‘Why government should increase N300 billion real sector support facility’

•Poor infrastructure impedes sector’s contribution to GDP
Going by the credit gap in the real sector and the need for job creation, local manufacturers have called on the Federal Government to increase the N300 billion allotted for support to the sector.

According to the manufacturers, while lingering challenges continue to negatively impact production costs and affect capacity of operators, improving access to credit will further aid the impact of the intervention in the real sector.

President of the Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs said the contribution of the manufacturing sector to GDP may not have improved simply because the operating environment remains difficult.

He however noted that with the Real Sector Support Fund (RSSF) unveiled by the Central Bank of Nigeria, operators are optimistic of an improvement in the sector’s performance.

In the RSSF, the CBN had clearly pointed out that activities to be covered under the programme would be Greenfield (new) and expansion (Brownfield) projects in manufacturing, agriculture and other related sectors approved by the CBN.

It, however, stated that emphasis would be placed on Greenfield projects.

It prohibited operators involved in trading activities from accessing its real sector support facility and warned banks that attempt to “falsify through presentation of projects that do not meet the eligibility criteria/specified terms and conditions shall attract severe penalties”.

Jacobs while speaking on how the funds may impact positively on the real sector said: “We had been clamouring for five per cent but got nine per cent interest rate. Our fear is that the RSSF is only N300 billion which is insufficient for the real sector. The Federal Government should increase the funding as many people will take advantage of the funds”.

On his part, the Director General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, described the initiative as a positive development, saying it would help increase the flow of credit to the private sector.

He said: “It is a very good initiative by the CBN. As service sector players, we have always canvassed for low interest rate and have always complained about high interest rate for businesses.

“Each time the Monetary Policy Committee met, they kept tightening the benchmark interest rate, which meant that the cost of borrowing would remain high.

“So, the issue of adjusted CRR is an innovative approach, which would help to boost investment through low-cost funds and longer tenor funds as well. So, it is a good initiative.”

But, Yusuf appealed to the CBN to also design such intervention schemes for other sectors of the economy, which according to him need support.

“The cost of funds to the real sector remains high, while infrastructure decay is still there. Goods are being moved via roads instead of the rail networks which should be the ideal way. This adds to production costs (both for raw materials and finished goods. Power has not improved especially for small businesses in a big city like Lagos. All these affect the real sector’s contribution to GDP”, Jacobs added, when responding to issues relating to the real sector’s performance to the GDP.

Though the Q2 data from the National Bureau of Statistics (NBS) showed improvement in the non-oil sector, as driven by the services sector, the manufacturing sector contributed 9.29 per cent.

Similarly, the agricultural sector, though recorded 22.86% to overall GDP in real terms in the second quarter of 2018, grew by 1.19% (year-on-year) in real terms, a decrease by –1.82% points from the corresponding period of 2017, also a decrease by -1.81% points from the preceding quarter.
Real GDP growth in the manufacturing sector in the current quarter of 2018 was 0.68% (year on year), marginally higher than the same quarter of 2017 but lower than the preceding quarter by 0.04% points and –2.71% points respectively. Growth rate of the sector, on a quarter-on-quarter basis, stands at –3.51%, representing a decline from Q1 growth rate.