Buhari’s second term: Manufacturers demand economic stimulus to boost sector

As President Muhammadu Buhari prepares to begin his second term in office, President of Manufacturers Association of Nigeria (MAN), Mansur Ahmed, has urged him to address the challenges militating against the manufacturing sector of the economy.

Boosting the manufacturing sector

Nigeria urgently needs a massive economic stimulus programme. If he can surmount the energy problems, Buhari should significantly increase spending in sectors, projects and programmes that boost the economy, generate employment and promote inclusive growth. He should prioritise infrastructure, labour-intensive manufacturing such as textiles and footwear, agro-processing, youth entrepreneurship projects, as well as health and education.

Nigeria has a very large stock of human and natural resources that aren’t being used optimally due to its huge infrastructural deficit. These range from dilapidated roads, epileptic electricity supply, acute water shortages, crumbling public buildings, grossly underfunded public tertiary institutions among others. The gap can be closed through public works projects executed with direct labour.

The benefits of this are clear. These projects would provide temporary employment for unskilled workers in government-funded projects, which would enable these workers to gain experience needed for permanent jobs. In addition, the targeted stimulus spending on productive and value-creating projects would spur growth, while also addressing inclusivity. The beneficiaries of economic growth in Nigeria have typically been politicians, workers in the oil and gas sector, high-level public officials, and executives of financial institutions. A vast majority of Nigerians are usually left out.

Some may wonder how the Buhari administration could possibly finance a massive stimulus spending, given dwindling oil revenues and a volatile global oil market.

There’s an answer to this conundrum: Nigeria could follow the example of Asian countries that financed their stimulus programmes through domestic borrowing mainly by issuing government bonds. Borrowing money domestically in a local currency isn’t nearly as problematic as external borrowing.

Promoting Industrial policy for industrial growth

First, we must consider what policies will make this vision feasible. When you are manufacturing, the first step is making an investment, so you want to look at the conditions that will make that investments worthwhile.The investment climate iskey, and I think we all know this over the years. This Government has been working on improving the business environment as there have been several initiatives to improve the investments climate andthereby making investments and businesses easier for investors.

The second are policies governing the development of infrastructure because asmanufacturers depend on basic infrastructures such as electricity, water, transportation etc. the poorer the infrastructure, the higher the cost at which they can produce and deliver products to the market. So, building infrastructure is one of the most critical responsibilitiesof the Government for industries as a whole to be more competitive.

The third is improving the spending power of the ordinary people because the higher the spending power, the more demand for products. So, putting more money in the pocket of ordinary Nigerian clearly creates more market for the manufacturers. Policies that help improve the income of the ordinary person is very important.

The fourth is policy against trade malpractices, such practices undermine the market and part of our major task is to ensure that Government continues to make laws and regulations that discourage these practices particularly smuggling, counterfeiting, dumping.

There is also the issue of finance. One major constraints of the manufacturing sector in Nigeria is that the cost of financing which is very high. For instance, if you borrow funds to invest at 20%interest rate, you must make more than 20% for that investment to yield benefit. In other countries, it is less than 10% interest rate for investments, this means that you will have problem competing with manufacturers from those countries. Cost of financing is very important and we must continue to work with Government to encourage the financial systems to continue to bring down cost of finance.

Again, given our current status in the manufacturing sector where a huge amount of manufacturing resources is spent importing inputs such as raw materials, spare parts, components, machineryetc, another area that is important to the manufacturing sector is the Foreign Exchange not only in terms of rate but whether it is steady or fluctuating. As much as possible we want a competitive foreign exchange rate and also to remain reasonably stable, if it fluctuates it makes it difficult for you to plan your operations.

African Continental Free Trade Agreement (AFCFTA)

Our position, is that ultimately trade is good and that there are opportunities for Manufacturers to grow if trading is expanded and made easier. However, in the context of the ‘Continental Free Trade Agreement’ what we have said is that before you go into an agreement you must access your capability to benefit from that expanded trade and your readiness to go into that kind of agreement.  I think this is just the fairest thing to ask in any situation like this.

Once you know what the opportunities are and what are the risks, then you will know what you need to do to mitigate the risks and to exploit the opportunities and this was what we said at the beginning of the conversation on the African Continental Free Trade Agreement. I think, to some extent,we were misunderstood by people who thought we are saying ‘No don’t sign’, but what we are saying is first understand what the agreement is going to mean in reality to your industry, to your economy, and so on and be prepared to mitigate the risks and to take advantage of the opportunities that arise.

This is what we asked for and I think this is what is now clearly being recognized by Government when it set up a committee to assess the readiness and to also investigate the pros and cons i.e., the costs and benefits of the agreement. This is important because by the time weclearly understood what we are going into, then we will be in a stronger position to know how to negotiate. Don’t forget, an agreement is something that is negotiable so if you don’t know what your goals are in the negotiation it’s impossible to negotiate effectively and that is what is happening.