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Comparative advantage: What if Nigeria refuses to restructure?

A cross section of Nigerian state governors


Comparative advantage: What if Nigeria refuses to restructure?

By Abigail Anaba

Nigeria is a country forever seeking a silver bullet as a solution to all its problems. Depending on the generation of thought to which you belong the silver bullet could be oil from the Niger Delta which should be equitably distributed, a return to the agricultural pyramids of the 60’s with the belaboured Nigeria must grow its own food and feed itself, or the call for ‘restructuring’.

These days, more and more persons are talking about restructuring. There is no consensus on what it entails but some of its proponents call for each state to be in control of its own natural wealth and pay appropriate tax to the Federal Government.

An avid follower of Nigeria’s history can easily tell that this conversation has been on for a while and will be continuing for a while longer. A primary reason being that there is still oil in the Niger Delta and our democracy tends to be more socialist in nature.

It becomes necessary then to think up a workable system that may not include actual use of the word ‘restructure’ (people are also coming up with definitions outside of what any dictionary would allow to redefine this word in the Nigerian context such that it translates to maintaining status quo) but will be a giant step towards the attainment of that goal. The word I have been thinking about for a while now is “Comparative Advantage”.

I first came across the phrase Comparative Advantage when I was reporting agriculture years ago. The phrase was used in relation to States in Nigeria being able to identify the crops that they have an advantage  at producing either because of prevailing soil or climatic conditions and how they can generate revenue by investing more in and developing those crops to the full potential either by providing inputs for farmers or by developing the crops value chain.  

I suspect this phrase has been around for a while. In fact, a search for the term took me back to an essay written by Robert Torrens in 1815. It was formalised by David Ricardo in 1817 leading to its being referred to in some circles as the Ricardian Model. But it made its way into main stream economic concepts in 1848 when John Stuart expounded on it in his book, “Principles of Political Economy”.

Though this theory has sometimes been referred to as being too utopian in nature, the principles behind it can prove very advantageous to states within Nigeria who can choose to work together to increase total output and revenue instead of competing in areas where they have no advantage.

But just what is Comparative Advantage? How does it work?

Think of it in terms of two siblings. Both of them know how to draw. And both of them can paint. But sibling A pays more attention to detail than sibling B. The fact that he pays more attention to detail means that he finishes slower than sibling B. So let’s assume sibling A is on a deadline. He needs to submit three paintings and he needs to cut down on time while still maintaining quality. If sibling B is ready to out-source his speed, then it would be to sibling A’s advantage to have him involved in the process that will slow him down. In so far as he is good at it.

Some years ago, Cross River state started positioning itself as the tourism capital of Nigeria. It started the end of year Calabar Festival, it also built the Obudu cattle ranch and Tinapa. At the same time Lagos started making tourism moves with the Easter boat regatta. Both events are held at different times of the year and if the plan is to maximise potentials, it means that tourists will be making two trips to Nigeria to witness almost about the same thing – display of culture.  The principle of comparative advantage suggests that the two states will sit and see how they can work together to generate the most income from tourism by working together. What if the two events are held together with the states alternating venue? The question they both should be asking is: what can I bring to the tourism table that the other has lesser advantage bringing.

While shared tourism potentials may not be the best example of collaboration, it speaks to the fact that states can look inwards and find something they can invest in, other than the obvious, that they could get so good at such that other states will be looking to outsource it to them.

Presently, there is a lot of talk about going back to the farm. While there is nothing wrong with trying to build an agro-based economy, the question of comparative advantage arises. Everyone cannot go agric in terms of owning land and farming, there are agric support services along the value chain that must be developed. Which states are thinking in terms of providing warehousing services? What about processing and logistics?  True, government should not directly be involved in business but what about creating an enabling business environment? What is being done about provision of basic infrastructure to show investors that there is a serious push towards welcoming them? Can states be seriously wooing investors when there is no proper road network within the States? When the women have to travel for hours to get portable water?

The education sector and its ancillary services is another sector where states do not seem to be giving any attention even though it is right under their purview. When the question is asked: which is the education capital of Nigeria, which state comes to your mind? Is it impossible that a state that has no oil can make itself a force to reckon with when it comes to education? What really would it take to attract investment in this area? Interestingly, states are allowed to make curriculum changes. They can choose to improve their own standards and capture some of the foreign exchange going to our neighbouring African countries.

Still on educational ancillary services, how about investing in building libraries? What about making a State the book capital of the country? The technology capital? Nollywood capital? Music Capital?

It is quite clear that States need to start creating value that will give them comparative advantage. The big question now is with States still dependent on stipends from the Federal Government or should I say, with States clearly dependent on oil from the Niger Delta, what is the incentive to pursue comparative advantage?

Believe it or not, the voice of the people is the incentive. But the people need to decide what they really want. Influencers, especially on social media need to understand that when they put their voices together and push for a cause, it is strong and can literally move the government to action. Is it then possible to begin to hold States more accountable for developing comparative advantage, something to bargain with? Is it not time to begin to think of ideas that can move our States forward and be willing to share these ideas with people that matter?

The fact remains that anything which requires building will be built by people who are able to come up with ideas that work not those who sit around and whine. It is time to choose.

– Follow this writer on Twitter: @Anabagail

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