Being the text of an address delivered by Nigeria’s Minister of Finance, Dr. Ngozi Okonj- Iweala at the 2nd Prof. Bart Nnaji Biennial Lecture series, held at the Enugu State University of Science and Technology, in Agbani, on Saturday June 7, 2012.
. I will like to extend my gratitude to my colleague and friend, Prof. Bart Nnaji, the Honourable Minister of Power for inviting me to deliver the keynote speech at the second of his biennial lecture series at the Enugu State University of Science and Technology. I must say that as Chair of the Board of the African University of Science and Technology in Abuja, I’m a big believer in science and technology. This is why I’m always honoured and delighted to speak in the midst of distinguished scientists, academicians, and scholars, as we have present here today.
Challenging Global Economy
· Let me open my talk today by saying that these are challenging times. The outlook on the world’s economy is rather grim in the aftermath of the 2008/09 global financial crisis. The Eurozone’s sovereign debt crisis continues to weigh down economic activity in Europe and beyond, leaving in its wake political instability – as we’ve seen in Italy and Greece. Advanced countries, which had been growing at an average 3 percent annually since the early 1990s are now forecast to grow at about 1.4 percent this year. The IMF recently revised its 2012 and 2013 growth projections for the USA down to 2 percent and 2.25 percent respectively (from April’s projection of 2.1% and 2.4% respectively), as fiscal conditions worsen. Japan’s better-than-expected growth of 4.7 percent in the first 3 months of this year is set for fall sharply as exports decline. The UK government just announced that the double dip recession is worse than previously thought, with GDP falling by 0.3 percent in Q1 2012. The euro area’s economy is set to contract by 0.3 percent this year, and already we see economies like those of Italy and Portugal shrinking by 1.4 percent and 2.2 percent respectively in the first quarter of this year.
· Growth in emerging markets, which accounted for about half of total global growth in the last decade, is now slowing down on the back of weakening exports demand from the Eurozone and the USA. India’s economy grew by 5.3 percent in the first quarter of this year – its lowest growth rate in 9 years, down from around 8 percent. The Chinese government also reduced its official growth target for 2012 to 7.5 percent from 8 percent, after growing by 8.1 percent in Q1 2012 – the lowest growth rate in 3 years.
· This grim economic outlook aside, an equally worrying development is the rising unemployment around the globe, especially among the youth. Newly-released data shows that the Eurozone’s unemployment has reached a new high of 11.1 percent, with youth unemployment now at 22.6 percent. The situation is bleakest in Spain and Greece – with nearly a quarter of Spain’s workforce unemployed, and 52.1 percent of youth are out of work – about the same in Greece. We see similar unemployment numbers in several other countries, including South Africa, and Nigeria. The last survey of employment in Nigeria shows that nearly one in four workers is unemployed, with youth unemployment at nearly 40 percent.
Impact on Nigeria
· Nigeria is already feeling the effects of the global uncertainty. The weak global demand is putting downward pressure on the price of oil, and consequently, on our growth numbers. At the beginning of this year (January 2), the price of bonny light was $109.58 per barrel, rising to a peak of $128.47 per barrel by mid-March. However by June, the price had dropped below $90 – the lowest price since December 2010. Our economy is expected to slow down to a growth rate of about 6.5 percent this year, below average annual growth of about 7 percent over the last 5 years. Already we recorded a growth of 6.17 percent in the first quarter of this year, down from the 7.13 percent growth recorded in the corresponding quarter of 2011.
· Even though our growth figures remain healthy relative to several other countries, it is imperative that we insulate our economy from the negative impact of global shocks by building both short-term buffers – in the form of higher foreign reserves and excess crude account balances, and the sovereign wealth fund we are implementing; and longer-term buffers – in the form of diversifying our economy away from oil dependency by prioritizing investment into key sectors like agriculture, power, housing and construction, solid minerals, education, health, ICT, and others that can drive growth and job creation, in accordance with President Jonathan’s Transformation Agenda. This is why the 2012 budget of fiscal consolidation, was based on a prudent oil price of $72, which should enable us build-up the short-term buffers, while focusing expenditure on the priority areas, for longer-term stability.
