In a bid to revamp the manufacturing sector which has dwindled over the years, the Central Bank of Nigeria (CBN recently announced a bailout package of N150 billion for the sector. Alexander Chiejina captures the hopes and fears of entrepreneurs over the pursuit of this objective
There is no doubt that the first two decades following Nigeria’s independence in 1960 had remained the glorious period of the nation’s economy. Several sectors of the economy experienced unequalled vibrancy during this period and contributed significantly to the nation’s Gross Domestic
Products (GDP). In its own case, the manufacturing sector played a great role in stabilising the engine of economic development in terms of employment, export and source of foreign exchange earnings.
Available statistics show that in the 1970s and 1980s, the sector contributed between 11 percent and 9.9 percent, respectively to the nation’s GDP. This same cannot be said of the current economic situation in the country.
Reports indicate that the contribution of the manufacturing sector to the nation’s GDP continues to dip year after year. Recent figures released by the Manufacturers Association of Nigeria (MAN), shows that the manufacturing sector contributes only four percent to the nation’s GDP. Also, industrial capacity utilization has also dropped to about 28 percent.
Currently, some local industries have continued to operate under severe environmental conditions such as poor energy supply, poor infrastructural facilities such as bad road network, lack of access to funds and high interest rates on bank loans, among other debilitating factors which has continued to affect the growth of the sector.
Given the plethora of problems the sector has been bedevilled with, The Central Bank of Nigeria (CBN) recently approved the release of N150 billion bailout fund being the first part of the proposed N500 billion bailout for ailing manufacturing industries in Nigeria. Governor of the apex bank, Lamido Sanusi, who made this assertion, said that the loans were intended to rejuvenate the near comatose manufacturing sector. Attracting an interest rate of seven percent, the loan is to be managed by the Bank of Industry (BOI).
According to the Governor, “We have concluded arrangement to release the sum of N150 billion to some 150 companies in the manufacturing sector in the first tranche release of the infrastructure fund. We will be signing agreements with banks that will be disbursing the credit next week. Each of the companies is to get N1 billion each.”
This recent development to revamp the sector has been received with mixed feelings by stakeholders in the sector. While some schools of thought see this as a welcome development, other stakeholders doubt its success of earlier botched schemes of similar profile.
Femi Duru, President, Lagos Chamber of Commerce and Industry (LCCI), described the CBN initiative as a welcome development, “provided the fund gets to the right people for which it was earmarked.” While soliciting for honesty and transparency in the fund’s disbursement, the LCCI boss cited the publication of beneficiaries of foreign exchange allocation by former Minister of Finance, Okonjo Iweala, as an example, the CBN should emulate.
“Even though we have been hearing of this life-line for long, it is good that it has finally taken off. I hope the implementation will be okay so that the money will get to the right people. I honestly hope it will go to the real sector and not to the wrong people. That is why I want to repeat what I have said before, that we should let Nigerians know the beneficiaries of funds like this. We have a very good example from Okonjo Iweala, who published a list of those who benefited from foreign exchange allocations when she was Minister of Finance”, Deru concluded.
For his part, Kehinde Oniwinde, Chairman, Pulp, Paper and Paper products, Printing, Publishing and Packaging group of Manufacturing Association of Nigeria (MAN), stated that if the bailout funds are meant for what it is stated, it is a good development. Oniwinde disclosed that there has been a clarion call to reactivate the industrial sector however, it is important to stress that the issue of implementation had always been the problem.
“The disbursement should be monitored to ensure that the money is used for what it is meant for. Besides, if it is meant for reactivating sick industries, then they should scale down the requirements for benefiting from it. A sick company cannot withstand what the strong one can do. “The condition to be given for ailing industries to benefit from the fund should not be too stringent. That was the problem most stakeholders complained of on the textile revival fund supervised by the Bank of Industry (BOI). We are not saying there should not be criteria for accessing the fund, but it should not be too stringent,” Oniwinde concluded.
While the intention to revamp the sector is a welcome development, certain issues which seems unclear is whether there was any thorough and critical look at operations of the manufacturing concerns before considering the mouth-watering loans. The CBN should perhaps have learnt some lessons from the controversial N200 billion special agricultural funds out of which one year on, borrowers have reportedly not been able to access the entire sum. Worthy of note is the need to urgently address, with utmost priority, infrastructural rehabilitation and expansion, which will provide the enabling environment for manufacturing to thrive.
For Simon Okolo, President of the Nigerian Association of Chambers of Commerce, Industries, Mines and Agriculture (NACCIMA), “It is a good development that the facility be extended to the re-financing and restructuring of existing loan portfolios to manufacturers, the agriculture and aviation sectors.”
Okolo however urged the CBN to match the pronouncement with action, regretting that the Federal Government had not been implementing some economic stimulus like the agriculture fund, the textile fund. Okolo went further to add that government should immediately release the fund and ensure that the funds are made available to the operators through the BOI, as specialized bank should desist from placing stringent measures for accessing the fund.