Five things Nigeria must do to fix-old problems hurting its industrialisation

After 63 years of independence, issues hurting Nigeria’s industrial prosperity in the 1980s and 1990s are still the same problems discussed today at every manufacturing forum.

The non-oil sector is a reflection of the state of the country’s manufacturing sector. Primary products have continued to occupy a prominent place in Nigeria’s non-oil export chart that serve as inputs for European, American and Asian factories.

Nigeria is not exporting much and the federal government is still doing little to improve non-oil exports despite its promises to restore the country to an exporting nation and the foreign exchange crisis that has continued to plunge the country’s economic growth.

The country has the potential to become a top exporter of finished products, but it must address some key issues that have bedevilled its industrial sector for decades.

In no particular order, BusinessDay takes a look at these five things Nigeria must do to boost non-oil exports

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.

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’s products to be competitive, the government must provide the enabling infrastructure for manufacturing to thrive.

Provide incentives

Export incentives are regulatory, legal, monetary, or tax programs that are designed to encourage businesses to export certain types of goods or services.

Incentives to encourage the export of finished products such as the Export Expansion Grant (EEG) have to be introduced to boost manufacturing exports.

According to experts, the government must address every bottleneck that has made exporters lose trust in the scheme and make its process transparent.

“The EEG helps exporters elevate and cope with pressures from the cost of doing business, break somewhat even, and compete,” said Odiri Erewa-Meggison, chairman of the Manufacturers Association of Nigeria Export Promotion Group (MANEG).

Meggison stated that without the export grant, it is difficult for Nigerian manufacturers to be competitive in the export market amid a challenging business environment.

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.

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.

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.

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.