MAN, FG, Others Agree To Explore Roadmap To Promote Manufacturing Sector- Ajayi-Kadri
The Director General of the Manufacturers Association of Nigeria, (MAN) Mr Segun Ajayi- Kadri, mni, appeared at the Nigeria Info FM station in Lagos for an interview during the ‘Sunny Side’ programme on 15th July 2024 on the activities in the manufacturing sector in Nigeria. The interview by the DG MAN was monitored and exclusively published by the Editor Gentechnews, Tony Nwakaegho.
EXCERPTS:
Kindly lead us into the functionality of the Manufacturers Association of Nigeria, (MAN) so that Nigerians will be able to understand the role of MAN?
The best way to start it was to start from where we started. More than 50 years ago Manufacturers Association of Nigeria, (MAN) was formed by a group of indigenous Manufacturers who felt that a voice needed to be given to this important sector. So, MAN was formed in the year 1971. And since then, we have committed to advocating for an environment that is conducive for Manufacturing business in Nigeria. In doing this we interface with government, international agencies, local Ministries, Departments and Agencies (MDAs) of government and just about any body that have their activities impacting on the manufacturing sector. In most cases, we have extended the mandate to cover West Africa where MAN is pioneering the Federation of West Africa Manufacturers Association, even to the continent where MAN is pioneering the formation of the Pan- African Manufacturers Association. We do all these to ensure that the Manufacturing sector plays at the national level a central role in advancing our economy and also at the continental role in integrating the continent so that whatever we produce is consumed in Africa and we do not allow the influx of products from such countries to overrun our economy. In a nutshell, Manufacturers Association of Nigeria is committed to promoting an environment that is conducive for Manufacturing business.
What are the present issues that Manufacturers Association of Nigeria now faces?
The issues we face are more or less the same as what most economic players face. We operate in an environment that is challenged by both global and domestic issues. At the global level since Post Covid-19 the international connectivity, the logistics and the general international trade are yet to fully recover from the destruction that it caused. We have also seen the general downturn in the GDP growth of many countries, most of it below five per cent. Which means that the global economy is slowing down in terms of its growth rate. Then in Nigeria we also have seen quite a number of challenges that confront the economy. We have seen in more recent times government reforms that are intended to impact negatively on how business is done. Though with a foresight of greater gain to come, but in the immediate environment you can see the impact of infrastructure deficit in terms of power, port, road, and so on. We have also seen challenges in insecurity, challenges of inflation which tends to make the cost of our own input more expensive and also limiting the purchasing power of the consumers. We have also seen the impact of insecurity in our logistics and movements and sourcing of our raw materials. We have seen a high inflation rate and borrowing rate has been quite high. We have seen the general apathy in consumers purchasing. In all of these we have tended to impact on the manufacturing business. So, we have our members who are manufacturers dragging to see how they could reinvest their systems to overcome these challenges.
Is the Nigeria government aware of what we can do at the micro level, given the sequence of events?
Quite right, at the domestic level, there are certain challenges, some of them familiar in the sense that they have been with us quite a while and you rightly hit it on the head. It is a fact that by the nature of our dependent economy and the fact that previous governments have not also prioritized manufacturing. We have seen those challenges lingering and it has tended to give the impression that the Nigerian economy does not value this very important sector. So, there are challenges and they are being put across to the government. But as to whether the government is doing anything about it, it has become a big question and that is where we have the Manufacturers Association of Nigeria playing a role to bring this to the attention of the government and at the same time working with government, Ministries, Departments and Agencies and the National Assembly to create an environment that is conducive. One thing that must be very clear is the fact that the manufacturing sector represents a strategic choice that an economy has to make. It is not just like every other sector. So, when you are talking about the interest rate that the Central Bank of Nigeria, (CBN) has maintained must be must be consistently kept high in order to encourage borrowing and to encourage people to save and for people to be able to borrow, we need to be able to identify the factors and insulate it from the spiralling rate of interest otherwise we will not have investment. So, what I am trying to say is that the manufacturing sector in order for you to cure it of its limitation we needed to have some basic established rules that they have to play which is insulating them from the general down turn of the economy because it is the highest chance of bringing a multiplier effect on all other sector of the economy. So, if you have a virile manufacturing sector, you will be able to see the one that is interrelated with agriculture, be able to see the one that promotes jobs, be able to bring the one that promotes innovations, the one that will pay government taxes and reduce social tensions. Some have also extended it to bringing the winding down of insecurity which most times is a product of an idle hand for those who are disadvantaged within the inclusive growth that all nations face. So, we have a system that cuts across in such a way that manufacturing reads through as to what solution that could be brought to the socio-economic challenges that we have in the country.
