About N19.5 trillion has been spent by manufacturers to import input in 16 years, says the Raw Material Research and Development Council. This huge capital flight may have prompted manufacturers and the government to look inwards for alternatives, reports Assistant Editor OKWY IROEGBU-CHIKEZIE.
For long, manufacturers have relied heavily on raw materials importation for production. Local raw materials, they argue, are not readily available. This has forced them to turn to importation at huge cost, which, of course, affects their profit and competitiveness.
For instance, between 2000 and 2016, raw materials importation, according to the Raw Material Research & Development Council (RMRDC), gulped a staggering N19.5 trillion. Experts and real sector operators have adduced several reasons for the heavy financial burden foisted on manufacturers by this huge capital flight, one of which was the paucity of infrastructure, particularly electricity supply and efficient road and rail network, among others. Others are lack of incentives for research institutions in the country to build their capacity; the Central Bank of Nigeria’s (CBN’s) policy that excluded importers of 41 items from access to its official foreign exchange (forex) market.
The CBN argued that the 41 items were finished products and were not qualify for forex. But manufacturers, who were affected by the policy had consistently kicked, insisting that what was banned were finished products for their sector. They lamented that the policy, which made it extremely difficult for them to access certain raw materials led to factory closures and loss of jobs.
But a new strategic approach aimed at halting more factory closures and the attendant loss of jobs by significantly cutting the huge money spent on raw materials import is underway. Essentially, the strategy, The Nation learnt, involves a renewed collaboration between the government and the real sector operators, especially manufacturers looking inwards to harness local raw materials and save the economy from the burden of continuous importation.
RMRDC Director-General, Dr. Hussaini Dikko Ibrahim, articulated the new approach when he said the government was developing a new national strategy on raw materials development and competitiveness in research and development institutions. He said this was to enable the country attain sustainable socio-economic growth and development.
“Today, particularly with the recession, Nigeria is confronted with the challenges of business failures, factory closures and high unemployment and inflationary pressures. Also, we are plagued by depleted foreign exchange earnings and reserve, drastic devaluation of the national currency, huge arrears of workers’ salaries and pension, among others,”he said.
Ibrahim said the strategy, which would be in partnership with industries and businesses, would accelerate and re-direct the pathways to recovery and growth of the economy. He said the initiative was aimed at attaining global competitiveness in raw materials and products development with the attendant boosts in local and international confidence in Made-in-Nigeria products and services.
He added that the unique features of the strategy include forging partnerships among Research and Development (R&D) institutions with industries, businesses and entrepreneurs towards providing solid and quality national infrastructure.
It also aims at ensuring co-ordinated mapping of some 100 Nigerian raw materials and products on the United Nations (UN) harmonised classification scheme map.
The RMRDC boss said this was in addition to the alignment of the nation’s R&D institutions with the Manufactures’ Association of Nigeria (MAN), National Association of Small Scale Industrialists (NASSI) and Nigerian Association of Small & Medium Enterprises (NASME).
The collaboration, he said, was geared towards promoting local utilisation of raw materials, R&D efforts to increase industrial capacity utilisation and contribution of manufacturing to the nation’s Gross Domestic Product (GDP).
Ibrahim expressed optimism that the successful implementation of the strategy will be far-reaching and beneficial to Nigeria. According to him, it would enhance alliance among Nigerian scientists and entrepreneurs, industries and businesses.
He regretted that the manufacturing sector has been facing stiff competition due to bilateral and multilateral trade agreements such as Economic Community of West African States (ECOWAS) Trade Liberalisation scheme (ETLS), Common External Tariff (CET) and the impending Economic Partnership Agreements (EPA), adding that other World Trade Organisation (WTO) trade policies are transforming the world economy into a vast free-trading zone.
The RMRDC Chief, however, observed that as a way of addressing the raw materials question, there was the need for research and development to identify local substitutes or alternative raw materials in local manufacturing.
He said: “As we all know, R& D in Nigeria both in the tertiary educational institutions and government-owned research institutes is not up to the level required. This could be attributed to a number of factors, including inadequate research infrastructure. Often times research results are left on the shelves of the laboratories where they are conducted.
