By Merit Ibe, ibe.merit@yahoo.com
Limited supply of raw materials is posing a hurdle to an already constrained manufacturing capacity, the Manufacturers Association of Nigeria (MAN) has said.
To this end, MAN has urged the Federal Government to encourage investment in the manufacturing industry, especially in sectors involved in ‘backward integration’, through introduction of incentives for local producers.
This is even as they argued that backward integration process can improve the value of manufacturing firms and reduce import dependency, promote Nigeria’s product competitiveness and create more employment in Nigeria.
MAN said there is a clear need for diversification of the Nigerian economy to promote quality growth, economic transformation and employment.
It stated that this can be aided by the development of value chains that facilitate higher-value added processing and manufacturing activities within Nigeria and make greater use of locally produced inputs and services in production through the creation of backward linkages.
It argued that backward integration programme can have positive effects by stimulating economic development, promoting the development of local industries, creating economic linkages, building local capacity, capabilities and technologies, developing skills within the workforce, boosting employment and minimising capital flight.
The Federal Government launched a backward integration policy several years ago to stem importation of raw materials for value addition in the manufacturing sector.
But since then, local manufacturers have continued to complain about the hurdles they face accessing raw materials.
Some operators are of the view that backward integration requires more funding for manufacturers and called for government to intensify efforts at enabling a more conducive business environment.
The manufacturers have stated that the average performance of local raw-materials utilisation among operators in the country is due to poor access to credit and inadequate economic infrastructure needed for inward development of local inputs.
Lack of access to foreign exchange for the importation of a couple of items, is enough to encourage local sourcing of raw materials for production, but the business environment is stifling the policy.
The development has however presented an oppourtunity for the country to stimulate and promote its import substitution agenda.
Regrettably several years into the clamour for backward integration, stakeholders and manufacturers have urged the Federal Government to implement policies that would discourage importation of manufactured good by incentivising local producers.
However, observers have argued that accelerating backward integration, some of the big challenges that must be tackled head on include insecurity, poor infrastructure, power, refining capacity among others.
MAN president, Francis Meshioye said it’s equally essential not to lose sight of the importance of harnessing locally sourced raw materials and availing oneself of critical support services such as financing and logistics.
He noted that it is time local manufacturers embraced technology to produce goods, support sustainable development and ensure the country is not reliant on developed nations.
“We must also remain committed to utilising locally sourced raw materials and leveraging essential support services, including financing and logistics, to drive our manufacturing endeavours and propel us into a prosperous and sustainable future.
“The current environment in which disruptive technologies and trends such as Blockchain; Internet of Things; Machine Learning; Artificial Intelligence; Driverless car and Augmented Realty, among others, would dictate the pace of development among nations,” he said.
Therefore, the need to start using technology to produce our own food, products and other indigenous innovations becomes imperative so that we do not end up dependent on developed countries.
One must also not lose focus from latching on locally sourced raw materials and other support facilities like the needed financing and logistics services.
Chairman, MAN, Apapa branch, Frank Onyebu, lamented that the backward integration policy has not been largely successful in Nigeria because of little and in some cases, complete absence of government’s commitment.
“The issue here is that most of our infrastructure are dilapidated. A manufacturer, for instance, who depends on farm inputs for his production would need to go to the villages to source his raw materials on non-existent roads. With the absence of electricity in the villages he would need to either process the raw materials with generators or transport the raw inputs to his factory with the attendant high transportation cost.
“The current security situation, which makes movement of goods very difficult, compounds the already bad situation. “Backward integration will thrive if the government creates the environment for it to thrive. Deliberate policies have to be made; infrastructures have to be upgraded; but above all, industrial clusters need to be created. These clusters have to be so designed in such a way to encourage backward integration. This is the way it is done in more developed economies.
For his part, General Manager, Ornua Nigeria, Tunde Afolabi, said government should create an enabling environment for local production. Backward integration is a good policy, but it does not just work so easily. A lot of money has to be committed to the business. “For milk production, you need to secure the land, the cows, machines and expertise to manage the business. With the value chain, there has to be a plant, where the milk can be preserved, so, we need constant supply of power. “The roads are not accessible, insecurity part seems to be the worst. Some who tried to invest into backward integration, have lost so much.
“The first thing government should have done first was to call stakeholders together and take decisions together. Government should have given a timeline say between now and the next three years we want to start producing milk in Nigeria or between now and five years we want to have our own companies. As experts, we will now say what we can do and then agree on the strategies.
“What we require from government is an enabling environment to do business.”
We need an enabling environment, the security issue is serious. We need constant power to preserve our products.
Our youths need to be educated on agriculture and technology needs to be adopted. Government needs to encourage the youths to go into farming through incentive. This will make the system competitive. Government also needs to encourage cooperative system of farming. This system has worked in India. They don’t import milk into India anymore, they produce more than enough. This is because locally, everyone has a cow or two.
The rate of inflation is so high, spending is difficult. Doing business as a private entity in Nigeria is so difficult to survive in this terrain.
Government has a good intention but it has not followed it up with a plan. Stakeholders need to be consulted to come up with their plans. In developed worlds, farmers are king, but here, they are not reckoned with.
The Director- General/CEO, Raw Materials Research and Development Council, Prof. Hussaini Ibrahim, viewed that the objective of the RMRDC is to develop local raw materials and coordinate research efforts in relation to raw materials acquisition, exploitation, conservation and development.
“We have partnership with MAN in co-hosting these a yearly expositions to maximise the benefits to our common stakeholders, who continually aim to reduce the cost of manufacturing amid the rising cost of raw materials and process equipment.
On our part, the Council has assiduously worked over the years with stakeholders to increase manufacturers’ access to both basic and secondary raw materials.
We are committed to ensuring competitiveness in raw materials and products development.