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Nigeria’s Industrial growth and development

LEADERSHIP Industry Correspondent AYODELE SAMUEL writes on efforts of government to reposition and to repair Nigeria’s manufacturing sector.

No doubt the first two decades following Nigeria ’s independence in 1960 remains the glorious period in the nation’s history. During this period, several sectors of the economy experienced unequalled vibrancy.

The period contributed significantly to the nation’s Gross Domestic Products (GDP). The manufacturing sector played a significant role in stabilizing the engine of the nation’s economic development in terms of employment, export and agriculture which serves as source of foreign exchange earnings. B

etween1970 to1980 according to statistics, the manufacturing sector alone contributed between 11 – 9.9 percent to the nation’s GDP respectively. Recent figure released by the Manufacturers Association of Nigeria (MAN) has shown that the manufacturing sector contributes only four percent of the nation’s GDP while Industrial Capacity Utilization has dropped to about 28 percent.

Currently, many local industries have continued to operate under very severe economic and environmental conditions such as poor energy, poor infrastructure facilities including bad road network, lack of access to funds and high interest rates on bank loans while those that cannot endure the economic hardship close shops.

Professor Eric Chiedum Eboh, a Policy Economist and a business researcher said for Nigeria to achieve its economic targets and development objectives it requires the right business environment to nurture a competitive and dynamic private sector. These indices have been a headache to manufactures and government itself.

This was what led to the convergence of the meeting between government and stakeholders to find lasting solution to the problems facing the nation’s industrial sector. It is on record that government through the Ministry of Commerce and Industry has been tackling these problems on many fronts by bringing both private and public sectors together to discuss the way forward in the commerce and industry sector.

In May this year, the Ministry had met with NACCIMA, Manufacturers Association of Nigeria MAN, and other stakeholders in the sector to fashion out possible solution to the problems facing the sector. Also, the problems of the nation’s industrial sector was on the front burner at the meeting of the National Council of Commerce and Industry, the highest policy decision making body in the sector which held in Kano from May 17-21, 2010.

This led to the formation of a committee to develop a 10 year National Strategic Industrial Development Master Plan (NSIDMP) to provide the roadmap for industrial development in Nigeria .

This committee is headed by the Minister of State for Commerce and Industry, Ms. Josephine Tapgun while the Akwa Ibom State Commissioner for Commerce and Industry, Dr. Emem Wills Wilcox is the alternate Chairman. During this interaction with the Manufacturers Association of Nigeria (MAN) Senator Jubril Martins-Kuye pointed out that the purpose of the meeting with the Organized Private Sector was to harvest their views on the challenges facing the sector as well as to find possible ways to alleviate the problems.

According to him “I know where the shoe pinches and I know that the mandate of this ministry is to remove all obstacles, stumbling blocks and barriers in the pursuit of Commerce and Industry and our tasks here is to support you.” He pointed out that most of the challenges that were facing the sector did not reside with his ministry; therefore the ministry has to interface with other ministries and agencies of government such as the Ministries of Finance, Petroleum, Power and the Nigeria customs Services and CBN to tackle the problems.

These interface with other ministries and agencies have started yielding results. The N500 billion revival funds for the industrial sector which led to the disbursement of N150 billion to the real sector was initiated by the ministry in 2009 and the present Minister followed it up for it to come on stream.

On the assurance the Ministry gave to manufacturers on special prices for Low Pure Fuel Oil (LPFO) which was one of the concerns raised at the meeting with the Minister, the Ministry of Petroleum has facilitated unfettered access to LPFO by manufacturers. Action has been stepped up on the 100 billion bailout funds for the textile industry, through the Bank of Industry (BOI), to enable more moribund textile companies to access the loans on one digit rate interest through the arrangement work out by BOI.

With efforts to tackle the illegal check-points that dot the Seme border route and various ports which have been the entry points for illegal imports into the country, a 21 – man Task Force on Trade Facilitation in Nigeria headed by the ministry’s Ag. Director Trade Mr. David Adejuwon has been set up, comprising members from Ministries of Commerce and Industry, Transport and Finance, Nigeria Customs Service, Nigerian Shippers Council (NSC), Nigerian Ports Authority (NPA), National Agency for Food and Drug Administration and Control (NAFDAC), Standard Organization of Nigeria (SON), Nigeria Quarantine Service (NOS) Nigeria Police, CBN and National Association of Clearing and Forwarding among others.

The Taskforce was on an assessment tour of infrastructure needs at the border posts recently to harmonize various activities of the agencies at the posts. This is to ensure compliance with multilateral and regional decisions on trade facilitation. In the course of their assignment, it was discovered that out of the over 30 government agencies currently operating at the borders and ports, only few are legal.

