print to a diversified export in order to achieve the desired
capital that will in turn boom the economy. Buttressing this, Ricardo (1817) in
Adenugba
and Sotubo (2013) is of
the view that foreign trade is paramount for a nation’s economic growth and
sustainable development. Singh (2010) in Adenugba and Sotubo (2013) also
observes that export trade is a major prerequisite for productivity and growth.
The practicality of this has helped shaped the economy of many nations and set
them on the path to achieve economic growth and development. This has informed
Nigerian policy makers to adopt those policies that bring about export-led
growth and neglect import substitution policies. These adopted policies gives
room for exportation via the process of removing embargos that affect the free
movement of the factors of production (Todaro & Smith, 2011 in Adenugba and
Sotubo, 2013). Abou-Strait (2005) in Adenugba and Sotubo
(2013) suggests that the export-led growth strategy
is capable of providing manufacturers with zeal and incentives to engage in the
process of exporting their manufactured products via various economic policies.
These strategies are designed to bring about an increase in the output of the
country which will bring about an increase in the volume of the goods the
country exports. The government has the power to promulgate policies that help
encourage and enhance the production output of the home industries so as to
exceed the domestic demand so that the surplus can be sold in the international
market for the sake of garnering wealth by earning foreign exchange. The
promotion of export involves embracing and supporting domestic production for
the sake of exportation which is done by providing incentives for the home
producers. These incentives come in various ways, such ways are: tax
reductions, subsidies, finding markets for such local products, provision of
loans and grants, among others. However, one should take note that this
strategy of promoting export is largely bent on diversification and the
expansion of domestic products (products
that were traditionally produced for domestic consumption) (Dunn Jr.
&Mutti, 2004 in Adenugba and Sotubo, 2013). Various studies in 1970s agree that developing
countries that ran with the vision of supporting exportation tell a good story
today. It is observed that these countries had a speedy economic growth
compared to those countries that promulgated policies of protectionism. These
countries that experienced an immense growth in their economy based on their
export-led policies are the Four Asian Tigers. These countries are: South
Korea, Taiwan, Hong Kong and Singapore. It is also important to note four other
Asian countries that sprang up after following the footsteps of the Asian
Tigers. These Asian countries are: China, Thailand, Malaysia and Indonesia. In
contemporary times, countries like Mexico, Brazil and India are also seen as
economic giants based on adopting same approach as the previous countries (Dunn
& Mutti, 2004 in Adenugba and Sotubo, 2013).
Azeez, et
al (2014) evaluated that “overall, international trade is a catalyst to
boost the economic prosperity of Nigeria” in their investigation on the effect
of international trade on economic growth in Nigeria (Azeez et al., 2014).
Omotor (2011) says that “Nigeria is one of the
world’s resource rich economies most at risk from the current economic crisis”.
This is due to the nature and structure of her economy and as Bruggemans and
Associates (2016) puts it;
Warren Buffett likes to say that when the tide goes out, we can see who
has been swimming naked. That applies to overborrowed households and
overleveraged companies. But it also applies to monoculture countries, ones who
have allowed any narrow dependency to form or to linger, that can become a
great weakness once a greater global unraveling strikes (Bruggemans, 2016).
Apparently, these words are true considering the
present situation of the Nigerian economy. Too much overdependence on a single
commodity has revealed its negative tendencies which are reflected in the
realities of the present economy. A global unraveling according to the terms of
Bruggemans and Associates (2016) has struck and now, the overwhelming yet
disheartening degree of Nigeria’s economic weakness is vivid.
Taking Indonesia and Malaysia into consideration, it
is observed that both countries share the multiplicity feature in ethnicity and
religion with Nigeria but comparing their economy with Nigeria’s ends these
similarities in that in 1987, Indonesia’s industrial output was 29.0 million
dollars as against Nigeria’s 7.1 billion dollars. A decade earlier (1977),
Nigeria’s economy had been more promising than Indonesia. The main difference between 1977 and 1987 is
that Indonesia invested very heavily in human infrastructure through science
and technology, in research and development and pursued their goals with
discipline and dedication. In the same
period, Nigeria failed to diversify and borrowed heavily to subsidize
consumption (Anya O. Anya in Bassey (2012).
Onodugu, et
al (2013) provides the information on Nigeria since the 1970’s becoming a
mono-cultural economy that relied heavily on oil as its major income generator.
They further provided the implication of
running a mono-culture economy being that the dynamics of the economy is at the
whims and caprices of the price of oil, which for the most part, has been
volatile (Enoma and Mustafa, 2011 in Onodugu, et al, 2013). The major
fallout of this fragile structure of the Nigerian economy is a situation where
the economy has been growing without creating jobs and reducing poverty
(Onodugo, 2013 in Onodugu, et al,
2013). A straight forward explanation to
this economic paradox is that the oil sector that produces about 90% of export
earnings are in the hands of less than 1% of the Nigerian population dominated
by expatriates and members of the political class who control production and
the proceeds respectively. Unfortunately, the sector is separated from other
tiers and sectors of the economy, thus offers little or no linkage and
multiplier effect to the economy as a whole (Onodugu, et al, 2013).
The Nigerian economy is driven by one major
commodity of which when looked at keenly, one observes that even the commodity
we export is primary. That is, exported crude oil is processed abroad then sold
back to us in fractions of finished products. It can be deduced from this
process that even the economy generally agreed by scholars in literature as
mono-cultured is semi-mono-cultured based on the export-import-chain. This
therefore calls for the creation of refineries where crude oil could be
fractionized and by-products exported. This will lead to a larger output which
in turn will earn more income. But since history reminds us of the refinery
issue, it is therefore wise the government maintains its focus on non-oil
sector for the sake of a diversified export base.
Itumo
(2016) lists certain implications of Nigeria’s oil based economy. These
implications are cited as:
Decline in Government Revenue: as pointed to
above in the subsisting presence of a volatility of global oil price, Nigeria’s
realizable revenue from crude oil export has declined greatly. With Nigeria’s
oil production of 2.2 million bpd, the country unequivocally earned more oil
revenue in the past years when oil price was above USD 100, compared to the
second half of 2014 when the oil price came under USD100 and had continued to
decline to below USD 30 in early 2016, only to climb a little higher to above
$40. With a reduced crude oil price, Nigeria loses even more, given that the
cost of its oil production is more than some other oil producing nations. It
cost Nigeria about USD 20 to extract a barrel of crude oil from the ground,
unlike Saudi Arabia that The Economist (2014) notes it costs $5 - $6 per barrel
to extract its oil. Budget funding crisis: Nigeria has three tiers of
government, which are the federal, the state and the local government
administrations. The three tiers of government rely on crude oil revenue for
budget funding which is shared from the distributable pool fund of the federal
government. With this as the case, the annual budget of state governments and
local governments are predicated on the federal government budget as their
major source of funding comes from the federal government. The other source of
revenue available to state governments or the local government administrations
are the internally generated revenues and levies collected locally to which the
federal government has no percentage share from. The crude oil export revenue
contributes about 70 percent of the distributable pool account of the country
from where federal government, state governments and local governments’
administrations receive monthly allocations to fund their independent annual
budget estimates. Essentially, the decline in global oil price practically
decreased revenue for a country like Nigeria that depends heavily on crude oil
revenue. For instance, with Nigeria’s crude oil production at about 2.2 million
bpd and oil price selling above $100, Nigeria made more in 2013 than in 2016
when oil price had gone down below $50. By implication, crude oil price halved
from the price in ending of 2013 and beginning of 2016, bringing about serious
shortage in budget revenue. Nigeria has begun borrowing from both local and
international sources in a bid to fund its national budget, as reflected in
2016 budget of 6 trillion naira (about USD 30 billion) which government
projects revenue of 4 trillion naira (about USD 20 billion) and would source 2
trillion naira (about USD 10 billion) through borrowing. Scarcity of foreign
exchange for a high consumption nation: Nigeria is unequivocally a consumption
nation. This is attributed to the high level of imported goods. Nigeria amongst
other things, imports large stock of refined crude oil due to lack of requisite
refining capacity. Nigeria has four refineries, but the cumulative output does
not still meet local demand of the country with estimated population of over
180 million. The declining oil revenue accruable to Nigeria means that foreign
exchange which earlier stood at about 90% sourced from crude oil export had
equally reduced. Many importers have begun to face challenges of raising needed
foreign exchange to import products which are crucial to national survival. A
product like crude oil imported into the country certainly needs foreign
exchange to import and the scarcity means reduced import and supply leading to
scarcity that in turn negatively affects the lives of the citizenry. Recently,
some airlines operating in Nigeria began to force passengers to pay for flight
tickets in foreign currency, a problem elicited by the huge airlines fund
trapped within the country because of shortage of foreign exchange. In like
vein, some foreign investors have faced challenges of operation arising from
scarcity of foreign exchange making it hard to repatriate capital or use it as
may be officially required from time to time for purchase of equipment from
outside Nigeria. Nigerian indigenous businesses which rely heavily on foreign
exchange to import goods are also suffering as a result of the scarcity of
forex. To be clear, the bulk of importation into the country is said to have
reduced in the first quarter of 2016, the cause of this situation may be
closely linked amongst other things to the scarcity of foreign exchange for
imports. Naira loss of value: since the advent of the recent fall in crude oil
price at the global level that began about mid-2014, the naira has lost value,
moving from about 170 naira to $1 to the first quarter of 2016 when the naira
pitched at 400 naira to $1 at the parallel market. At the central bank of
Nigeria’s official price, the naira equally slipped downward. The government
with the conviction that the naira should not be devalued continued to defend
the currency on the official exchange rate of 197 to $1 for a long time. But in
the second quarter of 2016, the government let go and allowed the exchange rate
of the naira to be determined by market forces of demand and supply, especially
the interbank rates in Nigeria. The loss of value of the naira is enormous. If
drawing from the example above, naira moved from below N175 to $1 in 2014 to
about N400 to $1 in first half of 2016. Implicitly, naira loss of value could
be adjudged to be more than hundred percent. The impact of naira’s loss of
value had been enormous. Businesses which borrowed money to invest would have
to pay more in loan refunds. The loss of value of the naira also affected the
Nigerian stock market which shed value of market capitalization over time as a
result of the loss of value of various stocks. Early in 2015, market investors had
thought that the stock at the year end of 2015 would be up, but in a
disappointing turn of event, the market ended the year lower than it started.
The public sector workers in Nigeria, under the umbrella of the Nigeria labour
Congress have in 2016 asked for a pay raise as a result of the loss of value of
naira and their sustained argument that the current minimum wage of the nation
at below one hundred dollars ($100) does not represent a living wage with which
workers would survive (Itumo, 2016).
Adefolaju (2014) on
the other hand provides that oil mono-product countries suffer similar
predicaments. Citing her, she says that-
The social consequence of the resource curse
is that countries solely dependent on oil exports have unusually high poverty
rates, poor health care, high rates of child mentality, and poor educational
performance. This is caused much because of the inability of such countries to
diversify from oil dependence into other self-sustaining economic activities
particularly agriculture and labour-intensive industry. A former Minister of
Education, Dr Oby Ezekwezili recently noted that the rising level of poverty in
Nigeria was due to poor governance and the monotonous economic structure of the
country (The Punch, 23, October, 2013 cited in Adefolaju, 2014).
Adefolaju (2014)
further says that-
Countries dependent on oil earnings also
display unusually high rates of child mortality and child nutrition, low life
expectancy, poor health care, and reduced expenditures on education as well as
other sectors of the economy. The Nigerian government spends about $2 per
person/ year on health care, a far cry from the $34 per year recommended for
developing countries by the World Health Organization (WHO). Furthermore as
against the world average of 26.5 malnourished children per thousand, the rate
is 37.7 per thousand in oil-rich Nigeria. Generally, the country lacks basic
socio-economic infrastructures like good road networks, electricity supply and
portable water, among others (Adefolaju, 2014).
Irrespective of the
huge export earnings from crude oil, the poverty rate in the country is still
high. The huge export earnings is not reflected in the lives of the Nigerian
citizens. This implies that only few share this wealth at the expense of the
well-being of the rest.
Dode (2012) has this
to say about the Nigerian economy-
The Nigerian economic system continued on this
diversified note for a number of decades, up to the middle 1950s, when crude
oil was discovered in 1956 and in commercial quantity in 1958 at Oloibiri, in
Brass Local government area of present Bayelsa State. Subsequently, Nigeria
gained independence on October 1, 1960, with a diversified economy, even in the
midst of crude oil exploration and exploitation. Unfortunately, not too long
after that period, this history of diversification could not be sustained by
the emerging ruling elite. The early 1970s witnessed a complete shift of
economic focus from other sources of revenue earnings for the state, to a
natural resource (crude oil). This act of abandoning, to a large extent, all
other sources of revenue generation and societal sustenance to concentrate on
only oil has continued till date. The data available in this regard shows that
for the past three decades, oil has accounted for between 80% and 90% of the
country’s foreign exchange earnings. This practice is not healthy for any
nation that must record growth and development in all spheres of human
endeavours (Dode, 2012).
From
Dode’s assertion, it can be deduced that the period when oil was discovered in
Nigeria was not a lucrative one in that crude oil was explored while the
Nigerian economy remained diversified until the oil boom period of 1973-1983
where oil prices sky rocketed in the global market and the Nigerian economy
drastically tended towards a mono-cultural direction until it totally relegated
other sectors of the economy to the background and concentrated its forces on
oil.
2.2.4. Logical Basis for Export
Diversification
In order to achieve sustainable growth, the
structural models of economic development holds that countries should diversify
from primary exports into manufactured exports (Chenery, 1979; Syrquin, 1989
cited in Hesse, 2008). Hesse (2008) further explains that export
diversification can lead to immense growth provided that developing countries
diversify their exports in order to enjoy the benefits of overcoming export
instability or the negative impact of terms of trade in primary products. He
further says that economic development is a process typical of structural transformation
where countries move from producing “poor-country goods” to “rich-country
goods.” Thus, export diversification is instrumental in this process (Hesse,
2008).
Mejia (2011) holds that
The
dependence on primary-product exports has been frequently mentioned as one of
the main features of developing nations. As stated by Todaro and Smith (2006),
less developed countries (LDCs) tend to specialize in the production of primary
products, instead of secondary and tertiary activities. Consequently, exports of
primary products play a very significant role in terms of foreign exchange
generation in these countries, traditionally representing a significant share of
their gross national product. Specially in the case of the non-mineral primary
products exports, markets and prices are frequently unstable, leading to a high
degree of exposure to risk and uncertainty for the countries that rely on them
(Todaro and Smith 2006). Primary-products exports have been characterized by
relatively low income elasticity of demand and inelastic price elasticity,
being fuels, certain raw materials, and manufactured goods, some exceptions
that exhibit relatively high income elasticity (Todaro and Smith 2006 cited in
Mejia, 2011).
As stated by Ali et al. (1991) cited in Mejia
(2011),
Export
diversification entails changing the composition of a country’s export mix,
being it “directly related to the structure of the economy and how it changes
as development proceeds” (1991, p. 6). The underlying consideration behind
export diversification as a possible developmental strategy is related to the
expectation of achieving stability-oriented and growth-oriented policy
objectives (Ali et al. 1991). A broader exports base, coupled with a special
promotion of those commodities with positive price trends, should be beneficial
for growth. Hence, the value-added export commodities would be stimulated, by
means of additional processing and marketing activities (Ali et al. 1991). A
country’s degree of diversification is usually considered as dependent upon the
number of commodities within its export mix, as well as on the distribution of
their individual shares (in Mejia, 2011).
