Policy somersault bane of Nigeria’s industrial development – The Guardian Nigeria

Policy somersault, involving periodic reversal of policies generally deemed to be in support of promoting the growth of local industries, has been identified as a major inhibition to industrial growth and economic development in the country. In this piece, ROSELINE OKERE analyses the pangs of this syndrome on the manufacturing sector and the economy in general.

THE importance of the industrial sector, particularly the manufacturing sector in the economic development process cannot be over-emphasised.

The experience of the East Asian newly industrialised countries with successful manufacturing attests to the fact that efficiency and productivity growth in the manufacturing sector is the key to promoting competitiveness and growth of the industrial sector and the economy as a whole.

Government policies have been identified as critical elements in determining the rate of economic growth, the levels of private investment and the magnitude of credit to the private sector.

Beside, Governments create the rules and frameworks in which businesses are able to compete against each other.

From time to time, the Federal Government has been changing these rules and frameworks, forcing businesses to change the way they operate, with unsavoury consequences.

For instance, World Bank Assessment Report titled: “Nigeria, An Assessment of the Investment Climate in 26 states,” stated that there were critical constraints in Nigeria that impede the development of the non-oil sector.

Some of the critical issues identified by the World Bank were inconsistency in government policies, electricity, which affects the productivity and competitiveness of enterprises.

The World Bank, therefore, called for urgent implementation of policies that would boost economic development in the country.

The Organised Private Sector recently expressed worries that the various policies and reforms being adopted by the government in the last few years had not impacted the real sector in terms of growth and development.

Stakeholders in the sector said that challenges facing the industrial sector have continued to nosedive, owing mainly to poor policy implementation arising from a lack of political will to make them work.

The Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN) complained about the inability of the Federal Government to implement the Federal Executive Council resolution of 2006 on patronage of local manufacturers, as well as, the government’s campaigns to “buy Nigerian made products”.

According to them, despite the policy on made-in-Nigeria products, the Federal Government’s was still in the process of importing anti-retroviral medicines worth over N1 billion into the country.

According to PMG-MAN, the Nigerian pharmaceutical sector has installed capacity to produce anti-retroviral medicine to meet local demand, if it gets the right encouragement from the Federal Government.

In a petitioned signed by the Chairman of PMG-MAN, Bunmi Olaopa and the Executive Secretary, Olakunle Okelola and made available to The Guardian recently in Lagos, the group insisted that the Nigerian pharmaceutical manufacturers have the capacity to produce ampicillin capsules/powder, amoxillin capsules/powder, clorpheniramine tablets/syrup, abscorbic acid/syrup, tetracyline capsules, ibuprofen tablet/syrup, dextrose of up to five per cent and 10 per cent and dextrose of up five per cent plus 0.9 per cent.

According to Olaopa, the sub-sector is currently grappling with declining patronage, which he said, would result to under-utilisation of capacity, rising stocks and other operational and economic challenges.

He said that local pharmaceutical manufacturers have installed capacity to meet over 70 per cent of Nigerian drug needs including anti-malarial and anti-retroviral medicines.

He noted that the on-going procurement process of the Federal Ministry of Health requires urgent intervention to protect the interest of the local manufacturers and avert the practice of preference for foreign companies who do not make any significant contribution to the growth of the Nigerian economy.”

Olaopa said that the association is committed to producing quality products of international standards.

“There is also need for the review of the ECOWAS Common External Tariff to retain the 20 per cent tariff for finished medicines and 35 per cent tariff ban for products that Nigeria has sufficient capacities to produce locally.

“We want the Federal Government to waive duty tariff on special equipment necessary for WHO pre-qualification such as air handling units designated as “other pats for industrial air conditioners.”

President of the National Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Herbert Ajayi stated, “we are concerned that the issue of low savings interest rate given by banks to their customers for money deposited is yet to be addressed as desired in the country”.

This has continued to discourage the savings habit by citizens, especially illiterates, most of whom prefer to patronise local money collectors  to save their excess funds or rather keep it in their bedroom at homes.  This practice definitely tends to reduce the quantum of funds available for on- lending by banks to investors/businesses, thereby, slowing productivity and growth process in the economy”.

To address this problem, Ajayi advise stressed the need for the Central Bank of Nigeria (CBN),  as a matter of urgency, through its Monetary Policy Committee narrow the present wide margin between the savings and the lending rates charged by banks in the country.

This, he said, has become necessary in order to restore confidence and stability in the country’s monetary system, which will invariably increase savings habits and deposits, increase available lonable funds for investment and improve the economy.

“The payment of a reasonable interest on savings vis-a vis lending rates by banks will also encourage Nigerians in Diaspora to consider it wise to repatriate their excess money back home for investment purposes that will lead to the growth and prosperity of our country rather than continue to keep it abroad. We, therefore, advice that government should put in place a deliberate policy that encourages remittances of money home back home by Nigerians in Diaspora,” he said.

He added that since the beginning of the new year the business community continues still to be confronted with assorted numerous taxes and levies being demanded by the three tiers of governments.

“This is in spite of the Federal Government’s promise to streamline the different Approved Taxes and Levies and other numerous “illegal” taxes and levies collectible in the economy.  Our repeated pleas notwithstanding, government is yet to address the issue of multiplicity of taxes and levies imposed on businesses following the landmark ruling of the Federal High Court judgment restraining the local government councils in the country from collecting and imposing taxes and levies outside what is constitutionally approved”.

The Lagos Chamber of Commerce and Industry (LCCI) said the chamber has continued to be inundated with complaints about the activities of regulatory agencies.

These complaints, he said, bother on frequent harassment, duplication of oversight functions, extortion, excessive documentation and unwarranted closure of factory premises with limited avenues to seek redress.

Health, Waste Water Management Agency etc.

“We call for coordinated action at the states and federal levels to streamline the activities of these regulatory agencies and minimize the burden they pose to manufacturers and give investors some breathing space. Investors in the pharmaceutical industry complain of inconsistencies in the classification of ethical and unethical drugs by NAFDAC. They complain as well about excessive documentation and extortion,” he stated.

Director-General of the Nigerian Textile Manufacturers Association (NTMA), Jaiyeola Olarewaju lamented the inconsistency in government policies, lack of protection of nascent home industry due to globalisation and liberalisation policies, high interest rate, smuggling and dumping of cheap Chinese wax and African prints, power failure and high cost of fuel, which had led to a sharp rise in cost of production.

He said that rising cost of Automotive Gas Oil (AGO) popularly called diesel has teamed up with failing infrastructure to put the final to make operation difficult for the surviving textile industries in Nigeria.

Olanrenwaju noted that unless the Federal Government took urgent action by giving a special relief to manufacturers, especially textile manufacturers in the country, to cushion the effect of the increase in the price of LPFO and AGO, the sector would soon become comatose, pointing out that with the problems facing the sector, the increase in the prices of diesel was capable of paralysing the sector.

“The current supply of electricity from the public source leaves manufacturer with no options than running a generating plant. Take, for instance, a textile company consuming 1,000,000 litres of diesel in a month and three million litres of LPFO a month, the increase in the prices of the product will definitely reflect on the price of their products.”