The Nation Newspaper

Category: Industry

  • Real sector on the rebound after years of sad tales

    Real sector on the rebound after years of sad tales

    Things are looking up for the real sector after years in which some firms died and others relocated because of what was described as harsh operating environment. It recorded growth between January and March; its capacity utilisation also increased. It is thanks to the Federal Government’s interventions and the sector’s push for a better deal. Assistant Editor CHIKODI OKEREOCHA reports. 

    Last quarter of 2014 to last year would probably go down as the most challenging period for manufacturers. The decline in foreign exchange (forex) flow into the country, caused by the sharp drop in oil prices, left a sour taste in manufacturers’ mouths. Many of them were unable to source forex to import critical raw materials that were not locally available.

    Expectedly, the result was telling. For instance, manufacturing capacities stagnated below average. Many manufacturers recorded huge financial losses. Many of them who could not weather the storm shut down; others relocated to neighbouring West African countries. Consequently, many people lost their jobs. Hopes of riding on the sector’s crest to diversify the economy also receded.

    But there are indications that the sector is gradually bouncing back. For instance, the manufacturing sector recorded positive growth in first quarter of the year, hitting 1.36 per cent, against -2.54 per cent it recorded in fourth quarter of last year. Capacity utilisation also increased to 59.18 per cent in the second half of 2016, from 44.3 per cent recorded in the first quarter of that year.

    As far as manufacturers are concerned, this growth recovery, driven by better policy adjustments particularly in the area of forex management, following MAN’s various meetings and presentations to the Federal Government, portends that the manufacturing sector is out of recession. MAN President Dr. Frank Udemba Jacobs who made this known described it as “heart-warming.”

    The President, who was represented by the group’s Director-General, Mr. Ajayi Kadri, stated this at last week’s breakfast meeting for directors/chief executive officers in Lagos. The event themed “Nigerian economic recovery: Strengthening the real sector” was organised by the Ikeja branch of MAN.

    The meeting is a yearly event that provides a platform for effective interactions of more than 300 chief executives, thereby helping them to chat the way forward to overcome the economic challenges/threats facing them.

    Jacobs said that in line with the recovery momentum in the manufacturing sector, any further discussion on the theme will evoke more credible measures that will help sustain and strengthen the sector’s recovery process. He expressed optimism that government’s current policies and guidelines aimed at addressing the challenges facing manufacturers will improve the operating environment in due course.

    One of the policies that may have put the sector on the recovery path, The Nation learnt, was the creation of a 60 per cent special forex allocation window for manufacturers by the Federal Government through the Central Bank of Nigeria (CBN), following several representations and stakeholders’ engagements by manufacturers.

    The apex bank explained that the gesture was to address an observed imbalance to the sector, as a negligible proportion of forex sales were being channelled towards the manufacturing sector hence, it directed authorised dealers to dedicate at least 60 per cent of their total forex purchases from all sources to end users, for the importation of raw materials, plants and machinery.

    The CBN said the balance of 40 per cent should be used to meet other trade obligations visible and invisible transactions. It also mandated forex dealers to publish weekly sales of foreign exchange to end users in the national newspapers and render statutory returns of sales on same to the CBN promptly.

    Recall that the CBN in June 2015 announced a forex policy that restricted importers of 41 items from accessing its official forex window. Even those who export products that fall under the 41 items listed in the CBN circular were barred from using their export proceeds to fund the importation of raw materials, which were classified as not valid for forex.

    The apex bank had argued that the policy was necessary to promote locally-produced goods, build robust foreign reserves, and also create jobs.  “…We needed to aggressively begin the process of feeding ourselves by ourselves and producing much of what we need in this country.

    “The huge amounts of money the country spends on importing things we can produce locally have become a significant drag on our foreign exchange reserves…,” CBN Governor Godwin Emefiele had said.

    But manufacturers and other members of the Organised Private Sector (OPS) kicked, describing the forex restriction variously as “obnoxious, superfluous, and ill-conceived.” Many of them argued that they were not consulted by the CBN and other regulators before the restrictions were placed on the items.

    They also pointed out that the vague nature in which the items in the import prohibition basket were described in the circular impeded the access of several local manufacturers to foreign exchange for procurement of their raw materials.

    They accused the CBN of emasculating manufacturers by failure to properly appraise domestic capacity for production of some of the excluded items, and therefore, called for a review.

    But CBN kicked its heels in, insisting that the policy was in the interest of the economy and Nigerians. The apex bank reiterated that the policy was necessary to re-awaken the consciousness of manufacturers on the need to look inwards and embrace the utilization of local raw materials, conserve foreign exchange and create jobs.

    However, following persistent requests by real sector operators, the CBN directed that a special 60 per cent forex allocation window be set aside for manufacturers. And as it turned out, the policy has infused life into the real sector as the performance of the sector has improved in the first half of the year.

