By Charles Nwaoguji

Manufacturing as a critical sector of the global economy contributes over $10 trillion to global Gross Domestic Product (GDP) every year. Despite that the global manufacturing production has recorded low growth for the last few years with 2.3 per cent in 2015, the annual growth of manufacturing value added still remained around 1 per cent for three consecutive years. Currently, global manufacturing sector is mainly driven by developing and emerging economies, particularly Asia, which is dominating the global manufacturing market.
The Asian countries have seen remarkable growth as a result of their policy of manufacturing for exports and constructive policies aimed at opening new markets, implementing favourable trade and exchange rate policies, and attracting foreign investment through stable governments and respect for property rights.
China, the world’s largest manufacturing nation, is a prime example. Other examples are the four Asian Tigers – Hong Kong, Singapore, South Korea and Taiwan.
Unfortunately, Nigeria has not been able to transform its economy through industrialisation, which is paramount for economic, inclusive and sustainable growth. Rather, Nigeria relies on the export of its raw and unprocessed commodities to other parts of the world.
Daily Sun investigation reveal that the reasons for the minimal success of industrialisation in Nigeria are due to the inability of successive administrations to successfully complete and/or carry out effective operations in state-owned enterprises created to spur industrialisation. For example, the Ajaokuta Iron and Steel Complex, tagged the “bedrock of Nigeria’s industrialisation”, is still not fully operational. Corruption has been cited as a major factor militating against their completion. Some of its completed units have been shut down due to lack of funds.
Other contributing factors to the failure to achieve industrialisation in Nigeria include lack of funds, lack of power, bad infrastructural base, lack of automation and technical know how, lack of adequate regulation, global economic recession and the usual woes that come along with that, such as foreign exchange decline, unemployment and balance of payment disequilibrium. Economic recession played a big part in the fourth national development plan’s (1981-1985), failure to reach its industrial policy objectives, which included the promotion of export-oriented industries, enhancement of value addition through small and medium scale industries, local sourcing of inputs, and a projected average growth rate of 15 per cent. All these challenges have made the  Asians to take over the manufacturing sector while pretending to be helping out but busy destroying the sector.
According to the President of Lagos Chamber of Commerce and Industry (LCCI), Dr. (Mrs.) Nike Akande, “the manufacturing sector provides the greatest opportunity for the transformation of the Nigerian economy. It is an antidote for unemployment, a creator of wealth and threshold for sustainable development.”
However, she explained that the sector’s potential has not been fully utilised. Post-rebasing, manufacturing accounts for 10 per cent of total GDP annually. “Nigeria’s Vision 20:2020, developed in 2009 as an 11-year long-term plan, envisaged Nigeria’s manufacturing sector to be globally competitive, tightly integrated, contributing no less than 25 per cent to GDP.
Using the pre-rebasing or post-rebasing figures, it is unfortunate that over a period of 55 years, manufacturing’s share of the GDP is still only 10 per cent or less. Just like the 1980s when a fall in oil prices triggered policy attention back to the manufacturing sector, the hope is that the recent decline in oil prices will ensure greater focus on manufacturing, leading to a greater GDP share to boost the economy. The problem though is that in this era, the infrastructure deficits and global and domestic economic situations may make it difficult for manufacturing to have a strong impact.
So what can be done to revive manufacturing in Nigeria, so that these Asians can be chased out of Nigeria? The Chairman of Toiletries and Cosmetics Manufacturers Group of Manufacturers Association of Nigeria (MAN), Mr. Ikpong Umoh, said a number of actions are necessary, which the President Muhammadu Buhari-led government must take.
Noting that with the right macroeconomic stabilisation strategy, business-friendly environment, improvements in public infrastructure (transportation, power and energy), and foreign direct investment, Nigeria’s manufacturing sector has the potential to grow more rapidly in the long-term.  Other actions include an unrelenting anti-corruption drive, strengthening national security and revamping human capital development.
“Nigeria’s vision of becoming one of the 20 largest economies in the world by 2020 is only attainable when science, technology and innovation are fully integrated into the national socio-economic development process,” he added.
The Chairman of the group said that failure of the government to take urgent steps in addressing the challenges facing the indigenous manufacturing sector, these Asian boys will continue to dominate the manufacturing sector in Nigeria.
Manufacturing is one of Nigeria’s growth drivers. A serious commitment to industrialisation and manufacturing has the potential to make Nigeria’s economy enviable among other nations, developing or developed. This will only be achieved if Nigeria can get its acts together and work towards achieving infrastructural development, inclusive growth and citizens’ welfare.


