By Nnamdi Odumody

The manufacturing sector in Nigeria is faced with a whole lot of challenges which has affected its productivity and prevented it from being globally competitive. According to data  on Global Competitiveness of Emerging Economies from the World Economic Forum 2018 and Business Day Nigeria, Nigeria was ranked 10^th at 47.5 percent with India first at 62 percent, followed by South Africa 60.8 percent, Brazil 59.5 percent, Algeria 53.8 percent, Kenya 53.7 percent, Egypt 53.6 percent, Ghana 51.3 percent and Rwanda 50.9 percent.

The Manufacturers CEO’s Confidence Index survey conducted by the Manufacturers Association of Nigeria in the first quarter of 2019 showed that CEO’s confidence in the economy was 51.3 points as the lending rate, foreign exchange rate, government capital implementation, multiple taxation, over regulation and difficulties in accessing raw materials, poor infrastructure and port congestion have prevented Nigerian industrialists to compete with their peers globally.

The recent refusal of President Buhari to sign the African Continental Free Trade Agreement (ACFTA), expected to create a single and the largest market in Africa, worth about $2 trillion, is to prevent Nigerian manufacturers from being at a disadvantage. The broad fear is that the country could become a dumping ground due to its large economic size, necessitating demand for products from other African countries which will be cheaper than those produced in Nigeria, even when it lacks competitiveness.

According to the National Bureau of Statistics, the manufacturing industry sectoral contribution to national GDP was 8.86 percent, unmoved since 2017. While Nigeria’s total non-oil export revenue in 2018 was $3.3 billion, Bangladesh earned $33 billion same period from its readymade garment industry.

The Following Solutions will make Nigerian Manufacturers Globally Competitive

Provision of a Single Digit Lending Rate and Easy Access to Funding: According to MAN data, lending rate to the manufacturing sector averaged 22.21 percent in 2018 and 22.84 percent in 2017. Compared to South Africa where the lending rate to customers is 10 percent, Kenya 9 percent, Zambia’s benchmark lending rate 9.75 percent and Ethiopia 7 percent, the Central Bank of Nigeria monetary policy rate is 13.5 percent while Nigerian banks lend between 20 to 30 percent. Clearly, it is obvious Nigerian manufacturers can’t compete with their African, and global peers, if a single-digit rate is not fixed for lending. The Development Bank of Nigeria and Bank of Industry should be recapitalized to enable them offer long term funding to manufacturers.

Tax Harmonization and Incentives: Multiple taxes affect the cost of production by Nigerian manufacturers today. The Federal Government and States Inland Revenue Services should harmonize all taxes and digitize tax collection to eliminate touts and offer industrialists tax waivers to encourage them to invest more in the real sector and grow the economy with job creation.

Curtailing Smuggling with Smart Technology: The Nigerian Customs and Immigration Services should invest in cutting edge technology like Artificial Intelligence, Blockchain, Cloud and Internet of Things and train its officers deployed at the nation’s borders to utilize them in preventing smugglers from Benin Republic, Togo, Niger, etc who smuggle products worth billions of naira, hurting the competitiveness of domestic products by local manufacturers.

Apapa Ports De-congestion and Ports Automation: The Nigerian Port Authority should decongest the Apapa and Tin Can Ports which contribute about 20 billion naira to the nation’s GDP daily as the gridlock has raised cost of production as a result of demurrages because of the delays in moving containers in and out of Apapa. A lot of manufacturers like NASCON, the salt manufacturing subsidiary of Dangote Group, are moving their operations out of Apapa due to the gridlock. Other ports in Warri, Calabar, and Port Harcourt should be dredged for manufacturers in the Eastern Region to utilize in importing raw materials and exporting their finished products. Also the Nigerian Customs Service should learn from Togo who just developed an ultramodern port and are deploying automation to make its operations efficient.

Provision of Stable Power Supply to Manufacturers: According to MAN, manufacturers in Nigeria spent N93.1 billion on alternative power sources in 2018. MAN should set up distributed decentralized renewable energy solutions to help manufacturers cut down costs on gas, diesel and other fossil fuels or power.

Embrace Design Thinking For Product Innovation: Nigerian manufacturers need to embrace design thinking to design the process which will lead to them developing world-class products that will meet and exceed the expectation of their customers, as this is the key to competing with global products in the world today.

Local Patronage of Indigenous Products: The recently issued executive orders to boost local manufacturing capacity and competitiveness will not come to fruition if the Federal Government doesn’t take the lead in promoting MADE In Nigeria products.

Adoption of Technology For Manufacturing Efficiency: Nigerian manufacturers should learn and utilize advanced technologies like 3D Printing, Artificial Intelligence, Internet of Things, Blockchain and Robotics which are helping their counterparts in developed countries to engage in predictive maintenance, real time production floor analytics, curb plant floor waste and improve efficiency for profit maximization. Also, these technologies will help them to replace worn out parts in real time besides producing products cheaper and faster with 3D Printing.

Three big global banks, Bank of America, Chase and Santander, have reported that each of them will spend at least $10 billion on IT on the year ahead [Chase specifically is $11.4 billion]. To put that in perspective, Nigeria’s total national budget is about $25 billion. If you remove wages, debt servicing, what Chase spends on IT is more than double what Nigeria spends on infrastructure and broad capital projects.

JPMorgan landed at No. 1 with an $11.4 billion technology budget for the year ahead. That’s a 5.6 percent increase from 2018 figures, with researchers finding nearly half of its technology budget last year was spent on disruptive technology to implement within the institution.

Bank of America has a $10 billion IT spending budget, with 30 percent used for its “technology initiative investment spend,” reports said.

Coming in at No. 3 and No. 4 are Wells Fargo and Citigroup, at about $9 billion and $8 billion in technology budgets, respectively.

Yes, take a look at the 2019 Nigeria budget below and use the black market rate, JP Morgan Chase now spends nearly twice Nigeria’s total capital expenditure on IT. How are you going to argue we are making real progress when one U.S. bank spends double what we put on capital infrastructure? Of course, when you model that we do not even end up funding the whole budget, you will get into the reality that this bank could be spending at least 3 times what we put on bridges, roads and other critical infrastructures in the nation.

Before you begin to throw digital fire, this is not a political hack. Simply, our private sector does not have depth as national budget is always funded by corporations, via taxes. That was a key part of my Platform presentation. Of course, government needs to make the environment enabling.

This is for you to know how much space we need to cover in Nigeria.

*My analysis has not considered purchasing power parity.