africa

In many countries, manufacturing plays an important role in economic development and accounts for a substantial proportion of total economic activity. The Asian countries have seen remarkable growth as a result of their manufacturing exports and constructive policies that aimed to open markets, implement favourable trade and exchange rate policies, attract foreign investment through stable governments and respect for property rights.1

China, the worlds’ largest manufacturing nation currently transitioning from an investment and export driven economy to a consumer driven one, is a prime example. Other examples are the four Asian Tigers – Hong Kong, Singapore, South Korea and Taiwan. Manufacturing is one of Singapore’s key growth drivers, accounting for 18.4% of Singapore’s GDP.2 Between 1960 and 2005, Singapore’s manufacturing share of GDP rose from 11% to 27%, helping raise the standard of living.3 Since 2007, there has been a decline in manufacturing GDP due to sluggish demand, Singapore’s susceptibility to external shocks, long term structural changes, regional competition, and higher business and labour costs.4 Nevertheless, the importance of the sector is not lost and attempts to spur the sector continue.

Unfortunately, in sub-Saharan Africa, not many countries have been transformed through industrialization, which is paramount for economic, inclusive and sustainable growth. Rather, the tendency is for many African countries rich in resources to rely on the export of raw and unprocessed commodities. In light of the global decline in commodity prices, China’s slowing growth, rapid urbanization, growing population and rising demand, it is useful to revisit the issue of industralisation in Africa. The focus here is on Nigeria, Africa’s most populous and largest economy.

According to the National Technical Working Group on Manufacturing Thematic Area for Nigeria Vision (NV) 20:2020, ’the manufacturing sector provides the greatest opportunity for the transformation of the Nigerian economy … It is an antidote for unemployment, a creator of wealth and threshold for sustainable development’.5 However, the sector’s potential has not been fully utilized. Post rebasing, manufacturing accounts for 10% of total GDP annually.6 Nigeria’s vision 20:2020, developed in 2009 as an 11 year long-term plan, envisaged Nigeria’s manufacturing sector to be globally competitive, tightly integrated, contributing no less than 25% to GDP.7

Although manufacturing in Nigeria has seen strong growth in recent years, with steady increases of 6.55% in 2010, 7.79% in 2011 and 2012 and 9.03% in 2013 post rebasing, this has not always been the case. Figures of 10% prior to the oil boom era of the 1970s, when there was a heavy reliance on oil exports, contributed to manufacturing’s decline to single digits from 1981 through 2012, pre–rebasing.8 For instance, from a high of 8.85% in 1990, the manufacturing sector’s contribution to GDP fell to about 4.1% in 2008.9

Using the pre-rebasing or post-rebasing figures, it is unfortunate that over a period of 55 years, manufacturing’s share of the GDP is still only 10% or less. Just like the 1980s when a fall in oil prices triggered policy attention back to the manufacturing sector, the hope is that the recent decline in oil prices will ensure greater focus on manufacturing, leading to a greater GDP share to boost the economy. The problem though is that in this era, the infrastructure deficits and global and domestic economic situations may make it difficult for manufacturing to have a strong impact.

Through the years, Nigeria’s attempt to promote industrialization through policies and plans has gained minimal success. One reason for the dismal results was the failure to harness the private sector’s potential. For example, the first national development plan from 1962-1968, amongst others, emphasized industrial development, but conceived the role of the private sector as marginal.10

The second national development plan (1970 - 1974) coincided with the time Nigeria acquired recognition as a major petroleum producing country and there was a policy shift from private to public sector led industrialization.11

Periods when the private sector was involved in industralisation saw some progress. For instance, in 1986, as a result of challenges from the collapse of oil revenues and Nigeria’s poor economic state, the structural adjustment programme (SAP) was introduced to promote economic efficiency and private sector development. SAP, which lasted till 1992, introduced exchange rate and trade policy reforms aimed at revitalizing the non-oil economy with some results.12 However, SAP’s deregulation of interest loans ultimately led to very high interest rates, and sectors such as manufacturing were adversely affect.13

