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No reforms yet 3 months after inauguration of industry minister

Three months after the inauguration of Niyi Adebayo as minister of Industry, Trade and Investment, the much-awaited reforms in the trade and industrial sectors of the economy are yet to take place.

Adebayo was inaugurated alongside other ministers in November 2019, but it seems there is no sunny side yet from his ministry.

At the moment, Nigerian products are not competitive locally or globally because of several internal factors such as multiple taxation, high cost of energy and poor infrastructure. Analysts say while all of these issues are not in the minister’s purview, the issue of export rejections must worry him as the  Nigerian Export Promotion Council remains one out of many agencies under his ministry.

As at today, the European Union is yet to unban Nigerian beans and other crops which it prohibited from entering its domain since 2015. After extending it in 2016 for three years, the ban was supposed to end in June 2019, but no serious engagement has been done by Adebayo’s ministry to ensure that the products are unbanned, say economic watchers.

The European Union funded the National Quality Infrastructure with about €12 million to better the standards of local and export products, but the country has failed to make use of that to standardise exports.

Degun Agboade, president of Nigeria Association of Small and Medium Enterprises (NASME), complained at the Nigerian Economic Summit in October 2019 that the infrastructure had been abandoned.

Africa’s most populous country has also failed to tap trade opportunities.

In 2000, the US opened its market for sub-Saharan African (SSA) countries through the AGOA. The idea was that countries like Nigeria would export up to 7,000 products to the U.S. without paying any duty or tariff.

The arrangement was supposed to end in 2015 but it was extended to 2025 to enable SSA countries, which did not take full advantage of the first tranche, to do so.

Some of the products/commodities eligible for export to the U.S. market are poultry, bees, meat of goats, fresh, chilled or frozen, turkeys, live ornamental fish, other than freshwater, mackerel and sardines.

Others are fresh or chilled swordfish other than fillets, milk and cream, yoghurt in dry form, butter, cocoa powder (sweetened or not), guava, apples, ginger, juice and pine apple, among many others.

Unfortunately, despite this opportunity, Nigeria is yet to take advantage of the market opening to ship its local products to the U.S. market.  Only petroleum products have benefitted from this trade treaty.

In 2014, Nigeria’s non-oil exports to the U.S. were $2.6 million while South Africa exported in excess of $1.2 billion.

Brent Omdahl, former commercial counsellor, US Consulate, Lagos, told BusinessDay in an exclusive interview in 2019 that participating countries, including Nigeria, needed to understand the concept of AGOA. He said being a participating country and enjoying tax free did not mean not following due processes.

“It is the Nigerian industry that needs to organise itself,” he noted.

The organisation is still not happening today.

Secondly, the minister is yet to come up with policies that will trigger economies within the economy. Think about Aba, Nigeria’s leather hub. Many shoe and garment makers in the industrial city cannot afford mere machines needed to raise output. The machines many of them use are crude and much of their work is still done by human labour.

“We are already struggling to meet demands,”  Ken Anyanwu, secretary of the Association of Leather and Allied Industrialists of Nigeria (ALAN), who produced Nigerian armed forces shoes in 2016, told BusinessDay recently.

“We in Aba have no good machines, and this is where the problem lies,” Anyanwu said.

“The Bank of Industry has done its best by giving some of us N300,000 each, but it takes $250,000 to N750,000 to set up a standard shoe factory. So, what can N300,000 do when the industry is capital intensive?” he asked.

There is yet little efforts by the Ministry of Industry, Trade and Investment to trigger this potential in Aba.

Apart from shoes, many cocoa trees are old and need new investments. Cocoa may fall into the Agriculture Ministry, but it is mainly a cash or export crop and was the major non-oil export commodity for Nigeria for years. Many cocoa farmers who spoke with BusinessDay recently complained about low level of investments, aging farmers and poor funding. Little wonder products like shea and sea foods are increasingly displacing cocoa as highest non-oil export earners. Up till now, the industry is yet to get the desired attention.