    According to Jacobs, the policy has seen MAN’s membership strength increased by 415 in the last two years. He said that although, the CBN has removed the 60 per cent preferential forex allocation through its forex policy of February 21, 2017, it has promised to continue to accord the manufacturing sector strong priority in forex allocation.

    The MAN boss stated that because of the increases in capacity utilisation and local sourcing of raw-materials, manufacturing production surged to N5.02 trillion in the second half of 2016, from N4.21 trillion in the same period in 2015 and N3.76 trillion recorded in the first half of 2016.

    Ease of Doing Business, MSME clinic, others also

    But the special forex allocation is not the only policy intervention that is gradually changing the manufacturing sector’s narrative. The establishment of the Presidential Enabling Business Environment Council (PEBEC) is also said to have the capability to further boost the performance of the sector.

    PEBEC’s mandate is to improve the Ease of Doing Business (EODB) in the country. As Jacobs stated, “The performance score card of PEBEC indicates that its seven points objectives set in line with the World Bank Indices of Ease of Doing Business (EODB) have been achieved.”

    The MAN boss observed, for instance, that there has been visible improvement in the ease of company registration, which is now being facilitated through a web portal. Also, trade facilitation constraints have been removed. He also noted the implementation of some aspects of the single windows ports operations, among others.

    He, however, said MAN will continue to encourage investors to take advantage of these initiatives while imploring government to extend the improvements to other areas that affect the Ease of Doing Business not currently captured in PEBEC framework to improve Nigeria’s competitiveness.

    Other policy interventions that may have signalled a new dawn for the sector include the recently launched Micro, Small and Medium Enterprise (MSME) Clinic, the inauguration of the Nigerian Industrial Policy and Competitive Advisory Council, which has the mandate to drive Nigeria’s industrial agenda of which MAN is a strong member.

    The recent signing of three strategic Executive Orders by Vice President Yemi Osinbajo to promote patronage of made in Nigeria products, transparency and ease of doing business as well as the review of CBN’s list of 41 items that led to release of 32 items of raw materials that can now have access to the official forex market are also gradually impacting the manufacturing sector.

    The Lagos State   Commissioner for Commerce, Industry and Cooperatives, Mr. Rotimi Ogunleye, said that his ministry was at the concluding stage of the industrial policy review where various laws are being promulgated to ensure adequate security, social welfare and economic well-being of the people of the state.

    He pointed out that the state had addressed the issue of multiple taxation and that the work place inspection team had been harmonised under one umbrella to reduce the incidence of multiple agencies carrying out inspections in the same company at different times.

    On her part, the National President of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, Chief Alaba Lawson, noted that the Federal Government in April this year launched the Economic Recovery and Growth Plan (ERGP) 2017-2020, which lists 24 programmes made up of 60 strategies and 369 key activities.

    She said the programme is to provide a catalyst through which the economy can be revamped to advance the diversification drive, ensure efficiency in government processes, promote ease of doing business, encourage easier access to capital, and solve the daunting challenge of infrastructure deficit, among others.

    While describing the ERGP as “laudable,” Lawson, however, lamented that the ERGP, just as other government programmes, plans and strategies aimed at strengthening the economy and the real sector, is being hampered by issues around proper guidelines, timelines, proper implementation, monitoring, feedback mechanism and information dissemination.

    She therefore, said that for policies and strategies to truly succeed in revamping the economy, the real sector must track the initiatives of government, offering insightful recommendations, reporting verifiable impact on the real sector and the Nigerian economy at large.

     

     

  • Spinning firms lead at Commerce & Industry awards

    Job spinning firms with demonstrable contribution to local sourcing and backward integration initiatives in  downstream sectors led the pack at the Lagos Chamber of Commerce and Industry (LCCI) Awards.

    The entrepreneurship giants were honoured based on direct and indirect impact on employment  creation, market share output, promotion of Small and Medium Enterprises and investment commitment to encouraging Nigerian products.

    The Murtala Muhammed Airport Two (MMA2), operated by Bi-Courtney Aviation Services, clinched the Public-Private Partnership Award; Lagos Metropolitan Area Transport Authority (LAMATA) – Infrastructure Project of the Year Award; School Media – Innovation & Technology in Education and the Nigerian Stock Exchange (NSE), the CSR company of the year awards, among others.

    President of the Chamber Dr. Nike Akande, said the selection of nominees and winners was subjected to painstaking and analytical procedures, following entries from various sectors of the economy.

    She urged players in the private sector to infuse more dedication to the business of wealth creating while the government stayed put to fixing the power sector, security challenges, foreign exchange, infrastructural and institutional bottlenecks.

    She said: “We are today celebrating enterprises that have excelled in the economy amidst that many of them are also indigenous enterprises. The LCCI Commerce & Industry Award would, among others, continue to promote healthy competition among corporate organisations as well as competition as it is a major driver of excellence. We recognise that there is no perfect time to make an impact in any system.”

