Nigeria may have clawed her way out of a debilitating recession last year but certain disturbing signs show that the economy is not out of the woods yet. Depressingly, one year after the cheery news of escape from five successive quarters of contraction, manufacturing, a component that holds out much hope for full and sustained economic recovery, through employment and wealth creation, is still hobbled by a harsh and choking business environment. It is such that people are beginning to wonder whether Nigeria has indeed exited recession.
This should, however, not come as a surprise because entrepreneurs have always complained about the stifling operational environment for business, which has been responsible for companies folding up at an alarming rate or relocating to more business-friendly environments. In 2012, for example, the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture put the number of companies that closed shop in the three years to 2011 at 800, classifying half of the surviving ones as ailing. At 272 companies, the number in 2016 was equally alarming. These are frightening signals for a country that keeps churning out a large population of young and educated people who should be productively engaged.
Just when the country should be thinking seriously about stimulating economic growth through manufacturing, for both export and local consumption, it is very dispiriting to hear the usual refrain that locally-manufactured goods are still finding it difficult to compete internationally. The spiralling costs of production make Nigerian goods too costly compared to their imported alternatives. By the time they hit the market, the locally produced goods are already about 40 per cent more costly, experts say. Worse still is the impact of rampant smuggling, which exposes locally-manufactured goods to unfair competition with cheaper foreign ones, particularly those from China.
This view was confirmed last week by the President, Manufacturers Association of Nigeria, Frank Jacobs, at the 2018 Annual General Meeting of its Rivers and Bayelsa states branch in Port Harcourt. Speaking on the theme, “The Challenges of Manufacturing in a Globalised Economy,” Jacobs said “made-in-Nigeria goods are struggling to compete with its likes in the global market.” There is no doubt that this is what has entrenched the country as an import-dependent economy or one that can only export raw materials instead of semi-processed or finished products. It calls for urgent and decisive steps to buck the trend.
Among other things, manufacturing in Nigeria is hamstrung by lack of regular power supply, high interest rates, scarcity of foreign exchange for raw material import, multiple taxation, and the glaring absence of investment in other areas of infrastructure development. Rather than improve, the situation appears to be getting progressively worse. It is a marvel how a country with a population estimated at 193 million manages to survive with just 5,000 megawatts of electricity. This is why it is very dangerous for the country to sign any free trade agreement for now. Not only will such a move turn Nigeria into a dumping ground for all manner of goods, it will also kill the local industry completely.
Compared with rival emergent economies such as South Africa and Mexico, for instance, Nigeria is just a non-starter. While USAID puts South Africa’s installed power generation capacity at 49,555 MW, Statistica, a statistics portal, says that of Mexico was 21.2 gigawatts in 2016, up from 19.2 GW the previous year (where 1 GW equals 1,000 MW). South Africa has been able to achieve its high level of electricity generation by relying on a mixture of thermal, hydroelectric and renewable energy sources and has achieved 85 per cent and 87 per cent rural and urban access respectively. It is not surprising that the country is the most industrialised in Africa.
But the country that should arrest Nigeria’s interest most is Ethiopia. Blighted by drought and famine for decades, the country now has the fastest growing economy on the continent, with the International Monetary Fund World Economic Outlook growth prediction of 8.5 per cent for 2018. According to the IMF, Ethiopia’s growth has been driven by “increase in industrial activities, including investment in infrastructure and manufacturing.” Despite a wave of civil unrest, the country has undertaken the building of a dam, the Grand Renaissance Dam, that, on completion, will be the largest in Africa, capable of generating 15,000 MW of electricity.
With the price of oil still fluctuating, it is important for the managers of the economy to chart a new course for Nigeria. Although there has been improvement in the Ease of Doing Business rating, a lot more still needs to be done. Efforts should be made to address the impasse in the power sector and liberalise the rail sector by scrapping the monopoly law of 1955, which has not helped the cause of that sector for the past 63 years. The aviation sector and the decrepit state of our road network need to be addressed, while the ports should also be made more competitive and up-to-date.
It is not by accident that Ethiopia has made its recent strides; it is as a result of painstaking plans and deliberate actions to improve sectors that aid manufacturing. In a new research, the IMF said, “Ethiopia can be the new China because it has been improving its road and rail connections, and also has good air connections.” Taking a cue from Ethiopia, Nigeria knows what to do. The government has to improve on infrastructure development; this is very pivotal to making the country’s products competitive.
