…Nigeria must produce for local consumption and more importantly for export, for the naira to be strong.
A former Minister of Finance, Olusegun Aganga, has stated that the Naira would continue to experience a free fall if Nigeria remains an import-dependent country, adding that Nigeria must produce for local consumption and more importantly for export, for the naira to be strong.
He asked: “What is the wisdom in spending billions defending the naira when it continues to fall instead of investing in genuine manufacturers and exporters of high-value products that would earn Nigeria foreign income and more
The former Minister urged the government to declare the industrial sector a national priority sector and back it with plans, policies, and money.
Olusegun Aganga stated this on Thursday at the 3rd Adeola Odutola lecture, during the 51st Annual General Meeting of the Manufacturers Association of Nigeria. Where he delivered a lecture on the theme: “Setting the Agenda for Competitive Manufacturing under the AFCFTA: What Nigeria Needs to Do,”
He added that Nigeria must produce for local consumption and more importantly for export, for the naira to be strong.
“Unlike the trillions spent on subsidies, bailouts, the Agric Anchor Borrowers Programme, the refineries, I can assure you that every naira, no matter how large, that is well spent on the strategic industrial sectors can be easily recovered and will deliver tremendous benefits to the economy and the nation,” he added.
Former Minister, Industry Trade and Investment, noted that history has shown that Industry multiplies national wealth, creates jobs, is critical for exchange rate and balance of payment management and would make the Naira stronger.
The Former Minister pointed out that embracing competitive manufacturing under the AfCFTA is crucial for Nigeria’s economic growth and integration into the global marketplace.
“Nigeria may not be able to compete with China now, but by investing in infrastructure, innovation and skilled labour, while addressing trade barriers, the business environment and promoting market access, Nigeria can certainly position itself as the manufacturing hub in Africa.
“Let us work together and seize this historic opportunity and create a prosperous and vibrant manufacturing sector that will benefit Nigerians and contribute to the economic development of the African continent as whole.”
He said a lot of weaknesses present a daunting and extremely difficult environment for any country to industrialise let alone aim to be competitive.
According to him,” Some of the weaknesses he listed were the emergence of lower cost competitors both from Africa and outside Africa; Nigeria loses its market and the opportunity to truly move from an agrarian to an industrial economy; the flooding of domestic market with cheaper and substandard products; the threat of continued de-industrialisation; Nigeria’s economy will remain very weak.
“These he said will of course lead to insecurity, increased levels of poverty, unemployment borrowing, a difficult macroeconomic environment with high inflation and exchange rates; balance of payments issues and dwindling foreign reserves.”
The Manufacturers Association of Nigeria, MAN, has raised serious concerns regarding faltering policy measures that have also promoted and supported factors that have inhibited growth of the manufacturing sector in Nigeria.
President of the Association Otunba Francis Meshioye, in his speech at the 3rd Adeola Odutola Lecture and Presidential Luncheon, being the last part of activities marking the 51st Annual General Meeting (AGM) of the group in Lagos, Thursday, noted sadly that the growth of industrialization in Nigeria remains at a very low ebb. Based on the African Development Bank (AFDB)’s industrialization index, Nigeria is yet to perform impressively, said Meshioye.
According to him, the UNIDO’s industrial competitive performance index has equally shown that Nigeria’s industrial sector has a low competitive capacity adding that there is no better time than now to confront the challenge of low competitiveness and abysmal performance of this important sector.
The President speaking on the theme of this year’s AGM, “Setting the Agenda for Competitive Manufacturing under the AfCFTA: What Nigeria Needs to Do.” explained that the motivation behind this theme is the manufacturing sector’s successive low performance over the years.
At the same time, he said his group is looking at the promising growth trajectory and development opportunities that are embedded in the African Continental Free Trade Agreement (AfCFTA) for the Nigerian manufacturing sector.
He said it has therefore become a matter of necessity and urgency to deepen awareness of the imperative of the AfCFTA; as the country need to develop the right strategies and concerted efforts to position our economy as the number one manufacturing hub of the African economy.
