Struggling Innonson Motors is a symptom of a bigger problem

The news surrounding the struggle of innonson motors is unfortunate, but hardly surprising. Ambitious entrepreneurs make things happen against the odds, but even the most ambitious entrepreneurs will find it especially hard in such a debilitating environment like Nigeria, where the fundamentals are just not working

First, in order for manufacturers like Innonson cars to flourish, you need to have a strong upstream sector, particularly in power and steel. These two sectors are the bane of Nigeria’s industrial development, and ones that require decisive and strong interventions from the federal government. Ajaokuta, for example, is well behind time in terms of technology. The same can be said about the obsolete approach to power, both in terms of production and distribution.

Ordinarily the current state of the Nigerian economy, with such drastic devaluation of the currency and the attendant high exchange rate, should be a manufacturer’s auspicious opportunity. Why? Because they can take advantage of favourable labour conditions to produce at a significantly cheaper rate compared with their international competitors. However, in the Nigerian case, this potential advantage is entirely wiped off by the almost total absence of a functional upstream sector in steel production, and manufacturers have to rely on foreign firms for raw materials, and having to generate their own power at an exceptionally high cost.

Of course, their international market positioning is weak to start with, given the superior technological and resource advantage of their competitors. Even so, government could have taken measures to at least stimulate the domestic market through public procurement. That is not protectionism, and developed countries routinely follow this strategy. Not so for Nigeria’s hopelessly selfish and clueless rulers. They’d rather import BMW for all ministries and parastatals.

The economic recession hasn’t helped matters, with less money in the hands of a previously flourishing middle class.

I hope Innonson Motors keep afloat, as an example and inspiration to others, but Nigeria has a long long way to go in order to achieve sustainable industrial progress.

 

Originally published on social media on 1st September 2016

Seun Kolade

September 2016

Comments

comments

Be the first to comment

Leave a Reply