Contributors to the Nigerian Economic Society
Conference on Diversification Strategy for Nigeria’s Economy in 1983 argued
that in order to achieve diversification, a number of factors are to be
considered to ensure a successful Nigerian Economy (one not based solely on
petroleum). These factors are:
First,
there is need to give priority to the development of industrial raw-materials
locally…. In this way, the industrial capability of the country in producing
exportables will be greatly enhanced.
Secondly, policies must be deliberately shifted away from inward-looking
industrialization around the home market towards systematic efforts to export
industrial products. Third factor of
marketing and export promotion strategy…. Developing countries that are
successful exporters of manufacturers export success has been based in part, on
learning special skills involved in marketing and producing customer
specifications (cited in Bassey, 2012).
According to Onayemi and Akintoye (2009),
Export
trade is an instrument for growth. It increases foreign exchange earnings,
improves balance of payment position, creates employment and development of
export oriented industries in the manufacturing sector and improves government
revenue through taxes, levies and tariffs. These benefits will in turn enhance
the process of growth and development in such economy. However, before these
benefits can be fully realized, the structure and direction of these exports
must be carefully tailored such that the economy will not depend on only one
sector for the supply of needed foreign exchange (cited in Adenugba and Sotubo,
2013).
This calls for the diversification of
Nigeria’s economy since it is heavily dependent on the oil sector. Evidence
that Nigeria’s economy can thrive based on non-oil export is provided in the
growing body of literature. Such contributions made by non-oil export
proponents who argue that non-oil trade has great potentials to propel
Nigeria’s economy for desired growth and development. Such proponents as
Onwualu (2012) cited in Onodugo, et al
(2015) is of the view that:
The
value chain approach to agriculture has the potentials to open up the economy
and generate various activities which are capable of creating jobs and
enhancing industrialization and thus makes the non-oil sub-sector to hold the
aces for future Nigerian sustainable economic growth (cited in Onodugo, et al, 2015).
Evidence provided by Soludo (2007), Olayiwola
and Okodua (2010) and Aigbakham (2008) cited in Onodugo, et al (2015) points to noticeable increase in the contribution of
non-oil sector to the growth of the Nigerian economy over the last ten years.
As cited in Onodugo et al (2015),
The
Central Bank of Nigeria (CBN) has attributed the growth in Nigeria’s Gross
Domestic Product (GDP) from 6.9 per cent in third quarter 2012 to 7.1 per cent
in the fourth-quarter of the same year to the increase in the contribution of
the non-oil sectors, particularly the industrial sector (NBS, 2012). In its
report titled “Economic Report Fourth-Quarter 2012” CBN submits that non-oil
receipts stood at N589.98 billion (24.4 per cent of the total). Adekunle (2012) maintains that Nigeria has the
potential to realize N310bn from non-oil export ……... National Bureau of
Statistics (NBS) further reports that the non-oil sector grew at 9.07% in the
fourth quarter of 2011 higher than the 8.93% increase recorded in the fourth
quarter of 2010. The growing body of literature indicating possible linkage
between non-oil export and growth of the Nigerian economy notwithstanding,
there is still paucity of empirical evidence as to the magnitude of the
contribution of non-oil export to the growth, and specific sectors and factors
that are behind such growth. Further, it is observed that most time series
studies in this line of investigation on Nigerian economy have focused on
export promotion strategy of industrialization, as a way of diversifying the
productive base of the Nigerian economy (Onayemi and Ishola, 2009) without
clear information on how strong the impact of non-oil export has on the rate of
change in the Gross Domestic Product (GDP) (cited in Onodugo, et al, 2015).
The revenue profile of the Federal Government
of Nigeria in the past half-decade shows that oil earnings accounted for over
80.0% of the foreign exchange earnings, while the non-oil sector, despite its
improved performance, contributed 20.1%(CBN, 2010 cited in Onodugo, et al, 2015). This reveals how heavily
the Nigerian economy is dependent on the oil sector to generate revenue and of
course raises a red flag of potential danger asking the question “what will
happen when oil prices collapse in the international market?” The answer is
evident in today’s economy where recession has become the order of the day due
to the overdependence on oil and the neglect of other sector of the economy.
Quoting Ajayi in Bassey (2012),
The
economic dangers of extreme dependence on a single product are too obvious to
need repetition. This danger assumes a
greater degree of fear in the case of petroleum which to all intents and
purposes can be seen as a commodity of international importance which can be
subjected to both economic and political manipulation (cited in Bassey, 2012).
Hence, to be safe from both economic and
political manipulation, policies that support diversification must be
implemented.
Ibanga and Obi (2001) also contributes to the
growing literature. They note that:
Reflections
on oil price slump of the early 1980s should prick the mind of policy
makers. A forcefully lowered consumption
or welfare level has never been desirable.
A deliberate effort to ensure optimal consumption for present generation
and a release of funds for reinvestment in appropriate man-made capital that
would ensure similar consumption for future generations is desirable, and it is
attainable (cited in Bassey, 2012).
It seems as though the issue of oil price
slump re-occurs. Yet, lessons are not learned. For instance, from the 1980 oil
slump price, it was evident that the need for economy diversification cannot be
overlooked. Yet, the government kept falling into the temptations of oil prices
when it picks up back in the global market.
Another logical reason for export
diversification particularly for the Nigerian economy, is the believe that oil
is exhaustible and as postulated by Bassey (2012), that if no new discoveries
as to oil substitute is made, the stock of oil in Nigeria will be exhausted in
the year 2065.
It is also important to consider Itumo’s
reasons for Nigeria to diversify and move away from a heavily oil based
economy. Citing Itumo (2016),
Acute
shortage of infrastructure: Nigeria has acute shortage of infrastructure in
virtually all areas of the society. The roads infrastructure still needs a lot
of attention. There is lack of access roads in some cases for the agricultural
products produced locally to be evacuated to urban centres for food supply and
further processing as in agro-allied industries. Lack of good road
infrastructure also impedes on transport system in movement of people. In very
many cases, bad roads have led to fatal accidents that claimed multiple lives.
This scenario is applicable to rail transport; it is moribund and is only being
revived at the moment. Same applies to seaway transport and air transport;
which are not yet at a higher level of operation. In the power sector, there
had been a huge crisis of inadequate supply, vandalizing of power installations
and disruptions of gas-to- power turbines by pipelines sabotage. There is no
doubt about the considerable potentials Nigeria has in power generation as the
country is located on the equator and can tap into solar source of power
supply. It also has the advantage of oil resources which makes it easier for
her to supply gas to power stations, but the sabotage impedes on it. This
situation is similar to the deficiency in the water resources sector, Nigeria
has many water bodies, but good drinking water has not been made available to
all Nigerians. Invariably Nigeria needs heightened economic boost to make huge
investments in infrastructure and other sectors. There is also the persisting
infrastructural shortage in housing sector with about 17 million housing deficit,
which continues to grow with profound increasing population of Nigeria. Also in
the health sector, fewer hospitals, lack of access and/or reduced access to
Medicare, inadequate number of physicians, drug counterfeiting, etc., all still
exist and urgently needs to be addressed. Bridging these kinds of gaps in
housing infrastructure will need serious funding which can only be possible by
economic buoyancy and boost that is not undermined by dependence on volatile
product resource like crude oil. Nigeria’s exploding population: Nigeria’s
population according to analysts represents one fifth of the black race on
earth. The Central intelligence Agency (CIA) World Fact book (2015) puts
Nigeria’s population at 181,562,056 people. The Guardian (2013) observed that
the Nigeria population would expectedly surpass the US Population by 2050 based
on the United Nation’s projections. It further notes that the United Nation’s
projections also predict that Nigeria would by the end of the century be the
third most populous country. The data from CIA World Fact book (2015) indicates
that youth population is more in Nigeria’s case. 30.56% of the population is
made up of the 25-54 years age bracket, 19.38% is made up of the 15-24 years
age bracket while 43.01% is made up of the 0-14 years age bracket.
Cumulatively, the 0-54 years age bracket accounts for 92.95% of Nigeria’s
population. Invariably, Nigeria has a huge youth active population that is
growing. Nigeria now has the challenge of feeding her growing population by ensuring
food sufficiency. Nigeria also has the challenge of good and effective planning
that caters adequately for the population by ensuring economic growth and
development. Nigeria is also faced with the challenge of providing and ensuring
quality education for its youthful population. Nigeria’s current Minister of
Agriculture and Rural Development is credited with saying that Nigerians may be
starving from lack of food by 2050, while making a case for increased
investment in agriculture. By all measure and standard, Nigeria’s exploding
population stands out as one of the major reasons why Nigeria must diversify
away from single product resource like crude oil. Security concerns: There are
serious security concerns within the Nigerian geographic space. The Boko Haram
meaning ‘Western Education Is Evil’ have engaged in endless acts of terrorism
which has displaced millions of people and seen to the death of tens of
thousands of people. The North Eastern part of Nigeria which is the hotbed of
the Boko Haram activities has been seriously devastated economically with
destruction of properties, business interest, viable investments and desertion
by indigenes. In like vein, investors think little of establishing in this
geopolitical zone and that is a minus for economic wellbeing and growth of this
area of Nigeria. The South region of Nigeria also has militancy problems with
new groups emerging by the day, targeting and destroying oil installations.
Their activities include blowing up of pipelines, kidnapping of expatriates,
theft of crude oil, establishing of illegal local refineries, etc. These
activities have huge negative impacts on Nigeria’s economic growth as serious
reduction is often occasioned in her crude oil quota supply at the
international oil Market. Nigeria, therefore, needs to diversify away from
crude oil and begin to enjoy economic boost in order to have funds to
adequately combat the scourge of terrorism and militancy. To continue to depend
on crude oil export has the implication of reduced revenue since the activities
of the militants in the Niger delta region of Nigeria reduces daily crude oil
output and similarly shrinks revenue earnings. The Boko Haram menace continues
to exact more pressure on the government for security of lives and property, with
the government in high need of adequately arming its military, dependence on a
dwindling revenue source would hamper serving these objectives. High youth
population and rising rate of unemployment: as noted earlier, Nigeria’s youth
population accounts for about 92 percent of Nigeria’s population which
continues to grow. The implication of this statistics is that Nigeria has
rising rate of unemployment. Nigeria’s former President, Olusegun Obasanjo, in
a statement observed that Nigeria is sitting on a keg of gun powder and the
situation is a time bomb ticking and waiting to explode. High youth
unemployment leads to increase in crime rate, theft, militancy, armed robbery,
terrorism, restiveness, etc. Part of what aggravates the situation in this
issue is the absence of social benefits within the country, meaning that a
hungry youth has no subvention or government intervention in any area of life.
Such scenario raises the vulnerability of youths to get involved in juvenile
crimes. Hundreds of thousands of young Nigerians gain admission into the higher
institutions every year, just as similar numbers graduate annually. Given the
foregoing scenario, it is highly imperative for Nigeria to diversify away from
crude oil and aggressively grow her economy in order to have means to create
jobs as could reasonably absorb the unemployed at the job market. Economic
roles played in the West African sub-region and the African region: Nigeria is
the foremost economy in Africa with a GDP of over $500 billion. Even before
Nigeria’s rebasing of her GDP which reflected her as the biggest economy on the
continent, it already was playing enormous economic roles at the sub-regional
and regional levels in the African continent. Nigeria has been the major
funding source to ECOWAS secretariat. Nigeria also lends economic support to
some countries in Africa by donation interventions and assists to lead peace
keeping missions within the region, including funding. Nigeria is the biggest
market in the West African sub-region, and if her economy contracts,
irrespective of the reasons, the economy of the sub-region will be negatively
affected too. In this circumstance, Nigeria’s economy needs continuous growth
in order to directly and indirectly support the economies of other countries in
the West African sub-region. As a matter of fact, there is growing funding need
in the African continent for security issues, economic growth and integration,
international organizations, alleviation and/or eradication of poverty,
development of education, infrastructural development, eradication of
terminal/contagious diseases, etc. Nigeria cannot play big roles as a big
economy in Africa if the economy is dependent on a volatile product resource
like crude oil. The unpredictability of Nigeria’s accruable revenue from oil
export: because of the volatility on global crude oil price, it is impossible
to predict or project what revenue is accruable to Nigeria from crude oil
export. Such a situation has far reaching negative implications for Nigeria.
The unpredictability of crude oil price means that planning is impossible for
Nigeria. Development requires serious level of planning at national level, and
dependence on a product resource with continuous unstable price means facts can
never be the same, adopting a patterned planning would remain hard and
inference would always be difficult to draw. Nigeria’s case is further
compounded by the spiraling[sic] insurgent activities in the Niger delta region
of Nigeria, where the oil resources are concentrated. The militants in this
region in quest for resource control and display of grievances over various
political and security issues disrupt oil production outputs by blowing up
pipelines and kidnapping expatriates. These kinds of activities disrupt oil
production in Nigeria and shorten her international supply quotas thereby
seriously decreasing her oil revenue. The volatility of crude oil price which
reflects in unpredictability of earned revenue would undermine economic growth
and development as it were in the case of Nigeria. Nigeria already missed the
opportunity: One of the measures countries dependent on a basic resources could
do in time of resource boom is to plough huge revenues from it into development
of other sectors of economy. Doing so would help to mitigate any negative
impact of price volatility or exhaustion of the basic resource. This same
measure could be applied to development of relevant and critical
infrastructures for national development and continuous economic vibrancy.
Investments could be made in the educational sector, power sector, enhanced
transport system, health sector and government social programmes that help in
poverty alleviation, less privileged and low income families. In the case of
Nigeria, all the opportunities for investing revenues from crude oil into
development of other sectors for ensuring continued growth and development in
challenging times have been missed. Nigeria did not save like Saudi Arabia that
has over $900 billion in foreign reserve. Nigeria only has less than $25
billion dollars in foreign reserve, which is much lower than what the total
budget estimates of year 2016. Nigeria has acute shortage of infrastructure,
inefficient transport system, acutely short power supply, dilapidated and
inadequate road network, unenhanced health sector. As it is, Nigeria had not
made any investment in any other sector in a way that it could support budget
funding or development efforts besides crude oil revenue. It is quite
challenging for Nigeria that nothing can really be pointed to as national
investment with potential to support Nigeria’s economy up to half of the
revenue derived from crude oil exports. Corruption continues to plaque Nigeria:
Just as stated earlier in the views of New Institutional Economists, countries
with basic resource abundance were associated with slower growth, while those
that have institutions that were “grabber friendly” failed to grow. This
scenario has played out in Nigeria and continues to exist where several cases
of corruption are being recorded in Nigeria both within various government
Ministries and Agencies as well as among politicians and other categories of
government workers. Former British Prime Minister, David Cameron was once
quoted in the media sources in 2016 as referring to Nigeria and Afghanistan as
being fantastically corrupt. Nigeria’s oil European Journal of
Interdisciplinary Studies 33 industry has repeatedly been embroiled in
corruption cases. Also, cases of corruption have been largely reported in the
Military arms deals, pensions fund, national Assembly, the Judiciary, in some
political parties and many other sectors of the Nigerian society. Nigeria’s
speaker of the lower house of parliament recently decried the alarming rate of
corruption with the revelation of stolen billions of Naira buried in a
farmland. With the current situation of massive scale of corruption, Nigeria
needs to diversify away from dependence on crude oil export (Itumo, 2016).
A study by Eko, et al (2013) on diversifying Nigeria’s economy focuses on a dual
approach. They provide that tourism and Agriculture are viable means of getting
the Nigerian economy from a mono-cultural direction to a diversified one.