Citing instances, Meshioye, said evidences from several parts of the world, including China, the United States, Japan, Germany, and South Korea, has shown the importance of the manufacturing sector in building a resilient economy.
“As an example, in 2021, average manufacturing output accounted for as high as 35 percent of Ireland’s GDP growth; 27.44 percent in the case of China, and 48 percent of Puerto Rico’s economy.
“In the United States, it accounted for more than 60 percent of the total exports and about 35 percent of the US economy’s total productivity growth.
“In Nigeria, the contribution of the manufacturing sector to the total output is not higher than 10 percent, with an average growth rate of approximately 2.3 percent over the last five quarters. Manufacturing sector development is key to industrialization.”
Speaking on challenges, the President informed the gathering that an average member of MAN is subjected to no less than 30 different forms of taxes, fees, and levies.
The consequences of the incidence of multiple taxation are immense and include the rising cost-of-doing business and rapid divestment in the manufacturing sector. These issues combine to depress demand; worsen job losses and increase the incidence of poverty and low revenue generation from the sector.
He however expressed confidence that the Presidential Committee on Fiscal Policy and Tax Reform will adequately address the matter as its Director General represents the Organized Private Sector on the Committee and as such he is looking forward to working jointly with the representatives of the Ministry on the Committee to make the case for fair taxation of the manufacturing sector.
Another constraining factor in the manufacturing sector, according to him, is the challenge of high interest rate.
He said the average bank lending rate for manufacturers is 26 percent per annum. “We acknowledge the 9 percent interest rate on the N75 billion loan facility for a minimum of 75 companies that was recently promised by Mr. President. While commending His Excellency for this initiative, we are hopeful that it could even come at a lower rate and MAN would be given the opportunity to work with the government to determine deserving sectors, agree the disbursement modalities, and join in the evaluation and monitoring of its effectiveness. We believe that this inclusive approach will guarantee more success and create the basis for granting a much bigger emergency fund for the beleaguered manufacturing sector in the near future.” he said.
Another factor he mentioned is poor infrastructure, including inadequate power supply, poor road networks, and inefficient port facilities are serious impediments to the growth of the manufacturing sector.
The Association he said is looking forward to the government improving investment and undertaking effective reforms to guarantee reliable power supply; good road networks; and an efficient port system.
Meshioye, also observed that Nigeria has a low local content adoption and patronage of made in Nigeria products and therefore urged the Government to ensure effective enforcement of local content and patronage regulations.
He said this can be achieved by strict enforcement of local content laws, incentivizing local sourcing of raw materials, and innovation in the manufacturing sector.
Also, the public sector at all levels should, as a matter of national importance, step up their compliance with existing government directives on the patronage of made-in-Nigeria products, including Executive Orders 003 and 005
In addition, he said the manufacturing sector is one of the sectors of the economy with wide sectoral interlinkages.
“However, the low level of development of auxiliary sectors is disentangling the manufacturing sector from the rest of the sectors. This is more so in agriculture, iron and steel and mining sectors. This has resulted in a limited supply of raw materials and other inputs for the manufacturing sector. Therefore, it is essential to encourage backward integration and sectoral linkages to promote a more sustainable manufacturing sector in Nigeria.” he advised.
On foreign exchange shortage, he said MAN appreciates the new administration’s policy on exchange rate unification as part of the measures to address the forex crisis, but however, noted the problem is only half solved as forex shortages and high rate persist in the market.
He said that addressing supply inadequacy is critical to a resilient manufacturing sector and urged government to intensify its current efforts in this regard.
Though he said the manufacturing sector is passing through hard and challenging times, setting a comprehensive agenda for the sector’s transformation will enhance its competitiveness and unlock its full potential.
Meshioye said the MAN has always been a key partner to the Government and remains willing, available and ready to support the Government in formulating and executing its policies.
“Therefore, we earnestly seek a summit to engage government at the highest ministerial level to discuss the fate of the manufacturing sector in Nigeria,” he concluded.