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MAN Reignites Drive To Get Government Do The Needful To Grow Manufacturing

‘The government needs to come to the realization that a win for the manufacturing sector is a win for the economy and by extension a better life of the citizenry.’

Siaka MOMOH

Over the years, the Manufacturing Association of Nigeria (MAN) in its advocacy role of ensuring that manufacturing is supported with all that is needed to make it grow and develop, persistently kept government on its toes. However,  in spite of MAN’s consistent advocacy efforts,  manufacturing  in Nigeria is yet to get out of the woods.

In fact, the Association’s outcry has began to sound like a broken record as was pointed out by the media. At Tuesday’s press interactive session at MAN House.

It was therefore not out of place on Tuesday in Lagos as MAN President, Otunba Francis Meshioye, reeled hot words against the Federal Government for gaps it noticed in its handling of manufacturing. He spoke at the MAN’s 2023 Media Award and Presidential Luncheon which held at MAN House Ikeja Lagos.

According to Meshioye, “There is no gainsaying the fact that manufacturing is pivotal to galvanizing and sustaining the economic growth and development of Nigeria. The government needs to come to the realization that a win for the manufacturing sector is a win for the economy and by extension a better life of the citizenry.

“Government and its agencies should deliberately abstain from taking harmful and inconsiderate policies that lack adequate inputs of key player that would be affected. He went ahead to  ask for permission  to make reference to two of such instances and went  ahead to do so as follow:

“Within the first two months of the this year, a ban was placed on single-use plastics and Styrofoam packs by Lagos State Government and NAFDAC , in similar fashion placed a ban on alcoholic beverages in pet bottles and sachet below 200ml.

The former was done outside the timeframe set by the national policy and the latter based on unfounded assumptions; both without due consideration for the economic and social impact of those unwarranted decisions.”

For him, “The negative impact of these policies on the manufacturing industries affected as well as the huge number of workers whose jobs are on the line cannot be overemphasized. Additionally, it has become pertinent for government and the private sectors to work in tandem to revamp the ailing manufacturing sector, especially at this time, by exploring home grown policy initiatives that will address  peculiar challenges. There is need to mobilize our local resources and more importantly, take deliberate steps to overcome the binding constraints that confront the productive sector. This has to be through frank conversations, effective collaboration and bold decision that radically departs from the norm.”

Meshioye is not done yet. He argues: “It must be noted that the nation’s economic recovery is highly dependent on the deployment of policy stimulus supported with a synthesis of domestic growth, export focused and offensive trade strategies. This will promote resilience, steady growth and ensure that the sector gains meaningful traction going forward. As we move in this direction, we are confident that as our partners, you will join us in our advocacy drive to actualize a vibrant manufacturing sector.”

And to improve the sector in the year, he  recommendations  as follows:

  • Expend cost saving from fuel subsidy to deploy a bouquet of production focused policies, backed with more structural measures to combat the peculiar inflationary pressures from insecurity, energy and transport cost.
  • Overhaul the power sector and incentive investment in renewables to boost electricity generation and promote energy-cost efficiency.
  • Government should lead by example and give priority to patronage of made-in-Nigeria product in all its purchases and for all government contracts and projects. Government should mandatorily upscale patronage of made in Nigeria products by deliberately reducing the excessive reliance of the country on imported products. The three tiers of Government should enforce the implementation of the Executive Order 003 in same for their ministries, departments and agencies.
  • Government should encourage local sourcing of raw materials through comprehensive and integrated incentives to address the challenges of low productivity and imported inflation.
  • Utilize the 2024 Budget to sustain effort at improving infrastructural developments, especially in strategic industrial hubs to reduce operation and logistics cost and promote competitiveness.
  • Encourage sub-national Governments and private investors to leverage the opportunities provided by the Electricity Act 2023 to improve energy security in Nigeria.
  • Maintain all measures to boost the level of liquidity and degree of transparency in the official forex window even as the backlog of $7 billion forex obligations is being cleared.
  • Manage the floating exchange rate system within an acceptable lower and upper bound, pending the actualization of a net-exporting economy aspirations.
  • Prioritize forex and credit allocation to the manufacturers and reduce the number of BDCs into large and well-established operators to curb their excesses and untowards operations through effective management and supervision.
  •  Encourage inflow of foreign direct investment into pre-determined and domestic production-enhancing businesses. Should intentionally guide diaspora remittances into non-oil sectors, especially manufacturing to aid forex inflows and curb rising inflation.
  •  The CBN should intensify its collaboration with the fiscal authority; Federal Ministry of Finance and by extension the Tariff Technical Committee (TTC) for proper policy alignment on the appropriate HS Codes for items that Nigeria has sufficient capacity to discourage importation and save scarce foreign exchange.
  • The apex bank should allow forex access for importation of vital industrial inputs that are currently not available locally and subject them to backward integration policy that gives priority to a predictable sunset clause. MAN offers to be part of a monitoring and evaluation team to ensure that government gets value for incentives offered to achieve this objective.
  • The CBN to develop a sustainable framework to channel credit interventions into the manufacturing sector, outside the direct intervention. Additionally, it should mobilize commercial banks to intentionally provide long term single digit interest loans to the manufacturing sector to fast-track the actualization of a $1 trillion dollar economy.

