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EDITORIAL

Re-positioning The Real Sector For Increased GDP

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The manufacturing, or what is known as the real sector, plays a key role in the economy of any nation to the point that it is accepted that for the country to achieve a sustained economic development, that sector must be placed on a sound footing.

The real sector plays a multi-faceted role both in the economy and the lives of the population, ranging from job creation, revenue generation through taxes and the expansion of the industrial base. At least, that is the understanding in most developed economies of the world.

Until recently, Nigeria’s real sector was very active. Sadly, a combination of factors, policy inconsistency, poor infrastructure and globalisation that opened the country’s door to cheaper brands from, especially Asia, slowed down the process of industrial activities, leading to either under performance with the attendant operating below installed capacity, outright shutdown or relocation to other countries believed to have more favourable investment climate. This situation was not helped by the over-reliance on oil.  This reduced the contribution of the sector to the nation’s Gross Domestic Product (GDP).

The United Nations Conference on Trade and Development (UNCTAD) expanded the scope of its assessment beyond Nigeria and suggested, in its report, that the contribution of Africa’s manufacturing- to- GDP ratio grew from 6.3 percent in 1970 to peak at 15.3 percent in 1990. Thereafter, Africa’s manufacturing-to-GDP ratio has been on a decline. Notwithstanding the advancement in manufacturing in some African countries, including Nigeria, it said that the contribution of manufacturing to total domestic production on the average has yet to match the pre-1990 peak.

The reason for this, in our opinion, is not far to seek. While Africa’s manufacturing sector is on the decline, industrial production in China and other emerging Asian economies is accelerating. Asia’s export-led industrialisation model has subdued Africa’s domestic manufacturing, as cheaper imports from that continent flood the local markets and replace locally manufactured products. For instance, Nigeria experienced its worst situation in manufacturing when over 820 companies either shut down or suspended production. Worst hit was the textile and garment sub-sector that at a point employed well over 700,000 people, with a turnover of $8.95 billion, but witnessed a calamitous collapse from 175 firms in the mid-1980s to 10 factories in stable condition in 2004, with employment  plunging from 350,000 to 40,000. The Nigerian textile industry virtually disappeared for this reason.

The Manufacturers Association of Nigeria (MAN) is of the view that infrastructure deficiency, general insecurity, smuggling and unbridled importation, multiple taxation and weak demand due to low purchasing power of consumers have not helped the situation in any significant way. However, we are not unmindful of efforts by government to improve the business climate in the country. We argue that more need to be done to get the country where it ought to be, industrially. It is against this backdrop that we hail the idea of waivers, exemptions and other government incentives aimed at boosting the economy, as well as encouraging new investment and creating new jobs.

Also, the special intervention funds of the Central Bank of Nigeria (CBN), disbursed through the Bank of Industry (BOI), have also helped to revive a good number of the ailing industries and Small and Medium Enterprises (SMEs). Those interventions have also helped to boost trade and investments in the non-oil sector. A joint survey conducted by the National Bureau of Statistics (NBS), in collaboration with the World Bank, affirmed a 7.7 percent growth in the nation’s manufacturing sector in 2013, up from 6.5percent in the 2011/2012  survey. We, therefore, urge the government to, as a matter of urgency, revisit the Manufacturers Association of Nigeria’s roadmap released to President Muhammadu Buhari  at the inception of this administration on how to unlock Nigeria’s huge potential, to enable it become one of the 10 great nations in the global market place. With the right political will, coupled with a policy that will create a solid industrial base and a national engineering culture, the country may yet put itself back on the path of industrialisation and advancement.

Above all, no meaningful progress can be made in an atmosphere of fear, insecurity and relegation of the rule of law. So, there is the urgent need for stability in the polity in order to make Nigeria a destination for foreign investment. The ability to attract investors will depend on their perception of the level of political stability and internal security. These are required conditions for engendering investment and accelerating the development of the economy in general and the manufacturing sector in particular. And with an estimated population of more than 180 million, there is a good basis for investment in the manufacturing sector in Nigeria and its expected positive impact on the GDP.



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