Another reason for the minimal success of industrialisation, related to the first, is the inability of numerous administrations to successfully complete and/or carry out effective operations in state-owned enterprises created to spur industralisation. For example, the Ajaokuta Iron and Steel complex, tagged as the ‘bedrock of Nigeria’s industralisation’, is still not fully operational.14 Corruption has been cited as a major factor militating against completion.15 Some of its completed units have been shut down due to a lack of funds.16 In December 2015, the Nigerian Senate backed President Buhari’s war against corruption and also called for the federal government to take measures to revive the Ajaokuta steel complex.17 The Eleme Petrochemical Complex was privatized in 2006 after years of operational problems and low capacity utilization making it a liability to the government. The Indorama Group now runs the complex profitably and has brought a lot of foreign investment to the country.18

Other contributing factors to the failure to achieve industrialisation, include the global economic recession and the usual woes that come along with that, such as foreign exchange decline, unemployment and balance of payment disequilibrium. Economic recession played a big part in the fourth national development plan’s (1981-1985) failure to reach its industrial policy objectives, which included the promotion of export-oriented industries, enhancement of value add through small and medium scale industries, local sourcing of inputs, and a projected average growth rate of 15%.19

So what can be done to revive manufacturing in Nigeria? A number of actions are necessary. With the right macroeconomic stabilization strategy, business-friendly environment, improvements in public infrastructure (transportation, power and energy), and foreign direct investment, Nigeria’s manufacturing sector has the potential to grow more rapidly in the long-term.  Other actions include an unrelenting anti-corruption drive, strengthening national security and revamping human capital development. In January 2016, President Buhari was reported to have said “Nigeria’s vision of becoming one of the 20 largest economies in the world by 2020 is only attainable when science, technology and innovation are fully integrated into the national socio-economic development process”.20 Some of the challenges enumerated were succinctly identified in the 7-point plan developed in 2008. Unfortunately, not much evolved from the plan.21

Subsequent plans, such as the Nigerian Industrial Revolution Plan (NIRP), have projected growth driven by a number of sectors, including oil and gas, solid minerals, agriculture and manufacturing.22

The NIRP aimed to raise overall manufacturing competitiveness through improved industrial infrastructure, power prioritization, reduced borrowing cost, access to finance, skills training, improved investment climate, better product standards, innovation and technology and promotion of local patronage of made in Nigeria goods – all areas seen as major hurdles for the manufacturing sector.23

Perhaps the NV 20:2020 will succeed where other plans failed.24 It sought economic diversification with the goal of growing the economy at an average of 13.8% driven by the agricultural and industrial sectors.25 Although the growth projection of 13.8% has not been achieved, as a result of rebasing, the Nigerian economy is now well diversified and no longer dominated by agriculture and oil, with services accounting for almost half of GDP.26 Indeed, manufacturing, which had 3, now has 13 activities, namely Oil Refining; Cement; Food, Beverages and Tobacco; Textile, Apparel, and Footwear; Wood and Wood products; Pulp Paper and Paper products; Chemical and Pharmaceutical products; Non-metallic Products, Plastic and Rubber products; Electrical and Electronic; Basic Metal and Iron and Steel; Motor Vehicles and Assembly; and Other Manufacturing.27

With the agro processing industry, a subset of manufacturing dominant in Nigeria, and the current administration’s plan to modernize agriculture with a budget raised by 96%,28 manufacturing is set to drive economic growth further.  Olam International recently announced the purchase of wheat milling and pasta manufacturing assets in the country, with a projection of 8% growth in the pasta market annually.29 The revival of motor vehicle assembly plants has also attracted top international brands such as Ford, Volkswagen In conclusion, manufacturing is one of Nigeria’s growth drivers. A serious commitment to industralisation and manufacturing has the potential to make Nigeria’s economy enviable among other nations, developing or developed. This will only be achieved if Nigeria can get its act together and work towards achieving infrastructural development,, Ford built its first made in Nigeria vehicle at its Lagos plant. In July 2015, Volkswagen resumed building vehicles in Nigeria since it stopped 25 years ago.30

In conclusion, manufacturing is one of Nigeria’s growth drivers. A serious commitment to industralisation and manufacturing has the potential to make Nigeria’s economy enviable among other nations, developing or developed. This will only be achieved if Nigeria can get its act together and work towards achieving infrastructural development, inclusive growth and citizen welfare, objectives highlighted in president Buharis’ recent 2016 Budget address to the National Assembly.

