This entails rapid expansion in the technology base, substantial
improvement in the quality of the human capital, enhanced efficiency and
productivity, among others.
Situation Analysis of the
Nigeria Manufacturing Sector
As elaborated in the Economic Transformation Blue-print, the sector
remains structurally weak and basic industries such as iron, steel and
petrochemicals are weak. The technological base is also weak primarily due to
lack of investment in research and development and innovation.
Manufacturers depend largely on imports of machinery, equipment and
spare parts, which is not sustainable due to foreign exchange limitations. The
sector also lacks the skilled manpower necessary to guarantee competitiveness
in a globalized world. The deterioration in the sector, is evident from its
contributions to the GDP, which has averaged 4 per cent between 2004-2009.
In addition, the contributions to foreign exchange earnings as well as
share of employment and government revenue generated have been low. However,
value added grew at an average of 8.8 per cent between 2005 and 2009 while
capacity utilization rose from 34. per cent in 2005 to 50 per cent in 2009.
This indicates some measure of progress, when compared to a 50 per cent
capacity utilization is relatively poor. The low capacity utilization rates
have largely been blamed on frequent power outages, lack of funds to procure
inputs and the reduced demand for locally manufactured goods.
The involvement of the manufacturing sector to the GDP in Nigeria is
further compared with those of other selected countries to further emphasize
the poor performance of the sector.
In terms of capability exploitation, the manufacturing sector that was
73.3 per cent in 1984 fell to 54.67 per cent by 2008.
The manufacturing sector is currently faced with several challenges.
Many small enterprises have closed down, as explanation and staff layoffs are
being practised in many medium and large-scale establishments.
Companies in the closed down group cut across all industrial products
but the most affected are products such as textile, chalk, dry cell and
automotive batteries, shoe polish, matches, candles etc.
The problem has been compounded by the introduction of the ECOWAS free
trade arrangement aimed at promoting freer movement of goods and persons within
the West Africa sub region. Nigerian manufacturers are relocating to other
countries within the sub-region that have more favourable investment climate.
Under the 1st NIP concerted efforts will be made to reverse the trend through
the pursuit of policies arid programmes that will ensure a substantial
reduction in operating costs and improvement in the business environment.
Issues and Challenges of the
Nigeria Manufacturing Sector
As elaborated in the Vision document, the major challenges in the
sector include:
1• Poor state of physical
infrastructure:
Frequent disruptions in electric power, water supply, inefficient
telecommunication and transportation systems, constitute a major constraint to
productivity of manufacturing firms. Manufacturers have to invest huge amounts
of capital to provide alternative infrastructural facilities and such high
operating cost structures reduce efficiency thereby resulting in loss of
product competitiveness;
2• Policy instability and
discontinuity:
Investment in manufacturing requires long range planning; consequently
stable and consistent macro-economic policies are a pre-requisite for high
performance in the sector. However, the increasing policy inconsistency
resulting in instability in the macro-economic environment, adversely affects
the corporate development;
3• Lack of funding and financial
services:
Funding challenges has made it difficult for manufacturing firms to
invest in up-to-the-minute machineries, information and communication
technology and human capital improvement, which is critical to reducing manufacturing
costs, raising output and recuperating competitiveness. High interest rates and
the reluctance on the part of financial institutions to comply with laid down
lending guidelines tend to frustrate corporate investments and fail to ensure
protection and growth of local industries;
4• Insufficient quality
control:
Although the Standards Organisation of Nigeria (SON) has taken various
measures to improve standards and quality of products, there are still gaps in
the implementation of quality control and standards. For example, commercial
laboratories for testing products are lacking and there are no set standards
for certain products, such as spare parts and components. In the absence of
clearly set standards and facilities for measurement of quality,
sub-contracting from large to small-scale establishments has been made
difficult and charges of inferiority against made-in-Nigeria products cannot be
easily verified.
5• Weak local raw materials
supply base:
Nigeria is richly endowed with agricultural and mineral resources but
most of these resources are yet to be fully developed or harnessed.
Manufacturers depend on imported raw materials. The high tariff regime
discourages investment in the manufacturing sector and makes the costs of
manufacturing uncompetitive.
6• Skilled manpower shortages:
The gap between training institutions and industry, inefficiency of
on-the-job training and the broad-spectrum lack of training has led to a lack
of quality manpower. Manpower availability, in the right quantity and quality,
is fundamental to the success of all other strategies designed to achieve set
targets for the industry.
7• Unavailability and poor flow
of data/ information:
The general lack of detailed, reliable and timely data and information
flow is of great concern in the industry. The fact that no reliable data exists
for some industry sub-sectors is worrisome. For example, little or no reliable
data exists on fruits and vegetable production; and in the engineering industry
there is no record of the amount of specialised alloy steels imported into the
country.
8• Low level of technology:
This is perhaps the greatest obstacle constraining productivity in the
Nigeria developments in technology and innovations are the primary forces
propelling industrialization today. New processes, procedures, and automation
have revolutionised manufacturing and helped to multiply productivity in the
industrialized nations.
Due to financial constraints, industries in Nigeria are unable to
acquire modern technologies. Most manufacturing sub-sectors, especially
textiles, cement, bakery, leather, paper manufacturing and some others still
use machinery that have been in use since the 1960s and 1970s. Consequently,
the equipment frequently breakdown and this reduces capacity utilization rates.
9• Absence of industrial core
base:
Due to the severe absence of core industrial base, majority of
processed raw materials used in the manufacturing process are imported.
Promising projects, especially those for steel and petrochemicals, which have
failed over the years, need to be resuscitated or newly developed to hasten the
production of basic raw materials for use in the manufacturing industry.
10• Low investment in research
& development:
In today’s fast changing world, Nigeria’s current level of investment
in Research & Development would be considered inadequate. It is imperative
that mechanisms and partnerships that promote the expansion of R&D are put
in place to hasten the manufacturing sector’s attainment of its Vision 2020
goals.
11• Competition with
sub-standard imports:
Competition with sub-standard imports and illegally
manufactured/uncertified local goods has led to the lack of competitiveness of
‘Made -in -Nigeria’ goods. Imported alternatives, regardless of their abysmal
quality, are cheaper and characteristically considered more interesting.
12• Difficult business
environment:
The bureaucracy involved in doing business in Nigeria is a major
deterrent to the growth of the manufacturing sector. Issues of poor governance
and awkward access/contract dealings have increasingly encouraged corruption;
thereby make the business environments difficult to operate upon.
No comments:
Post a Comment