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National President of Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Hajiya SaratuIiya Aliyu

Overview of the Nigerian Manufacturing Industry in 2019

 

By Charles Nwaoguji

To say the last 12 months have been momentous for the country is certainly stating the obvious.

Many challenges confronted Nigerian manufacturing sector in 2019, simply because of inability for the government to pay proper attention to the real sector.

The Stakeholders, in the real sector, who spoke to Daily Sun recently,  believes that the real sector has not fared well. The Director General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf said, contributions from the industrial sector to the country’s Gross Domestic Product (GDP) are still poor about 4 percent.

“The impact of manufacturing on Nigeria economic development can’t be overemphasized. Nigeria has not grow its  wealth from manufacturing sector because it has not invested enough  in the manufacturing industry. A strong and thriving manufacturing sector usually precipitates industrialization,” he said.

Lack of funds and an enabling environment for industrialists have denied the nation the capacity to achieve significant industrial growth or industrialization which Nigeria has always hoped and craved for. Considering the enormous importance attached to industrialization and how it impacts on our economy, any problem militating against its achievement should be of interest to us.

2019 has showed that  manufacturing in Nigeria has been marred with a series of policy inconsistencies and distractions attributable to the discovery of oil. From a modest 4.8 percent  in 1960, manufacturing’s contribution to the nation’s GDP increased to 7.2 percent  in 1970 and to 7.4 percent in 1975. In 1980, it declined to 5.4 percet but then surged to a record high of 10.7 percent  in 1985. By 1990, manufacturing contributed 8.1 percent to the GDP but then dropped to 7.9 percent in 1992, 6.7 percent  in 1995 and fell further to 6.3 percent in 1997. As of 2001, it dropped further to 3.4% from 6.2 percent in 2000. However, it increased to 4.16 percent in 2011 which is less than what it was in 1960, the current manufacturing’s contribution to the nation’s GDP stands at 4 percent which is not healthy to the economy.

Despite the challenges that beset the Nigerian manufacturing industry in 2019, it has witnessed good growth in recent years. This can be traced to many factors including the government’s ban on imported goods. In recent times,  five local vegetable oil brands dominate the Nigerian Market due to the government’s import ban. Similarly, the spaghetti and rice manufacturing industry has recorded huge success in recent years. Nigeria is now classified as one major rice and the 12th largest instant noodle market globally.

The same success has been recorded in the cement industry. For instance, Dangote cement accounts for 60 percent of the estimated 33 million metric tonnes (MMT) of local cement demand in Nigeria. Also, manufacturing industries in Nigeria have done well in the production of goods for the nation’s population as well as for export.

In addition, the government has highlighted some initiatives to boost manufacturing in Nigeria which include; Provide incentives to support industrial hubs; review local fiscal and regulatory incentives to support the development of industrial cities, parks and clusters; rationalize tariffs and waivers on the equipment and machinery imports required for agro-industry.

Ease of doing business

Despite many hiccups, the nation scored some good point in the area of ease of doing business as it moved up the ladder in 24 places last year.

According to the Senior Special Assistant to the President on Industry, Trade and Investment/Secretary to the Presidential Enabling Business Environment Council, Dr. Jumoke Oduwole, who spoke recently in Lagos during the Lagos Chamber of Commerce and Industry International Investment Conference with the theme: ‘Promoting Industrialisation for Economic Recovery and Sustainable Growth,’ empahsised that there is a lot going for the country in the SME space.

Oduwole, who was represented by an official of the council, Mr. Soji Akinyele, disclosed that the action plan targeted the SME sector of the economy with 11 initiatives. The first action plan contained eight initiatives for the sector.

Oduwole pointed out that the first phase of the national action plan was responsible for moving Nigeria 24 places up the ladder of the World Bank Ease of Doing Business ranking.

In the view of the National President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Hajiya SaratuIiya Aliyu 2019 was a tough year but there are small mercies.

“Summarily, 2019 is a mixed bag for us, we worn in some areas and we lost in some areas. So let us learn lessons from the areas we lost, and build on it for 2019, in terms of increasing the space of opportunities for the private sector,” he said.

Like NACCIMA, the President, Manufacturers Association of Nigeria, Mansur Ahmed said the manufacturing sector didn’t fare any better.

According to him, “The manufacturing output in the year 2018 was not encouraging. There is the need to sustain investment and to push the sector forward to avoid what happened in 2018 repeating itself.”

Expatiating, he said, “In 2019, the manufacturing sector grew by 4 percent and later went down to 1.5% which indicates the tragic fall in the overall. Manufacturing suffered loss in capacity utilisation, it recorded 54 percent  in 2019 as against 57 percent in 2018.

“Again, if you look at the budget, there is a significant reduction in the allocation to agriculture, where as in 2018 the allocation was over N89 billion and in 2019 it came down to about N80 billion, this is not good for the growth of the sector.”

