ECONOMIC DIVERSIFICATION: PROMOTING INDIGENOUS ENGINEERING

WORKS OF CREATIVITY
1
Adewale, A.S, 2Femi-Jemilohun O.J. and 3Oluwafemi, I.B.
1
Department of Electrical / Electronic Engineering
Federal Polytechnic Ado-Ekiti, Nigeria.
2
Department of Electrical/Electronic Engineering
Ekiti State University, Ado Ekiti, Ekiti State.
1
addsmt@yahoo.com, 2dunnifj@yahoo.com 3ibto75@gmail.com,

Abstract
Recently, Nigerian populace has witnessed expressions of both pains and hope with respect to
diversifying the nation’s economy, drifting from a mono based economy (crude oil). The
general understanding of mono based economy is still blurred. Some of the solutions prof-
fered made us to have a weak understanding of what the problems are and the way out. The
revenue accruing to the Nigerian government from oil proceeds is insufficient to meeting the
needs of the citizenry. For Nigeria to meet her basic obligations to the citizenry and to be free
from external shocks resulting from global oil price fluctuations, there is need to diversify the
economy taking into consideration the three dimensions in evaluating economic diversifica-
tion, that is; national output, government revenues and exports. In modern economies, the
vital need of most emerging market countries is to upgrade their export base geared towards
increasing proportion of high skill manufacturing and high-technology components. This pa-
per suggests diversifying into Electrical and Electronics manufacturing industries, promotion
of indigenous engineering works, innovations and creativity, ensuring the conversion of pro-
totype fabricated machineries to commercial scale as a way to stimulate the economy in the
face of the economic downturn occasioned by the fallen oil price.

Keywords: Diversification, crude oil, indigenous, engineering, creativity, electronics, innovations

1.0 Introduction

Diversifying the Nigerian Economy to address near total reliance on proceeds from the oil

and gas sector is a policy that has been undertaken by successive governments in Nigeria.

Obviously, the policy makers and stakeholders in the nation’s economy does not need any

soothsayer that diversifying the economy is not optional but mandatory while considering the

present state of the nation’s economy. At independence, agriculture provided employment for

over 75% of the national workforce and also generated revenue for the government through

export taxes and marketing board surpluses (Adeyemi and Abiodun, 2013). The discovery of

oil in the 1970’s changed the face of the economy. This led to abandonment of agriculture.

As of today crude oil accounts for over 90% of Nigeria export revenue and 80% of the

government’s budget (Anyaehie and Areji 2015.). Dr Yemi Kale, the Statistian-General of the
federation while speaking on the theme “Unlocking Nigeria’s Potential…growing through

diversification” said it is very apt and timely, given the major challenges Nigeria is facing today

that threatens to erode the gains that we have achieved as a country in the past decade.

Accordingly, today’s conference and its theme provides a timely opportunity for operators,

regulators, investors and stakeholders in general to re-examine regulatory policies, business

models, products, and risk strategies, at a time when financial and economic players in Nigeria

are going back to the drawing board on the strategies for economic recovery.

2.0 The Concept of Economic Diversification.

Economic diversification is defined as the process in which a growing range of economic

output is produced. It also refers to the diversification of markets for exports or the

diversification of income sources away from economic activities (UNFCC, 2013). Diversification

promotes growth and development by making use of savings in the surplus sector to grow the deficit

sector. It has the capacity to protect a nation’s economy from internal and external shocks in the face

of depleting natural resources and global price fluctuations.

There are many options available in diversifying an economy. These include tourism,

manufacturing, industrialisation, information and communication technology, solid minerals,

etc. However, there is no perfect model as different nations of the world have their distinct

demography that determines their economic nature and challenges. The diversification model

of Malaysia, Philippines and Thailand will be studied.

2.1 Malaysia Success Story ‘Penang Industrial Hub’

Penang is a state located on the northwest coast of Malaysia Peninsula. It is the second

smallest and the eight most populous. It has no natural resources. Before the independence of

Malaysia (1957), the city was a trading post for East Indian company. It has an airport,

sea-cargo terminal and also container port. This helps the city develop a trade- related

economy. There were telecommunication services, power supply, banking, insurance and

freight forward services, transport services etc. The city has an entrepot status. (Athukorala
2011).After Malaysian independence, focus of economy and administration shifted to the

capital city Kuala Lumpur. Port Klang became the main port of the country, the city entrepot

status came under threat from Thailand, Burma and Indonesia when this new states began to

develop their own ports. The Malaysian government finally revoked the free port status of

Penang. The city resources began to dwindle while population increased.

