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Experts say Nigeria will need to remove barriers to free trade, increase its power distribution capacity and carry out credit reforms to free funds to the real sector. It will also raise the contribution of the manufacturing sector from less than 9 percent to 16 percent.
The experts say the country needs to distribute at least 14,000 megawatts of electricity (MW) in the next five years to cut production costs for manufacturers and enable them compete both locally and internationally.
“The two key things Nigeria needs at the moment are access to power and regional integration,” said Eme Essien, country manager (Nigeria), International Finance Corporation (IFC), at the Lagos Chamber of Commerce and Industry (LCCI)- organised International Investment Forum on Thursday in Lagos.
“We know that industrialised nations have relied on trading across borders. Agriculture is important, being the largest sector and employer of labour, but we must move from primary agriculture to more value addition in order for industrialisation to happen in Nigeria,” Essien said, stressing that investors land in the country every week because of incredible opportunities in the country but warned policy makers on the need to sustain efforts on Ease of Doing Business to retain global interest.
From 169th in the World Bank Doing Business Index last year, Nigeria is now 145th, moving up 24 places, placing the country among top 10 performers in the last 12 months. The country of 180 million people is expected to become the most populated after China and India in 2050 but its power generation capacity is still around 5,000 MW and lending to the private sector is expensive, hovering between 18 and 30 percent, which investors say are antithetical to development.
“If we have achieved 7,000 MW of power in generation, we must double that in terms of distribution. A litre of diesel if N200 and it increasing our costs as manufacturers. SMEs are struggling because they can’t get credit at 25 percent and compete with imports and even globally,” said George Onafowokan, managing director of Coleman Wire & Cables, represented by Sanusi Ilori.
According to Oluwatoyin Sanni, CEO of UBA Capital, Nigeria’s progress on ease of doing business must be reflected at sub-national levels.
“Our lives are reflected more on day to day basis on decisions taken by states and these states must key in. If we are registering titles to movable assets, then we need to be sure that financial institutions are ready to accept the assets, otherwise nothing concrete will happen,” Sanni said.
One of the key gridlocks to trade in Nigeria is a plethora of agreements entered into by policy makers, which do not benefit the country. The agreements ensure that Nigeria exports agric products such as cocoa, rubber and fruits, which serve as raw materials for European and American manufacturers, and then import finished goods.
Oil still maintains 85 to 93 percent of Nigeria’s foreign exchange earnings while cocoa, which is used in the manufacture of tea, represents 23 to 27 percent of non-oil export, according to BusinessDay calculations of the country’s five-year non-oil export profile.
“The country needs private capital to bridge the huge financing gaps that currently exist in many aspects of our economy,” said Nike Akande, president of LCCI. We need to attract investments from within and from across the globe to complement available resources,” Akande said.
However, Jumoke Oduwole, senior special assistant to President Muhamadu Buhari on Industry, Trade and Investment, said investors are showing interest in the Nigerian economy as the stock market has rallied 36 percent so far this year, while $22 billion has been invested in 41 projects across the country.
Oduwole said foreign capital into the country has risen from $908 million in the first quarter of 2017 to $1.8 billion in the second quarter, owing to steps taken by the federal government to improve the business environment.
She attributed Nigeria’s improvement on the World Bank Doing Business partly to two legislative acts: Credit Reporting Act and the Movable Assets Act, which can facilitate access to credit.
