Outlook for Nigeria’s manufacturing sector in 2014
With a domestic and captive market of up to 170 million consumers, Nigeria is well positioned to nurture and sustain a thriving manufacturing industry and also to be a major hub of manufacturing for sub-Saharan Africa. That is why the threats and obstacles that may be a hindrance to this industrial strength should be addressed adequately by governments and the business community.
In 2014, there are developments, policies and industrial issues that may define the fate of Nigeria’s manufacturing sector. While a number of them are carry-over issues from 2013, a few others could possibly emerge in the course of the year.
One emerging issue is the possible increase in the price of 1000 standard cubic feet of domestic gas to meet international price standards. If this is done within the first quarter as is speculated, there will likely be outcry from the industrial community that will bear the greatest brunt. The outcry will be hinged on the negative effects such a decision will have on production costs. Manufacturers are struggling under high cost of production. According to them, increase in domestic gas prices will have untold effect on their production costs as well as profits. It will also prevent many from competing favourably in the international market as Common External Tariff (CET) regime closes on.
Another issue that may dominate discourse this year is the power supply situation and its cost implications. With the recent privatisation of the power sector, there seemed to be light at the end of the tunnel towards the end of last year. But so far, power situation is yet to improve following gas shortages throughout the country. Manufacturers are pessimistic. They argue that the handover to generating companies (GENCOS) as well as distribution companies (DISCOS) has not resulted in any improvement. In other words they will still have to maintain big generators and transformers (for those who could afford them) in 2014
If the energy situation does not eventually improve, production cost will remain high (or higher in situations of worsening gas supplies). Before now, experts too had advised Nigerians to not expect regular power supply till 2016 or 2017, but many Nigerians are yet to come to terms with this. However, if something beyond the ordinary happens, resulting in improved power supply, manufacturers will have cause to smile.
Apart from energy costs, the issue of smuggling and influx of fake and substandard goods may also dominate industrial debates within the year. Manufacturers are insistent that unbridled imports are stifling the growth of their firms, especially infant ones. They also complain that some of their products which compete in African markets are cloned by Asian importers, in collaboration with their Nigerian counterparts
Consequently, the issue of trademarks protection will also be brought to the front burner with a view to ensuring that nobody steals someone else’s products and ideas in the West African sub-region or across the continent.
The controversial suspension of Export Expansion Grant (EEG) may also be brought to the fore. EEG, the only visible impetus given to export-oriented manufacturers, was recently suspended by the Nigeria Customs Service (NCS). Insider sources say this suspension could be attributed to the financial burden it imposed on NCS, which had to bear the brunt of the policy. However, the issue is expected to be brought for discussion as exporters are appealing to the Federal Government for its revision.
Furthermore, there will likely be campaigns to further reduce production costs and increase capacity utilisation in some sub-sectors such as textile, pharmaceuticals, cosmetics, chemicals, among others.
No matter the direction of developments in Nigeria’s manufacturing industry, in 2014, it is certain that Nigeria’s aspiration to be one of the top 20 economies by the close of this decade will remain a mere dream if this critical industry remains in doldrums.
By: BusinessDay