‘Manufacturing in Nigeria is N92.77 billion constrained by inadequate and high cost of credit. Of the N92.23 trillion aggregate credit to the economy by commercial banks from 2017-2021, only N92.77 billion or less than 1 percent was channeled to the manufacturing sector.’
Nigeria’s manufacturing sector is characterized by sub-optimal performance hovering around 9 per cent because of some existing biding constraints.
This is why governments’ efforts at industrializing Nigeria, over the years, through manufacturing, has failed.
This was the submission of Aliko Dangote, President and Chief Executive of Dangote Group in Lagos on Tuesday, at the 2nd Adeola Odutola Lecture in Commemoration of the 50th AGM of Manufacturers Association of Nigeria.
In a paper titled ‘Agenda Setting for Industrializing Nigeria in the Next Decade’, Aliko Dangote listed the challenges as including Acute shortage of forex; Dearth of long term funds; Limited infrastructure; Policy inconsistencies/ implementation/enforcements; Limited industries; Over regulation; Multiple and tax rates for industries and Insecurity.
On acute shortage of funds, he argued that the manufacturing sector is currently overwhelmed by shortage of forex which makes imports difficult and expensive. Said he: “In the official forex market, manufacturers are only given about 25 per cent of their forex requirement, which is often allocated in bits over a period of a few months. This obviously affects their ability to fulfil obligations with suppliers for raw materials, spare parts, equipment/machinery, etc.
On dearth of long term funds, he explained manufacturing in Nigeria is N92.77 billion constrained by inadequate and high cost of credit. According to him: “Of the N92.23 trillion aggregate credit to the economy by commercial banks from 2017-2021, only N92.77 billion or less than 1 per cent was channeled to the manufacturing sector”.
For him, the stock of infrastructure available to support manufacturing in the country “is grossly inadequate”. He explained Nigeria provides about 4000 megawatts of electricity per day for over 200 million people and corporate entities. “Inadequate power supply is a major cause of high cost of production and low competitiveness” he said. He listed other infrastructure related challenges as including the poor state of roads, congested seaports, limited gas network and underdeveloped rail system.
His argument on policy inconsistency/implementation /enforcement is well known to stakeholders in the business space. Dangote argued, “The Nigerian industrial sector used to be a haven for Foreign Direct Investment(FDI) but that has changed due to inconsistency and impromptu changes to the implementation of Export Processing Zone, Pioneer Status, Export Expansion Grant modalities, frequent tariff changes and the dichotomy between CKD and SKD in the automobile assembly subsector”.
On limited core industries, for him, a number of large-scale investments that would have triggered the proliferation of smaller industries around it are unfortunately either comatose or functioning sub optimally. He listed iron and steel complexes, the paper mills, aluminum smelting plant, vehicle assembly plants, refineries, petro-chemical plants, etc. “Some of these investments at some point provided inputs to local industries.Today, the manufacturing sector relies largely on imports for vital raw materials despite the high cost and difficulty in sourcing forex as well as its impact on competitiveness,” he argued.
Another major challenge is over regulation, according to Aliko Dangote. Hear him: “Even when a government committee recommended the rationalization of these agencies with duplicated mandates, it has not yet been implemented. Today, industries are bombarded daily with a barrage of demand notices emanating from agencies with similar mandates.”
On multiple and high tax rates Aliko Dangote fed the audience at the hall and its overflow at the Oriental Hotel venue in Victoria Island, Lagos with an intimidating list of taxes on the industry by government. Said he : “The manufacturing sector is beset with over 30 statutory taxes, levies, fees, rates and charges including company income tax, stamp duties, petroleum profit tax, capital gain tax, industrial training fund tax, education tax, etc., etc.
For him, the latest and “the most grievous challenge confronting industries is the heightened level of insecurity across the country manifesting in the form of kidnapping , banditry, herdsmen-farmers crisis to mention a few”. He said a number of industries “have closed down on account of insecurity leading to job losses”.
In summation, Aliko Dangote agued: :In consideration of the afore-mentioned challenges, there is an urgent need for a shift in policy approach and strategy to reposition the manufacturing sector for familiar challenges limiting the pace of industrialization are frontally addressed while setting a clear-cut agenda for the next 10 years.”
Meanwhile, President of the Manufacturers Association of Nigeria Engr Mansur Ahmed added his voice to express the pains that manufacturers are burdened with in the industry space. Said he: “The manufacturing sector is struggling to survive from high cost of operating environment, especially those arising from the numerous fiscal darts constantly thrown at industries in a bid to upscale internally generated revenue. He argued what is keeping the sector alive till date include the enormity of investments on ground , huge good will, strategic thinking, , sheer doggedness and commitment to sustain industrialization in Nigeria.
Source: The Real Sector; www.realsectornow.com
