Dangote Takes Manufacturers’ 

Burden to FG in Abuja

The saying that only the wearer knows where the shoe pinches came to light when Africa’s richest man and Chairman of Dangote Group, Alhaji Aliko Dangote chronicled some of the frustrations of Nigerian manufacturing firms at a three-day summit in Abuja last week. However, the readiness of the federal government to tackle some of the issues raised by participants will determine whether the three-day summit was another jamboree or a pathway to industrial development in Nigeria, writes Festus Akanbi

To the President of the Manufacturers Association of Nigeria (MAN), Otunba Francis Meshioye, the three-day summit that attracted key government representatives and leading manufacturers in Nigeria, including Vice President Kashim Shettima last week, was a dream come true.

It was a forum that afforded the federal government first-hand information on impediments to the manufacturing sector which included debilitating energy costs, lack of access to cheap credit, declining purchasing power of the citizens, unstable government policies, and a free-falling national currency. Other issues include low capacity utilisation, which has gone below 50 per cent, a rising inflation rate which is 26.5 (officially but in reality, it is about 33 per cent in banks), and security challenges that are seriously crippling production.

High Interest Rates

No other manufacturer could have summarised the pains of Nigerian businesses more than the President of the Dangote Industries Limited, Aliko Dangote who complained that the Central Bank of Nigeria’s (CBN) high interest rate regime is stifling economic growth and job creation in the country.

Citing the need to rein in inflation and achieve price stability, the CBN in May, raised its benchmark interest rate, the Monetary Policy Rate, (MPR), by 150 basis points to 26.25 per cent from 24.75 per cent, the third raise less than three months.

But Dangote said interest rate at its current rate is not good for investment, growth, and the economy in general, pointing out that the development is already leading to job losses, closure of factories, and lack of productivity.

The foremost industrialist argued that as many manufacturing firms continue to either shut down or operate at a lower capacity, Nigerians will have to continue to rely on imports.

Charity Begins at Home…

Dangote also noted that foreign investors and manufacturers would be attracted only when they see that local investors are also doing well.

According to him, what attracts foreign investment is not when the President or any other government agencies go outside the country to seek foreign investment.

“I am recommending that government policies should support, and protect existing industries so that others will know that their investments will also be protected.

”Are there any better incentives than that? I don’t think so.

“So, I humbly submit that an industrial policy that assures investors of support and protection is the greatest incentive for all investors both local and foreign,” he said.

Dangote also underscored the importance of stable and affordable power, as well as accessible financing to sustain and attract investors and manufacturers.

He said stable, affordable power and access to finance by manufacturers and investors would guarantee growth, industrialisation and prosperity.

According to him, an import-dependent economy is equivalent to importing poverty and exporting jobs.

He further said that when government policies become more supportive and protective, investors would be more willing to collaborate and partner with the government.

“This will help in resolving other challenges such as infrastructure deficit, market instability, and market economic issues such as inflation and foreign exchange volatility.

“However, ignoring all these facts is what gives rise to insecurity, banditry, kidnappings, and abject poverty in the land,” he said.

On bank loans to investors, Dangote said that the current 30 per cent interest rate is stifling growth and there is no way anybody can create jobs.

He, however, expressed the optimism that Nigeria has all it takes to develop and sustain a globally competitive manufacturing sector.

“To do so, we must rethink our industrialisation policy. We must look to leading countries in the West and the East who are protecting their domestic industries.

“We must similarly, introduce policies to protect our domestic industries and nurture them into home champions that will create the jobs and prosperity we desperately need. The time to rethink our industrial policy is now,” Dangote said.

He reiterated that manufacturing remains the key driver in the nation’s quest for economic development and self-sufficiency.

Beyond Industrial Roadmaps

Interestingly, each time the president travels abroad, he promises to provide an enabling environment for investment to thrive but the questions are, how will investment thrive, how will foreign investors come to Nigeria if as Dangote has pointed out, people who are doing business here are groaning?

So in terms of the signals, the international community who watched the summit will conclude that Nigerians themselves have issues.

However, reacting to the outcome of last week’s summit, experts expressed disappointment at the government’s input saying the promise by Vice President Shettima to produce roadmaps for the manufacturing sector’s development is unacceptable.

“The MAN president asked the FG to provide a forum like the one that took place in Abuja last week for them to look at the issue. They had the forum but unfortunately, there was no solution. Vice-President Shettima was saying there would be solutions. The problem with Nigeria is that there is no dearth of ideas, but solutions,” said Olukayode Adeoye, a Lagos-based analyst.

According to him, “It is also quite instructive that in attendance at the summit was the former Minister of Investment, Trade and Industry, Mr. Olusegun Aganga, who spearheaded the production of an industrial policy and a revised trade policy for Nigeria.”

He said Aganga’s presence was a reminder that Nigeria has an industrial policy, what is needed is the seriousness to implement the policy, adding that this is not the time to be promising to come up with a policy framework and roadmap, those frameworks and roadmaps exist.

Analysts said it is ironic for the government to sit in the same room at the forum with Aliko Dangote, with his vast investments in Nigeria, and still be talking about roadmaps. The government has the opportunity to get a first-hand account of the challenges in the real sector.

In his reaction, the Chairman of the Economic Policy Analysis and Research of the University of Lagos, Prof Ndubisi Nwokoma, confirmed that the economic operating environment in Nigeria is very hostile. 

Speaking on a live programme on ARISE NEWS last week, the professor faulted the stance of the CBN for its fixation on interest rates as a tool for curbing inflation.

He said, “In Nigeria, interest rate is high. The need to fight inflation and attract capital inflow as the reason for the high interest rate is flawed.”

Funding Critical Sectors

He stressed the need for the government to set aside funds for critical productive sectors of the economy. He explained that Nigeria cannot maximise the gains of its agricultural potential because of insecurity.

An economist at the Nigerian Economic Summit Group, Faith Iyoha, described the frequent rate hikes by the MPC as an ineffective tool to combat the country’s inflation. 

She was quoted as saying that the increase in MPR would hurt productivity, a development that would consequently cause a decline in Nigeria’s gross domestic product. 

She reasoned, “They have not rejigged the Monetary Policy Rate to be effective in curbing inflation or signalling direction. Inflation will continue to go up. They are only putting pressure on the market because interest rates will increase. 

“It means productivity will become difficult. GDP growth will be constrained because the interest rate will be high. That will further put pressure on the market. It means productivity will be low. Prices will go up. It’s like going around in circles.” 

On his part, the Managing Director of Cowry Asset Management Limited, Johnson Chukwu, in his reaction to a recent interest rate hike, said that the interest rate means that liquidity in the private sector will be constrained and tightened. “The tightening of liquidity, since it has a positive impact on the exchange rate, is likely going to hurt productive activities,” he said.