High production costs could deny Nigerian manufacturers AfCFTA benefits – MAN

Nigerian manufacturers say high production costs could deny them the benefits that the African Continental Free Trade Area (AfCFTA) promises.

Seleem Adegunwa, chairman Manufacturers Association of Nigeria (MAN) Ogun State, said this at the 36th annual general meeting of the branch themed African Continental Free Trade Area Agreement and Nigeria’s Manufacturing Sector: Maximizing the Gains and Mitigating the Drawbacks.

“There are concerns that the agreement seems to favor African nations that have lower costs of production, as they can export cheaper and gain market share unlike Nigeria where challenges confronting the manufacturing sector in Nigeria seem to grow by the day,” he said.

Manufacturers’ production and distribution costs increased by 21 percent in the second quarter of 2021 according to the MAN CEOs Confidence Index (MCCI) for the second quarter of 2021 and this stands as a hindrance to the competitiveness of manufacturers in Nigeria.

Adegunwa who is the Managing Director of Rite Foods Limited, noted that the purpose of the trade agreement was to create a Single Market for goods and services within the African continent by increasing trading among African nations; eliminating import duties, applying preferential tariffs to imports from other state parties and encouraging industrialization by fostering competitive manufacturing.

He stated that the trade agreement holds huge prospects for manufacturer’s growth by boosting intra-African trade by 52.3percent and providing between $50 billion and $70 billion in monetary terms.

“More worrisome, is the non- compliance of some African Countries with the AfCFTA Rules of Origin which may negatively affect Nigerian manufacturers who already operate in a harsh manufacturing environment that may render their products unable to compete with similar products from their African counterpart,” he said.

Highlighting issues that drive poor competitiveness, Adegunwa said shortage of FX, unfavorable exchange rate, high interest rates, poor infrastructure, multiple taxes and levies by various tiers and arms of Government, high electricity tariffs and irregular power supply, insecurity, etc.

He urged that the government address these challenges and help boost the competitiveness of manufacturers, adding that passage of Bills that have direct or indirect impact on the manufacturing sector in the State should be done after due consultation with manufacturers.

“The state government should provide tools and equipment needed by the various security agencies to aid their operations geared towards tackling insecurity in the state. It would also help to curb the daily harassment of manufacturers by different agents of the governments for payment of various taxes, many of which are not legitimate,” he said.

Read also: Bad governance, poor infrastructure denying manufacturers of AfCFTA benefits – MAN

Dapo Abiodun, governor of Ogun State said that in line with its economic diversification goal, the government has focused on re-tooling the manufacturing sector and harnessing its potential for economic sustainability.

“As a government, we have focused on making the manufacturing sector a key component of building our future together, this informed the vision to provide focused and qualitative governance while creating an enabling environment for a Public Private Sector Partnership, which we believe is fundamental to the economic growth of the state and individual prosperity of our people,” he said.

Abiodun said that a PPP relationship has become vital in economic development especially with the implementation of the AfCFTA which holds implications for employment generation, wealth creation, food security, poverty alleviation and improvement of living standards.

“The task of transforming the State into a fully industrialized State can be best achieved with the cooperation of the private sector, we are determined to convert the push factor to a pull factor and sustain it and also increase our ranking of the ease of doing business index,” he said.

He urged that critical stakeholders in different African countries collaborate and provide improved and more practical recommendations that will make the AfCFTA beneficial to the manufacturing sector in particular and the nation’s economy in general.

Mansur Ahmed, president of MAN, said that the last few years have been particularly challenging for private sector players as they tried to navigate economic meltdowns, the pandemic and other issues, hence the need for governments at all levels to engage and consult with them more closely.

“This will facilitate a shared understanding of what must be done to build resilience and emerge stronger and for the government to achieve increased investment and growth in the manufacturing sector,” he said.