LCCI sees low activity, poor investor confidence killing Nigeria’s manufacturing

Says businesses moving south for forex

Lagos Chamber of Commerce and Industry (LCCI) has said that the declining state of Nigeria’s manufacturing sector could be linked to lower levels of activity, power fluctuations and dip in investor confidence arising from election uncertainties.

According to the chamber, the restrictive foreign exchange policies have also had negative impact on the sector.

The manufacturing sector’s growth has gone negative in the last two quarters, signifying a sector in recession. The CBN Economic Report for the second quarter of 2015 put index of industrial production at 110.2, indicating a fall by 5.9 percent and 6.6 percent in the preceding quarter of 2015 and the corresponding period of 2014, respectively.

Both capacity utilisation and index of manufacturing production also fell slightly.

Remi Bello, president, LCCI, said these were indications that things were not well for the productive sector.

“Looking more at the burdens of these restrictive policies, several foreign credit lines hitherto extended to Nigerian investors by their foreign counterparts have been lost following the numerous cases of payment defaults to foreign suppliers,” Bello said at the annual seminar of the Industrial Group of LCCI, held in Lagos.

“Even reputable blue-chip companies have defaulted for the first time in their several years of business relationship with their foreign suppliers. Considerable damage has, and is still being done to the image of many companies and the country in the international trade and investment arena. A major confidence crisis is being created for investors,” Bello said, in reference to the increasing burden of monetary policies on investors and business owners in the country.

He said many small businesses have moved to neighbouring countries to effect transfers to their suppliers, even as the banking sector is being denied considerable revenue which typically accrues from trade finance and related services to importers and exporters.

Ayo Salami, partner, KPMG, who was the keynote speaker, said the manufacturing sector has shed 40,000 jobs already while revenues that ought to accrue to the federal government is now going south.

Salami suggested engagement with the CBN with regard to exemption to finance import of inputs with no local capacity or with inadequate capacity, as well as collaborating with local producers to exhaust all local supply channels, as short-term measures.

In terms of long-term measures, he suggested procurement of capital items and import as ‘foreign loan’ to facilitate the processing of COLCI (and repay/pay the principal and interest), as well as domestication of the production of most of the items on the list.

“The intent of the policy is good but the problem is in the manner of implementation,” he said.