In recent years, global supply chains have come under immense pressure because of trade turbulence, economic uncertainty, geopolitical tensions and natural disasters, leaving the systems, a recent United Nations Conference on Trade and Development (UNCTAD) report has revealed.
These, among other similar factors, have led relevant stakeholders in Nigeria, such as manufacturers and industry players, to continue to innovative ways to strengthen supply chain resilience.
Although the integration of Nigeria’s economy into global supply chains is low compared to other countries and regions, disruptions to supply chain operations, especially in recent years, the report noted, has had a more than proportionate adverse impact on the country’s economy.
The UNCTAD Economic Development in Africa Report also noted that Nigeria as well as other African countries could become major participants in global supply chains by harnessing the vast resources needed by high-technology sectors and their fast-growing consumer markets.
Supply chains encompass the systems and resources needed to develop, produce, and transport goods and services from suppliers to customers.
The need for debt relief for the country to offer fiscal space to invest in strengthening supply chains was also stressed since, on an average, African countries pay four times more for borrowing than the United States and eight times more than European economies.
UNCTAD Secretary-General, Rebeca Grynspan, said it is the country’s moment to bolster its position in global supply chains as diversification efforts continue, offering an opportunity for Africa to strengthen its emerging industries, foster economic growth and create jobs for millions of its people.
Nigeria’s abundance of critical minerals and metals, including aluminum, cobalt, copper, lithium/manganese, vital components in technology-intensive industries, positions it as an attractive destination for manufacturing and exports, but recent upheavals caused by trade turbulence, ethnic violence and economic uncertainty are a threat.
Nigeria also offers advantages such as shorter and simpler access to primary inputs, a younger, technology-aware, adaptable labour force and a burgeoning middle class known for its growing demand for more sophisticated goods and services, the report said.
It highlighted that creating an environment conducive to technology-intensive industries would help to raise wages, currently set at less than $50 monthly, compared to an average of $668 in the U.S. and that deeper integration into global supply chains would also diversify the economy, boost its resilience to future shocks and better exploration of its vast renewable energy potential, particularly solar power.
This could help reduce production costs and decrease reliance on petrol, kerosene, and diesel, according to the report.
Revealing that Nigeria needs significant investment in infrastructure to bolster its position as a supply chain destination, it said 17 African countries have already implemented local content regulations to support the growth of local supply chains, foster technology transfer, create jobs and add value within their borders.
“Additionally, Nigeria should also secure better mining contracts and exploration licences for metals used in high-tech products and supply chains. This would strengthen domestic industries, enabling local firms to design, procure, manufacture, and supply the necessary components. The adoption of innovative digital technologies is also critical to optimising supply chain processes and several other countries have made notable progress in this realm,” it stated.
Reiterating the call for better financing solutions to offer businesses affordable capital and liquidity to invest in strengthening their supply chains, it said small and medium-scale enterprises (SME’s) need more supply chain finance, which bridges the payment time gap between buyers and sellers, improves access to working capital and reduces financial strain.
“The value of the African supply chain finance market rose by 40 per cent between 2021 and 2022, reaching $41 billion, but this is small when compared to other regions. The continent can mobilise more funds by removing barriers to supply chain finance, including regulatory challenges, high-risk perception, and insufficient credit information,” it noted.
