Nigeria @ 62: Manufacturing in progressive decline

By Merit Ibe                           [email protected] 

That the Nigerian economy is in dire straits can only best be considered as understating the obvious. What perhaps would really be of concern to many at the country’s 62nd independence anniversary is the fact that its huge potential that ought to have catapulted it to the helm of continental and global economic champion are rather left to rot in various sectors due to its poor policy environment.

With foreign reserves rabidly depleted and the quest for foreign currency largely unmet, oil/ gas prices instability and weakened manufacturing sector crisis,  Nigeria’s  aspiration  for industrialisation remains a far cry at 62 compared to where it was at independence or viewed alongside other nations on similar economic pedestal at independence in 1960. Today, amidst these potential, the country’s economic and industrialisation dreams are still hobbled by high rate of insecurity, public sector corruption and other headwinds that tend to accentuate its tag of a failed state.

Despite efforts by successive  governments to industrialise the country and achieve sustainable economic growth, real sector stakeholders believe the economy is progressively declining.

Industrialisation, which was seen as the only means to achieve economic  growth and development, is yet to be accomplished after 62 years of nationhood.

The lack of industries, stunted growth in manufacturing,  rising unemployment unemployment rate, food insufficiency, lack of investments as a result of poor infrastructure, capital flight due to huge dependency on importation, inadequate raw materials supply, production of sub-standard goods, illiteracy/inadequate skilled manpower, among others are still a huge challenge to the nation.

This was even as the Federal Government disclosed that the manufacturing sector  has demonstrated over the years  that it remains the backbone of the country’s employment sector, with over seven million Nigerians under its employ.

Experts opine that for Nigeria to be relevant in a dynamic world, it must have a Gross Domestic Product (GDP) of over a trillion dollars, with the manufacturing sector contributing at least more than 21 percent.

At 62, the Manufacturers Association of Nigeria (MAN)  is worried that the sector that should propel job creation, productivity and economic growth is encumbered by a series of challenges as it recorded a dismal 9 percent average contribution to the GDP in three years, from 2019 to 2021.

The association listed its challenges to include power supply, which  remains a major headache for businesses; insecurity, decaying infrastructure,  shortage of forex and  naira  depreciation among others. These challenges have remained the bane of the nation’s real sector.

President of MAN, Ahmed Mansur, noted that the economy can not grow sustainably without a strong and competitive productive sector, since manufacturing sector is the engine of economic diversification and growth.

Mansur posited that  a robust manufacturing sector should be based on coherent and coordinated efforts resulting from close collaboration between government and manufacturers.

He lamented challenges such as forex scarcity, inconsistent foreign exchange policies, inefficient transport infrastructure, high production cost, weak consumer demand and the new competitiveness pressure foisted by the AfCFTA and adviced that efforts should be geared to solving these issues.

“There is the  need to develop a strong infrastructural base, as extensive, cheap and affordable infrastructure is vital for the success of our economy.”

“The forex issue has been a pain in the neck of manufacturers and businesses as they are unable to access it to enable them import vital raw materials, machines and spares that are not available locally.

Applauding the forex stance of the Central Bank of Nigeria (CBN), which he said has positively  impacted the nation’s forex reserve and deepened the backward integration  efforts of the sector, he lamented undue restriction of manufacturers’  access to forex, which has created trust issues with overseas  suppliers and reduced manufacturing output through prolonged stockout and factory shutdown.

He appealed to the CBN to also grant manufacturers increased access to forex to enable them meet with production demand and supply.

“Clearly, the sector is still in need of a comprehensive and concerted support system from the government, as observed  trend shows that the sector is struggling due to diverse familiar challenges.

“Manufacturers are still inundated with numerous, oftentimes duplication of demands from the tiers of government in form of taxes, levies, fees, permits, etc;

“Manufacturing companies are continually overwhelmed with multiple regulations from different regulatory agencies and excessive drive for revenue by government agencies;.

Dearth of trade facilitation infrastructure, poor access to the nation’s sea ports and longer turnaround time for clearance of cargo collectively stifle the smooth operations of manufacturing concerns.”

He also emphasised that the security situation in the country deteriorated in the last decade. “It impacted negatively on investment and worsened the country’s perception and image by the global investing community. “Access to markets in the troubled parts of the country has reduced for many enterprises with negative consequences for investors’ confidence.”

