Nigeria has the potential to become an industrialised and resilient economy. But it must address some of the issues that have bedevilled its industrial sector for decades.
First is infrastructure. Clearly, rains are increasingly exposing the poor state of roads in the country. From Agbara industrial cluster in Ogun to Apapa in Lagos, roads are bad or inaccessible. Access road to Apapa and Tin Can ports has continued to be nightmares for manufacturers and exporters. Between October 2019 and March 2020, cost of moving goods in a 40-foot container from Apapa to Ikeja (ordinarily 40-minute drive) rose from N350,000 to N650,000/ N700,000. Similarly, goods stay for weeks on bridges before being exported. Perishable goods get spoilt, in addition to frustrations by the port authorities due to lack of functional scanners. It is worse today with workers and businesspeople spending hours on Apapa bridges just to gain access to the port city.
In the first quarter of 2020, MAN undertook a CEO survey to determine what constituted challenges for them. At the end of the survey, 94 percent of the CEOs interviewed agreed that congestion at the ports significantly affected their productivity negatively.
It is impossible to talk about infrastructure without discussing power. Though the cost of alternative sources of energy by manufacturers dropped from N82.6 billion in 2018 to N67.38 billion in 2019, signifying an 18.4 percent decrease over the period, the cost of energy is still high. Most manufacturers have long ditched DisCos because of irregular supply of power, which raises their production costs significantly and forecloses their chances of competing with international peers. Local products are often more expensive than imported Chinese products because production costs in the country are significantly higher than China’s, especially when key issues such as taxes and regulations are factored in.
Experts want improvement in infrastructure to enable manufacturers to thrive.
Apart from infrastructure, regulation is a major issue hurting the sector. In Nigeria, Africa’s most populous country, agencies of the government work at cross-purposes. For instance, the Standards Organisation of Nigeria (SON) does not accept tests done by the National Agency for Food and Drug Administration and Control (NAFDAC) and vice versa. Worse still, their responsibilities overlap. Similarly, local or state governments do not accept agreements by the Federal Government, particularly when it has to do with money or taxes.
In the CEO survey mentioned earlier, 94 percent agreed that multiple/over-regulation by agencies of government hurt productivity in the manufacturing sector. In a state like Lagos, touts visit manufacturing outfits, demanding all sort of fees, levies and taxes.
MAN has called on the government to harmonise these taxes, especially at the state level, to make payment clearer, transparent, efficient, certain and convenient.
Another critical issue bedevilling the industrial sector is funding. Nigeria is cash-strapped due to low oil prices. This is hurting the country’s capacity to fund projects and critical sectors. However, pool of funds from the CBN and development finance institutions is stashed in banks which are sometimes unwilling to lend to businesses due to what they call ‘high-risk level’ of lending to businesses in Nigeria. Consequently, several manufacturers have complained that they are unable to access most funds advertised by the government.
While some manufacturers have accessed funding from the CBN, Bank of Industry and others, the feeling in the sector is that funds are not easily accessible by all players. Analysts call for monitoring of specialised funds domiciled in the deposit money banks to ensure they are disbursed to the right candidates.
Next to this is policy inconsistency. There is no guarantee that some of the current CBN policies- as protectionist as they are- may survive in the next dispensation. Farmers of maize are complaining of CBN’s recent sudden U-turn where it gave four companies licenses to import 262,000 metric tons of maize despite pronouncing total FX restrictions earlier. Though the policy itself is seen as detrimental to the economy, it represents policy inconsistency to do a U-turn two months after pronouncing it.
Analysts say policy consistency will enhance investor confidence and attract more foreign direct investments into the manufacturing sector.
More so, insecurity is putting a lot of investments at risk. In the North-East and North-West, some manufacturers have fled, leaving their investments and farms, due to the activities of terrorists and bandits. In the southern part of Nigeria, investors lose their businesses at every slightest provocation.
Farms are constantly being attacked with farmers losing their lives every now and again, making the backward integration drive almost a mirage.
“We call for an urgent review of the current security architecture to fix the seemingly worsening security situation,” Toki Mabogunje, president of the LCCI, said at a press conference held in early October.
Perhaps, Nigeria can learn one or two things from Bangladesh. At independence in 1971, the South-East Asian country had 82 percent of its citizens below the poverty line. But by early to mid-2000s, it had lifted 33 million citizens (23-26 percent of the population then) out of poverty. Two of the reasons adduced by analysts for this miraculous jump out of poverty pit were industrial policies and market reforms.
Bangladesh’s garment industry is partly responsible for rising prosperity witnessed in the country, according to Brookings Institute.
“Bangladesh offered a better environment for manufacturing firms to achieve economies of scale and create a large number of jobs,” Kaushik Basu, an economic analyst, said.
The country offered low and organised tax system, cheap funding, and empowered its manpower, skilling its youths to fit into the new industrial vision.
