Aganga urges FG to set Agenda for Competitive Manufacturing in Nigeria

• Streamlines areas to collaborate with China, others

 

The former two-time Minister of the Federal Republic of Nigeria, Olusegun Olutoyin Aganga has called on the Federal Government to set agenda for competitive manufacturing in Nigeria.

Aganga made this call while delivering his lecture at the 3rd Adeola Odutola Lecture during the Manufacturers Association of Nigeria 51^st Annual General Meeting (AGM) in Lagos.

He harped on the need for Federal Government to set Agenda for Nigeria’s Competitive Manufacturing, noting that some Nigeria’s competitors in and outside Africa took some of  initiatives and actions to improve their competitiveness.

Aganga said over the years, China has implemented various strategies to make its products competitive in Asia and the global market.

Some key factors that have contributed to China’s competitiveness, he said, include: “Investment in education and skills development to create a large and low-wage skilled workforce capable of supporting its growing industries; Heavy Investment in Infrastructure such as transportation, ports, and communication networks which has improved the efficiency of the supply chain and reduced production costs; China established Special Economic Zones (SEZs) such as Shenzhen and Pudong with adequate infrastructure that offered tax incentives, streamlined regulations, and easier access to foreign investment.

These zones, he said, facilitated foreign direct investment and technology transfer and developed industrial clusters, leveraging on the strengths of various regions, making production more efficient.

Other agenda set, he said include: Adopted export-oriented policies, focusing on manufacturing products for international markets, stressing that this strategy helped Chinese companies gain exposure to global demand; China identified and supported strategic industries, such as manufacturing, electronics, and information technology, that were critical for its industrial development as the Chinese government provided financial incentives, subsidies, and support to certain industries to promote growth and competitiveness; Encouraged technology transfer by collaborating with foreign companies, universities, and research institutions.

However, he said, joint ventures and partnerships facilitated the exchange of knowledge and expertise; Collaboration between foreign outfits and Chinese partners was enforced in some sub sectors.

“For instance, in the auto industry, global players were compelled to partner with Chinese automakers if they wanted to sell into the huge Chinese market. Not only was partnership a requirement, the structure was such that the different units of a foreign manufacturer had to partner with a different Chinese operator. So, Ford Motor was broken into sedans, compacts, buses, trucks etc. and each arm could only partner with a totally different Chinese outfit!” he said.

He revealed that China adopted flexible and adaptable Manufacturing to meet the different market demands, allowing them to produce a wide range of products, adding “As some say, you can get the very best and the worst of a product from China. It depends upon your specifications which has become standardised to the extent that China has specs for major markets such as the USA, the EU etc. It’s called contract manufacturing to specifications. It all depends on what you are prepared to pay for. Nigerians have developed a reputation for demanding lower specs.”

China offered incentives to attract foreign investors and multinational corporations to set up manufacturing facilities in the country; Attracting FDI from multinational companies brought in advanced technologies and managerial expertise, further enhancing China’s productivity; China also provided support for the establishment of these companies through technology parks such as the Beijing Technology Park which comprised six university campuses and two ICT parks with global players and local participants.

China has also entered into various bilateral and regional trade agreements with various countries, providing easier access to international markets for its goods.

For example, he said, China already has trade agreements with several African countries and regional organisations including South Africa – a member of BRICs, Angola, Ethiopia – a key partner in China’s Belt and Road Initiative (BRI), Kenya, Egypt, and Algeria to mention a few.

According to him, China is also taking the following steps now to become even more competitive globally such as Innovation and Technology: China has been investing heavily in research and development (R&D), aiming to become a global leader in technology and innovation through Initiatives like “Made in China 2025” (MIC 2025) and “China Standards 2035”.

He explained that MIC 2025 is a 10-year comprehensive strategy which focuses heavily on intelligent manufacturing in 10 strategic sectors which include: railway equipment, energy saving, power equipment, agricultural machinery, high-tech ships, aerospace equipment and medical devices, adding that these are some of the high-value products imported by African countries.

