Need to revive Nigeria’s manufacturing sector

Nigeria, Africa’s largest economy by GDP, is in dire need of faster development that will trickle down. In spite of the country’s abundant natural and human resources, poverty rate is estimated at 33.1 percent by the World Bank.

For the country to reverse this situation and inch closer to becoming a developed economy, the industrial base needs to be alive and contribute above 12 percent to GDP, from the present 9 percent, and increase capacity utilisation to 70 percent from its present 52 percent. Unfortunately, the manufacturing sector has been recognised only on paper by successive governments as driver of development with little attention paid to enhancing its operations.

With the sector’s importance in the economy and its potential role as a veritable source of employment generation in a country with a high unemployment rate, it is sad that the manufacturing sector still struggles under a myriad of challenges.

The leading sub-sectors have been non-metallic products, food/beverages and metal/iron/steel sub-sectors, accounting for 82 percent of manufacturing output in the first half of 2014, according to the Manufacturers Association of Nigeria (MAN). A recent data also shows output in the non-metallic products sub-sector, led by cement, fell by a whopping 40 percent from what was obtained in the last half of 2014. That of metal/iron/steel also fell 8 percent.

Nigeria’s manufacturing sector has over time had to contend with poor power supply, insecurity issues and high bank borrowing cost. According to one manufacturer, however, “The area that has most damaged the competitiveness of Nigerian-produced goods over the years is poor transport infrastructure.”

In spite of some improvements, it still takes several days to convey goods from one end of Nigeria to another, especially in the rainy season. It is also cheaper and easier to transport locally produced goods to Bamako in Mali than Maiduguri. Distribution of goods is still hampered by greedy tax collectors and poor state of roads in many areas, which expose manufacturers to thieves and robbers. This creates an extra cost to the manufacturers.

In addition to the various challenges, manufacturing sector was particularly affected by naira depreciation, a decision informed by the desire of the Central Bank of Nigeria (CBN) to save Nigeria’s reserves. This has the capacity to raise by 20 percent the production costs of manufacturers that import raw materials, according to the Lagos Chamber of Commerce.

We agree with Keith Richards, chairman of Promasidor, that one of the ways to awaken the nation’s manufacturing sector is to ensure that those involved in overseeing it are taken from the sector. This is important because one of the problems the industry has faced, according to Richards, is that past administrators have had little experience in or understanding of the practice of manufacturing as successive governments have recruited from the private sector – oil and gas, banking and consultancy – for ministers but not from the industry.

Nigeria is a manufacturing hub for the West African market. To ensure competitiveness, we advocate quick completion of the reforms in the power sector so as to guarantee stable power supply and thereby reduce the cost burden on manufacturers who have had to generate their own power. Thankfully, Nigeria has a big market of about 174 million people which promises strong consumer demand, especially with emerging middle class.

Now that President Muhammadu Buhari has mounted the saddle of leadership, we demand that the new president gives more attention to the manufacturing sector by reducing the cost of doing business, checking multiple taxation and developing local raw materials to prevent incessant import of inputs that has now created more problems for the economy.