Charles Nwaoguji; +234 8032715118 [email protected]
While campaigning in the 2015 elections, President Muhammadu Buhari, convinced Nigerians to do something that had never been done before – turn power over to the opposition party at the national level. In return, Nigerians expected him and his party, the APC, to do something that is hard to do – successfully steer the country through turbulent economic and political waters.
The Nigerian people have held up their side of the bargain, by sweeping Mr. Buhari to the presidency and delivering the Senate, House of Representatives and the governorship of the states to the APC. In doing so, Nigerians provided Buhari with every tool that a president needs to succeed.
Over three years later, the promise of change has become a promise of doom. Nigeria is ravaged by an economy in recession, which led over 2000 manufacturing companies to shut down. Also insecurity, epileptic power supply and a host of other challenges now rein supreme. This explains why the Buhari led government has failed the manufacturing sector which is the engine room of the economy.
Policy Inconsistency
At the beginning of his administration, Buhari told Nigerians the many things he thought was wrong with the country. He bemoaned the fact that Nigerians imported things as basic as toothpick. Three years later, nothing has changed, the manufacturing sector is still the same. The GDP is very low when compared to other sectors of the economy.
Not a single coherent and consistent policy framework that is aimed at correcting many of the ills that Buhari had complained about has been put in place. Nothing has been done to make it easier for Nigerian businessmen to manufacture toothpick locally than for them to import it. There are no trains and inland water networks that will help them transport the wood that they need from the forest to the cities where their production sites and customers are. There are no plans for providing them with the energy they need to cut the wood, shave and package it. There are no policies that provide investors with access to capital at interest rates that encourage local production. There are no environmental policy that will regulate how trees are cut down and ensure that deforestation does not result, once we start making our own toothpick.
It does not matter what sector one looks at, the issues are exactly the same- the Buhari government is doing nothing to enable Nigeria manufacture grow. Till date, the Petroleum Industry Bill, which experts agree is key to unlocking the immense potential of Nigeria’s downstream oil sector has continued to languish. The President of Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs, said: “The past one year has been the worst period in the history of manufacturing because of the fact that government policies made it difficult for manufacturers to plan”
“The issue of foreign exchange affected manufacturers to the extent that many of our members had to close shop while others operated at very low capacity because they did not have enough forex to buy their raw materials.
Lack of power supply
Buhari’s government cannot ignore the elephant in the room: power. As with many other elements of Nigeria’s economy, inadequate power has been the biggest drawback for Nigeria’s manufacturing sector. One reason why the devaluation may not materialise is that increased energy costs may erode any potential gains. This would ostensibly work except for one minor detail – the devaluation also increases the cost of manufacturing/production in the country. Power accounts for 30 percent of the cost of manufacturing and given the unreliability of the national grid, most plants have to generate 80 percent of their energy demand. In the south, these factories have some access to natural gas, but northern factories rely mainly on diesel, which has also become more expensive due to downward pressure on the naira, among other things.
This is one reality that our government will need to face. The key to reversing the decline of manufacturing in Nigeria does not lie in only eliminating external competition or infusing the sector with more capital.
CBN’s 41 Items
In a bid to prevent the naira from a fall in global oil prices, Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, opted to restrict importers from accessing foreign exchange on 41 items. Without access to the forex market, importers are effectively unable to make purchases.
Ironically, the devaluation of the naira is actually supposed to be good for the manufacturing sector. Cheaper naira makes imported items more expensive, reducing the price gap between domestic and foreign fabrics. It could be hurting the industry it is supposed to help, and it may be time to review this forex policy.
No wonder, in one of the events the President was invited, he lamented that Nigeria failed to develop the automobile initiatives started in Bauchi, Kaduna and Ibadan, and depended too much on oil as mainstay of her economy.
According to him, Nigeria as a country recognised her problems early enough, but remained potential for too long, and so did not achieve much results in manufacturing sector.
“We must avoid the mistakes made in the past by both government and manufacturers, and we are ready to get investment from all quarters, so that we can improve the lives of our people,” he said.
SMEs not having access to intervention, fund
Despite the establishment Development Bank of Nigeria with the take off capital of $1.3 billion for funding and capacity development to support small and medium businesses (MSMEs) across the country not much has been achieved. The Federal Government said the new Development Bank of Nigeria (DBN) has finally taken off, with initial funding of $1.3bn (provided by the World Bank, German Development Bank, the African Development Bank and Agence Française de Development) to provide medium and long-term loans to MSMEs. Unfortunately Nigerans are yet to feel it.
The DBN, it said, has already disbursed N5 billion to 20,000 MSMEs, through three microfinance banks.
The Director General of Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf , also said, “The economic policy space remains unclear,. Policy conception is faulty: hence, policy coordination and implementation suffer serious setback. There is, therefore, an urgent need for ventral policy strategy with detailed and well-designed policy direction. This is critical for effective and efficient coordination and implementation of policies.”