Published in: News 24 Nigeria, 10 February 2016

[1] Ron Sandrey and Hannah Edinger, China’s Manufacturing and Industrialization in Africa, African Development Bank Group, Working Paper Series, May 2011

2 See Share of GDP by industry from 1999-2014 available at http://www.singstat.gov.sg/statistics/visualising-data/charts/share-of-gdp-by-industry

3 Nah Seong Ling, Singapore’s Manufacturing Sector 1991-2005, Statistics Singapore Newsletter, march 2006 available at https://www.singstat.gov.sg/docs/default-source/default-document-library/publications/publications_and_papers/manufacturing/ssnmar06-pg7-11.pdf

4 Saving Singapore’s manufacturing sector, DBS Research Group, 17 August 2015 available at https://www.dbs.com.sg/treasures/aics/GenericArticle.page?dcrPath=templatedata/article/generic/data/en/GR/082015/150817_insights_saving_singapore_manufacturing_sector.xml#

5See http://www.nationalplanning.gov.ng/images/docs/NationalPlans/manufacturingntwgreport.pdf

6 See NBS, Manufacturing, 2014 http://www.nigerianstat.gov.ng/sectorstat/sectors/Manufacturing

7See Executive Summary, Overview of Nigeria Vision 20:2020 available at http://www.nationalplanning.gov.ng/images/docs/NationalPlans/nigeria-vision-20-20-20.pdf

8 Actual statistics can be found at Nigerian Manufacturing Sector, Summary Report: 2010-2012, National Bureau of Statistics, 14 October 2014 available at http://www.nigerianstat.gov.ng/nbslibrary/sector-statistics/sector-statistics

9 See http://www.nationalplanning.gov.ng/images/docs/NationalPlans/manufacturingntwgreport.pdf

10 Jide Ibietan and Oghator Ekhosuehi, Trends in Developmetn Planning in Nigeria 1962-2012, Journal of Sustainable Development in Africa, Volume 15, No. 4 2013 available at http://www.jsd-africa.com/Jsda/Vol15No4-Summer2013B/PDF/TrendDevtPlanning%20InNigeria.pdf accessed 19 January 2016

11 See L.N Chete, J.O Adeoti, F.M Adeyinka and O. Ogundele, “Industrial development and growth in Nigeria: Lessons and Challenges” Brookings Africa Growth Initiative, Learning to Compete, Working paper 8

12 Nigeria: Structural Adjustment Program: Policies, Implementation and Impact, 13 may 1994, World Bank

13 Jide Ibietan and Oghator Ekhosuehi, Trends in Developmetn Planning in Nigeria 1962-2012, Journal of Sustainable Development in Africa, Volume 15, No. 4 2013 available at http://www.jsd-africa.com/Jsda/Vol15No4-Summer2013B/PDF/TrendDevtPlanning%20InNigeria.pdf accessed 19 January 2016

14 Michael Jegede, Buhari’s government and Ajaokuta Steel, leadership.ng, 2 June 2015 available at http://leadership.ng/news/437691/buharis-government-and-ajaokuta-steel

15 Eric Ikhilae, ‘Corruption responsible for non-completion of Ajaokuta Steel’ The Nation, 5 February 2013 availabe at http://thenationonlineng.net/corruption-responsible-for-non-completion-of-ajaokuta-steel/

16 See Ajaokuta Iron and Steel Complex, Background of Organisation http://www.ajaokutasteel.com/site/pagef.php?cnt=Background of Organization

