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To reverse the bleak future of manufacturing

By Editorial Board
16 August 2022   |   3:50 am
The cry by the National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) on the sorry state of manufacturing in the country may not be surprising to watchers of the economy; it nevertheless calls for serious attention by all concerned Nigerians.

The cry by the National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) on the sorry state of manufacturing in the country may not be surprising to watchers of the economy; it nevertheless calls for serious attention by all concerned Nigerians. In apparent lamentation of the bad state of the manufacturing sector, the National President of the Association, John Udeagbala indicated that the sector is currently faced with a bleak and despairing future and thus poses a threat to the country’s effective participation in the emerging African Continental Free Trade Area (AfCFTA). The facts necessitating this cry are quite obvious as well as in the public domain. First, a number of manufacturing firms have been so overwhelmed by the prevailing challenges that they no longer engage in production but have switched to importation of finished goods from other countries. From a profit perspective, this is the more reasonable thing to do, as many of those firms still involved in production within the country are struggling to stay afloat. Some others have moved their operational production base to the neighbouring countries while leaving their marketing arms within the country. This is a clear case of exporting jobs abroad. It is thus no wonder that many of the warehouses in the industrial estates within the country have become empty and thus converted to other uses. These are negative signs of the times.

The challenges that bedevil the sector include the perennial energy shortages both for power from the national grid as well as self-generated power. The unholy frequencies of the collapse of the national grid and the power supply shortage implications are well known to all stakeholders. In fact, some have come to regard power supply from the national grid as the alternative power source given that many industrial outfits in the country had over the years been relying on their own power generation as the major supply. Alas, this has been given a big blow in recent times with the skyrocketing of prices for diesel casting doubts on the capability of the manufacturing firms to generate their own power. This obviously adds to the factory-gate prices of their products which are invariably beyond the reach of the average Nigerian.

Real incomes have fallen across the country with the ever increasing trend of inflation and thus many locally produced manufactures are largely left unsold. Other challenges include the grave shortage of semi-skilled labour such as welders, electricians among others due to the uncompetitive wages the manufacturing firms can pay relative to what they can get in the unorganised informal sector. Some other firms are forced to scale down their operations or even shut down. This is not to forget the preponderance of other challenges in the operating environment such as poor infrastructure and the growing insecurity in the country. Many manufacturing firms are grappling with these and many other challenges that the symptoms earlier identified are manifesting across the country. The sorry state of manufacturing in the country spells doom for the revival of the economy from its current doldrums. This has been caused largely by recurring poor economic management over the years. As a consequence, spates of de-industralisation have currently set in, which obviously do not augur well for economic growth and development. Indeed the future of manufacturing is bleak.

With these challenges, it does appear that Nigeria is not ready to benefit from the African Continental Free Trade Area (ACFTA) arrangement. How can it compete with other well performing economies on the continent, even in West Africa? It is a known fact that Ghana has been the location of choice for many of the firms that left Nigeria and thus Nigeria is incapacitated in the supply of goods to the continent given its high production challenges. Nigeria may end up being a dumping ground in manufactures from other African countries, under the ACFTA. Even globally, China is known to have the capacity to dump cheap manufactured goods in any country that open its borders to it, to the detriment of the receiving country. So is the case with other countries among the Asian Tigers.

Going forward, Nigeria needs to put its house in order. First, it has to address the problems of the manufacturers from the macroeconomic policy level. Issues of multiple exchange rates in the country inhibit access to the much needed foreign exchange for their imported inputs. The increasing public debt crowds out the private sector, especially manufacturing firms from the domestic credit market and thus inhibits their capacity to produce. Also the growing inflation in the country, poor state of infrastructure, irregular power supply and insecurity challenges are all waiting for attention in order to enhance the growth of the economy and industrial sector in particular and thus stem the growing spate of de-industrialisation which the Nigerian economy is currently going through.