Minister of Industry, Trade and Investment Dr Okechukwu Enyinna Elelamah has a major task-to revive the moribund real sector, whose contribution to the Gross Domestic Product (GDP) stands at a meagre 9.5 per cent. Is he up to the task? Operators and experts point the way forward. CHIKODI OKEREOCHA reports.
The task before the Minister of Industry, Trade and Investment, Dr Okechukwu Enyinna Enelamah, is enormous. He came at a time the real sector is the focus of the Federal Government’s strategic rethink in favour of weaning the economy of its age-long over-dependence on oil revenue. This means that the responsibility of driving the diversification agenda rests on him.
Lagos Chamber of Commerce and Industry (LCCI) Director-General Mr. Muda Yusuf said the minister’s success would depend on the support he gets from other ministries and agencies to complement his efforts through appropriate policies and infrastructure.
“If the country does not have the right infrastructure and policies, he cannot succeed in his portfolio,” Yusuf told The Nation.
Describing the minister as “a good material,” he said the bulk of his work should be advocacy so that other agencies would collaborate with him in the task of repositioning the real sector, especially manufacturing, to play its role as a catalyst of economic development through the provision of basic infrastructure.
“He can only succeed to the extent that other ministries complement him to drive the real sector,” Yusuf emphasised.
Manufacturers Association of Nigeria (MAN) president Dr. Frank Udemba Jacobs said Enelamah must concentrate on improving on the nation’s poor infrastructure such as electricity, roads and railway among others. According to him, the dearth of infrastructure especially poor electricity supply is responsible for the rising cost of production, which in turn lowers manufacturers’ productivity and competitiveness. It is also responsible for the high mortality rate of manufacturing firms in the country.
Jacobs, who spoke with The Nation on the sideline of the 48th Annual General Meeting (AGM) of MAN, Ikeja branch, held in Lagos, last week, noted that without infrastructure, locally manufactured products won’t sell beyond the country’s shores. Pointing out that the manufacturing sector, more than any other, has the greatest capacity to create wealth, generate employment and facilitate skill acquisition, he said: “All obstacles to its sustainable growth and development should be removed in order to achieve its full potential.”
He also said the minister must address fiscal and monetary policies that have worked against the manufacturing sector. Although he described Enelamah’s emergence as industry minister as “a welcome development”, Jacobs pointed out that one of the policies the minister must address is the Central Bank of Nigeria (CBN) Foreign Exchange (forex), which prohibits importers from accessing its forex window for 41 items that can be sourced locally.
Jacobs lamented that under the forex restriction policy, which has thrown manufacturers into confusion, some essential raw materials that are not available locally were lumped together with finished products. He argued that only imported finished items should have been on the list for the policy to be truly beneficial to the manufacturing sector and the economy generally.
Noting that the challenge of inadequate forex and CBN’s new forex guidelines, to a large extent, negatively affected manufacturers and increased the cost of production, Jacobs raised the alarm that if not addressed , the policy could result in factory closures and loss of jobs.
Indeed, the picture of the real sector Enelamah inherited is everything but inspiring. For instance, over the last decade, the manufacturing sector’s contribution to the nation’s Gross Domestic Product (GDP) stood at an average of four per cent. Although, there was a significant increase in the sector’s contribution to GDP to 9.2 per cent in 2013 following the rebasing exercise, before it peaked at its current 9.5 per cent, the figure is still considered a drop in the ocean.
For instance, while Nigeria’s real sector contribution to GDP is 9.5 per cent, those of US and China stand at 35.6 per cent and 49.5 per cent, respectively, according to the Chairman, Economic Policy Committee (EPC) of (MAN), Reginald Ike Odiah. He said Japan, India and Germany also parade 38.2 per cent, 38.4 per cent and 35.9 per cent real sector contribution to GDP.
Odiah, who made this known at the 48th AGM of MAN Ikeja branch, expressed regrets that, despite priding itself as Africa’s biggest economy following the recent re-basing of the economy, Nigeria has been unable to ensure the support and development of her real sector to grow her economy the same way other countries with large populations like hers such as China, India, Indonesia and Brazil did.
