7 December 2017

Nigeria: 'How to Reposition Nigeria's Manufacturing Sector for Increased GDP'

Stakeholders have raised concern on the parlous state of infrastructure at the ports, as well as the activities of multiple government agencies at the terminals, urging government to adopt a holistic strategy that would unlock rapid development of transport infrastructure in Nigeria.

This, according to them, would help reverse the current negative position of the manufacturing industry, and increase the sector's contributions to the nation's speedy recovery from recession.

Indeed, recent figures released by the Nigerian Bureau of Statistics (NBS), the manufacturing sector returned to negative growth position in the review period, declining by 2.9 per cent year on year against a contraction of 4.4 per cent in Q3, 2016. The Purchasing Managers' Index (PMI) of the sector declined to 45.9 per cent in the first quarter, relative to 48.9 per cent achieved in Q1 2015.

The stakeholders linked the poor performance of the sector to the inability of manufacturers to pass on the increased cost incurred due to infrastructure deficits and demurrages arising from unnecessary delay at the ports.

Specifically, the Group Managing Director, Vitafoam Nigeria Plc, Taiwo A Adeniyi, in an interview with The Guardian, said the share price of the company remained stagnant at N2.50 kobo for most part of the year due to harsh operating environment.

"The ease of doing business is worst than when we do not have anything like ease of doing business. But it is not to cast aspersion on the current government or to say that the current government is not working. Execution is critical. Who are those executing the orders of the government? This government came in with a laudable idea that they want to make it easy for people to do business in Nigeria.

"Take for instance, the Nigerian port; the largest of them is the Tin can or the Apapa port, that is the largest window where 60-70 per cent of materials used in production in this country come from, these are agencies of government are there frustrating the order of government.

"The former Finance Minister paid a visit to the port and found out that number of problems we were having at the port were caused by agencies of government, the likes of LASTRA, the NAFDAC, SON, she gave an order for them to evacuate the port and go back to their offices.

"For me as a manufacturer, to bring in an item into this country, I must have obtained SONCAP, a quality approval which is done by the SON, they issued a certificate to say bring in, they claim they have done analysis and inspection, and they issue a certificate and I paid for it. I brought in that material, the same SON is at the port doing what, to still certify as if that is not enough; NESREA is there too, all these agencies are there frustrating the orders of government and efforts of the local producers."

A financial analyst, Rob Rose, argued that if the manufacturing sector of any economy were not recording a significant improvement, the companies operating in the environment would find it difficult to grow and make profit. This, according to him would continue to reflect on the company's financials and share prices in the stock market.

"The share price will drop and nobody would come to such market to raise capital because the market cannot support it. Regulators at the ports must promote the ease of doing business and provoke more domestic demand in the economy so that the demand can drive supply for consumer companies to make profit and make it cheap for people to borrow and companies can employ more people, hire and train more workforces," he added.

The Managing Director, Highcap Securities, David Adonri, explained that the import dependence of the economy is due to the weakness of the nation's manufacturing industry, caused by the absence of engineering infrastructure.

According to him, this is already having a multiplier effect on the performance of the sector's stocks on the Nigerian Stock Exchange (NSE).

"Again, due to the absence of engineering infrastructure, Nigerian manufacturing industry is inefficient and uncompetitive. Their problem is beyond finance and government has derailed from earlier development plan meant to address the challenge holistically.

Nigeria

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