Dr Frank Udemba Jacobs, President of Manufacturers Association of Nigeria (MAN) in this interview with Bukola Aroloye speaks on the nation’s manufacturing landscape, expectation for the 2017 budget among other sundry issues. Excerpts:
What is the state of manufacturing in the country now?
The manufacturing sector has remained in a precarious situation over the years, having grown at 5.5 percent before 2013 and attained 21.8 percent in 2013 to become the driver of the economy. This growth, however, declined to 14.7 percent in 2014 and by 2015 it crashed to -1.47. Worse still, statistics from the first and second quarters of 2016 revealed further decline to -7.0 percent and -3.36 percent respectively.
Manufacturing capacity utilisation, employment and investment respectively also declined. Over 50 manufacturing companies closed down from January 2015 to June 2016. Many more have closed down since then but we are still compiling the figures.
What is MAN doing in this time of recession to help stimulate the economy to recovery?
Manufacturers are adopting a number of strategies in order to remain in business and also to stimulate the economy. Such strategies include increased local sourcing of raw materials, sourcing forex from the parallel market and other available windows, etc. Of course, we have been discussing with government, at all levels including the CBN, on the way out of the recession.
Over N300 billion is said to be owed manufacturers by government. What is the state of this debt?
Government owes manufacturers a lot of money and they are still outstanding.
What do you think is the way forward for a virile manufacturing sector in the country?
The way forward is the adoption of resource-based manufacturing, increased local sourcing of raw materials and deliberate policies towards backward integration while the existing industries should be given monetary and fiscal incentives to survive and grow. Adequate incentives should also be articulated for investments in core industries that would serve as catalyst and spin-offs for the growth of other industries.
What can you say about 2017 Budget and the Manufacturing Sector?
Going by the 2017 budget presentation by Mr. President, MAN would want to believe that 2017 would be a better year for the industrial sector in Nigeria, all things being equal. The budget addresses major issues that would help to improve the industrial sector but, perhaps, not sufficient enough to address all the challenges.
Areas of note in the budget include the following allocation of N15 billion for the recapitalisation of the Bank of Industry (BOI) to help improve Small and Medium Scale (SMEs) funding access. We also think there should be allocation of US$1.3 billion to the Development Bank of Nigeria for its operationalisation and take-off, focusing exclusively on SMEs.
Besides, the N92 billion earmarked for Agriculture through the CBN’s Anchor Borrowers Programme, at a single digit interest rate to small farmers. We also think the government should focus on rapid development of infrastructure especially rail, road and power (N213.14 billion) just as we believe the N50 billion earmarked as contribution for the expansion of existing, and development of new Export Processing and Special Economic Zones.
We also feel strongly too that there should be renewed commitment on patronage of made-in-Nigeria products as well as commitment towards resuscitating domestic refining of crude oil.
There is need top also encourage domestic garment manufacturing sector in the country. Added to this is the need to promote manufacturing power houses like Aba, etc, towards making Nigeria a new manufacturing hub. This, we believe will enhance the growth of non-oil export. By deliberate commitment to the alignment of fiscal, monetary and trade policies and the release of the Fiscal Policy document.
For us at MAN, we hope the demand that the President personally issue executive order to ensure speedy facilitation of government procurement and approval, as well as compliance with the Fiscal Responsibility Act to support local content by MDAs.
He should also show the needy commitment to ensuring ease of doing business in Nigeria as well as focus on payment of outstanding debts to local contractors.
However, there are some areas that needed to be addressed in order to fully stabilise the industrial sector. These include foreign exchange management. With the recent increase in the price of crude oil and expected higher inflow of forex, MAN expects higher forex allocation to manufacturers. The 60% preferential allocation to manufacturers’ directive by the CBN which did not quite materialise, should be strictly implemented.
Furthermore, we expect that the backlog of confirmed Letters of Credit should be honoured at the rate prior to the depreciation of the Naira. This would help to increase domestic production.
On additional sources of forex, there is need to further intensify and encourage non-oil manufactured export through the full implementation of the EEG/NDCC scheme as this would encourage manufacturers to produce for export.
The gap between the inter-bank exchange rate and the parallel market is too wide and should be narrowed through deliberate policy by the CBN.
MAN appreciates the provisions in the budget in terms of the recapitalisation of BoI, operationalisation of Development Bank of Nigeria as well as the Anchor Borrowers Programme. However, the usual problems encountered with these facilities, as was the case in the various CBN intervention funds, in terms of challenges and complexities in processing applications as well as built-in additional charges should be addressed and avoided.
On the fiscal policy, MAN appreciates the federal government for addressing the issue of 41 items as well as the release of 2016 fiscal policy measures. However, there is need for further amendment or clarification to the policy as some important sectors have been removed from the import prohibition list, or adversely adjusted; eg sanitary wares, domestic articles and wares of plastics, equipment for scafolding, bulk tea and billets. These should be addressed. On the whole, I believe that if the budget is effectively implemented, it would go a long way in addressing the issues of the industrial sector.