The President of the Manufacturers Association of Nigeria, Engr. Mansur Ahmed, who was elected last October, in this interview with Jonathan Eze, identifies challenges affecting the country’s manufacturing sector and measures government can adopt to increase the contribution of manufacturers to the Gross Domestic Product
What should member-companies be looking out for during your tenure as President of the Manufacturers Association of Nigeria (MAN)?
Today, as you are aware, the manufacturing sector is contributing less than nine per cent of the Nation’s Gross Domestic Products (GDP). That is not good enough. In countries that are even less developed than Nigeria, we have seen higher rates of contribution by the manufacturing sector and at any rate, for any country to be regarded as industrialised, the manufacturing sector being the productive sector that produces the goods that generate value and wealth, must be contributing significantly to the growth of the economy.
For instance, in many of our peer countries; Malaysia, Indonesia, Brazil, South Africa, you see manufacturing sector contributing something in the range of 30 per cent of their GDP. But here we are contributing less than nine per cent. So, clearly, we have a long way to go to raise the level of contribution of the sector to the GDP.
Part of the contribution comes from, not only the scope or depth of the sector, but also from the operational efficiency of the productivity, that is the capacity utilisation. Consequently, we need to make sure that we eliminate those things that on a day to day basis tend to impede the operations of members and therefore reduce their capacity utilisation.
Therefore, under my administration, members should expect expansion of the sectors, that is bringing more manufacturers into the fold and ensuring that sectoral groups are made vibrant. We have about ten sectoral groups, but if you look at the relative contributions you will observe that not more than four or five sectoral groups are responsible for most of the contribution of the manufacturing sector to the economy and for most of the employment as well.
The textile sector used to be very vibrant, but it has declined significantly. So, we must broaden the sector to ensure that sectors that are not adequately functioning are restored to good health.
In leather and footwear there is tremendous capacity but today it is not being fully exploited, we are stopping at the production of wet leather. Value addition is the key to success in manufacturing, for instance, if you take the process from hide to finished leather and compare the value that is added from that finished leather to a pair of women’s handbags, the difference is huge.
Hence, there is need to deepen the sectors. The same scenario is applicable to food processing; you produce cocoa, turn it into cocoa butter and you export it, what you get from that cocoa butter and they convert it into chocolates, for the same quantity of cocoa butter the manufacturers of chocolate will make literally a thousand times more than you do.
One of my goals is to work with the National Council and Government to ensure that we continue to grow the manufacturing sector both in depths and scope through increase in value addition and thereby better the contribution of the manufacturing sector to the GDP.
There is also, the need to constantly improve on the technology of our manufacturers particularly today with growth in technology. It is not enough to have a factory you must also watch what technology is doing to that factory, if you don’t update your technology very soon your processes will become obsolete and therefore your products will not be competitive. To state specifically, these are some of the issues my administration hopes to bring to bear, this means of course we have two responsibilities which include: to make sure that the economic policies the Government put in place are policies that will enable us achieve our goal; and also, we ourselves must be willing to take advantage of policies, creating the right interface between sectors and the policy makers in government and ensuring that there is some level of understanding.
What policies do you consider paramount to catalyse industrial growth?
First, we must consider what policies will make this vision feasible. When you are manufacturing, the first step is making an investment, so you want to look at the conditions that will make that investments worthwhile. The investment climate is key, and I think we all know this over the years. This government has been working on improving the business environment as there have been several initiatives to improve the investments climate and thereby making investments and businesses easier for investors.
The second are policies governing the development of infrastructure because as manufacturers depend on basic infrastructures such as electricity, water, transportation etc. the poorer the infrastructure, the higher the cost at which they can produce and deliver products to the market. So, building infrastructure is one of the most critical responsibilities of the government for industries as a whole to be more competitive. The third is improving the spending power of the ordinary people because the higher the spending power, the more demand for products. So, putting more money in the pocket of ordinary Nigerian clearly creates more market for the manufacturers.
Policies that help improve the income of the ordinary person is very important. The fourth is policy against trade malpractices, such practices undermine the market and part of our major task is to ensure that government continues to make laws and regulations that discourage these practices particularly smuggling, counterfeiting and dumping. There is also the issue of finance. One major constraints of the manufacturing sector in Nigeria is that the cost of financing which is very high.
For instance, if you borrow funds to invest at 20 per cent interest rate, you must make more than 20 per cent for that investment to yield benefit. In other countries, it is less than 10 per cent interest rate for investments, this means that you will have problem competing with manufacturers from those countries. Cost of financing is very important and we must continue to work with Government to encourage the financial systems to continue to bring down cost of finance.