In 1969, the central government engaged a sound economic consultancy firm, Robert R.

Nathan Associates, to help in diversifying the state economy and creating more wealth. The

Nathan report called for a shift in economy from limited agricultural potential to keying into

the global economy using human resources as its option. This according to him was achieved

by creating an enabling environment for foreign electronics industries to operate from the

region. As at then, the electronics industries in the developed world were beginning to look

for cheap labour. The central government adopted the report and created free trade zones

(FTZ) (Athukorala, 2011). The state reduced its tariff and non-tariff measures. Malaysia also

reduced her effective rates of protection (ERPs) against imported goods 35% in the 70’s, 23%

in 1982 dropping further to 17% in 1987 (Noh 2013).

National Semiconductors arrived in Penang in 1971; this was followed by Advanced Micro

Devices (AMD) and then Intel. Between 1972 and 1975, five other Multinational Enterprises

set up assembly plants in Penang. By mid-1980’s Penang had become the world largest

exporter and third largest assembler of semiconductor after United States and Japan. SMEs

began to spring up that supported this Multinational Enterprises in areas like automation

equipment, jigs and fixtures, machine tools, moulded rubber products, etc. As at 2005, there

were 203 foreign firms operating in Penang employing 215, 517 workers (Malaysia

Manufacturing Census, 2005).

2.2 From Coconut chips to Microchip, The Philippine Story

Philippines were an agrarian economy that is still the world largest producer of coconut and
pineapple. In 1976, Agricultural based products (Rice, coconut, pineapple….) contributed
69% to the country’s exports. As of 2004, electronics components and goods contribute 69%
to the volume of export (Santiago, 2005).
2005)

Fig 1: Changing face of export from coconut to microchips

The country studied the trend of large electronics companies looking for cheap labour around
the world and keyed into this. Philippines had English as her second official language, this
further helped in attracting multinational eenterprises within her shores.

The government introduced

roduced different policies that attracted Foreign Direct Investment (FDI).
Some of which included Omnibus investment code (1987),
(1987), Special Economic Zone Act
(1995). The Government also:

• Conducted
onducted investment missions with the private sector for up to eight times
(8) annually,
• Boosts the country’s status through interactive television media, trade events
• Created economic zones aand attracted investments into the zones.
• Capturess export oriented Foreign Direct
D ct Investment(FDI) from the European Union
(EU) and Japan
 • Provide competitive manufacturing cost through investment into infrastructure
• Created human competencies by establishing IC Design Training Center in the
Philippines,
• Pursued the unified Microelectronic program for University participants,
• Collaborated with Taiwan on training in IC design with the acquisition of lab scale
wafer fab for training purposes.
• Created Board of Investment (BOI) that gives tax exemptions and concessions to
companies and enterprises registered with them
• Created Philippines Export Zone Authority (PEZA) that provides fiscal incentives to
enterprises registered with them
• Created Subic Trade Zone that has a Freeport status.

All of these began to attract foreign electronic manufacturing companies to the shores of
Philippines. As of today, Electronics Companies operating from the Philippines include
Texas instruments, Samsung, Canon, Brother, Amkor, Analog Devices, Sun power, Aruze,
Tong Hsing, etc. As of October 2015, Electronics exports receipts was $2.388billion
accounting for 52% of total export revenue of the Philippines,(Philippines Statistical
Authority (PSA), 2015) employing one hundred and thirty nine thousand nine hundred and
thirty workers (139,930) (PSA 2014).

2.3 Electronic sector of the Thailand Economy:

The economy of Thailand has grown from self-sufficient
self sufficient agrarian economy to industrial
based economy in the
he past fifty years. This is traceable to diversification of the economy.

Pupphavesa, W (1994) found that FDI has contributed significantly to capital formation and
increase of foreign capital flow into Thailand. In 2011, the electrical and electronics industry
contributed almost 24% of Thailand export revenues generating $55billion. (BOI 2013).

(Source: Thai Electrical and Electronic Institute.)

Institute.

