Business
2010: Mixed Grill For Nigeria’s Manufacturing Sector
From all indications, Nigeria’s manufacturing sector has recorded some improvement last year due to a number of reforms initiated by the Federal Government.
The Manufacturers Association of Nigeria (MAN) says that macroeconomic indicators in 2009 showed that the country’s Gross Domestic Products (GDP) grew by 7.0 per cent in the third quarter of last year, compared with 6.13 per cent in 2008.
The association says the growth was driven mainly by the non-oil sector, particularly agriculture, which accounted for 45.35 per cent of the GDP.
Industry operators attribute the feat to the latest round of Central Bank’s banking reform programme, which started in August 2009, saying that the reform has impacted positively on the manufacturing sector in 2010.
They also note that the Federal Government’s Power Sector Reform Programme, aimed at fully liberalising power generation and distribution, has also boosted production in the manufacturing sector.
They say that the two reforms, if well implemented, are capable of reviving manufacturing activities and the national economy, while aiding the fulfillment of the Federal Government’s Vision 20:2020, aimed at making Nigeria one of the top 20 industrialised countries in the world by 2020.
MAN, at its last annual general meeting, described the latest banking reforms as “timely, creative and critically beyond the teachings of liberal economic theory where the primary role of the central bank is macroeconomic stability and to ensure a stable banking sector’’.
The immediate-past President of MAN, Alhaji Bashir Borodo, conceded that it was rare for the CBN to initiate such initiatives to redeem the real sector of the economy directly, adding that such tasks often fell within the exclusive preserve of politicians, ministers of finance or national planning.
He noted that the World Bank and the International Monetary Fund (IMF) often viewed developing countries’ efforts to inject funds to prop up the real sector of their economies with scorn.
Borodo said that the banking reforms had a three-stage process which was first of its kind in any developing country, adding that the first involved the restructuring of existing short-term, high-interest loans into long-term loans with a low interest of seven per cent per annum.
Under this requirement, banks are expected to give loans to the real sector, using at least 50 per cent of funds received from the Bank of Industry (BOI), while the CBN guarantees loans given to
manufacturers and SMEs under the Medium Enterprises Credit Guarantee Scheme.
“We believe this bold initiative by the CBN will set the standards for monetary intervention in the real sector and will ultimately define the relationship existing between the banking sector and the real sector,’’ Borodo said.
The MAN chief, however, said that for the manufacturing sector, there had been “growing challenges’’, induced mainly by the economic environment of the country.
Industry watchers, nonetheless, commend the Federal Government for approving N150 billion for the manufacturing sector and N100 billion for the textiles sector, out of which N30 billion has already been disbursed through the Bank of Industry (BOI).
In spite of the intervention, experts say that many challenges are still confronting the manufacturing sector, stressing that a major limitation was the country’s energy crisis.
However, the Federal Government is not unmindful of the energy constraints, as it has repeatedly pledged to make electricity more available by 2012 via its power reform programme.
On August 26, for instance, President Goodluck Jonathan launched the roadmap to power sector’s reform, in which Federal Government is expected to sell off its 51 stake in electricity distribution companies and thermal power stations to private investors.
Under the new arrangement, however, the Federal Government will still own the transmission grid but the facility will be managed by private sector operators.
Prof. Barth Nnaji, the Chairman of the Presidential Taskforce on Power Issues, said that the Federal Government was working hard to ensure that some of the electricity companies were sold before the expiration of the administration’s tenure.
The measures notwithstanding, economic analysts contend that the limitations of the manufacturing sector include inconsistent government policies, poor infrastructure, multiple taxation, smuggling and importation of substandard goods.
They also criticise the new Federal Government policy lifting the ban on imported products such as textiles and fabrics, toothpicks and beverages, while extending the age of imported second-hand vehicles to 15 years.
The Minister of Finance, Mr Olusegun Aganga, who unveiled the new policy, defended it as a strategy aimed at encouraging Nigerian importers to use the country’s seaports for imports to generate revenue for the government and discourage smuggling of vehicles in particular.
