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By Daniel Kanu
There is no doubt that Nigeria’s manufacturing sector is in near comatose state. Today, only a few local manufacturers are still staying afloat. Many had gone under while some of the multi-nationals have quit the country.
Although the collapse of the sector did not start with the President Bola Tinubu APC government, but the past one and half years under the present administration has accelerated the collapse thereby intensifying the hunger and hardship in the country.
The situation is one that industry and economic experts have continued to blame Tinubu’s anti-poor policies.
Concrete evidence abound, according to experts, that the cruel combination of high energy costs, predatory regulatory environment, high logistics costs, foreign exchange scarcity, rising inflation, insecurity, and stratospheric interest rates, the manufacturers have had to grapple with in recent months is threatening their existence in the sector.
It has become imperative that immediate steps need to be taken to prevent the manufacturing sector from not only collapsing totally, but also to salvage it from extinction.
As a matter of emergency, economic and industry experts are calling on the Federal Government to revive the industrial sector in order to save the economy and reduce hardship.
According to data from the Manufacturers Association of Nigeria, at least 767 manufacturers had shut down operations and 335 became distressed in 2023. Unsold inventories amounted to N350 billion during the same period, it was learnt.
Records showed that prominent pharmaceutical multi-nationals – GlaxoSmithKline (GSK) and Sanofi Nigeria Limited – exited the country in 2023, citing the forex crisis.
On May 31, 2024, Kimberly-Clark, makers of Huggies, also announced its decision to stop local manufacturing and sale in Nigeria after solid 14 years of operation.
PZ Cussons Plc is also considering leaving Africa as a whole, partly due to its Nigeria woes that had resulted in a 48 per cent drop in sales.
This occurred against the backdrop of economic challenges that have worsened the investment climate.
Manufacturers are particularly concerned about rising operational costs imposed by recent government policy actions.
The Director-General of MAN, Segun Ajayi-Kadir, recently threatened that the association’s 2,500 members would shut operations to protest the 250 per cent hike in electricity tariff after manufacturers were forcefully placed on the controversial Band A regardless of whether they operate round-the-clock shifts or not.
Most industries are already buckling under the weight of high diesel costs before the electricity tariff hike that has seen energy accounting for between 40 and 50 per cent of costs and avoidable expenses.
Manufacturers have also complained about their inability to access foreign exchange to import raw materials and machinery as well as ridiculous import tariffs calculated at parallel market rates by the Nigeria Customs Service.
A slew of taxes, multiple taxation and penalties imposed by all tiers of government contribute to manufacturers’ woes in an increasingly hostile regulatory environment.
Industry expert, and Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, expressed concerns recently about “disturbing tendencies of overbearing regulatory dispositions, disproportionate sanctions, obstructionist actions, outrageous fines and penalties, intimidation and high-handedness”.
Significant transportation and logistics challenges, poor infrastructure, and climate issues resulting in flooding in some parts of the country are also taking a toll.
Insecurity in several states has also denied manufacturers access to certain markets. It amounts to self-immolation for Nigeria if the sector’s vulnerabilities are not addressed urgently.
In a chat with the Founder and President, Kingsway International Christian Centre, KICC world-wide, Pastor Mathew Ashimolowo, told Sunday Sun that it costs him over N5 millio to provide security for the rice and beans his outreach organization, CCRWF (Christ Compassion for the Rural World Foundation), bought from Taraba State to Ibadan, Oyo State capital, for the church crusade in the city this November beginning from the 25th.
“The country is challenged, manufacturers are leaving Nigeria, the economy is going down by the day, and there is unbridled insecurity. It is a serious issue that the President Tinubu-led government must seriously address.
“This government must address what I call the 5Es. They are: education, economy, environment (agriculture), electricity (power), electronics (IT intelligence).
“You must make the environment condusive for industries to thrive,” Ashimolowo advised.
The manufacturing sector is crucial for job creation, productivity, and economic growth, yet it has continued to decline.
Nigeria’s manufacturing sector contribution to the Gross Domestic Product (GDP) witnessed a significant contraction over the past two quarters, reflecting a decline of 20.95 per cent from the end of 2023 to the second quarter of 2024, according to the National Bureau of Statistics.