· Against the backdrop of this heightened global uncertainty, let me emphasize that we, in Nigeria, have to be more self-reliant. We need to develop innovative ways to diversify our economy, and grow sustainably. It is often said that innovation is the central issue in economic prosperity. In the words of the famous American novelist, Bill Bryson – “if you think of a single problem confronting the world today – diseases, poverty, global warming, and so on. If the problem is going to be solved, it is science that is going to solve it. Scientists tend to be unappreciated in the world at large, but you can hardly overstate the importance of the work they do. If anyone ever cures cancer, it will be a guy with a science degree or a woman with a science degree”. I, for one, believe it will be a woman.
· Therefore with these opening words, distinguished ladies and gentlemen, permit me to talk to you today on what I’ve titled “Science and Technology – the key to Nigeria’s Transformation”. I will commence by drawing on global experience and empirical evidence, to highlight the role that science and technology can play in development, within the context of President Jonathan’s Transformation Agenda. Next, I will touch on the state of science and technology in Nigeria, before moving on to discuss some ideas on the way forward for the sector in Nigeria.
The Role of Science and Technology in Development
· S&T has a very unique side to it – it is intrinsically linked to most, if not all, sectors of an economy so naturally, economic development should be the result of advancing S&T. Perhaps nothing sums up the importance of science and technology better than this quote by British Physicist, Stephen Hawking – “The world has changed far more in the past 100 years than in any century in history. The reason is not political or economic but technological – technologies that flowed directly from advances in basic science…”
· Recent analysis shows that economic growth over the period 1950 to 2010 is indebted to the innovations, incentives, and productivity gains arising from technological advancements. It is estimated that about 35 percent of the world’s GDP growth from 2000 to 2008 can be explained by productivity derived from technological capability and its enhancement through information technology, human capital development, and so on.
· Advances in S&T can help to diversify the economy, by improving productivity in sectors like agriculture, while defining new ones. Productivity in Nigeria’s agriculture sector – which contributes about 40 percent of our GDP, and employs more than half our workforce – remains low. Yield per hectare is 20 to 50 percent of what is obtained in similar developing countries. In fact Nigeria is food insecure, giving that we spend more than $10 billion annually on food imports. The Nomura Food Vulnerability Index ranks Nigeria as the 4th most vulnerable country to global food price shocks, out of 80 countries. We lack the right plant varieties and storage systems to be efficient. Yet global experience shows that with the right investment in S&T for agricultural processes, output can rise quickly. Malaysia, for example, laid emphasis on R&D to develop higher yielding oil palm varieties. Today, they control 40 percent of world oil palm products trade valued at $18 billion. Thailand leveraged agriculture to backward-integrate into value-adding manufacturing processes, and achieved one of the world’s lowest unemployment rates at 1.2 percent in 2010. With aggressive investment in agriculture, Vietnam and China took 40 percent of their population out of poverty in 10 years. These achievements can be replicated here in Nigeria.
· Look also at the relatively recent development of the hybrid engines that harness solar power and batteries (for cars, and more-recently for ocean liners and ships) – one of S&T’s responses to the challenges of carbon emission and exclusive reliance on fossil fuels like diesel and petrol. Imagine the impact of adopting such technology on our country Nigeria? Our fuel subsidy bill, which cost N2.19 trillion (or about 5 percent of GDP) last year, would be substantially lower given lower PMS consumption, creating the fiscal space to invest in other sectors and diversify our economy. We could also see a drop in air pollution levels in this country (which is becoming an issue) since the transport sector, together with the power sector, account for about 10 percent of total carbon emissions in Nigeria. The World Bank estimates that with the right technology, Nigeria can generate up to 10,000 MW over the medium to long-term, through Concentrated Solar Power. We currently generate about 4,000 MW from all sources.
· Take the impact of technological advances in the ICT sector. A recent World Bank study shows that the invention and usage of mobile phones and broadband internet is strongly associated with economic growth: a 10 percent increase in mobile phone coverage and high-speed internet connections will increase GDP by 0.8 percent and 1.3 percent on average, respectively. In Nigeria, for instance, our telecommunications sector has been growing at over 30 percent annually (32.83 percent in Q1 2012) – outperforming growth in any other sector by far, on the back of rising mobile phone and internet subscriptions. Today’s electronics sector, which is driven by an incessant wave of branching innovations that are generating a constantly proliferating range of products, can also aid economic growth and diversification. Look at the development of various Apple products like the iPad, the iPhone, and the iPod – products which have promoted new sectors like digital entertainment, e-libraries, and so on.