However, Mr Jaiyeola Olanrewaju, the Director-General of the Nigerian Textiles Manufacturers Association (NTMA), said that the textile sector did not perform well in 2010.
He, nonetheless, said that some textile producers were able to have access to N30 billion, out of the N100 billion which the Federal Government gave to BOI for the development of the textile sector.
Olanrewaju bemoaned the state of Nigeria’s infrastructure, deploring the dismal state of the country’s energy situation in particular.
“Unless the power situation is improved, our industries cannot produce competitively, as imported items will continue to be cheaper than locally produced products,’’ he said.
The NTMA chief stressed that no country could develop without a productive industrial base which was hinged on regular electricity supply.
He described the new government policy lifting the ban on imported items, including textiles, as “absurd’’, particularly when locally produced fabrics could not compete with the foreign ones.
“Stakeholders believe that the ban should be maintained until the operating environment is conducive enough, as most of our textile products cannot compete with imported ones because of high costs of production,’’ he said.
Olanrewaju said that it was incongruous for the government that was struggling to ensure the revival of the country’s ailing industries to initiate such a policy that could provoke the closure of more industries and worsen the unemployment situation.
He wondered how textiles manufacturers would be able to pay back the loans they got from BOI if they were unable to produce and sell fabrics because of the new policy.
“It means the government will have to take over the factories sooner or later when they cannot meet their obligations to the bank,’’ he said.
Olanrewaju identified some of the problems plaguing the sector as poor electricity supply, prohibitive costs of diesel, gas and transportation, as well as bad roads.
Apart from textile manufacturers, other industrialists have bemoaned the government policy relaxing the import restrictions placed on certain manufactured goods.
They argue that the country would soon become a dumping ground for substandard products, stressing that the Federal Government must reverse the policy which, they say, is inimical to the growth of the manufacturing sector.
Alhaji Amuda Obelawo, the Chief Executive Officer of LOPIN Industries, identified the influx of substandard goods into Nigeria as the bane of the country’s industrial development.
Obelawo, who made the observation during a recent inspection of one of his factories by the Standards Organisation of Nigeria (SON), stressed that the importation of poor quality goods would thwart efforts to foster the country’s economic development.
“Government should stop the production and importation of substandard products because the buyers are just being hoodwinked to buy products that are not durable.”
“The proliferation of substandard products in our markets is affecting the national economy and is posing serious threats to the survival of indigenous companies.
“The government is also responsible for the problem because its agencies do not buy ‘Made-in-Nigeria’ products and quality goods because of selfish gains,’’ he said.
Obelawo alleged that many contractors handling federal, state and local government contracts were fond of using fake products in the projects, adding: “That is why we often see new buildings collapse.”
Still on the Federal Government policy, Dr David Obi, a member of MAN’s executive council, stressed that the lifting of the ban on the importation of certain categories of second-hand vehicles was an example of policy inconsistency.
Obi, who is also a member of the governing council of the National Automotive Council (NAC), urged the Federal Government to rescind its policy that increased the age of imported vehicles to 15 years, saying it would cause more harm than good.
He said that such a policy was a disincentive to some automobile companies itching to establish vehicle assembly plants in Nigeria, adding that such plants would also create more employment in the country.
Obi urged Nigeria to take a cue from China, a country which started the development of its automotive industry instead of relying on cheaper alternatives offered via the importation of used vehicles.
“In fact, China was offered thousands of used vehicles free of charge by Japan some years ago but China turned down the offer because it would interfere with plans to build its own automotive industry.”
“Nigeria now wants scraps to be brought into the country as vehicles without regard for the development of its automotive industry,’’ he said.
Obi stressed that the Federal Government ought to protect and nurture the development of the country’s automotive industry, urging it to learn lessons from the U.S. government which had always protected the country’s steel industry against unfair competition.
Reacting to the criticisms of the policy, Alhaji Jubril Martins-Kuye, the Minister of Commerce and Industry, said that the new policy on importation of used vehicles was not just to earn more revenue for government but also to make more vehicles available for the citizens.