    Governor Akinwunmi Ambode said the government was relentless at initiating policies and strategies enhance a globally competitive condition for business opportunities in the various economic sectors.

    Represented by the Commissioner for Commerce and Industry Rotimi Ogunleye, he said: “Strategic technological development have changed the way business is done globally. Therefore our local investors and business entrepreneurs to leverage on its strength by pushing Nigerian products on the global stage. I urge the organise private sector to continue to partner with us as we redeem commitment to finding solutions to the dynamics of the business sector. We are making progress on the ease of doing business, global policy initiatives and infrastructural development.”

  • Why Nigeria should review stance on EPA

    •As EU douses tension of unfair rivalry

    The European Union (EU) has again urged the country to review its opposing stance on the Economic Partnership Agreements (EPA), stating that the opportunities of trade interaction were more than conceived apprehensions.

    Head of Trade and Economics Section, Delegation of EU to Nigeria, Mr. Filippo Amato, who spoke at the Lagos Chamber of Commerce and Industry (LCCI) Stakeholders Forum, said the agreement would not threaten domestic products but expand export windows.

    According to him, the pursuance of infrastructural development, capacity expansion for Small and Medium Enterprises (SMEs) and stability of interest rates should simultaneously run with achieving long- term stability in attracting foreign direct investment in, for instance, the  agricultural or textile value chain.

    On the sensitivity to domestic production, Amato said the agreement also respected protectionism of locally manufactured products, such that unhealthy competition would be deterred by exclusion.

    “This is an agreement not all about trade but development. It is a device to compliment the development corporation activities which EU has been carrying out in Nigeria by adding trade as tool to get our sectors on board to thrive development, growth and industrialisation of the region. It is in a way that Europe will open completely its market to any good coming from West Africa in terms of duties. On the other hand West Africa will remove duties only on the imports machinery, capital goods which are necessary to the local industry. We are leaving protection on the goods which local industries are able to produce. So basically all the agribusiness industry is going to be protected”.

    He reiterated the flexibility in the agreement noting in the event that something was not protected, there is a possibility to still protect the local industry and there is a review clause every five years that makes it possible to review everything.

    However, while the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) admitted that protectionism might hamper the quest to achieve a sustainable economy, the President Iyalode Alaba Lawson, insisted that certain sectors of the economy may be scuttled by global competition.

    Represented by a NACCIMA executive, Uzor Nwaije, she said: “Challenges facing the real sector such as poor infrastructure, high interest rates and a devalued currency make it difficult for the real sector to take full advantage of the EPA. It is therefore in view of the Association that the country’s infrastructure deficit challenge needs to be improved considerably as this will enhance productive capacity of the Organised Private sector.”

    The ECOWAS Commissioner, Laouali Chaibou said its main concern is to help manufacturers in the  region improve their production competitiveness while ensuring a greater influx of private investment into the ECOWAS union.

    He said: “These advantages offered by the EPA tend to make our region production the center for export to Europe. The integration of ECOWAS and Nigeria in the global value chains therefore involves the ability of this country to attract investments from all walks of life either to transform local raw materials or to semi-finished products elsewhere and the EPA is one of the ways to achieve this.”

    Meanwhile, Director General, LCCI Mr. Muda Yusuf believes that with proper assessment of the options, the country come to considerable conclusion that there are opportunities in other sectors besides manufacturing.

    “It is a very contentious matter particularly from the supply perspective. But I think it’s something that we need to discuss, to see if we can find a middle ground to be able to also allay the fears of the manufacturers. Those who are in non oil sector are also seeking opportunities in Europe but unfortunately it is weak for now.   There are strong arguments from both sides whether to sign or not.”

     

  • Enelamah is vice chairperson, Africa, WTO Ministerial Conference

    Enelamah is vice chairperson, Africa, WTO Ministerial Conference

    Minister of Industry, Trade and Investment, Dr. Okechukwu Enelamah, has been elected the Vice-Chairperson representing Africa, for the 11th World Trade Organisation (WTO) Ministerial Conference.

    His election was at the meeting of the WTO General Council, which acts on behalf of the Ministerial Conference on all WTO affairs.

    It also meets as the Dispute Settlement and Trade Policy Review Body to oversee procedures for settling disputes between members and to analyse members’ trade policies.

    The Ministerial Conference, which meets every two years, is the topmost decision-making body of the WTO. It brings together members of the organisation, all of which is countries or customs unions and can take decisions on matters under any of the multilateral trade agreements.

    This election is viewed as an important recognition of Nigeria’s leadership role at the WTO and contributions on trade policies.

    Other members of the Bureau of the 11th Ministerial Conference are the Chairperson;   Ms Susanna Malcorra of Argentina; Vice Chairperson;  Todd McClay,  Minister of Trade of New Zealand; Vice Chairperson: Mr. Edward Yau, Secretary of Commerce and Economic Development, Hong Kong, China.

