Repositioning the manufacturing sector – Nigerian Pilot

Unarguably, no nation achieved sustained development without a strong manufacturing sector. Imagine where the United States of America, USA, Japan, Germany and lately China would be today without a vibrant industrial sector. In fact, Britain in the 19th Century earned its global reputation and power as the home of the industrial revolution, churning out varieties of goods for world markets and in the process built a mighty empire on the foundation of this industrial behemoth.
Unfortunately, Nigeria has no such luck when it comes to this vital sector of the economy that is manufacturing. Not only is the sector declining, it is in fact on the verge of total collapse, if urgent measures are not taken to stem the decay. Figures from the Manufacturers Association of Nigeria, MAN, are truly troubling. In the last ten years, according to MAN, over 1,000 industries had closed shop, and a total of 1.8 million jobs were lost over the same period. Also, the contribution of manufacturing sector to the country’s Gross Domestic Product, GDP, experienced a sharp fall, which is an indication that in the last fifty years or so, manufacturing in the country has really been on a steady decline.
In effect, Nigeria, over the years has been experiencing what can be termed as de-industrialisaton, with all the grave consequences this entails for the entire economy, among which are the loss of millions of jobs and the decline of our Gross Domestic Product, GDP.
According to MAN, the culprits responsible for these massive factory closures and the huge job losses that follow, include “acute state of infrastructure deficiency, general insecurity, smuggling and unbridled importation-with the textile industry hardest hit, where over 70 percent of all textile used in the country are imported, multiple taxation and weak demand due to low purchasing power of consumers”.
Quite clearly, these are tough conditions for any industry to thrive under, much less flourish. That some industries in the country are still operating despite these harsh conditions, is an eloquent proof to their resolve and will to survive.
Poor infrastructure in such areas as roads, railways, but most especially lack of adequate power supply, cripple businesses and discourage new ones from opening shop. In Nigeria this has been the lot of businesses. Add the heavy cost of transportation and the high volume of smuggled goods which result in domestic businesses losing markets, and it is not difficult to see why our industries are disappearing, leaving our once bustling industrial zones with empty structures, and little or no hope of ever being resuscitated.
We are however not unmindful of efforts by government to improve the business climate in the country, especially the improvement in the energy and transport sectors and the private sector initiatives, especially on cement and sugar production. But far more needs to be done to get us where we ought to be industrially.
It is self-evident today that the incentives have had some positive impact on the manufacturing sector. For instance, the incentives and concessions given to the cement industry has contributed to the phenomenal increase in national cement production from less than 2million tons in 2002 to over 20million tons now, and Nigeria moving from being a net importer to becoming a net exporter of cement in less than a decade, thanks to the government enabling environment, especially, the special intervention funds of the CBN through the bank of Industry, BOI, which has further helped in reviving a good number of ailing industries and SMEs in the country.
However, the cost of doing business in Nigeria still remains high; incentives and waivers are thus required not only to attract investment, but to also compensate for the public infrastructure deficit. In most developing economies, incentives are being given to attract investment in priority sectors where they have comparative advantage, so Nigeria cannot be an exception.
To reverse this ugly trend, we must recognize the importance of manufacturing to the quest for rapid and sustained development. And to successfully do this, we have to tackle the current infrastructural decay, especially the provision of adequate power supply, access to bank credits, quality education, properly policed borders to stop smuggling of goods into the country, curtailing the dumping of all manner of goods, most of which we do not need, or can afford, enhancement of security and improving the ease of doing business.
In short, we must create an industry-friendly environment that will not only result in old industries coming back to life, but also successfully wooing new ones under a much more expanded role for the private sector as the main driver of the economy. If government can help to design and implement such laudable industrial policies for manufacturers, in addition, it must include generous tax-breaks and adequate and modern infrastructure. This will help in reabsorbing the millions now jobless, by taking them out of the streets and into the factory assembly lines. And perhaps more importantly, we would have started in earnest our journey to truly sustained growth and development, which with our size, talents and resources, should not be too difficult an objective to achieve.