Charles Nwaoguji, [email protected]
The manufacturing sector, like so many sectors, is facing a lot of challenges as the present economic situation in the country is greatly affecting the manufacturing sector. A recent report by CEO’s of Manufacturers Association of Nigeria (MAN) shows that the sector is facing severe challenges.
Challenges of manufacturers
Manufacturing CEOs revealed a number of challenges confronting the sector. The challenges range from power supply to cost of energy first and closely followed by multiple taxation and over regulations. Poor electricity and gas supplies/Non-reliability of gas supply /scarcity of diesel, Multiple taxation/levies/frivolous demand notices by government agencies, and over regulation are listed as key challenges. Similarly other challenges include high interest rate, difficult condition in accessing loans in Nigeria, poor accessibility to ports/gridlock at the national ports/high demurrages, poor economic infrastructure/bad roads/poor rail transportation, difficulty in sourcing Forex by manufacturers, low patronage/poor patronage from the government, counterfeiting/influx of sub-standard products, high cost of spare parts, poor purchasing power and non-implement of import ban on tomatoes/juices.
Interest Rate
This can be justified with the double-digit cost of borrowing from the commercial banks, which no doubt, discourages investment. They Affirmed need for measures that will lower cost of borrowing, particularly to the manufacturing sector. The volume of loan from commercial banks to the manufacturing sector does encourages productivity in the sector. It is therefore important that a policy should be designed to improve the proportion of commercial banks loanable funds that goes to the manufacturing sector. 28 percent of respondents agreed while the 18 percent were not sure if the size of the bank loan to the sector encourages productivity.
Access to national ports
The poor access to national ports and the associated gridlock negatively affect productivity in the manufacturing sector. The poor scenario accounts for delay in clearance of manufacturing inputs and machinery as well as high demurrage which increases cost of production in the sector and often times put manufacturing concerns in stock-out situations. It is therefore important that government urgently addresses the difficulty in accessing the national ports, particularly Lagos ports. One of the major challenges was lack of access roads. The bad road condition and absence of an efficient traffic management system are part of the problem. Poor state of trucks coming to the port, which makes it difficult to service them, cause a number of breakdowns affecting the terminal operations.
Fatigue on the part of the drivers after the long wait on the port access road also has potentials to cause accident leading to more gridlock.
Local sourcing of raw-materials
Notwithstanding the improvement, it is important that priority attention should be given to the development of local raw-materials while adequate forex is allocated for importation of vital raw materials that are at the moment, not available locally.
Patronage of Nigerian manufactured products
The patronage of Nigerian manufactured products has improved due to Executive Order 003 which mandated all government establishments to make Nigerian manufactured goods first choice in their procurement processes has improved but a lot more needs to be done. . No doubt, Executive Order 003 is novel, but there is need for proper monitoring and evaluation of the processes to ensure that all MDAs conform with the provisions of EO 003 be looked into.
Way forward
In order to improve the performance of the manufacturing sector in Nigeria, government must make conscious efforts to address the following challenges,
Repair and expand the roads leading to Lagos ports, make other ports outside Lagos functional so as to address the gridlock challenges and the associated cost; make FX more available for purchase of manufacturing inputs that are not locally available/ convergence of the existing FOREX windows, expedite the process of issuing manufacturers the End Users Certificate through liaison with the MAN as it is being currently worked out; continue to improve on the power supply and the general upgrade of the nation’s infrastructure; capital Expenditure component of the National budget should be conscientiously implemented to bridge the infrastructure gap; design and implement appropriate incentives for the struggling sectors; Oversight function of NASS should be coordinated through the supervising MDAs to obviate the incessant and unwarranted invitation of manufacturers to the National Assembly. Proper implementation of government laws and regulations; resolve the issue of back-dating of the reclassification of manufacturers as strategic gas users; ensure improved surveillance of the National borders to reduce the menace of smuggling and importation of goods on the prohibited list sold openly in supermarkets; improve supply of natural gas to manufacturers; Create a flexible condition to improve manufacturers’ access to fund.
Ensure compliance all tiers of government to the regulation on harmonised taxes so that only the approved ones are implemented; entrench better monetary policy management to reduce the currently high inflation rate in the economy; Ensure that NAFDAC & DPR agree on who inspects base oil used by the Petroleum Products Sub-group. Facilitate long term and low interest loan facilities to the real sector, at no more than 5 per cent. Ensure conscientious implementation, monitoring and performance evaluation of Executive Orders 003 for improved patronage of locally produced goods by MDAs. Pay particular attention to the development of railways around the national ports.