“There is poor linkage between the researches and prospective investors and entrepreneurs to commercialise these innovations. One way to address this is for manufacturers to get involved in R&D for the development of local raw material substitutes to imported ones, new technologies in raw materials processing or new products development for the local market.”
Ibrahim revealed that government tax laws have provided a number of incentives to encourage manufacturers to venture into R&D for the development of local raw material substitutes to imported ones.
The RMRDC Chief noted that over 10 billion raw materials are available in the country, with every square metre having over 10,000 square metric tones of solid materials. He argued that indigenous manufacturers have no reason to import raw materials or machinery as almost all they need for their processes are in the country.
According to him, RMRDC’s studies and researches have made the nation a net exporter of cement, with over 25 million metric tonnes unlike what it was in 2002 when Nigeria was importing the product with the scarce foreign exchange, which was draining the economy.
Real sector operators’ position
MAN President, Dr. Frank Udemba Jacobs, stressed the strategic place of manufacturing in driving growth and economic development in a country. He observed that the major challenge of the sector was obsolete machinery and equipment, which impeded the efficiency of manufacturers, especially small and medium-scale ones.
According to him, it has slowed down production, inhibited efficiency and economy of scale. He, therefore, pledged MAN ‘s preparedness poised towards leading the sector to play its key role in the new vision of the nation with the belief that Nigeria has the potential to become one of the leading industrialised economies of the world.
Jacobs called on SMEs to learn new processes on how to boost their production output, reduce cost, improve product quality and manufacture for new markets. He canvassed a structural shift towards higher growth in more value-addition and higher labour-absorbing manufacturing that will drive a shift to a developmental path with capacity to generate more growth and higher levels of employment.
He also noted that appropriate policy choices in the productive sector can engender economy-wide employment.
The National Office for Technology Acquisition and Promotion (NOTAP) Director-General, Dr. Ibrahim Dan Azumi, frowned at the level of raw material importation and asked that it should be reduced to encourage local content.
He said: “Let’s build a linkage between manufacturing and the academia and join forces to make things better for the socio-economic development of the country. There is the need to commercialise the credible researches that have been done in our universities. Besides, the government needs to develop infrastructure to encourage local manufacturing.”
On his part, Director of Government Relations and Public Policy, Sub-Saharan Africa Operations, Procter and Gamble (P&G), Temitope Illuyemi, lamented the N19.5 trillion spent on the importation of raw materials between 2000 and 2016.
Speaking at a forum for suppliers in the manufacturing sector, organised by her company in partnership with the Ministry of Industry, Trade and Investment and MAN, she said: “A huge percentage of industrial raw materials for manufacturing of products are still being imported into the country.”
Speaking on the objectives of the forum, Illuyemi said: “Backward integration is essential to the growth of the Nigerian economy and P&G’s aim was to encourage our global partners do the same and thereby promote technology transfer. We will work to pre-qualify local suppliers for materials used in the production of consumer packaged products and by extension, build capability of local manufacturers to compete effectively in regional value chains and further strengthen the diversification efforts of the Nigerian government.”
She noted that for the manufacturing sector to experience potential growth going forward, it needs to focus on local production and companies like Procter & Gamble are taking deliberate steps to support the Federal Government’s economic development agenda.
According to her, P&G currently manufactures its products close to consumers and this has aided technology transfer. Also, the company’s continuous local investment is a testament to its commitment to support the Federal Government’s diversification efforts.
Illuyemi maintained that it was imperative for all sectors to intensify efforts towards enabling local entrepreneurship development and helping with the capabilities required to produce raw materials locally. According to her, this will go a long way in actualising the country’s economic development agenda.
She further stated that the company remained committed to the Nigerian economy and has invested over $500 million in the country till date.
Earlier, Minister of Science & Technology, Dr. Ogbonnaya Onu, had encouraged Nigerian manufacturers to patronise locally made raw materials for their production. He said it was the only way the economy can grow as it has a multiplier effect.
The Federal Government, he said, is in support of the growth of the private sector and an economy driven by the sector. He encouraged them to use RMRDC raw materials technology data.
He further asked investors to show interest in sponsoring alternative raw material investigation and subsequent usage in the manufacturing sector.