Nigeria's Manufacturing Needs A Nudge To Drive Industrialization - Dr. Muda Yusuf

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Tuesday, June 9, 2020 / 12:48 PM / Bukola Akinyele for WebTV / Header Image Credit: The Guardian Nigeria

 

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Nigeria has to address its infrastructure, logistics, and manufacturing sector challenges as  a way pushing the country towards job-inclusive industrialization said the Director-General of the Lagos Chamber of Commerce and Industry (LCCI) Mr. Muda Yusuf while speaking as a guest on WebTV's 'Economy and Politics' programme which looked at the issue of, "Resetting Nigeria's Manufacturing Sector for Global Competitiveness". 


Speaking on the manufacturing sector, the GDP report for Q1 2020 published by Nigeria Bureau of Statistics showed that the sector grew by 0.43% compared to 1.24% in 2019, Yusuf said the manufacturing sector has faced the same challenges over the years and the basic challenge is infrastructure.  He was of the view that in countries that are performing well, none of them have poor infrastructure.


According to the LCCI DG, Nigeria has entrepreneurs that can make things happen to create wealth, generate employment,  and generate tax revenue for the government but they need to be supported by far better infrastructure.  He said, there is no way to industrialize if there is poor logistics, he said that the country cannot industrialize where it generates only 4,000 Mega Watts of electricity. It cannot industrialize where the domestic interest rate is around 20%.


The DG pointed out that,  Nigeria needs basic industries to support the manufacturing sector. He cited the Petrochemical industry as the provider of inputs used by manufacturers. Nigeria's Petrochemical industry is at best weak and lean. 


Looking at the country's manufacturing sector, Yusuf noted that materials used for domestic production are largely imported. He said the production environment critically determines how investors behave and the current Nigerian environment is uninspiring.


The microeconomic specialist noted that the beauty of Nigerian manufacturing is not only in the growth of domestic markets but also in its ability to cope with import restriction, border closure, import tariffs, and exclusion from the foreign exchange market which is not a sustainable way of moving the sector forward. Yusuf believed that public policy needed to be framed around the fundamental issue of competitiveness, the country needs to compete within the sub-region and global markets.


He cited petroleum as the easiest product to mine and refine but the country has had problems with this for more than 30 years. According to him, the huge amount Nigeria uses to import petroleum products into the country could be used for our reserve which could go up to $1oobn reserve or even more.


 On the part of the construction sector, he said besides cement all other products are imported such as in the telco sector, he noted that generally, local content was not up to 20%. The LCCI DG said that the contribution of the manufacturing sector to GDP was less than 10%. He concluded that the country needed to deal with this fundamental issue to forge ahead with its industrial aspirations.


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Speaking on the federal government's fiscal direction and the recent CBN monetary [policy committee (MPC) reduction of the monetary policy rate (MPR)  by 100 bases point from 13.5% to 12.5%, he was of the view that more needed to be done to unlock manufacturing's potentials. He said that the country's fiscal commitment to infrastructure was very low. He said the policy measures to incentivize private sector investors were weak and required a major workaround to encourage big-ticket private-public partnerships (PPP). The economist insisted that the country could not continue to use debt to fund infrastructure.


However, Yusuf commended the Central Bank of Nigeria (CBN) for providing intervention funds to stabilize businesses during the novel coronavirus pandemic.  On the side of textile production, Yusuf said, there was a need to bring the cost of production. Taking into account that about 30% of textile costs are linked to energy. He said the high domestic cost of production leads to land border smuggling.


According to Yusuf, the Oil & Gas sector accounts for almost 60%  of total government revenue, 90%  of foreign exchange income but contributes only 10% to GDP which underscores the need to deepen the domestic value chain. The LCCI DG said that there was low indigenous participation in local production, with minimal value chain linkages. Yusuf opined that the country needed to strengthen local value chains.

Speaking on how to develop a strong domestic supply chain that is protected from the international contagion, he said, the domestic supply chain must have deeper rooted domestic interfaces. He cited  Nigeria railway as poorly managed and designed distribution solution that was supposed to be the primary means of movement of food, cargo and people in the country. He noted that no way can the country progress without high-quality logistics.


 Still, on the matter of a robust domestic value chain, the Yusuf explained that there were issues of low productivity, low application of technology, and the poor scale of production. He said,  these factors affect domestic industrial growth and there was a need to work on domestic integration of the economy for greater competitiveness. He concluded that Nigeria should focus on growing the manufacturing sector and making it a regional and global powerhouse.

 

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