It can be recalled that in the past, Nigerian manufacturers  listed increase in the cost of energy, acute shortage of forex and the continuous depreciation in the value of naira as their biggest challenges affecting productions and growth of the industry.

They argued  prevailing circumstances in the domestic operating environment, especially high cost of diesel, poor access to foreign exchange, insecurity, delay in importing raw materials and exporting finished products among others are taking a toll on their productivity.

Manufacturers noted that increase in cost of energy pushed up global inflation which affected the cost of importation across the world, including Nigeria, saying with limited forex inflow from crude oil sales, forex demand pushed over the bounds of supply and contributed to the depreciation in naira value.

They said manufacturing in Nigeria is heavily beset by these price developments and manufacturers are contending with these challenges while struggling to sustain production. 

Speaking during an instance in the past, the director-general of Manufacturers Association of Nigeria (MAN), Segun Ajayi-Kadir, said manufacturers are concerned about the increase in the cost of energy, acute shortage of forex and the continuous depreciation in the value of naira, including other familiar challenges of the sector.

According to him, the primary driving force for sustaining production is the patriotism and resilience that the Nigerian manufacturers process, optimism that these challenges would eventually be addressed.

He noted that most manufacturers embark on strategic measures to minimise the impact of the inclement operating environment on their activities such as: cost cutting; products selection and prioritisation; expanding their investment in the development and production of raw materials locally; increased resort to self-energy generation and energy mix to complement the inadequate electricity supply  from the national grid; and dissaving retained earnings to support the current crippling condition.

The CEO of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, has also agued that  the sharp depreciation of the naira exchange rate in the parallel market remains a cause for concern.

He stated that “it is a trend that should not be allowed to continue and all necessary steps need to be taken and urgently too to stem the slide and volatility.  He said these developments should not be ignored. According to him, “It is as much of an issue to consumers as it is to producers and other stakeholders that create value in the economy.  It calls for an urgent review of the current foreign exchange policy”.

Yusuf called for adoption of a flexible exchange rate policy regime, clarifying that this is not a devaluation proposition, rather is it is a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market.

“It is a model that is sustainable, predictable and transparent.  It is a policy regime that would reduce uncertainty and inspire the confidence of investors.  It is a policy framework that would minimise discretion and arbitrage in the foreign exchange allocation mechanism,” he said.

He added that “the Nigerian economy has the capacity to weather the current turmoil if the policy contexts are right. We have the market, the people and natural resources. The opportunities that the present situation offers would only be realised if policy obstructions to resource flows are removed.”

The former president of Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), Ide Udeagbala, has also called on both the federal and state governments to urgently prioritise the need to revitalise the industrial sector for more inclusive economic growth.

He suggested that government at the federal and state levels should create and maintain enabling environment that is investment friendly as this will entail enunciating and maintaining policies that remove bottlenecks to business investments.

Udeagbala insisted on government to address the various factors that are capable of increasing cost of doing business in Nigeria, saying these are critical issues which if addressed urgently will help position the economy for foreign direct investment and encourage local investors into establishing industries that will enhance jobs creation and improved GDP.

The ex president of Lagos Chamber of Commerce and Industry (LCCI), Dr. Michael Olawale-Cole,on his part also said many factors have continued to weigh on the growth of the manufacturing sector, such as rising energy costs with diesel above N800/litre, Jet-A1 at N710 per litre, and PMS selling above the government-regulated price of N165/litre, saying these price levels will continue to aggravate production costs which may lead to restrained manufacturing and eventual job losses.

He also noted that “the worsening security situation in many parts of the country will continue to threaten agricultural production, manufacturing value chains, and logistics.

On way forward, Olawale-Cole said that the Central Bank of Nigeria (CBN) needs to initiate a gradual transition to a unified exchange rate system and allow for a market reflective exchange rate.

According to him, CBN also needs to roll out more friendly supply-side policies to boost productive sectors, bolster investor confidence and help attract foreign investment inflows into the economy.

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