A financial expert, Mr Okechukwu Unegbu, urged the Federal Government to take urgent steps to revive the manufacturing sector so as to boost the local economy.
Unegbu said that the absence of a vibrant industrial and manufacturing sector in the country had exacerbated various economic challenges, like rising inflation and an unstable currency (naira).
According to him, the priority for the government and its relevant agencies is to help the industries to start producing again.
“Production and manufacturing of essential goods will stop the dependence on imported goods, and go a long way in revamping the economy and strengthing the naira.
“The Federal Government should address fundamental dislocations in the country, like boosting investment, reducing unemployment rate and cutting down on inflation,’’ he said.
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He added that it would also be advisable for the government to reduce the tax rate so as to increase the volume of tax to enhance economic growth.
“The more employment you get, the more tax you will get, and that will boost the government’s revenue drive.
“Government should lower the tax rate for more investment and a wider tax volume,’’ he counselled.
He also advised the Central Bank of Nigeria (CBN) to adopt effective monetary policies that would strengthen the value of the naira.
“A strong currency is also indicative of a performing economy. The CBN should take innovative steps to firm up the value of the naira.
“The apex bank should be more proactive and more open in its foreign exchange operations.
“The idea of direct allocation of foreign exchange to certain categories of businessmen, instead of allowing them to go through deposit money banks, is an abuse of the naira,’’ he noted.
Also, an economist and entrepreneur, Dr Tope Fasua, said that the Federal Government should take concrete steps to boost productivity, with strong local content to boost the country’s economy.
Fasua said that a country’s economy could only be as strong as the productivity that underlies it.
“This is talking about the knowledge quotient of the goods and services that a country produces.
“If a country does not have a lot of local content going into the products it exports then the economy of that country will have issues,” he said.
The Nigeria Economic Summit Group (NESG) suggested that Nigeria needs to achieve a paradigm shift in governance and policy design to sustain and accelerate economic growth.
Mr Laoye Jaiyeola, a leader with NESG, after studying the group’s Macroeconomic Outlook. said that failure by the Federal Government to embark on humane reforms could worsen current economic challenges.
According to Jaiyeola, “in the NESG, we believe that the role of government is to ensure that reforms translate to a friendly business environment and better welfare conditions for households.’’
He said although Nigeria had enormous potential, job creation across sectors was lagging, resulting in an increase in unemployed individuals.
He said that widespread insecurity across the country had informed the need for policy formulation and implementation that impacted all strata of society.
“The heightened insecurity and social vices in several parts of the country is proof that when some segments of the population are left behind, it will offset the few gains made. It will also deprive the country of much-needed investments that would ensure sustainable growth and development,” he said.
Experts agreed that revitalising the manufacturing sector should be prioritised by both the federal and state governments.
A UNIDO working paper has reaffirmed that traditionally, manufacturing plays a key role in the economic growth of developing countries.
Intensive investment in manufacturing, according to Dr Phillips Nto, an economist and former finance commissioner in Abia State, proved to be a significant game-changer in the economic transformation of the BRICS countries –Brazil, Russia, India, China, and South Africa.
For the manufacturing sector to thrive, there is a need for improved stakeholder engagement to draw up measures targeted at mitigating the current challenges.
For instance, a significant rebate or suspension of import tariffs is needed in critical sectors such as pharmaceuticals to lower costs and prices.
The sweeping 250 per cent electricity tariff hike for manufacturing plants makes no economic sense, according to industry watchers, which must be reversed.
Stakeholders have argued that manufacturers should not be punished for the gross inefficiencies of the power sector for which the government is largely to blame.
It is a disgrace that Nigerian manufacturers and households are still struggling with barely 4,000MW of power distributed. Access to affordable gas is said to be another way to lower costs for factories.
For Nto, “the overall business climate needs to improve and the tax regime must be streamlined quickly as planned in line with ease of doing business requirements”
Also, road, rail, and port infrastructure and processes are expected to be speedily enhanced to support manufacturers, while insecurity must be defeated without any further excuses.
A government that claims to be business-friendly must focus on addressing manufacturers’ challenges.
The sector needs to be healthy to create jobs, generate taxes and reduce Nigeria’s reliance on oil revenues for foreign exchange.
Government must begin to have another look at the combined effect of some of it’s ruinous policies that have brought the manufacturing sector to a miserable state.