I want to assume that from what you have just highlighted insulating the manufacturing sector from the consistent flux in this exchange international market has not been done and the rate at which the Nigerian economy has been battling with, the CBN does not insulate MAN?
Yes, it doesn’t and that is the conversation that we are having in such a way that we will be able to draw attention to it because one can understand the role of the CBN, the government bank, and Nigeria’s bank to the need to maintain a balance. But, from the practical economic point of view, you cannot solve local challenges with those. We need to be able to identify where your real sector lies. And if you want to intentionally promote productivity you need to insulate it from vagaries of both imported and locally determined finding constraints. So, you are going to for instance ensure that while you make sure that we have savings that the interest rate is high enough for you to encourage people to put their money in the banks. We need to identify some sectors that will in the same way create jobs, pay taxes to the government, reduce social tensions, bring down insecurity and intentionally insulate them from the unintended consequences of having a higher interest rate. Those are the issues we are making and we are not asking for what has not been done in other countries. Deliberately, for those countries that will compete to bring in their product to Nigeria and they have low interest rate, in most cases less than five per cent. But the average lending for the manufacturing in Nigeria is nothing below 28 per cent and it is as high as 35 in some cases. There is no manufacturing business that you will do that will enable you to have a return on your investment if you borrow at those rates for instance.
The exiting of international companies in Nigeria. What deciding business environment is defining these moves?
Like I said, the Nigerian economic environment is tough and for the manufacturing sector it is so difficult because the job of a manufacturer is to produce and that is what most people think, but in the real sense of it, it is to sell what they have produced. So, because once you produce and you are not able to sell it is double jeopardy because you are going to invest in warehouses where you are going to keep those products that have not been bought either by the wholesale or the retailers. And once you do that it reaches its expiry date, you have to pay for its disposal. So, the job of the manufacturer is not only to produce but to be able to sell. And what we have said is that, one, our production is constrained because they import raw materials in some cases and of course the inflation has made the input including the raw materials to be high. So, we have low production capacity and at the same time average income of the Nigerian is dwelling so we have less purchases. So, when you take these together it tends to limit your performance, you are not able to rise above what will allow you to deliver on your shareholders’ own. Don’t forget the point that manufacturers’ shareholders earn dividends. Don’t also forget that they also borrow money and they have to pay interest. Don’t also forget they operate in an environment where competition is real. So, there are imports of similar goods and they come into your market in Oyinbo, Kaduna and Port Harcourt and your goods are lying side by side on the shelf. If they are cheaper, Nigerians will not say, Oh I love my brother, this product is made in Nigeria and they are going to buy it. They are to obey the law of their pocket, so they leave yours on the shelf. So, eventually, you will see that the environment for the local producers will have to be conducive in order to be able to compete.
I know that those companies like medicine and the consumables that left the country, left a void. Are those voids being filled?
