Role of Manufacturing in Accelerating National Development
IN the development economics literature, the manufacturing sector is often seen as the engine of growth and development.
Major economies of the world: United States, China, Germany, Japan, United Kingdom, etc., gained economic importance primarily through industrial revolutions that were driven by advances in manufacturing capabilities .
In most emerging economies, the manufacturing sector remains central to job creation as well as inclusive and sustainable industrial development.
Manufacturing currently accounts for more than half a billion jobs worldwide and around 17% of the world’s roughly three billion workforce.
It goes without saying that for Nigeria to achieve sustained and accelerated economic growth, it cannot be an exception.
It must improve its manufacturing capabilities to move from a producer of predominantly primary products to a producer and exporter of finished products.
It is the added value of manufacturing that will allow the country to earn much more in global markets while creating new jobs and attracting foreign direct investment as well as increasing returns to the government through improved taxes and levies.
This is why, for about a decade, the federal government has focused on economic diversification and reducing the government’s reliance on crude oil as a primary source of revenue or foreign currency.
The country’s performance still leaves much to be desired. Over the past five years, Nigeria’s major non-oil exports have been dominated by commodities.
For example, a February 2021 Central Bank of Nigeria (CBN) monthly report revealed that in November 2020, Olam Nigeria Limited topped the list with a value of $26.65 million from the export of cocoa beans, cashew nuts and sesame seeds to Turkey and China. .
A notable finished goods manufacturer that has consistently remained among the top five non-oil exporters over the past three years is British American Tobacco (Nigeria) Limited (BAT Nigeria) which exports cigarettes to several West African countries.
In the referenced CBN monthly report, BAT Nigeria had total exports of $12.57 million. This is made possible by the company’s cumulative investment of $185 million in a state-of-the-art factory in Ibadan, which has created over 350,000 direct and indirect jobs for Nigerians. BAT Nigeria and other levies over 20 years, while repatriating more than $100 million in foreign exchange per year and supporting an additional $30 million in foreign direct investment by a primary supplier.
Data from the National Bureau of Statistics reveals that until the fourth quarter of 2021, sesame seeds remained Nigeria’s top non-oil export, only recently being overthrown in the first quarter of 2022 by urea (which is a petroleum by-product raw).
These are indicators that show the urgency with which Nigeria must improve its productive capacity.
The list of major non-oil exporters must be increasingly populated by manufacturers of finished products in volume and value.
Nigeria needs more companies that will establish factories to increase the production of finished goods in the country. For example, companies that will process cocoa into quality chocolates for export rather than aggregators that export cocoa beans. Factories that will produce bags, shoes and other leather accessories rather than our strong processed leather exports.
The same is true for other commodity exports such as sesame seeds, cashew nuts, gum arabic, etc., so Nigeria will benefit from more FDI; increased repatriation of foreign currency; improved revenues from taxes and levies as well as job creation from many more businesses as is currently the case with BAT Nigeria.
The United Nations Industrial Development Organization (UNIDO) Industrial Development Report 2022 recommends that, to prepare for the future, countries around the world should “strengthen their manufacturing and digital capabilities and promote the mutual learning and knowledge sharing”.
It specifically notes that “in developing economies, governments and business leaders must strive to foster the development of domestic productive capacities to ensure long-term resilience in a rapidly changing global industrial landscape.”
The Manufacturers Association of Nigeria (MAN) has remained at the forefront of efforts to foster an enabling environment for manufacturing and industrialization in the country, alongside employers’ unions, industry organizations private and economic experts.
They continued to describe issues plaguing the manufacturing sector, including an unfavorable business environment; erratic feeding; poor and dilapidated physical infrastructure; multiple taxation; high interest rates; and the incoherence of government policies, while proposing solutions.
At the recently concluded Nigeria Employers Summit 2022 in Abuja, the CEO of the Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf identified spiraling inflation; exchange rate depreciation and volatility in the foreign exchange market; the multiplicity of taxes and levies; and trade policy issues as some of the issues that militate against investment and the ease of doing business in the country.
“Manufacturers need to be supported by trade policies, given the fact that they import raw materials and machinery and the challenges that come with that. Inappropriate monetary and fiscal policies could make or break any investment in any any economy. These policies are at the center of a business-friendly environment. There is therefore an imperative for reform in the entire international trade ecosystem and the country’s general macroeconomic management system,” he said. he adds.
Other speakers at the Summit also called for the introduction of sustainable regulatory frameworks that will secure current investments in the country and create additional investment opportunities beneficial to the national economy.
In its economic review of the second half of 2021 contained in a report dated May 26, 2022, the Manufacturers Association of Nigeria (MAN) noted that the foreign exchange crisis, which is responsible for the depreciation of the value of the naira against foreign currencies. convertibles such as the US dollar decreases the size of manufacturing and manufacturers’ incentives in the country, as the depreciation in the value of the naira leads to higher manufacturing costs of raw materials and machinery imports.
Elujoba is part of the Center for the Promotion of Best Business and Business Practices