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Real sector growth takes the heat


Mixed reactions trailed the country’s real sector performance in the half-year (H1) of 2021 as issues of non-implementation of AfCFTA, COVID-19 impacts production, foreign firms abandoning Nigeria for Ghana, infrastructure deficits, overregulation from MDAs, insecurity, rising production costs and others played out ostensibly. TAIWO HASSAN reports

Indeed, the National Bureau of Statistics (NBS) report on Nigeria’s gross domestic product (GDP) for Q1’21 showing 0.51 per cent increase revealed the poor performance of key sub-sectors that made up the composition of country’s GDP. This means that all is still not well with the dire economy. The reason is not far-fetched as the profound straits presented by COVID-19 plunged many sub-sectors into perpetual recession with the main national GDP just proportionally out of recession marginally by the 0.51 per cent recorded. However, the 0.51 GDP growth rate in Q1’21 was a clear indication that it was low, and also showing that the economy is picking up gradually in the country aftermath of the profound challenges.

MAN on Nigeria’s GDP


While reacting to the NBS’ 0.51 per cent GDP recorded in the Q1’21, the Director General of Manufacturers Association of Nigeria (MAN), Segun Ajayi- Kadir, explained that the reported GDP result outcome may possibly mark the beginning of a tortuous journey back to the path of recovery and meaningful growth in Nigerian economy. Ajayi-Kadir emphasised that the onus was on the Federal Government to urgently change the tides following the prevailing economic circumstances and the struggling state of the manufacturing currently. According to him, government should intensify its intervention initiatives and follow through on the cost reduction aspect of ease of doing business in the country. He also added that ther e was anurgent need to create a more friendly operating environment and deliberately support the productive sector in a strategic manner, settinprioritiseies along the line of improved infrastructure, competitiveness and stronger industrial linkages in order to re-jig the fragile economy.

Multiple tax/over regulation

Another challenge that was witnessed in the country’s H1’21 was the alarm raised by manufacturers that they were still facing over regulation from government agencies, which is currently depressing productivity in the country’s manufacturing sector. Particularly, it is worrisome that despite the worsening economy hitting many key sectors, government’s MDAs are not allowing firms operate freely as the come up with multiple taxes and others. These inappropriate charges in one way or the other hindered growth and development in the country’s manufacturing sector. MAN President, Mansur Ahmed, disclosed that despite government’s commitment to the revival of the country’s industrial sector to attain optimum growth in value chain, it is shocking that agencies of government were frustrating local manufacturers from making headway and achieving sustainable productivity. The MAN president explained that often times agencies of the federal, state and local authorities regulate the same manufacturing process resulting in man-hour losses, supervisory duplication using similar checklist and multiple regulatory charges, which often culminates in increased overheads for manufacturers.


AfCFTA

However, one of the most topical issues in the manufacturing sector discussed in the just concluded H1 of 2021 is the full mplementation of AfCFTA by African Union (AU) not being in place. In fact, the six months after trading began under the AfCFTA saw Nigeria yet to join the list of countries that are either trading or about to trade, thus costing the country’s economy about $590 million (N283.2 billion). With six months expiring and trading yet to commerce in the country, local manufacturers under the umbrella of Manufacturers Association of Nigeria raised the alarm that the delay in AfCFTA was making them to incur losses running into billions of naira, as they have waited eagerly to officially join in trading like Ghana, Egypt, South Africa. New Telegraph learnt from MAN head office that many firms were worried and also being apprehensive about their investments over AfCFTA delays amid the implementation of tariffs, HS codes and others that would enable them import raw materials at zero rates for production within the continent. Already, the Federal Government had said that it would take some time for Nigeria to be fully ready for AfCFTA as the country was not yet ready to replace 85 per cent of Nigeria’s export revenue. MAN said that government’s stance on AfCFTA would lead to massive disruptions and in manufacturing sector because many firms have boosted their installed capacity utilisation by importing sophisticated machinery for increased production.

COVID-19 impact on raw materials

In the H1, a logistics expert and also the Director-General of the African Centre for Supply Chain (ACSC), Dr. Obiora Madu, raised the alarm that 80 per cent of Nigeria’s manufacturing ecosystem that experienced instant operational paralysis during COVID-19 lockdown were still struggling to get raw materials from abroad amid continued global lockdown restrictions in key importing countries. In particular, Madu, who is a former Chairman, Export Group of the Lagos Chamber of Commerce and Industry (LCCI), said that lockdown of Wuhan and other Hubei provinces of China, Europe and the Middle East was hindering movement. He hinted that, currently, 80 per cent of Nigerian manufacturing firms needed life support (raw materials) to survive production challenges at this period worsened by the COVID-19 restrictions and foreign exchange (FX) scarcity. Indeed, he alluded to the fact that for several decades, China remained the raw material hub of most Nigerian manufacturing organisations. He, however, noted that operational shutdown in China and the enforcement of lockdown in Nigeria during COVID-19 naturally resulted in the transportation business’s shutdown and manufacturing business in the country.

FG’s Twitter ban

In the H1’21, the world and Nigerians were shocked when President Muhammadu Buhari’s administration announced Twitter ban in Nigeria. Indeed, the announcement generated lots of negative reactions with members of the organised private sector not left out. Particularly, the private sector group warned government that Nigeria could not afford to be an isolated economy. Similarly, the private sector group also raised the alarm that this could further lead to more foreign firms shunning Nigeria over infringement on ease of doing business. In addition, the Twitter ban was expected to take a decisive toll on the country’s foreign direct investment inflow with the economy forecast to suffer massive decline. The private sector lambasted the Federal Government for the harsh move to suspend Twitter usage in the country, saying it was a serious infringement on ease of doing business in the country, which will have multiple economic effects on the country’s GDP in thenlong terms. Indeed, the OPS opined that the ban would see more foreign firms leave the shores of Nigeria for neigbouring countries, including halting inflow in foreign businesses into the country.

Sugar war over BIP

In the H1, government suspended BUA Sugar Refinery Free Trade Zone (FTZ), a key investor in Nigeria’s sugar industry following mounting pressure from other investors. In fact, the suspension of the company showed that all was not well with the country’s quest to attain its Backward Integration Plan (BIP) in the sugar sector. The Federal Government, through the National Sugar Development Council, handed over suspension letter to BUA Sugar Refinery Free Trade Zone from enjoying immunity from refined sugar importation into the country as concession under the BIP following the outcome of a joint petition by competitors.

Worsening insecurity

Also in the H1’21, the Lagos Chamber of Commerce & Industry (LCCI) raised the alarm that the ongoing insecurity in the country on the economy remained profound and multidimensional at the moment. In particular, the chamber noted that the crisis had crippled many private and public investments across the nation. Several businesses and investors in affected areas are currently counting their losses. President of the LCCI, Mrs. Toki Mabogunje, made this known in Lagos while commenting on the chamber’s position on the country’s state of insecurity. She said: “The Lagos Chamber of Commerce & Industry notes with serious concerns the worsening security situation in the country. It is a sad commentary that kidnapping, herders-farmers conflict, ethno-religious violence, vandalism, armed robbery, banditry, arson, and insurgency have become routine occurrences in Nigeria. “The impact of this security crisis on the Nigerian economy remains profound and multi-dimensional. The crisis has crippled many private and public investments across the nation. Several businesses and investors in affected areas are currently counting their losses. “Many households have lost their means of livelihoods, while some have been displaced.”

Last line

However, with the profound challenges heralding the country’s industrial sector in the H1 of 2021, it’s regrettable that many firms are closing down their factories as they cannot compete favorably under the harsh operating environment.

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