How channelling of infrastructure to manufacturers can drive productivity
Among other incentives, infrastructure plays a key role in determining the productivity of a nation as well as the cost of goods and services. While the dearth of infrastructure remains high in the country with efforts ongoing to borrow more funds to finance some, deliberate actions are required in creating an environment for improved productivity. FEMI ADEKOYA writes.
Like previous years, manufacturers and private sector operators last year complained about lingering infrastructural issues with access ports, power and Lagos traffic ranking top in the concerns identified for action. Despite government’s ease of doing business initiative, poor pace of productivity as a result of lingering challenges not limited to the multiplicity of regulation, poor access to power and the nation’s ports, remains.
According to the Manufacturers Association of Nigeria (MAN), the operating environment remains challenging and depresses productivity in the manufacturing sector. Specifically, the operators cited poor electricity and gas supplies/non-reliability of gas supply/scarcity of diesel/high cost of LPG as the highest impediment to production in the country.
Indeed, the CEOs of manufacturing companies in Nigeria urged the government to improve basic infrastructures within strategic economic hubs nationwide, classify manufacturers as strategic users of gas, expand the roads leading to Lagos Ports and make other ports outside Lagos functional to reduce cargo traffic and stimulate economic activities in those locations.
They noted that port-related challenges at the Lagos ports still persist. For instance, the Director-General, Manufacturers Association of Nigeria (MAN), Segun Kadir, added that traffic gridlock makes manufacturers more susceptible to miscreants who take advantage of the situation.Kadir in a chat with The Guardian earlier, however urged the government to embark on road repairs in the night when there is less traffic, saying that road repairs during the day time is not the best option.
On measures to address power challenges in the real sector, he said: “What we have is what we call the manpower development company which was facilitated to give our members access to power. As you know, power is like blood to the manufacturers; so, what we have done is to create a company that is a special purpose vehicle that will be able to have an arrangement with suppliers of power whether captive or through the national grid to be able to reach our members in clusters.
However, we have been hampered by the not too successful attempt of the Eligible Customer Scheme. What has hampered is actually the fact that we are required by some regulation to have a no-objection letter if you like from the Discos, with whom we are also engaged in a court case. So, it is like asking your enemies to pray for you. I think essentially, we are trying to go around that, but we are saying that there has to be more ingenious ways for us to benefit from capturing the so-called stranded power.
Similarly, Chairman, MAN, Apapa Branch, Frank Onyebu decried the parlous state of infrastructure in the state saying: “Manufacturers within our areas of operation are beset with a lot of challenges. These include dilapidated roads, poor power supply, multiple taxation, security challenges, among others.
“However, beyond these obvious challenges, manufacturers, especially those within the Amuwo Odofin and Kirikiri Industrial areas are faced with additional challenges with regards to access to their factories. This is because of the invasion of trailers and other articulated vehicles into the industrial areas. With little/no regard to the harm they are causing to the economy, the drivers of these vehicles often take up every inch of the access roads thereby making access to factories often impossible”.He noted that this situation has led to most factories accumulating large stock of unsold inventories since customers no longer have access to the affected factories.
Some members, according to him, have, in desperation, turned to using barges/pontoons to ferry customers’ trucks in order to sell their inventories, adding that, overall it is estimated that over N20 billion is lost yearly by manufacturers within the Amuwo Odofin and Kirikiri Industrial zones as a result of dilapidated infrastructure.
“We do not need a soothsayer to tell us that things are not all rosy for the manufacturing sector in Nigeria, especially as the implementation of the African Continental Free Trade Agreement approaches. Adequate structures, therefore, must be put in place if manufacturing in Nigeria is to survive. First of all, the infrastructural challenges should be tackled aggressively. The roads, especially roads to the industrial areas, must be fixed without further delay. Power supply to industries should also be tackled to ensure competitiveness/survival of local industries.
“The menace of trailers and other articulated vehicles must be given the urgent attention it deserves. The government should find a way of clearing access roads to the Ports as well as the industrial areas. The government should also work with manufacturers and other stakeholders to improve the ease of doing business”, he added.Majority of the CEOs (94%) interviewed in the third quarter 2019 of Manufacturers CEOs Confidence Index (MCCI) survey agreed that congestion at the ports significantly affects productivity negatively.
“This unpalatable issue manifest daily in form of delay in clearance of manufacturing inputs and machinery as well as high demurrage which increases the cost of production in the sector and often times slows down manufacturing operations.“Contributory factors include inadequate space inside the ports, weak trade facilitation infrastructure, poor road network, and the associated traffic gridlock that all combined to limit operators’ access to the ports.
“While commending the Federal Government for recent efforts at improving the situation at the Lagos ports, the persistent gridlock indicates the need for holistic measures that would engender lasting solutions and improve seamless access and operations inside the ports”, they added.
Though a large percentage of respondents claimed that the level of local raw-materials sourcing has increased in the country, a greater proportion of those interviewed are still of the view that effort should be intensified to improve the development, sourcing and utilization of local raw materials.
“Government needs to promote private sector driven policies that would further enhance the capacity of relevant institutions to deliver on set mandates and improve the level of local sourcing of raw materials.“Even though only 38 percent of those interviewed agree that the level of local sourcing of manufacturing inputs has improved, the cumulative percentage of those that disagree (39 percent) and those not sure (23 percent), which is 62 percent, signify that there still exists a larger room for improvement.
“Therefore, Government needs to properly fund the relevant institutions, initiate policies that will give priority attention to the development of local raw-materials in commercial quantities, create friendlier environment for investment on the value-chains of these materials and ensure that adequate forex is made available for importation of vital raw materials that are at the moment, not available locally”, MAN explained.
On his part, LCCI’s Director-General, Dr Muda Yusuf said: “As a sustainable solution, it is imperative to fix the fundamental issues of high cost of domestic production, the prohibitive cost of cargo clearing at the Lagos ports, prohibitive import tariffs, high cost of logistics within the economy, and border policy capacity”.However, from policy perspective, Yusuf expressed the view that prolonging closure of the land borders would further add impetus to agricultural output in 2020.
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