  • Only 10.9% workers have retirement savings account, says NBS

    Only 10.9% workers have retirement savings account, says NBS

    The National Bureau of Statistics (NBS) has revealed that only 10.93 percent of Nigeria’s working population has retirement savings account (RSA), as at the end of the second quarter of 2017. This implies that more than 89 percent of the nation’s workforce is without pension accounts.

    NBS, however, noted in its latest report that the assessment was based on available data, and that Q2’17 data would be updated as soon as it is available.

    The report stated: “The retirement savings account, RSA, membership distribution data for Q2 2017 reflected that 7,589,936 workers are registered under the pension scheme compared to 7,493,590 registered workers in Q1 2017 out of a total working population of 69,470,901 recorded as at Q4 2016. This represents 10.93 percent of the total working population.

    The report, however, said it is not surprising that the largely informal structure of the Nigerian labour force, with about 50 percent of the workforce engaged in subsistence agriculture and informal trading. Micro businesses for example account for over 90 percent of Micro, Small and Medium Scale Enterprises in the country.

    NBS further noted that RSA membership is dominated by the private sector. It stated: “The Federal level had 1,898,199 registered RSA members under the national pension scheme as at Q2 2017 of which 1,384,579 or 72.94 percent were male and 513,620 or 27.06 percent were female compared to 1,889,143 registered RSA members of which 1,378,382 or 72.96 percent were male and 510,761 or 27.04 percent were female in Q1 2017. This may indicate that there are a lot more male employees in the Federal public service than female”.

    It also stated that at the state, including local government level, 1,537,138 state public workers are registered under the national pension scheme with 863,605 or 56.18 percent male and 673,533 or 43.82 percent female as at Q2 2017 compared to 1,525,748 registered public workers of which 858,365 or 56.26 per cent were male and 667,383 or 43.74 percent were female in Q1 2017. This the report stated that  the Federal Public Service is larger than that of all 36 States combined and similar to the Federal service with men dominate with respect to number of employees.

    “Private firms had 4,154,599 registered RSA members under the pension scheme as at Q1 2017 of which 3,143,703 or 75.67 percent were male and 1,010,896 or 24.33 percent were female compared to 4,078,699 registered RSA members of which 3,091,288 or 75.79 percent were male and 987,411 or 24.21 percent were female in Q1 2017,” he added

  • How to make modified EEG work, by stakeholders

    How to make modified EEG work, by stakeholders

    The Federal Government has lifted the suspension on the Export Expansion Grant (EEG) after some modifications. It has also begun its phased implementation. While operators in the non-oil export business welcome the development, the N20 billion voted in the 2017 budget for the settlement of unutilised grants of about N230.9 billion is grossly inadequate. Certain provisions of the modified EEG have also not gone down well with them. Assistant Editor OKWY IROEGBU-CHIKEZIE reports.

    When the Federal Government introduced the Export Expansion Grant (EEG) in 1999, it was envisaged to cushion the effects of cost disadvantages, caused by infrastructural deficiencies, on operators in the non-oil export business.

    The grant, disbursed in the form of Negotiable Duty Credit Certificates (NDCC) to exporters, was expected to boost the competitiveness of indigenous products in the international market. Beneficiaries were expected to use it to pay duties on their exports.

    The impact assessment of the scheme was to be carried out yearly by external consultants, or as determined by the Minister of Finance. The implementation committee consists of Nigerian Export Promotion Council (NEPC), Federal Ministry of Finance (FMF), Nigeria Customs Service (NCS), and Central Bank of Nigeria (CBN).

    However, by January 2014, when the Federal Government suspended the scheme, following what Minister of Industry, Trade and Investment, Dr Okechukwu Enelamah, described as abuse by exporters, not a few Nigerians believed that the initiative failed to deliver on its promises. The consensus was that the EEG may have left non-oil exporters worse than it met them. For instance, many of them are still agonising over a backlog of N230.9 billion unutilised EEG.

    Although the Federal Government has lifted the suspension on the EEG scheme, with some modifications, some real sector operators are not pleased with the amount set aside for the settlement of outstanding claims.

    The Federal Government set aside N20 billion in this year’s budget for the settlement of the backlog of EEG, but the amount is considered by many operators and stakeholders as grossly inadequate, considering the huge size of the outstanding unutilised grant of N230.9 billion. Some of them insist that it should be increased.

    Besides, the government has yet to fulfil its promise to pay claims and resume the scheme’s  implementation.This has not gone down well with some members of the Organised Private Sector (OPS), who argue that the scheme’s suspension was hurting non-oil export.

    Some of them noted, for instance, that the only way out for Nigeria to extricate itself from the restraints of mono-economy was for the government to diversify the export sector.

    Manufacturers Association of Nigeria (MAN) President Dr. Frank Jacobs called on the Federal Government to re-introduce the scheme to salvage the sector.