The plan, he declared seeks to stop China’s reliance on foreign technology imports with its own innovations and create companies that will not only produce essential components but also produce finished products for local and international markets.

“It was inspired by Germany’s Industry 4.0 and is in line with the German and Japanese approaches to competitiveness, economic development and innovation. MIC 2025 has the goal of raising domestic content of core components and materials to 40% by 2020 and 70% by 2025. These are targets we can set for some of our products. In the Agricultural sector, the goal is to establish up to 3 recognisable brands and up to 5 internationally competitive companies. These are some of the areas in which we can seek to collaborate with China.

“Belt and Road Initiative (BRI): Under the BRI, China continues to expand its global infrastructure and connectivity project, the BRI, which involves investments in transportation, energy, and telecommunications infrastructure in partner countries. This will make it easier and cheaper to move their goods to those countries. Nigeria, Ethiopia, Kenya, South Africa, Senegal and 12 other African countries are partners in this program. It is interesting that these are also target countries for Nigeria under AfCFTA.

On digital Transformation, he said involves promoting a digital economy, including developments in ecommerce, fintech, and 5G technology, which has been a significant part of China’s competitiveness strategy, adding that over a 10 to 15-year period, the plan is to “drive digital manufacturing forward by increasing digitilisation and the interconnection of products.”

He pointed out that we can learn from this, as it involves adopting information technology and the internet to connect small and medium sized companies to global production networks.

He hinted that China is shifting from low-cost manufacturing to high-value-added industries, such as advanced manufacturing, biotechnology, and green technologies and queried, “What is Nigeria’s strategy?”

Speaking on setting an agenda for Nigeria and Africa, Aganga  lamented that high energy costs, slow down in industrial output, increase in the number of multilateral and bilateral trade agreements, and sluggish demand for products generally mean that almost every country is now more focused on competitiveness with competitors now setting the benchmark.

“Nigeria cannot afford to be left behind as it competes with leading importers like China, Germany and export-oriented African countries to meet the demands of consumers in Africa.

“Competitiveness drives productivity and will determine the long-term prospects of our economy as we saw in Asia. Investors are not in love with China for the sake of it. They go to China because it is cheaper to produce there and they know they can get world-class skills and technology, without paying too much. That is competitiveness,”

“In 2005, landed costs to manufacture in China and deliver to the US were 25% to 30 % less than manufacturing in the US. This led to a huge reallocation of capital and capacity towards Asia. Recent analysis suggests that the gap has narrowed to 10% – 15% or even less but the gap remains. Also, when Germany lost its clothing and fabrics manufacturing to cheaper locales such as China, India and Turkey, German companies had to innovate and move up the technology curve to stay competitive. They now have a commanding share of the global market for complex machines that weave, braid and knit textiles and other high-tech products including the automotive and aerospace sectors. It is not just about becoming competitive but staying competitive.

“As regional markets consolidate, economic blocks strengthen and trade barriers are removed through multilateral and bilateral agreements, it is becoming more important to be competitive than ever before. The effects of agreements such as the AfCFTA, Common External Tariff, EPA, and Preferential Trade Agreement mean that Nigerian businesses are now open to competition from all over the world. Nigeria must act decisively and quickly.”

Aganga proffered some recommendations for Nigeria thus: “Agree on a vision for industrialisation with targets that the whole country will buy into.

“Develop a policy and plan of implementation. The Nigeria Industrial Revolution Plan (NIRP) which MAN helped develop is a good starting point. Let me remind you what NIRP set out to achieve: to make Nigeria a top 10 global player in at least 10 key manufacturing categories within the next 5 to 10 years. This was the vision and we thought it was realistic then as we do now.

“China, Germany and the UK are on the 4th Industrial Revolution Plan and have a history of rigorously implementing their plan over decades. That is why they are where they are today.

“Nigeria on the other hand had been deindustrialising due to external intervention and lack of support from Government and yet wanted to be prosperous, create job opportunities, generate significant non-oil foreign income, have a strong Naira, large foreign reserves and a stable exchange rate. No, it does not work that way. That is wishful thinking. We must walk the talk.

