Recession exit: Manufacturers renew push for local products

Mostly driven by an improvement in oil prices and production volumes, the economy is out of recession and the manufacturing sector is also gathering momentum due to improved foreign exchange liquidity. But, to sustain the recovery tempo, manufacturers are seeking for increased patronage of locally-made products by the government. They argue that the government, being the single largest spender in the economy, holds the ace to boost the industrial sector by increasing its patronage of made-in-Nigeria goods. The Nation’s Assistant Editor CHIKODI OKEREOCHA reports that the government’s patronage of local products will increase revenue through taxes and job creation, among other positive spin-offs.

Manufacturers are unrelenting in their push for patronage of locally-made products. Even before the exit from recession, their heart cry was the promotion of goods and services produced locally. Their argument: it is the fastest way of pulling the country out of recession. According to them, cutting down on the insatiable appetite for imported material to the detriment of locally-produced ones will reduce the pressure on Foreign Exchange (forex) triggered by the nation’s huge import bills and low receipts from exports.

They further argue that curtailing the growing demand for forex for consumption, rather than capital products and equipment; will strengthen the local currency (the Naira).

Besides, the patronage of locally-produced goods will stimulate economic growth by revitalising the manufacturing sector and boosting its competitiveness thereby creating jobs.

Bouyed by the benefits, local manufacturers have again renewed their clamour for increased patronage of their products, following the country’s exit from recession, stating that doing so will sustain the recovery of the economy.

The National Bureau of Statistics (NBS) has confirmed in one its reports gave the economy, which slipped into recession for the first time in more than two decades in August last year, a clean bill of health. According to the NBS report, in the second quarter of 2017, the nation’s Gross Domestic Product (GDP) grew by 0.55 per cent (year-on-year) in real terms.

The Bureau described as an indication that the economy has exited recession after five consecutive quarters of contraction since the first quarter of last year. It attributed the recovery to improved performance of oil, agriculture, manufacturing and trade sectors of the economy.

Experts at multinational consulting firm PricewaterhouseCoopers (PwC) Nigeria also confirmed the out-of-recession claim. The PwC attributed the recovery partly to a sharp recovery in the oil sector, driven by an improvement in global prices and production volumes.

The experts said that in addition, the non-oil sector recorded a positive growth for the second consecutive quarter, boosted by a strengthening of the broader manufacturing sector, reflecting impact of improved foreign exchange liquidity.

In a report made available to The Nation, PwC experts led by Partner & Chief Economist, Dr. Andrew S Nevin, said that besides the improvement in real GDP, the performance in other macro-indicators suggest that the economy is on track for a broad-based recovery.

The report entitled: “Nigeria’s Q2’17 GDP: From Recession to Recovery” was a projection that Nigeria’s real GDP will attain full recovery by 2019, with growth moving closer to its long-term trend of 6.7 per cent.

Latching on to the recovery trend, particularly in the manufacturing sector, manufacturers are renewing their clamour for increased patronage as a viable, credible and win-win strategy to sustain and strengthen the sector’s recovery process.

At the forefront of the push is the President, Manufacturers Association of Nigeria (MAN), Dr. Frank Udemba Jacobs, who has identified the government as the largest single spender and could drive industrial development and economic growth by increasing its patronage of locally-made products.

Jacobs, who spoke in Lagos at the 50th Annual General Meeting (AGM) of Ikeja Branch of MAN, appealed to the government to increase its patronage of made-in-Nigeria products, noting that this will boost the manufacturing sector, resulting to increased revenue to government through taxes and employment creation, among others.

The AGM had as its theme: “Building a Competitive Manufacturing Sector: Road Map to Nigeria’s Economic Recovery”, with special emphasis on “Monetary and Fiscal Policy Measurers: Catalysts to Restoring the Growth of the Real Sector”.

It offered a platform to review the activities of the branch, the performance of the manufacturing sector as well as the economy in the past year.

Udemba, in his address at the AGM, noted the Federal Government’s efforts at reviewing the current Public Procurement Act (PPA) at the federal level and the introduction of the Executive Order on improved patronage of made-in-Nigeria products as well as the current build up against smuggling and counterfeiting activities in the country.

The MAN president, who was represented by the Vice President of MAN, Lagos Zone, Rev. Isaac Ade Agoye, however, said it was pertinent to note that public procurement is not just mere purchases, but a strategic fiscal tool that has been used by other countries, including advanced nations, to develop their manufacturing sector.

The Federal Government, through the Minister of Industry, Trade & Investment, Dr. Okechukwu Enelamah, announced that at least 40 per cent of government procurement spending will be on made-in-Nigeria goods and services.

The minister also said the government was working at moving up 20 places up the ranking on the Ease of Doing Business index this year and it has to start from growing made in Nigeria.

The development was sequel to the signing of three strategic Executive Orders by Vice President Yemi Osinbajo, when he held the forte for President Muhammadu Buhari, to promote patronage of made in Nigeria products, transparency and ease of doing business in Nigeria.

Going forward, Enelamah said that any document issued by any Ministry, Department and Agency (MDA) for the solicitation of offers, bids, proposals or quotations for the supply or provision of goods and services shall expressly indicate preference to be granted to domestic manufacturers, contractors and service providers and the information required to establish the eligibility of a bid for such preference.