The Thailand government made some policy decisions that encouraged

encouraged Foreign Direct
Investment (FDI) into the country.
ntry. The most prominent of these was the Plaza Accord (1985)
and currency appreciation in Japan,
apan, Taiwan, Hong Kong and Korea. (Puapan,
(Puapan 2014). Foreign
Direct investment by the manufacturing sector was the greatest.

In the early 1960s, under the country’s first National Economic Development Plan (NEDP)
(
(1961-1966),
66), the government shifted its policy
policy from state direct involvement to an ‘import
‘import-
substituting
uting strategy’ which was based primarily
p on labour-intensive
intensive industries and local
natural resources,, and encouraged private
private-sector participation.
articipation. The Thai government
embarked on provision of basic physical
physical infrastructure necessary for industrial development,
especially in transportation, telecommunication, and energy. This strategy’ failed because
growth in manufacturing was based heavily on production geared toward the small domestic
market, which is not sustainable

Under the fourth National Economic Development Plan (NEDP) (1977-1981) (which by
1972 was renamed the ‘National Economic and Social Development Plan’ – NESDP), the
government reoriented its economic development strategy, making it an outward-looking,
export-oriented development policy. At this point in time, Thailand already possessed reliable
basic infrastructure. This came with calculated tax incentives and other subsidies, the
government intention was to attract Foreign Direct investment (FDI), as well as fostering
domestic investment (Suphachalasai, S., 1995).

This policy began to produce results after the 1985 Plaza Accord. FDI swarm into the country
and there was double digit economic growth. This continued throughout the first half of the
1990s when the economy was the fastest growing in the world. (Suphachalasai, S., 1995).

Thailand attracted Foreign Direct investment in the areas of Hard Disk Drive (HDD)
becoming the largest exporter of hard disk, Integrated Circuits (IC), electrical appliances (air
conditioners, refrigerators, and digital cameras & video camera recorders. The industry
currently employs over six hundred thousand people (600, 000).

3.0 Diversifying the Nigerian economy through Electronic Manufacturing Industries

The prevailing economic situation has prompted Nigeria to work harder to further diversify

our economy as well as government revenue. However, almost half of the economy is infor-

mal and out of the (fiscal) control of government. Policies aimed at drawing in this huge in-

formal sector into the system must necessarily be deployed at this time in order to diversify

our sources of revenue and achieve a more sustainable structural transformation of our econ-

omy, (Yemi,K.,2017). By Economic Diversification, we mean the strategy of making the

economy dependent on a wide range of products and sectors instead of relying on a few or

just one product. It also means integrating the economy into different regions of the global

economy so that a robust economic growth and sustainable development can be generated.

Uzonwanne, M.C. 2015.

With regards to Nigeria, economic diversification is the process of avoiding over dependence

on crude oil to the neglect of agriculture, manufacturing, services/trade and the other Emerg-

ing sectors and revenue earners. Nigerian can take a cue from Malaysia by making frantic

effort in creating an enabling environment for Multinational Electronics Enterprises to thrive.

Considering the state of Nigeria in the West African region, if the production environment is

favourable, multinationals can invest in the country. Electronics components which form the

core of the electronic industries are made of metallic compounds, rubber and ceramic which

are available in Nigeria in large quantities. There is need to create more Free Trade Zones

(FTZ) as found in Calabar in Nigeria, where levies and government duties are reduced on

foreign manufacturers operating from the region. The multinational companies that make

electronic devices should be made to see the need to have their production base in Nigeria

because of her status and importance to the African continent as a whole. Presently there are

four Nigerian companies that assemble computer systems, they are Zinox Computers, Brian

Technologies, Omatek Computers and Veda Computers, and these companies should be

given special incentives and waivers for them to be sustained. There is an assurance for the

future with respect to commercializing Prototype Engineering Equipment, This plan was

made known by the Minister of Science and Technology, Engr. Dr. Ogbonaya Onu, FNSE

when he received the President of the Nigerian Society of Engineers (NSE) Engr. Otis An-

yaeji, FNSE on 19th February, 2016 in Abuja. He declared that plans are on by the Federal

government to galvanize indigenous engineering works of creativity and commercialize

same, that the move is part of the effort at ensuring diversification. He added that government

was convinced that the conversion of prototype fabricated machineries to commercial scale

will go a long way in stimulating the economy of our dear country.