“Nigeria launched its industrial plan in 2014, commenced implementation and then put it in the cooler for 8 years. If it had been implemented rigorously, Nigeria would have become atop competitive global exporter in at least 3 or 4 of the 13 products identified for export by now. It is all about continuity and discipline.

“It is the job of MAN and the Government led by His Excellency the President and supported by Ministers of MITI and Finance/Coordinating Minister of The Economy to keep the industrial vision alive and make it the cornerstone of the Government’s plan.

“Continuity is key: This is our major problem not plans. In fact, as I always say, we are long on plans but short on implementation. China, Germany, the UK and others are all on their 4^th Industrial Revolution Plan and unlike Nigeria, South Africa has an automotive policy that it reviews, enhances periodically and that it has implemented rigorously for more than 60 years.

“That is why at a time, South Africa accounted for more than 95% of the non-oil exports by African countries to the US under AGOA, exporting cars and spare parts mainly.

“In 1980, China was the seventh-largest economy with a GDP of only $305.45 billion, while the US was then at $2.86 trillion. In 1978/79, China commenced the implementation of its economic reform which included its industrial plan. These reforms and plans were rigorously implemented over 35 years and the results were astonishing: an average annual growth of 10% for many years and now, the largest economy in the world with a GDP (in PPP terms) of $25.27 trillion and an industrial powerhouse. That is what manufacturing does and what Nigeria is missing. It multiplies national wealth.”

Underpinning all these, he said, is the business environment, adding “Strong and stable macroeconomic environment. One of the biggest determinants of how much investment an economy attracts is the macroeconomic environment. An environment where inflation is at record high level, and still rising, exchange rates are high and volatile, and a large percentage of national income is going towards servicing debts cannot foster the kind of stimulus our economy needs. “There is a need to design a macroeconomic framework that will be supervised by a strong macroeconomic management team within the economic management team that is accountable to the President. The macroeconomic management team would take responsibility for economy, using dedicated task teams constituted from the relevant ministries, departments and agencies. They should be charged with specific targets and with specific delivery timelines. The goal to pursue is a return to single-digit inflation.”

Other recommendations he mentioned include: “Streamline customs procedures and regulations to simplify and reduce the costs of cross-border trade. Establish common standards and norms to reduce non-tariff barriers. Implementation of the WTO Trade Facilitation Agreement would help.

“We also need to pay more attention to the ease of doing business particularly those areas that are not covered or adequately covered by the Ease of Doing Business Survey like poor implementation of government policies, multiple regulators with overlapping mandate, illegal roadblocks, levies, demands by local communities etc.”

He maintained that the local manufacturers and investors are in a better position to point the government in the right direction.

He made reference to the National Competitiveness Council, noting that over the past few years, national competitiveness councils (NCCs) have proven to be one of the most successful approaches to institutionalizing public-private dialogue on competitiveness globally.

“That was the catalyst for setting up the first NCC in 2014 with Dr Chika Mordi as the pioneer CEO. Unfortunately, it was discontinued when I left the Government. In general, the purpose of a NCC is to provide a platform for constructive public-private dialogue on economic competitiveness, provide objective information on the state of competitiveness in the country and raise awareness of the strong link between national competitiveness, business performance, economic growth and the population’s prosperity and wellbeing to the Government, businesses and the public. In addition, councils can help clarify the role of the business sector in improving competitiveness and help mobilize and channel support of this part of society members of the NCC are ministers, MAN and some industrialists.”

Security of lives and property, the national values system and the rule of law, he said, have to be addressed to improve the business environment.

He pointed out that Japan’s industrial plan and sectors, where they have a competitive advantage, are partly based on their core values of discipline, attitude to work, attention to details etc. and that the WEF had identified poor work ethics in the national labour force as an area of concern for Nigeria, therefore, Nigeria must rebuild its values system and link it to economic prosperity. Law and order and the value system are two sides of the same coin.

