Policy somersault involving periodic reversal of policies generally deemed to be in support of promoting the growth of local industries is also identified as a major inhibition to industrial growth and economic development in the country. Policy inconsistency in respect of unregulated importation of goods that are being produced locally has affected the local industries negatively.
A recent example is the cement companies who are currently experiencing low capacity utilisation occasioned by weak demand. This is not unconnected with continuous influx of cheaper and sub-standard cement products into the economy.
Another example is the Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN) which claimed to have installed capacity to produce anti-retroviral medicine to meet local demand if it gets the right encouragement from the Federal Government. Sadly, government is reported to be importing anti-retroviral medicines worth over N1 billion into the country annually.
Another challenging obstacle facing the industrial sector, especially manufacturing, is the lack of skilled manpower. The problem is that Nigeria’s educational institutions are not designed for the modern economy. They lack the tools to produce good quality graduates to manage the affairs of the nation. Majority of them (the graduates/workers) lack the skills that drive human productivity. Increase in productivity would enlarge the nation’s economic activities and thereby create employment opportunities, reduce poverty and crime.
No nation would make any meaningful socio-economic and political stride without viable educational institutions. The curriculum of some schools is as old as the institutions. They are rarely updated to accommodate the requirements of modern economy. Invariably, the institutions produce half-baked graduates who are misfits into the new industrial environment. That is why we have a dearth of skilled workforce which hinders productivity and creates a disadvantage against off-shore competitors.
Building a vibrant economy or restoring growth to a sluggish economy requires solid legal and institutional framework. To ensure long-term growth and prosperity, Nigeria must use its resources wisely, invest in advanced technology and rebuild the legal systems and institutions without which the economy will not gain from the ‘power of productivity’. Investors would definitely be wary of bringing funds into an economy with weak legal and institutional framework for enforcing contractual obligations and resolving conflicts as evidenced by the unceremonious exit of governments from PPP arrangements entered into with some institutional investors.
Doing Business in Nigeria for 2013 confirms that globally, Nigeria stands at 155 out of 185 economies on the administrative burden of complying with multiple taxation for businesses. On the average, the report further states, firms pay total taxes amounting to 33.8 percent of profit. MAN has always lamented the negative effects of multiple taxation on sustainable industrial growth. According to the association, “The incidence of multiple taxation is reported to be on the increase year to year. The exact number of taxes and levies collected from entrepreneurs in Nigeria is not clearly defined as a result of the non-specificity of the number of taxes chargeable and the continuous introduction of new ones.”
Multiple taxation makes Nigeria’s business environment unfriendly and a disincentive to industrial growth as it makes firms in the country uncompetitive through abysmally high cost of doing business. Despite FG’s promise to streamline the different approved taxes and levies and other numerous “illegal” ones collectible in the economy, the government is yet to address this issue significantly.
Easy access to credit is also a major problem for industrial growth. While the cost of fund in the economy is significantly high compared to other vibrant economies in the world, access to credit is even a more serious problem, in view of the tight monetary policy stance of the CBN, which affects the credit conditions. For instance, the collateral cover requirement by banks to access credit is beyond many SME investors, which impedes access to credit, slows down the tempo of economic activities and undermines intermediation role of banks in the financial system.
High level of insecurity is also an impediment to industrial growth. Major challenges faced by the industrial cum manufacturing sector include insecurity in most parts of the North and few spots in the South, which impedes sales and distribution of goods and services. It was reported last year that telecommunication companies lost an estimated sum of N1.0 billion as result of the destruction of masts by Boko Haram insurgents in parts of Northern Nigeria.
As at 2011, the size of global economy was about $70 trillion, according to World Bank statistics. The US contributed about 22 percent of this. China overtook Japan in 2010 as the second largest world economy, with 10 percent contribution to the global economy due to significant industrial growth of 46.6 percent compared to Japan’s growth of 27.3 percent in the same sector. In the same year, Nigeria contributed about 0.35 percent to the size of the world economy, and there is no African country amongst the top 25 economies in the world. The statistics notwithstanding, Nigeria has the potential to join the league of emerging economies if we pay special attention to industrial growth and development, but it cannot be business as usual.
Apart from the need to overhaul our infrastructure through direct investment by the government and PPP arrangements, we should have a renewed focus on the following:
(1) It is imperative that government should encourage research and the dissemination of research findings to the industrial sector through adequate funding and appropriate technology. All major research institutions should be exposed to modern methods of data gathering, analysis and dissemination. Research findings should assist industrialists to determine areas where there are comparative advantages for efficient allocation of resources.
(2) Government should adhere strictly to the policies that have been formulated to check importation. Government should also check the influx of substandard goods into the Nigerian market as well as swiftly and permanently fix the security problem in the country.
(3) Government should look into ways of combating the problem of multiple taxation through comprehensive review and harmonisation of various tax laws at all levels of government. With this, taxes to be paid and beneficiaries should be explicitly defined and penalties for violating the law by any tier of government should be well stipulated and enforced
(4) To avert the challenge of skilled manpower in the manufacturing sector, industrialists are already calling on the government to reform the curriculum of tertiary institutions in the country to bridge the wide gap between industrial skill requirement and the output from Nigerian institutions. Specifically, there should be a holistic overhaul of our educational curriculum to meet the requirements of globalisation, best practices and modern technology. Students should be sent on relevant trainings and exchange programmes to keep abreast of global trends and new technologies.
(5) Government should ensure that SMEs and all agro-processing value chain activities get loan at a single digit and banks should devise means of eliminating delays associated with loan processing. This will significantly lower the cost of doing business and make our local firms more competitive.
(6) Government needs to get the business climate and the cost of doing business right. The success story of the emerging economies of South East Asia, India, China and Brazil, which is evident in their upscale of global economic ranking, was essentially driven by the low cost of doing business.
In conclusion, research findings clearly suggest that structural transition from low to high productivity is a necessary pre-requisite for economic development and that industrial sector remains a key engine of growth in the development process. In other words, economic transformation and prosperity will remain a mirage in Nigeria unless we keep our attention focused on creating an enabling environment for sustainable industrial growth.