Revisiting Nigeria’s industrial policy for competitiveness
Nigeria has lofty ideas and policies but becomes hamstrung when it comes to implementation. For the industrial sector, the Nigerian Industrial Revolution Plan (NIRP) remains one of the most comprehensive industrial policies in the country’s history, but the same cannot be said about its execution. With emerging challenges and a new continental market, the Minister of Industry, Trade and Investment, Adebayo Adeniyi, has initiated some reforms as well as review of the NIRP, alongside other policies, with a view to aligning the provisions with current economic realities and global aspirations. FEMI ADEKOYA writes.
Experiences of countries such as China, Brazil, South Korea, Singapore and Malaysia have proven that the manufacturing sector plays a critical role in transforming many less developing and middle-income countries.
In highlighting the importance of the manufacturing sector to economic growth and development, the Federal Government over the years has introduced national development plans, industrial policies, initiatives, monetary and fiscal measures and sectoral developments to enhance the sector.
These plans, policies and initiatives included different periods of effective control and management of the exchange rate market among other policies and plans such as Nigeria Economic Empowerment Development Strategy (NEEDS), national industrial policy, privatisation policy, the creation of industrial estates in various cities in the country, the establishment of Bank of Industry to provide cheap loans to Small and Medium Scale Enterprises and the national export strategy to improve competitiveness in the foreign market and create job.
Despite these efforts, challenges have remained, with many industrial estates becoming warehouses and some even being converted to event and worship centres.
The result of policy flip-flops was that the manufacturing growth rate has continued to remain poor while capacity utilisation in industries followed the same trajectory, falling from 70 to below 50 percent, according to data from manufacturers.
As the cost of production was rising, the government introduced Cargo Tracking Note, raising production costs higher. The Manufacturers Association of Nigeria (MAN) said in 2009 that 839 firms shut down that year. Within this period, policies on the automotive industry, palm oil, rubber, cocoa and other non-oil export products were never implemented religiously.
In other words, these firms shut down because governments after governments had fluctuating import and export policies. Import duties were unilaterally relaxed or lowered by some regimes without due consultations with critical stakeholders. Export policies were inconsistent.
Revisiting industrial policies
At best, the NIRP was tagged the most ambitious and comprehensive industrialisation programme because it is based on the areas where Nigeria has competitive and comparative advantage such as agriculture and agro-products, metals and solid minerals, oil and gas, construction and light manufacturing services. It has identified those sectors where Nigeria can be number one in Africa and top 10 globally.
Former President Goodluck Jonathan while speaking during the launch of the NIRP in Abuja, described the NIRP as the most ambitious and comprehensive road map that would transform the nation’s industrial landscape, boost skills development, enhance job creation and conserve foreign exchange.
Jonathan said, “The NIRP will also address the physical constraints that have consistently inhibited the growth of manufacturing by building industrial infrastructure, prioritise power for industrial use, reduce borrowing cost and mobilise funds for the real sector. It will help to build our industrial skills, improve our investment climate, raise our product standards, link innovation to industry and ensure local patronage of made in Nigeria goods.
“The goal of the Nigeria Industrial Revolution Plan is to increase the contribution of the manufacturing sector to GDP from the present four per cent to more than 10 per cent over the next five years. This will boost the annual revenue earnings of the Nigerian manufacturers by up to N5 trillion per annum.”
Years after, the goals of the NIRP are yet to be realized with manufacturers’ woes even worsened.
New Vista from Adebayo?
The Federal Government recently unveiled plans to review the Nigeria Industrial Revolution Plan (NIRP) in a bid to achieve the global target of net-zero emissions by 2050 and align the plan with current economic realities.
The government noted that the fourth industrial revolution, Africa Continental Free Trade Agreement (AfCFTA) and climate change have equally necessitated the need to review the policy.
The Minister of Industry, Trade and Investment, Adeniyi Adebayo stated that the review would also provide a clear and definite path to evaluate the nation’s industrial aspirations taking into cognisance AfCFTA.
He added that the move would help Nigeria to take advantage of opportunities the trade pact offers while also creating job opportunities through increased production to leverage the wider market provided by AfCFTA.
The prioritisation of promotion of government’s policies of Ease of Doing Business (EoDB), job creation, poverty eradication and industrialisation, among others, appears to have taken centre stage, with Adebayo, who seeks to rewrite the nation’s trade and investment narrative.
The Minister had, upon assumption of duties on August 21, 2019, noted that his agenda is to deliver on his mandate to contribute to the fulfilment of the President Muhammadu Buhari administration’s second term promise to lift 100 million Nigerians out of poverty over the next 10 years.