He also harped on the need to update and implement Nigeria’s Industrial Revolution Plan, adding that almost all the global exporters and in particular our competitors for the African market now have a new plan.

“As discussed earlier, China, the largest supplier of imported goods into Nigeria and Africa has already commenced Made in China 2025 plan. Germany, on their part, has been at the forefront of the Industry 4.0 revolution, which is about smart factories that will manufacture products in a more flexible energy-efficient, resource-saving and cost-effective manner. The UK has also commenced its 4th Industrial Revolution Plan. South Africa, Morocco and Egypt have been promoting manufacturing and adding value to their exports, particularly in sectors like automotive, agribusiness and chemicals. It is noteworthy that in response to the Ukraine crisis, the following counties have announced or proposed changes to their industrial plans this year; essentially to de-risk from foreign supply chains and ensure protected technology– the USA, China, Germany and even Britain which had largely become de – industrialised,” he added.

The former minister advised that Nigeria need to update and commence the rigorous implementation of its own Industrial Revolution Plan.

“The NIRP focuses on value addition and identifies sectors where Nigeria can truly win and dominate, based on an assessment of our country’s competitive and comparative advantages. It proposes specific initiatives and interventions to improve productivity and competitiveness in those target sectors and increase production output. The NIRP also adopts an indirect approach in tandem, thereby acknowledging that it is sometimes difficult to predict where free market forces will lead the industry and which sectors will be transformational winners. As such, the NIRP establishes cross-cutting interventions that address the competitiveness of the entire manufacturing sector in Nigeria (i.e., regardless of sector). These indirect interventions create a broad “Nigerian platform” for manufacturing to thrive, while private capital determines which sectors will grow. The plan also identifies 13 items that can become a major source of foreign income as we walk towards implementing the zero-oil policy.

“The philosophy of the NIRP starts with the acknowledgement that Nigeria’s industrialization must be driven by long-run competitiveness. Industries thrive locally when they can compete globally. The industry needs a competitive business environment to prosper, an environment where costs are low, regulation is streamlined, infrastructure is reliable, and government bureaucracy is minimized. The global competition is for capital, technology, credible sponsors, and skilled labour. These resources are finite and not in limitless quantity, as such Nigeria must decide to act in earnest and build differentiating competitive advantages in areas where it already has some comparative advantages and strengths,” he emphasized.

The Sovereign Wealth Fund and indeed the NNPC/NNPCL, he said can play a major role in Nigeria’s Agenda as they did in Brazil, UAE, Malaysia and Saudi Arabia where they helped to diversify the economies and build large competitive industries. Aganga said “The example I used in “Reclaiming The Jewel Of Africa” is Saudi Basic Industries Corporation (SABIC), a Saudi Arabian multinational corporation that was established in 1976 by Aramco (Saudi Arabia’s NNPC) but began production in 1981 with an investment of $1.8 billion. Today, it is the second-largest diversified chemical company in the world and a market leader in the production of ethylene, methanol, polycarbonate, polyethene, polypropylene, ethylene glycol, fertilizers, engineering plastics and its derivatives and granular urea. Its mandate is to pioneer and drive gas industrialization in Saudi Arabia by adding value to the gas produced. The company had total assets of $83.46 billion as of the end of December 2022, while the aggregate production was about 61 million metric tonnes. It operates in 50 countries, employs about 31,000 people and generated $46.6 billion in sales revenue. With 65 world-class manufacturing and compounding plants worldwide, 20 innovation centres in the USA, Europe, Middle -East, South Asia and North Asia and over 9,948 global patents, the company also has the SABIC Academy, which trains all SABIC staff as well as hosting classes for university students. The interesting thing is that SABIC has in turn created The Saudi Iron and Steel Company, one of the world’s largest fully integrated producers. Malaysia used Khazana funds and UAE used Mubadala.

“We can do the same in Nigeria to accelerate industrialisation in identified sectors. Nigeria does not need to start from scratch. It just needs to find genuine manufacturers in the identified sectors with potential, invest heavily in them and put a robust Governance system in place. The model and example I gave in the book is the NLNG and to some extent Indorama.”