17 Taiwo Adisa abd Ayodele Adesanmi, ‘Senate backs Buhari’s anti-corruption war’ Nigerian Tribune, 18 December 2015

18 IFC, Eleme Petrochemical Company Limited: Summary of Proposed Investment available at http://ifcext.ifc.org/ifcext/spiwebsite1.nsf/0/a9be4a6dacd483ff852576ba000e28aa; IFC supports Nigeria’s Eleme to Encourage Improved Agricultural Productivity, 19 February 2013 available at http://ifcext.ifc.org/ifcext/pressroom/IFCPressRoom.nsf/0/C9D4328D940310F985257B17002DA729

19 See L.N Chete, J.O Adeoti, F.M Adeyinka and O. Ogundele, “Industrial development and growth in Nigeria: Lessons and Challenges” Brookings Africa Growth Initiative, Learning to Compete, Working paper 8

20 Isiaka Wakili, “Buharis sets conditions for attaining vision 20:20202, Daily Trust 7 January 2016 available at http://www.dailytrust.com.ng/news/general/buhari-sets-conditions-for-attaining-vision-20-2020/127859.html#YpzdpAohA27IsGlx.99

21 See Robert Dode, Yara’adua 7-Poimt Agenda, the Mdgs and Sustainable Development in Nigeria, Global Journal of Human Social Science Vol 10 Issue 4, August 2010

22 See also see Dynamic Industrial Policy In Africa, Nigeria’s industrial Revolution Plan unveiled, Economic Commission for Africa http://www.uneca.org/sites/default/files/PageAttachments/era_2014_feature_story_nig_eng.pdf, last accessed 15 January 2016

23 see http://www.uneca.org/sites/default/files/PageAttachments/era_2014_feature_story_nig_eng.pdf; see also Nigeria’s renewal: delivering inclusive growth in Africa’s largest economy, MckInsey); All Africa, 2014 in Retrospect – Many Hurdles for Manufacturing Sector, 2 January 2015, www.equities.com;

24See Federal Ministry of Budget and National Planning Website available at http://www.nationalplanning.gov.ng/ 

25NV20:20202 document available at http://www.nationalplanning.gov.ng/images/docs/NationalPlans/nigeria-vision-20-20-20.pdf

26Obinna Chima, Lagarde: Nigeria’s Economy will Recover Slightly in 2016, Thisdaylive 8 January 2016

27 See NBS, Economics Statistics: Harmonized Documentation Surveys Sources and Methodology for GDP Rebasing available at http://nigerianstat.gov.ng/nbslibrary/economic-statistics/gross-domestic-product

28 See “The agro processing industry and Economic Development , Part III in The State of Food and Agriculture 1997,FAO Agriculture Series No.30 at http://www.fao.org/docrep/w5800e/w5800e12.htm; Odinaka Anuda abd Josephine Okogie, why agric’s 965 budget raise not sufficient to diversify economy, Businesdayonline 8 January 2016 available at http://businessdayonline.com/2016/01/why-agrics-96-budget-raise-not-sufficient-to-diversify-economy/; Roberts Orya, Agro-processing to Drive Nigeria’s New Economy, The Hub: International Perspectives 16 June 2015 available at https://www.stratfor.com/the-hub/agro-processing-drive-nigeria%E2%80%99s-new-economy

29Melissa Tan, ‘Olam Buys Nigeria’s BUA assets for US$275m’ The Business Times, 12 January 2016

30Graeme Roberts, Nigeria: Stallion to assemble Volkswagen cars and trucks, just-auto.com 16 Decenber 2014 available at http://www.just-auto.com/news/stallion-to-assemble-volkswagen-cars-and-trucks_id153715.aspx; Abiodun Alade, ‘Ford produces first made in Nigeria Vehicle’ Vanguard 18 November 2015 available at http://www.vanguardngr.com/2015/11/ford-produces-first-made-in-nigeria-vehicle/; Christoph Rauwald and Paul Wallace, VW Brings Car Assembly Back to Nigeria to Tap Growth in Africa, Bloomberg, 7 July 2015 avalable at http://www.bloomberg.com/news/articles/2015-07-07/vw-brings-car-assembly-back-to-nigeria-to-tap-growth-in-africa

 

 

 

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