In a paper he presented at the AGM titled:“Serious Constraints to Sustainability of the Real Sector (From a Manufacturer’s Perspective)”, Odia, who is also Managing Director of Bennett Industries Ltd., said when adequately developed, the benefits derivable from the real sector, which includes agriculture and manufacturing are huge. According to him, the sectors have enormous backward and forward linkages with other sectors of the economy.
Indeed, Odiah and other experts believe that the real sector holds better prospects of galvanising the economic. According to them, the sector is more inclusive and sustainable, growth-oriented and also characterised by high economic linkages.“The real sector of any economy is the engine of growth. The need to ensure a healthy and strong real sector therefore, cannot be over emphasised’’, Odiah pointed out.
The need for a robust real sector has become more compelling now that oil prices are plunging, compelling the Federal Government to shift focus to the sector in the hope of reversing the trend where oil revenue accounts for more than 75 per cent of government’s revenue and close to 90 per cent of foreign exchange income. For real sector operators, this is the most auspicious time to unlock the massive potential in the manufacturing sector and increase its productivity through result-driven policies.
One of the major steps is for the minister to work with relevant ministries and agencies to close the huge infrastructure gap, particularly power that has been a thorn in the flesh of manufacturers. The consensus is that the power sector reforms embarked upon by the immediate past administration failed to offer manufacturers the needed succour. The crisis in the energy sector has refused to abate. The power sector privatisation has not seen any significant improvement in electricity supply to residential and industrial consumers.
“A situation where manufacturers spend a whopping N500 billion annually on in-house power plants along with other added costs of providing other infrastructural deficiencies certainly is out of the equation,” Odiah lamented, noting that apart from basic infrastructure, other major components the minister must focus on, working with other relevant ministries and agencies, include good governance, financial reforms, security and corruption.
He said, for instance, that a good government must constantly look inwards with a view to encouraging consumption of locally made goods. “This is the first step to developing a strong real sector. A strong internal market for locally-made goods will create employment, reduce crime and bring prosperity to the people,” Odiah pointed out.
In recent time, unemployment rate has assumed a scary dimension and is believed to be contributing largely to the insecurity that pervades the nation. Investors’ confidence has also drooped. Most local and foreign investors are said to be holding back, waiting to see a significant improvement in security of life and investments.
Although these issues present significant challenges to the new minister, industrialists and members of the Organised Private Sector (OPS) say he has no reason to fear if only he could pay closer attention to the challenges facing the real sector. Some of them who spoke with The Nation said in doing so, the minister must give room for robust consultations with private sector bodies for input into policy formulation processes and a universal application to all investors in a given sector.
For economist and Managing Director of Cocosheen Nigeria Limited, Mr. Henry Boyo, respecting the sanctity of monetary stability would help reposition the real sector. “The pillar of any economy is monetary policy and the pillar of monetary policy is interest rate, inflation and exchange rate. When you get those ones right like in other countries you will fix the sector and the economy generally,” he declared.
Delivering a paper titled: “Future Growth and Capacity Utilisation of Nigeria’s Manufacturing Sector in the Context of New Economic Realities and Tariff Policy Constraints” at a 44th AGM of Apapa branch of MAN, Boyo said: “high interest rate makes it impossible for the real sector to grow”. According to him, there is need to stem the crisis of excess liquidity in the system, which is responsible for the high interest rates, inflationary pressure, and devaluation of the naira.
According to him, excess liquidity in the system is caused by Central Bank of Nigeria (CBN) “crazy, merciless, insensitive, and unilateral policy” of substituting naira allocations for dollar-derived revenue. He said CBN’s conscious, deliberate and misguided payment arrangements result in market imbalance, which ultimately weakens the naira exchange rate.
Can Enelamah ride the storm? Only time will tell. But going by his intimidating resume, operators and stakeholders are hopeful that the Abia State-born medical doctor, chartered accountant and chartered financial analyst would deliver.