    Noting that recipients of the grant held an instrument called NDCC, which they used for paying import and excise duties, he regretted that its suspension had affected manufactured goods export.

    The MAN chief recalled that the scheme was introduced to reduce Nigeria’s dependence on oil as a source of income and foreign exchange. He also recalled how he made it clear to the government to re-introduce EEG and pay the outstanding NDCC to save many companies from folding up.

    Jacobs stressed that if nothing is done fast, many companies will fold up, noting that the scheme is not just about manufacturers, but also a useful tool for the diversification of Nigeria’s revenue base.

    He, however, noted that the policy recorded success with the volume of non-oil exports increasing from $700 million in 2005 to $2.9 billion in 2013. This, he said, included an increase in value chain expansion in terms of processing.

    He said the increased manufacturing capabilities resulted in significant new investments and job creation in the sector. The scheme’s contribution, he added, was further evidenced by the market penetration of made-in-Nigeria goods and employment of about 11 million persons in the non-oil sector.

    Jacobs, however, lamented that all these benefits waned within one year of the suspension of EEG and resulted in the decline of Nigeria’s non-oil export by eight per cent from $2.97billion in 2013 to $2.71billion the following year.

    He commended the government for lifting the suspension of the EEG scheme after almost three years.

    He observed that it had been regigged. For instance, he said the NDCC has been renamed. It is now called the Negotiable Export Credit Certificate (NECC).

    Other changes, he said, are the settlement of grants computed by issuing NECC to the beneficiaries, which shall be valid for two years and transferable once. The MAN president revealed that beneficiaries could use the certificates to settle all Federal Government taxes such as company income tax, Value Added Tax (VAT) and Withholding Tax (WHT).

    Beneficiaries will also use the certificate to purchase Federal Government’s bonds, settle credit facilities by Bank of Industry (BoI), NEXIM Bank and Central Bank of Nigeria’s (CBN’s) intervention facilities, as well as settle Asset Management Corporation of Nigeria (AMCON) liabilities.

    Jacobs continued: “In the modified guideline, the EEG payment rate was reduced to 15 per cent maximum from the ruling 30 per cent before the suspension of the scheme. New EEG applications in the year would be paid with NECC while the applications before 2017 and outstanding NDCC would be paid via a 10-year maturity Promissory Note.

    ‘’The implementation of the modified EEG scheme guideline has commenced after the suspension was lifted by the Federal Government and it is in phases.  At the moment, companies are submitting their baseline data to the Nigerian Export Promotion Council (NEPC) to enable the Council determine their export values, local and foreign sales values and other relevant information as part of the first phase of the implementation processes.’’

    The MAN boss listed documents required for submission to NEPC to include Forms NXP, which must be certified by the processing bank; Nigeria Customs Service (NSC) and the Pre-shipment Inspection Agents; Bill of Lading and Final Commercial Invoice; Single Goods Declaration (SGD) Forms, endorsed by NSC, both at front and back.

    Others are Evidence of the repatriation of export proceeds (CBN confirmation of repatriation of proceeds by exporter) and Clean Certificate of Inspection (CCI) to include quality certification; NEPC non-oil Export Certificate (where applicable) and Certificate of Manufacturer and Scanning Report; any other documentation as may be required by NEPC from time to time.

    According to Jacobs, it is after the submission of these documents that the factories of companies that have submitted their baseline data would be inspected for due diligence, audit, and verification of export values vis-à-vis installed and utilised operational capacities. Exporters with a clean bill report would then be issued the new NECC.

    He said the 10-year stipulated for the recovery of the Promissory Note  should be reduced.

    Lagos Chamber of Commerce & Industry (LCCI) Export Group Chairman, Mr. Bamidele Ayemibo, commended the government for putting it in the 2017 budget. He, however, advised that it should avoid the pitfalls of the past.

    He claimed that some people who have nothing to do with export got the grant.

    Ayemibo canvassed that the government should give incentives to verified manufacturers of finished products and those adding value to products.

    Banks under attack over EEG

    Ayemibo criticised commercial banks for not doing enough for manufacturers and exporters, despite that the banks collect dedicated funding from the CBN.

    He said henceforth, CBN should give funding to verifiable performance tied to exports by commercial banks. He regretted that some banks that had good initiatives on exports scaled their activities because of the perceived foot-dragging by CBN on the export stimulus grant.

    According to him, most banks are hypocritical in their support for businesses. He said until the government wields the big stick on the commercial banks, the situation would not change.

    A former Institute of Chartered Accountants of Nigerian (ICAN) president, Chidi Ajaegbu, who lauded the scheme, noted that rescuing the economy from its state requires an integrated approach ,including revisiting the suspended EEG.

    According to Ajaegbu, who is also the Chief Executive Officer of Heritage Capitals Limited, the EEG will boost local industry and complement government’s earnings from the oil sector.

