Osinbajo urges manufacturers to adopt right macroeconomic, industrial policies for business to thrive 

 

Prof Yemi Osinbajo, SAN, GCON, Vice President, Federal Republic of Nigeria has facilitated with the iconic trade and business institution, the Manufacturers Association of Nigeria (MAN) on the celebration of its 50th anniversary and urged stakeholders in the industry sector to adopt right the macroeconomic, industrial policies for business to thrive in the country.

Osinbajo gave the charge at the roundtable on industrialisation in Africa themed: ‘Positioning African Industries for Economic Transformation and Continental Free Trade’, adding that MAN has been working with other organs of the Organized Private Sector, government, and other stakeholders in the economy, to create an enabling environment for industrial development, growth, and prosperity.

The VP extended the warm felicitations of Mr. President, President Muhammadu Buhari to the President and National Council of MAN as they celebrate the Golden Jubilee of the organization.

He noted that the theme for roundtable is apt, because governments and private sector alike pay close attention to ‘Positioning African Industries for Economic Transformation and Continental Free Trade.’

In his words: “The evidence, historical and contemporary from across the world is that manufacturing is critical to economic transformation. It has been key in adding value to agricultural products and minerals and has also been a major motor of economic growth because it boosts productivity.

“Equally compelling from the perspective of Nigeria which has a large population is that manufacturing has the potential to create a large number of sustainable jobs. Given the large number of entrants into the workforce every year and the important role of employment in reducing poverty, there is no doubt at all that industrialization must remain a key priority for African countries.”

He lamented that the COVID-19 virus continues to cause havoc and complicates all efforts to adapt to climate change and leapfrog into the Fourth Industrial Revolution.

Accordingly, he urged all stakeholders to ponder on how industrial policy benefits from the African Continental Free Trade Area.

He stressed that for certain, the free trade agreement itself is indispensable if industrial development is to take off in Africa because it offers wider markets and economies of scale which are essential for manufacturing to be competitive.

“So, the crux of my message today is that we must take policy actions to create an environment in which businesses can thrive. To start with, we must adopt the right type of macroeconomic and industrial policies.  It is important for African governments to provide a stable macroeconomic environment that avoids and smoothens out volatility in prices, sharp deteriorations in the current account and budget deficits, and of course, rapid accumulation in debt burdens,” he emphasized.

He, however, advised that while they should be avoided, the problem is seldom the occasional spikes in macroeconomic variables, but rather rapidly changing and fluctuating conditions that make it difficult for the private sector to make informed business decisions.

Speaking on the industrial side, the VP mulled policies like tariffs, quotas, subsidies, and non-tariff barriers which protect the country’s infant industries so that they can create jobs and enable learning are vital.

Prof Osinbajo posited that well-negotiated rules of origin are important in the context of the free trade agreement as they are key to preventing trans-shipment and the deflection of trade.

According to him, “Without them, firms from non-state parties could set up simple labelling operations in one Member State with a view to shipping already finished products to another Member State without really adding any value.

“By the way, I think it is important for MAN to involve itself in an advisory capacity to government negotiators as we go further into the rules of origin negotiations (these rules negotiations have, of course, started), but I think as we go on, we should get more contributions and advise from MAN.”

He added Nigeria manufacturers must also strive to become competitive after clearly specified time periods so that they can withstand the ever-present danger of stiff competition from imports.

“When the gap in prices between domestically produced goods and imports is too high, arbitrage opportunities become irresistible and Customs Services will struggle to reduce trans-shipments and stem smuggling.

“In other words, while our manufacturing industries must be nurtured and supported, they cannot remain infants forever.

“One of the ways to increase the competitiveness of African industries is to develop and deepen regional value chains wherein production systems starting from conception and design right through to supply of raw materials, processing, transport, storage, marketing, and sales take place within our countries and continent.

“When we export commodities to the rest of the world, we are also exporting jobs and the positive spillover effects such as learning that come with manufacturing are lost,” the VP added.

He recalled that they are already beginning to see some green shoots emerging in this regard as Nigerian fertilizer blenders obtain phosphates from Morocco for blending with urea produced in our petrochemical plants.

Similarly, he noted, that South African car manufacturers already buy leather for car seats from Botswana, stressing that there is need much more of such activities.

He opined that for the sector to see the kind of manufacturing activity that it desire, there is a need to develop a strong infrastructural base, especially an extensive, cheap, and affordable infrastructure which is vital for the success of the nation’s economies.

“We must build a network of roads, bridges, and rail that will facilitate the movement of goods and people just as we build the electricity plants to power our factories and the broadband networks that lubricate modern business.  It would also be essential in the interim to develop sites with dedicated infrastructural and regulatory structures like Special Economic Zones and Shared Facilities for small businesses.

“Another requirement is to deepen the ecosystem for domestic and regional value chains.  In such an ecosystem, incentives will be coordinated and tied to performance, development banking institutions will be geared to supporting manufacturing activity while investment and intellectual property regimes are harmonized, aligned and consistent with Africa’s realities and industrial policy objectives. There would also be sharing of research and development outcomes across regions and even supply chains that interlink Special Economic Zones.

“Another major objective must be to ease payments across borders.  It follows that payment flows which work in the other direction of the flow of goods and services are equally important,” he explained.

Prof Osinbajo also decried how foreign currencies have been mostly used for such payments which constrain the amount of trade that takes place because most African economies face foreign exchange constraints.

He declared also that “It is quite essential then to develop and deepen inter-regional and continental payments systems.  It is particularly important in this regard to rapidly operationalize the effort by Afreximbank to establish a Pan-African Payments and Settlement Platform. This will go a long way in creating the desired continental payments system and also in facilitating cross-border informal trade which is estimated to be about $93 billion per annum.”

He emphasized again that some complementary policies are required for industrial transformation especially in the context of the free trade agreement.

“I have in mind the free movement of people across the continent.  Right now it is often easier for business people and tourists from outside the continent to travel within Africa and this need to change especially as security and related concerns can now be addressed with technology including improvements in travel documentation and maintenance of digital databases.

“Free movement including the right of establishment will create the necessary framework for businesses to widen their operations across the sub-region and thereby deepen regional value chains.

“So, I call on the AU Member States to ratify and implement the Protocol on the Free Movement of Persons, Right of Residence, and Right of Establishment,” Prof. Osinbajo concluded.

Earlier in his address, Engr Mansur Ahmed, President MAN on behalf of the National Council of the Manufacturers Association of Nigeria, welcomed all distinguished guests and all participants, and thanked them for accepting their invitation.

President MAN commended His Excellency, Prof. Yemi Osibanjo GCON, the Vice President of the Federal Republic of Nigeria for taking unprecedented steps to be part of the event.

“It is our firm belief that our conversations at this event will help chart the course for sustainable Africa’s industrialization and economic transformation,” Ahmed said.