Whoever is eventually appointed the minister of industries and trade will face the daunting task of reviving the manufacturing sector which is already in recession.
Recession is generally defined as a fall in the gross domestic product (GDP) in two successive quarters. Nigeria’s manufacturing sector, which accounts for 9.2 percent of GDP, contracted for a second consecutive quarter by 3.8 per cent year-on-year in the second quarter of 2015, just against 14.0 per cent a year earlier, signifying a sector in recession.
The sector has suffered from lack of competitiveness, resulting from poor infrastructure and financing, low power supply in industrial zones, high cost of logistics, port gridlocks, inconsistency in government policies, multiplicity of taxes and skills shortages, among others.
“This sector faces common challenges that must be overcome before it can play its expected role in the growth process,” said Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN), in an economic blueprint.
Most of the challenges the new minister is expected to find solution to involve the environment. A recent research by The Economist shows that an average business in Lagos spends 956 hours per year in paying taxes. Nigerian manufacturers are still uncertain about the number of taxes to pay, contrary to Adam Smith’s canon of certainty.
“Nigeria has to develop the enabling environment that nurtures medium to high-tech industries, in order to accelerate the growth rate,” said Jacobs.
Also, the new minister is expected to collaborate with the Central Bank of Nigeria (CBN) to end the woes manufacturers go through while sourcing foreign exchange to import their raw materials.
The new minister will need to liaise with the CBN and the finance minister to ensure that some of the 41 items excluded from the foreign exchange windows are removed, to cut cost of production and save jobs.
“What we have now is pressure on manufacturers to lay off their workforce before the end of the year. Most manufacturers affected have been unable to produce lately, due to lack of foreign exchange, delays in the processing of Form ‘M’ to import raw materials in order to meet demand, and this has led to loss of market share,” said Remi Bello, president, Lagos Chamber of Commerce and Industry (LCCI), recently during an economic briefing.
Moreover, the new minister will be expected to attract investors and financing with which to build infrastructure. BusinessDay checks show that absence of long-term financing in the solid minerals sector has been one key reason why some industries such as glass and ceramics are yet to develop. There is also absence of heavy-duty machineries with which to do beneficiation in the sector, as well as lack of skilled manpower.
“’There is lack of significant number of professionals with appropriate skills and expertise in ceramics manufacturing business in Nigeria. There is also absence of avenues for people interested in ceramics manufacturing business to pursue their ambitions, as no university or higher institution in Nigeria offers training in ceramics science/engineering/technology,” said Patrick Eguakhide Oaikhinan, professor of ceramics engineering and CEO,Epina Technologies Limited, in an interview with BusinessDay.
The minister is also expected to move swiftly to reinstate the Export Expansion Grant (EEG), the only export incentive in the country, which has been in suspension for 26 months now.
“We expect the government to bring back EEG as only non-oil export can help the country to diversify its economy,” said Tunde Oyelola, chairman, MAN Export Group, in an interview with BusinessDay.
There is also the need for the minister to ensure that the Development Bank of Nigeria, meant to provide finance to the real sector at single interest rate, is realised, say manufacturers. This has become critical as financial institutions charge manufacturers an average of 23 percent interest rate.
ODINAKA ANUDU