Citing them,
Diversification
implies “movement into new fields and stimulation and expansion of existing
traditional products.” Diversification does not discourage specialisation, but
requires that resources be channelled into the best alternative uses (see
Ayeni, 1987; Iniodu, 1995). In macroeconomic planning, diversification promotes
growth and development through the mobilisation of savings from surplus sectors
for use in the development of deficit sectors of the economy. Options for
diversifying an economy abound, such as agriculture, entertainment, financial
services, industrialisation, information and communication technology, tourism,
etc. However, it is worthy to note that country-specific circumstances ought to
as a matter of necessity, be considered. This is cogent, since due to
structural differences, a model that fits an economy perfectly well may prove
irrelevant in another With a major objective of diversifying the productive
base of the Nigerian economy with a view to reducing dependence on the oil
sector, this study zero in on ‘agriculture’ and ‘tourism,’ as imperatives. The
choice of this dual approach is informed by the huge successes recorded by some
Asian countries–which are collectively referred to as ‘Asian Tigers’–in
applying these imperatives, as well as the fact that these countries were
basically at the same level of national development with Nigeria, at the time
of their respective take-off and still share certain similarities with Nigeria (Eko
et al, 2013).
Since export trade is characterized by two or
more countries in business, there is either a positive or a negative effect on
each country’s currency. In the case of Nigeria, exchange rate fluctuates due
to the oil dependent nature of her economy in the light of dwindling oil price
in the global market. This of course will have a negative effect on her currency.
According to the Central bank of Nigeria’s
research department (2013), it is observed that developing economies estimates
the external sector on the premise of small country assumption which makes it
only possible to model the demand side at the expense of supply condition.
Therefore, exchange rate regime, openness of the economy, institutional
arrangements and the degree of capital mobility are vital to modeling the
external sector (CBN, 2013).
Umaru, et
al (2013) opine that
Export
income is a function of export price and volume of goods, and the exchange rate
of the local currency to the international currency. Production volume for
export been fairly stable (Adubi & Okunmadewa, 1999; and Chukwu, 2007)
suggest export drive as based on export price (itself fairly stable) and the
fluctuations in the exchange rate. Fluctuations, positive or negative,
influence export: increasing export when depreciation occurs and decreasing
export when exchange rate appreciations occur. The traditionalist view on the
impact of currency depreciation on trade indicates that it leads to an
expansion in trade via lower export prices. The structuralist school, however,
stresses some contractionary effects, Meade (1951). Hirschman (1949) points out
that currency depreciation from an initial trade deficit reduces real national
income and may lead to a fall in aggregate demand. Kandil and Mirzaie (2002)
argued that currency depreciation gives with one hand, by lowering export
prices and takes away with the other hand, by raising import prices. They
observed that if trade is in balance and terms of trade remain unchanged, these
price changes offset each other, especially when the famous Marshall-Lerner
condition is not satisfied. If imports exceed exports, the end result is a reduction
in real income within a country. See Krugman & Taylor (1978) and Edward
(1988 and 1989) (cited in Umaru, et al,
2013).
Further citing Umaru, et al (2013), it is discovered that:
Foreign
exchange fluctuations whether positive or negative are not desirable to
producers of export products as it has been found to increase risk and
uncertainty in international transactions which discourages trade (Adubi and
Okunmadewa, 1999). Findings by the IMF (1984) revealed that these fluctuations
induce undesirable macroeconomic phenomena called inflation. Similarly,
Caballero and Corbo (1989) observed positive effect of exchange rate
fluctuations on export trade in European Union countries. Accordingly, Walsh
and Yu (2010) noted that low exchange rate favour the importation of
productions machinery, and production and export in periods of high foreign
exchange rate. Lama and Medina (2010) opined that different open economies
experience different episodes of exchange rate appreciation in response to
different types of stocks, contending that an appreciation in exchange rate
induces a contraction of the exporting manufacturing sector. Maintenance of
export performance to them require the depreciation of the real exchange rate
of a country’s currency, the achievable through monetary injections; noting
that a policy of exchange rate depreciation can successfully prevent a
contraction of export output, having an allocative effect in the economy (cited
in Umaru, et al, 2013).
Moreover,
Adubi and Okunmadewa (1999) posited that Nigeria, a developing nation, is
expected to gain from export conversion price increase as a result of currency
devaluation. Findings by Obadan (1994) and Osuntogun, et al (1993) on the effect of stable exchange on export performance
showed that exchange rate affect a country’s export performance. In addition,
instability in an exchange rate with its attendant risk affect exports
earnings, performance and growth which turn out as positive to exporters when
devalued. Poor results from the floating exchange regimes of the 1970’s
necessitated a change in foreign exchange rate management. The structural
adjustment program was introduced in 1986 with the cardinal objective of
restructuring the production base of the economy with a positive bias for
agricultural export production. This reform facilitated the continued
devaluation of the Nigerian naira with the expected increase in domestic prices
of agricultural export boasting domestic production.
Thus,
Srour (2006) asserted that, diversification of countries export base is one
reason given by developing nations for changing foreign exchange rates and
regimes. In the same vein, the World Trade Organization (2010) wrote that,
diversification increases local production, employment, income and economic
growth. In different works, Chukwu (2007) and Adubi & Okunmadewa (1999)
concluded that foreign exchange rate is a determinant of export trade and
economic growth in Nigeria. Similarly, Lama & Medina (2010) observed a
coincidence in exchange rate appreciation with a contraction of 3% in the
country’s gross domestic product in the manufacturing sector; with a 2% average
decline in manufacturing GDP over a 20 year period characterized foreign
exchange rate appreciation. Although, carrying attendant risks, foreign
exchange rate movement are monetary policy instruments to achieve export
growth, economic growth and development of any nation (cited in Umaru, et al , 2013).
Citing Itumo (2016),
Naira
loss of value: since the advent of the recent fall in crude oil price at the
global level that began about mid-2014, the naira has lost value, moving from
about 170 naira to $1 to the first quarter of 2016 when the naira pitched at
400 naira to $1 at the parallel market. At the central bank of Nigeria’s
official price, the naira equally slipped downward. The government with the
conviction that the naira should not be devalued continued to defend the
currency on the official exchange rate of 197 to $1 for a long time. But in the
second quarter of 2016, the government let go and allowed the exchange rate of
the naira to be determined by market forces of demand and supply, especially
the interbank rates in Nigeria. The loss of value of the naira is enormous. If
drawing from the example above, naira moved from below N175 to $1 in 2014 to
about N400 to $1 in first half of 2016. Implicitly, naira loss of value could
be adjudged to be more than hundred percent. The impact of naira’s loss of
value had been enormous. Businesses which borrowed money to invest would have
to pay more in loan refunds. The loss of value of the naira also affected the
Nigerian stock market which shed value of market capitalization over time as a
result of the loss of value of various stocks. Early in 2015, market investors
had thought that the stock at the year end of 2015 would be up, but in a
disappointing turn of event, the market ended the year lower than it started.
The public sector workers in Nigeria, under the umbrella of the Nigeria labour
Congress have in 2016 asked for a pay raise as a result of the loss of value of
naira and their sustained argument that the current minimum wage of the nation
at below one hundred dollars ($100) does not represent a living wage with which
workers would survive (Itumo, 2016).
In addition, taking into consideration the
fluctuation of the Nigerian currency (Naira) from the time a new administration
emerged in 2015, it is observed that the devaluation of the Naira is an
intentional strategy by the Central bank of Nigeria in that it is believed to
drive innovation leading to manufacturing which will finally result to a
diversified export base. This strategy stifles importation in that it
discourages importers in their multitude since the price paid on import duties
are exorbitant and encourages exportation since the price for exporting is on
the low. Thus, enjoying the advantage of balance of trade where the degree of
exportation exceeds that of importation.
According
to Onodugo, et al (2013), the non-oil
sector comprises of those groups with economic activities differing from oil
and gas sectors. Such as; the manufacturing, tourism, agriculture, health, real
estate, telecommunication, service and construction sector. A decade from
independence was characterized by the exports of non-oil products especially
agricultural commodities such as cocoa, groundnut, rubber, cotton, coffee,
cattle, hides and skin which dominated trade until the 1970s that was
characterized by a boom in the oil price which led to a neglect of the non-oil
sector and tended towards the embrace of petroleum mono-cultural economy. Thus,
while petroleum export was growing, non-oil export drastically declined
(Onodugo, et al, 2013). This has
informed the decision of the Nigerian government to adopt certain measures
believed to ensure diversity in the export base of the Nigerian economy.
Certain policies were implemented to address the issue of mono-culture. Such
policies are mentioned below.
The
Nigerian Export Promotion Council (NEPC) was established in 1976. According to
Abebefe (1995) in Adenugba and Sotubo (2013), it is charged with the following
responsibilities:
•
To champion the promotion and development of exportation via the provision of a
blueprint which entails plans that advances the course of trade exports in
Nigeria.
• To serve as a consultant to FGN on matters
that involve pointing out viable industries with the prospects for exportation.
•
To provide assistance to FGN by creating the necessary infrastructures such as
incentives that will aid exportation.
This
section of the constitution talks about export incentives and other provisions
pertaining export led growth.
According to CBN (2010), this decree was
declared on the 11th of July,1986 which further brought about the establishment
of institutions and programmes that were solely aimed at promoting non-oil
commodities for export. Adenuga and Sotubo (2013) holds that “the decree
provided for the establishment of three funds; Export Development Fund, Export
Expansion Grant Fund and Export Adjustment Scheme Fund” (Adenugba & Sotubo,
2013).
The
Nigerian export and Import bank known as the NEXIM bank for short was founded
in 1991 for the sole aim of providing funds and charged with the responsibility
of contributing to export growth and contribution to the diversification of the
country’s economy and finally, to ensure a structural balance.
The
decree no. 34 of 1991 constitution under the regime of Babangida gave rise to
the export processing zones. According to Afeikhana (1996),
An Export Processing Zone (EPZ)
is a special enclave outside a nation’s normal custom barriers where foreign
and domestic firms may manufacture or assemble goods for export without being
subjected to the normal customs duties on imported raw materials and finished
products present in that economy; firms operating within the zone are normally
exempted from industrial regulation applying within the domestic economy,
especially with regards to foreign ownership of firms, repatriation of profits,
employments of nationals, access of foreign exchange, etc (cited in Adenugba,
2013).
Adenugba
(2013) holds that, the numerous institutions and promulgated policies which FGN
has adopted in order to encourage the exportation of non-oil commodities have
produced unsatisfactory results. According to Ogunkola, et al (2006), “the proportion of oil to total exports and concluded
that since crude oil accounted for over 90.0% of total export, therefore all
efforts directed at diversifying export from oil to non-oil products are yet to
materialize.”
According
to Anyaehei and Areji (2015), there have been a whole lot of strategies
provided by the Nigerian government to tackle the problem of mono-economy.
Although, efforts have been channeled towards the diversification of the
economy, but these efforts have been in futility in that governmental policies
in this area have not been effective due to a number of challenges mentioned
below.
Anyaehei
and Areji (2015) are of the view that the Nigerian economy does not reflect
productivity rather, it is characterized by sharing of wealth and who gets
what. This orientation is rooted in the nation’s psyche by the easy revenues
gotten from extraction of natural resources, especially petroleum. Investment
of funds gotten from petroleum resources are not on long term productive
ventures. Loans from both government and private sectors operate on high
interest rate and can only be economically used for only short term projects.
Hence, most of the loaned funds are used for trading (especially importation)
which involves high turnover. Consequently, this discourages investments in the
industrialisation of the economy. A chunk of the country’s revenue goes to the
hands of those in the political class who lavish it on ostentatious materials
which are mostly imported. Also, resources are wasted on bogus white elephant
projects that are often times incomplete and if completed, cannot be maintained
resulting to dilapidation and rendering the product useless. They further note
that main stream of the economy, the business and working class, are deprived
of the necessary resources which can encourage skill acquisition,
industrialisation and productivity. Those who hold political offices are among
the highest paid in the world while the common citizens and workers are among
the leasst paid in the world. This is exactly the reason why many professionals
and other elites abandon their areas of specialisation and either juggle for
political positions or leave the country for a better condition of service.
There is urgent need for the nation to re-channel her resources towards
productivity and not bureaucracy. Wealth gained from resources should be
channeled towards creating productive jobs and industrialisation. The
importation of foreign goods should be restricted in order to ensure the
survival of indigenous industries (Anyaehei and Areji, 2015).
According
to Anetekhai (2013), “the key components of macroeconomic policies are fiscal,
monetary and trade policies.”
He
explains fiscal policies as focusing-
on budgetary, tax and debt
management policy instruments. Budgetary policy influences economic stability
and rate of inflation in the economy. These, in turn, influence the climate for
the flow of investment, especially foreign private investment. Tax policies
that focus on personal and corporate tax rates, tax reliefs, and other tax
concessions are key incentives (or disincentives) factors affecting consumption
and investment decisions. A favourable corporate tax policy regime enhances
after-tax profits and, to that extent, may promote increased investment. A
country’s external debt burden affects its international credit rating and its
capacity to finance public investment. International credit rating affects the
flow of foreign private investment while the level and quality of public
investment directly affect the flow of both foreign and domestic private
investment (Anetekhai, 2013).
refer
to the combination of measures designed to regulate the value, supply and cost
of money in the economy, in consonance with the expected level of economic
activity. Liquidity, interest rates and foreign exchange rates are the channels
through which monetary policy influences economic activities. Liquidity is
affected by money supply. Money supply influences credit supply and interest
rate (cost of capital). Interest rate, in turn, influences consumption, savings
and investment decisions in the economy. Basically, the existence of interest
and exchange rate differentials, resulting frommonetary policy measures,
induces substitution between domestic and foreign assets (foreign currencies,
bonds, securities real estate, etc) as well as domestic and foreign goods and
services (CBN, 1997). Since 1986, the main instruments of market-based monetary
policies have included the open market operations (OMO), changes in reserve
requirements and discount policy. Open market operations involve the
discretionary power of the CBN to purchase or sell securities in the financial
markets in order to influence the volume of liquidity and levels of interest
rates that ultimately affect money supply (Anetekhai, 2013).
.
Finally, he says that trade
policies
are
a very important component of structural adjustment policies. The main focus of
trade policies is on measures to regulate export and import trade through such
measures as tariffs, export and import quotas and prohibitions. They influence
the investment climate in many ways. For example, a liberal trade policy
constitutes an incentive for foreign investors who may need to import raw
materials and / or export products. But a protectionist trade policy may also
serve as an incentive for investors in nontradable products that are largely
locally consumed, or investors in import -substitute products (Anetekhai,
2013).
2.3.3.
Poor Infrastructure
This
is another challenge militating against sustainable development and the
diversification of the Nigerian economy. Development and diversification of
Nigerian economy face the challenge of poor economic and social infrastructure.
Bad road network, erratic power supply, scarce potable water, poor healthcare
facilities, poor transportation and communication network, scarcity of
investible fund, and poor and unstable educational system are among the main
constraints to economic development and diversification of the economy. Nigeria
needs to invest its resources wisely on technological development, skill
acquisition and human development, and provision of economic and social
infrastructure for her to be on the path of sustainable development. An
improved infrastructure will create an avenue for innovation and productivity
among her dense population which will in turn boost the production of goods and
services for both domestic consumption and for export (Anyaehei and Areji,
2015).
It
is apparent that the Nigerian government has the intention for economic
diversification but lacks commitment. Anyaehei and Areji (2015) believe that to
ensure a diversified economy, it is paramount for the government to be
seriously committed to the course. The poor state of both corporate governance
and institutions in the country is due to poor ethical standards in both public
and private organisations which in turn frustrate the achievement of the goals
of different economic and social policies. They further hold that, the Nigerian
government has implemented numerous policies over the years to ensure economic development
and diversification but most of these policies yielded marginal effect as they
were truncated along the course due to weak institutions and political
instability occasioned by personal and sectional interests (Anyaehei and Areji,
2015).