    He said: “I agree the EEG should be revisited. In an economy like this, it is very critical that we do everything possible to diversify our source of foreign exchange earnings and encourage local manufacturers that are still producing profitably to continue to do so across all sectors of the economy.

    “EEG will help to grow the manufacturing base of the economy and generate employment because companies are closing, people are being fired every day. So, whatever policy that will help to generate employment and grow the economy is welcome by me.”

     

  • ECA: address infrastructure gap to boost intra-African trade

    The United Nations (UN) Economic Commission for Africa (ECA) has reiterated the need to address limited connectivity within Africa to boost intra-African trade.

    The body said this position at the just-concluded Aid for Trade Global Review at the World Trade Organisation (WTO) headquarters in Geneva, Switzerland, according to ECA’s statement.

    ECA Capacity Development Division Director, Mr.  Stephen Karingi, emphasised the need to boost intra-African trade, which currently stands at a mere 13 percent of the continent’s total trade.

    Karinga  canvassed  the need for African governments to do more to grow intra-African trade stressing  that Africa’s relatively low intra-regional trade is as a result of barriers created by limited connectivity within the continent. He called on leaders in the continent to think of physical connectivity and infrastructure where the gaps remain significant.

    He said: “We should consider softer aspects of connectivity. Non-tariff and tariff costs both influence how African countries can link with each other. Boosting intra-African trade is the most effective channel for trade to deliver development on the African continent adding deeper trade integration is the surest way to speed up Africa’s economic transformation. Policies to enhance intra-regional trade on the continent are crucial; strategies to implement, enforce and monitor their progress and impact are also needed”.

    He maintained  that trade contributes towards industrialisation and structural transformation and regretted that  Intra-African trade currently stands at a mere 13 percent of the continent’s total trade, which is very low.

    Higher volumes of intra-African trade are essential so African countries can do business with each other more frequently and with wider margins, Karingi added.

  • MAN’s breakfast meeting to focus on strengthening real sector

    This year’s edition of the Ikeja branch of Manufacturers Association of Nigeria (MAN) “Breakfast Meeting for Managing Directors/Chief Executive Officers (MDs/CEOs of member-companies will focus on strengthening the real sector to fast-track economic recovery.

    A statement signed by the Association’s Executive Secretary, Oluchi Odimuko, said the business get-together with the theme, “Nigerian Economic Recovery: Strengthening the Real Sector” will hold on Tuesday, August 1, at the Lagos Airport Hotel.

    The statement, which was made available to The Nation, said the event will discuss some topical issues on how to grow the real sector by harnessing non-oil resources to boost economic recovery.

    “The meeting is a yearly event that provides a platform for effective interactions of over 300 Chief Executives, thereby helping them to chart the way forward to overcome the economic challenges/threats that they face,” it said.

    The Chairman, MAN, Apapa branch, Mr. F.B. Odunayo will be the guest speaker at this year’s event. He will be speaking on “Boosting the zero oil earnings: A catalyst to the growth of the real sector.”

  • SON Act 2015 can enhance ease of doing business, say stakeholders

    SON Act 2015 can enhance ease of doing business, say stakeholders

    •Port operators suggest joint cargo inspection by SON, other agencies

    The Ease of Doing Business policy being promoted by the Federal Government will promote commerce, economic growth, export trade and ensure efficiency in trade facilitation.

    The policy will also receive significant boost from the provisions of the Standard Organisation of Nigeria (SON) ACT 2015, which include the removal of substandard products from the market place, and prosecution of offenders.

    This was the consensus of stakeholders at a consultative meeting in Lagos, titled: “SON ACT 2015 and Ease of Doing Business.”

    SON  Director-General Mr. Osita Aboloma explained that the SON Act 2015 was meant to ensure that compliant business persons were not disadvantaged by those into manufacturing, importation or exportation of sub-standard products.

    Aboloma, who was represented by SON Director of Legal Services Mr. Umaru Kawu said the provisions of the Act would also enhance enforcement of penalties against persons dealing in products not compliant with any mandatory industrial standard.

    “The punishment ranges from fine of not less than N1 million or 15 per cent of the value of the product, to a fine of not less than N2 million or 20 per cent of the value of the product,” he said.

    The SON boss explained that where every person concerned with manufacturing, importation, exportation, sale of products do so acting on the same requirements, cost of doing business would become predictable as discipline would be brought into the system.

    “It is the same discipline that the Ease of Doing Business initiative seeks to bring into our system and where cost variables are minimised, price divergence is eliminated,” he added.

    Abaloma said the Act, among other things, has a unique provision towards ensuring that level playing field is created for manufacturers, importers, traders and exporters.

    Debunking the impression that SON is all about enforcement, the SON boss stated that the agency’s preferred mode of conflict resolution is by negotiation, mediation and reconciliation.

    To this end, SON, he said, has established a full-fledged Alternative Dispute Resolution Desk within its Customs Feedback & Collaboration Unit, noting that this strategy was also a means of easing the cost of doing business.