Gas suppliers killing local industries

Bimbola Oyesola

Many have come tobe the afflictions of the Nigerian manufacturers, as the local industries, besides the problem of foreign exchange, now have to grapple with soaring price of natural gas‎ used to power their plants.
The Manufacturers Association of Nigeria (MAN), last week, raised the alarm that more firms are set to shut their operations following  the high price and the non-supply of gas to their factories.
With over 45 per cent of the cost of production expended on gas in the country, well over 200 per cent compared to global prices, members of MAN have drawn the attention of the Federal Government and the general public to what they say may signal the end of many viable industries in the country.
The Chairman, MAN Gas Users Group of the association, Dr. Michael Ola Adebayo, said the problem with the gas providers has reached a crisis dimension as most factories have stopped production and are about to shut their operations due to non-supply of gas to power their operations on one hand, and current exorbitant and dollarisation of the available ones.
“In fact, some of our factories have been threatened with disconnection on account of their inability to pay for the increased prices,” he added.
He explained that the providers sell to the companies in dollarswhile the international price of gas is at an average of $2.5, the average price of gas in Nigeria is currently at $7.65 per standard cubic metre, noting that since Nigeria operates in a global market, “it will only make sense to adopt the global pricing instead of indulging in the habit of exploiting our manufacturers and innocent citizens.
“The fact that Shell Petroleum sells gas to NGC at about 9 cents, and NGC sells to other franchisers at $2, and the same franchisers sell to manufacturers at $7.38 is more than enough reason to worry,” he said.‎
Adebayo recalled that members of the association converted to gas when the Federal Government took the bold initiative to stop gas flaring, and in a bid to encourage and stimulate industrial activities, the price of natural gas was benchmarked against the price of LPFO.
“The main objective of this initiative was to make gas cheaper and at about 30 per cent lower than LPFO, which was then the cheapest among the petroleum products,” he said.
The MAN chairman said the idea not only made Nigeria to have a cleaner industrial energy in line with the United Nations policy but equally salvaged companies, which were on the verge of collapse due to inadequate power supply, high cost of diesel and other conventional energy sources.

He, however, said that controversy on the issue of gas pricing started in 2008 when one of the Nigerian Gas Company (NGC) franchisers, with the knowledge of the NGC, increased the price of gas from N21.05 to N67.63.
Adebayo added that in 2010, another infringement was perpetrated by all the franchisers with the demand for another increase in price without any amendment of the GSPA, adding that the disagreement and the controversy that followed the action created a prolonged industrial dispute in which manufacturing was almost grounded to a halt.
He noted that the National Gas Pricing Mechanism (NGPM) was released and circulated by the Minister of Petroleum Resources, which became effective from October 2010 and expired on December 31, 2014, stating that the gas pricing policy released by the ministry then benchmarked the price of natural gas to the movement of foreign exchange as published by the Central Bank of Nigeria (CBN).
The Chairman said benchmarking the price of gas against forex was a bad decision as there was no country that transacts business within the country in a foreign currency.
He stated that the association considered the present situation as regards the actions of the franchisers as unacceptable, adding that for the past one year, manufacturers have been confronted with a number of increases in the price of natural gas due to the unstable rate of exchange of dollars to the naira.
He explained that: “The price of gas was N38.19kobo per scm of gas when the exchange rate was at N155 to dollar, it was increased to N51.17k per scm by end of 2015, which still existed till May 2016 when the exchange rate was N196.5k. Also, between the months of June and July, the price was increased to N66.58k, N72.64k and N80.41k per scm respectively, all of which were based on the movement of exchange rate in the price of gas. Determining gas price based on exchange rate is total flagrance to the directive of the CBN that all transactions in Nigeria must be in local currency.”‎
Adebayo opined that the high cost of the product has led to the high cost of production, which has made Nigerian products uncompetitive with those produced abroad, adding that with other infrastructure challenges and unstable policies, there may be possible job losses in the country in the future.
He urged the Federal Government to enhance good governance and sustenance of the economy, saying, “government must ensure that effective mechanism is put in place to checkmate the powerful moguls who are always bent on breaking the rules. Government must be seen to protect its policies,” he stressed.
The Chairman also urged the Senate and House Committee on Gas to intervene as was done in the past by their predecessors to prevent a possible collapse of the economy and the manufacturing sector in particular.
“As our organisation holds the progress and success of the nation so dearly to heart, and in order to avoid further misunderstanding on the issue of settlement of bills with our numerous franchisers, our members are advised to pay their bills henceforth based on the naira unit cost/charges paid in the month of May, to determine payments for their subsequent months, pending the resolution of the issues raised.”