As
Anyaehei and Areji (2015) rightly
puts it, that “the endemic nature of corruption in Nigeria makes it very
difficult to effectively manage the nation’s economy and sustain any policy
that will transform the economy.” They hold that the policies implemented and
the structure of the economy is designed to satisfy certain individual or
sectional interests. It is no news that huge earnings from the country’s
resources are shared between a few which robs the common citizens significant
impact on their living standard. Nigeria is a place where there are
millionaires and billionaires who cannot legitimately provide evidence on how
they accrued their wealth, they enjoy nepotistic advantages since they are
friends to the government. Thus, these
endemic corruption denies the country of revenue to generate infrastructural
and economic development (Anyaehei and Areji, 2015).
Citing
Anyaehei
and Areji (2015),
The Nigerian educational system
is tailored to bureaucracy and not to productivity. Nigerian educational system
produces educated graduates without skills. Certificate acquisition is
treasured above skill and productivity. It is unfortunate that the nation is
playing down skill acquisition and technological institutions for universities.
This has led to massive pool of unemployed graduates which continue to strain
the economy. The educational system needs to be restructured to produce the
right graduates with requisite skills for the economy. Again, the educational
system has to be well funded to create the enabling environment for academic
exercise and put an end to incessant disruptions of academic activities
(Anyaehei and Areji, 2015).
Thank
God for certain private higher institutions that have incorporated measures to
tackle the poor and unstable education system in the country. Universities such
as Covenant university, ota, Nigeria which serves as a pioneer in fostering
high education standards in Nigeria.
This aspect reviews certain key theories that
can be used to explain economic diversification. However, only one will be
picked to explain this work.
As provided by Abogan, et al (2014), development literature is centered on the linkage
between oil, non-oil export and economic growth. The central point focuses on
how some of the components of non-oil export affect economic growth in Nigeria.
Recently, there have been a resurface of the application of the endogenous
growth theory which is found in the works of Moosa (2002), Devarajan, et al (1996). Although, one of the
pioneering authors in their original contribution are the works of Barro (1990)
and later Futagam, et al (1993). In
Barro’s work, he made use of the endogenous growth model to find a linkage
between public revenues / spending and economic growth which Abogan, et al (2014) linked with the relationship that exist
between non-oil export and economic growth in Nigeria in their research work.
(Abogan, et al, 2014).
The theory of Absolute Advantage was
propounded by Adam Smith in 1776 in his publication An Inquiry into the Nature and Causes of the Wealth of Nations.
According to Adenugba and Sotubo (2013), “this theory uses a two by two by two
model, i.e. there are two countries involved in the trading of two commodities
and using only two factors of production; labour and capital. The theory says
that a country should export products in which it is more productive or
efficient than other countries it’ is in trade relations with” This means that
“goods for which it can produce more output per unit of input than others can
(i.e. in which it has an absolute advantage) while importing those goods where
it is less productive than other countries” (Adenugba & Sotubo, 2013). “Absolute
advantage means the ability of a country to produce a larger quantity of a good
with the same amount of resources as another country.” The country’s absolute
advantage may be due to the nature of its resources or to its production skills
(Adenugba & Sotubo, 2013). According to Smith, “each nation benefits by
specializing in the production of the good that it produces at a lower cost
than the other nation, while importing the good that it produces at a higher
cost. This will increase specialization, world output and the gains from trade”
(Adenugba and Sotubo, 2013). “According to this theory, foreign trade is a
positive-sum game, because both countries involved will benefit from the trade.
Thus, a nation need not gain at the expense of other nation, as all nations
could gain simultaneously” (Adenugba & Sotubo, 2013). “However, the
question of whether or not to trade when one of the two countries trading has
an absolute advantage in the production of the two commodities. Should trade
still take place when one partner can produce both commodities more efficiently
than the other partner? The theory failed to answer this question
satisfactorily thus, giving rise to Ricardo’s theory of Comparative Advantage.”
(Adenugba & Sotubo, 2013).
This theory is credited to David Ricardo who
propounded it in 1817 after a thorough perusal of Adam Smith’s work. Ricardo
was not satisfied with the vagueness of Adam Smith’s theory (Adenugba and
Sotudo, 2013). Thus, filling the lacunar, Adenugba and Sotudo (2013) explains
that according to Ricardo's theory of comparative advantage, even if a nation
has an absolute cost disadvantage in the production of both goods, there still
exists a basis for mutually beneficial trade. The less efficient nation should
specialize in the production and exportation of the good in which it is relatively
less inefficient (where its absolute disadvantage is least) while the more
efficient nation should specialize in the production and exportation of the
good in which it is relatively more efficient (where its absolute advantage is
greatest). This theory proved to be better than Smith’s absolute advantage
theory because it is possible for a nation not to have an absolute advantage in
anything but it is not possible for one nation to have a comparative advantage
in everything and the other nation to have a comparative advantage in nothing.
That is, because comparative advantage depends on relative costs (Carbaugh,
2004 in Adenugba and Sotubo, 2013). Therefore, for the purpose of this work,
the Ricardian theory of comparative advantage will be used in explaining a
non-oil export commodity. The theory of comparative advantage is picked above
the absolute advantage theory of Adam Smith because, it is evident that Nigeria
has an absolute advantage of exporting crude oil to nations with an absolute
disadvantage of crude oil but since crude oil price has the disadvantage of
fluctuating in the global market and the economy of Nigeria is solely dependent
on it, it is wise we look beyond oil exports which definitely will diversify
the economy and save her from the pangs of mono-culture. In the process of
looking beyond oil export for non-oil export commodities, the theory of
comparative advantage comes in to play, in that those non-oil commodities of
which Nigeria has a comparative advantage or those commodities in which Nigeria
can produce efficiently or those commodities in which a low cost of production
generates a massive output compared to other countries’ should be looked into
and measures set in motion to set them on a course of exportation. Such product
is the African Catfish which Nigeria is the leading producer of in the world
according to (FAO Fishing Statistics, 2006).
The framework of
analysis is based on the theory of Comparative Advantage which was propounded
by David Ricardo in 1817 as a counter to Adam Smith's theory of Absolute
advantage. Since this theory talks about the ability of a country to produce
those products in which it has a low marginal cost or opportunity cost compared
to other countries. This theory was preferred to the theory of Absolute
advantage since a country could have more than one commodity in which it has an
absolute advantage over other countries it is in trade relations with. Adam
Smith's argument was based on one commodity in which a state has high
efficiency in producing while Ricardo's theory of comparative advantage answers
the question - 'what if that country has more than one commodity in which it
has high efficiency in producing?' And since Nigeria potentially has the
ability to efficiently produce African catfish amidst other commodities as
against her African counterparts, this is solely the reason why this theory was
picked in explaining this work (Maneschi, 1998). As old as this theory is, it
is the most popular in International trade literature and despite scholarly
critic as against its benefits, contemporary scholars like development
economist Ha-Joon Chang supports and embraces the idea that every country
benefits from free trade and in his
work, Bad Samaritans,
According to Chang
(2007),
Ricardo's theory is absolutely right- within
its narrow confines. His theory correctly says that, accepting their current
levels of technology as given, it is better for countries to specialize in
things that they are relatively better at. One cannot argue with that. His
theory fails when a country wants to acquire more advanced technologies- that
is, when it wants to develop its economy. It takes time and experience to
absorb new technologies, so technologically backward producers need a period of
protection from international competition during this period of learning. Such
protection is costly, because the country is giving up the chance to import
better and cheaper products. However, it is a price that has to be paid if it
wants to develop advanced industries. Ricardo's theory is, thus seen, for those
who accept the status quo but not for those who want to change it. (p. 30-31)
Also,
it is important to note that since Nigeria leads in the production of African
catfish, it has a strong comparative advantage to every other country in the
world particularly country that demand this commodity.
2.5. The African
Catfish Aquaculture Industry in Nigeria
Aquaculture can be defined as the
rational rearing of fish in an enclosed and fairly shallow body of water where
all its life processes can be controlled. It is an important sector for the
nation’s economic development, at a time when government is seeking for ways to
diversify the economy, from being purely oil based. It is a potential means of
contributing to the food security of the nation, directly by producing fish for
food and indirectly by generating employment for the teaming unemployed
populace, save foreign exchange and generate foreign exchange through export of
fish and fish product (Adewumi, 2015) .
Further citing Adebayo and Daramola (2013),
Food
and Agriculture Organization (2002), made a statement that fisheries products
represented a major source of export revenue for developing countries,
amounting to over US $ 20 billion per annum in late 1990s. This exceeded the
values obtained from the exports of meat, dairy, cereals, vegetables, fruit,
sugar, coffee, tobacco and oilseeds in 1997 from developing countries
(International Trade Centre, 2002). However, F.A.O (2007), estimated that
Nigeria imports about 560,000 tonnes of fish estimated at about $400 million
annually while annual domestic fish supply in Nigeria stands at about 400,000
tonnes. This makes Nigeria one of the largest importers of fish in the
developing world (Adebayo & Daramola, 2013).
The information above proves that the
African catfish aquaculture has the potential of positively contributing to the
growth of Nigeria’s economy. However, importation excesses needs to be
drastically reduced and those monies used in importing what the country is
capable of producing on a massive scale should be invested into this sector.
This will further meet the demand of catfish domestically and of course if
investment is maintained, there tends to be a spillover which will lead to
sourcing market for this commodity outside the borders of the country.
Meanwhile, Anetekhai (2013) is
cited as saying that-
Catfish
is the major fish cultured in Nigeria because it is found all over the Country,
eaten by most tribes, resistant to harsh environmental conditions, commands
good price, tasty and can be kept alive for days during marketing. Estimates
put the current production output of Clarias gariepinus in the Country at over
253,898 metric tonnes per year (Anetekhai, 2013).
This citation gives credit to the
information provided by Adebayo and Daramola (2013) on how lucrative the
African catfish venture is by providing further information based on the
resons.
2.5.1.
Origin of the African Catfish
It
is paramount to note that the African Catfish in itself has over a hundred
different species. There have been systematic researches based on
morphological, anatomical and biographical studies in identifying these
species. The earliest of these researches is that of David (1935) cited in (FAO, 2006) who identified 5
species namely:
• Clarias
anguillarus
• Clarias
senegalensis
• Clarias lazera
• Clarias
mossambicus
• Clarias
gariepinus
It
is recorded in literature that the existence of the African catfish dates back
many centuries but no actual date of its origin is recorded. Although, its
first domestication trial was in the 1950’s with various experimentations over
the years until the 1970’s which ushered in the African catfish as the most
desirable aquaculture species particularly in Central and Western Africa (Inter African Bureau For Animal Resources, 2015) .
40
African catfish gotten from the wild waters of Central African Republic served
as the first brood stock that were introduced to Europe in 1976. In 1985, the
commercial farming of this species commenced in the process known as the
recirculation aquaculture systems (RAS) which simply means the transfer of an
aquaculture commodity to an artificial habitat mostly enclosed like the
aquaria.
Later
on, brood stocks from Israel and South Africa were introduced to Europe. They
were crossed to produce fingerlings which resulted in the present cultured
“Dutch species” African catfish (Roosendaal, 2012) .
It
is apparent that African catfish as the name implies originated from Africa and
was introduced to the world. This simply means that wherever catfish is found
on earth, it has its origin from the African waters.
Anetekhai
(2013) provides key information about broodstocks in Nigeria. According to him,
expensive good quality feed :
There are no quality feeds developed for broodstocks. The hatchery operators
tend to feed their broodstock with feed meant for grow out. This affects the
quality and quantity of eggs produced by the catfish i.e. reduction in ratio of
eggs/gram body weight and hatchability. • Limited management knowledge: Hatchery
operators use fish that are immature (less 1 year and less 1 kg in weight)
resulting in low quality eggs which may hatch but die within a week. This has
become a common occurrence in the hatchery business. There has equally being
inbreeding with farmers selecting from the same cohort. • Water quality:
Broodstock requires water with temperature in the range 27-30C, pH 6.5-8.5,
with water depth of about 1-2 meters. This conditions are usually absent during
the dry season and harmattan when temperature could drop below 25C in the night
and as high as 33C in the afternoon. This affects the physiology of the
catfish, feed conversion to egg efficiency, resulting in very low
gonado-somatic index. In extreme situation, there will be complete egg
reabsorption. This is one of the reasons why catfish are seasonal in carrying
eggs when not properly managed. It is suggested that competent hands be
identified by the public sector to handle broodstock production and management
(Anetekhai, 2013).
Deacon
Omoboni, one of the interviewee stated that the Nigerian government took
advantage of the catfish boom period by implementing policies of assistance to
the catfish aquaculture industry (Deacon Omoboni, 2017) . This information is
corroborated with that of Anetekhai (2013) who states that:
“Catfish
Farming was dominated by Government and its agencies (State and Federal) with
direct involvement in Catfish production.” The government provided technical
assistance in the construction of fish ponds and provided both fingerlings and
feeds. Demonstration farms were established by the government between the
period of 1971 and 1981. These farms were situated in the South-West and in the
South-East. Ibadan and Akure enjoyed the benefit of hosting it in the
South-West while Okigwe in Imo state, Itu in AkwaIbom and Opobo in Rivers state
were privileged to host it in the South-East.
A
four zonal seed production and training centers were also established by the
government. These were in Oyo (South-West), Okigwe (South-East) Panyam (North-
East) and Mando- Kaduna (North-West) between the period of 1978 and 1980.
The
aforementioned projects were collaboratively sponsored by the Federal
Department of Fisheries and the UNDP. According to Anetekhai (2013), The UNDP
contribution was derived from the Freshwater Fish Farming Development and
Demonstration Project- UNDP/FAO /79/059. In addition, the federal government
with the help of FAO established the African Regional Aquaculture Centre (ARAC)
at Aluu, Port Harcourt which was charged with the responsibility of providing
research support and training for aquaculture development in Sub-Saharan
Africa.
Also,
the River Basin Development Authorities (RBDA) were established and charged
with the responsibility of running commercial Catfish Farms and the function of
proving the commercial value of aquaculture in Nigeria. These farms were
successful at inception based on the fact that the expertise of expatriates was
utilized and funding came from external sources. Anetekhai (2013) further
reveals that the period from 1981 to 1991 sparked the interest of both private
sector and state government to engage in the activities of aquaculture based on
the immense dividend the sector yielded. However, the period between 1991 and
2001 experienced a drastic decline in the assistance of the Nigerian government
in that the government started viewing aquaculture as a business concern.
Animal husbandry, crop production and other sub-sectors of agriculture were
also viewed in the same vein. Thus, this sector started yielding marginal
success of Government Farms. This is reflected in the Agricultural Development
Programs (ADP) championed in most of the States despite the huge support
provided by the World Bank. In contemporary Nigeria today, the case is that
while Government provides enabling environment such as signing treaties, the
private sector is charged with commercial production (Anetekhai, 2013)
Citing
Anetekhai (2013),
Major form of processing are
smoking and drying. Refrigeration or freezing is scarce since the catfish can
be alive over a week in a bow of water with regular changing of water. Smoking
is done using fire wood or charcoal as source of energy. The catfish is usually
smoked until the moisture content is reduced to about 20 -30% depending on
number of hours spent in drying. Modern smoking kiln has been developed by
NIOMER and are already in use. This smoking kiln is said to have capacity for
smoking about 200 kg of catfish/day using charcoal as source of energy (Anetekhai,
2013).
There
are various ways of consuming the African catfish. This depends on the
consumers’ choice. Various consumption styles are discussed below.
This
style is commonly called ‘pepper soup’ in Nigeria. The table size is usually
used in preparing the African catfish in this way. Virtually every bar, hotels
and exotic restaurants sell the African catfish in this style due to a very
high demand from consumers.
