The Organised Private Sector of Nigeria has unveiled a document that contained its policy priorities for the incoming government on how to boost industrialisation in the country, writes Dike Onwuamaeze
The members of the Organised Private Sector of Nigeria (OPSN), in conjunction with the Centre for International Private Enterprise (CIPE), has outlined some policy priorities for the incoming president on how to accelerate the country’s economic development through a viral and vibrant industrial sector.
The memo, which was titled “OPSN Policy Priorities for Political Parties in Nigeria,” expressed the expectation of the OPSN that the incoming government should make the development of the industrial sector the flagship of its economic agenda for the country from May 29, 2023, and onward.
The OPSN is comprised of the Manufacturers Association of Nigeria (MAN), the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), the Nigeria Employers’ Consultative Association (NECA), the Nigeria Association of Small Scale Industries (NASSI) and the Nigeria Association of Small and Medium Enterprises (NASME).
It expressed the view that Nigeria’s industrial development is being slowed down by lack of updated philosophical direction as the country is utilising ideas that does not correspond with the empirical reality of its current economic state.
Hence, in the past two decades, the asymmetry in governance has the Nigerian economy fraught with a litany of challenges. Thenceforth, economic activities, industrial and non-industrial operations, have grossly been depressed. This accounted for the lingering poor performances of macro and socio-economic indicators in the country, which has seen the Gross Domestic Product, exchange rate, interest and inflation rates, industrial and manufacturing production, per capita GDP, unemployment and youth unemployment, poverty and many more degenerating.
The corollary is that country is currently running a system of rigged prosperity, which cannot support the eradication of poverty. The OPSN, therefore, said that “in the light of this, we succinctly present field-based observations of the core challenges of industries in the country at the moment.
“We are sanguine that addressing these challenges will in no small manner trigger significant activities in the industries and propel the economy to recovery and sustained growth.
“The OPSN believes that come May 29, 2023, the new dispensation of government will provide the opportunity to address and redress these challenges through reshaped economic policies and implementation, so as to swiftly rekindle and improve productivity in the economy.”b
It stated that growing the non-oil sector should be the heartbeat of any industrial economy. It argued that no economy could attain any meaningful industrialisation without a vibrant industrial sector because the real sector is synonymous to greater job creation for the unemployed and wealth creation for wellbeing of the populace.
Consequently, the OPSN is full of expectations that the new government will support the development of the industries as the flagship of its new economic agenda from May 29, 2023. This is no doubt, critical in achieving the longstanding collective industrialisation aspiration of our dear country.
OPSN’s Policy Priorities
Top on the priorities of the OPSN is improved electricity supply to the industrial sector: It stated that this could be addressed by government’s commitment “to up scaling electricity generation by at least 10,000MW annually,” by following the example of Egypt that built 10000MW within two years. It also encouraged the government to further investment in electricity value chain that comprised of generation, transmission and distribution and to “sustain the eligible customer initiative to improve electricity supplied to the manufacturing sector; embrace and support significant development of energy mix and renewables by appropriating the country huge potentials for solar and wind energy sources”
It urged the government to “allow gas to be supplied to domestic users including manufacturers at international export price plus $1.” It suggested that $3.2+$1 rather than the current $8.76 per cubic metre.
According to the OPSN, “it is the government’s responsibility to ensure that Nigeria generates enough electricity, to provide the private sector with tools needed for innovation, production, entrepreneurship and value addition for national development.”
It said that factories in the country have persistently contended with inadequate electricity supply, high electricity tariff, and the huge outlay for providing alternative energy. “The share of energy to total cost of production in the industries is about 40 per cent, which contributes to the high cost of production, high community prices and low competitiveness of the Nigerian industrial sector,” the OPSN said.
The OPSN also tasked the government to identify and develop the country’s economic philosophy, saying that “it is imperative that we identify and understand our economic philosophy. Funding is not the issue but designing the right policy with proper implementation and monitoring, for desired expectation. It is important to note, that incentives provided by politics does not align with the promotion of businesses.”
The OPSN also harped on the need to stabilizing the economy through strategies that would reduce the high rate of inflation, to at least a single digit, address foreign exchange misalignment, promote equality, create a friendly enabling environment, and improve human capital development, whilst targeting increased productivity.
It also advised the government to ensure that economic decisions are data driven, which is currently lacking in the management process of the economy.
It also made a case for inclusiveness in policy design, implementation and monitoring. This argument is based on the assumption that the private sector “is arguably the backbone for revenue generation towards the effective operation of a viable economy. It is therefore, imperative to include the organised private sector in all economic-related decisions of the various arms and tiers of government” in the country.
