DEVELOPING A KNOWLEDGE-DRIVEN NIGERIAN ECONOMY:
AN ECONOMIC FRAMEWORK FOR THE 21ST CENTURY

 

By Debbie Ariyo

 

Introduction

Exciting trends are sweeping across the world. In the advanced economies "knowledge" is fast becoming a strategic asset for economic development. Technological advances and globalisation are gathering pace. Advances in information and communication technology are occurring on a tremendous scale. For countries tapping into the new ideas, innovations and technologies that proliferate in a knowledge-driven economy, there is a definite abundance of wealth and opportunities for all its people.

Why a Knowledge Driven Nigerian Economy?

The concept of the "knowledge driven economy" (KDE) or "the new economy" is used to describe an economy in which the generation and the exploitation of knowledge has come to play the predominant part in the creation of wealth. It is about the more effective use of all types of knowledge and creativity in all manner of economic activity.

Nigeria has probably taken care of the greatest political hurdle facing it since independence by putting in place a democratically elected government. However, the time is now ripe to shift emphasis onto something equally important. To bring lasting peace, economic freedom and prosperity to its people and help tackle the long term problems posed by ethnic rivalry and tribal clashes, Nigeria needs a change of direction. But not only that. The forces of change outside Nigeria are driving the need for change within it. Therefore, to maintain itself on a par with the rest of the world, and to be able to compete successfully in the fast moving world economy, Nigeria has to radically reform itself.

Most of Nigeria’s wealth and power comes from the control of physical assets - land, oil, iron and steel, coal. But in the 21st century, this cannot continue to happen. The main source of value and competitive advantage in the new economy is human and intellectual capital. With a population of 120 million people, Nigeria, in theory has the capacity to make a successful transition into a truly knowledge driven economy.

The Drivers of Knowledge in the Advanced Economies

To use both the US and the UK as our examples of economies that are knowledge driven, it is necessary to assess the growing importance of knowledge in both countries. This exists in the progress made in Information and Communication Technology (ICT) that has made it possible for information to become more easily available, to travel faster, in greater quantities and much more cheaply. Entirely new products like digital TV, mobile video phones and services like e-commerce have been created and more sophisticated production processes have been developed.

There is increased global competition facilitated in part by reduced communication costs which have opened up markets that never existed. The costs of international transports have fallen while goods and services can be delivered via a telephone line. Of course the size of the market available to such businesses has correspondingly increased. It also means that products and services become quickly out-of-date which then means that a business needs to innovate more quickly and make more use of its "knowledge" and creativity in order to survive.

Another driver is the increased speed of scientific and technological advance. Increases in basic scientific research and business R&D have led to an acceleration in the growth of the stock of scientific and technological knowledge. At the same time, the potential scope and productivity of R&D has increased as equipment have improved, and better communication technology has facilitated the widespread diffusion of research findings. The fundamental advances made in the field of genetical engineering and the recent claims of a cure for aids and various forms of cancer are manifestations of this.

Knowledge is also transforming other sectors, both in their processes and the nature of their final product. Branding and design accounts for an ever higher proportion of the value of the goods and services consumed in both the US and the UK. It is not surprising then that about 70 percent of the production cost of a new car can be attributed to knowledge-based elements such as styling, design and software. It is said that a modern luxury car includes more computing power than Apollo 11.

There is changing demand brought about by rising income and the changes in tastes and attitudes that come with greater prosperity. This is not surprising. The booming US high-technology sector has created more than 1 million high-paying jobs over the past five years alone. Increasingly, well paid, sophisticated and demanding consumers are driving changes in traditional corporate values and behaviour due to their demand for more innovative and better-quality products.

Knowledge is Universal

The fact of the matter however is that knowledge is not exclusive to those countries of the advanced economies. Neither is the concept of a knowledge driven economy. Other emerging markets like South Africa and Singapore have developed their own frameworks for catapulting their countries into a knowledge driven economy. Just like the US and the UK, it is also possible for Nigeria to become a successful knowledge rich economy. However, this can only happen if the Nigerian government is seriously committed to making it a reality. Essentially, it has a role in establishing the right environment and encouraging the cultural changes that stimulate a knowledge driven economy.

Strategy for Developing a Knowledge Driven Nigerian Economy

There is no disguising the phenomenal scale of work, commitment and seriousness that needs to be inputted before Nigeria can lay claim to being knowledge driven. It demands a complete change of culture and attitude. Not only that, there needs to be a new wave of collaboration and joint-working between different agencies and different sectors of the economy to make it a reality. For this reason, it is equally unrealistic to expect things to change within a short timescale. The first step then is for the government to put in place a cohesive and coherent long-term strategy to help make the idea a reality.

