By Merit Ibe, [email protected]
The Nigerian manufacturing sector has a lot of potential. But the sector is going through tough times and that is putting it mildly.
However, Chairman, Apapa branch of the Manufacturers Association of Nigeria (MAN), Mr Frank Onyebu, told Daily Sun that the sector has become a dying breed that needs to be rescued.
Excerpts
State of Nigeria’s manufacturing
Nigeria’s manufacturing sector is a dying breed. It is in a state of comatose. Factories are shutting down in their numbers. Some manufacturers with capacity are relocating to other countries.
But most manufacturers are unable to relocate to other countries owing to the huge financial requirement. It requires much more than packing a baggage and hopping onto an aircraft. The logistics of winding down an existing business and building a new business in a new environment is mind-boggling.
So, you see, only few manufacturers have succeeded in relocating. A greater percentage, however, have either wound down their operations or are in the process of closing shop. A lot more are also just hibernating, meaning they are just hanging onto life support, waiting for some miracle to happen.
I would say more than 30 percent of manufacturers fall into this category (that is, winding down, wound down or hibernating).
Most of them are in the small and medium categories.
Factors responsible for death of companies
Many factors are responsible for this, but they all revolve around a central factor – government’s lack of appreciation of the potential of manufacturing in the economy. I can say, without fear of contradiction, that agriculture and manufacturing could catapult this country from this current situation to heights we have never imagined. But the anchor has to be the government. Government needs to come up with very bold initiatives to grow the sector.
Government’s part
The government can do quite a lot. First it has to make the environment investment-friendly. By deliberately creating and implementing business-friendly policies. This will include tackling insecurity head on, dealing with the monster called corruption, closing the huge infrastructure gap, eliminating multiple taxation, making cheap credit readily available to manufacturers, giving preferential foreign exchange policies to manufacturers, among others.
How government can build infrastructure.
First, government has to reduce the cost of governance as well as eliminate corruption or at least bring corruption to the barest minimum. Then, it has to bring in the private sector to develop infrastructure. This can be done under the public private partnership (PPP) umbrella.
The impact of functional infrastructure cannot be overemphasised. It has a direct impact on the economy and the general wellbeing of the populace. It is a known fact that investments flow with infrastructure. I expect a threefold growth in both local and foreign investments if there is a massive overhaul of our infrastructure. This will not only open up previously inaccessible communities but will create employment for the teaming youths who would otherwise take to banditry and other crimes.
Insecurity
The Nigerian economy has lost humongous amounts, running into trillions of Naira, to the unprecedented level of insecurity in the past few years. To put it in context, try to look at the fact that farmers in most parts of the North can no longer go to farms. Large expanse of arable land are now lying fallow. Several factories that would otherwise rely on inputs from the hinterland have shut down. Mines have shut down.
General investments are going in the negative direction. There are hardly new investments in most sectors of the economy. Existing investments are disappearing. Even the Chinese, who are renowned risk-takers are packing up and leaving.
Cost of insecurity to economy
I would say the Nigerian economy has lost nothing less than 10 to 15 trillion Naira in the last five years, both in investments and lost investment opportunities. Agriculture and manufacturing would take a large chunk of this figure.
Cost of diesel
The current energy crisis, especially the astronomical hike in the price of diesel is a major cause of concern for manufacturers. This is more or less the proverbial last straw for struggling manufacturers, who have long been burdened with energy cost.
I say this knowing that African Continental Free Trade Area Agreement (AfCFTA) is already at the implementation stage with one obvious implication: uncompetitiveness of the Nigerian manufacturer.
The only way manufacturers could survive this diesel price regime is for a major improvement in electric power supply to industries. There is need for a deliberate policy to ensure manufacturers receive adequate/stable supply of electricity to be able to compete with manufacturers from countries with more stable power supplies.
Manufacturers could also turn to gas, which is a greener/cheaper source of energy than the current regime of N600 per liter diesel. This option, however, comes with a very high initial investment which many struggling manufacturers cannot afford at this time. The government would therefore need to intervene with some form of funding for this option to succeed.
Need for Change
We need to change our mentality. We need to embrace manufacturing. We need to embrace it as if our lives depend on it, because it does. I can categorically tell you that the survival of this nation hangs in the balance. The only hope of survival for us is to urgently embrace production just as we embraced consumption in the past. We have for long been tagged a consuming nation. We need to change this mentality. We need to change this mindset. We need to consciously do it, like China did so many years ago, like most of the far East countries did. There’s no way around it.
Advice to govt
The government needs to wake up to its responsibilities towards the Nigerian state. It must create the right environment for production. Fight insecurity; provide cheap financing and other incentives to industries; eliminate multiple taxation, work on infrastructure – access roads, power, etc.
The manufacturing sector must not be allowed to totally collapse because that would be disastrous for the already struggling economy. Besides being a major employer of labour, the sector contributes so much to the economy by way of taxes and savings in foreign exchange by manufacturing products which would otherwise be imported.
Advice to manufacturers
Manufacturers should do their utmost to remain afloat. Review processes, operations and energy mix. Adopt best practices. Eliminate wastes. Where it’s possible, substitute foreign inputs with local ones. Total dependence on imported inputs is obviously no longer sustainable.
I know things are hard. I know it’s not by any means, easy. But we have to begin to think out of the box. Tough times don’t last but tough people do.