2.5.5.
Grilled
This
style is new, although it is becoming widely accepted due to its unique taste
and it is usually garnished with fried sweet potato and a chili sauce. The
African catfish is wrapped in a foil paper after spreading the chili sauce around
it then placed on the grill to heat up for a few minute.
The
smoked catfish is simply the process of either oven drying the African catfish
or smoking to a level where there is no water in the fish anymore. This style
is used in the exportation of African catfish so as to ensure preservation. It
is obtained that a well prepared smoked catfish has a shelf life of at least
4-6 months (Oluwajimi, 2017) .
The
African catfish cultivation involves the process from procreation or producing
seed to stocking in a prepared pond and from feeding to the point of cropping
or harvesting. Some catfish farms produce their products themselves while
others buy from those who produce fingerlings. The first stage of the hatching
result is known as the fry stage where brownish tiny particle-looking-like
products are seen moving at the base of the hatchery can. The second stage of
the product is referred to as the fingerling which takes about 3-4 weeks from
the stage of the fry. From this stage, sales could be made. Some farmers prefer
to buy fingerlings so they could feed them to their taste and to see if the
products are good while other farmers prefer going for the third level known as
juvenile. Most catfish business people go for juvenile simply because it is
reasonably bigger than the fingerling and most believe that they will save more
on feeding if they purchase the juvenile. According to Adewumi and Olaleye
(2011), “In Nigeria, the minimum fish fingerling requirement is 4.3 billion
while the total fingerling supply from all sources is 55.8 million” (Adewumi & Olaleye, 2011) . This points at the
inefficiency toward the aquaculture sector in Nigeria despite the huge
potential.
There
are various types of African catfish feed. Most of these feeds are imported.
That is, they are produced abroad. However, there have been various locally
made feed companies springing forth particularly for the sole purpose of
circumventing the hike in price of these foreign feeds based on the current
unfavorable exchange rate. Although, the difference between the local feed and
the foreign feed is glaring in that the local feed sinks into the pond while
the foreign feed floats on the pond. This signifies a disadvantage and an
advantage. The disadvantage is due to the fact that the local feed sinks.
African catfish sometimes do not respond to feeding but when they do later, the
feed that was initially served won’t be accessible due to sinking, unlike the
foreign feed with the advantage of being able to float on water. It should be
of note that the African catfish feed varies in size. The fingerling feeds on
0.5 mm while the juvenile feeds on 1-2 mm and the moderately medium sized
catfish feeds on 3 mm and above. It is obtained that the 0.5 mm is the most
nutritious feed making it the feed with the highest price tag.
Anetekhai
(2013) provides information that corroborates the information already provided
above about the African catfish feed. He is cited as saying that:
Catfish feed is the most
important and critical input to achieving success in catfish farming after
stocking of good quality juveniles that will respond faster. It constitutes
over 80% of cost of production. They are sourced mainly from foreign Countries
like Holland, USA, Germany, India, and Brazil etc. The price ranges from
N250-N350/kg and can be higher when there is scarcity. There are also local
producers but the locally produced feeds are yet to be perfected and are
equally expensive. The local feeds has low digestibility, poor feed conversion
efficiency with majority of them sinking to the bottom. In addition, the
pelleting is rough and irregular in shape (Anetekhai, 2013).
The
African catfish aquaculture is a lucrative venture. From what was obtained from
an African catfish farmer in the field, what you feed your fish is what you
get. That is, the weight of the fish is determined by the amount of feed the
farmer provides the catfish. For instance, if a catfish farmer feeds his
catfish with a 100 kg of feed, it automatically converts to the weight of the
catfish giving it an additional 100 kg. This simply implies that the African
catfish aquaculture venture is a business of weight. Therefore pointing to the
economics of the African catfish that is, what you put in is what you get back;
ceteris paribus (provided everything
works out as planned) plus the immense potential profit as explained under the
viability of African catfish. Also, the fact that money could be made from the
numerous platforms the African catfish provides. Such as from the fingerling
platform which is currently sold at 5 Naira during the time of this study and
the juvenile sold at 10-12 Naira. From the field work, it was observed that
certain fish farmers are not interested in stocking ponds, feeding for some
time and then cropping. These farmers are concerned with the production of
catfish and the sales of fingerlings and juvenile. Also, there is what is known
as brood stock. Brood stock refers to very matured male and female African
catfish usually more than a year old, they could be a year old. These mature African
catfish are used for the production of fingerlings. I was opportune to
experience a hatching process. It was observed that the male brood stock
usually is sacrificed during this process as what is called the “milt” is cut
out and spread on the eggs gotten from the mature female. The process of
squeezing out eggs from the mature female is known as “spawning”. As at the
time of this research, a good brood stock will go for 8000 Naira- this is also
a lucrative platform. Then the popular platform of stocking, feeding and
selling on cropping. This platform provides two sub-platforms. The first which
is the sale of smoke fish. This process involves feeding for 2-3 months then
sales are made to those women who smoke them then sell (another platform). Then
the final platform involves feeding the catfish for about 4-5 months for the
sole purpose of selling as table size. The table size buyers are those who are
known for making “pepper soup”. The African catfish provides various lucrative
platforms and if exploited well, the returns will be alarming.
According
to the Federal department of Fishery, a projection is made for the population
and demand of this commodity, particularly the African catfish from 2010- 2025.
Table 1. Projected population and fish demand 2017 to
2025
Year
|
Population (million)
|
Fish demand (million tonnes)
|
2017
2018
2019
2020
2021
2022
2023
2024
2025
|
198.0
204.3
210.9
217.6
224.6
231.7
239.2
246.8
254.7
|
3.65
3.76
3.88
4.01
4.13
4.27
4.40
4.54
4.69
|
Source:
FDF, 2007 in (Adewumi & Olaleye, 2011)
This
is a counter technique to the popular sacrificial process involved in the
production of seed or procreation of the African catfish. As provided above
that the common process of producing catfish seed involves killing the male
brood stock in the activity of cutting it to bring out the “milt” which is then
spread over the eggs spawned from the female brood stock. It is observed that
while the male brood stock is sacrificed, the female brood stock remains alive
and could be used in procreation after few months of replenishing.
There
is a counter technique to this process. The counter technique is known as the
Cryopreservation method which involves preserving the life of the male brood
stock. Information provided by Olanrewaju, et
al (2015) states that:
The process of induced
propagation of African catfish was still based on long standing technique of
sacrificing male for fertilization with its attendant problems.
Cryopreservation is now being explored globally to solve these challenges and
promotes viable aquaculture production as obtained in livestock industry. But
the level of adoption of this technology is relatively low in Nigeria hence the
need for this awareness. A successful and sustainable cryopreservation method
will require integrated practices for sample collection, refrigerated storage,
freezing, thawing, rule for use and disposal, transfer agreements and database
development. Some of these procedures have been standardized for catfish with
room for improvement before commercial production commenced [sic] (Olanrewaju & Orisasona, 2015) .
Citing Omitogun et al. (2006) in Omitogun et
al. (2012),
The
production of fish in Nigeria is still very small and cannot sufficiently
satisfy the increasing demand of its population of 140 million. To solve the
populace’s high demand for fish, Nigerians resort to aquaculture which is
currently faced with major constraints including lack of fish seed and quality
of feed. The scarcity of good broodstock has necessitated the need to conserve
the fish genetic resources which are wasted during natural and artificial
induced spawning process of fish breeding. One way of expanding aquaculture in
Nigeria is by devising a means of preserving genetic resources of our
broodstock for all year round supply of fish seed through cryopreservation
(Omitogun et al., 2006 in Omitogun et al., 2012).
In a country where the demand for catfish
exceeds the supply, it is wise to devise ways and encourage this way such as
the method of cryopreservation which entails the preservation of the male
broodstock as opposing the popular method that involves sacrificing the male
broodstock.
In the words of Kofi Annan,
Aquaculture offers an increasingly attractive solution to meeting
food needs. Aquaculture is already the fastest growing animal food producing
sector, but the potential for further expansion is great. I do not ask you to
change direction but I ask you to accelerate progress (Annan, 2012).
These words of Kofi Annan signify the importance of
the aquaculture sector to the Nigerian economy and can by validated by the
research of Fakoya, et al (2015) that resulted in the believe that
aquaculture is the only viable option to guarantee food security and generate a
chain of multipliers effects on the Nigerian economy and other countries in the
Sub-Saharan Region (SSR). Adewumi and Olaleye (2010) provide that “the story of
aquaculture in Nigeria is essentially the story of catfish culture and the hope
of fish supply in Nigeria hangs on its development and culture” however; the
potential of this sector has not been fully exploited. This therefore calls for
the Nigerian government to look into this sector because of its lucrative
tendencies in generating immense wealth and also contributing to the
diversification of the mono-culture economy of Nigeria which can also address
the challenge of unemployment. Since Nigeria has a
population advantage and her high demand for fish positions her on the path of
a strong market compared to other African countries (Miller and Atanda, 2011),
this indeed proves the fact that she is the leading producer of fish in Africa
which has a whole lot of untapped potentials which her economy could abundantly
benefit from. To further prove the lucrative benefit of the aquaculture sector,
It is reported that 30 per cent of new
investments in agriculture programmes are in fish farming with bankers now more
informed and willing to consider loans in this sub-sector. With high demand for
fresh fish and consumer preference for fresh water catfish (Clarias gariepinus),
the Nigerian private sector launched fish farming in earnest around 2000, with
the rehabilitation of many abandoned fish farms and new investments in others.
By 2003, a nation-wide inventory totalled 2,642 fish farms (Miller, 2003; AIFP,
2004; Brummett, 2007) with annual production estimated at some 30,000mt by the
Federal Department of Fisheries (FDF, 2007). Increased market demand has
dramatically impacted annual production which has now reached some 120,000mt
annually, whereas tilapia production is less than 5,000mt per year (Miller and
Atanda, 2011).
Based
on the above citation, it can be deduced that the African Catfish has more
market value than other species of fish due to its high demand. This next
citation also proves this fact coupled with the pioneering innovations Nigeria
has displayed in the past. Miller and Atanda (2011) further record that-
The Nigerian experience is a
useful study, as it brings into focus several innovative ‘firsts’ in African
aquaculture development. Responsibility for these innovations was primarily
attributable to the awakening of a range of private sector agents, the strong
consumer preference for catfish and the consequent market opportunity. Much pond
infrastructure had already existed and was relatively easily put into
production, moving from subsistence low-input tilapia culture to more intensive
and commercialized catfish farming (Miller and Atanda, 2011).
Again,
the economic advantage of Catfish over tilapia is reflected in the above
citation.
The
essentiality of fish has informed its lucrativeness in that it serves as a
vital source of food, income, employment, and even as recreation for people
around the world. It also serves as a good source for protein for both man and
animals in developed and developing economies. Studies have shown that in
Nigeria, the current demand for fish is about four times the level of local
production thus, reflecting the underperformance of this sector. Research also
finds out that Humans consume approximately 80 percent of fish as food while
the remaining 20 percent goes into the manufacturing of products such as fish
oil, fertilizers, and animal food. Fisheries and aquaculture are an integral
part of agriculture which have been found to have positive effect on the
country’s GDP and has the potential to solve unemployment woes provided it is
optimally managed (Ozigbo, et al,
2014).
Graaf
and Janssen (1996) cited in Okechi (2004) talk about the possibility of a year
round supply of African catfish. That is, due to artificial reproduction, there
is the tendency of it always readily available. Okechi also lists certain
benefits of this aquatic species. In his words:
In the culture of this species
artificial reproduction ensures a year-round supply of fish seed. The African
catfish is relatively insensitive to disease and does not have high water
quality requirements. It tolerates high concentrations in the water of ammonia
(NH3) and nitrite (NO2). Low oxygen concentrations are tolerated because the
fish utilizes atmospheric as well as dissolved oxygen, (well developed air
breathing organs). It grows fast and feeds on a large variety of agriculture by
products (cited in Okechi, 2004).
Based
on these benefits, the African catfish is on a higher demand compared to other
aquatic species. These facts have contributed to its lucrativeness. A study by FAO (2003) on the UK market for
West African smoked catfish from Nigeria and other traditional exporting
fishery countries shows that majority of smoked fish is sold to consumers
through Afro-Caribbean grocery shops and Afro-Caribbean restaurants in London.
It was also found that some of these importers have their own grocery shops.
FAO further records that retailers of the smoked fish are concentrated in
certain areas of London such as Brixton, Peckham, Dalston in the south and
Finsbury Park in the north. It was observed that six retailers own groceries in
Brixton Market alone, four run by Nigerians, one by Ghanaians and one by Sierra
Leoneans (FAO, 2003). These pieces of information about the aquaculture,
particularly the African catfish suggests the potential benefits which if can
be exploited by the Nigerian government will benefit the economy and deliver it
from the pangs of mono-culture. Also, it is observed that most exporters of
African catfish are in the private sector. The government should endeavor to
put measures in place by providing incentives such as funds in order to
increase the scale of exportation. As in the words of Adewumi (2015), “It is an
important sector for the nation’s economic development, at a time when
government is seeking for ways to diversify the economy, from being purely oil
based”.
According
to Bada and Rahji, 2010,
Aquaculture is about a century
old in Africa. The yield from this sub sector in Africa has remained low over
the years despite the vast potentials in the continent. (Jamu and Ayinla, 2003;
Machena and Moehl, 2001). Nigeria is the largest culture fish producer in
Africa with production ranging from 17,700 to 25,000 metric tonnes. (Machena
and Moehl, 2001; Ridler and Hishamunda 2001) (Bada & Rahji, 2010) .
Remarking
the above content, it is deduced that viability, profitability and a high
degree of economic development potentials are embedded in the sector of
Nigeria’s aquaculture. Oyeleye (2007) in Fakoya, et al (2009) attributes the lack of a consistent framework in this
industry based on the fact that “there is a growing concern on the possibility
of a glut in farmed catfishes in Nigeria’s domestic market despite increasing
demand for fish and fishery products.”
And further states that “Many
small –scale farmers are actively engaged in virtually all facets of catfish
farming ranging from seed or fingerling production, tablesize or growers
production to feedmilling” (Oyeleye 2007) in (Fakoya, Sokefun, Owodeinde, Akintola, & Adewolu, 2009) .
Finally,
as recorded by Gordon, et al (2013),
Sub-Saharan African aquaculture
is currently dominated by Nigeria and Uganda, the region has experienced very
rapid growth in output, albeit from a very low base. Other countries are also
likely to expand output, particularly where producers have good access to urban
markets, and where key inputs of feed and seed can be provided at suitable
price and quality levels (Gordon & Cambria Finegold, 2013) .
Thus,
the production base of the aquaculture needs to be expanded and support
garnered from the government.
It is discovered from the reviewed literature
that there is no clear contribution to the attainment of economic
diversification of the Nigerian economy but rather, a generality of non-oil
export is recommended. This study stands out in that it offers a specific
contribution to the economic diversification of the Nigerian economy. Since
Nigeria is the world leading producer of African catfish and since European
countries yearn for this commodity, it is wise for policy makers to put
measures in place that will attend to and exploit the lucrative benefits of
this commodity. Also, in contributing to the growing body of academic
knowledge, this study observes that the nature of the Nigerian economy is not
really mono-cultured as generally implied in literature. This study finds out
that the nature of the Nigerian economy is worse than that. Since in the actual
sense, Nigeria’s major export is primarily crude oil and it imports fractional
products from this exported crude oil. Then it should be seen as a semi-mono-cultural
economy since it has no capability to exploit the one singular commodity her
economy heavily depends upon to generate more wealth. Thus, countries that
depend heavily upon one singular finished product for export should be regarded
as a mono-cultured economy.
