Nigeria’s industrial sector, which is regarded as the real sector of the economy, in 2016, was at its worst, when compared to other years. The year 2016 has so far witnessed more job losses and factory closures than any other period in recent history. For instance, between 2015 and April 2016, it is reported that more than 1,500 of the 2,500 registered manufacturing companies were shut down due to shortage of raw materials to continue production. Millions of employees of various manufacturing firms have likewise lost their jobs within the period.
The contribution of manufacturing as a share of total economic output in Nigeria declined in 2016. Many factors have contributed to the variation in sector share through time, many of which show both the vulnerability of manufacturing to global economic pressures, as well as the impact policy changes can have in reshaping the sector.
Prior to the oil boom of the 1970’s, manufacturing contributed approximately 10 per cent to Nigeria’s economic output. Thereafter, increased revenues from oil caused the sector’s relative Gross Domestic Product (GDP) share to decline; growth persisted albeit at a slower rate.
The recession caused by the fall in oil prices in early 2016 resulted in the decline of the manufacturing sectors. There is restriction of foreign capital inflows, which led to the shutting down of most of the industries.
Also in 2016, there was price manipulation through export and import subsidies, which encouraged the importation of intermediary inputs and thus the expansion of assembly-based industry, so that it contributed to 7.83 per cent of total economic output. However, the price manipulation discouraged domestic manufacture of inputs, as well as investment in the infrastructure and human capital required to do so in the future and this share soon began to decline. In 2016, import ban on 41 raw materials imposed by the Central Bank of Nigeria (CBN) was the worst policy introduced by the government, as most raw materials cannot be easily found in the country by manufacturers.
For most stakeholders who spoke to Daily Sun, the country’s forex policy had negatively impacted on the manufacturing sector as lack of access to forex had hampered manufacturing activities in the country. They said out of 13 activities in the manufacturing sector, only three had managed to record minimal growth. The three are oil refining, cement and food, beverages and tobacco.
This was further corroborated by Chairman of Toiletry and Cosmetic Manufacturing Group of Manufacturers Association of Nigeria (MAN), Mr. Ikpong Umoh, who said the policy and high interest rate payment have constrained the Nigerian manufacturing industry in no small measure.
Umoh, who is also the Managing Director of Stella Com. Limited, said Nigeria’s manufacturing sector is yet to find a lasting solution to its various structural problems. He said this has resulted in a slow growth rate in terms of output and exports; low level of investment; high concentration of manufacturing industries in certain areas, occasioning uneven development; technical inefficiencies, poor quality of products, and low level of research and development activities, which are necessary to be put on positive directions for successful implementation of the country’s transformation plan.
He said although the present government does not have agenda for the manufacturing sector, among other things, the sector is characterised by low saving-investment ratio, low growth, high interest rates and taxes, low productivity and low technology.
However, he believes that 2017 may offer a ray of hope for the real sector, if government’s commitment to industrial growth would aid the revival of moribund and near comatose industries such that decent jobs that would address the problem of unemployment and poverty are created in sufficient numbers.
One of the biggest challenges faced by operators of the Organised Private Sector (OPS) in 2016 was unavailability of fund for their operations. It was seen from all angles as the sector can no longer produce enough products to adequately serve the needs of the populace.
According the Chairman of ACCERS Limited, Mrs. Morenike Babington-Ashaye, the long term funding windows to ensure adequate flow of resources to the private sector at a minimum cost not above single digit interest rate to aid proper and effective planning and investment in the sector was eroded.
She said for the real sector to achieve success in 2015, government should rather seek to recapitalise the bank through a form of sovereign funds to be invested into the Bank of Industry (BoI) from the excess crude account on behalf of the Federal Government and 0 per cent ports surcharge on all imports should be channeled also to recapitalise the bank.
“Government should also evolve funding support for organisations in the private sector employing up to 5,000 workers through a special fund or guarantee for bank loan. Other countries have development banks for long term investments, particularly in the real sector,” she explained.
For the Secretary General of International Chamber of Commerce Nigeria, Mrs. Olubunmi Osuntuyi, the manufacturing sector was greatly affected by government policy inconsistency in 2015.
“Of course, manufacturers incurred a lot of losses in the investment portfolio, which resulted to low income to most of them,” she explained.
She noted that it is a well known thing that investment in manufacturing requires long range planning, which can only work well with stable and consistent policies.
“Government policies in Nigeria have faced frequent changes over time. Industrial policies should be made to have a time frame, which would ensure that it is adequately tested before changes are introduced. This will enable the OPS operators to maintain a projected plan,” she stressed.
While emphasising the need for effective industrialisation, she said, “no country has become rich and moved a huge number of its citizens out of poverty by exporting raw materials and foodstuff alone without having a modern industrial sector supported by a vibrant service. Of course, this means shifting from trading commodities to higher value products; it means a refocusing on manufacturing and on natural resources.
“Above all, it means looking objectively at the concept and aims of international development cooperations and taking the route of wealth creation to reduce poverty. Anything else is a missionary approach to poverty reduction, which has kept about half the Nigerian population poor, despite decades’ long interventions. Manufacturing is undoubtedly the principal propellant in transforming human and natural resources.”
In making Micro, Small and Medium Enterprises (MSMEs) relevant in the economy, the Committee of Council was set up by the Federal Government at the last quarter of the year.
According to the Chief Executive Officer of BoI, Mr. Rasheed Olaoluwa, the bank has developed a new model to enhance MSMEs’ access to finance in order to aid their start-up and productivity.
“The bank has clustered the SMEs in a form of industrial pack to enable them negotiate better for funding and access to raw materials, rather than working through the grid. Many SMEs have not been able to overcome certain challenges due to their inability to collectively bargain and negotiate for basic infrastructure and adequate financing for the business,” he said.
“To reduce the cost of doing business by many SMEs, the bank has decided to address key challenges encountered by the businesses through a cluster approach by setting up industrial /cluster parks with all necessary amenities in order to address the issue of infrastructure, high legal documentation registration fees among others.”