Manufacturing’s robust performance in 2014 justifies call for industry-specific incentives

A leap in manufacturing’s contribution to Nigeria’s Gross Domestic Product (GDP), huge investments in cement, sugar and automotive industries, as well as a surge in capacity utilisation within the year are indications that the sector can perform better in 2015 if the Federal Government pays more attention to broad-based, industry- specific incentives, rather than the individual-type motivations, stakeholders say.

“Majority of the members interviewed are of the opinion that once the government continues with broad-based incentives, the possibility of capacity utilisation improving further is high,” says the Manufacturers Association of Nigeria (MAN), in its most recent economic review.

“What this translates to in the economic-wide aggregate, is

expansion in the industry, with an increasing number of new entrants, leading to more jobs being created,’’ says MAN.

Manufacturing’s contribution to GDP leaped from 6.81 percent reported after the rebasing exercise to nine percent by end of the half year, according to the National Bureau of Statistics (NBS). Capacity utilisation also spiked to 53 percent, from 46 percent recorded previously.

These feats may be attributed to huge investments in the cement industry, which totalled $7 billion within the year, according to Olusegun Aganga, trade, industry and investment minister.

Similarly, over $2.6 billion investments were recorded in the sugar industry by companies like Dangote Sugar Refineries, Golden Sugar Company, HoneyGold and Crystal Sugar, among others.

The cement and sugar industries have been the beneficiaries of the Backward Integration Policy (BIP), which placed importation of the two products on the Prohibition List, while encouraging hitherto exporters to set up local plants and import equipment at almost zero percent duty.

The automotive industry also reported an upsurge of activity as 21 dealerships in the country made commitments with foreign technical partners to set up assembly operations in the country. This is owing to the full implementation the automotive policy within the year. The policy encouraged local investments with incentives, while making importation of vehicles more expensive.

MAN confirms that investments were directed mostly to industries where government seemed to direct attention.

Following the successes of these three sub-sectors and their capacity to drive the economy in 2014, analysts have said the Federal Government should now focus on other industries such as fruit juices, electronics, aluminium, iron and steel, paints and varnishes, toiletries and cosmetics, rubber and leather/footwear.

They also point to the need to spur domestic/industrial plastics, nail and wire, packaging, printing, carpets and rugs, furniture and plywood, school chalk, crayons, glass, and ceramics, foam and textile, among others.

“Why should the government allow some people in the same industry to have advantage over others? What type of manufacturing policy is that?” asked Robin Neville, managing director, First Aluminium plc, manufacturers of roofing sheets and coils, in an interview with BusinessDay.

Neville said neglect of the aluminium industry has resulted in the influx of sub-standard products, owing to the laxity of the Nigeria Customs Service. It has also led to loss of jobs.

“We lost 200 employees in 2012. We had to close down operations in December 2012, because production was and still is uneconomic in Nigeria,” Neville said.

As oil prices dwindle, government revenues fall and the Nigerian economy becomes more exposed, analysts say the Federal Government must in 2015 substantially implement the Nigerian Industrial Revolution Programme (NIRP), launched in early 2014. They say there should be more action than talk in changing the harsh business climate for investors.

“The problem the manufacturing sector is facing is lack of competitiveness. If you produce here and you are not competitive either in terms of price or quality, you cannot do any successful export. So it goes back to the issue of quality of business environment. You need to create a business environment that will enhance productivity and minimise bottlenecks,’ said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI).