Why The Super High Dollar Exchange Rate Is Not Going To Boost Our Export

image: themanufacturer.com

On TV, on radio and on newspapers, I keep hearing people say the increased dollar rate and oil price slump will help us develop our manufacturing industry and export more. This is not true on a national basis.

If you have a Cocoa plantation, it will be true for you. If you already manufacture something exportable and already have the resources and experience, then you'll benefit from the high dollar rate. So in the end, it's mostly the businesses already exporting their products before the Naira fell who will benefit from the current situation. People like me and you can't suddenly plug in to benefit, and we constitute the majority.

A significantly big business needs three things to exist profitably:

• scale via expensive equipment/plant
• huge initial capital investment
• production/industry experience (there's always a learning curve)

Even if you find a way to overcome the first two hurdles in time to capture the potential gain available in our current situation, the third one can't be acquired in a rush. We can't suddenly start producing all the products we import because it takes more than just a market opportunity and financial resources (which isn't in abundance anymore) to competitively produce for the international market. You need, at least, years to be a competent enough producer. That is why Omatek and Zinox aren't making any wave globally.

We have the resources to manufacture most of what we import, the problem is that we don't have people willing to go through the learning curve and sink in a huge capital to do things on a big scale level. So we keep importing matches (matchsticks), maths sets, cloth materials, sticky notes, toys, and cars. 

The only business you can start almost immediately and plug in to gain the potential opened by our current situation is the commodity export market. Especially the agricultural commodities. Then again, to achieve significant increased agricultural exports we will need a lot of new mechanized large scale farms. And that in itself is a big roadblock. You would need to import the tractors and large scale farming equipment, and their prices would have gone up crazily due to the dollar rate. Then to export the types of products that attract high international attention, you will need years to go from planting to harvest. Cocoa, coffee beans, oil palms and those export worthy products aren't a 6 months from seeds to maturity products. Some take close to a decade. Why would you go that route when it's obvious that the opportunity is now and you aren't sure of years from now?

And as for the appliances we import, they will take us years of learning and setting up to manufacture technically okay and cost effective ones that can compete on the global market. We can't just start buying made in Nigeria smartphones, cars, TVs, ACs, fridges, DVDs, and ceiling fans. There are no made in Nigeria ones. And it will take years, even if we put in the deliberate effort and financial resource to create industries that will produce those products. 

So we are mistaken if we think the high dollar rate is an economic blessing. It is not. The things we need to do are still same as 10, 20 years ago. Real development is deliberate, strategic and involve capital investment. It is not by talking or senate discussions or CBN policies or legislative laws that real development happens. They are catalysts and all useless if there is no physical medium to act on.

The only way to be a better economy is to do more of the right things. We can't keep doing the same things and expect different results. Talking is never action. We can change our talk, the EFCC's talk and the legislator's talk as much as we want but if we don't do the tangible things that need be done, if we don't bend down to tilt our ground and plant the seeds, that harvest we are all talking about and wishing for will remain a wish.

If we want to increase export then we have to produce more of what the world will buy. If we want to diversify our economy then we have to update our education system to equip people with relevant and creative skills, while creating research labs and the companies that will build the new industries we want to diversify to. Whatever we want we have to create it through serious work.

The change in dollar rate is simply a reflection of how well the US economy is doing compared to ours. And as long as we stand still or slide backwards while they are speeding forward, no CBN policy or Buhari magic will reverse the trend.