Look inwards, save manufacturing
There is no doubt that the foreign exchange restriction on 41 items by the Central Bank of Nigeria (CBN) has compounded the problem of industrial production in the country especially for import-dependent manufacturers. As many as 272 manufacturing firms have reportedly shut down within the last one year.
This is disheartening but not unexpected, given Nigeria’s dire situation. The Manufacturers Association of Nigeria (MAN) says at least 222 small-scale businesses have also closed shop leading to 180,000 job losses.
Although, the CBN has reportedly directed that 60 per cent of forex allocation should go to the manufacturing sector, it is yet to be seen to what extent this would help to ease the problem.
President of MAN, Dr. Frank Jacobs, has, however, lauded the CBN’s action, and expressed confidence that with such a concession, manufacturers may be able to do more in the country.
That the industrial sector is the hardest hit by the foreign exchange squeeze and epileptic power supply plaguing the country is not in doubt. Scores of industrial plants have been forced to close shop. Many multinational firms have relocated to neighbouring countries where better prospects exist for manufacturing and the few remaining firms are finding it extremely difficult to remain in business, a situation that does not augur well for an economy.
Of course, it is more desirable to produce more and be export-oriented, that is not the case at present as there is more of importation of virtually every conceivable need, including raw materials. To change the situation would require strategic and serious economic re-engineering of Nigeria through good policies.
Enhanced productivity is one viable option of rescuing the economy and productivity, in this case, means massive industrial manufacturing and agricultural production.
Unfortunately, the machinery and raw materials input needed for such productivity to take place have been hampered by the current devaluation regime.
With naira exchanging at, and above N400 to the $1, manufacturers are lamenting their inability to meet the high cost of forex, in addition to other pressing issues like poor electricity supply, non-competitive industrial products, low patronage, high interest rates and policy inconsistency. Industry stakeholders, therefore, want the policy reviewed. They want the CBN to allow their members access forex from the official market or grant them a concessionary rate.
It must, however, be noted that though, among the items on the restriction list are key raw materials, these are agricultural raw materials that can effectively be produced locally given the right focus and incentives. For instance, that palm products, of which Nigeria was the leading world producer in the 60s, is now a major imported product is highly shameful and regrettable.
It is appropriate that the CBN removed it and others from the official foreign exchange window, leaving the manufacturers to import with foreign exchange sourced from the parallel market.
The Lagos Chamber of Commerce and Industry (LCCI), has, however, said the CBN announced the restriction without consulting other stakeholders, and lamented that 16 other items on the list are critical raw materials for intermediate goods produced in Nigeria.
While this dilemma faced by the manufacturing industries calls for re-assessment, it must be emphasised that given the right push by way of policy direction, Nigeria should be able to produce some of the raw materials needed for industrial production.
It is a shame that local production of palm oil is put at meagre 600 metric tonnes annually, while the total demand is about 1.8 million metric tonnes, with a shortfall of 1.2 million metric tonnes and the restriction on oil palm products alone has reportedly led to the loss of over 100,000 jobs in related industries. So, millions of people could be employed in the oil palm-related industry alone!
This means that nothing should stop Nigeria from producing oil palm products in which the country has comparative advantage and was the leading world producer and exporter in the 60s.
Nigeria gave Malaysia oil palm seedlings in the 60s. Today, that country is the world’s largest producer of palm oil while Nigeria imports the same products from Malaysia!
Such failure is not limited to palm produce alone. There is practically no mineral resource that is not found in Nigeria. Putting the right framework in place to exploit them is the issue and the Federal Government should allow states to diversify into harnessing the mineral resources in their domain.
At times like this, a nation has to be innovative and bold. The manufacturing firms too must be creative and innovative to survive. Difficult times provide great opportunities for breakthroughs and research; therefore, it is a must for innovation to take place.
Nigerians have many agricultural products that are in high demand overseas. They are even known to export bitter leaf and some vegetables to Europe, thereby earning foreign exchange. That should be extended to other raw materials for local production of goods, to curb the culture of import dependency and promote industrial development in the country.