So, having established that those companies that are leaving were beset by those things I have painted that they are having to leave. It is next to establish the fact that while most local industries that are closing shops are not reported, the fact that no search light has been brought upon them and in most cases those existing ones do not have any other place to go. When you see those that are exiting the country, they have options, so they move to other countries or they just simply wind up their operation and invest in some other things. That is why you are seeing those exits because the factors that are affecting them are affecting the local ones. As to whether there is replacement, the truth is that when those companies are in Nigeria, they also have competitors. It is only in cases where you have those that don’t have local competitors that will have to rely on importation of those items which of course will make it more expensive. One product that has been cited is Augmentin that the price immediately went below N10,000 to N34,000, N35,000 just because local production has been stopped, and it has now been imported. And the exchange rate has risen from 150, 750, 1,500 and if you do the maths, it generally escalates the cost and these are necessary medicines that Nigerians use. In retrospect, most of those that are exiting may not be immediately replaced because they have lost the local capacity. But for those that have competitors in Nigeria, it will actually, incidentally give an opportunity for them to stay and to fill the void that have been left by the departing companies. One thing I don’t want to lose is that it is not a good thing to say that manufacturers, especially multi-nationals, are leaving your country. It is a very bad signal to the foreign direct investment objective of the government. So, they will ask why did these companies like GSK, and others leave, so they went to investigate and it will point its search light to those limiting and binding constraints within the local economy that have led to their exits. And what we have always told the government is that rather than pursue an objective of getting people to come and invest in your country you take care of the local ones such that when those foreign would-be investors look into the country, they see opportunities for investment. A satisfied customer is a better marketer for you than spending a lot of money in trying to attract foreign direct investment. Nobody can love Nigeria more than Nigerians. I think this has been exemplified by Alhaji Aliko Dangote who has invested heavily in Nigeria and has become a reference point for would-be investors.
Which sector in the manufacturing industry concern you the most that has either collapsed or on the verge of collapse?
We have had very serious challenges in the electrical electronic sector and also the steel sector has been on the decline. We have seen very low appetite for investment in these areas and you can directly relate it to the dearth of raw materials, to the absence of a conducive environment and policies to deliberately promote them. We have also seen situations where there have been better attractions in other economies around us that have attracted investment in those areas. But it is to evolve, that just depends on how resilient these segments of the manufacturing sector you have. We have ten sectors in MAN for instance and several of them even if they face an underlining investment environment, but some of them are more susceptible to the challenges that we have than the others.
I know that MAN sometimes published that they have closed shops and also how the closing of the shops gave direct implication to employment. I thought the figures were understated. Can you help recapture what MAN was aiming at in that particular publication?
Over time, about five years ago we had more than 700 Nigerian companies that closed shops. You know we also have about 3,000 members and over time we have seen that decline. When I give you a figure of above 700, what this means is that they have stopped production and they are due to certain factors. And the joy of it all is that those companies also have a high probability of coming back to production if the right things are done. For instance, some of them had to close shops because they couldn’t afford to continue operations due to the dearth of raw materials.
What do you have to say about the currency?
Some of them are not able to import their machines, raw materials and spares because of the exchange rate, so it will have a capital inflow or it will have a required fund that they could restart their production. So, while it is depressive that almost 800 companies have closed in the last five years, it is also good news that something can be done that is why we are engaging government and we are having a listening on the side of government as to what measure needed to be taken in order to be able to bring them back on board.
How do the monetary policy and fiscal policy directly affect the manufacturing sector in Nigeria and other sectors that are GDP related?
We have consistently advocated for the right mix of monetary and fiscal policies. At the monetary level, we are looking forward to a situation where there is favourable allocation of Forex for instance at a rate that will allow productivity to thrive. That is at the monetary level. At the fiscal level also, we have asked for favourable fiscal policy measures that import duty and quota allocation that will favour domestic manufacturing. If these two are able to interface you wouldn’t have where the gains that have been made in teams of the import duties for instance will be removed by placing some restriction as to what you can bring into the country and also access to the Forex. You wouldn’t have for instance those $2.4 billion forward that were not redeemed by the CBN, because this is counter productive. While the duty that were supposed to be favourable, you have done all your transaction it now remains for the CBN to fully fund the Forex for which you have fully paid your Naira component and you are now jeopardized and asked to pay interest rate both in Naira and dollar. And that is how important the monetary policy is and it has to be the same with the fiscal policy.
