By Charles Nwaoguji 08032715118 [email protected]
The Nigeria’s manufacturing sector in 2018 witnessed heavy down-turn as many of the manufacturing companies shut down their factories and relocated to other West African countries due to the untold hardship in the country.
Despite its slow-paced growth, the nation’s real sector had its share of gains and pains in 2018, especially in the areas of backward integration of certain products, trade liberalisation, multiple taxation, incentives for growing industries, policy inconsistencies, poor funding, among others.
But Nigeria’s manufacturing sector is yet to find lasting solution to its various structural problems, resulting in a slow growth rate in terms of output and exports, low level of investment, high concentration of manufacturing industries in certain areas, resulting to uneven development, allocate 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.
Although the transformation agenda among other things, seeks to reset the economy from one characterised by low saving-investment ratio, low growth, high interest rates and taxes, low productivity and low technology to one of high saving-cum-investment, high technology productivity and high sustainable growth rates.
However, the 2019 financial year 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 quantities.
One of the biggest challenges which the Organised Private Sector (OPS) faced in 2018 was non-availability of fund for its operation. It was seen from all angles as the sector can no longer produce enough products to go round in the country.
According to the Managing Director of Biostadt Company Limited, Dr. Emma Ajayi, 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.
He said for the real sector to achieve success in 2019, government should rather seek to recapitalise the Bank of Industry (BoI), with sovereign funds to be invested into the bank from the Excess Crude Account on behalf of the government of the federation and zero percent ports surcharge on all imports should be channeled also to recapitalise the bank.
Government should also evolve funding support for organisation in the private sector employing up to 5,000 workers though a special fund or guarantee for bank loan, stressing that other countries have development banks for long term investments, particularly in the real sector.
The Managing Director of Managing Director of Sound Prince (SP) International Company Limited, Mr. Paulinus Ugochukwu, said the manufacturing sector was greatly affected by government policy inconsistency in 2018.
“Of course, the manufacturers made a lot of losses in the investment portfolio which resulted to low income to most of them,” he explained.
Ugochukwu noted it was 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 the times. Industrial policies should be made to have a timeframe which would ensure that it is adequately tested before changes are introduced if the year 2019 would be prosperous year for the sector. This will enable the Organized Private Sector (OPS) operators to maintain a projected plan,” he stressed.
As the 2019 financial year kicks off, there are moves to salvage the remaining part of local industries, as the Minister of Industry, Trade and Investment, Enelamah said the agencies under the ministry are developing initiatives to enhance government’s industrialization moves, as well as flow of investment in the country.
According to him, the government, through the ministry, had put in place strategies to restructure areas of critical needs and losses in the economy.
Okechukwu, while emphasizing the need for effective industrialization, said, “no country has become rich and moved a huge number of its citizens out of poverty by exporting raw materials and foodstuffs 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 cooperation 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 of Enterprises (MSMEs relevant in the economy, the Federal Government set up Development Bank of Nigeria (DBN).
The Managing Director of the bank, Mr. Tony Okpanachi, said the Development Bank of Nigeria is gearing up to provide N5 billion to 20,000 Small and Medium Enterprises (SMEs) in its first full year of operation on a sustainable basis.
He said the lending started in November 2017 with loans to three of the largest microfinance banks in the country.
“DBN management is taking this phenomenal responsibility very seriously and we are determined to ensure that serious entrepreneurs get the support they need to grow so that the positive impact is felt in their businesses and the economy as a whole,” he said.
On repayment terms for DBN loans, Okpanachi said the institution will “provide funds for up to 10 years in terms of actual repayment period but when necessary we also provide a moratorium of up to 18 months.”
He said DBN loan cuts across all sectors of the economy. “Our mandate and operations seek to achieve the Nigerian Sustainable Banking Principles (NSBP) of the Central Bank of Nigeria (CBN), where financial inclusion ranks high, as well as the United Nations Sustainable Development Goals and are in line with the Economic Recovery and Growth Plan of the Federal Government of Nigeria.”
He said another step taken by the bank was the recent shortlisting of seven banks for loan disbursement to entrepreneurs across the country who meet the requirements.
Despite all these good promises from the Bank, loan to the SMEs are still very low and access to loan facility by the SMEs are still difficult.
Another serious problems which the real sector faced in 2018 was the issue of multiple taxation which has led to the closure of many factories. It’s believed that if care is not taken by the government, the way, they are going about collecting multiple taxes from companies, most especially the manufacturing sector- the SMEs, more factories are expected to shut down in 2019.
The Founder/President of International Centre for Tax Research and Development (ICTRD), Mrs. Morenike Tejade Babington-Ashaye said it is only in this part of the world that SMEs (manufacturing ) are allowed by the government to suffer and die natural death.
She called on Federal government to allow the Small and Medium Enterprises (SMEs) to pay a single rate of tax that could cater for income and services that relate to their trade whether from local, state and federal government.
“The world is moving away from ‘Bus Stop’ tax methods, adding that with the numerous taxes, levies and fees that taxpayers face in this country , the government must have solution to the problem,” she explained.
“It is a known fact that SMEs are too much involved in their products and services that they have little time for accounting and tax administration. The Internal Revenue Service should create a platform where SMEs could register with their neighbourhood professionals in the field of accounting and taxation. These professionals service them and government pay them from the taxes collected from the enterprises,” she said.
The Manufacturing Association of Nigeria (MAN), also called for the commencement of the implementation of the harmonised taxes and levies and to allow the Joint Tax Board (JTB) monitor and enforce compliance by states and local governments. It said that the government should be more interested in result-oriented spending with frugality, be more transparent and accountable in order to assuage the psychology of taxpayers for improved tax compliance.
A major challenge to the development of the sector is the infrastructural imbalance within Nigeria, particularly adequate electricity supply, and access roads to sites of the factories.
However, according the Managing Director of Lashone Links Group of Companies, Dr. Lanre Shonekan, the privatization of the national utility and reform of the power sector are stimuli for private investment in the sector. As capacity increases with new investments in the generation, transmission and distribution of electricity, the shortages currently being experienced will be overcome.
He said pending the resolution of the power problem on a national scale, manufacturing sector can meet their power needs by engaging independent power producers for captive generation and supply of energy to the manufacturing sector.
Furthermore, he stated access roads will ultimately improve with the ongoing investments by the Federal and State Governments in road infrastructure. “The ongoing rehabilitation of the rail lines will also facilitate product evacuation across the country for export.”