• Friday, June 21, 2024
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BusinessDay

When manufacturers emigrate

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Usually, whenever the exchange rate of the currencies of some major economies inch a notch higher, there is panic among their policy makers. Japan and China are known to fret anytime their currencies pick up against the dollar. When they press the panic button, it is to protect their exports and make them remain competitive in the international market. A drop in the strength of their national currencies is good news to them. In fact, they take extraordinary measures to keep their currencies weak, a situation that has always triggered angry accusations from the United States of America and Europe.
Before President Muhammadu Buhari reluctantly allowed the Central Bank of Nigeria (CBN) to float the naira, he had feared that a weak national currency will impoverish Nigerians through an inevitable runaway inflation. He was absolutely right. And his predecessors equally knew it, hence the frenzied drive to mortgage the nation’s foreign reserves to prop up the naira. Somehow, this hand-to-mouth policy has been the hallmark of successive administrations. Years of neglect of the real sector, a period during which the major concern of policy makers was to structure a tariff regime that would make importation as cheap as possible, have finally caught up us.
The continuous frittering away of our foreign exchange earnings to import goods we could produce locally and sustain a policy regime that created the ambience for unbridled importation is about the greatest injustice done to Nigerians by successive myopic and naive leadership.
When the inevitable eventually happened with the removal of restrictions on the exchange rate of naira, the country was hit with the wide implications of the measure and the opportunities missed. From a relatively cozy rate of N197 to the US dollar, it went up by nearly 50 percent to over N280. In other climes, this could have elicited an air of optimism and excitement from the business community. Not unexpectedly, manufacturers have been put in a quandary. Capacity utilisation that was already hovering around 50 percent is now set to plummet.
Rather than seek fresh strategies to ramp up production for exports, manufacturers cannot wait for the proposed single market and passport under the auspices of the African Union (AU) to come on-stream so they move their machines to other countries with more clement environments. The challenge for the Manufacturers Association of Nigeria (MAN) is that the cost of sourcing of alternative power supply has become prohibitive. They did not complain about electricity supply from the public grid as they are used to having it as a standby source over the years. It is the astronomical increase in the cost of producing their own power that is the huge challenge. Diesel which until recently sold for an average of N120 per litre now goes for N200 or more. That, according to Frank Jacobs, president of MAN, is one burden too many. Escape route? Take their machines and jobs out of Nigeria.
Even before that is done, the country has been rapidly losing the benefits associated with an economy with considerable population. The country’s estimated 170 million people is said to provide a huge market for the smart investor. But that perception is quite questionable now that the level of deep poverty and the decimation of the middle class that have left the country with a demography of extremely rich few and extremely poor majority. That is not the definition of a huge market for the smart investor.
From the testimonies of Kemi Adeosun, minister of Finance and Godwin Emefiele, CBN governor, before the National Assembly last week, we are in a full recession despite the Minister of National Planning, Udoma Udo Udoma’s attempt to classify it as technical recession.
The major concern within the business community is the seeming unwillingness of the Federal Government to address the key economic issues that could energise the real sector. More than one year after coming on board, the administration has yet to come up with a road map for addressing the energy crisis. Of course, the Buhari administration is not directly responsible for the abject state of public power supply. But government is a continuum and the previous administration had done a great deal in building a new generation of power plants under the NIPP programme.
The resurgence of militancy in the Niger Delta does not make it a justifiable alibi for the administration not to energise those power plants. If the Abuja considered the coming on stream of those gas powered plants critical to its developmental agenda, it would have taken a different approach in dealing with the issues in the region rather than the bellicose disposition towards the militants that apparently exacerbated the atmosphere of mistrust.
It does not inspire confidence in government when its key functionaries off-handedly blame the militants for the tragic state of public power supply in a manner that suggests it’s up to the citizens to prevail on the militants.
Since the late President Umar Yar’Adua reached out to the militants in 2007, the region has almost had uninterrupted peace until the advent of the current administration. The attitude of the administration is a reflection of where its priorities lie. If it considered the boosting of the power generation capacity in the country important, it would have done just that with the militants keying into the programme. If it considered job creation as a critical index for measuring success beyond the rhetoric associated with electoral campaigns, perhaps manufacturers would have had something to hope for and turn their attention to exploring the emerging opportunities.
Unlike the way banks were hounded and threatened when declining fortunes forced them to down size, the Federal Government cannot arm-twist private manufacturers should they decide to relocate their machines to other countries. Businesses thrive where they are welcome by the host government through a prudent regime of policies that will enable them operate at minimal costs and where policies are not routinely amended with the appointment of a new minister.
Pius Mordi