Speaking on the development of the MSME Sector, he said that all over the world, MSMEs are the primary drivers of employment and economic growth.

He pointed out that “In China and Brazil, MSMEs employ 75% and 70% of the workforce, respectively. The last survey conducted by the NBS and SMEDAN in 2020 identified 40 million MSMEs, employing 76.5% of Nigeria’s workforce, accounting for 49.78% of the GDP and 7.64% of exports.

“Enough attention has not been given to this sector, particularly since 2017. According to the surveys by the NBS and SMEDAN, the number of enterprises in the sector grew by 20m from 17 million in 2010 to 37 million in 2013. Between 2013 and 2017 it grew by only four million, and in 2020 it fell by about two million to 40 million, partly due to the effects of the COVID-19 pandemic. Nigeria’s 40 million MSMEs comprise 96.7% of all businesses in Nigeria. 98.8% of them are in the micro cadre. One positive factor is that 67% of businesses are owned by the youth; according to BusinessDay newspaper of 2 March 2023.

“Nigeria already has a comprehensive plan, the NEDEP, which was launched in 2014 along with the NIRP. This can be updated and implemented as part of the long-term plan. It covers the entire ecosystem of the sector nationwide, working closely with the SMEDAN, ITF, BOI, the state and local governments and the private sector, under the supervision of the National MSME Council, which was set up in 2014 in accordance with SMEDAN’s Act but was discontinued when the new administration arrived in 2015. The Council was set up to facilitate the accelerated development and competitiveness of the sector and was made up of ministers of the relevant MDAs and the private sector. This should be complemented by state MSME councils.”

Speaking on the need to focus on Export-Oriented Growth, he said “In 1980, both China and Nigeria each accounted for 1% of global world exports. However, by 2011, China accounted for 11% of global exports (all non-oil), while Nigeria was less than 0.4% and shrinking. China has grown richer and its currency, the Yuan, much stronger. Like the Chinese, the only way to strengthen the Naira is to increase productivity, increase capacity, and become export-oriented. Nigeria’s Export to GDP ratio is also very low when compared to Malaysia, 76%, South Africa, 31%, China, 24% and Brazil, 12%. Nigeria will need to earn about $72 billion from non-oil exports to achieve 15%.

“Nigeria must now prioritise attracting and retaining foreign investment into sectors identified for exports to bolster export capabilities. The NIRP already identifies 13 items/sectors where Nigeria has a comparative and competitive advantage and can become a top ten global producer. NEXIM bank can be empowered to play the role China Exim Bank plays in Africa by providing loans to credit-worthy countries in Africa to buy Nigerian manufactured products and services. As discussed earlier, the SWF, CBN and the NNPC/NNPCL can also play a major role.”

At the heart of the Chinese economic and industrial revolution which started in 1979, he said, lies the strategic use of special economic zones, or industrial cities.

“Just two years after this policy was introduced, these zones accounted for a significant percentage of the total foreign direct investment going into China and by 2021, China’s 21 free-trade zones contributed 17.3% of its total foreign trade and 18.5% of its foreign investment inflows.

“Nigeria adopted this policy a few decades ago, creating two agencies: the NEPZA and the Onne Oil and Gas Free Zone Authority. It licensed over 30 free-trade zones but only about five set up by the private sector are considered to have been successful or partially successful.

“Again, this was a result of the poor implementation of a policy that has worked so well in other countries. If Nigeria improves on the quality of implementation, we can employ these FTZs to gain a competitive advantage as Malaysia, India, Indonesia, Saudi Arabia, Kenya, Egypt, and China have all done.

“SWFs in Saudi Arabia and their partners invested in some of the industrial zones in 35 industrial cities and in the technology zones too, the investments exceeded $133 billion and the zones employ about 528,000 people. In parallel with export-oriented growth, the domestic market should be developed to leverage our competitive advantage.”