There are a number of varying and different issues such a strategy should concentrate on. However, for the purpose of this paper, we shall concentrate on three main issues which I think are crucial for the development of a knowledge economy:

1. Fostering the Spirit of Enterprise

All over the world, the private sector is at the forefront of wealth creation and employment generation. So will it be in the new economy. At present, so is it in Nigeria where 97 percent of all employment is generated by small businesses. As Nigeria’s main wealth creator and job generator, small businesses will form the bedrock of a knowledge driven economy. It is therefore the government’s paramount role and responsibility to enable the right macro-economic conditions to make them prosper. This then negates the current practice in the country where the government attempts to do everything by itself, including the recent announcement to create 1 million jobs. Apart from the negative effect of this on enterpreneurship and innovation, there is a stifling effect on the growth of knowledge as there is no place for a welfarist government in a knowledge driven economy.

The focus then should be on helping to foster the spirit of enterprise and creativity among the people by encouraging business start-up and growth. For the man and woman on the street, this translates into the positive encouragement to turn good ideas into successful business ventures, via the provision of good business support and the enabling of the right macro-economic conditions. An important strategy will be to set up a Small Business Office (SBO) which will have responsibility for the nation-wide provision of business support activities for small businesses.

Just like the Small Business Administration in the US and the Small Business Service in the UK, the SBO will have local offices (one-stop-shops) in all the states and local government areas where businesses can have direct access to the help and support they need. The menu of services provided by SBOs should include advice on starting up in business, exporting, use of ICT for business growth, business research and development, information on government regulations, training for business managers, organising conferences and other fora to help collaboration and create awareness among small businesses, and taxation.

Yet another important role which the SBO should take on board is the vigorous pursuit of the development of more sophisticated forms of funding, including venture capital, business angels, corporate venturing, and hire purchase and leasing. In a knowledge economy, the role of the private sector is indispensable. The provision of government grants can only do so much to help a business grow (again government trying to do everything). However, with the injection of equity finance into a business, the potential for success is unlimited. In the US, the venture capital market has been responsible for the growth of a number of very successful and well known businesses like Oracle, Cisco, Compaq, and in the UK, nearly a quarter of the 1998 Fast Track 100 companies have used venture capital at some point during their development.

The role of banks also need re-evaluating. At present, banks are the highest providers of external finance for small businesses. The government will however need to re-evaluate their role to fit in with the new agenda. The current practice whereby banks charge too high interest rates for business debts does not augur well for business success and is not in the best interest of a knowledge economy. Not only that, banks will need to seriously consider how they can help Nigerian small businesses take more part in the global market, and in particular make the best use of e-commerce to boost their sales by the introduction of business credit cards and similar finance products acceptable in other countries of the world.

Other strategies to encourage business start up and growth can and should include the introduction of economic instruments like tax breaks for new (registered) businesses. In the US, business start-ups are exempted from paying taxes for the first five years. This is to encourage more people to go into business and also to help conserve the all important capital for business growth. Another strategy for growth should be the discouragement of imported products which are produced locally via high taxation.

In particular also will be the key role that research and evaluation can play in informing small business policy development. At present very little is done in this area. In a knowledge driven economy, research and evaluation of government activities will play a predominant part in determining the effectiveness of government action to help business succeed.

 2. Encouraging the Development and Growth of Education and Training

Success in the knowledge driven economies of both the UK and US has been due largely to the skilled workforce. Workers everywhere are more highly educated. In most hi-tech companies like computer software the value of a company or its intangible assets resides almost entirely in the knowledge and creativity embodied in its patents and its staff. It is not surprising therefore that in most countries, even in Nigeria, graduates earn twice as much on average as those with no qualifications. In an increasing knowledge important Nigerian economy, the average salary of those highly educated and highly skilled is bound to grow even faster. Unfortunately, for those with no qualifications and no skills, the chance of getting a proper job will be non existent. This might lead to a new generation of haves and have-nots, depriving some of the benefits that come with a knowledge driven economy. How these people will be integrated into the new economy will also be a key role for government.

In the next century therefore, investing in knowledge, skills and learning for all should be a top priority. In this wise, the government will have to ensure that the right policy is put together so that all its people can have access to good quality education. The introduction of Universal Compulsory Education (UCE) is a right step in the right direction, although much more still needs to be done. At present, there is a serious problem posed by cultism, the perpetual strikes by teachers and university lecturers due in part to the non-regular payment or underpayment of salaries and a lack of adequate funding. In this regard, a complete overhaul of the higher education system and a serious injection of resources is necessary to ensure Nigerian universities can produce high quality and well trained graduates who are able to stand head-to-head with their counterparts in other parts of the world.

Such top quality graduates should be knowledgeable, highly skilled, IT literate, innovative and entrepreneurial. Graduates who are able to raise their sights, to collaborate, to compete, to solve complex problems, to generate ideas and to take risks. Such people should be in charge of the small businesses and public administration system of the future since they have the capability to move Nigeria forward.