· S&T also plays a key role in improving the quality of life. For instance, research in healthcare has proven vital to the prevention, diagnosis and treatment of various killer diseases. The American Heart Association recently announced that deaths due to coronary heart disease fell by nearly 40 percent in the USA over the last decade due largely to new treatment inventions. The same applies to HIV/AIDS – one of the top three killers of African youth. In 1996, a 20-year old person in the US with AIDS expected to live for about 3 to 5 years, but now expects to live to be 69 years. Only about a few weeks ago was it announced that – Truvada – an HIV fighting pill, can also be used to prevent the disease, after a three-year study. In Nigeria, preventable or treatable infectious diseases such as malaria, pneumonia, diarrhea, measles and HIV/AIDS still account for more than 70 per cent of the estimated one million under-five deaths in Nigeria. Several of these deaths occur as a result of misdiagnosis, due to the poor state of technology in many hospitals. This is why many Nigerians are going abroad, to countries like Egypt, and India, for medical services (including diagnosis) spending between $600 million and $1 billion annually, according to our health ministry’s estimates.
· In the education sector, particularly higher education, there is an emerging paradigm shift in the world today. The recent onset of powerful technologies, including cloud computing and precise online assessment regimes enabled the launch of a number of top-tier university entrants into what is being called the Massively Open Online Course (MOOC) marketplace. World class universities ranging from Harvard, Stanford, MIT, are now providing free, high-quality, rigorously assessed and highly accessible online university level education to the masses. While this may not result in the award of a university degree, it can provide a level of certification that can develop industry-standard skills, for example in the ICT industry, and actually provide a way out for 80 percent of the 1 million Nigerian youth who do not get into universities each year, due to limited supply of college/university places.
· In a nutshell, developing countries cannot hope to prosper in an increasingly competitive global economy and open trading system if they do not build the appropriate science and technology capacity to produce more value-added goods and services. In fact, I can confidently say that S&T is the dividing line between developed nations and those less developed.
· With this in mind let me move on to the next part of my speech:
The State of Science and Technology in Nigeria
· Nigeria is making some contributions to the development of S&T, but we are underperforming, relative to our abundant human capital. According to NEPAD’s African Innovation Outlook (2010), South Africa produced over 86,000 scientific papers – about 37 percent of the total research output of 19 African countries surveyed between 1990 and 2009; Egypt produced nearly 60,000 – about 27 percent of output. Nigeria produced 27,743 papers (or 12 percent of the total output) – about one-third of South Africa’s output. But a worrying finding is that the productivity growth of Nigeria’s scientific research is the second-lowest of the 19 countries. Even though, our scientists doubled their productivity in the period 2005 to 2009 relative to output between 1990 and 1994, other African countries like Algeria and Uganda saw their productivity increase by a factor of 6.3 and 5.4 respectively. To put things in perspective, countries like Brazil and Malaysia saw productivity rise by a factor of above 100.
· Similarly, South Africa was able to secure more than 1,000 patents in 2010 alone, according to data obtained from the World Intellectual Property Organization (WIPO); whereas, Nigeria secured only 18 patents in the last 8 years. This is unbelievably low. Egypt and Kenya got 604 and 49 patents, respectively, over the same period. I know that Nigerian scientists are making progress, sending our own satellite into orbit. I am also aware of developments in medical science, such as drugs used in combating sickle cell and other diseases; but a majority of these remain at the formative stages and do not become mainstream.
· There are a number of reasons for the poor state of our S&T sector. Firstly, we need a better and more coherent national strategy, as the sector remains highly fragmented, lacking effective coordination. Even the existence of our Science and Technology Ministry was intermittent, until the end of the 1990s.The Steven Oronsaye Committee for the Restructuring and Rationalization of Federal Government Parastatals and Agencies reports that there are about 106 core research and quasi-research institutes spread across the Ministries, with each one conducting its research without synergy and harmonization. Some of these institutions have been in existence for more than 30 years, yet there is little to show for their work as Nigeria still relies on research done internationally. If public sector research institutes in other countries can develop major technological advances like the internet and the human genome project, what is wrong with our own?