Another area, he said, is the Foreign Direct Investment and Export Promotion, noting that incentives could be offered to attract foreign investors and multinational corporations to set up manufacturing facilities in the country.

He stated further that attracting FDI from multinational companies brought in advanced technologies and managerial expertise, further enhancing China’s productivity and so Nigeria must also actively promote its manufactured products in both regional and international markets.

Speaking on developing and enhancing industrial infrastructure, Aganga said inadequate economic and trade-related infrastructure significantly limits our capacity, and productivity and increases the costs of production and logistics.

Aganga said “The lack of electricity alone adds about 20%-30% to the cost of production and of course, the recent increase in fuel prices has further increased the cost of production. The problem has persisted due to the poor implementation of various infrastructure development plans, lack of creativity and focus to attract investments into infrastructure development, low priority given to trade-related infrastructure etc.

“Funding is also poor and when Nigeria has relied on borrowing, proceeds have not been allocated to infrastructure projects that will expand the economy. The application of funds has been driven more by politics and personal interest rather than by the economy. The Ministry of Power must work closely with the Ministry of Industry, Trade and Investment and the industrial sector to develop immediate, short and long-term solutions which may involve deploying imaginative models of licensing independent power plants. That was why the Presidential NIRP Implementation Council set up in 2014 included ministers of works, transport, power, MAN and some industrialists. It might be worth reviving this. Models, such as the one that enabled the success story of Geometrics Power Limited in Aba, should be replicated for other industrial and commercial clusters. Industrial and economic zones with captive power and other shared services as explained in NIRP could accelerate the process.

“We also had a plan to create industrial/economic zones across the country with dedicated power supply and the necessary infrastructure to move goods and people in and out of the zone. NEPZA was identified to lead the initiative but I understand that even though they got the budget a few years ago, there has been no major progress. The new arrangement with Siemens, which has started, should improve the situation drastically.

“Some large companies have started using Palm Kernel Shells (PKS) as a source of energy and it has reduced their energy costs by 60%. The Government should incentivise the private sector to scale up this alternative source of energy for industrial use. There are many infrastructure financial instruments, strategies and incentives that can be explored, including private finance initiatives (PFIs), public-private partnerships and diaspora funding.

“Nigeria and other African countries that suffer resource paucity for the design and delivery of development projects in their pursuit of inclusive growth do not always have to borrow for this purpose, especially offshore loans that are expensive and come with other attendant concerns. If these countries take advantage of the large and growing population of migrant workers and their home remittances. There are two possible ways to get the diaspora population involved in economically viable infrastructure projects. The first and increasingly popular way is a diaspora bond tied to specific infrastructure projects and the second is a diaspora fund to finance economic/trade-related infrastructural development.

“The success that Nigeria recorded with its maiden issuance of a $300 million diaspora bond in 2017 illustrates this potential. This instrument can be further explored by ensuring that the proceeds are project-tied. For example, the bonds can be floated to fund new projects in aviation, power, railway and road, eliciting confidence through transparency, accountability and opportunity for the investors to take ownership.

“There is ‘citizenship pride’ when their investment is tied to specific national projects. India adopted this instrument to meet matured financial obligations during financial crises, and Israel issues diaspora bonds on a yearly basis to fund developmental projects. Ethiopia raised funds from the diaspora for a major hydropower plant.

“Nigeria also needs to attract investments into Digital Infrastructure. This will foster a digital economy, enhance e-commerce, fintech, and support technology start-ups and the techdriven sectors to enhance competitiveness and innovation.”

Speaking on quality infrastructure, the former minister stated that apart from a very low manufacturing value add base, the major problem with Nigeria’s export of non-oil commodities and competitiveness is standards/quality.

He lamented that poor compliance with phytosanitary measures has caused Nigeria to have one of the highest levels of rejects of agricultural produce exports to Europe and the US, noting that this results from the excessive use of agrochemicals that exceed the maximum residual level permitted, the use of banned agrochemicals and the presence of aflatoxin in agricultural commodities.

