The Federal Government has renewed the push for the patronage of locally-produced goods and services. It envisages that this will reduce the pressure on the naira, stimulate economic growth, create jobs and, ultimately, mitigate the crippling effects of recession. But hopes of achieving these objectives are being threatened by the weak manufacturing base. Experts and operators argue that without the political will to match intentions with actions to reposition the sector, the ongoing campaign will, at best, be an hollow ritual. Assistant Editor CHIKODI OKEREOCHA reports.
The campaign resonated with manufacturers’ sustained clamour for a cut on the nation’s insatiable appetite for imported goods and services at the detriment of locally-produced ones. This was why the Federal Government’s renewed campaign to encourage the patronage of locally-produced goods and services enjoyed the endorsement of manufacturers and other private sector operators.
To them, the Made-in-Nigeria or ‘Buy Nigeria campaign’, though not new, is the much-needed tonic to revitalise the manufacturing sector and boost its competitiveness. The initiative, which started gaining momentum shortly after the 22nd Nigeria Economic Summit (NES) held in October in Abuja, with the theme: Made in Nigeria, also envisaged that a paradigm shift in favour of consuming locally-manufactured products and services will significantly reduce the pressure on Foreign Exchange (forex).
The pressure on forex, according to experts, was caused by the huge import bills and low receipts from exports. By curtailing the growing demand for forex for consumption rather than capital products and equipment, the thinking was that the local currency would be strengthened, while economic growth and development would be stimulated and jobs created.
Also, the initiative was expected to help reinvigorate moribund industries. The consensus was that a rebound of moribund industries, spurred by the renewed Buy Nigeria campaign, would help fast-track the ongoing economic diversification agenda, promote the Federal Government’s Backward Integration Policy (BIP) and boost non-oil exports, which, interestingly, are areas expected to help pull the economy out of the recession.
However, while the objectives of the ongoing campaign on patronage of Made-in-Nigeria products are no doubt laudable, real sector operators are worried that government’s failure to match words with action with regards to galvanising investments in the agriculture and manufacturing sectors may throw spanner in the works.
Renowned industrialist and Managing Consultant, Starteam Consult, Mazi Sam Ohuabunwa, did not mince words when he said: “We must match intentions with actions.” For instance, he was emphatic that if Nigeria pursues a determined manufacturing policy, most of her current economic challenges such as high unemployment, high inflation, and high exchange among others will abate.
According to Ohuabunwa, manufacturers’ and indeed, Nigeria’s major economic challenge is not shortage of forex, but low productivity. Hear him, “The major economic challenge we have is not shortage of dollars or forex, but low productivity. We export rubber and import tyres, export cocoa and import chocolate, export hides & skin and import shoes & hand bags; export crude oil and import Premium Motor Spirit (PMS), Dual Purpose Kerosene (DPK), diesel, and Jet A1.
“We will produce a lot of tomatoes but consume so much of imported tomato concentrate and puree. Much of the packaged cashew nuts we buy from our supermarkets are imported, made from the raw cashew nuts we export. And because the cost of buying a unit of the processed items is higher than what we earn from the export of the raw materials, we find that we are perennially short of forex.”
Presenting a paper entitled: Vibrant Diversified Economy: Panacea to Economic Recovery, at the 49th Annual General Meeting (AGM) of Ikeja branch of the Manufacturers Association of Nigeria (MAN), on Tuesday, Ohuabunwa said the surest way Nigeria could walk out of recession was through “a single-minded focus on manufacturing-production through value-addition.”
Nigeria boasts of bountiful agricultural and mineral resources which could make other less-endowed countries green with envy. Sadly, however, most of these resources, if not all, are exported in their raw form, without any value addition. The country does not process them from primary produce to secondary or intermediate products. Rather than do so, the raw materials are taken to factories in other parts of the world where they are processed and sent back to Nigeria.
The implication is that Nigeria ends up losing money that could have been made from finished products produced locally. More importantly, Nigeria creates jobs for nationals in other parts of the world, while the country continues grappling with unsavoury socio-economic consequences of rising unemployment particularly among graduates.
To reverse this trend, real sector operators and other stakeholders in the economy argue that the time to truly transform Nigeria into a primary, productive market and not a secondary market for the dumping of goods has come.