Since the Manufacturers Association of Nigeria has seen all these issues besetting it and the dire consequence of that, will the foreigners like China will attempt to fill up the gap as some goods that were normally being produced in Nigeria are now being imported by China. Does that have a direct implication on the local manufacturing in terms of quality and even manufacturing.
Yes, you are right. Let us take the underlying factor. Anytime you import any product that can be locally manufactured you are importing poverty and exporting jobs and prosperity because in the real sense of it you are undermining the performance of the domestic industry because we operate in an unconducive environment and China will normally promote export, even subsidizing export. Those goods will come into this country at lower prices and they will beat the ones that are produced locally. We also mentioned the issue of quality. There is a high probability of those imports not meeting standard and because of the challenge we have been managing our borders, to unscrupulous business people, you see them importing substandard products even picking and counterfeiting local brands that are successful. So, that is the level of bringing in products that have local alternatives. There are also those that are brought into this country that we do not yet produce locally, but we have the potential of producing. Now, when you allow unfettered access for those products you kill the local initiatives for local and domestic production. And I think that is why people have been concerned about the potential impact of allowing unregulated and unchecked massive importation because countries take deliberate measures to promote export from their countries, in some cases dumping is even done in such a way that those import will come into this country sell at much lower and subsidized prices. And when they have succeeded in submerging the local economy, they are able to raise their prices. So, it becomes a strategic market asset that undermines domestic production and then promotes perpetual reliance on imports. That is the danger that we see, so in the long run what is a measure that will ensure that Nigeria is not sub changed is to intentionally promote domestic production so that you are able to replace those things that you import with local options and the advantage that brings for you is readily available, it can be regulated by our agencies, you can have access particularly those one that don’t rely on installing imported raw material, for you to even source your raw material and it expand jobs. You are also able to pay taxes to the government. You are able to improve local skills that will be able to allow a multiplier effect on other sectors of the economy, such as logistics, wholesale, retail, banking and so on.
I wonder whether the concept of regulating a thing exists in Nigeria sphere because there are original and counterfeit items sold in the market. I don’t know whether it falls within your jurisdiction. What do you have to say about this?
In terms of standard, yes, we do have Standard Organisation of Nigeria (SON) and NAFDAC to regulate both products that are imported into the country and those that are produced locally. For those that are imported we have Soncap and for those that are manufactured locally we have the Mancap. Mancap is for the domestic one and Soncap is for the ones that are imported. SON will normally regulate the quality and ensure that they meet standards. But like I said, we have unscrupulous business men that beat the NAFDAC and the SON regulations. So those are the ones that you see come into this country without meeting those standards. But the local ones, that is the case for domestic manufacturing for those products that are made in Nigeria by manufacturers that are registered and have NAFDAC and SON certification, they are quality products and they will serve you for as long as it is specified. We do not have problem with those, but it is those who operate in the fringes that make those products that do not meet standards and as a matter of fact it may not be justified for us to blame either SON or NAFDAC or other regulatory agencies if they have not certified any product that you have bought and does not meet standard. As a matter of fact, it is the efficiency and the efficacy of our regulatory agencies, in this case including Customs, NAFDAC and SON that will determine the quality of the product that you get. How far reaching is their capacity to catch up with those people perpetuating these nefarious activities to be able to protect our domestic market from being infiltrated by this deliberate attempt by some Nigerians and also with the support and the deliberate collaboration of the foreigner that is importing into our country? The idea of buying made in Nigeria goods, you are also right and I have said it before that it is not possible for you to be paid Nigeria Naira, Nigeria money and you do not buy Nigeria products. There is absolutely no reason why Ministries, Departments and Agencies of government will not patronise, for instance, made in Nigeria cars and there is no reason that they shouldn’t wear made in Nigeria clothes. There is no reason we should not have those things that are assembled in Nigeria to be purchased because if for instance you buy a product that is made in Nigeria and you have a complaint you can directly walk into that company and tell them that you are doing a bad job here. But those ones that are imported where are you going to catch them? So, it makes sense for us to rather not pursue foreign exchange that is at that rate that has hit the roof for you to be using it to purchase products from outside the country. So long as the country relies on imported items, we will always pursue the dollar and the rate of our currency will never appreciate.