In the last two years, Adebayo had prioritised the domestication of production through backward integration plan (BIP) for selected priority products, which included palm oil, automobile, dairy, sugar, cassava starch and Cotton, Textiles & Garments (CTG), by conducting revision and realignment of the incentive system for sugar, through a restructured performance management framework and improved access to Foreign Exchange (forex) for producers.
Also, in collaboration with the Bank of Industry (BoI), the ministry provided N12 billion soft loans to 57 companies in the automobile sector to enhance production capacity, even as it launched electric-powered vehicles in line with future direction of the world.
The critical role of MSMEs as the economy’s growth engine is also not lost on Adebayo. Accordingly, the ministry has established an MSME policy to drive the growth and competitiveness of MSMEs in the country.
“We have concluded a landmark $1 billion syndicated term loan through BoI to provide affordable loans of medium to long-term tenor, alongside moratorium benefits to MSMEs. We also established the MSMEs Innovation Portal to ensure that MSMEs have wider market access where they can be matched with customers and clients,” he said.
The Minister, who spoke to select newsmen while rendering account of his stewardship recently, also said as part of efforts to revitalize MSMEs, it has implemented the MSME Survival Fund Initiative, which is a component of the Nigerian Economic Sustainability Plan (NESP) to help MSMEs respond to the shocks caused by the COVID-19 Pandemic.
He listed some key highlights of the response to include Payroll Support Scheme, under which it successfully disbursed to 460,000 beneficiaries of which 43 per cent female-owned businesses have benefitted; General MSME Grants, which has successfully disbursed to about 45,000 beneficiaries of which 35 per cent female-owned businesses have benefited.
There is also Transport and Artisan Grant, which was disbursed to about 120,000 artisans and 200,000 transporters; CAC Formalisation Scheme, under which the ministry provided free company registration for over 200,000 MSMEs.
It also established a N15 billion MSME Guaranteed Offtake Stimulus Scheme (GOSS), to protect and sustain the income of vulnerable Micro and Small Enterprises by guaranteeing the offtake of their products.
To significantly reduce the cost and time associated with trading in Nigeria, Adebayo said trade facilitation was one of his ministry’s priorities. Noting that the goal was to implement the World Trade Organisation (WTO) Trade Facilitation Agreement by 2025, he said: “We are at 40 per cent implementation.”
With the Secure Agricultural Commodities Transport and Storage Corridor (SATS-C), he also said the goal was to strengthen the agricultural supply chain, standards, commodity handling, reduction in haulage cost and reducing post-harvest losses, ultimately, resulting in lower consumer prices.
“We are on track to achieving these targets,” Adebayo declared, reaffirming Nigeria’s commitment to the agenda of the Director-General of WTO to reform it to be responsive to the 21st century economic realities as well as support inclusive growth and development. “This certainly aligns with one of our thematic areas: “Implement a 21st Century trade economy,” he stated.
As the AfCFTA became operational, Adebayo identified the ECOWAS Trade Liberalisation Scheme (ETLS) as an important mechanism Nigerian manufacturers would lash on to deepen trade integration in the sub-region and a cornerstone of effective economic integration of the region.
He said: “It has provided a key regulatory tool for the free trade area, which has helped enhance competition and consumer choice within the region. It has also helped create export opportunities for Nigerian manufactures, thereby increasing employment in the economy through the expansion of market access for our products.”
Stakeholders weigh in
While the government might be exploring policy framework for the industry, stakeholders believe that government will need to look outward at industrial policies and permissive economic strategies anchored on free-market economy, including deregulation, liberalisation, free entry and free exit of factors of production, local resource development and utilisation, among others.
The thrust of such outward position will be to enhance capacity production utilisation in the manufacturing sector, as well as vigorous export promotion and expansion through the provision of the appropriate mix of incentives to local and foreign investors, manufacturers and exporters, so as to encourage increased domestic production and export of made in Nigeria goods which have huge potential to generate alternative streams of foreign exchange to crude oil of which the economy is currently heavily dependent.
Furthermore, in order to attract Foreign Direct Investment which is very key to industrial development, government will need to play the role of an enabler or a catalyst by creating an enabling environment in terms of putting in place investor-friendly policies and special incentives, as well as efficient and functional infrastructure, particularly up-scaling the power sector output, for businesses to thrive.
According to the LCCI, the government needs to address fundamentals like the high cost of doing business and low productivity, which could be ascribed to macroeconomic factors, institutional challenges and structural issues.
The stakeholders believe that if Nigeria is to unlock and unleash her vast economic potential and truly achieve the goal of industrial revolution, beyond sloganeering, there is the need to substantially improve the business environment and make it more friendly and conducive to both local and foreign investors, especially in terms of the ease and cost of doing business.
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