Henry Okonkwo
Mr. Ambrose Oruche, Acting Director-General of the Manufacturers Association of Nigeria (MAN), who doubles as the organisation’s Corporate Affairs Director is understandably worried about the disruptions and devastating impact of the COVID-19 pandemic, but more importantly, lessons have been learnt. In this interview he talks about these, the postponed AfCFTA (African Continental Free Trade Agreement), it’s implications for Nigeria and much more.
COVID-19 gave a big blow to our economy. How has the pandemic affected Nigeria’s manufacturing sector and are there lessons to be learned from this experience going forward?
By now everyone should know that the COVID-19 disrupted a lot of things, and manufacturers were worse hit because factories were shut down, and most of the machines when you shut them down to restart them takes a lot of resources and energy. And because of the sudden lockdown, some raw materials were wasted. The lockdown was a terrible period because we shut down factories, and yet had to pay workers’ salaries, redeem the loans taken from commercial banks, and still pay our tax and the rest of them. We had constraints in sourcing raw materials. The value chains were constrained. Most of the materials ordered could not be imported because of restrictions on export from the countries of origin. Majorly hit by the lockdown were the APIs (active pharmaceutical ingredients) used by pharmaceutical companies for the production in China and India and a several of other countries. At a point they began to recall some of the ones they had shifted into Nigeria so they could sustain the firms in their country.
During the total lockdown, movement was restricted, so those that produced could not sell, and you can’t move your consignments. Even the essential commodities that were allowed to move around, there was human restriction caused by military and security agents that were supposed to man the checkpoints, and they insisted that they must be ‘settled’ to allow delivery trucks to pass.
So COVID-19 lockdown disrupted a lot, in terms of production, marketing and sales. But are there new n opportunities? I’ll say yes because the lessons manufacturers should learn from this is to begin to look inwards for their raw materials and not depend entirely on imported raw materials, to avoid being affected if there is any restriction in export in the future.
Another is the issue of automation, because in the wake of easing of the lockdown, we were now asked to maintain physical and social distancing. So the lesson learned is to upgrade your facility to be able to take advantage of technology. We’re talking about the Fourth Industrial Revolution (4IR), which has much to do with robotics and artificial intelligence.
You recently applauded the CBN for some of their fiscal measures, like the N50 Billion intervention fund set aside to bail out manufacturers. How have operators in the manufacturing subsector been able to access these funds?
It is not a good story to tell really. In as much as I appreciated them for being thoughtful and coming out with these intervention funds, but the actual fact is that the implementation was muddled by politicians. The fact is that N50 billion was approved and expended, but question is, to who? No one knows. Many of our duly qualified manufacturers applied, but their applications did not scale through. Most manufacturers didn’t get the money. It was traders that got the money, and how they were shortlisted no one knows. The Nigerian factor came into it.
And I don’t know why we must put Nigerian factor in a well thought out policy aimed to help manufacturers import raw materials to start production and create jobs. The money was shared, but to who, no one knows.
They should give us the statistics of the number and names of the people they gave the grants to. I know there is a confidential agreement between banks and their customers, but with our situation now, we require the banks especially, to come up with the names of people that got this money.
What about the other financial incentives, like tax relief that the government promised to grant business owners?
Nothing else was done. The government did not come into that. I know that the challenge of the government is that they are also looking for money to finance the loans they took. In the first quarter report, we were made to understand that 95 per cent of the revenue was used for loan servicing. So they are now left with the remaining five percent. We have a loan overhang. We have borrowed a lot, and the revenue is not coming. So even as other countries are giving stimulus package and providing palliatives for their industries, Nigeria is demanding from industries. That is the irony of it.
So what measures should the government take to accelerate the growth of the manufacturing sector?
The first is infrastructure. The government should not borrow from the capital market to finance infrastructure because they will crowd out the private sector. The private sector is the one that makes the economy move. So the government should rather partner with the private sector to build infrastructure by creating tax incentives. With right incentives, the private sector can now go to the market and borrow this money knowing that they would repay, and then find a way to make these infrastructure projects effective to be able to recover their investment. If the government wants to do this thing alone, it would not be possible. They should allow the private sector to be involved in infrastructure development.
Two, the inefficiency at all the ports is so enormous, especially at the seaports. The Nigeria Customs Service is a headache for importers. Their charges are enormous and throw importers into financial dilemma. That is why many manufacturers abandon their raw materials at the ports. I will advise that the Customs should rather emphasize trade facilitation instead of revenue generation. I know that government needs revenue, but we should not make all the agencies to be about revenue generation. So that companies can pay tax, create jobs, and remove unemployment. Hence, the government should look at it, and see how it can help the manufacturing sector to come back to business.
I’ll also advise giving priority to manufacturers for forex. In the course of the pandemic, there was a crisis in the international oil market and since our total revenue depends on the sale of oil, that has affected our inflow of forex. So we don’t have forex, and manufacturers need forex to import raw materials. We want the government to re-enact what it did during the 2016 recession when the oil price dropped drastically. The government created a sectoral allocation where manufacturers were allotted forex. They should also try to apply the same at this time to aid manufacturers.
You were once reported to have said that Nigeria was not previously prepared for the initial kick-off of AfCFTA. Please elaborate on this.
The major challenge that Nigeria has is the supply chain constraints, in the sense that our economy is a high-cost production economy because of the infrastructure deficiencies. Our ports are inefficient, it takes a longer time to take your consignment out; our road network is nothing to write home about; the railways are not there, and we have to understand that some African countries we are competing with have these facilities as a basic. Their railways are already there to move things from the inner parts to the ports, but we don’t have such here. These other African countries enjoy 24 hours of electricity at the right quality and price, but what do we have here? The power outages are so much, so we have all these infrastructural challenges.
So with the extension, we believe the government should be able to do something and make these inefficient factors to be a bit more efficient, so that when AFCFTA takes off, we can also take advantage of it and reap the benefits.
But how positive are you that these infrastructural deficits would be addressed within these few months? For example, the issue of power supply has lingered for decades yet no government has found solutions. How possible do you think that these would be straightened-out in a few months?
It’s not that all these would be there in five months. But we hope that by then the efforts the government is already making to get these things improved would begin yielding results. The government has made moves like the agreement with Siemens to generate power, the railway projects and some other initiatives. We assume that these projects would help our readiness. However, with what is on ground at present, I don’t think we’ll still be ready to compete with other countries in 2021.
With all the purported benefits of the AfCFTA, don’t you think Africa’s major trading partners like the European Union (EU) and China would feel sidelined?
No. The fact is that they are not being threatened, but rather they are encouraged to come to Africa, invest, and take advantage of the trade agreement. AfCFTA is to encourage our trading partners to bring investments to Africa instead of using it as a dumping ground. They should set up their plants and move in their goods within Africa thereby creating jobs and wealth for Africans.
Yes, I agree with you that some of them may not like the AfCFTA to function, but the EU is in support of the union. EU has invested so much in the African Union and in this process; they support the agreement and have invested so much in it. I see the agreement as a backdoor introduction of the Economic Partnership Agreement (EPA) that the EU wanted to sign with Africa that couldn’t work because Nigeria refused to be part of the process. EU has a neighbour in northern Africa so I think their intention is to use that link they have with North Africa to be able to get their consignments/ products moved within Africa. And that’s why we are insisting that safeguard measures and Rule of Origin have to be agreed on before we go deeply into this agreement.