Once upon a time, Opeda, the great grandson of Adam could not find enough wheat flour to make bread for his visitors and had to go visit his cousin, Padam, to borrow some flour. It would not be the first, the second or the third time that Opeda had made the short trip to his cousin’s.Opeda had a penchant for wheat flour and this time Padam was determined to get something better than promises in return. On his arrival, Padam gently asked him to give him a ram for the previous 12 jars of wheat plus this last one. Opeda screamed at the request and so the barter began.
They took a while to haggle over the worth of one ram, in comparison to wheat flour, and finally they settled for fourteen jars of wheat and a new wineskin as the worth of one ram. Opeda left, carrying the two jars of wheat and the new wineskin, with a promise to Padam to send the ram over the next day… and so began trade by barter in the ancient town of Seth.
Trade by barter thrived for a long while until someone invented money. History had it that it was Padam’s grandson. He had returned from a distant land, after years of sojourn, to see the earth with some precious items. He had a leather bag full of the smooth round beautiful objects that everyone admired. The whole village gathered to look at them and soon everyone was trying to exchange something for them. Then men would travel far and wide to bring more of it and so this smooth sea shells became our money.
Until we saw silver…
Money is an Invention
The story above is a fictitious account, it seeks to illustrate that money, as in the currency we use today, is an invention of man. We invented money, as we know it, to overcome the limits of trade by barter. Chief of these limits is the storage function; money allows us to store value.Naira notes are official units of exchange designed and approved by the relevant authorities for the representation of economic value in Nigeria. When stored in a bank, these currencies represent accumulated value.
As demonstrated in the story above, a billion naira could allow one to potentially store several million kilogrammes of wheat flour, provided there is someone who has the ability and desire to sell. The rationale behind the volume of money a nation can print is the representative economic value of that nation. Assume a nation’s economy depends on wheat alone, when a nation prints more currencies than the proportionate volume of wheat, you would have more currencies chasing wheat, hence inflation. More money would be needed to buy the little available wheat. This would be manifested as artificially high cost of wheat. It is therefore correct to say that it is not the ability to print money that is the problem in a nation but rather, the volume of wheat available. In Nigeria, the majority of this “wheat” is crude oil.
Meaningful Societies exist to Create Value
It is common parlance to say that it is the job of the entrepreneur to create value for customers but really, it is everyone’s work. The government, the academic, religious and business institutions exist to create, manage and exchange value. The human, material and social infrastructure upon which the prosperity of any nation is judged is a reflection of the value-capital of that nation. This is often reflected in the size of their budget and gross domestic product; these reflect the degree of productivity of the nation. Since these productivities represent value, they often need to be stored as money e.g. Nigeria’s foreign reserves.
The nation of Nigeria can be said to be rich, not because she has billions of Naira notes but rather because of her abundant natural resources, which happen to have a lot of economic value at present. Of late, some OPEC member nations are not a trifle concerned that China is focusing on exploring her shale oil and gas deposits. What this means is that if there is more oil around, the price of oil would fall, though its usefulness is still the same. Countries like Nigeria would be in trouble. The key word here is estimated economic value.
There are two basic sources of value:
The natural raw material/resource– e.g. oil and gas, man (labour), trees, coal, etc.
The immaterial resource – ideas, techniques, skills, competencies, processing procedures, strategies and software etc.
Natural raw materials like crude oil and human population are relatively fixed in supply and come at their lowest economic value. Immaterial resources on the other hand, are not fixed and are the major determinants of the estimated economic value of the productivity of any nation. They constitute “processing factors” and can improve the value of other raw materials. By increasing the ownership and capacity of these “processing factors”, a nation can indefinitely multiply her economic value.
This is why Singapore, with a population of just above 5 million people (2012 Census) has a GDP (PPP) of $325,557 billion, while Nigeria with a population of above 170 Million people (2012 Estimate) has a GDP of $448.495 Billion.
One could say that though we have so many natural resources and have 34 times more people than Singapore, we are just about 1.37 times more productive than Singapore that does not have many natural resources. The resource of Singapore therefore is the people of Singapore; each of them, on the average, generates about 23 times what a Nigerian does.
Business institutions play two cardinal functions:
- They manage the factors of production that decide the “estimated economic value” of items and systems.
- They manage the stored economic value of every nation (banks, stock market, insurance companies, pension funds, government funds and budgets).
By default, though business organisations are, most times, created and managed by individuals who arrived at their charge by sheer dint of hardwork and a good dose of favour, they play crucial social functions. Their acts and inactions greatly affect the rest of the populace. They do not perform these roles in isolation. Together with the government that provides the rules and, sometimes, material and the academic institutions that provide human capital, business institutions go about creating and managing the pooled resource of every society, sometimes for profit, sometimes not.
Nigerian Pharmaceutical Industry
From the above, stakeholders in the Nigerian pharmaceutical industry have a social function. It is a function that, when executed effectively, would determine the collective prosperityand posterity of the general society and the stakeholder’s themselves. Just like the shale oil situation, when we do not have the capacity to find alternative value for our crude oil, especially in a more competitive setting, there would be problems. At present, Nigeria does not own the systems, the processing factors, which determine the economic value of her crude oil.
The same applies in the pharmaceutical industry; we do not own the systems that determine the economic value of the industry. The highest asset in the industry right now is the size of the purchasing power of Nigerians, which is the numeric power.The other potential assets like production capacity, innovative processes, proprietary rights and human resources are clearly not owned by Nigeria. Apart from the fact that there are many mouths to serve, the industry does not really exist. In other words, there is really no “wheat” in this case. The stakeholders are mainly playing a distributive function, as the systems to increase our capacity to create and own such relevant processing systems are not functional. What this means is that we cannot, as it is, increase our economic value. We can have a lot of competition and activity, but the economic value can only be increased and sustained when there is a greater capacity to create value. Right now, we are re-distributing value, not creating it and this situation does not assure sustainability.
The responsibility to change the status quo cannot be left to the government alone. The government needs active engagement and the only way I believe it can be achieved is for institutions to adopt the paradigm that their responsibility is even much more than that of the government. At the end, it is the business institutions that make governments and not the other way round. Hence, the government and academic institutions must of necessity be engaged by businesses to avoid a certain bleak future.
Entrepreneurs who adopt this understanding know that the profit motive would not be enough, in the short term. The term “profit” should of necessity be redefinedbefore we find out, like America is finding out, that at the end of the day, the collapse of society’s economic value capital would lead to the collapse of businesses, eventually.
There is a great opportunity. The nation’s productivity is gradually increasing.We need individuals with audacious goals and this social function paradigm to see beyond the challenges band rise to the opportunities of today. Collaborations would be needed, massive investments must be secured, and the government would be radically and proactively engaged. It would involve a lot of risks no doubt, but I believe, just like OPEC members know – that to do nothing is far more risky.