Global supply chain disruptions as driver of local manufacturing
Until now, the world relates as a value-chains dependent on each part for sustainability and production and supply of critical goods and services. However, with the disruption in global supply chains, every nation is depending on its local capacity for survival. Like never before, Nigerian manufacturers carry the burden of bridging the supply gap. FEMI ADEKOYA writes.
Trade organisations, in their notes, observe that global supply chains are set for a major reshuffle as the coronavirus pandemic exposes the vulnerability of countries and companies that rely heavily on a limited number of trading partners.
The new coronavirus disease, formally known as COVID-19, was first reported in the central Chinese city of Wuhan. Since late-January, a wave of city-wide closures and quarantines in China have shut down factories in the world’s second-largest economy, disrupting supply chains globally.
“One of the things that really became apparent with COVID-19 is the rapid change that has occurred in terms of the critical mass of value chains that have built up in China from 2003 when we had SARS to 2019,” said Alex Capri, a visiting senior fellow at the National University of Singapore’s business school.
SARS, or severe acute respiratory syndrome, was another kind of coronavirus that broke out in 2002 and 2003 that wrought damage to China’s economy.
Then, China’s contributed 4% to the world’s GDP. Now, the country contributes almost 20% to world GDP, with much of the growth coming from foreign investment.
With the pandemic raging across the globe and leading to a lockdown, there are concerns about the sustainability of the available supply chains as countries hoard supplies.
Already, Kazakhstan, one of the world’s biggest shippers of wheat flour, banned exports of that product along with others, including carrots, sugar and potatoes. Vietnam temporarily suspended new rice export contracts. Serbia has stopped the flow of its sunflower oil and other goods, while Russia is leaving the door open to shipment bans and said it’s assessing the situation weekly.
Though local manufacturers have promised to sustain production, most of the raw materials needed are largely imported, with the exception of foods produced locally.
According to NBS data, imported agricultural products accounted for N233.3billion of total agricultural trade in Q4, 2019. The major product was Durum wheat (not in seeds) imported mainly from Latvia (N11.58billion) and Canada (N11.15billion). Durum wheat (seeds) was also imported from Singapore and Russia valued at N14.9billion and N6.78billion respectively.
Wheat flour is a major source of raw materials for bread, pastries and even widely consumed noodles. As it is, many governments have employed extreme measures, setting curfews and limits on crowds or even on people venturing out for anything but to acquire essentials.
To address supply chain challenges, the Federal Ministry of Industry, Trade and Investment, after series of meetings with the Manufacturers Association of Nigeria (MAN) and the Pharmaceutical Manufacturers Group (PMG) of MAN (PMG-MAN) and other key stakeholders, said measures would be taken to address challenges, potential threats and the impact of COVID-19 on the nation’s economy.
The Minister of Trade and Investment, Richard Adeniyi Adebayo, told journalists that the measures include: management of all industrial sites should sensitise and educate their workers on compliance with COVID-19 guidelines of the Nigeria Centre for Disease Control (NCDC); all industries shall provide requisite facilities and supplies for the prevention of COVID-19, in line with extant guidelines of the NCDC.
All industries are encouraged to do their best to sustain ongoing operations in order to avoid the shutdown of production activities; manufacturers are encouraged to scale up their production, especially of essential commodities such as pharmaceuticals, consumables, sanitary and hygiene products needed to curtail the spread of the virus.
Adebayo said government will continue to do everything possible to support industries to sustain their operations, and where necessary, even stimulate a surge in the production of essential commodities especially medicines and sanitary products.
He advised all Nigerians not to indulge in any fear-induced behaviour such as panic buying, adulteration, hoarding or price hiking, as government, manufacturers and other stakeholders are working closely to minimise the impact of COVID-19 on the populace.
“It is my sincere prayer that the COVID-19 pandemic will soon come to an end in Nigeria and world over, and that Nigerians will not suffer any hardships in its wake. We shall overcome,” the minister added.
Similarly, the Manufacturers Association of Nigeria (MAN), confirmed that production will continue, even as the operators urged government to consider the introduction of fiscal measures such as waivers on import duties on Active Pharmaceutical Ingredients (APIs), and other essential products.
The further asked for the extension of tax holiday to companies on corporate tax, and waive the Value Added Tax (VAT); and reduce the burden of personal income tax as a way of increasing the disposable income of an average Nigerian worker.
MAN president, Mansur Ahmed, in a statement, urged the government to ensure that manufacturers have reasonable access to industrial supplies and inputs such as gas, electricity supply, fuel and other essential infrastructure needs.
“Given the fundamental role manufacturers will be playing at a time like this, they have been encouraged to sustain ongoing operations to avoid reduction or shut down of production activities; and scale up their production especially of essential commodities such pharmaceuticals, consumables, sanitary and hygiene products needed to curtail the spread of the virus (COVID-19)”, Ahmed said.
Some of the operators present at a stakeholders’ meeting held with the Federal Government earlier to address the issues affecting local production, stated that everyone has been tasked to explore measures to address shortages in production that may arise from the pandemic.