23rd July, 2014
A recent economic report by Renaissance Capital, an investment firm that operates in high-opportunity emerging markets, revealed that the Nigerian manufacturing sector has suddenly become healthier than it was before the rebasing exercise. According to the report, the manufacturing sector is growing faster than all other sectors, courtesy of the rebased gross domestic product, GDP. But many Nigerians have refused to agree with the so-called new research findings of the Renaissance Capital.
Nigerians have more than enough reasons to disbelieve the assertion that the manufacturing sector now drives the growth of the economy, surpassing the oil and gas and the agricultural sectors. It is even more surprising that the Minister of Industry, Trade and Investment, Olusegun Aganga, who should know better, also preferred to concur with the “findings” which he is quick to refer to as corroborating the fact that the manufacturing sector is being transformed under the transformation agenda of President Goodluck Jonathan.
The manufacturing sector is obviously not yet robust enough to be tagged glowingly as Nigeria’s engine of growth. It is untrue that the food, cement and textile sub-sectors are all doing remarklably well. Although cement manufacturing got a significant boost courtesy of Aliko Dangote’s heavy investments in the sub-sector recently, the textile industry is, in reality, still gasping, with most of the factories across the country that were once functional yet to be revived from their present moribund state. And even with the much amplified and advertised growth in cement production for instance, the sub-sector only accounts for about one percent of the country’s Gross Domestic Product, GDP.
Nigeria’s non-oil exports for which total earnings in 2013 was largely driven by agricultural raw materials, further exposes the weak state of the manufacturing sector and its feeble capacity. The 2013 non-oil exports data from the Nigerian Export Promotion Council, NEPC, put the total earnings by the end of 2013 at $2.97billion, with cocoa exports, an agricultural commodity being 26 percent of total non-oil exports worth $758.64million. This was followed by the exportation of sheep and goat skin or leather, sesame seeds, cotton yarn and tobacco products. Others include copper, cashew nuts, edible nuts, prawns and shrimps. Locally manufactured products fetched next to nothing in terms of exports. There cannot be a clearer indication that the manufacturing sector is still way behind. Government must strive to sincerely galvanize and encourage value adding firms till they garner the capacity to maximise the diverse and enormous raw materials in the country.
Small and Medium Enterprises should also be given the required shot in the arm to boost their capacity towards playing the role of the engine of industrial development in the economy. At their currently weak state, the sector’s contribution to wealth and employment in the country is far below its potential. The one percent contribution of the SMEs to the GDP is ridiculously insignificant when compared to the 40 percent contributed by SMEs in Asian countries and 50 percent in the USA and Europe.
The Central Bank of Nigeria should also step in to introduce and implement fiscal policy measures that can turn the fortunes of the manufacturers around. The double digit lending rate that has limited the leap of the manufacturing sector thus far must be brought down as it obtains in more sensible economies that sincerely desire industrial growth.