Nigeria’s industrial growth and development has been phenomenal in the past six years. The rebasing of the nation’s economy this year which placed its value at $510 billion, making the country the colossus of the African continent, leading South Africa, now in distant second position with $ 370 billion is not mere statistical gimmick. The feat is the classic consequence of a country which got it right in various segments of its economy, particularly in the industrial sector. For a long time, Nigeria actually did not have a functional industrial policy or any clearly defined action plan. The Goodluck Jonathan administration made this a clear objective but did not bring the industrial sector to a halt while the new plan was being contrived. President Jonathan finally launched the Nigeria Industrial Revolution Plan (NIRP) and the National Enterprise Development Programme (NEDEP), aimed at ushering in a new era for industrial, micro, small and medium enterprises development in Nigeria, this year. The president described the NIRP as the most ambitious and comprehensive road map that would transform the nation’s industrial landscape, boost skills development, enhance job creation and conserve foreign exchange. He said: “The NIRP is the flagship industrialisation programme ever embarked upon by this country. It will fast-track industrialisation, accelerate inclusive economic growth, job creation, transform Nigeria’s business environment and stop the drain on our foreign reserves caused by importing what we can produce locally.” He said the plan was the most ambitious and comprehensive industrialisation programme since it is based on the areas where Nigeria has a competitive and comparative advantage. Expectedly, the benefits of a more precise and better targeted industrial sector is now clear for all to see with the current federal government achieving milestones that were never before possible in the Nigerian economic space. In investment, the aggressive marketing strategy of the government is yielding fruits. The Doing Business and Competitiveness and Investor-Care committees were revived; the One-Stop Investment Centre at the Nigerian Investment Promotion Commission (NIPC) was repositioned and strengthened; the National Competitiveness Council of Nigeria was established to drive healthy competition in business and starting a business can now be done within 24 hours. The United Nations Council for Trade and Development (UNCTAD) named Nigeria the biggest destination for Foreign Direct Investment in 2012, quoting total FDI inflows of $8.92 billion at that time and far higher today. International consulting firm, KPMG,ranked the country as one of the four major investment destinations and growth areas in the world; while Global Benchmarking Network also moved Nigeria up by 12 points in its Global Competitiveness Report. Trade: Trade balance improved significantly from $8.62 billion in Q2, 2012 and $1.60 billion in Q3, 2011, respectively, to $12.37 billion in Q3, 2012 due to lower imports of goods and services and increased exports earnings. For the first time, in 2012, the federal government did not issue any import licence to import cement into the country. Also, for the first time, Nigeria is now a net exporter of cement. In the area of industry, statistics from Manufacturers Association of Nigeria (MAN) showed that industrial capacity utilisation increased from 46.44 per cent in 2010 to around 52 per cent in 2014. Textile Industry Rebounds In the mid-1980s, functional textile mills in the country numbered around 180. Employing about a million people, it accounted for over 60 per cent of the textile industry capacity in West Africa, empowering million of households across all geopolitical zones of Nigeria. The story soon changed and the sector took a massive dive into an industrial abyss. At a point during the crisis in the sector, from about 180 thriving textile companies, the number came down to almost zero, with textile giants like United Nigerian Textile Company bowing to the pressure imposed by a profoundly mean operating environment. The Obasanjo administration came, made promises to resuscitate the sector, but all the promises to the near comatose sector, including a commitment to bail out the sector with N70 billion at that time, ended up as mere charade and political statements. Turnaround Phase However, since Olusegun Aganga took over as Minister of Industry, Trade and Investment, there has been a rebound in the sector. If a stakeholder is asked the question: “Has the sector arrived finally at the former position of pride and glory?” The answer will be an emphatic no. But it cannot be denied that a steady ascension has become noticeable in the sector. In 2009, the number of functional textile mills in the country had risen to 25. Although they were not producing at maximum capacity, their production lines were turning again and people were returning to work. Data from the Manufacturers’ Association (MAN) showed that capacity utilisation in the surviving mills stood at 29.14 per cent in 2010 and 49.70 per cent in 2011. The textile sector, which is a major contributor to the overall increase in industrial capacity utilisation, had its capacity utilisation rise to 52 per cent due largely to the Cotton and Textile loan, which was disbursed to more than 50 textile companies at six per cent interest rate. The recent initiative by the Trade and Investment Ministry to enhance the revival of the textile industry through reinvestment of a 20 per cent levy on imported textile is another major step taken to reposition the industry on the path of sustainable growth. Minister Aganga said the idea behind the levy is to promote the development of the textile sector, as boosting local production is the major objective of the ministry. “We must diversify our economy by industrialising our country, and one of the areas we are focusing on within the next four years is the development of the textile sector as part of our industrialisation plan,” he added. Checking a Decline The textile