It therefore goes without saying that further collaboration between business and education, especially our universities, will need to be seriously encouraged. Businesses should have more direct role to play in education since the bulk of their workforce will need to have the necessary skills and knowledge to make the business more competitive and more prosperous. Again, exposing young people to the world of business at an early age will help to foster and develop the enterprise culture making more and more young people go into business. With the right business support, good macro-economic conditions and good quality education behind them, the potential for success is phenomenal.

3. Fostering the Growth of Science and Information and Communication Technology (ICT)

With a knowledgeable workforce and well supported businesses also come the development of basic science and technology and ICT infrastructure to help the growth of the new economy. Again there is a key role for the government in this, in establishing the right environment and setting technical standards. In ensuring Nigeria becomes a producer of high technology, not just an importer of it. In fostering the growth of the science and technology sector. For instance, the local technology clusters that abound in the Eastern part of the country should be directly and financially encouraged by the central government in order to foster its growth and development. Again, our universities need to be encouraged and adequately financed so that they can become the true abode of scientific research and development - just like other universities in other parts of the world.

In the area of communication technology, the competitiveness of the country in today’s information rich world will depend on it’s ability to access and exchange information both locally and globally. Through appropriate government regulations and private and international funding, telecommunications networks can be designed and implemented to suit the needs of the country. Recent announcement to provide seven million new telephone lines by the end of Year 2003 is a good step in the right direction. But of course, this is not enough. More important is for the government to ensure that access to a working telephone and fax line for the average individual and business does not remain a privilege but is seen as a necessity. At present, Nigeria is the most expensive place on earth to make an international phone call. Access to communication in a knowledge economy however cannot be a privilege. It is a great necessity.

Which then leads to the next point about the growth and exploitation of Information Technology in Nigeria. All over the world, the growth of the internet is gathering pace. At present, it is estimated that there are about 150 million regular users world-wide, and this figure is expected to double within the next 3 years. How many of these are Nigerians? Not a lot, by the look of things.

There is no point in me preaching the benefits of the internet to you since you are likely to be reading this article on the internet. Suffice it to say, however, that for the individual, business and government, the sheer scale and potential of it is absolutely phenomenal. It is therefore easy to see what role the further encouragement and exploitation of the internet can play in developing a knowledge economy.

More importantly however is the need to catapult Nigeria from an IT end -user country into a serious producer of high technology. Just like in Bangalore, India and in Barbados in the Carribean where off-shore information processing is thriving, the building of information industries will in no small way help Nigeria participate in the information economy. With a population of over 120 million people in Nigeria and another 622 million in the rest of Africa, there is a ready-made market and potential workforce for this. Not only that, there are enough Nigerians in the field of computer technology, both outside and within the country, to collaborate and develop a customised system that will open up the use of computers to all Nigerians – both young and old, both educated and illiterate. At present, the biggest Black-owned software company in the UK- Openlink Software - is owned by Nigerian brothers Kingsley and Kevin Idehen. In Scotland Godwin Osigwe and his software company Sigtronics, are also making waves. Efforts should be made to encourage such highly successful Nigerian owned high-technology companies to transfer their skills back to the country to help the growth and development of the industry.

Equally important is the further expansion of other physical and social infrastructure. The provision of constant, non-stop electricity, good transport system, including good network of roads linking the different parts of the country, a functioning, efficient and effective railway system and developed and trustworthy air transport service should be pursued vigorously. This will encourage the easy transportation of goods and services and the movement of labour to and from one part of the country to another.

Transparency

Perhaps the most important change that needs to occur if Nigeria is to partake in the new global economy is the cultivation of a spirit of openness and transparency. Without doubt, corruption has become the bane of all aspects of Nigerian life, and according to Transparency International, Nigeria sits top of the scale as the second most corrupt country in the world. However, no country, no matter the amount of knowledge embodied in its people can prosper if corruption rules as king.

Conclusion

Knowledge holds the key to modernising the Nigerian economy. However, to achieve this, the government needs to put in place a proper economic framework to help drive the country forward. Essentially this must involve tapping into the wealth of knowledge embodied in its 120+ million people, encouraging enterprise, private sector involvement, innovation and creativity, putting the necessary business support programmes in place to help the growth of its small businesses and the development of both its physical and social infrastructures. It involves a change of culture and attitude, and in particular in fostering a new spirit of transparency and openness in all aspects of Nigerian life. It also involves collaboration - between the government itself, the private sector, the education sector and the Nigerian populace as a whole, both at home and abroad. Only then can Nigeria aim to successfully compete in the fast moving global economy.

Debbie Ariyo is a Director of DMA Consulting , an organisation providing strategic advice on small firms policy to governments in developing countries. Contact by e-mail: dmaconsulting@hotmail.com

Transmitted: 1999

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