Manufacturing Woes Contributing To Foreign Exchange Shortage — NESG Report

Nigeria’s weak manufacturing sector is one of the key factors contributing to the shortage of foreign exchange in the country, according to a recent report by the Nigerian Economic Group (NESG).

The report, titled “Nigeria in 2023: Bridging the productivity gap and building economic resilience,” was authored by Dr Wilson Erumebor, the NESG Senior Economist, and published by Foresights Africa.

The report noted that the Nigerian economy has faced significant challenges in the past seven years, with two economic recessions and a shift of economic activity towards agriculture, and a slowdown of the manufacturing sector.

The manufacturing sector’s neglect has resulted in a shortage of foreign exchange, limited job opportunities, and an import bill that surpasses current export earnings.

Furthermore, the report highlighted that the unemployment and underemployment rates in Nigeria reached an all-time high of 56.1 percent in 2020, with 90 percent of workers employed in low-productivity sectors, such as agriculture and non-tradable services.

To address this, the incoming administration must work with stakeholders to develop an agenda for economic and social inclusion, which must include a practical strategy for structurally transforming the economy by moving labor and economic resources from low-productivity to high-productivity sectors.

Dr. Erumebor emphasised the importance of manufacturing, which sits at the middle of the productivity ladder. He suggested that the sector has a much higher productivity level than agriculture and can accommodate a large number of the labor force in the country. Additionally, Nigeria’s projected rising population, mineral resources, and adoption of a single market in Africa, such as the African Continental Free Trade Area (AfCFTA), present an opportunity for the manufacturing industry to thrive.

However, Dr. Erumebor pointed out that inadequate power supply and the burgeoning infrastructure deficit hinder the competitiveness of the manufacturing sector.

He called for the incoming government to address these issues and develop an industrial policy that supports the scale, efficiency, and competitiveness of local firms within the manufacturing sector. Such policies must be integrated with Nigeria’s AfCFTA strategy and support the transition of small-scale firms that are often the drivers of job creation in the country.