Again, given our current status in the manufacturing sector where a huge amount of manufacturing resources is spent importing inputs such as raw materials, spare parts, components, machinery etc, another area that is important to the manufacturing sector is the foreign exchange not only in terms of rate but whether it is steady or fluctuating. As much as possible we want a competitive foreign exchange rate and also to remain reasonably stable, if it fluctuates it makes it difficult for you to plan your operations. Manufacturers have constantly clamored for a strong campaign against smuggling and counterfeiting.
What strategies would you recommend to government to curb the menace?
We are already engaging government on this; there are initiatives that have been started under President Muhammadu Buhari’s administration which tries to focus on taking necessary measures to discourage all these malpractices. I think that one thing is having the regulations and policies; the other is making sure that people who are engaging in these things are identified and dealt with according to the law. Therefore, the implementation of the regulation is key. We have been pushing and working with the key regulators that are involved in ending these malpractices such as the Customs Services, NAFDAC, SON, and will continue to work with all these regulatory agencies to ensure that the regulations put in place are effectively implemented.
I also believe that we have our own responsibility as manufacturers; our members ought to know that you can’t eat your cake and have it so we must ensure that we don’t get involve in these malpractices. Secondly, we must also be watchful because we are out there in the market and so we know what comes into the market and what goes on and we must therefore help government by ensuring that when we see these malpractices taking place we don’t just fold our hands and say this is not our responsibility, we must take steps to make sure that the culprits are identified and arrested, therefore we must work hand in hand with the government to curb this menace.
The cost of funds and lack of long-term loan affect manufacturers, particularly the small and medium scale industries (SMIs) How do you hope to address this concern?
The SMIs are very critical to the growth of the manufacturing sector because the more successful they are, the more the larger industries can rely on them to do a lot of the things that they themselves are having to do. This way the value chain will be stronger and will help both the larger and the smaller industries. We will continue to advocate for initiatives that will put more funds in the hands of the SMIs at lower cost or lower interest rate and on a longer-term basis because investments in manufacturing is on a long-term basis. So long term funding is important. It is indeed lack of long-term funding that also tends to keep our industries small and at tertiary levels.
On the lingering subject of African Continental Free Trade Agreement (AFCFTA), what is your view?
Our position is that ultimately trade is good and that there are opportunities for manufacturers to grow if trading is expanded and made easier. However, in the context of the ‘Continental Free Trade Agreement,’ what we have said is that before you go into an agreement you must access your capability to benefit from that expanded trade and your readiness to go into that kind of agreement. I think this is just the fairest thing to ask in any situation like this.
Once you know what the opportunities are and what are the risks, then you will know what you need to do to mitigate the risks and to exploit the opportunities and this was what we said at the beginning of the conversation on the African Continental Free Trade Agreement. I think, to some extent, we were misunderstood by people who thought we are saying ‘No don’t sign’, but what we are saying is first understand what the agreement is going to mean in reality to your industry, to your economy, and so on and be prepared to mitigate the risks and to take advantage of the opportunities that arise.
This is what we asked for and I think this is what is now clearly being recognised by government when it set up a committee to assess the readiness and to also investigate the pros and cons i.e., the costs and benefits of the agreement. This is important because by the time we clearly understood what we are going into, then we will be in a stronger position to know how to negotiate. Don’t forget, an agreement is something that is negotiable so if you don’t know what your goals are in the negotiation it’s impossible to negotiate effectively and that is what is happening. We are very satisfied with the position government has taken which has provided time for this subject to be properly evaluated and also, necessary information for successful negotiation.
How will you rate the current administration with respect to the manufacturing sector?
The manufacturing sector has been fragile for quite some time, so you really can’t blame this administration which has just been in the power for three years. The overall economy has been affected by factors which are way beyond this government. The crash of oil price in the international market has tremendously impacted negatively on the economy that its effect spread across every sector particularly the manufacturing sector.
I believe that government has tried to some extent to alleviate some of the pains we suffer, such as by creating special windows for manufacturers for forex, setting up of the Presidential Enabling Business Environment Council (PEBEC) and the Industrial Council to monitor what is happening to manufacturing as well as other sectors and recommend what needs to be done to ensure there is improvement. You are aware that as a result of the collapse of the oil price we went into a recession, and although we are out of that recession things are still fragile, the manufacturing sector is still up and down.
But we are beginning to see at least in terms of current government decisions possibilities that can help the manufacturing sector to grow but the execution of these policies is very important. As stakeholders, we will continue to monitor this and raise alarm if need be, when things are not being executed when they should. I believe that the position in a nutshell is that yes, the sector is too fragile, and a lot more needs to be done to strengthen it and sustain its growth trajectory.