“I must say that this is also a local consumer protection issue, as sanitary and phytosanitary measures are there to protect humans, animals and plants from disease, pests or contaminants. Government agencies whose mandates relate to standards and quality must be revamped. These include the Standards Organization of Nigeria (SON), the NEPC, the Department of Weights and Measures at MITI and Federal Produce Inspection Services, among others. To address some of these issues, the Standards Organization of Nigeria established two internationally accredited laboratories which I had the privilege to commission in 2014, and we commenced a comprehensive quality infrastructure programme with the United Nations Industrial Development Organization (UNIDO) and the European Union (EU).

“I understand that the policy document (2021-2025) was approved by FEC and the governing structure for the Nigeria National Quality Policy has also been inaugurated. The Policy is designed to put in place the necessary regulatory framework to ensure global acceptance of Nigeria’s products and services. The programme which we started about 9 years ago needs to be prioritised for competitiveness and to protect Nigeria from an influx of substandard goods.”

Speaking on access to affordable finance, he said, that finance is insufficient and the cost of funds in Nigeria is high, typically between 15% and 20%.

He hinted that “Relative to its competitors, Nigeria has a remarkably low domestic credit to GDP ratio and the credit, too expensive due to a combination of factors including high treasury rates, high inflation, infrastructure deficit, inefficiencies etc. Also, available tenures on credit facilities are too short and cannot be used for long-term competitive businesses. The short-term facilities in Nigeria are best suited for trading.

“There is no access to development finance including risk capital for infrastructure and yet the country needs about $1.5 trillion over ten years to close its current infrastructure deficit. There is also a shortage of dollars for the importation of intermediate inputs and machinery for manufacturers. The cost is higher due to the exchange rate. If not well managed this could lead to the collapse of some industries and scarcity of products.

“Nigeria must review the legal framework for alternative financing sources such as private equity and venture capital funds, and development funds for infrastructure development. The country’s development financial institutions, such as the Development Bank of Nigeria, BOI, Bank of Agriculture and NEXIM (Nigeria Export-Import Bank), are unable to meet the needs of Nigerians because they are grossly undercapitalized.

“For example, the last time a comprehensive review was undertaken the total loans given by BOI since inception was significantly less than the ANNUAL demand by manufacturers. We commenced the repositioning of BOI in 2013 which included getting it credit-rated so that it can access cheap funds from the international capital markets and institutions. I am delighted that as a result of the initiatives, BOI has been able to raise funds from international institutions to support their efforts. Strategies must be put in place to strengthen these institutions to meet the needs of the manufacturers. Based on the study of many countries we suggested many solutions in the NIRP document including setting up an industrial and investment holding company and comprehensive review of the entire financing value chain to identify and address the constraints.

“I will encourage the government and MAN to update and implement the work that had already been done on the financial value chain. The CBN also has to develop a financing model, working with local banks to unlock new sources of cheap long-term capital for strategic industries. It is important to bear in mind that almost all the competitors of Nigeria provide financial incentives and support to manufactures especially in strategic industries. This can come in the form of grants, subsidies or low interest loans. The development bank of Nigeria was set up in 2014 as a wholesale bank to source cheap finance from external sources for DFIs, like BOI. I am not sure it working that way now and would encourage the government to review the performance of the bank and reposition it.

“To support exporters who have to import intermediate raw materials and machinery, a dedicated fund can be established which is funded from the proceeds of a dollar bond issued by the FGN which has a moratorium of about 4-5 years with bullet payment of capital and interest in the fifth year. This will support confirmed letters of credit with exporters paying back from the proceeds of export.

“It would be useful to now undertake a comprehensive and in-depth review of the domestic capital market to determine how it can optimise its contribution to capital formation and financing, going forward.

“For the external private capital market, it should be recalled that, under my guidance as Minister of Finance, the DMO in January 2011 successfully issued the first Nigerian sovereign debt in the International Capital Market (ICM). The debut of $500 million was for ten years and it was oversubscribed. One of the objectives for the issue was to create a sovereign benchmark, which Nigerian corporates have leveraged to access long-term capital in the ICM.”