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‘Why government should involve local producers in BIP policy formulation’

By Femi Adekoya
20 May 2020   |   4:18 am
Nigerian manufacturers have urged the Federal Government to involve the private sector in the crafting and implementation of adjustment frameworks as part of efforts to deepen...

Nigerian manufacturers have urged the Federal Government to involve the private sector in the crafting and implementation of adjustment frameworks as part of efforts to deepen the backward integration plans and ensure that the little gains made so far in the country’s industrialization drive are sustained.

Without proper collaboration, the local producers noted that local sourcing of raw materials would remain low and government’s industrialisation agenda may not be realised.

According to the Manufacturers Association of Nigeria (MAN), government needs to sustain the implementation of the backward integration policy by properly funding relevant institutions, giving utmost priority attention to the development of local raw-materials in commercial quantity and creating friendlier environment for investment on the value-chains of these materials that are not locally available at the moment.

By restricting access to foreign exchange for the importation of a couple of items, the Central Bank of Nigeria (CBN) had hoped to encourage local sourcing of raw materials for production.

However, some manufacturers had requested for the HS Codes of many of the products in order to cater for products whose raw materials cannot be accessed locally.

Though local sourcing of raw-materials in the manufacturing sector increased marginally to 57.0 percent in the first half of 2019 from 56.87 percent recorded in the corresponding half of 2018, representing 0.13 percentage point increase over the period, the growth has been described as poor compared to previous performances.

In its latest Manufacturers CEOs Confidence Index (MCCI) for the first quarter of 2020, MAN noted that the recent change in the forex market dynamics on account of safeguarding the forex reserve of the nation from depletion, reduction in export proceeds and the impact of COVID-19, a sizeable number of its members, notably 43 percent as against the 29 percent recorded in the preceding quarter, agreed that the level of local sourcing of raw materials by the sector improved in the first quarter.

MAN noted that the development shows that manufacturers are now daily increasing the intensity with which local raw materials are sourced for production.

However, 40 percent of respondents as against the 49 percent of the last quarter, disagreed that local sourcing of raw materials improved in the quarter under consideration, while the remaining 17 percent were unsure of the status of local sourcing.

Members that disagreed represent selected manufacturing sectoral interests that the vital raw materials that they require are not available locally in any form, while respondents that expressed uncertainty are operators that the raw materials needed are not available locally in commercial quantity and those that require huge capital outlay to develop or beneficiate or properly refined for production.

Similar to the pattern reported under capacity utilization, volume of production being a twin component also revealed a massive decline.

Indeed, 86 percent of CEOs interviewed (54 percent declining and 32 percent severely declining) reported decline in production volume on account of this pandemic.

However, 13 percent of respondents were of the opinion that it has no effect on their production activities while a paltry 1 percent reported increased production on account of this development.

Clearly, the former and the latter represents manufacturing concerns producing fast moving goods, seasonal items, essential products, those that are not dependent on imports for basic raw materials and have full control of their value chain.

Similarly, the larger percentage of respondent CEOs, precisely 79 percent (45 and 34 percent) reported decline in volume of sales. However, 16 percent of respondents were of the opinion that the break-out of the pandemic had no effect on their volume of sales while the remaining 5 percent reported increase in volume of sales on account of this development.

This confirms that the pandemic has negatively affected both the demand and supply side of the economy.

According to MAN, this affirms the reason for an effective collaborative framework for Government and Private Sector operators to rub minds on suitable stimulus packages that would enable the manufacturing sector to ramp-up production to effectively meet domestic consumption requirements and in readiness for export.