Border closure and Ban on imported goods

Last quarter of 2019 witnessed the Border closure and ban on some imported goods most especially raw materials used for production by industries. This action by the government has affected the manufacturing sector as most of the companies have shut down their factories. Although this has  helped Nigerians not to  being overly dependent on imported and “made in abroad” goods, regardless of the quality and safety. This particular observation has led to the exploitation of consumers by Nigerian based manufacturers and suppliers.

Some manufacturers now affiliate with Chinese companies to produce substandard products which is then shipped down to Nigeria.

The ones fortunate enough to produce theirs within Nigeria now resort to the replacement of the right country of production with a foreign country. You now get to see shoes coupled by a shoemaker at your backyard wearing tags such as “made in Italy”, “made in China” and you wonder, why the lies? It’s quite obvious because that’s what Nigerians like and want, they prefer “made in Italy/china” to “made in Nigeria” and shoemakers must sell their products right? So they just exploit Nigerian’s taste to sell theirs.

The capability of companies to make investments in modern machines, information technology and human resources development have been limited greatly by the lack of access to funds, and yet, these tools are very crucial to the reduction of production costs, raise of productivity, improvement of competitiveness, and expansion of operations.

Low investment have discouraged banks to invest very largely in this sector, owing partly to the mismatch between short-term nature of banks funds and the medium to long-term nature of funds needed by industries.

Also because of the risky nature of this sector, banks intend to lend to low-risk ventures such as commerce which records high returns. Lending to the manufacturing sectors attracts a high rate of interest which is not profitable for the industry.

Power situation
The Power situation remains a major burden on business in 2019.  It is one area in which the trend since independence has been that of progressive decline. Power supply has consistently lagged behind the pace of the economic activities and population growth. This development impacted negatively on investment over the past few decades with increased expenditure on diesel and petrol by enterprises. This also comes with the consequences of declining productivity and competitiveness

Power failure has been a problem in Nigeria since day one. It is quite unfortunate that after the privatization of the power company, we still haven’t witnessed any outstanding improvement in power supply.

Electricity is a very important and indispensable tool to industrialization. Most manufacturing processes are automated, computers and machines are not powered by water but by electricity, and in a situation where this driving force is dysfunctional, there is bound to be an impediment to most if not all industrial activities.

Nigeria now records a high rate of generators importation. Data on Genset Import/Export Trade obtained by Vanguard from the United Nation Statistic Division, showed that manufacturers of generators brought into the country different brands of generators worth $51.055 million in 2014/2015 and this figure is projected to hit $450 million by 2020.

Power situation
The Power situation remains a major burden on business in 2019.  It is one area in which the trend since independence has been that of progressive decline. Power supply has consistently lagged behind the pace of the economic activities and population growth. This development impacted negatively on investment over the past few decades with increased expenditure on diesel and petrol by enterprises. This also comes with the consequences of declining productivity and competitiveness

Power failure has been a problem in Nigeria since day one. It is quite unfortunate that after the privatization of the power company, we still haven’t witnessed any outstanding improvement in power supply.

Electricity is a very important and indispensable tool to industrialization. Most manufacturing processes are automated, computers and machines are not powered by water but by electricity, and in a situation where this driving force is dysfunctional, there is bound to be an impediment to most if not all industrial activities.

Nigeria now records a high rate of generators importation. Data on Genset Import/Export Trade obtained by Vanguard from the United Nation Statistic Division, showed that manufacturers of generators brought into the country different brands of generators worth $51.055 million in 2014/2015 and this figure is projected to hit $450 million by 2020.

Security  Issues
The Security situation in the country deteriorated in the last decade. It impacted on investment risk and worsened the country’s perception and image by the global investing community and affected the manufacturing sector 2019.  Access to markets in the troubled parts of the country has reduced for many enterprises with negative consequences for investors’ confidence.

Related to this are the many cases of ethnic and religious conflicts, herdsmen attacks on communities and kidnapping. The incessant oil theft and the vandalization of oil pipelines remain major concerns for investors in the oil and gas sector. Billions of dollars have been lost in revenue; many lives have been lost as well. The many oil producing communities suffered serious environmental degradation as a consequence of this problem.

 Moving forward

In order move the real sector forward, Muda said government should pay more attention to solving the power crisis problem plaguing Nigeria for years now. They should allow and support industries to setup their own local power generating systems.

“Funds should be approved for application in the remedy of crucial problems; these may directly and indirectly favour the industrial sector. Banks should grant loans to young entrepreneurs and startups to help them push forward their plans,” he states.

In order to discourage importation, the  (NACCIMA) boss, Hajiya Aliyu says,  locally made products should focus more on quality and durability rather than quantity and profit.

“ Roads, railways, airports and seaports should be constructed by the government to ease safe transportation of products and overdependence on road transports,” she said.

She says,  Government policies should be such which will encourage industrialization rather than do otherwise. “Any company in need of skilled manpower should recruit and train the unskilled ones with potentials.”

 

 

 

 

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