It added that, “inconsistency of our policies does not promote development in any way. There is a need for synergy between the fiscal, monetary, and trade policies.”
Promoting Economic Growth
The OPSN also tasked the incoming government on deliberate promotion of economic growth. It said that, “an active promotion of economic growth, namely infrastructural investments and industrial policy will enhance and compliment the human capital investment. However, if not done, it may lead to private sector capture” in a manner that would be equivalent to the ongoing brain drain in the health and education sectors.
The OPSN also called for the Development of outward-oriented development strategies that could encourage export of manufactured goods. “It has become evident that outward-oriented development strategies are superior to nationalistic and dissociative economic strategies. The experiences of the classic (Northeast Asian) developmental states have also confirmed the benefits of an outward-oriented development strategy for long-term economic growth and development.”
Furthermore, the OPSN called for a structural reform of fiscal and monetary policies for the sake of promoting the growth of enterprise in the country. It emphasised a need for structural reform of the fiscal system to achieve a prosperous future, which should include tax harmonisation, clarification of taxing rights vis-à-vis fiscal federalism, setting the right tone and improving tax culture, an integrated revenue optimisation, expenditure efficiency; policy on national debt restructuring and management, to reduce high debt cost (debt servicing).
It pointedly tasked the incoming government to address inadequate supply of foreign exchange to the productive sector, especially manufacturers. It demanded the granting of “concessional foreign exchange allocation at the official foreign exchange market to industries for importation of productive inputs that are not locally available.” It also called for a clear foreign exchange policy that would spur supply through various sources and perpetuate rate convergence through the market forces and rather than by the Central Bank of Nigeria’s (CBN) fiat.
The OPSN also made a case for improved access to long term funding for manufacturers through setting up a monitoring and evaluation platform with private sector representatives to oversee the allocation of fund for the industries.
These will include providing a credit guarantee scheme for industrial loans from commercial banks; the creation of development funding windows for Small and Medium Enterprises (SMEs) with liberal conditionality.
Need for Competition
The OPSN also highlighted the importance of encouraging more competition in the Nigerian economy and warned that “market practices that avoid monopolies will open up our economy to function appropriately. There should be more competition across all levels of production.”
It also advocated for the development of end-goal strategy that would help Nigeria in designing the right policy, sustaining economic growth and low inflation rate must be maintained.
It added that government should take deliberate and urgent steps to engender conducive and enabling business environment for businesses. “In the first place, government should undertake a comprehensive review of policies and initiatives for enterprise growth and development. There is a need for a collaborative approach to policy development. A medium to long term integrated policy development framework should be undertaken in order to ensure that polices are integrated,” it said.
Furthermore, the OPSN called for development of political entrepreneurship approach in the civil service. It argued that for a “nation like ours, we must ensure we have a meritocratic civil service of highly trained and motivated individuals who must work with the private sector and take responsibility for selling the products of the country.
“We also need the political elites who are ready to form a consensus such that the system will not be opened to elite capture or the capture of vested interest.
“Enact a bill to give legislative backing to the Nigerian Codes of Corporate Governance 2018 and set up implementation lab to evaluate impact of the NCCG 2018. Develop policy on mandatory corporate governance reporting by all federal MDAs.”
It also urged for development of sound, unbiased, non-monopolistic backward integration policy that should guarantee truly free markets. This can have positive effect in terms of stimulating economic development; promoting the development of local industries, creating economic linkages, building local capacity, capabilities and technologies; developing skills within the workforce.
It would also boost employment, and minimise capital flight as “greater use of local content and more extensive backward linkages can also help Nigeria avoid the resource curse.”
The OPSN also tasked the incoming administration on patronage of Made in Nigeria goods and local content development. It said that the Executive Orders 003 and 005 on patronage of made in Nigeria goods and development of local content are critical policies that would drive higher level of industrial production if well implemented.
However, it is important to ensure that Ministries, Departments and Agencies of government are persuaded to mandate and strictly prioritise made in Nigeria items in all their purchases and contracts.
“Industry players believe that there are some sectors where it makes a lot of sense to deepen backward integration. There are others where it is not appropriate. Having a blanket policy that applies to all is not realistic. Backward integration policies must be nuanced by the circumstances of the sector.
“There must be cost-benefits analysis. In practical terms, this means that, after the various investments have been made, the level of costs should be lower than the cost of importing. If they are not, it does not make sense to do backward integration.”