Why manufacturing sector needs urgent attention

Nigeria’s manufacturing sector needs an urgent attention from whoever will become the next president. The reasons are obvious.

First, former President Goodluck Jonathan introduced Automotive Policy in 2013 with a target to produce 50,000 cars annually at N1.5 million each, while creating 700,000 jobs.

Five years down the line, prices of new cars have risen by over 200 percent as naira-dollar exchange rate doubles by more than 100 percent since 2013.

The federal government imposed 35 percent levy and another 35 percent duty on imported cars, hiking cost of imported cars.

While the National Automotive Design and Development Council (NADDC), the body responsible for implementation of the auto policy, has issued 54 licenses to intending car assemblers, the policy seems to have raised car smuggling from Benin Republic into Nigeria.

The combined capacity of the 54 assembly plants is 410,000 vehicles, while annual car importation into the country is between 250,000 and 300,000 vehicles.

“We are driving a policy that is encouraging companies to continue assembling combustion engine cars when the Original equipment manufacturers (OEMs), who own these combustion engines themselves, have already announced they will phase them out. Are we sure we are not setting ourselves up to being a dumping ground?” Bambo Adebowale, chairman, Lagos Chamber of Commerce and Industry (LCCI) Automobile and Allied Products Sectoral Group, asked.

Adebowale explained that even with Automotive Policy, car import has not slowed down, wondering how the car assemblers will be able to compete with up to 300,000 cheap vehicles imported into the country.

“If we want to develop a market for these 410,000 capacity plants and we import about 250,000 and 300,000 used vehicles, how are they going to support vehicles being assembled, since the ones being assembled will be more expensive?” he asked.

Also, the president is expected to proffer solutions to Ajaokuta Steel, which has gulped $8 billion public funds, according to government records. The Senate has approved $1 billion for the revivification of the plant but this remains a waste of resources, according to analysts.

Since 1994, successive governments have claimed that the complex is 98 percent completed. Muhammadu Buhari’s government budgeted N3.9 billion in 2016 and N4.27 billion in 2017 for the resuscitation of the steel, despite an earlier business case in the last administration showing that the complex could only work if properly privatised.

BusinessDay checks show that Ajaokuta Complex has the capacity to produce one million metric tonnes of steel, one million metric tonnes of coal , manganese and limestone, among others.

Due to lack of operations at Ajaokuta Steel, Nigeria today imports steel valued at $3.3 billion every year.

Frank Udemba Jacobs, immediate past president of the Manufacturers Association of Nigeria (MAN), said recently that over 50 percent of raw materials used in the sector would have been locally available had Ajaokuta been working.

Up till now, the Aluminium Smelter Company, located in Akwa Ibom State, is not in operation due to the tussle between Bancorp Financial Investment Group Divino Corporation (BFIG), a consortium of U.S.-based Nigerian investors led by Reuben Jaja, and the United Company RUSAL, a Russian firm.

Kayode Fayemi, former minister of solid minerals development, had stated that the government was resolving this crisis, but long after his departure, the plant is still under lock and key.

“We need that resolved. Aluminium Smelter Company needs to be re-started so that we can get ingots for local roofing sheets manufacturers,” Oluyinka Kufile, chairman, Basic Metal, Iron and Steel Group of the Manufacturers Association of Nigeria (MAN), told BusinessDay earlier in an interview.

ODINAKA ANUDU