Our Thoughts on Non-oil export and AfCFTA – MAN
The performance of the economy in 2018 was fair as it recorded fragile growth. On the high side, GDP growth increased to 1.81 percent in the third quarter 2018 from 1.50 percent growth recorded in the second quarter of the year. Inflation headed southward, exchange rate was relatively stable, supply of foreign exchange improved and manufacturing capacity utilization in 2018 hovered around 55.5 percent as against 57.14 percent of 2017. On the low side, national debt profile and servicing expenses soared; aggregate local sourcing of raw materials by the sector dropped to about 57.87 percent in 2018 from 63.21 percent recorded in 2017.
More worrisome is the fact that records have shown that beginning from the first quarter of the year. Government paid more attention to electioneering activities and little to economic management that would boost economic performance of the country. If you observe, since the economy exited recession in 2017, its performance has been positive but fragile. Therefore, in terms of the expectations of MAN for 2019, critical to manufacturers want FX stability, provision of long term loans, lower interest and inflation rates. Others expectations are adequate electricity supply, enormous reduction in the cost of doing business, reduce documentation and shorter cargo clearance time.
Our association is expectant that 2019 would be a good year if and only if government balances its election programmes with better management of the economy in the year, sustain all economic-oriented policies and resolve all the supply side constraints facing the manufacturing sector.
In terms of non-oil export, the National Bureau of Statistics (NBS) report shows that the contribution of non-oil exports to total export in 2015 was 12.1 percent, falling to 4.0 percent in 2016 and 4.6 percent in 2017. The record, therefore, indicates an urgent need for deliberate actions that would promote non-oil exports in the country. MAN believes that the starting point to increasing non-oil export is improving the productive capacity in the real sector, particularly the manufacturing sector. Consequently, we expect that in 2019, government would:
Intensify the resource-based industrialisation programme, which involves the resourceful utilisation of the abundant natural resources in the country for domestic production.
Develop key selected mineral resources through backward integration especially those with high inter-industry linkages such as iron ore, zinc-led, bitumen, lime stone and coal;
Encourage private sector investment in solid mineral development for domestic utilization with appropriate incentives;
Intensify backward integration in the agricultural sector to produce more industrial input supply for other sectors.
Further strengthen the Bank of Agriculture to continue to lend for agricultural production (crop and animal production) at a rate that supports production in the sector;
Resuscitate the petrochemical industry by encouraging domestic refining of crude petroleum – consider privatizing the four national refineries to make them fully function
Strengthen the various public research institutes in Nigeria through adequate funding programmes and support the commercialisation of research output.
Encourage private research institutes in the country through appropriate funding
Sustain implementation of the newly resuscitated Export Expansion Grant (EEG) by observing and improving on all the provisions in the new guideline so as to encourage more manufacturing production and export in the country.
On the African Continental Free Trade Area (AfCFTA), the Association has been verified and validated, evidenced by the ongoing technical review and consultations with the private sector. As we speak, a Presidential Committee on AfCFTA impact and readiness assessment, that have MAN and other stakeholders as members, is currently working tirelessly to ensure that Nigeria takes an informed decision on AfCFTA if the agreement must be signed. This is in line with the position of MAN, all thanks to President Muhammadu Buhari. The study conducted by the association is ready and the fact sheet would be circulated soonest. It is, however, pertinent to state that the findings of the study are eye opening.
We have shared the outcome in several of our recent presentations on AfCFTA and formally presented same to the leadership of the committee earlier mentioned.
Evidence now abounds that under AfCFTA, import will surge into the economy leading to decline in investment, output and employment in the real sector of the economy. Therefore, MAN expects that in the coming year, government would
Not just sign the agreement on diplomatic niceties or bandwagon euphoria without thoroughly weighing its pros and cons.
Ensure that the trade agreement that will improve intra-African trade should not be at the expense of industrial and economic diversification aspirations of Nigeria.
Ensure that no predatory intrusion from legacy agreements that many African countries have signed with third party countries erode the likely gains from AfCFTA
As a matter of priority, promote the versions of AfCFTA Text, Protocol, tariff framework, market access offer, safeguard measures, Rules of Origin, third party arrangements and trade remedy infrastructure as well as the underlying principles that would be in the best interest of Nigeria.
By: Manufacturers Association of Nigeria (MAN)