industry in Nigeria rose to become the largest in Africa after Egypt, with over 250 vibrant factories operating above 50 per cent capacity utilisation. Then, the local textile market had a share of about 20 per cent of Nigeria’s textile products, with the balance of 80 per cent being imported. Sadly, this sector, which generates about $2 billion annually for the country across the value chain, suffered the decline which government is now trying to deal with. The collapse of the industry was driven largely by smuggling at the borders, failed government policies, high costs of doing business arising from prohibitive raw materials, energy cost, and a plethora of challenges which plagues the investment climate in Nigeria. A report by the United Nations University (UNU) pointed out that in 1987, there were hundreds of textile firms in the country, operating 716,000 spindles and 17,541 looms. This was the golden period of Nigeria’s textile industry. Between 1985 and 1991, it recorded an annual growth of 67 per cent, and as at 1991, it employed about 25 per cent workers in the manufacturing sector. It is not often remembered that it is the problem of infrastructure and competition that led to the sordid state. The government made a fundamental mistake by pushing Nigeria into the World Trade Organisation (WTO) at a time when the country’s industrial base was still very weak. In 1995, WTO adopted Agreements on Textile and Clothing, which states that all quotas on textile and clothing will be removed among WTO member countries. The main beneficiary of the policy turned out to be China. The global textile market is worth more than $400 billion at present. But, according to China Customs, the export value of China’s textile and garment alone amounted to $206.5 billion in 2010. The Nigerian textile was one of those that suffered, especially because of the cheap exports from China. Nigeria used to be the major supplier of good quality wax-resist textile, popularly called Ankara in Nigeria. However, in the early 2000s, cheap imitations of these products were being produced and exported from China to West Africa. Some would even be slapped with Made-in-Nigeria or Made- as-Nigeria labels and then sold in Nigeria. Aganga noted that “it is the responsibility of government to create an enabling environment for industries to flourish and the textile industry is one key area we are working with stakeholders to develop. The textile sector generates employment for Nigerians as well as revenue for the government through taxes.” “The development of industries remains the major mandate of the ministry. We must diversify our economy by industrialising our country, and one of the areas we are focusing on within the next four years is the development of the textile sector as part of our industrialisation plan,” he added. The minister said his ministry was working with stakeholders in the textile industry to address the problems militating against increased productivity in the sector. He said, “We are working closely with stakeholders in the sector towards achieving increased productivity. We have held meetings across the value chain in the textile sector and identified all the problems in the sector. “Textile industries are one of the areas we want to focus on going forward. Apart from the fact that the sector is labour intensive, Nigerians are very fashionable people,” he added. Manufacturers’ Stance The Nigeria Textile Manufacturers Association (NTMA) said the intervention of the federal government through the Textile Intervention Fund had significantly assisted in reviving some of the dead textile companies. Auto Industry Resurgence The story of the Nigerian automotive industry at a point was a sordid one, similar to that of other segments of the economy such as textile sector and ago- business, where vibrant industrial production gradually gave way to shameful dependence on massive importation. The Nigerian automotive industry’s domestic production began in the late 1970s through partnerships between the Nigerian government and foreign companies. Six assembly plants – two for cars and four for trucks – were established between 1970 and 1980. These were: Peugeot Automobile Nigeria Limited (PAN) in Kaduna; Volkswagen of Nigeria Limited (VWON) in Lagos; Anambra Motor Manufacturing Limited (ANAMMCO) in Emene, Enugu; Steyr Nigeria Limited (Bauchi); National Truck Manufacturers (NTM) in Kano for Fiat trucks; and Leyland Nigeria Limited in Ibadan. Today, all these auto manufacturing plants are either completely moribund or on life support. The period during the establishment of the assembly plants coincided with a dynamic period in the global automobile sector. The sector, in Nigeria, was meant to be a vital component of the national economy, contributing to overall economic development through capacity building (made possible by transfer of technology) and job creation. Total production capacity was about 108,000 cars, 56,000 commercial vehicles and 10,000 tractors annually. The strategy was to encourage backward integration with the steel mills in tow. Unfortunately, the automotive industry went through a decline in the early 1980s and 1990s with the increasing acceptance of smaller and technologically advanced cars from all over the world. This was made worse by the influx of second hand cars, better known as Tokunbos, which rendered Nigeria’s assembly plants, which had been designed mostly to fit the production of lower technology vehicles, uncompetitive. Essentially, modern automobiles, which are characterised by standardisation, fuel injection engines, and the use of computer aided designs, quickly displaced the larger, less functional and less fanciful cars churned out of the Nigerian automobile plants, which had become antiques. Financial Derivatives Company (FDC), a Lagos-based economic and financial advisory firm, in a detailed analysis of the new automotive policy is of the view that to measure up to the new global standards of production in the 1980s, the Nigerian government and its foreign