Manufacturers Association of Nigeria (MAN) has declared that the low growth of the Nigerian industrial sector would hinder the attainment of the federal government’s aspiration to achieve a $1 trillion economy in Nigeria.
MAN also blamed the Nigerian industrial sector’s poor performance in the third quarter 2024 GDP report on high interest and exchange rates as well as escalating energy costs.
Those views were expressed on Monday by Director General of MAN, Mr. Segun Ajayi-Kadir, in a statement, titled, “Position of the Manufacturers Association of Nigeria on the GDP Report for the Third Quarter of 2024 as Released by the National Bureau of Statistics.”
Ajayi-Kadir observed that the industrial sector, according to the GDP report, recorded a growth of 2.18 per cent, which was an improvement from the 0.46 per cent recorded in the third quarter of 2023. He added that the services sector accounted for 53.58 per cent of GDP, while agriculture and industry contributed 28.65 per cent and 17.77 per cent, respectively.
He stated, “Apparently, the service sub-sectors dominate the composition of the country’s GDP and its pattern of growth. This poses a significant drawback for the industrialisation agenda.
“In other words, as the services sector continually booms at the detriment of employment and production in the manufacturing sector, the economy is set to fail in its aspirations of reducing forex demand pressures, promoting value addition, generating mass employment, increasing export earnings, driving industrial-led growth, and ensuring sustainable development.
“By implication, achieving a $1 trillion economy by 2026 is apparently difficult, as the growth rate clearly falls short of the 6 percent average targeted by the present administration.”
Ajayi-Kadir pointed out that it was unfortunate that the manufacturing sector was one of the least growing sectors during the period under review, with a growth rate of 2.18 per cent.
According to him, this meagre growth highlighted that the “sector is being choked by interest rate hikes, high exchange rates, and escalated energy costs”.
He said, “Manufacturers’ negative outlook on the economy has resulted in decreased production and employment.
“Foreign investors are hesitant to invest in a weak economy, and the scarcity of foreign exchange further hinders manufacturing operations.
“In all, while the higher growth recorded in the reviewed period is laudable, it is still relatively modest. Given the prevalence of high unemployment and poverty, a double-digit GDP growth rate is necessary to achieve inclusive growth that benefits all segments of society.”
The director general of MAN stated unequivocally that the decline in the growth of the manufacturing sector was a clear indication of the detrimental effect of the prevailing macroeconomic policies. He stated that this was further evidenced by the significant drop in nominal growth from 36.59 per cent to 32.97 per cent year-on-year, driven by high inflationary pressure and the exit of major multinational manufacturing companies.
According to him, “It is evident that inflation has been a significant factor in undermining the growth of the manufacturing sector, as the sector has been particularly vulnerable to the unstable macroeconomic environment, exacerbated by recent economic reforms.”
Ajayi-Kadir said in spite of the crucial role of agriculture in fuelling the growth of the manufacturing sector by ensuring a steady supply of affordable local raw materials, “both the agricultural and manufacturing sectors failed to rank among the top five growing sectors during this period, primarily due to security challenges in farming areas and their subsequent negative impact on agro-allied industries”.
He stated that the limited growth in those sectors would lead to increased costs for local raw materials; high cost of living that would be characterised by high unemployment and inflation; and reduced consumer purchasing power that would lead to increased unsold inventory for manufacturers.
Ajayi-Kadir stressed that a vibrant manufacturing sector was essential for driving economic growth and prosperity, and urged the federal government to take decisive actions that would address the challenges hobbling the industrial sector in order to unlock its potential.
MAN, therefore, recommended that the government should create special windows for providing single-digit interest rates to productive sectors and relax stringent conditions for SMEs to access funding.
The recommendations included the recapitalisation of the Bank of Industry (BOI) to meet the growing credit demand of industries, enhancing credit information systems and broadening the scope of assets for collateral.
MAN also urged the government to “implement the recommendations of the Presidential Fiscal Policy and Tax Reforms Committee.
“Reduce the excessive increase in Environmental Impact Assessment (EIA) and Effluent Discharge (EMP) fees imposed by NESREA.
“Retain the current excise duty of N10 per litre on non-alcoholic beverages to avoid shutting down the industry.
“Direct the Central Bank of Nigeria to clear $2.4 billion outstanding dollar obligations on FX forward contracts to support manufacturers.
“Review import duty rates for production inputs, particularly those not locally available, and consider pegging the rate at N800.
“Implement measures to streamline customs procedures, including increased use of technology and decentralisation of seaports.
“Prioritise budgetary allocation for infrastructure development, especially along strategic economic hubs.
“Encourage public-private partnerships for infrastructure development, including roads, railways, and port access roads.
“Direct the Nigerian Electricity Regulatory Commission (NERC) to review the excessive increase in electricity tariffs for Band A customers.
“Prioritise domestic gas supply to manufacturers and enforce Naira-denominated pricing.
“Ensure transparency in electricity tariff charges, invest in infrastructure and efficiency improvements by Distribution Companies, and introduce outage compensation mechanisms.”
Dike Onwuamaeze
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