    Abaloma stressed that this was where the link between the SON ACT 2015 and the Ease of Doing Business in Nigeria was intertwined.

    One of the resource persons, Mr. Ubong Esof Akpan, a lawyer, said the government ease of doing business can only succeed when Nigerian business men decide to do the right thing.

    He encouraged importers to embrace the one stop portal for registration to ensure they do their businesses effortlessly without recourse to under the table dealings.

    The Trustee of Shippers’ Association, Lagos State, Mr. Odolo Nicodemus, advised SON and other relevant government agencies at ports to inspect cargoes to reduce time of doing business.

    He urged other relevant regulatory agencies to tow the line of SON to make it possible for all documentation to be done online and ensure that all operators take advantage of the single window platform to achieve the 48-hour cargo clearance target of the Federal Government.

    Nicodemus hailed SON for reminding port operators about the importance of transparency in cargo procedures, stressing that transparency would reduce the bottlenecks facing government regulatory bodies.

    Also, the National Publicity Secretary, Association of Nigerian Licensed Customs Agents (ANLCA), Mr. Kayode Farito, urged SON to look into its overlapping functions with the National Agency for Food, Drug Administration and Control (NAFDAC).

    He urged SON to put its Standard Operating Procedures (SOPs) on its website to educate Nigerians on its procedures.

    He advised that SON should be a regulatory agency instead of generating revenue for Customs and also review the number of days involved in prosecuting an offender.

  • Diversification: Push for value chain addition in agric

    Diversification: Push for value chain addition in agric

    The economic diversification programme was anchored on the agric sector because of its potential to create jobs, boost domestic demand, and generate significant foreign exchange. But its capacity to deliver these benefits is hampered by lack of investments in value chain addition. Most raw materials from the sector are exported without any value addition, resulting in loss of huge revenues and jobs. Experts say that massive investments are required to increase production and create value addition in the sector. Assistant Editor CHIKODI OKEREOCHA reports.

    Despite agriculture being Nigeria’s single largest economic sector, its impacts on government and export revenues have remained relatively small. In 2016, for instance, the sector accounted for a meagre 4.8 per cent of the total foreign earnings and 24.4 per cent of Gross Domestic Product (GDP).

    For a sector upon which Nigeria anchored its hope of diversifying the economy, following the crisis in the international oil market where crude oil prices have been tumbling, causing serious upsets in the finances of Africa’s largest economy and oil producer, this is unacceptable.

    It is even more unacceptable, perhaps,disheartening, particularly considering that it was not the case for the sector in the past. In the 1960s. Before the discovery of crude oil, agriculture was the mainstay of the economy, accounting for an average of 57 per cent of GDP, and generating as much as 64 per cent of export earnings.

    Nigeria was a big producer of many agric commodities. The country was a global powerhouse in cocoa production and export, for instance. She also had competitive and comparative advantage in other non-oil products such as cassava, groundnut, palm oil, cashew, sugar, rice, Sesame seed, and wheat, among others.

    However, from 1970 to late 2000s, the sector’s fortunes nose-dived, and its GDP contribution and export earnings started declining steadily. That was when Nigeria shifted its focus on crude oil and neglecting agriculture, despite boasting 82 million hectares of arable land that can support commercial agriculture.

    But the recent fall in crude oil prices has since forced a strategic rethink in favour of transforming the agric sector to diversify the economy and exit recession. According to experts, the agric sector has the potential to create jobs, boost domestic demand, and generate significant foreign exchange.

    Despite the emphasis on agric, the sector, according to experts, has remained largely under-developed, primarily because the focus has been on production, rather than on enhancing value addition across value chain segments. They noted that most of Nigeria’s agric commodities are exported in their raw form, without value chain addition.

    Indeed, most semi-finished or finished products attract more value at the international market than products in their raw forms. By converting the raw materials into semi-finished or finished goods through processing, before exportation, more Nigerians across the value chain will be employed and the size of the sector’s contribution to GDP will increase.

    But because of issues around infrastructure such as steady and reliable electricity, processing facilities, access roads and rail transportation, among others, to ease conversion of these raw materials or agric commodities into semi-finished or finished goods for exportation, Nigeria has practically been exporting jobs and importing poverty and unemployment.

    Nigeria’s cocoa industry is a case in point. Nigeria, according to the United Nations Food and Agriculture Organisation (FAO), is world’s sixth largest cocoa producer, behind Cameroun, Brazil, Indonesia, Ghana, and Ivory Coast.

    Out of the country’s total production volume of 248,000 tonnes of cocoa beans, only 30 per cent is processed into cocoa derivatives such as cocoa powder, cocoa butter, and cocoa paste, with the remaining 70 per cent exported without processing.

    Yet, the processing of cocoa into cocoa derivatives is the highest value adding activity in the cocoa value chain. It has the potential to generate significant export revenues. For instance, in 2015, cocoa, a key cash crop, accounted for 21 per cent of Nigeria’s agricultural exports and generated $711 million in export revenue.