4.0 Industrialization via the Small/Medium Industries (SMIs) Initiative

This strategy is basically Private sector driven. The proponents of the SMIs theory assert that
SMIs provide the missing links between the informal micro enterprises and the formal

sector doted by large business. The building of bridges between the micro and the ma-

cro/maxi industries leads to accelerated transfer of improved technologies and economic

growth (Ball, D.A. & Mc Cullock W.H. 1999). International business. New York: Irwin Mc

Graw-Hill P. 403.The Asian tigers, Malaysia, Singapore, Taiwan etc are known to have bene-

fitted from the SMI theory. The attraction also is based on the fact that the capital outlay is

small per unit of industry and within the reach of developing nations. The Nigerian industrial

policy objectives in 1980, 1988 recommend the SMI initiative but again the banking debacle

of the 1980s and 1990s sent a lot of the industries to their graves when they were declared

bankrupt and had their assets sold off by drowning banks. Electronic business has become the

global technology that is used worldwide. But because of broadband problem the use of this

technology in Nigeria is limited. Finally the government has to grapple with the dumping of

inferior goods from South East Asia on Nigerian markets and encourage local manufacturers.

Also, Nigerians' preference for imported goods is bad. Other challenges include international

trade barriers including barriers within the West African sub region in spite of ECOWAS

treaties.

5.0 Conclusion

Nigeria economic performance has been woeful since the discovery of oil within our shores.

Considering the strength of Nigeria in the West African Sub Region and her population, she

can woo investors who will create an electronic hub that will support the Nigerian market and

indeed Africa. To achieve this, the Nigerian nation needs to confront the challenges that

hinder her economic diversification and reposition her on the path of productivity.

Diversification of the nation’s economy will help stabilise her from shocks and protect

against the vagaries of oil market fluctuations. This will help her in fulfilling the basic need
of her youth and providing sustainable development to her teeming population. In spite of the

daunting challenges Nigeria can still take off and diversify the economy once there is a will

and transparent leadership. Global challenges need engineering innovation, good leadership

and actions. It is the birth right of Engineers to be vanguard of global development. Engineer-

ing will continue to be critical in the economy and commercial development of any nation

like ours as it has been in the past. Innovation is needed both for enhanced productivity and

the progress of any community anywhere in the world. The study shows that since 1999

manufacturing has been making significant contribution to GDP. Therefore, if more resources

are invested into manufacturing industry, the Nigerian economy will be diversified for sus-

tainable growth and development.Development, sustainability and economic diversification

come at a price and the Nigeria state should be ready to pay that price.

6.0 Recommendations

The nations of the world that had their economies diversified went through policies and

programmes that brought about the change they desired. To achieve this goal, the followings

are recommended:

• More funding should be channeled to manufacturing industry to enable it lead

diversification. This should be backed with a ban on the importation of none essential

commodities to encourage local production.

• Exchange rate disability should be treated seriously. The government should invest

more in human development to increase the skill and knowledge required to

increase productivity and decrease import dependence which puts pressure on the

exchange rate.

• There must be willingness to do things differently and with genuine interest. Most of

the policies of the Federal government no matter how genuine they look are borne out

of greed or a medium to syphon public resources. The leaders in the developed

 countries of the world have the mind for change and also put their mind to turning

things around for a better society.

• No economy can develop to becoming diversified in the face of lack of basic

infrastructure. Airports, waterways, Railways roads must be put in good shape for

development to take place. No economy can be productive with generators serving as

the major source of power supply. The Federal Government must find a way of

providing uninterrupted power supply.

• There’s need to create an enabling environment that cater for the need of the

Multinational Enterprises. This should be complemented with good roads, airport,

telecommunication facilities, water supply rail services, shipping ports .etc. There

should also be Investment Promotion Council tasked with the sole responsibility of

wooing investors into the country

• Nigeria as a nation needs to formulate policies that can bring about diversification.

These policies must be statutory and must not be subject to change by various

governments coming into power. Continuity with respect to such policy should be

embraced for the common good.

• Our institutions of learning should be revamped in terms of basic infrastructure. There

is also need to review the school’s curriculum (University, Polytechnic, Colleges of

Education, and Technical Colleges) to meet the present day need of our world.

Creativity and implementation that brings about good innovation should be

encouraged and motivated by education policy makers and stakeholders. Entrepreneur

skills should not be an option but a compulsory course to be taken in our schools

regardless of the level.

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