MAN Highlights 6 Key Challenges Facing Manufacturing Sector in Nigeria
By Azeez Disu
The Manufacturers Association of Nigeria (MAN) has reeled out some of the challenges facing the manufacturing sector. It pointed out that the sector has been the worst hit by the combination of external and domestic challenges.
MAN President, Otunba Francis Meshioye, in his welcome address at the Adeola Odutola Lecture for the 51st Annual General Meeting of the association held recently outlined some of the challenges militating against the sector’s growth.
According to him, the five (5) key challenges are below:
Multiple Taxation
An average member of MAN is subjected to no less than 30 different forms of taxes, fees, and levies. The consequences of the incidence of multiple taxation are immense and include the rising cost of doing business and rapid divestment in the manufacturing sector. These issues combine to depress demand; worsen job losses and increase the incidence of poverty and low revenue generation from the sector.
We are confident that the Presidential Committee on Fiscal Policy and Tax Reform will adequately address the matter. Our Director General represents the Organized Private Sector on the Committee and we look forward to working jointly with the representatives of your Ministry on the Committee to make the case for fair taxation of the manufacturing sector.
High Cost of Borrowing:
Another constraining factor in the manufacturing sector is the challenge of high-interest rates. The average bank lending rate for manufacturers is 26% per annum. We acknowledge the 9% interest rate on the N75 billion loan facility for a minimum of 75 companies that was recently promised by Mr. President. While commending His Excellency for this initiative, we are hopeful that it could even come at a lower rate and MAN would be given the opportunity to work with the government to determine deserving sectors, agree on the disbursement modalities, and join in the evaluation and monitoring of its effectiveness. We believe that this inclusive approach will guarantee more success and create the basis for granting a much bigger emergency fund for the beleaguered manufacturing sector in the near future.
Infrastructural Inadequacy:
Poor infrastructure, including inadequate power supply, poor road networks, and inefficient port facilities are serious impediments to the growth of the manufacturing sector. We look forward to the government to improve investment and undertake effective reforms to guarantee a reliable power supply; good road networks; and an efficient port system.
Low Local Content Development and Patronage of made-in-Nigeria Products:
Nigeria has a low local content adoption and patronage of made-in-Nigeria products. We urge His Excellency to ensure effective enforcement of local content and patronage regulations. This can be achieved by strict enforcement of local content laws, incentivizing local sourcing of raw materials, and innovation in the manufacturing sector. Also, the public sector at all levels should, as a matter of national importance, step up their compliance with existing government directives on the patronage of made-in-Nigeria products, including Executive Orders 003 and 005
Poor Sectoral integration of the manufacturing sector:
The manufacturing sector is one of the sectors of the economy with wide sectoral interlinkages. However, the low level of development of auxiliary sectors is disentangling the manufacturing sector from the rest of the sectors. This is more so in agriculture, iron and steel, and mining sectors. This has resulted in a limited supply of raw materials and other inputs for the manufacturing sector. Therefore, it is essential to encourage backward integration and sectoral linkages to promote a more sustainable manufacturing sector in Nigeria.
Shortage of Foreign Exchange:
MAN appreciates the new administration’s policy on exchange rate unification as part of the measures to address the forex crisis. However, the problem is only half solved as forex shortages and high rates persist in the market. Addressing supply inadequacy is critical to a resilient manufacturing sector and we urge the government to intensify its current efforts in this regard.
I am confident that our Distinguished Guest Speaker will adequately address these issues and more, in greater detail.