• Tuesday, April 16, 2024
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Five things Nigeria must do to become industrialised

Five things Nigeria must do to become industrialised

Nigeria has the potential to become an industrialised and resilient economy. But it must address some key issues that have bedevilled its industrial sector for decades.

And in no particular order, BusinessDay takes a look at these five things the government must do to drive industrialisation and help businesses thrive:

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Improve infrastructure

The availability of adequate infrastructure is also a major determinant of the success of every country’s industrial sector; however, Nigeria does not have adequate infrastructure to grow businesses, especially developed transport systems such as roads and railways connected to the nation’s seaports.

From Agbara industrial cluster in Ogun to Apapa in Lagos, roads are bad or inaccessible. Access roads to Apapa and Tin Can ports – Nigeria’s two main ports have continued to be nightmares for manufacturers and exporters.

It is impossible to talk about infrastructure without discussing power. Energy is a key element of the production process. Nigeria’s inability to supply and distribute sufficient electricity has left businesses at the mercy of generators powered by diesel and petrol, whose prices have surged in recent months.

This raises the production costs for manufacturers 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.

According to the Manufacturers Association of Nigeria (MAN), manufacturers spend 40 percent of their total production cost on generating energy for their businesses.

For Nigeria to be industrialised, experts say the country must improve its infrastructure to enable manufacturing to thrive.

Harmonisation of regulations

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.

According to experts, the government must harmonise taxes, especially at the state level, to make payment clearer, transparent, efficient, certain and convenient.

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Provide adequate funding

Nigeria is cash-strapped due to low oil prices and high debt serving. This is hurting the country’s capacity to fund projects and critical sectors.

However, the 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 the ‘high-risk level’ of lending to businesses in Nigeria.

Consequently, several manufacturers have complained that they cannot access most funds advertised by the government.

While some manufacturers have accessed funding from the CBN, Bank of Industry and others, however, the funds are not easily accessible by all players.

Experts call for monitoring of specialised funds domiciled in the deposit money banks to ensure they are fairly disbursed to the right candidates.

Policy consistency

There is no guarantee that some of the current CBN policies may survive in the next dispensation. Dairy producers are complaining about CBN’s sudden U-turn in lifting FX restrictions for the importation of milk and dairy products in the country.

Due to the policy, several dairy investors put a lot of money into ranching and processing, which are very capital-intensive.

Experts say policy consistency will enhance investor confidence and attract more foreign direct investments into the manufacturing sector.

Address rising insecurity

Worsening 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.

Nigeria must offer a low and organised tax system, cheap funding, empower its manpower, and improve its infrastructure if it wants to industrialise.

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Funlayo Bakare-Okeowo, managing director and chief executive officer, FAE Limited, said that the government needs to be intentional about growing the manufacturing industry, adding the country must give priority to the sector if it wants to industrialise and grow its economy.