partners would have had to put up major capital investments to reconfigure their plants, a step which appeared so challenging for the owners of the plants to take at the time. The result was an embarrassing average quarterly importation bill of around N1.6 trillion and a negative quarterly balance of trade of over N2 trillion. Modern cars produced internationally became more popular with Nigerians than the “post- civil war” cars produced locally at the time and the industry’s problems were exacerbated by lack of economies of scale, the disappearance of the middle-class, as well as weak import policies and enforcement. The subsequent devaluation of the naira, rising inflation and lack of power, resulted in high production costs at Nigeria’s inefficient assembly plants. The result is the import dependent automotive industry which Nigerians are familiar with today: an industry with an annual installed capacity of about 100,000 cars, but with only 5 per cent of this capacity being utilised. To meet the demand gap, the average Nigerian is forced to be import-dependent, of which 80 per cent of the automotive imports are used cars (‘Tokunbo’). The Thai Model FDC, in its assessment of the automotive policy, drew attention to the Thai model. According to the firm, the Thailand government’s automotive industry experience in the 1960s, shows the possible outcomes of the initiative when it is effectively implemented. As part of their Industrial Investment Promotion Act of 1960, the Thai government attempted to spur activities in the automotive Industry. At that time, the country produced 525 vehicles, but it is now the ninth largest producer of vehicles globally with a production of 2.49 million in 2012. To achieve this growth, Thailand essentially underwent a three-phase approach: creating production capacity, rationalisation and localisation, full liberalisation and export promotion. New Policy to the Rescue This, according to analysts, underscores the timeliness of the National Automotive Policy introduced by the federal government in October and is expected to run as a 10-year plan, but will be reviewed every five years. An integral part of the policy, which aims to replace imported vehicle with locally produced ones, is the establishment of automotive clusters in three regions, which will enhance productivity and cost efficiency. According to the Minister of Industry, Trade and Investment, Olusegun Aganga, the policy is expected to engender technology transfer and create at least 700,000 jobs, with 210,000 indirect jobs in the SMEs that will supply the assembly plants. 490,00 other jobs would also be created in the raw materials supply industries. Currently, 2,584 persons are directly employed by the assembly plants. In addition, the policy would make brand new cars more affordable for Nigerians in the long run. Aganga noted that the new automotive policy is a deliberate government effort to release a strategic and critical economic sector from the strangulating grip of “dumping” to allow it to grow and flourish with all the attendant benefits, including massive employment. “With no intention to change the meaning of dumping, dumped products in this context, mean automotive vehicles and products import that have lost integrity and can no longer pass standard appraisal tests elsewhere – Tokunbo and new cars whose production cost has been aggressively subsidised by home governments to override Nigeria’s pretence at tariff protection (averaging 15 per cent). It means that deliberately or otherwise, Nigeria’s capacity and capability to meet a significant portion of its automotive needs has been undermined by massive wholesale seemingly juicy imports,” Aganga stated. Industry Incentivised Solid incentive agreements are essential both for the development of local capacity and for the protection of investors due to the large capital requirements involved. Similarly, creating capacity can be implemented through production incentive packages with a lower focus on protectionist policies. Incentives could include a 50 per cent reduction on import duty for Complete-Knock-Down units (CKDs) for five years; corporate income tax exemption for five years; and permission to remit foreign exchange out of the country, and permission to bring in foreign experts and technicians. Even though higher import duties might be needed for the Fully Built Units (FBUs), a net benefit is achievable and joint ventures between multinationals and local companies to operate CKD assembly plants will be spurred. The Executive Director of the Nigerian Automotive Manufacturers Association (NAMA), Mr. Arthur Olisa Madueke, told THISDAY that the new policy for the automotive industry was the only way forward for the nation’s auto sector and the economy in general. Stressing that the political will of the Goodluck Jonathan administration to initiate the policy should be commended, he said Nigeria could not continue in its current path in the auto industry, which sees the nation spending trillions of naira annually on importation of FBUs. “In one FBU, you have a minimum of 2,000 component parts and each component part is potentially an entire industry and it is not difficult to see that if this new policy is implemented not only will large corporations like Toyota, Nissan, Volkswagen and others set up assembly plants in the country, other smaller corporations which manufacture the component parts that are put together to make the FBU will also begin to make inroads into the country to invest and set up plants. All these will lead to unprecedented capacity building for Nigerians, massive technology transfer and job creation,” he said Madueke said if the new automotive policy was allowed to sail through, as is being recommended by the federal government, and if the major stakeholders in the automotive sector provide support, in about two years, the country would experience a total transformation of the sector. 7 hrs · Privacy: Public
Posted on: Sun, 11 Jan 2015 06:27:33 +0000
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