Chapter Three
McGrath (1995) provides that methods refer to those
tools, that is, instruments, procedure and techniques engaged by a researcher
in gathering information and analysing data. This aspect of the dissertation explains
the methods adopted in carrying out the research. Such methods as: data
collection, instrument of data collection, population of the study, sampling
technique and the technique of data analysis. An outline of the process
involved in gathering and collecting data and information for the study is
provided.
This research adopted two methods in sourcing for
data. Both the Primary and Secondary methods were utilized. McGrath (1995)
holds that no method of collecting data is in itself perfect, that every method
has its flaws and strength. Although, when more than one method is used in
conducting a research, the flaws are offset by strengthening each method’s
weaknesses. Therefore, this research engaged both primary and secondary methods
in that information gathered from the field (primary source) corroborated those
from secondary sources.
Within a qualitative research design, the strategy of
collecting data commonly entails the action of collecting a large amount of
data on a rather small, purposive sample via techniques such as in-depth
interviews, participant observation, or focus groups (Hox & Boeije, 2005).
Thus, for this research, the primary methods engaged in sourcing for data were in-depth
interview and participant observation methods by which interviewees were given
the chance to express themselves by reflecting their experiences, views and
knowledge. A period of two weeks was engaged in participating in the
purposively selected five African
catfish farms for the sake of observations. Three African Catfish business
persons were interviewed based on their experience on the international trade
(exportation) of African catfish. Also, an additional interviewee provided a
piece of information as regards the “shelf life” of the dried African catfish
making the total number of interviewees four.
The primary method of collecting data via indepth-interview was based on the
perception that it has a high degree of reliability in social science
(Olorunfemi, 2004 cited in Folarin, 2010).
According to Hox and Boeije (2005), the main sources
of secondary information are official data archives which are available as
files on various platforms such as on CD-ROM and internet. This research relied
on a chunk of secondary data derived from online materials such as reports,
journals and newspapers which provided useful data that corroborated the
experience from the field and information provided by the interviewees.
This study engaged the in-depth interview method in
order to get first-hand information from the selected informant practitioners
of the African catfish aquaculture industry (farmers and exporters). The
in-depth interview method of collecting data is perceived as the best for this
study because it helps fulfil the objectives of the research.
The study was
conducted in Ondo West local government, Ondo State, Nigeria. Ondo West is a
Local Government Area in Ondo State, Nigeria. It has an area of 970 km² and a
population of 288,868 going by the 2006 census. The predominant activity in
this area is aquaculture. Majority of the ponds in this area are stocked with
the African Catfish due to its lucrativeness based on high demands from
consumers (Ministry of economic planning and budget, 2010) . The population of
the study comprise of the 22 functioning African catfish ponds in the area of
study.
Purposive sampling technique was used in carrying out
this study. This study selected 5 ponds out of the 22 ponds based on their
consistent productivity and experience in the exportation of African Catfish.
3.8. Technique of Data analysis
The data analysis technique employed for this research
is textual analysis and a case study data analysis technique by which a case
study provided from secondary source (documentary evidence) was used to analyse
qualitative data and information retrieved from the primary source. According
to Fawole, et al (2006), “textual
analysis involves analysing, evaluating and interpreting written materials”
while the case study technique involves analysing data gathered from a small
group through observation, interview and documentary evidence (Fawole, et al, 2006). Yin (2014) holds that the
case study data analysis technique helps “to improve our social
science methods and practices over those of previous generations of scholars”
Chapter Four
At independence in 1960,
agricultural commodities accounted for up to 83% of export revenue. But, since
1974, agricultural commodities have declined to below 5% of export revenue. The
decline did not come from desirable structural transformation of the export
sector. Rather, it reflects the decline in the international competitiveness of
agricultural exports brought about by the neglect, consequent to the dramatic
earnings from crude oil (Eboh, 2015) .
This
section of the research work attempts to do justice to the raised research
questions in chapter one by analyzing qualitatively data garnered from the
field work via a case study technique and triangulating these information with
contents from secondary sources mostly article journals and reports via a
content analyzing technique.
A
mono-cultural economy is one characterized by generating a large chunk of
revenue from just one source of export. An epitome of such case is Nigeria that
got infested by the Dutch disease from 1973 where she gradually abandoned other
sectors of her economy and tended towards a mono-product economy where a huge
part of her revenue is generated from only one source at the expense of other
potentially valuable sources.
Export
trade in Nigeria is majorly characterized by one commodity (crude oil) which is
responsible for about 90% of the revenue generated by the FGN. This puts the
economy of the country in a potential state of quagmire in that, what if crude
oil prices collapse in the global market? And what if Nigeria’s major customers
of crude oil desist from purchasing from her? This of course will put the
economy of the country in an ailing state bringing about negative implications
discussed below.
4.1.1.
Recession
A
recession simply refers to the event that has an adverse impact on individual’s
economic well-being (Lee & Shields, 2011) .
Recession
is imminent in a mono-cultural economy in that when the commodity heavily dependent
on fails or its price crashes, there are no alternative commodities to play the
redeemer role, therefore bringing about an economic crunch. From the definition
of Lee & Shields (2011), it is observed that everyone citizen of the
country practicing a mono-cultural economy stands to be affected. This is the
exact reason why everyone in Nigeria complains and blames the government for
running a mono-cultural economy.
Dode
2012 records that-
The poor show of Nigeria’s
economy during the 2007 - 2009 recession was largely caused by the nature of
its economic base which has virtually depended on the export of crude oil for
more than forty years now. The Nigerian political elite have to a large extent
shown lack of foresight and incompetence in preparing for and managing an
economy during a recession (Dode, 2012).
In
the case of Nigeria, since the 3 tiers of government are heavily dependent on
revenue generated from the mono-product, in the case where the product fails or
the price collapses, there will not be enough funds to pay government workers.
This fact is corroborated by the statement of the Director-General, Lagos
Chambers of Commerce and Industry, Muda Yusuf that:
majority of the states in Nigeria
are over 70 per cent dependent on statutory allocations which makes the impact
of declining oil price very profound, adding that this is even more so when the
culture of big and profligate spending has been entrenched (Shosanya, 2014) .
4.1.3.
Exchange Rate Fluctuation
Since
exchange rate is dependent on demand and supply of exports, and Nigeria’s major
export is the crude oil, all indications point to the fact that a decline in
the price of this commodity will affect FOREX. Thus, the rate of Naira to
Dollar will slump, depreciate or plung.
4.1.4.
Unemployment
The
case of unemployment is in two folds. The first fold points at the fact that
since the country tilts toward an industry and abandons other sectors of the
economy, while some are opportune to work in oil companies, others either
manage in the private sector or are unemployed and secondly, in a case of oil
price collapse, foreign oil companies in the country fold up, thereby leading
to a massive loss of job.
According
to Tunde Sanni, an interviewee, he stated categorically that the mono-cultural
nature of the economy can only be tackled by an economy diversification. And
that the African Catfish aquaculture is a lucrative venture that can contribute
to diversifying the mono-cultural Nigerian economy (Sanni, 2017) .
This information provided by Tunde Sanni can be triangulated by the statement
made by Punam Chuhan-Pole, a World bank Lead economist that “export will be
affected unless efforts are made to improve production in other sectors” (Vanguard, 2013) . Thus, improving
production in the African Catfish aquaculture sector is a good idea since this
sector of the economy is lucrative and has potentials of bringing about
economic growth and development. And has believed by African catfish farmers,
this industry can save the ailing economy of the country.
Abogan
and Akinola (2014) provides that prior to the oil boom period of 1973/1974,
agricultural products dominated Nigeria’s economy where over 66% of total
export were accounted for by these products namely: groundnuts, palm kernel,
palm oil, cocoa, rubber, cotton, coffee, copra, beniseed and others. However,
the decline of the non-oil sector was as a result of neglect and lack of
competitiveness in the international market which has made this sectors total
export output lower than 5% where Nigeria now imports products they were chief
at exporting.
It
is imperative to note that “exports of commodities are possible when domestic
demand for such are satisfied and surpluses exist in commercial quantities” (Abogan & Akinola, 2014)
The
African catfish is a non-oil commodity with the potential of positively
influencing an economic growth and sustainable development based on
observations made from cropping (harvesting) from 5 African catfish farms in
Ondo west local government, Ondo State, it is apparent that domestic demand of
this commodity is high as consumers and retailers were present to purchase in
large number. The first farm sold product weighing 3500 kg, the second farm
sold product weighing 7000 kg, the third 4700 kg, the fourth 2007 kg and the fifth
pond sold 9800 kg. All sold at the same price of 650 Naira. The number of the
buyers amazed me and made me wonder other farms experiences around the country.
The demand of this product is on the increase. This has informed the decision
of fish farmers to stock more African catfish than other species. This
experience can be triangulated by the statement according to the fish site
(2012) that “catfish farming in Nigeria is an untapped goldmine based on the
fact that there is an ever increasing need for it as the best alternative to
meet the protein need of the people” (FishSite, 2012) .
Based
on the imperative that export is possible only when a commodity has met the
domestic need and spillovers are expected to be exchanged for foreign
currencies, with the activity experienced at the 5 African catfish farms and
the corroborative statement by Fish site, it is deduced that if the African
catfish aquaculture sector is given the due attention, it will pass for export
excellently since the demand is high and definitely will lead to spill over if
enough investment is pumped into this sector. Also, from the information
gathered from the informant interview conducted, Tunde Sanni categorically
stated the countries that demand for his products. These countries are: U.S.A,
Europe(Continent), and the Gulf States comprising of Bahrain, Iraq, Kuwait,
Oman, Qatar , Saudi Arabia and the United Arab Emirate (UAE) (Sanni, 2017)
If there can be more exporters of this products, provided that there is
consistency, it is definite that economic growth and sustainable development
will be achieved.
Information
gathered from the three interviews made were complementary. They all pointed to
similar challenges. Deacon Omoboni provided that the present economic crisis
has affected prices generally in that the fish feed he used to get for 5000
Naira has sky rocketed to 7000 Naira (for 4 mm) depending on the size. He said
this has discouraged production which has affected the ability to export (Deacon Omoboni, 2017) .
Madam
Pat., who is virtually involved in every platform of the African catfish
business, also complained of the exchange rate. In her words, she said “I
cannot export at the moment based on customer relationship integrity” she
continued by saying she has been selling a kilo of smoked dried catfish for
$3.5 USD for about 2 years but cannot export at the same rate based on the loss
she will incur. She maintained that changing the price suddenly will bridge
trust and she prefers to study the market for some time before deciding on what
to do (Madam Pat., 2017) .
In
the case of Tunde Sanni, lack of trust between buyers and sellers is one
challenge while the discouraging policy of the exchange rate is another. In his
words, “Foreign sales are made formally as a result of which informal export
thrive” that is, African catfish export could be either formal or informal. He
is involved in the formal export which does not provide a flexible means of
sudden price changes while the informal on the other hand has room for
flexibility in price tags (Sanni, 2017) .
From
the information provided by the three interviewees, it can be inferred that the
major challenge is the mono-cultural economy style the country is running. In
that oil price slump as affected the exchange rate which has indirectly
affected exportation of this product in that the price for every material to
set the commodity in motion for exportation has sky rocketed. From the price of
fingerlings which used to be 7-10 Naira, now 20 Naira to the price of feed that
used to be 5000 Naira , but now 7000 Naira (4mm). Prices vary based on
different sizes of feed. This has discouraged export for some while it has
slowed export for others.
In
addition, considering the information retrieved from a periodical that says “40
percent of smoked fish exported from Africa is detained, returned or destroyed
at the U.S. and European ports, due to improper packaging and labeling” (Olumide, 2016) . It is clear that
this challenge is on the part of the exporter but it is worthy to note this
fact.
The
experience and data gathered from the field indicates a high demand for this
product. This fact is corroborated in journal articles such as FishSite (2012)
that says “Fish farming in Nigeria is currently a very lucrative business and it is
mainly boosted by the continuous rise in the demand for catfish” (FishSite, 2012) . Adewumi (2015) also
provides that with Nigeria being highly populated, her citizens as at the end
of 2012 had a projected fish demand of 2.66 million tonnes of Catfish (Adewumi, 2015) .
Although,
an interviewee, Tunde Sanni attests to the fact that there is a high demand for
African catfish, but domestic production has not been able to meet this demand.
This information is corroborated by a statement made by the national president
of Catfish Farmers Association of Nigeria (CAFAN), Mr
Tayo Akingbolagun that the aquaculture potential in Nigeria is
estimated at four million metric tonnes annually as against the expected 2.66
million tonnes (Osehobo, 2015) . Tunde Sanni further provided
information based on the quantity his farm exports annually. As of the time of
the interview, he said he had exported a sum of 60kg smoked catfish in the last
4 weeks. He further said that the quantity exports at the moment is unstable.
Although, in the past years, the total quantity of African catfish export he
made ranged between 10.4 metric tonnes to 13 metric tonnes. This simply implies
that on an average, he sells about 225 kg on a weekly basis.
Deacon
Omoboni who has stopped exportation based on the hike in prices of materials
needed to set exportation in motion, ranging from the fish feed, to acquiring
fingerlings or juveniles, and also the transportation cost provides an estimate
of his past annual exports which ranged from 7 metric tonnes to 7.6 metric tonnes.
This implies that he sells an average of about 140 kg per week.
Madam
Pat., the all-round catfish business woman who is involved in the production of
seeds, production of local catfish feed, breeding of catfish, smoking and
export provides that on an average, she exports about 8.5-9 metric tonnes per
year. This indicates that she exports about 168 kg on weekly basis before
halting export to study the market based on foreign exchange fluctuation.
From
the above information, all indication point to the fact that the African
catfish has a high demand not just domestically, but internationally.
Corroborating this fact with an information accessed in an article in a
periodical that:
The huge trade in smoked fish is
a consequence of the growing demand by the increasing number of Africans living
in the Diaspora. The U.S. and Europe remain the major destinations for
Africans, who venture abroad (Olumide, 2016) .
Also,
as provided by Foundations for Partnership Initiatives in the Niger Delta
(2011),
Aquaculture in Nigeria is
expanding rapidly, from 16,119 metric ton in 1995 to 25,720 metric tons in year
2000 and 85,087 metric tons in 2007. It further increased to 152, 796 metric
tons in 2009. Aquaculture has great
potential for growth and for employment in the Niger Delta region. Catfish is
the major product from aquaculture and accounts for over 90% of fish
cultivation…. The demand for fish is increasing at an annual rate of 3% and
current demand nation- wide is about 2 million tons while present supply is
about 1.5 million tons. (Foundation for Partnership Initiatives in the Niger
Delta, 2011) .
Taking
the area of study above as a case study for Nigeria, it can be analysed that
there is a high demand of African catfish and the content provided above
reflects the potential of the African catfish sector in that it is the major
produce in the aquaculture accounting for more than 90% and the fact that it
has the tendency of tackling unemployment in the country. This sector is indeed
a lucrative one and can most definitely contribute to the diversification of
the Nigerian economy.
4.4.1.