Is it because there is no faith in the quality of our product?
I think it also has to do with a bit of that because many Nigerians are used to foreign products at the best. They do not worry to check that even in those countries they also have inferior products that are made by manufacturers who operate on the fringe. If they are also able to operate outside the regulation, just like people operate outside the regulation here, products like fake razor blades can be counterfeited. And it has to do with the efficacy of our regulatory agencies. There are so many people that are able to beat them and that means that they need to up their games. They need to be able to monitor properly because products just do not just fly in the air. They must either come in through the port, through the land border or the sea, so we should be able to tighten this, not to only ensure that Nigerians have the right products, but to protect the local industries that are impacted by this importation. And Nigerians have to change their orientations. What is produced in Nigeria is of good quality. We need to ensure that necessary certification which are usually displayed on those products you look carefully out for it because you will get it. For instance, I do not purchase any foreign products that have similar products that are made in Nigeria. My shoes, clothes are all made in Nigeria and I am enjoying it. Everything in my office, chairs and furniture are made in Nigeria.
Have we in any way benefited from African continental trade?
The African Continental Free Trade Area Agreement (AfcFTA) is actually, unfortunately still at the inception stage. As a matter of fact, tomorrow a great answer will be given to your question when Nigeria is going to commence the guided trade initiative. So, we are still operating at a level of a guided trade where we are going to make our first shipment under the AfcFTA. But it is a good start for the continent and the issues that MAN raised before the AfcFTA thing was signed. And that is why Nigeria didn’t sign early is that we needed to overcome some infrastructural and logistics challenges that are prerequisite for a continental trade and because Africa not only Nigeria has not been able to overcome it by the rule of origin and other protocol that needed to be signed and jointly agreed as what is to be done. But we are making incremental steps and we believe that maybe in the next twelve months or so we will see an expansion of the trade activities so that it will no longer be guided trade, but it will be an open trade because there are quite a number of challenges that we needed to overcome before we started. It is better late than never. Africans need to make sure it is going to enjoy a huge dose of goods if we can make it work.
What is the timeline for what the Vice President promised at the Manufacturers Association of Nigeria Summit and what are you hoping to be achieved and the expected outcome?
The three-day MAN Summit is first of its kind. It has never happened in the history of Nigeria and it was deliberately crafted to ensure that we have unfettered access in terms of location and in terms of content. We brought in all the Ministries, Departments and Agencies of government under the guidance of the presidency and with our partners, the National Institute of Policy and Strategic Studies, the ministry of Industry and Investment, the Earth and Young Manufacturers Association of Nigeria. The Vice President decided to have a 3-day consecutive day of exchange to address those five pillars that you eloquently enunciated at the beginning of this segment of your question and we were able to arrive at (1) The binding constraint under those five pillars. We are able to identify those options that we have, policy options that will be taken by the government to be able to assuage those ones. We itemised it and the beauty of this summit is that all of us, the manufacturers and the responsible agencies for resolving those issues reached some consensus of what needed to be done and that is the difference. It is no longer MAN recommending, but both of us agreed that is what needs to be done for the manufacturing sector to survive. And then we have crafted it. We have submitted an interim report and we are finalizing it to submit before the end of this month with (1) The policy recommendations, who is supposed to do it, when it is supposed to be done and how it is supposed to be monitored. I believe that when this has been submitted to Mr President before the month runs out, we will be able to have a sort of a roadmap that will align with government policies because we have been able to within those days aligned our objectives, our expectations, our aspirations with the government, so it is no longer a private sector agenda. It is a joint government and private sector agenda that will be able to have effective implementation. So, we believe that from what we have seen and from the active participation of all relevant government agencies under the leadership of the presidency and kudos to the Vice President because he was there throughout and we attracted the best from the middle, from the high and from the low in the manufacturing sector to participate. So, this promises to be a tremendous and significant impact on the manufacturing landscape with this starting more than ever before that we have reached a point that will be difficult for anyone to sabotage this process because there is government buy-in and the private sector is also involved and we have agreed on a joint monitoring and evaluation and a periodic review and thankfully for stakeholders like you it will remain on the radar until it is done. Because it is doable and it has been jointly agreed like I told you we have NADFAC, Customs, SON, Ministry of Industry, Trade and Investment, Finance, CBN, Power, Agric, all of them were there, industry and subject experts were also in attendance. We reviewed our performance, why we are where we are, and where we jointly want to be. We also agreed on the growth part rate that we have that were incrementally increased by five per cent yearly and that in another four or five years we will record up to 20 to 25 per cent. That is an ambition that we believe that can be done because it has been done in other places. And we have taken time to address those binding constraints and we had inter-ministerial agreement on who will play what role to deliver on what we have set for ourselves.
