Taofik Salako (Capital Market Editor)
THE Federal Government is working on strategies to further enhance macroeconomic stability in order to halt decline in foreign direct investments (FDI) and make Nigeria a destination of choice for foreign investors.
Minister of Industry, Trade and Investment, Otunba Adeniyi Adebayo, at the weekend said government considered Nigeria’s attractiveness to foreign investors as a top priority and would implement economic policies to improve the country’s competitiveness in the global investment market.
The National Bureau of Statistics (NBS) recently indicated that foreign capital inflow into Nigeria declined from $5.82 billion in second quarter 2019 to $5.36 billion in third quarter 2019, a drop of 7.8 per cent.
Speaking at the CEO Interactive Session for Consumer Goods Sector organised by the Nigerian Stock Exchange (NSE), Adebayo said various reforms have led to improvement in the macroeconomic environment while government is committed to working with stakeholders to further make Nigeria a good destination for investment.
“Also high on the agenda of this administration is the stabilisation of our economy to recapture exiting foreign direct investments from the country,” Adebayo said.
He said the government will also continue to work with stakeholders to remove bottlenecks hindering the growth of domestic consumer goods industry in line with the inclusive and diversified economic agenda of the government.
He pointed out that the consumer goods sector remains a critical segment in the development and advancement of the Nigerian economy, urging stakeholders to collaborate with the government in the bid to optimise the intrinsic potentials of the sector and proffer solutions to the numerous challenges faced by operators in the sector.
According to him, the Federal Government remains committed to improving the business environment towards industrialisation and economic prosperity.
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Adebayo said the foreign exchange restriction on some items and the recent closure of border were part of strategies to enhance demand for locally manufactured goods and engender favourable competition amongst manufacturers.
He noted Nigeria has intrinsic growth opportunity for the consumer goods sector with estimated population of 200 million people and 72 per cent of its population under the age of 30, all which indicate huge potential for future investment and consumption activities.
He added that Nigeria is one of the fastest-growing consumer markets not only in Africa, but the world at large. Nigeria’s consumer market is valued at $377 billion in 2013 and expected to peak at $454.3 billion in 2025. This growth is driven by three major factors – Population, Urbanization and Increased spending power.
“You are all aware that the Economic Recovery and Growth Plan (ERGP) aims to achieve a more diversified and inclusive economy by 2020. We are therefore committed to work with stakeholders to eliminate the bottlenecks which hitherto have hindered the growth of the sector,” Adebayo said.
He outlined that the Ministry of Industry, Trade and Investment, through its Nigeria Industrial Revolution Plan (NIRP), is also addressing some key challenges in the manufacturing sector, such as limited access to credit and financial services, poor infrastructure and unreliable power supply, which have resulted to reduced competitiveness and profitability.
He added that the ministry is promoting a strategic linkage between agriculture and industry through the implementation of an agribusiness and Agro-Industry initiative (NAADI) with the main goal of value addition through processing of Agri-commodities.
Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr Oscar Onyema, said while recent data might suggest steady growth in the Nigerian consumer goods sector, the sector remains challenging.
According to him, over the last few years, Nigeria’s economic landscape has been particularly challenging for the manufacturing sector and particularly the consumer goods industry.
He noted that despite the implementation of different industrial policies and industrialisation strategies like the import substitution policy, export promotion strategy and foreign private investment led industrialisation, the sector has experienced policy reforms and directives that have negatively impacted on the performance of the sector’s value chain.
He outlined that the sector has also suffered a declining productivity rate largely caused by inadequate and epileptic power supply; substandard trade facilitation infrastructure; high cost of natural gas; multiplicity of taxes, levies and fees, high excise duties on imported raw materials; congestion at the Lagos seaports; and most recently the border closure; all of which have resulted in the reduction in capacity utilisation and output of operators in the sector.
He pointed out that in spite of the end of the recession and gradual economic recovery which started in second quarter of 2017, the Nigerian consumer market is yet to recover from adjustments in consumer spending patterns, following the crash in global oil prices in the second half of 2014 culminating in the 2016 economic recession.
“In 2019, the NSE Consumer Goods Index in particular has recorded a significantly higher negative return of 29.01 per cent year-to-date, compared to the NSE Industrial Index returning -13.26 per cent and the Main Board Index returning -22.48 per cent,” Onyema said.
He, however, noted that the consumer goods sector has witnessed some improvement as many consumer goods and industrial firms have looked inwards for local alternatives for raw materials, with specific focus on backward integration and also exploring different product lines.
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