All documents of solicitation shall require bidders or potential manufacturers, suppliers, contractors and consultants to provide a verifiable statement on the local content of the goods and services to be provided.

Defining ‘local content’ as the amount of Nigerian or locally-produced human material resources utilised in the manufacture of goods and services, Enelamah said that made-in-Nigeria products shall be given overwhelming preference, or at least 40 per cent, of the procurement spent on locally manufactured goods and service providers.

He listed some of the priority items to include: uniforms and footwear; food and beverages; motor vehicles; pharmaceuticals; construction materials; information and communication technology, furniture & fittings and stationery.

The Nation, however, learnt that government agencies have not lived to the manufacturers’ expectations in their compliance with the Executive Oder on patronage of local goods and services.

The MADs’ attitude has prompted the manufacturers and other private sector operators’ renewal of advocacy with the hope of getting more government patronage.

Justifying the MAN’s position at the AGM, Jacobs said: “It is an established fact that when we buy foreign goods, we pay the returns to factors used in producing them in the originating countries; that is to say that we pay wages, rent, interest and profit to foreign countries with our local resources.”

He said greater patronage of made-in-Nigeria products, on the other hand, will enhance the manufacturing sector and in turn, result to increased revenue to government through taxes. It will also reduce social vices as well as guarantee peace.

The MAN chief specifically called on the Lagos State government to set a minimum percentage threshold for its purchases of made-in-Nigeria products.

He said: “At the federal level, a 40 per cent minimum threshold of purchase has been fixed for Small and Medium Enterprises (SMEs) through the Executive Order One.

“Also, we want you (Lagos State government) to give an acceptable Margin of Preference (MoP) of about 35 per cent in terms of price consideration for those products as against foreign ones.

“This will mean that even if local products cost a little more than foreign ones, the local ones should be patronised within the set margin of preference,” Udemba said.

According to him, this is in consideration of the prevailing high cost of the operating environment in and the need to keep local manufacturing companies in production. Besides, he said there is the need to retain jobs and create new ones.

Udemba pleaded with Governor Akinwunmi Ambode and his colleagues in other states to ensure patronage of made-in-Nigeria products in their states’ procurement policies and processes.

The thinking is that the made-in Nigeria campaign must be driven by all the states if the targeted objectives must be met.

Not a few operators and stakeholders in the various sectors believe that if the made-in-Nigeria campaign must succeed, it should not be the challenge of the Federal Government alone; the 36 states must have a role to play.

A voice for robust monetary, fiscal and exchange rate policies

Prof. Ademola Oyejide of the Faculty of Social Science, University of Ibadan, who was guest lecturer at the AGM, noted that countries that have developed did so on the back of the productivity of the manufacturing sector.

In his presentation entitled: “Monetary, Fiscal and Exchange Rate Policy Measures for Restoring Nigeria’s Real Sector Growth,” Oyejide said the manufacturing sector can only be productive and competitive with the appropriate mix of macroeconomic policies.

According to him, having more than one exchange rate distorts the market and hurts the manufacturing sector.

Dr. Okechukwu Kelikume of the Department of Economics, Lagos Business School (LBS), noted that indeed, Nigeria exited recession, starting from the second quarter of 2016, precisely February 2016, when oil price started moving up gradually.

He, however, said that if the recovery momentum must be sustained and strengthened by riding on the back of the renewed campaign for patronage of local goods, it was important to ensure that “if we make policies, we must also stop distortions.”

Citing the government’s policy to encourage local production of rice, the expert said it was critical to halt the distortion in the policy by way of halting the smuggling of the product.

For instance, he said that at a time a bag of foreign rice cost about N13, 500, the price of a bag of local rice cost N17, 500. He said even though the policy to encourage local production of the product was in place, it made more economic sense for consumers to buy foreign rice because it was cheaper.

Kelikume, who blamed it all on smuggling and high of doing business in the country, traced manufacturing contribution of a meagre 0.6 per cent to the GDP to the inability of the government to curb smuggling.

Govt re-assures real sector operators

In his remarks through the Commissioner for Commerce, Industry & Cooperatives, Prince Rotimi Ogunleye, who represented him at the AGM, Ambode said that his administration has intensified efforts at making the environment conducive for manufacturers and other private sector operators to thrive.

He listed some of the efforts to include the state’s contribution to improving Nigeria’s rating on the World Bank’s Ease of Doing Business Index; automation of Lands Bureau to facilitate unhindered and smooth access to members of the public and other stakeholders who transact business with the institution; aggressive infrastructure development across the metropolis.

Prof. Osinbajo had also assured that the Federal Government will not rest on its oars on improving the economy. He said the latest impressive ranking in the World Bank’s latest ‘Doing Business’ report, was an indication that the President Buhari-led administration’s reforms were producing results.In the World Bank report, Nigeria achieved the unprecedented step of climbing 24 places in the rankings, and earning a place on the list of 10 most improved economies in the world.Many stakeholders have described news as cheery for real sector operators, even as some of them argue that if government could complement this by increasing its patronage of locally made products, the current economic recovery momentum will be sustained and strengthened.Some operators who spoke with The Nation have advocated the urgency to address the lack of supportive infrastructure and challenging monetary and fiscal policy environment that weaken the manufacturing sector’s capacity to produce goods and services for local consumption.

Source:-The Nation

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