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Dumping: Erisco declares N5bn loss 

By Louis Iba

Indigenous firm, Erisco Foods Limited, has floated a multi-billion naira backward integrated tomatoes, rice, groundnut and maize farm as well as a new tomato processing plant in Katsina State.       President/CEO of the company, Chief Eric Umeofia, who spoke at the ground breaking/foundation laying ceremony of the project commended the government of Katsina State for the provision of about 27 hectares of land with Certificate of Occupancy to the company to kick-start the farm and processing plant.
He, however,  said the Federal Government has to step up its effort to create the right environment that would assist genuine investors in the manufacturing sector sustain their investments.
According to Umeofia, the company had lost about N5 billion in recent months to the problems of dumping of substandard and fake imported tomato paste as well as the scarcity of foreign exchange (forex) to support local manufacturers, thus making it imperative for the government to intervene and ameliorate the sad trend.
“This multi-billion naira agricultural backward integration scheme will no doubt help in the much needed diversification of the nation’s economy and above all help our target of creating over 50,000 jobs in the next two to three years,” said Umeofia.                 “But we want to make it clear that we cannot continue this gigantic Katsina project of processing up to 1,000,000 metric tonnes per year of tomato paste with the ‘black market’ forex as we currently do in our Lagos factory without any CBN intervention loan and forex supply to buy the machines, high yield disease resistant tomato seeds, chemicals, tractors, fertilizers and other needed implements.
“We have already lost over N3 billion borrowed from our foreign subsidiary to continue to subsidise our Nigerian operations but in recent months the dumping of substandard and fake products has forced us to stock our tomato paste and other goods worth over N2 billion in our warehouse as we have no market to sell them, while our regulators, through their policies, are creating markets for imported goods,” he lamented.
Umeofia therefore called on the government to ban the importation of all foods and products that can be manufactured locally in order to protect and boost the local industry.
“Federal, state and local governments should provide infrastructure like roads, electricity, reinforcement of industrial estates in order to reduce the cost of producing local foods and other items,” said Umeofia.

“At Erisco Foods Limited, we have resolved that, if encouraged, we will use the Katsina project to demonstrate how a Nigerian company can change the face of farming, transportation, processing, and export of agric products and foods out of Nigeria,” he added.


Manufacturing sectors capacity utilisation drops by 20% –MAN

Charles Nwaoguji
Manufacturers Association of Nigeria (MAN), has given reasons why the  manufacturing sector has recorded a 20 per cent drop in capacity utilisation at the end of the 2nd quarter of 2016 from initial 40 per cent. It however added that this will  continue to the fourth quarter of the year.
The Chairman of Manufacturers Association of Nigeria (MAN), Apapa Branch, Mr. Faolu Odunayo, said the decline was principally due to scarcity of foreign exchange for raw materials’ replenishment and declining purchasing power.
Odunayo, who stated this at the 7th edition of the Business Luncheon held at the weekend in Lagos, said there are also the longstanding negative factors that are yet to be removed, including inadequate public power generation and poor road network. He stated that government does not appear to want to borrow funds to shore up the economy, adding that an economy that is not shored up at moments like this could collapse.
Odunayo noted that exchange rate losses by companies for transactions validly made through the CBN, which were unconsummated by the apex bank because of inadequate forex funding run into hundreds of billions of naira.
“These transactions include approved Form Ms, Letters of Credits, and approved Bills for Collections. Government is not accepting responsibility for not consummating these transactions and by massively depreciating the naira through the flexible exchange rate, the failing and inadequacies of government policies have become the burden of the private sector,” he said.
He stated that many companies now declare huge exchange rate losses, whereas all the outstanding transactions only needed to be warehoused by government and settled at a fixed rate of exchange after appropriate discussion with the overseas creditors, adding that these losses already run into hundreds of billions of naira, and many manufacturers that are unable to further bear the burden have closed down.
Also speaking at the event, an economist, Mr. Henry Olujimi Boyo, said for the first time since 2010, Nigeria has suffered a drop in its GDP, and it was a year decline of -15.3 per cent in 2015.
“This decline may continue unless dollar funds can be injected to support the private and public sector sector needs,” he said. He said the greatest challenge facing Nigeria at the moment is low productivity, noting that in 2nd quarter of 2016, industrial production stood at near zero.  Boyo said, “a revitalised industrial production seems to be single most potent solution to the current economic recession in Nigeria.”  He pointed out that it began with the mismanagement of the windfall that was gained from exceptionally high oil prices between 200 and 2014.
“The government of that time did not cultivate the culture of saving, and as soon as oil prices came crashing the country became exposed. The challenge now remains how to manage the aftermath of the oil price drop, and its resultant 70 per cent drop in revenue earning for the country,” he explained.