Viability of African catfish
The
Cambridge dictionary defines viability as “the ability to work as intended or
to succeed” (Cambridge Advance Learner's dictionary, 2017) . Therefore, the
ability for the African catfish to succeed under harsh conditions unlike other
aquatic species makes it preferable for cultivation by the farmers in that it
is a rugged aquatic species. Information retrieved from the area of study
provides that the African catfish can also serve as a police fish in that it is
used to control other aquaculture species. For instance, in a pond that has
numerous tilapia fish, the population of this tilapia can be controlled by
introducing African catfish into the pond. It is obtained that the African
catfish feeds on the tilapia. Thus, drastically reducing its population in the
pond. One of the African catfish pond under study had a pond that cultivated
strictly tilapia but due to the drop in demand for tilapia, they switched to
the cultivation of African catfish based on high demand but before the pond
could be used to cultivate African catfish (fingerlings), Big African cat fish
were introduced to feed on the remaining tilapia in this pond. This process
saved money for de-muding the pond and at the same time, it provided food for
this big African catfish. Although, it is obtained that there are certain
chemicals one could apply to kill the unwanted tilapia but the process of
applying big African catfish as predators reflects a striking characteristic of
this aquatic species. Also, viability refers to the commercial success of this
venture. As of the time of study, the local price of the smoke size catfish is
650 Naira per kilogram while the price of the table size catfish is 1,000
Naira. In the international market, that is when exported, the smoked catfish
is $3.5 USD per kilogram. When converted to Naira as of the rate in the study
period, a kilogram of catfish in the international market is 1,225 Naira as
against the local price of 650 Naira. This calculation proves the viability of
African catfish when exported. Also, taking into consideration the
profitability in the local market, an African catfish farmer buys fingerlings
for 5 Naira, let’s assume he buys 5000 kg at 25,000 Naira and spends 100,000 on
feeding until the time of cropping. All things being equal, he sells the 5000
kg at 650 Naira per Kg and makes 3,250,000 Naira. If we deduct the 100,000
Naira spent on feeding until the time of cropping (harvesting), the farmer is
left with 3,150,000 Naira (all things being equal) as against the 25,000 Naira
initial capital. This is just a rough estimate but it reflects the viability
and the profitability of the African catfish venture in Nigeria.
A
major tenet of export trade is spillover. That is, the overflowing of certain
produced commodity efficiently utilized in order to avoid wastage and over
supply of that product. Therefore, the spillovers are exported which definitely
have a positive effect on the economy of the producing commodity. There might
have not been a spill over in the production of African catfish industry in
Nigeria but there is a strong potential. Even if foreigners do not demand for
African catfish, it is believed that there are Nigerians all over the world
even in the only debt free sovereign state in the world, Brunei. The Nigerian
government can work on how a global exportation of African catfish can be
achieved. Although, there are people in the private sector who are involved in
the exportation of African catfish commodity. One of such is Mr Tunde Sanni,
The CEO of Tee Ess Farms who majorly will do justice to the next section of
this research work based on the interview conducted with him. Mr Sanni’s farm
has been approved by the United States of America’s FDA to produce and export
smoked cat fish for the US market. This of course was achievable by meeting the
smoking or drying standards of the FDA. This implies that there are certain
standards that need to be met before the smoked African catfish could be
exported. According to Agbaji (2016), he is cited as saying:
The huge trade in smoked-dried
fish is a consequence of the growing demand by the increasing number of
Africans living in the diaspora. The US and Europe remain the major
destinations for Africans who venture abroad. As a result of this
transcontinental migration, and a growing appreciation for African flavours and
food, the demand for dried and smoked fish appears to be growing by day (Agbaji, 2016) .
This
corroborates the initial view raised about Nigerians in the diaspora that if
foreigners are not interested in this commodity, Nigerians in diaspora hunger
for it. But with the information provided by Agbaji (2016), it is apparent that
foreigners have suddenly developed interests in the African flavoured delicacy
such as the smoked African catfish.
In
addition, Atanda (2007) states that:
Nigeria is a country where the
fish demand-supply gap is about one million tonnes per annum, due to dependence
on fish for 40 percent of her animal protein requirement. The country is
benefiting from an emerging commercial catfish farming industry, which is
transforming the long-dormant aquaculture sector. More than 80 percent of
cultured fish in Nigeria is catfish (Atanda, 2007) .
Apparently,
the demand-supply gap stated above is not impressive compared to the population
of the country and the benefit the country is enjoying from the growth of
commercial catfish industry is attributed to the private sector.
According
to an export guide prepared by Nzeka (2012),
Nigeria is the largest market in
sub-Saharan Africa with a population of more than 160 million people, and a
population growth rate estimated at three percent annually. Petroleum exports account for about 20
percent of GDP, 95 percent of total export earnings and close to 85 percent of
federal government revenue. Gross
domestic product (GDP) growth fell to 3% in 2009, compared with 6% in 2008. This
mainly resulted from the effects of global financial crises as well as reform
programs in the country’s financial sector in 2009. Driven by a recovery in oil prices, GDP was
[sic] rose to 6.8% in 2011 and 7.4% in 2012.
GDP growth rate is projected to reach 8.5% in 2012 (Nzeka, 2012) .
This
information provided in 2012 is still relevant today as the economy situation
is in a state of quagmire due to the inability of the government to finds ways
of diversifying the mono-petrol economy. We had to wait until oil prices
collapse again before remembering to put on our thinking caps.
Nzeka
(2012) further provides that:
Nigeria is a long standing member
of the WTO and is an active participant in CODEX and WTO committees. However, the country’s powerful agricultural
and industry interests have continued to hamper GON’s attempts at total trade
liberalization. Hence, the country
continues to pursue trade protection regime but remains under pressure to
liberalize trade in conformity to its WTO commitments…. Major agricultural
commodities produced in the country are cocoa, peanuts, palm oil, corn, rice,
sorghum, millet, cassava (tapioca), yams, rubber, cattle, fish and timber. Nigeria’s agricultural exports to the United
States increased to nearly $110 million in 2011, up from about $69 million the
same time last year. This is nearly
double compared to export figure in 2010.
This increase was mainly due to larger cocoa and rubber exports. The
principal export destinations for Nigerian agricultural exports are Britain,
the United States, Canada, France, and Germany….Nigeria is a huge net importer
of agricultural products, with total imports of more than $4.0 billion and
exports to all countries at about $650 million in 2011…. Nigeria has no
existing laws governing agricultural biotechnology but the country’s National
Assembly (NASS) passed a bio-safety bill into law on June 1, 2011 but the law
requires the President’s assent before it becomes operational. Reportedly,
Nigeria’s Presidency recently stated that the bill has become void as the bill
was passed by the 6th session of Nigeria’s National Assembly (NASS) whereas the
current NASS is the 7th session. This
implies that the bill will have to be re-processed entirely again in order for it
to reach the stage it would require the President’s assent (Nzeka, 2012) .
By
simply analyzing the content above, it is observed that Nigeria imports more
than it exports. It is so alarming that a country that was once agrarian and
led in agriculture export in the world now heavily imports commodities it can
produce. The balance of trade is nothing to write home about in that import
drastically exceeds import.
The
preferred form of exporting African catfish is the smoking or oven drying
method. This simply is for the purpose of preservation as provided by the
interviewees. One Adedapo Oluwajimi, a worker in one of the grilling companies
where the catfish is dried and packaged for export provides that a properly
dried African Catfish has a shelf life of about 4-6 months. As provided by the
Foundation for Partnership Initiatives in the Niger Delta (2011), smoking the
African catfish adds value to the fish and also provides a means of
preservation as earlier stated. Even locally, the demand for smoked African
catfish equally competes with the demand for the fresh form. Although, the
export rate of the smoked catfish supersedes the fresh form. As Tunde Sanni
noted, that there are standards for formal exports. He said that before he
could be licensed by the FDA to export fish to the U.S.A, certain tests were
conducted. Information gathered from Olumide (2016) corroborates Tunde Sanni’s
claim in that the African catfish intended for export has to be smoked well
using the right technique to avoid high levels of what is known as Polycyclic
Aromatic Hydrocarbons (PAH). PAH is a poisonous substance considered by the EU
and the U.S.A to be hazardous to human health as it causes cancer (Olumide, 2016) .
The
three major interviewees provided same destinations except for an additional
destination provided by Tunde Sanni. The two common destinations provided by
the interviewees are the United States of America and Europe. This is
corroborated in African catfish articles such as in Olumide (2016) who provides
that the U.S. and Europe are the major destinations for this commodity since
majority of Africans in diaspora are found in these regions. Tunde Sanni’s
additional destinations are the Gulf States that comprise of Bahrain, Iraq,
Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). Using the
UK as a case study destination of export, information gathered from a research
sponsored by FAO (2003) provides three main ways by which the smoked African
catfish and smoked fish in general are exported into the UK. These ways are: by
airfreight, by accompanied baggage and by overland from mainland Europe (FAO, 2003) .
It
is also important to take into consideration certain key collecting points for
catfish exportation in Nigeria and the destinations. As provided by Anetekhai
(2013), the major collection points for smoked catfish export and their
destination are: Cross River, Lagos, Ogun and Anambra. The particular point in
Cross River is Nsidung, in Lagos is Badagry, in Ogun state is Idiroko and in
Anambra, Onitsha. Their export destinations are: from Cross River to Cameroon,
from Lagos to Ghana, from Ogun to Ghana and from Anambra to Niger, Tunisia,
Libya and Egypt (Anetekhai, 2013).
As
provided by a study sponsored by FAO (2003), there are about 30 key importers
of smoked fish in the UK, they are all based in London. Some of these importers
include: CA Foods, Fovitor International, BIMS African Food Store. They are a
regular importer of smoked fish and also deal majorly in a list of traditional
African delicacies such garri, fufu, vegetables and palm oil. A large number of
small-scale importers who bring in smoked fish via airfreight on an ad hoc basis
also exist. They are not as regular as CA Foods and the like. A list of
Airlines that carry smoked fish as airfreight are: British Airways, Swiss Air,
Sabena, Alitalia, KLM and Ghana Airways. These imported smoked fish arrive
packaged in cardboard or polystyrene boxes. Each of these boxes contain between
12 – 25 kg of smoked fish. A arrival at the airport, these boxes are
scrutinized by customs and the Port Health Authority (PHA) who inspect the
consignments. These consignments are either cleared within 24 hours of arrival
in the UK by agents through the Customs and PHA or by the importers themselves,
unless Customs or Port Health identify any misappropriation. In a case where
misappropriations are identified, the consignments are instantly detained. Air
Marine Ltd is responsible as the agent who clears smoked fish arriving Heathrow
while Kingscoat is the agent responsible for clearing at Gatwick. Fao (2003)
further provides that “once these consignments are cleared by an environmental
health officer from Port Health, they can be shipped to any other EU country
without undergoing another port health inspection.” Those consignments that are
not detained are released to importers who collect them from the airport and
hands over to retailers as required. It should also be of note that some
importers re-export these consignments to mainland Europe like France and
Belgium (FAO, 2003) .
This
method of exporting the African catfish is informal in the sense that they go
into the UK via baggage of passengers. These passengers are mainly from West
Africa, Nigeria. Compared to the airfreight method of exportation, this method
as limited inspection and extra charges are not paid. African catfish exported
through this means are often sold to London traders and most of the time, are
meant for personal consumption. It is worthy of note that the amount of African
catfish that comes in through this means is alarming in that it surpasses those
that go into the UK formally, that is, through airfreights (FAO, 2003) .
An
importer interviewed for a study sponsored by FAO (2003) provides that the
airfreight method is quite expensive for him, so he subscribed to buying smoked
fish from the Chateaux Rouge Market in Paris, France from the proceeds he makes
from selling palm oil and then imports it to London where he sells from his
shop and also to retailers. It is gathered that Smoked fish is imported into
France from African countries such as Côte d’Ivoire, Togo and Senegal (FAO, 2003) .
Although,
the average quantity of African catfish annual exports by the three
interviewees have been discussed under the demand for African catfish. It is
expedient to have a sort of case study on a wider range. Using the United
Kingdom as a case study again, the same study sponsored by FAO in 2003
estimates that a total of 500 tonnes enters the United Kingdom from West Africa
on an annual basis with retail value of £5.8 to £9.35 million. It is
approximated that 120 tonnes arrives by airfreight, while a significant
proportion of the remainder goes in through accompanied baggage and overland
from mainland Europe. It is provided that Nigeria currently exports
approximately 5 tonnes of smoked fish per month as airfreight which with
calculations gives 60 tonnes per annum. Majority of the consignments go through
Gatwick Airport. Other Nigeria’s smoked catfish export counterparts includes Ghana,
the Ivory Coast and Cameroon (FAO, 2003) .
Corroborating
the information provided by FAO (2003) with Agbaji (2016), Nigeria singularly
exports about five tonnes of smoked fish on a monthly basis via airfreight into
the UK. However, strict regulations on food imported into the US and Europe as
posed a great deal of challenge to many African catfish exporters who find it
difficult to exploit the million-dollar foreign market for smoked and dried fish.
But the United States Food and Drug Administration (FDA), in partnership with
the Nigerian Export Promotion Council (NEPC), has made things quite easy for
Nigerian export and as a result, have received samples of fish from the
processing plants of the farmers for laboratory testing and have certified the
product fit for export to the US with FDA Food Facility Registration number (Agbaji,
2016) .
An interviewee, Tunde Sanni is privileged to be part of those licensed to
export African catfish to the United States. Although he provides that his
major challenges as of late are lack of trust between sellers and buyers,
discouraging policy of the exchange rate which affects formal export while
informal export thrives. The other two interviewees’ responses are synonymous
in that the current inflation poses as a major challenge in exporting African
catfish.
Also,
the challenge of meeting the increasing demand of African catfish consumers. As
provided earlier that the ratio of the amount produced is minimal compared to
the ratio of the demand.
It
was gathered that certain companies’ exported products are confiscated based on
the inability to meet up with standard. This also is a challenge, although a
self-inflicted one based on the incompetence of the exporting company. Some
companies do not give due attention to the packaging of their products and on
reaching the destination, products with poor packages are seized. Also, some
exported products fail hygiene tests which also lead to confiscating these
products.
The
interviewees also mentioned that the support from FGN is lacking. In that they
are not aware of the lucrative potential of this sector and prefer to fall into
the temptations of a mono-product economy based on the huge revenue petroleum
products used to accrue but now that oil prices have plunged drastically in the
global market, the African catfish aquaculture sector should be considered as a
viable contribution to the diversification of Nigeria’s mono-cultural economy.
Chapter Five
The
African catfish aquaculture is recommended as a contribution to diversifying
the economy due to its lucrative potentials and viability. The research
finds that the increasing demand for this commodity surpasses the supply of the
commodity.
It
also finds that the private sector is the major player in this aquaculture
industry as at the time of the research. Although, the boom period of the
African catfish aquaculture industry was controlled by the government before
the economy of the country tended towards a mono-cultural direction.
It
is recommended that FGN should trace its steps back to when it was fully
involved in this industry. The private sector needs the corroborative support
of the FGN in ensuring the promulgation of effective policies that would
help guide the African catfish aquaculture industry to the desired success of
meeting the increasing demand thereby leading to spill overs that can be
conveniently exported to earn foreign exchange.
This
industry also has the potential of tackling and solving the problem of
unemployment as it can provide employment for a teeming population of
unemployed in the country. The following are the recommendations made to ensure
a vast exploration of the potentials of this lucrative venture:
5.1.
Recommendations
The
inability to meet up with the required demand of this product is rooted in the
limited number of hatcheries around the country. The FGN needs to step into
this case so as to ensure a multiplicity of hatcheries for the production of
seeds which are nurtured to maturation and for the sake of meeting the demand
of consumption. It should also help resuscitate abandoned hatcheries.
5.1.1.2.
Seeds
To
ensure a high quality of seeds, the brood stock should not be inferior, they
should be of high quality because like begets like. It was observed that
fingerlings that are products of inferior brood stocks tend to have a shortened
life span but those otherwise are referred to as shooters with the tendency of
maturing to a point of becoming brood stocks based on the high mortality rate.
Good seeds should be produced based on quality of the source (brood stock)
which will ensure an increase in profit and cub losses which is often the order
in most private farms.