The power situation remains a major burden on businesses in the last 62 years of independence. It is one area in which the trend has been that of progressive decline.

Chairman, MAN Apapa branch, Frank Onyebu, in his view noted that manufacturing in Nigeria has gone through various phases in the last 62 years, influenced by various government policies.

“Most of these policies, starting from import substitution, through indigenisation and later liberalisation, have failed because of inconsistencies and outright policy summersaults.

“It is being speculated that the British colonialists did not prepare Nigeria for industrialisation, but we became independent from Britain some 62 years ago. I believe 62 years is long enough for us to find our feet.

“Unfortunately we appear to have been stagnant since independence. The import substitution policy of the 60s, which was designed to reduce the over-dependence on imports by transforming the economy from an agrarian to an industrial economy, did not work because the government did not fully grasp what it would take for a full industrial take off.

“All the emphasis was on protectionism and not on practical solutions to the challenges of industries.

“The indigenisation policy of the 70s, which was meant to transfer foreign ownership of major companies to Nigerians, failed because it was marred by unbridled corruption. Many of the new owners lacked the capacity to manage complex companies and therefore allowed several of the companies to disintegrate. 

“The later liberalisation/privatisation programme of subsequent governments also failed for similar reasons. Liberalisation also brought about uncontrolled importation of mostly cheap substandard finished products which led to the dearth of many manufacturing firms. The government also paid only lip service to diversification of the economy since it was getting sufficient revenue from crude oil production. “The situation has deteriorated over the years because of the lack of government commitment to industrialisation. There are no incentives to encourage manufacturing. Power supply situation deteriorated rather than improve. Access roads to factories are not being built. Most of the existing ones are completely dilapidated. Foreign exchange needed for importation of inputs are not available. The current state of insecurity does not allow for backward integration. The issue of multiple taxation still persists. The list is endless.”

He noted that the sector was experiencing more pains than gains as it has been neglected all these years, in spite of its huge potential.

“I feel we have not done well as a nation. The past 62 years appears to have been wasted. Isn’t it disheartening that most of the nations we started this race with have moved past us? We are still crawling in spite of our numerous resources. 

This is quite unfortunate because most developed economies owe their growth to the manufacturing sector. 

Proferring the way forward, Onyebu said however, it’s not all gloom. “We still have a chance to redeem the country. I call on the government to use the opportunity of our independence day anniversary to reset our collective button. Let us go back to the drawing board.”

He suggested that the government should urgently enact and fully implement policies that would encourage manufacturing in the country. The government needs to understand that revolutionising manufacturing is the only way out of the current quagmire. The government needs not only to encourage existing manufacturers but must also go all out to attract more local and foreign investments in manufacturing.

“To do this, it must create a healthy and attractive environment for manufacturing to thrive. All the above listed challenges must be tackled head on.

Dr Muda Yusuf, Founder/CEO, Centre for the Promotion of Private Enterprise (CPPE) and  also an economist, speaking on the gains in the economy, noted that over the past six decades the Nigerian economy has transformed significantly from a basically agrarian economy to an economy driven largely by services,  oil and gas. “While the agricultural sector contributed an estimated 70 percent to the country’s GDP in the sixties, its contribution has reduced.

Conversely, the services sector has grown significantly since independence and now contributes over 50 percent of the country’s GDP.

“These are indications of significant structural changes that have taken place in the economy since independence. The service sector contribution to employment generation and revenue to government has risen sharply over time.

“The over two decades of uninterrupted democracy, since 1999 reflect relative political stability which is also good for the confidence of investors.

“The Nigerian economy had recorded impressive growth rate over the past decades although with a few instances of sluggish growth.” 

However, the former director general of the LCCI disclosed that  the challenge of creating an inclusive growth trajectory remains a major concern, adding that  while the economy had experienced some positive growth trend over the past 62 years, especially in the oil boom era, the impact of poverty, inequality and job creation have been very minimal.  

“This is what is characterised as growth without development.”

 He lamented that the country’s macroeconomic management framework continues to pose serious challenges to investors in the economy.

