‘Over-regulation, access to ports, power affecting local production’
Despite government’s ease of doing business initiative, local manufacturers have decried 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.
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.
Majority of the CEOs (94%) interviewed in the second 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 per cent of those interviewed agree that the level of local sourcing of manufacturing inputs has improved, the cumulative percentage of those that disagree (39 per cent) and those not sure (23 per cent), which is 62 per cent, 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.
Of all the MAN CEOs interviewed, 46 percent disagree that the rate at which the sector sources foreign exchange (forex) has improved.
36 percent however agreed while the other 18 percent are not sure that forex has improved.
The response, according to MAN, thus suggests the need for a production-focused forex policy and improvement in the quantum of forex available to the sector, particularly for the importation of machines, raw materials and other manufacturing inputs that are at the moment not available in the country.
In terms of inventory, 55 percent disagree that Inventory of unsold manufactured products in the country has reduced over the last three months; 21 percent agreed while the remaining 24 percent were not sure.
“The high level of disagreement among respondents indicates the need for Government to introduce disposable income enhancing fiscal policy measures that would be in sync with existing monetary policies. No doubt, this would boost the purchasing power of Nigerians and stimulate aggregate demand in the country”, they added.