According to the National Bureau of Statistics (NBS), the Nigerian manufacturing sector is dominated by the production of food, beverages and tobacco, with sugar and bread products generating the greatest value of output. To encourage more output in these and other sectors, the government has been making it cheaper for consumers to purchase locally manufactured goods by making the smuggled foreign alternatives prohibitively expensive or totally unavailable through prohibitions. Most recently, the Central Bank of Nigeria (CBN) announced plans to facilitate the issuance of single-digit interest rate loans to firms operating in the agriculture and manufacturing sectors. Port reforms and other ease of doing business initiatives by the government are also helping to make the manufacture of goods easier in the country; relatively, at least. Owing to reforms, Nigeria’s ease of doing business ranking moved to 145th place in 2017 from 169th in 2016, for instance.
The Nigerian manufacturing sector has been performing well in recent years. While year-on-year growth for each of the quarters in 2015-16 was negative, there was only one such instance in 2017; in the third quarter. Incentives by the government are also beginning to encourage greater interest. According to official data, at 9.3% of GDP, the Nigerian manufacturing sector grew by 3.4% year-on-year in the first quarter of 2018, an improvement from 0.1% y/y in Q4 2017 and -2.9% y/y in Q3 2017. The last time there was something close to such growth in the period since Q1 2016 was in Q1 2017, when the sector grew by 1.4% y/y. For the whole of 2016 till then, the sector recorded negative growth.
The government’s industrialization focus is on small and medium scale enterprises and is one of the five key execution priorities of its 4-year Economic Recovery and Growth Plan (ERGP). Other stated priorities are the stabilization of the macroeconomic environment, energy sufficiency, improvement of transportation infrastructure, and the achievement of food security. To ensure optimal execution of the ERGP, the Nigerian government resolved in August 2017 to conduct sector or focus labs “designed to tackle complex challenges by bringing together all stakeholders to identify the root causes of the challenges [within a sector] and [generate] ideas and resources to solve them.”
For manufacturing and processing, phase 1 of the ERGP focus labs sought to unlock investment commitments in the food manufacturing, textile, garments and leather industry, mining & downstream activities, petrochemical industry, general manufacturing, and industrial parks. These should also be the focus of potential investors interested in the Nigerian industrial sectors. A participation in future phases of the focus labs is also recommended.
In phase 1, for instance, the focus labs “expedited the access of a mining company to the Solid Minerals Development Fund (SMDF)”, and brought to the attention of the mining minister the troubles of a bitumen mining company seeking to renew its exploration licenses. Additionally, the focus lab aided a metal manufacturing and aluminium company, which “required additional funding” and had held several funding syndications with multilaterals and commercial banks, in getting an agency of the World Bank to conduct a review of their projects within the lab. Consequently, the2 companies have been long-listed for screening. In other words, the focus lab facilitated access to funding for the firms.
Other opportunities emanate from the imported manufactures currently prohibited by the Nigeria Customs Service. Foreign investors would easily get a listening ear from the government if they choose to invest in manufacturing them domestically; a well-tested approach.
- The author, Dr Rafiq Raji, is a consultant at the NTU-SBF Centre for African Studies, a trilateral platform for government, business and academia to promote knowledge and expertise on Africa, established by Nanyang Technological University and the Singapore Business Federation. This article was specifically written for the NTU-SBF Centre for African Studies. This article was published on How We Made It In Africa on 27 September 2018.
Tags: Nigerian manufacturing sector