To make this happen, MAN President Dr. Frank Udemba Jacobs said that government should create attractive incentives for investors who would engage in the processing of the abundant agricultural and mineral resources from primary produce to secondary or intermediate products. “This would go a long way in attracting potential and current manufacturers into the use of local raw material inputs,” he said at the AGM.
Ohuabunwa could not agree less on the need for government to create what he called “irresistible incentives,” which, he said, would compensate for the nation’s current infrastructure deficit. “To compensate for our current infrastructure deficit, our poor score in the global ease of doing business index etc, we need to introduce mouth-watering and irresistible incentives,” he said.
He listed some of them to include tax holidays, lower corporate tax, lower cost of transferring & registering property, elimination of double & multiple taxation, sustenance of the Export Expansion Grant (EEG) scheme, establishment of many industrial estates, parks and free trade zones, tax deductible energy cost among others.
Jacobs also called on the government to continue the search for viable options of making forex available for manufacturers who he said must remain in business. While commending government’s recent efforts through the Central Bank of Nigeria (CBN) to give preferential forex allocation to manufacturers, he, however, said that some manufacturers are still having challenges with the intervention.
Describing the CBN’s recent directive to banks to allocate 60 per cent of their forex to manufacturers as “revolutionary,” and “a better option than banning anything,” Ohuabunwa said the intervention represents one key way of incentivising manufacturing in Nigeria especially at a time like this.
“If the government follow this with other fiscal incentives like the EEG scheme, we will not only be promoting local manufacturing but also exports that will help diversify our national revenue sources, lessen our current over-dependence on crude oil while reducing forex scarcity and pressure on the long run,” he added.
But like other laudable incentives and initiatives, the lack of political will to enforce the directive remained a clog in the wheel. “The challenge as always is how to enforce the directive. This is always our default line. Good policies, good intentions, good pronouncements and launching ceremonies but after that, the Nigerian factor steps in,” Ohuabunwa lamented.
He said the CBN must watch the backs of the banks and analyse their monthly returns and publications on forex utilisation, while manufacturers on their part, should set up a mechanism to monitor weekly allocations and provide feedback to the CBN and to Nigerians. Besides, industry groups, he said, should authenticate their memberships because, according to him, “emergency manufacturers will arise.”
The Nation learnt that these measures have become necessary because of the sorry state of the manufacturing sector. A combination of lack of critical infrastructure and lately, challenging monetary and fiscal policy environment, have weakened the manufacturing sector’s capacity to even produce goods and services for local consumption.
As a result of the harsh operating environment, many manufacturing companies are closing down rapidly. For instance, MAN said that as at August this year, as much as 272 firms closed down in the past year, 50 of them manufacturing outfits. It is also responsible for why Nigeria, according to Ohuabunwa, is occupying an unenviable position of 169 out of 189 on the Ease of Doing Business Index.
“We are not globally competitive,” the industrialist pointed out, adding that this is why the cost of manufacturing products in Nigeria is high, which results in high cost of finished goods when compared to goods produced in countries with better ranking on Ease of Doing Business Index.
He also described as worrisome recent data released by some international rating agencies about Nigeria. Hear him: “Standard & Poor’s, one of the biggest global rating agencies, has revised Nigeria’s sovereign credit outlook to negative, from the stable it was previously. Nigeria currently has a B+ rating by the agency.
“Fitch Ratings has affirmed Nigeria’s long term foreign and local currency Issuer Default Rating (IDRs) at ‘BB-‘and ‘BB’ respectively. The outlook on the long term IDRs is negative.” He added that at the moment, market contraction due to declining consumer purchasing power, increased decline in corporate sales and profitability, and growing corporate atrophy, morbidity and mortality.
Other market realities, he said, include increased delinquency in meeting obligations (credit defaults or increasing non-performing loans), and prioritisation of consumer spending, as many consumers now focus on needs than wants.
For Nigeria to surmount these challenges and make the Made-in-Nigeria campaign succeed, experts are of the consensus that the fiscal and monetary authorities must urgently take sensible and actionable policies to return the nation to a state of macro-economic stability. They pointed out that exchange rate, interest rate and inflation rate can all be moderated by sensible and co-ordinated policies.