It
was gathered that most African catfish farmers suffer loss based on the
inability to feed their stock. Also, stunted growth of the stock is experienced
based on underfeeding which also contributes to losses since the business of
the African catfish is solely dependent on weight for profits. This challenge
should be tackled by the government by putting measures in place that will
ensure the production and availability of numerous feeds. It is recommended
that the FGN invest in the arm of the aquaculture industry charged with the
responsibilities of producing feed. Since majority of the feeds used are
imported and expensive, the FGN should invest in already established feed mills
so as to encourage those involved, expand it, provide more jobs and more feed
to tackle the challenges of loss and
under-feeding of the stock. Also, research institutes should be sponsored to
engage researches for the produce of feeds for seeds. It was gathered that
these feeds are very expensive and only few producers of seeds can afford them.
Therefore, in tackling this challenge, these feeds ought to be produced locally
for the sake of affordability and meeting the teeming demand of this product.
Most
African catfish farmers who are out of business complain of the unavailable
infrastructure for cultivation. Such infrastructure as land which is the major
resource of this sector. The federal government should provide lands for
farmers with experience in this field and ensure an effective supervision over
these farmers in order to monitor progress and efficiency.
5.1.4.
Loans
Loans
should be granted to catfish farmers who have been kicked out of business due
to unavailability of funds. It is recommended that these loans should be cheap
so as to ensure easy pay backs.
There
have been established bodies charged with the responsibilities of controlling
activities and ensuring a high efficiency in this sector. The FGN needs to
retrace its steps back to when it was fully involved in this sector before
falling into the temptations of an economy characterized by a mono-product. A
lot can be learnt from the initial involvement and corrections can be made in
terms of mistakes made during that period. It is recalled that FGN launched
projects pertaining to the African catfish aquaculture. Such projects as the
establishment of demonstration ponds in the South-West and in the South-East
where government provided full assistance by providing fingerlings, feeds and
constructing ponds. This way, the government focused on the potentials of this
sector before losing focus and tending towards a mono-cultural economy where
virtually all the sectors of the economy were abandoned except the oil sector due
to the oil boom period. The FGN needs to refocus on this sector in order to tap
its benefits and high tendency of contributing to the diversification of its
mono-product economy and earning foreign exchange.
Once
the FGN shows interest back in this sector by setting policies in motion
coupled with actions in actualizing these policies, this would in one way or
another attract the attention of multi-lateral organizations such as the arm of
the UN, FAO who had in one occasion supported the FGN during the commencement
of the African catfish aquaculture. Also, financial organization will be
readily available to provide financial support due to the fact that this sector
is a lucrative one and has huge potentials. Therefore, the money provided for
assistance will not be wasted on a white elephant project. But on a project
that is tenable.
5.1.7.
Global market Strategy
This
strategy reflects the theoretical framework of this research in that practices
reflecting the comparative advantage theory are engaged in by the government.
These practices involve sourcing for a global market where trade based on
comparative advantage is carried out. In the case of Nigeria, findings point to
the fact that she is the world leader when it comes to the production of
African catfish. The FGN should tap into this lucrative potential by investing
measures that will improve the efficiency of this sector. There by making
Nigeria the most efficient in the production of this commodity which in turn
carries the power of diversifying her economy in that it will create a huge
platform for export trade of this commodity with both African countries and
non- African countries who will prefer buying African catfish from Nigeria due
to the cheap production in Nigeria.
A
global market can be achieved by encouraging Nigerian migrants not just only in
Europe and America but in every part of the world to be involved in the
diversification process of the economy since there is a consensus in
development literature that a collective effort is needed in setting the
country on the path of desired development. Therefore, it will take the
collective effort of Nigerian migrants to support this product worldwide in
other to harness the lucrativeness of this sector and a diversified economy.
This support will be reflected in the world wide availability of this
commodity.
Prior
to the Uruguay Row of Negotiations (URN)
which led to the establishment of the World Trade Organization (WTO) in 1995,
the participation of Nigeria was perceived as passive in that her trade
negotiations was weak and she was heavily dependent on special and differential
treatment. However, with the commencement of the WTO, an effective
participation is required. To ensure an effective partnership, there needs to
be a complete overhaul of Nigeria’s trading system to conform to WTO’s
obligations. This includes sanitizing the Nigerian Export Promotion Council
(NEPC). Nigeria needs to realign her trading policies and laws with the
requirement of WTO (Ogunkola and Bankole, 2005).
The
research finds out that many African catfish farmers prefer the domestic market
due to high export cost, competitiveness in the international market such as
meeting standards. Therefore, it is recommended for the FGN to negotiate
favourable conditions for the export of this commodity. This will encourage
more private sector players to engage in the exportation of this commodity by
looking beyond the domestic environment.
After
all measures are put in place and the African catfish export is set in motion,
it is recommended that the FGN create a committee responsible for check mating
lapses, revisiting and revising policies in order to ensure consistency and
continuity in exporting this commodity.
In
addition to the recommendations, it was discovered from secondary sources that
there exists an association known as the Catfish export
Development Association in Nigeria but not yet certified as at the time of the
research. Based on the motive of improving exportation of catfish and making it
easy for stakeholders in the catfish aquaculture industry to export their
products, it is recommended that the FGN certifies this association and also
promote it for the sake of the economy, that is, to tackle the mono-culture
nature of Nigeria’s economy by contributing to its diversification which has
huge benefits such as providing wealth and reducing the poverty rate in the
country (Anetekhai, 2013).
Also,
in a country where the demand for catfish exceeds the supply, it is wise to
devise ways and encourage this way such as the method of cryopreservation which
entails the preservation of the male broodstock as opposing the popular method
that involves sacrificing the male broodstock.
By
encouraging this method, male broodstocks will be saved in multitude which will
portray conservation and also aid productivity which will reflect in the supply
as against the increasing demands of catfish.
The
African catfish in itself provides room for diversification in that it involves
various lucrative platforms such as: the production of fingerlings and
juveniles which serve as means of making money for the farmers, the activity of
stocking ponds for sale, the activity of nurturing fingerlings to maturation
(brood stock) for further reproduction, the process of smoking for both domestic
consumption and exportation.
Anetekhai
(2013) provides that the African catfish in itself has a huge potential of
diversification in the sense that by-products of the catfish could also serve
as needed commodities. Anetekhai says that the catfish oil is a by-product
which is used in cooking and also for greasing catfish. The pharmaceutical
industry also makes use of this oil in drugs and also the cosmetic industry (Anetekhai,
2013).
The
research finds that Nigeria is a global leader in the produce of catfish but
still has not met with the increasing demand of this produce. If the afore
mentioned recommendations could be strictly adhered to, the potentials of this
industry will materialize into a gigantic exporting empire which will lead to
further diversifying the economy based on inspiring the numerous unexplored and
abandoned sectors of the economy to also contribute to redeeming this
mono-cultural economy of Nigeria.
In
addition to the recommendations made, an awareness program can be launched.
This program should be charged with the responsibility of creating awareness
about the importance of protein and that the African catfish is a cheap source
of protein. Also, the health benefits of this product should be communicated.
This will encourage and inform the teeming population thereby sparking up interest
in this commodity. The Federal government should also organize training
programs which will serve as an update to the prior knowledge of the
technicalities involved in this aquaculture sector. This will provide an up to
date technical know-how of this sector and curb ignorance.
Transfer
of technology should be sourced for so as to enhance the quantity and quality
of produce of this commodity in order to win competition.
Proper
packaging and labeling is also paramount since there is a standard to be met.
The FGN needs to play the role of effectively cross-checking packaged smoked
African catfish ready for exportation so as to meet up with required standards
and avoid the consignments from being confiscated at the destination airports.
The FGN should also provide a subsidy on tariffs involved on airfreight so as
to encourage smoked African catfish exporters to use this means of exportation
and not the illegal means of smuggling the products into designated locations.
Concluding
by quoting Osehobo (2015),
Historical evidence shows that no
country ever achieved industrial progress without initial significant
technological learning and productivity improvements in agriculture. It was
also revealed that Nigeria spent N100 billion annually in the importation of
1.44 million metric tonnes of fish, a development fish farmers believe is a
huge loss of revenue and jobs for Nigerians in the fishing business Nigeria’s
catfish production jumped from 83,000 tonnes in 2006 to 900,000 just eight
years later, according to the statistics presented by the Catfish Farmers
Association of Nigeria, CAFAN (Osehobo, 2015) .
It is on this note that the African catfish is
recommended as a valuable commodity amongst others for the diversification of
Nigeria’s mono-product economy.
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PRIMARY
SOURCES
Interviewees
Deacon Omoboni, O (2017) African
catfish farmer and exporter, interviewed on his farm in Ondo, Ondo state on
April 22, 2017.
Madam Pat. (2017) African catfish
farmer and exporter, interviewed on her farm in Ondo, Ondo state on April 22,
2017.
Oluwajimi, A (2017) Worker at
Double Joy Farms, Ondo West, Ondo, Nigeria, interviewed on April 22, 2017
Sanni, T (2017) African catfish
farmer and exporter, CEO of Tee Ess Farms, interviewed online on April 22,
2017.
LIST
OF FARMS VISITED
1. Double Joy Farms, Ondo Housing
Estate, Ondo, Ondo State
2. Fadoma pond, Oka, Ondo, Ondo
State
3. Koya Pond, Ajilo, Ondo, Ondo
State
4. Mr Bee Pond, Arigbabola, Ondo,
Ondo State
5. Pat’s Aquaculture, Orimolade,
Ondo, Ondo State
APPENDICES
APPENDIX A
Interview
Questions
- What is the nature
of the demand of African Catfish?
- In what form is
the African Catfish exported?
- How often do you
export African Catfish?
- What quantity do
you export on an annual basis?
- Are there
challenges involved in the exportation of African Catfish?
- What
continent/country is the major market for African Catfish export?
- Does the
government support the aqua sector in exporting African Catfish?
APPENDIX
B
Interview
Excerpts
Deacon
Omoboni, Obadiah, African catfish farmer and exporter
Q:
What is the nature of the demand of African Catfish?
The demand of the African catfish
is high and that is why most ponds in the area are stocked with them. Although
there is a high demand for tilapia but the degree of its demand is no way near
the African catfish.
Q:
In what form is the African Catfish exported?
Since it is going to be exported,
it is always smoked to preserve it from contamination.
Q:
How often do you export African Catfish?
It depends on the demand and on the
state of the economy. Presently, I am not exporting because of the state of
things in the country. There is hike in prices on virtually every facet of
every catfish aquaculture ingredients that enables for exportation. Although on
an average, I used to export two to three times every month. But the oftenness
of export largely depends on the call for supply.
Q:
What quantity do you export on an annual basis?
Like I said earlier, the quantity
exported is solely based on the demand of foreign customers. Roughly, I used to
export 7-7.6 metric tonnes on an annual basis.
Q:
Are there challenges involved in the exportation of African Catfish?
Every business has its own
challenges. The exportation of the African catfish is no exception. The major
challenge is economic in nature in that the fish feed I used to get for 5000
Naira has sky-rocketed to 7,000 Naira which poses a great challenge for me and
this is why I have stopped production for the main time.
Q:
What continent/country is the major market for African Catfish export?
For me, I have customers majorly in
the United states and the United Kingdom. This is largely due to the high
population of Nigerians there.
Q:
Does the government support the aqua sector in exporting African Catfish?
It’s so disappointing that the
Nigerian government is blind to see that this industry as viable and can help
bring out the country from the economic problems it is faced with today.
Madam
Pat, African catfish farmer and exporter
Q:
What is the nature of the demand of African Catfish?
The nature of the demand is high
and this is why most fish farmers opt for it.
Q:
In what form is the African Catfish exported?
In order to avoid it from getting
spoilt, it is smoked. Smoking or drying the African catfish preserves it for a
long period of time.
Q:
How often do you export African Catfish?
I export every month but due to the
present economic situation, I have taken a break. I am concerned with
maintaining an integrity relationship with my customers. I cannot just suddenly
change the price and I cannot sell at the price I used to sell because I will
incur a huge loss. I used to sell a kilo for $3.5 USD but I am studying the
market in the main time to know the next step to take.
Q:
What quantity do you export on an annual basis?
Annually, I export an average
of 8.5- 9 metric tonnes.
Q:
Are there challenges involved in the exportation of African Catfish?
Yes there are challenges involved.
Like I just said, I cannot suddenly change the price and I cannot sell at the
price I used to sell based on trust and the fact that I do not want to lose my
customers. This is a challenge to me as business of exporting has been placed
on an alt.
Q:
What continent/country is the major market for African Catfish export?
The major destinations of my
products are the UK and U.S.A.
Q:
Does the government support the aqua sector in exporting African Catfish?
No, the government does not. They
prefer oil. We need people like you to help us tell them to support us. I
believe this sector has the ability of turning the economy of the country
around for the better.
Oluwajimi,
Adedapo, Worker at Double Joy Farms, Ondo West, Ondo, Nigeria
Q:
What is the shelf life of the African catfish?
A properly dried African catfish
has a shelf life of about 4-6 months.
Sanni,
Tunde, African catfish farmer and exporter, CEO of Tee Ess Farms
Q:
What is the nature of the demand of African Catfish?
The demand is high, very high but
it is unfortunate that the supply has not yet met the demand. This is more
reason why we need the support of the government to join hands with us, the
private sector to explore the advantages of this viable industry.
Q:
In what form is the African Catfish exported?
In a dried form. There are
standards for formal exports. Before the Food and Drug Administration could
certify me to export my products to America, the process involved in drying the
fish was strictly scrutinized.
Q:
How often do you export African Catfish?
In the last four weeks, I have
exported 60kg worth of African catfish. Although, I export more than this
sometime. The export varies according to orders placed by foreign customers.
Q:
What quantity do you export on an annual basis?
Like I said, it varies but on a
rough scale, I export about 10.4-13 metric tonnes yearly.
Q:
Are there challenges involved in the exportation of African Catfish?
Ofcourse, there are challenges. The
one I am experiencing now is the new policy of exchange rate which is so
discouraging in that foreign sales are made formally as a result of which
informal export thrives. I am involved in the formal export that creates no
room for flexibility when it comes to price. Lack of trust between buyers and
sellers is also a huge challenge.
Q:
What continent/country is the major market for African Catfish export?
U.S.A, U.K and Gulf the states are
the major market for my products.
Q:
Does the government support the aqua sector in exporting African Catfish?
No, the government does not support
us. I think it is because they look down on the potential of the aquaculture
industry. The African catfish aquaculture industry is viable, I have been in
this industry since I retired in 2006. I have a vast experience and I know the
returns it generates. The government needs to lend support to this industry in
order to meet the high demands of this commodity both home and abroad.
Photographs
Relevant to the Research
Figure
1 Live African catfish
Source : Field trip, April, 2017.
Figure
2 Packaged Dried African catfish
Source: Field trip, April, 2017
Figure
3 Packaged Dried African catfish
Source: Field trip, April, 2017.
Figure
4 Packaged dried African catfish
Source: Field trip, April, 2017
Figure
5 Dried/ Smoked African catfish
Source: Field trip, April, 2017
Figure
6 The process of spawning
Source: Field trip, April, 2017.
Figure
7 Hatchery
Source: Field trip, April, 2017.
Figure
8 Fries
Source: Field trip, April, 2017.
Figure
9 Cropping process
Source: Field trip, April, 2017
Figure
10 Process of Sorting
Source: Field trip, April, 2017.
Figure
11.1 Smoked African catfish
Source: Field trip, April, 2017.
Figure
11.2 Process of smoking African catfish
Source: Field trip, April, 2017.
Figure
11.3 Process of Smoking African catfish
Source: Field trip, April, 2017
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