“The macroeconomic management challenges over the years have manifested in the following ways; weak and depreciating currency, high inflationary pressure, high debt profile, exchange rate volatility, liquidity crisis in the foreign exchange market, increasing fiscal deficit, acceleration of money supply growth following the rising CBN financing of deficit.

“There are also profound concerns around investment climate issues.  High infrastructure deficit, cargo clearing challenges which have continued to worsen, weak productivity in the real sector largely as a result of infrastructure conditions, regulatory challenges and policy inconsistency.

“Persistent importation of petroleum products had continued to put pressure on foreign reserves and weaken the capacity of the CBN to support the forex market. Petroleum refineries have remained non-performing over the years.”

Lagos branch chairman of Nigerian Association of Small Scale Industrialists (NASSI), Gertrude Akhimien lamented the  lack of good leadership that had been the bane of the nation for years, noting that  good leadership will propel “us to succeed as a nation.” She cited a story of how Singapore rose from penury to become one of the biggest economies of the world and one of  the asian Tigers, due to good leadership. She however, commended individual Nigerians who have remained  resilient in spite of the difficulties. 

“Nigerians can succeed given a little  opportunity. That Nigerian spirit has always driven us to succeed no matter where we find ourselves in any part of the world. We succeed and show the stuff we are made of. For me, that is the gain we have had as Nigerians.

“The nation has not been lucky with leaders.  “We don’t have leaders with vision that can drive the different sectors of the economy with the right policies and individuals. Leaders  who can actually drive these policies and get them working. That is the unfortunate story of Nigeria.

In spite of all that, Nigerians can succeed given a little  opportunity. That Nigerian spirit has always driven us to succeed no matter where we find ourselves in any part of the world.

Beyond that, we lack leadership with vision, passion. The politicians don’t think about the people but just self centred. But it’s not too late, our children are becoming more outspoken and confident and I believe that they will take over this country and bring a change, that is my prayer.”

For his part, Executive Secretary of the National Association of Small Medium Enterprises (NASME), Eke Ubuji, noted that there are  indications that the manufacturing sector is lagging behind compared to other developed nations.

“One can say outrightly that Nigeria has not achieved industrialisation.

An industrialised country has several indications to show. We are still struggling  with epileptic power supply and therecan’t be industrialisation without power supply.

“Like in developed nations,  solid infrastructure like transportation by road, sea, and air should be efficient.

The road networks are not adequate and our our ports are congested and inefficient.”

He said though there is improvement in agriculture, in terms of producing food for local consumption, in the area of exporting our products, the nation needs to improve more.

“Abandoned projects by various administrations has played a negative role in industrialising the country; just like the Ajaokuta Steel Company Limited (ASCL), Kogi State and others. It was envisaged that the project would generate innumerable socio-economic benefits and increase the productive capacity of the nation through its linkage to other industrial sectors.

Ajaokuta company is yet to fulfil the yearnings of Nigerians to have localised steel products to boost the manufacturing industry despite successive administration’s continuous follow-ups.

“The necessity to reposition the steel in Nigeria has geared up to be part of this worthwhile aspiration, as history is yet to reveal a nation that ever industrialised without a viable steel sector. Nigeria cannot be an exception.

He proffered that measures should be put in place to ensure that local manufacturers  have easy access to cheap credit. These  credits granted to the manufacturers should also bear low interest rates, so as to encourage them to borrow.

“Encourage local manufacture of industrial machines to venture into the manufacturing of some of the heavy industrial machines imported from abroad.

Improve education system /manpower training; technical courses should be introduced into the secondary and university curriculum, with more emphasis on practical than theories.

The government should pursue policies geared towards improving the agricultural sector. When this is achieved, the sector can then guarantee enough raw materials for industrial production. This could be achieved through agricultural mechanisationn.

Favourable government policies like tax holidays, excise duty reduction and tariff protection and even  granting special loans to encourage export of locally made goods.

Provision of basic infrastructure like electricity, good road network, rail and water transport facilities, improved communication infrastructures and so on, and improve ports facility. These will enhance the growth of the manufacturing sector and industrialisation.

All these and more would facilitate the production and movement of goods within and outside the country.  Government should minimise the constant change of economic policies.

Measures should be employed to tackle the security problems in various regions of the country as it has hampered industrialisation.

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