The real sector, without doubt, is one of the sectors pivotal to driving Nigeria’s diversification agenda to actualIsation via massive industrialisation.
The sector grew by 5.44 per cent in Q3, 2021 and contributed 92. 51 per cent to Nigeria’s Gross Domestic Product (GDP), within the same period.
Some of the components of the real sector include trade, manufacturing, agriculture, transport, Information and Telecommunication(ICT), electricity, real estate, hospitality amongst others.
However, the success of the sector, hinged on several factors, is seen to be on a slow and fragile, though steady upward trajectory.
The Federal Government has in no small feat reeled out multi-pronged development and sustainability measures aimed at providing the boost the sector needs.
This is particularly following the impacts of the Coronavirus (COVID-19) pandemic that ravaged economies of the world.
Some of the efforts by the Federal Government include the Economic Sustainability Plan, development banks to ensure access to finance, executive orders 003 and 005, and MSME Survival funds.
More recently is the launch of the Medium Term National Development Plan 2021-2025 aimed at establishing a strong foundation for economic diversification, investing in critical infrastructure, among others.
In spite of all these, some stakeholders of the real sector believe that the macroeconomic variables critical to the growth of the sector need adequate focus in the coming year to enhance its contribution to economic growth.
According to Dr Muda Yusuf, Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), the sector is not short of good policies or models for industrialisation.
Yusuf said that the challenge had been the yawning gap between the brilliant policies and the practical outcomes.
“In spite of the numerous policies and measures articulated by successive governments, manufacturing contribution to GDP remained at less than 10 per cent on average over this period.
“The sector has remained largely import-dependent, which has made it very vulnerable to external shocks and has weakened the impact of the sector on the economy and the development process,” he said.
Yusuf said since the collapse of oil prices in the early eighties, the manufacturing sector suffered considerable setback as there was no sufficient foreign exchange to support the import dependence of the sector.
“The sector is still grappling with this shortcoming till date.
“The performance of the various sub sectors was largely dependent on the extent to which they could source their raw materials locally.
“This became a major factor in the competitiveness of industries.
“As it stands, systemic issues of infrastructure, access to foreign exchange, insecurity, electricity supply and logistics should be addressed as a matter of utmost priority.
“We should ensure that there is adequate investment in core industries such as iron and steel and petrochemical,” he said.
Mr Segun Ajayi-kadir, Director General, Manufacturers Association of Nigeria (MAN), noted that a survey by the association revealed that poor access to foreign exchange for importation of raw materials and machines ranked first among the challenges affecting the real sector.
Others, he said, include insecurity, high cost of local raw materials, inconsistent government policy, inadequate finance, high cost of energy, high transport cost, poor infrastructure, multiple taxation, and overregulation.
He stressed that in order to sustain and improve on the current performance of the manufacturing sector, it was important that these issues be addressed.
“The Central Bank of Nigeria (CBN) should direct the commercial banks to build capacity and designate a desk to swiftly process and treat the numerous forex applications by manufacturers in view of the new policy that suspended allocation to the BDCs segment of the market.
“The widespread insecurity across the country- from the North to the East – has huge consequences on industries.
“Apart the regular use of the armed forces to engage the situation, government should as a matter of priority embrace and invest in modern technology which will ensure timely response to security emergencies.
“Government should therefore focus on developing strategic products that can feed the industrial sector through backward integration to help ease the sourcing of raw materials for production.
“There is also the need for government to encourage significant investment in the production of Active Pharmaceutical Ingredients (API) in the country; investment and production of machines; iron and steel; petrochemical materials, etc to support manufacturing,” he said.
Dr Chinyere Almona, Director-General, Lagos Chamber of Commerce and Industry (LCCI), said the foreign exchange market which was still faced with liquidity challenges had taken a huge toll on capacity utilisation and sustainability of businesses.
She added that many investors lamented the difficulties in accessing foreign exchange for the importation of raw materials, equipment, and critical inputs for production and processing.
“The Lagos Chamber welcomes the adoption of the Nigerian Autonomous Foreign Exchange Rate (NAFEX) as the official exchange rate.
“The unification is expected to improve the country’s currency management framework given that the multiple exchange rate systems has been creating uncertainty issues and sources of arbitrage.
“It is however noted that a free fall of Naira exchange rate makes the CBN apply demand containment and/or price control measures as seen from the 43 items ban and quest to peg the exchange rate of the Naira.
“Tightening measures have always failed to stabilize the exchange rate in Nigeria, it only redirects FX transactions to the underground arrangement, with unintended consequences of creating wide premium between the official and parallel market exchange rate.
“There is a need for the CBN to scale up its intervention efforts and roll out more friendly supply-side policies to boost liquidity in the market to bolster investor confidence and attract foreign investment inflows into the economy,” she said.
Almona also stressed the need to address the bottlenecks with the clearing of cargoes, especially the activities of the Nigeria Customs Service (NCS), that constitute a significant deadweight to the process.
“We advocate for an urgent reformation of the NCS through executive orders or legislative actions to enable Customs to discharge its trade facilitation functions effectively.
“We call for proper management of the roads leading to the ports and the withdrawal of government officials from the roads to curb the persistent traffic situation at the Lagos ports,” she said.
Prince Saviour Iche, National President, Association of Micro Entrepreneurs of Nigeria (AMEN), bemoaned the high cost of clearing and transporting merchandise from the ports to warehouses.
Iche added that the country’s current energy situation, inaccessibility to foreign exchange, loans and grant had also limited the potential of the sector.
“In my area, I consume diesel, as a small industrialist, worth N14,000 daily and three million worth yearly and this issue has driven many small businesses out of operations.
“Government should wade in to engender ease of access to the finance allotted to Micro, Small and Medium Enterprises (MSME) so it does not become just paper finance.
“Government should partner with commercial banks to create SME desk in each commercial bank to facilitate the funding,” he said.
Some good news came days to the end of the year as the Federal Government said it was working on relevant measures to improve access to foreign exchange (FX) for the importation of raw materials and machines, which could not be sourced locally.
President Muhammadu Buhari gave the assurance during an advocacy visit of the leadership of the MAN.
He said that the relevant ministries would revisit their concerns about the increase of excise duties on the identified products and other tariff-related matters.
This, no doubt, is cheering news to the manufacturers and which will take care of some of their fears as 2022 rolls in.
