If foremost Nigerian industrialists such as Adeola Odutola, Sir Louis Odumegwu Ojukwu, Adeyemi Lawson, Henry Fajemirokun, and the renowned technocrat and industrialist Olawale Kuye resurrect today, they would be disappointed with the way the one-time thriving manufacturing sector in Nigeria has deteriorated. They were prominent members of the Manufacturers Association of Nigeria (MAN)
They would perhaps be asking where the Dunlop, Michelin, Kaduna and Ikeja textiles Companies, Nigeria Gas Company, manufacturer of gas cylinders in Ibadan, The Oluwa Gas co, company, Steyr (Nigeria) Ltd in Bauchi, Volkswagen Beetle Company in Lagos, Phillips, Leyland Motors are.
The unfortunate thing is that the surviving companies are struggling in the face of bad policies which have left them gasping for breath.
The deterioration of the manufacturing sector did not start today. It started during the infamous regime of General Ibrahim Babangida and was replete with a high level of policy summersaults which eventually eroded the confidence of investors and gradually resulted in some of the companies dying or leaving the country completely.
This, coupled with the lack of foresight of the leaders to invest in power infrastructure by the same government and the immediate ones that followed before 1999, created the level of decadence being witnessed in the sector. Power infrastructure has not been upgraded since the commissioning of the 1320 megawatts Egbin Power Plant that the government of Late Shehu Shagari commissioned in the early 1980s.
Power plays a significant role in manufacturing because a cheap source of power will lead to reduced cost of production which will ultimately make manufacturers’ products affordable to consumers.
According to MAN’s half-year report of 2022, electricity supply to the industries from the national grid declined marginally to 11 hours per day from 12 hours in the second half of 2022. This is a sector that should be enjoying a 24-hour uninterrupted power supply. The challenge of power alone has made many manufacturing concerns close shops. The government must address the challenge squarely if it is serious about resuscitating the manufacturing sector.
Even though resuscitating the sector has become a herculean task, it is not impossible to do with good government policies and the execution of such policies with the cooperation of other stakeholders.
The Manufacturers Association of Nigeria (MAN) in recent years has been advocating that the government should make policies that would make the manufacturing sector come alive again and take its pride of place in the economy of the country, by removing obnoxious policies that are inhibiting the growth of the sector.
MAN’s leadership lamented the dwindling fortunes of the sector because this situation has prevented the sector from contributing its expected quota to the growth of the country’s gross domestic Product GDP
For instance, according to MAN’s report, the nation’s manufacturing capacity utilization in the second half of 2022, year-on-year, declined to 54.9 percent from 59 percent recorded in the corresponding half of 2021; thus, indicating 4.1 percentage points decline over the period. Quarter-on-quarter, it declined by 3 percentage points when compared with 57.9 percent recorded in the first half of the year. Manufacturing capacity utilization averaged 56.4 percent in 2022 as against 55.9 percent average of 2021.
The decline in manufacturing capacity utilization in the period was due to the adverse effect of high cost of energy and the Russian-Ukrainian war, the grave effects of the Naira Redesigning policy and other perennial challenges such as acute shortage of Forex for importation of raw materials and machines, high cost of borrowing and many more.
The Manufacturing sector factory output value declined to N2.68 trillion in the second half of 2022 from N3.73 trillion recorded in the corresponding half of 2021; thus, indicating N1.05 trillion or 28 percent decline over the period. It also declined N1.31 trillion or 32 percent when compared with N3.99 trillion recorded in the preceding half. The value of manufacturing production totaled N6.67 trillion in 2022 as against N7.39 trillion recorded in 2021.
Inventory of unsold finished products in the manufacturing sector is also on the increase. For instance, the value of unsold finished products increased to N282.56 billion in the second half of 2022 as against N169.75 billion recorded in the corresponding half of 2021; thus, indicating N112.81 billion or 66 percent increase over the period. It also increased by N85.46 billion or 51 percent when compared with N187.1 billion recorded in the first half of that year. We can go on and on.
MAN believes and argues that it is critically important that the challenges identified by manufacturers as militating against the industrial growth of the country should be adequately addressed as follows, among other solutions:
According to MAN’s President, Otunba Francis Meshioye, MAN has consistently encouraged the government to see to the challenges confronting his association and take appropriate measures to address them. For him, the Manufacturers Association of Nigeria remains focused and committed to its advocacy for a conducive business environment and specific targeted policies that will support the revitalization of the manufacturing sector in Nigeria.
According to the MAN’s boss, part of the solution to the revitalization of the ailing industrial sector of the country includes: improving the availability of foreign exchange which is very critical for the purchase of raw materials and machine needs of the industries through the official window,
MAN, he said, wants the government to develop and implement a roadmap for improved power supply focusing on off-grid solutions and independent power projects by the private sector to ensure an adequate supply of energy for production and also attract and expand investment, carry out further investment in the electricity value chain and commit to adding 10000MW to the current electricity distributed in the country.
On the issue of taxes which have acted as disincentive to smooth business operation, Otunba Meshioye says MAN wants government to address this issue by Publishing the list of approved harmonized taxes and levies for the manufacturing sector by the Joint Tax Board (JTB) to address the issues of multiples taxes and levies; He wants government to Commence implementing the harmonized taxes and levies project which should be monitored and enforced strictly by the Joint Tax Board (JTB).
He also calls for investment in infrastructure and that the government should set up a monitoring and evaluation platform with private sector representatives to oversee the disbursement of the various development funds meant for the industries while also providing Credit guarantees for industrial loans from commercial banks.
For him, the situation of the Nigerian Manufacturing sector is redeemable if government can implement most of the suggestions presented to it by MAN and other members of the organized private sector.