By Charles Okonji
In furtherance of the concerted efforts by the Manufacturers Association of Nigeria (MAN) towards curbing inflation, the Federal Government has been charged to develop the manufacturing sector as it has the potentials of reducing inflation.
The President of MAN, Otunba Francis Meshioye who stated this in his speech at the 52nd Annual General Meeting (AGM) shortly before the 4th Odutola Lecture noted, that the challenges faced by the manufacturers makes it imperative to advocate for a deliberate and concerted approach toward the development of the sector.
Meshioye pointed out that the manufacturing sector plays a pivotal role in value addition, transforming raw materials into finished goods, and capturing a greater share of the value chain.
According to him, “By developing our manufacturing capabilities and leveraging its potential, we can reduce inflation and our overdependence on imports, promote import substitution, create more jobs, boost government revenue, and strengthen and stabilizing the forex market.”
On his part, the Director General of MAN, Mr Segun Ajayi-Kadir stated that the numerous challenge facing the manufacturing sector is both internal and external, adding that the continued geopolitical risks and uncertainty, the escalating trade wars, and the recent global protectionist policies, such as changes in tariffs and quotas restricting international trade flows were some of the external factors.
Ajayi-Kadir stated that the major internal challenge which is more troubling to MAN was policy related issues, adding that multiple taxes should be addressed with urgency.
He said: “The sector continues to grapple with multiple challenges that impede its growth. The sector has continued to be impacted by several structural and policy related bottlenecks over the decades.
“The challenges limiting our innovation and production capacity is the problem of high production costs. It poses a significant hurdle, and adversely impacts our competitiveness and growth.
“High energy costs and frequent hike in electricity tariffs: the arbitrary hike in electricity tariff is highly worrisome. It is unfortunate that the Distribution Companies (DisCos) persistently disconnected manufacturing facilities from the national electricity grid despite payment of current electricity charges on existing tariff, and against court injunction prohibiting them.
“We have consistently maintained that manufacturers will struggle without rate above 100 percent increment in the electricity tariffs. Electricity costs alone accounted for more than 35% of an average manufacturers’ cost structure. The government should wade in to address this issue for the sector to thrive.
“High importation costs, scarcity, and fluctuating prices of raw materials: Due to the high and volatile foreign exchange rate and the attendant high import duties, the cost of importing necessary raw materials has risen astronomically. Sadly, while most of these raw materials are not available locally those that are available are scarce and very limited in supply. We must deepen backward integration and encourage local sourcing of raw materials to reduce reliance on imports.
“Inadequate transportation infrastructure and poor logistics services: There are bad road networks in and around major industrial estates nationwide. An example is the overly deteriorating state of the highway.
“Multiple layers of charges: manufacturers are on daily basis confronted with several charges. Multiple taxes, levies, and fees by the different tiers of government, multiple charges along the Abidjan-Lagos ECOWAS Corridor, and arbitrary charges for export containers by Export Processing Terminal operators, etc. are quite evident.
“The manufacturing sector cannot grow with the series of charges. We encourage the government to address the overlapping functions of agencies in the production and export value chain to reduce the payment of multiple taxes and levies. The sector needs more incentives to grow and develop.”