· Secondly, our scientists complain about lack of funding. I agree that fast growing economies must invest in S&T. China has been growing its R&D expenditure by 20 percent annually, since 1999. China now accounts for 12 percent of global R&D expenditure, spending nearly 5 percent of its budget (or 1.76 percent of GDP) in 2010, on the sector. Let’s compare this to Nigeria. Over the past decade, government’s S&T expenditure has been less than 2 percent of the yearly budget (less than 0.3 percent of GDP per year) – a grossly inadequate figure. But the question I have is “for what we have put in so far, what do we have to show for it? Let me ask our scientists this: “why should the government increase your funding, in view of the limited contributions to S&T in Nigeria? South Africa spends 8.5 times more on R&D than Nigeria but produces over 70 percent of the drugs manufactured in Africa. What do we produce? Clearly, there is inefficient resource allocation in our S&T sector. For example, about N97.1 billion was allocated to all our research institutes in the 2011 fiscal year. Of this, only N10.4 billion or a mere 11 percent was meant for core research activities, according to the Steve Oronsaye Committee Report. Personnel and overhead costs accounted for about N52.7 billion or 53 percent of the total. Surely, there is need for greater efficiency and reallocation here.
· The quality of our education system is also a problem. Our education system has deteriorated to a point where students cannot acquire the necessary skills they need to become employable or innovative in an ever-changing world, upon graduation. Higher institutions are plagued with inadequate S&T facilities and materials for practical skills development. Many laboratories lack the basic equipment for thorough scientific research. How, for example, can a computer science graduate not understand the basics of writing software codes? Nigeria is churning out thousands of S&T graduates each year, but several of them are under-employed, going into banking and other non-scientific sectors. This is why I am proud that Mr. President is already taking strong steps to improve the quality of our scientists by recently instituting the Presidential Special Scholarship Scheme for Innovation and Development (PRESSID) to sponsor outstanding students in S&T, Economics, and Medicine for postgraduate studies in the top 25 universities in the world.
So what’s the Way Forward?
· Policy makers at all levels in Nigeria need to be keenly aware that few countries can achieve development goals of economic diversification, food security, improving health systems, cleaner energy, generating wealth and jobs, and reducing absolute poverty, without the scientific, engineering, and technical capacity to handle these challenges. There are no sustainable solutions if countries do not build the capacity to find and develop appropriate technologies, and modify them for local use.
· In the first instance, there is a need for an overarching national strategy for S&T and innovation: a strategy that will restructure our S&T sector for greater coordination, communication, and policy harmonisation. I am happy that the Steve Oronsaye Committee, having looked into this, came up with the idea that the government should establish a single point of research funding to promote synergy and create an efficient and effective platform for managing research.
· Secondly, given the government’s limited resources, the chances of increasing allocation to the S&T sector are rather slim in the short to medium term. This is why we need to focus our research efforts and expenditure on the few areas where we have comparative advantage – areas like agriculture, petrochemicals, renewable energy, and mining, to mention a few. The good news is that Nigeria does not need to climb technology ladders from the bottom. We can leapfrog on new technologies, even though we may need to modify for our use.
· Thirdly, more effective partnerships between the public and private sector should be established. In developed countries, R&D is mainly driven by the private sector. Close to half of the world’s R&D expenditure is accounted for by only 700 private firms, according to the OECD. Private companies contribute 76 percent of the gross expenditure on R&D in Japan; in the USA, they contribute 70 percent. In South Africa, they contribute 42.7 percent, whereas the government contributes only 36.4 percent. So leveraging the private sector is crucial; any existing barriers to this kind of partnership should be removed.
· Fourthly and finally, mechanisms must be put in place to improve the quality of equipment and facilities available for teaching at all levels, as well as for research at the tertiary level. These measures are not limited to simply increasing funds available; collaboration between higher institutions (national and international), a more limited focus in research programs offered, and an improvement in the culture of maintenance are all measures that will help deliver this end. In the case of university research, funding should be competition-based, to provide incentives to enhance efficiency and strengthen collaboration with industry.
Let me close on the note that, for sustainable growth in Nigeria, we really have no choice but to develop our S&T sector. In the words of American writer Stephen Brand, “once a new technology rolls over you, if you’re not part of the steamroller, then you’re part of the road”. Thank you for listening.