More so, many manufacturing companies are struggling to stay afloat. From brewers to pharmaceutical firms, recent financials of firms show the struggle is on.  Analysis of Unilever’s financials for the 2019 full year shows that the firm recorded a series of declines year-on-year in both sales and revenue across its major segments, especially in  home and personal care products. PZ Cussons has also recorded consistent drops in its margins. The biggest brewer Nigerian Breweries also suffered decline in margins in its 2019 full-year financials.

Many firms in Nigeria today are struggling as high poverty and unemployment rates continue their onslaught on consumer wallets.

However, with high cost of production necessitated by poor business environment, many manufacturers who deserve incentives are not provided with any lifeline.

The Pioneer Status granted to a few companies, which exempts them from paying income tax, has been one of the biggest achievements of Okechukwu Enalamah, former Industry, Trade and Investment minister.

“Now is time to expand the list to accommodate key manufacturers that are distressed, or those in other industries not covered at the moment,” Ike Ibeabuchi, ceo OF md Services, a manufacturing and services outfit, said.

In September 2019, Guinness Nigeria Limited, StrongPack Limited, Flexipack Ltd, Dangote Ibese Lines 3 and 4, Dangote Cement Obajana Line 4, Promasidor Nigeria Ltd, Daraju Industries Ltd, West African Packaging Ltd and Flour Mills of Nigeria Plc, among others, were denied pioneer status.

 At the moment, the Nigeria-Benin border is still closed despite an earlier January 31 deadline for its re-opening.

While the closure favours some manufacturers who now raise their production and capacity utilisations, it disfavours exporters who can no longer move their goods to West Africa. Many manufacturers have halted exports to Africa owing to the closure.

Okhai Ehimigbai, export manager at Aarti Steel, which exports steel products and zinc ash, said his company had stopped export to the Economic Community of West African countries (ECOWAS) due to the closure of the border. He further said export to Ghana by sea would take one month as against two weeks or less through the land borders.

 “We can’t export because we can’t get all the containers on time,” he said.

The implication of this on trade and non-oil inflows can be dire. As of the third quarter of 2019, Ghana was the biggest importer of Nigerian non-oil products. It imported 17.18 percent of made-in-Nigeria products within the period, beating the European Union and China, according to the NBS data. This is no longer a possibility. So, while one sector in Adebayo’s portfolio gains, another sector loses.

“Complete shut-down of cross border trade [imports and exports] between Nigeria business and their counterparts in the West Africa subregion has grave consequences for investments and jobs,” the Lagos Chamber of Commerce and Industry (LCCI) said late last year,  in a statement signed by Muda Yusuf.

“Many industries have invested in products registered under the ECOWAS Trade Liberalisation scheme [ETLS].  These are investors whose business models were anchored on market opportunities in the ECOWAS.  These investments have been completely disrupted and dislocated,” he further said.

The shut-down of the border is coming when the entire continent is planning to commence the African Continental Free Trade Area (AfCFTA) agreement.

More so, the Export Expansion Grant (EEG), which is a practice in Brazil, China and many European countries, was suspended since 2013 and it is yet to be fully reinstated. Even though there have been cases of abuse of the EEG by fraudulent firms, data have shown that export will rise when the EEG is given to genuine exporters. For example, non-oil export rose from a little above $1 billion in 2005 to $2.97 billion in 2013 when exporters enjoyed the EEG.

Again, the logistics problem of manufacturers is still a big challenge, with many firms facing hiccups to import raw materials or export their product owing to the congested state of Apapa and Tin Can roads in Lagos. Currently, the minister has failed to engage in discourses around Nigeria’s seaports despite that it is one of the biggest issues in the manufacturing sector.

According to a report by the LCCI, about 5,000 trucks seek access to Apapa and Tin Can ports in Lagos every day, despite that access roads and the two ports were originally meant to accommodate only 1,500 trucks.

In the 2019 fourth quarter CEOs Confidence Index released by the Manufacturers Association of Nigeria (MAN) recently, port challenges ranked 3rd out 12 biggest challenges facing manufacturers in the country.

 

ODINAKA ANUDU

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