By Merit Ibe, [email protected]
The Executive Director, Universal Luggage Industries Limited, a manufacturing outfit, Frank Onyebu is deeply worried over the harsh operating space in Nigeria, which has led to the exodus of hitherto thriving companies to calmer climes.
To address the challenge, he said the manufacturing sector should be given the required attention and prioritised by the government.
Onyebu, a member and former chairperson of the Manufacturers Association of Nigeria (MAN), Apapa branch, expects the government to appreciate the fact that the real sector can pull the economy out of the woods and that the sector could go into extinction if the right policies are not quickly put in place.
He speaks more about the scathing realities manufacturers face in Nigeria.Excerpts
Economic decisions
The government has taken some very tough, maybe even harsh, decisions regarding the economy. Some of the decisions, though painful, are necessary due to the level of deterioration of the economy. However, one would expect an equally tough stance on the issue of the cost of governance. Unfortunately, we are seeing an expansion of decadence and profligacy, at the detriment of businesses. This is not good for this government and the image it is trying to create.
Poverty level
I think it would be rather unfair to blame the new administration for the current level of poverty in the country. The rot, which resulted from the failures of previous administrations, cannot be corrected overnight; it certainly would take some time and a lot of dedicated work.
The lack of government foresight over the years, which obviously is at the heart of the matter is a major reason for the level of poverty. What is happening today is the result of decades of mismanagement of the economy. Anyone with discerning eyes could have foreseen what is happening today decades ago.
Our population kept soaring while our production continued to decline. Our per capita income naturally declined, no wonder we are currently referred to as the poverty capital of the world.
Manufacturing sector’s challenges
One of the biggest challenges facing local manufacturers is the issue of dilapidated or in some cases, complete absence of basic infrastructure. We are all conversant with the state of our roads throughout this country. The terrible state of our roads makes it difficult for many manufacturers, distributors and buyers to access factories, source raw materials and sell products. We are all aware of the unstable nature of our electricity supply. On average, most manufacturers get less than 40 per cent of their energy needs from the grid. Sadly, alternative energy sources are very expensive. There’s no way any manufacturer can remain competitive with the current level of power supply to industries. Another major problem we face is multiple taxation and levies, both legal and illegal. The different tiers of government come up with all manner of taxes, unmindful of the harsh effects of these taxes on the real sector. The consequences of these heavy tax burdens can only be imagined. This only compounds the already dire business environment in Nigeria.
On the issue of forex, most manufacturers need it to purchase equipment and raw materials but are unable to access it because it’s simply not available or very expensive. The foreign exchange market itself is in turmoil. The rates change several times in a day, making planning very difficult and makes us wonder how anyone can run a business successfully like this. We also have the issue of policy somersault. It is difficult to plan when you can’t rely on some level of consistency in government policies. There’s nothing that scares investors more than inconsistency in government policies. The obvious implication of all these is that our cost of production is very high. Unfortunately, the poor state of the economy cannot support an appropriate increase in the prices of goods and products, so, manufacturers are stuck with a large stock of finished products which they cannot or struggle to sell and this affects the bottom line. It is no wonder then that a lot of manufacturers are going under while others are relocating to countries with less uncertainty. Those left are hanging on by a thread, struggling to survive.
Diversification of economy
Certainly, it would have been different if past administrations had taken the issue of diversifying the economy more seriously. Past administrations had unfortunately, paid lip service to the issue of diversification of the economy away from the petroleum sector. I expect that after so many years of inaction, this government would have realised that there is no alternative to embracing diversification. I expect that the present government fully understands the role of the manufacturing sector in this regard. I expect this sector to be given the required prioritisation by the government. I expect the government to relate to the fact that the real sector can pull the economy out of the woods and the fact that this sector could go into extinction if the right policies are not quickly put in place.
We made ourselves lazy by thinking that we are a rich nation simply because we have crude oil and other mineral resources. We paid and continue to pay lip service, to diversification of our economy. We crave for imported goods rather than support our local manufacturers. Collectively, we crushed our local currency. We drove our naira from one of the strongest currencies in the world to one of the weakest.
Unification of exchange rate
It is a good policy which looks unpleasant now and will ultimately benefit the economy in the long run. The multiple-exchange rate regime was riddled with corruption and benefited only a few privileged individuals. Most businesses, especially SMEs, never benefitted, even though we were supposed to be one of the biggest beneficiaries. So, I think it was only fair that it was scrapped. The challenges being encountered presently are due to the inability of the Central Bank of Nigeria (CBN) to properly fund the FX market. We can all see how the market has been reacting to the liquidation of some of the outstanding FX backlog. We should expect stability if this is sustained properly.
Revival tips for economy
The economic reality unraveling every day in Nigeria is harsh and everyone is feeling the heat. The government has made some very hard and sometimes, harsh decisions. I doubt if there’s anyone living in this country now who is not feeling the pinch of the economy. There is an urgent need to cut the cost of governance. It’s not enough to tell everyone else to brace up for hard times, the government has to take the lead and lead by example. Again, there is a need to drastically cut the cost of governance. There’s no way the people will fully understand what the government is saying until the government takes certain actions to curtail its many extravagances.
There is no way people will be happy to put up with suffering when the government is appointing thousands of non-essential officials while appropriating billions for their welfare. The money being allotted for the renovation of certain government facilities is enough to construct roads, schools, hospitals and revive the real sector.
It doesn’t make sense.
I expect every official, from the National Assembly to the Executives, to realise the precarious situation this country is currently in. What should be occupying their minds right now should be how to get this country out of the current mess it is in. We should all be thinking about employment creation initiatives because, with the current level of unemployment, I have to warn you that this country is almost at the edge of the precipice.
The productive sector
I have to say that we have no choice but to industrialise and fast. We need to build hundreds of thousands of factories all over the country. We need to build and fund micro, small, medium and large-scale industries. I’m by no means saying the government should build these factories. No. What the government needs to do is to create the right policies as well as provide an enabling environment. This country has the potential to become a major industrial power. We have the capacity. We have the people. We have the resources. What we lack is government support. We have lost so many opportunities as a result of this lack of government support and policy somersault.
Govt’s support
This country has potentials to become a major industrial power. We have the capacity. We have the people. We have the resources. What we lack is government support. We have lost so much opportunities as a result of this lack of government support.
There was a time, in the recent past, when lots of Chinese, Indian and other Asian companies were reaching out to us, making serious inquiries about investing in Nigeria. They are not reaching out anymore. Why? It is simple; our harsh business environment has sent them to other places. It is not enough to go meet them and tell them to come and invest, they are making their inquiries privately and what do you think they will find out? What does the government need to do, you may ask at this point? The government needs to create a favourable environment for manufacturing to thrive; invest heavily in infrastructure and power, fight insecurity and corruption as well as enact policies that would make manufacturing more attractive than importation of finished products. These may appear far-fetched, but I assure you that all these are doable if we set our minds to it.
The government does not have to invest its direct resources. It could accomplish much via the public-private partnerships route and transparency. I can assure you that with our large population, Nigeria would be irresistible to investors from all over the world if we do the right thing. Nigeria could become a major industrial hub. Nigeria could become the next big thing. China did it, we can do it as well. Nigeria could become the next China, but we all collectively need to actively work towards this goal. Wishing it into existence or seeking investments without doing our homework first is an exercise in futility that will take us nowhere.