2 January 2013

Nigeria: Manufacturing Sector in 2013 - Job Creation, Power, Security Top Demands

As we step into the New Year, Florence Udoh speaks with manufacturers on their expectations from the federal government in the new year, after a cursory reflection on 2012 policies.

The national president of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Dr. Herbert AdemolaAjayi, in a chat with LEADERSHIP said that the 2012 performance did not translate to any significant positive impact on the real sector of the economy and the citizenry.

He said for the business community, the challenges arising from unfriendly operating environment and infrastructural constraints, particularly in the areas of power and energy, and of course, security, which when summed up and added to other challenges, economic and social ailments, would easily wipe out any gains or progress recorded in the manufacturing sector in 2012.

He noted that available statistics on macro-economic indicators showed some development in 2012, including an exchange rate, which stabilised within a band of N155 and N161 to the dollar; inflation rate, which went up from 10.3 per cent in December 2011 to 11.3 per cent in September 2012; a GDP growth rate, which also went down from 7.40 per cent in December 2011 to 6.28 per cent at the end of second quarter of 2012.

According to Ajayi, external reserves rose from $34.4 billion in December 2011 to $45.6 billion as at November 19, 2012. Interest rate, he said, remained double digit, hovering between 17 per cent and 28 per cent as against a single digit rate expected by business operators.

The NACCIMA boss said industrialists are also worried that despite the recent high tariff charged by the Power Holding Company of Nigeria (PHCN), electricity supply is yet to reduce the burden of private power generation for businesses and the citizens since the government's intention to meet the 6,000 megawatts (MW) to 10,000MW has been difficult, saying that this has contributed, as always, to the high cost of doing business estimated at about 40 per cent.

However he pointed out that there were significant gains in the cement sub-sector even as he urged the business community to forge ahead and reap the gains from the sector.

But according to the director-general of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, the transformation of the Nigerian economy is critically dependent on the quality of investment climate.

He noted that in an assessment of the business environment in 2012 carried out by the chamber, it discovered that the business and economic environment was typically characterised by upsides and downsides, but the latter seemed to outweigh the former.

The economy, he said, offered tremendous opportunities during the year, but the capacity of investors to harness the opportunities was constrained by the prevailing challenges of the operating environment, adding that the limitations were even more profound for indigenous entrepreneurs.

"The country is reputed for its robust natural endowments, youthful demography, large coastlines, largest population in the continent, seventh largest oil-exporting country in the world, a large enterprising population, an innovative banking sector, a GDP growth of 6.6 per cent, which is one of the best globally; rising foreign reserves which was $44.5 billion as at November 2012, excess crude account of $9.6 billion and a stable polity, bolstered by increased credibility of the electoral process. All these formed the major components of the upside in the economy in 2012," the chamber said, but lamented that for most investors, the downside was more overwhelming, as the operating environment was generally adjudged to be unsatisfactory by many investors, which had profound impact on returns on investment (RoI) and profit margins.

It noted that some of the challenges faced by many investors during the year included weak consumer demand; high cost and low access to credit; cumbersome cargo clearing processes; high transportation costs, especially because of the collapse of the rail system; institutional problems, and corruption, especially in relation to public sector transactions. Other concerns of the manufacturing sector in 2012 were the uncertainty and inconsistency in the policy environment, growing insecurity, manpower issues and the relevance of educational curriculum to the needs of the economy, high level of receivables across sectors, power supply challenges, poor sectorial linkages and weak commitment to the development of indigenous enterprise.

The chamber however noted that the there was prospects for the cocoa and rubber sector in terms of exports in the new year 2013.

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