The National Sugar Development Council in collaboration with the Ministry has flagged off the delivery of input loans and credits to members of 40 out-growers Association in conjunction with Bank PHB, the Central Bank of Nigeria and National Agricultural Insurance Corporation of Nigeria (NAIC). Also the Ministry has provided new guidelines for companies granted approval to import unfortified raw Sugar for Industrial use on packaging and labeling of their products as well as to ensure at least 70% local contents in National Sugar consumption by 2015.

The council recently developed up a National Sugar Master Plan that will foster new investment and help existing investment in the sector to consolidate. Also, the Ministry through the Bank of Industry (BOI) has approved N58 Billion for 675 small enterprises to guarantee the utilization of raw materials, especially agricultural produce, generate employment, increase export potentials, promote MSMs by women as well as deepen bank’s credit delivery process through lending to cooperative groups under collective guaranteed arrangement.

In a bid to sustain continuity of policy and programme of the Ministry the Minister has given his support for the Campaign for Patronage of Made in Nigeria Products.

The Ministry is also collaborating with Common Fund for Commodity (CFC) on the provision of prototype cassava processing plant. Another Cassava Processing Factory was commissioned by the Permanent Secretary, Dr. Abubakar Mohammad at Angwa Nungu Village of Lafia, Nasarawa State in July 2010 adding to the two prototypes already commissioned in Masaka and Kuje both in Federal Capital Territory and Nasarawa State respectively. Also, CFC granted Nigeria Palm oil project an estimated $4,611,040 meant to improve the income generating potential of oil palm in West and Central African region ( Nigeria and Cameroon ).

The project was meant to benefit small-scale palm oil processors operating inefficiently, with limited market access or ability to effectively participate in palm oil domestic and national supply chains. The project will improve on existing technologies and provide skills training (technical) for operators and business skills for management staff.

The Ministry has shown the zeal to promote development of industrialization by sustenance of Government Backward Integration policy on cement through cancellation of all un-utilized cement import licenses issued from 2002 – 2008. This measure was reached in collaboration with stakeholders in the cement sub-sector after it was confirmed that there was substantial increment in the capacity of local manufacturers of cement in Nigeria .

This measure is primarily aimed at accelerating the growth of local capacities as well as providing possibilities for eventual export of cement products to other African states and beyond. In view of the above, and to achieve the much desired self-sufficiency in local manufacturing of cement, create employment and value addition,government has issued new cement import licenses to investors that have committed resources to local production of cement. The new import licenses cover the period of 1st July to 31st December 2010.

It is imperative to note that government granted license to existing and new entrants into cement in 2008 in a bid to bridge the shortfall and ensure a decline in the price of the commodity in Nigeria . The new entrants were BUA Group, Madewell, Reagan Reinassance, Minaj, Lababidi and NICA. They were granted license to import 500,000 tonnes of cement each with option of bulk, jumbo or 50kg bag cement. BUA Group used its allocation on bulk cement while others like Madewell and Minaj did 50,000 tonnes each, Reagan did 20,000 while Lababidi and NICA did not utilize their allocation. This non-utilization and under utilization by new entrants added to the problem of shortfall in cement supply in the country.

Local production of cement in 2009 stood at 8.5 million while the shortfall was 8million tones which government bridged with import. With new investment and expansion of lines by cement manufacturers, local capacity projection for 2010 is 11 million tones while the remaining balance will be imported by those who have shown commitment in local production. Government has tried to encourage genuine local investors in the cement sub-sector by granting them license to import bulk cement for bagging at their facilities but no group or individual under the guise of operator should hold government responsible for their failure to grasp the rare opportunities provided to them by government to participate in the sector.

However, public commentators have been analyzing the significance of this government action in boasting local production of cement. MAN Director-General, Mr. Jide Mike described the move to re-introduce the Cement Backward Integration policy as a positive one that would enhance local capacity production and eventually significantly reduce the price of cement in the country.

By the move, he said the federal government has displayed its commitment to the survival of the real sector of the economy, which has almost been extinguished by faulty policies and the harsh environment of the past years. Commending the government on the backward integration policy, which became effective in 2002 and has significantly boosted the local manufacturing capacity, he said the era of overtly relying on imported cement is over as local production now exceeds the imported cement.

Chairman of the Cement Manufacturers Association of Nigeria CMAN Engineer Joseph Makoju while commending the action the government explained that that by the end of 2011, Lafarge Cement WAPCO will have rolled out its new plant at Lakatabu Ogun State; Dangote Group would have commissioned the Ibeshe plant and doubled capacity at the Obajana factory and Benue Cement Company, all of which will increase the local production of cement above 20million metric tonnes per annum. Makoju also stressed that the rising output from the various local cement companies had already begun to result in the crash of the price of cement from over N2000 per 50 kg bag to about N1500 per 50kg bag.

He said with the promises made by the federal government to revamp the nation’s power sector, finance the manufacturing sector and boost infrastructure already taking shape, the price of locally produced cement was on its way to around N1000 per bag or even less. Makoju assured Nigerians of a drastic crash in the price of cement, as the nation moves towards full self sufficiency in the area of cement production next year.