    These were some of the findings contained in a new report by PwC Nigeria, a firm, which delivers quality in assurance, advisory and tax services. The report was titled “Transforming Nigeria’s Agricultural Value Chain: A case Study of the Cocoa and Dairy Industries.”

    The report, which was obtained by The Nation, identified poor infrastructure, low investment, and unfavourable government policies as some of the factors hindering the exploitation of the opportunities in the nation’s cocoa value chain, for instance. It also observed that Nigeria’s cocoa production was highly subsistent and harvest done in small quantities.

    Experts at PwC Nigeria said, “From our survey, a combination of inadequate farm inputs, in particular improved seedlings and fertilisers, high disease and pest incidence, limited agricultural mechanisation, ageing cocoa trees, and inadequate extension services have been responsible for low cocoa yield.”

    The added that production was further limited by the size of the cocoa plantations, which is an average of 2.5 hectares (ha) farm size. Besides, cocoa processors in Nigeria, the report said, “are underutilised, as Local Buying Agents (LBAs) and cooperatives prefer to sell cocoa beans to merchants, who offer a higher premium than processors.”

    The report, therefore, recommended that “introducing an appropriate tariff on cocoa beans exports to disincentivise LBAs and cooperatives from selling to merchants could be a policy for upgrading processing in the cocoa value chain”.

    It added that Nigeria’s agric sector requires massive investments to increase production and to create value addition across the most profitable segments of the value chain.

    The report identified the various actors and stakeholders in the nation’s agric value chain as regulators, Federal Ministry of Agriculture & Rural Development (FMARD), Standard Organisation of Nigeria (SON), and National Agency for Food, Drug Administration and Control (NAFDAC).

    Others are finance institutions, Central Bank of Nigeria (CBN), commercial banks, private equity firms, and Nigeria Sovereign Investment Authority (NSIA); Development Finance Institutions (DFIs) including Bank of Agriculture (BoA) and Bank of Industry (BoI). There are also local and international research institutes.

    The key players or actors are those involved in input supply, production, processing, marketing/trade.

    The report identified poor access to improved seedlings, high cost of agro-chemicals, difficulty in acquiring land, and climatic variation (high temperature and irregular rainfall) as the challenges facing operators in input supply.

    It also said agric commodity producers are challenged by frequent pest and disease attacks, poor irrigation systems, low utilization of mechanised tools, and inadequate research.

    On the other hand, operators in the processing segment of the value chain are faced with high cost of power and processing equipment, limited storage facilities, and inadequate skilled personnel.

    The report added that marketers and traders are plagued by illegal food imports, poor road network, low cost of imported agricultural products, and inadequate market information.

    Sadly, while Nigeria, despite her competitive and comparative advantage agric commodities, has yet to address these obstacles to the effective development of the value chains, other less endowed countries are deriving immense benefits from the agric sector.

    For instance, in Brazil, improvement in the country’s agric value chain resulted in agri-business generating 16 million new jobs in 2012 and accounting for 46.3 per cent of exports in 2016. Also, Brazil has become a global producer of many agro processed commodities including orange juice, sugar and ethanol.

    The PwC report said Brazil’s agric value chain developed because of the availability of improved seeds, improvement in soil fertility, increased adaptation to technology, and the support of domestic and international research institutions.

    Developments in the global cocoa industry perhaps, bring the reality of Nigeria’s poor showing in the agric sector nearer home. For instance, The Netherlands, a non-cocoa producer, boasts one of the largest cocoa producing industries in the world.

    The processing and exportation of cocoa derivatives generated $4.2 billion for the Dutch economy last year. It is the third largest exporter of chocolate in Europe. In comparison, Nigeria generated only $144 million from the exportation of cocoa derivatives to neighbouring countries like Ivory Coast, Cameroun and Ghana.

    According to experts, the global market for finished goods made from cocoa is about $ 200 billion annually. But unfortunately, Nigeria has not been able to claim a chunk of this market share because of lack of a vibrant chocolate industry to process cocoa into chocolate and other finished products.

    The Nation learnt that at present, 90 per cent of chocolate products in the Nigerian market are imported from Europe and other African countries such as Ghana, Cote d’Ivoire and South-Africa. There are few processing companies in Nigeria with the capacity to process cocoa into chocolate.

    Issues around regular supply of cocoa, capital to establish local processing plants, and the challenge of marketability viz-a-viz imported chocolate, among others, have been identified as serious obstacles to the emergence of a vibrant local chocolate industry.

    For the dairy value chain, the report recommends breed improvement, scaling up of dairy extension services, encouraging backward integration, improving processing tools, improved organisation of producer groups, and massive investment in cold chain technology.

    It identified the main actors in the chain as pastoralists and commercial dairy producers, local and commercial processors, retailers and consumers.