Increasing competitiveness of made-in-Nigeria goods in global market

The focus of the Federal Government and local manufacturers under the umbrella of key advocacy groups such as the Manufacturers Association of Nigeria (MAN), Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), state chambers of commerce and other stakeholders is to ensure that locally-made goods compete favourably with imported ones and those of other countries across the border.

In all discussions and engagements involving stakeholders in the country’s manufacturing sector, numerous suggestions on how to enhance competitiveness of locally made products have been made, prominent among which are: dealing with infrastructure challenges, harsh interest rate regime, unbridled imports and smuggling, poor perception and inability to obtain required international certifications, counterfeiting and cloning of locally made products, suspension of the Export Expansion Grant(EEG), among others.

Many manufacturers across various sub-sectors are battling with high energy costs as power supply to industrial areas continues to slump. Seni Adetu, CEO, Guinness Nigeria, recently reported that his firm had to spend $3 million in its bid to have access to gas for its operations. A number of manufacturers in the medium-scale category who spoke with us confirmed that they spend between N200,000 and N500,000 weekly on diesel and gas for production.

In 2006, MAN conducted a survey on 850 members to ascertain which among key issues like cost of funds, cost of energy, access to raw materials and regulatory pressure affected them most. Eighty percent of them reported that power challenge was the greatest impediment.

In 2009, MAN disclosed that members spent N1.8 billion weekly on diesel used in production. Analysts believe this would have doubled following sharp increases in diesel prices within the last five years. Despite privatisation of the power sector, analysts say no significant change has been recorded.

Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), had wondered how the country’s products would be competitive with the current energy spend. Analysts say high energy expenditure means high production costs, which must be transferred to final consumers. To them, this makes it almost impossible for locally made goods to compete with imported ones from Asia, notably China, in terms of prices.

Apart from energy challenge, there are infrastructural deficiencies such as absence of clean water in many states needed for production, poor road network, insecurity, among others, that increase production costs and consequently market prices, according to players.

The Federal Government’s contractionary monetary policy, which maintains the Monetary Policy Rate (MPR) at 12 percent, pushes inter-bank interest rates to between 18 percent and 30 percent. The implication of this is that cost of funds in the country remains one of the highest in the world, say stakeholders. Worse still, borrowing at such rates will also have significant effects on prices as manufacturers would transfer the burden to consumers, they add.

“With the current interest rates, it will be difficult to achieve the desired economic growth and motivate indigenous entrepreneurs to create businesses since they will not be competitive with their foreign counterparts who obtain funds from their countries at single digit,” says Mohammed Badaru Abubakar, national president, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA).

Remi Bello, president, LCCI, also states that 90 percent of funds available for lending were offered on short-term basis, usually one year, implying that many real sector players in the country were simply working for the banks.

Regulatory pressure remains a behemoth for manufacturers as they have to battle with genuine and fake tax collectors in many states. Apart from the fact that taxes in some states are unreasonably high, agencies who claim to collect them range from 15 to 25. A CEO of a manufacturing firm in the food and beverage category told BusinessDay that his firm had to deal with 21 agencies, which came at different points to collect taxes and levies. Apart from this, registration and certification at regulatory agencies are often cumbersome, while there are still cases of overlap of functions, say stakeholders.

MAN Export Promotion Group (MANEG) says suspension of the Export Expansion Grant(EEG), the only grant given to manufacturing exporters in the country by the government, has increased the cost of production among stakeholders.

Since the EEG was meant to cushion the effect of high production costs and enhance non-oil exports, suspension of Negotiable Deposit Credit Certificates (NDCCs), instruments used in the scheme, means manufacturers have to bear the cost brunt wholly.

“With the ongoing non-acceptance of the NDCC, manufacturing exporters are incurring cost for duties payments that NDCC is meant to cover for their raw materials,’’ says Tunde Otelola, chairman, MANEG.

The group adds that the EEG need be reversed, while countries which seek aid from Nigeria should be given locally-made goods rather than cash, stressing that this will make these products competitive. Due to cloning across the ECOWAS countries, the group advocates trademarks protection as well as establishment of regional railway networks.

There is also smuggling and influx of Asian products into the country. Stakeholders say apart from the fact that many of these products are substandard, they are often cheaper and better packaged, thus making it difficult for local manufacturers to match them.

Stakeholders further stress that one major problem of the country’s products across the continents is questionable quality. According to them, while products of some firms may not internationally acceptable, those of many are, given the number of Nigerian companies finding markets in the United States, Europe and other parts of the world. Dufil, Procter & Gamble, Nestle, Dangote Group, Lafarge, Unilever, Armajaro, West African Cotton, Promasidor, among others, are such examples.

However, they add that Nigerian drugs in particular are not accepted in many climes because of poor packaging and inability to obtain the World Health Organisation (WHO) certifications needed to make them competitive.

“If you do not have pre-qualification, you cannot be competitive. We need to make efforts to obtain it by putting our own house in order,” says Azubuike Okwor, immediate past president, Pharmaceutical Society of Nigeria.