Why is the furniture sector not doing too well as Nigerians are meant to believe?
The furniture sector incidentally is one area where we have made a lot of progress but where the factor that you, yourself identified earlier has continued to limit local manufacturing. There are just some Nigerians that want to sit on what is imported and it is actually pitiable and I let you one secret on this programme because you have spoken too much. Most of that furniture that is imported into this country was actually produced in Nigeria. They are produced here; they are exported and our people go to import them. That is the tragedy of the Nigerian factor. Many people just have it in their head and I laugh when I go around some offices and they display what is known to me, it is not true.
What are some of the goods manufactured in Nigeria that Nigeria exports if we have the capacity and the standard that other countries are buying?
That is true because we have this mentality that honestly, I find it very difficult to understand and that is because it has been engraved and we have existed in an environment where we are able to always get foreign exchange to use. But I think the situation has even played out that now many more people are patronizing made in Nigeria products because they can’t even have the required exchange for them to be able to bring in those imported materials. I want to use this opportunity to say that quietly even though it is also and you wouldn’t believe it again that exporting in this country is actually difficult, almost as difficult as importing. In some cases, because you have to go through the whole process of getting your product to be officially exported, you almost reach your shelf line in the process. I believe that is going to be another conversation for another day where all the regulatory agencies and those agencies that are involved in ensuring that you are able to export just make your life difficult. Those processes are being worked out and they are part of the issues that we identified at the summit that we needed to bring down so that for instance we have the one-stop-shop for export that will make it a lot easier. But we have a lot of products that we export. Our assembled vehicles for instance are making sales especially around West Africa. Products that are assembled in Nigeria like automobiles, many of them are not being purchased by our Ministries, Departments and Agencies of government but governments outside the country are buying those. There are also the issues of shoes and furniture. Many of those shoes that are written made in Brazil on it and so on are made in Aba, so they will deliberately put those things so that elites like you who like to show off at parties will buy it. They are enjoying it but the truth of it is that we have come of age and the technology is there. We have one or two companies in Nigeria that actually determine the international prices of leather. We have them in Kano for instance. We have Nigeria brands that are beating foreign brands in some of those areas. It is just for us to intentionally put our money where our mouth is for us to be able to patronise authentic made in Nigeria products. Because even those imports, I don’t want to mention countries are deliberately counterfeiting our products. Not too long ago some Nigeria’s brands were actually being imported into Nigeria and they were apprehended at the port. So those brands that are performing well in Nigeria are actually under threat from imported counterfeits. Those are issues we have that we need to strengthen our institutions so that they are able to protect and promote domestic production. And that is one of the objectives of this government and that is why Manufacturers Association of Nigeria is supporting the government to actualize this objective of authentic buy made in Nigeria campaign and I believe in the next few months we will start to see this our campaign gain more attention and Nigerians are being receptive to it.