He noted that neighbouring countries, such as Benin Republic and Togo, had 15 years as the age-limit for imported used vehicles, adding: “Somehow, these vehicles find their way to Nigeria through smuggling.
“And since the vehicles are smuggled into Nigeria, the Federal Government loses the revenue that should normally accrue to it and this is what we want to stop,’’ he said.
Besides, Martins-Kuye stressed that government only lifted the ban on those textiles that were not produced in the country, saying: “We only unbanned the importation of goods, including textiles, that we are not produced locally.’’
The minister pledged the Federal Government’s commitment to promoting Nigeria’s industrialisation, and explained why it had placed appreciable emphasis on the power sector’s reform, so as to make the country more investment-friendly.
All the same, industrialists have been commending the campaign to promote increased patronage of Made-in-Nigeria products, which started in August 2009, as a tonic that would boost the development of the manufacturing sector.
They, nonetheless, insist that the government should make concerted efforts to tackle the country’s energy crisis, saying that the achievement of a stable power supply in the country would play a pivotal role in transforming the national economy.
The experts also urge the government to provide low-interest credit facilities for manufacturers and reduce taxations on manufactured goods, while raising the duties payable on imported items to encourage local production.
All said and done, the experts believe that the development prospects for the manufacturing sector are quite bright in 2010.
Grace Yusuf
“Payment of tuition fees for undergraduate/postgraduate studies shall be subject to a maximum limit of $25,000.00 per semester,” the Manual states.
The expansion of international card limits also reflects growing confidence among lenders that foreign exchange liquidity has improved enough to support retail dollar transactions.
Speaking recently at the BusinessDay 14th Annual CEO Forum in Lagos, CBN Olayemi Cardoso, governor of the CBN said buying and selling activities now increasingly determine outcomes in the foreign exchange market, unlike in the past when market participants relied heavily on routine Central Bank interventions.
According to Cardoso, Nigeria’s net foreign exchange reserves have risen from just over $3 billion at the start of the reform programme to more than $40 billion, while gross reserves have climbed to about $52 billion, providing stronger confidence for investors and enabling the Central Bank to reserve interventions for periods of market stress rather than day-to-day liquidity management.
The restoration and expansion of international naira card spending limits are increasingly being seen as one of the clearest signs that the benefits of the CBN’s foreign exchange reforms are beginning to reach households, students and businesses making legitimate cross-border payments.
The Secretary-General and Chief Executive Officer, WEC, Dr Angela Wilkinson, disclosed this in a statement, last Thursday.
“Nigeria’s participation comes at a pivotal time as the country seeks to expand energy access, strengthen energy security, accelerate gas development and mobilise the capital required for industrialisation and sustainable economic growth.
“WEC Nigeria will convene leaders from across the energy ecosystem, apply the WEC’s globally recognised Energy Trilemma framework to Nigeria’s unique context, and promote evidence-based dialogue, practical collaboration and informed policymaking.
“It will also ensure that Nigerian and broader African perspectives contribute meaningfully to global energy conversations,” she said.
Wilkinson expressed confidence that Nigeria would play a significant leadership role at the World Energy Congress scheduled for Riyadh in April 2027 and beyond.
The statement also quoted the Chairman of WEC Nigeria, Isa, as describing the country’s participation as an opportunity to deepen national and African leadership within the global energy community through practical solutions tailored to regional development priorities.
He said the platform would promote collaboration across sectors and attract sustainable investments into Nigeria’s energy sector.
The Chief Executive Officer of WEC Nigeria, Wunti, was quoted in the statement as saying that the council would connect leadership, evidence and investment to build a secure, affordable and sustainable energy system.
“This system will be capable of driving economic growth and shared prosperity.”
According to him, the platform will also connect Nigerian institutions and businesses with international knowledge, technology, partnerships and investment opportunities through the World Energy Council’s global network.
Recall that WEC, founded in 1923, is the world’s oldest independent and impartial community of energy leaders and practitioners, advancing informed, collaborative and practical action across the global energy system.
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