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Tuesday, October 27th, 2020

Embracing Made-in-Nigeria goods

by October 17, 2016 General

HAUNTED by recession and fast-depleting foreign reserves, President Muhammadu Buhari has bought into a campaign by the Nigerian Economic Summit Group to encourage Nigerians to patronise Made-in-Nigeria products. At the 2016 edition of the NESG forum, the President aligned with the theme of the summit, whose goal is to wean the country from its addiction to imported commodities. This is one of the rare occasions when the public and the private sectors would be subsuming their different interests in pursuance of the same economic goal. However, the strategies to be employed in achieving this ambition are not that straightforward.

Since oil prices crashed in the middle of 2014, the economy has atrophied. Factory closures, job losses, reduced foreign exchange earnings; capital flight and thinning foreign direct investment have aggravated the downturn. In spite of the tenuous state of the economy, Nigerians have not curbed their insatiable taste for imported goods and services. This is irrational, provoking the NESG, the government and other stakeholders to launch the buy made-in-Nigeria crusade.

Apparently, the heavy dependence on foreign products threatens the domestic economy. From statistics, it is obvious that the country’s obsession with imported goods is not sustainable. It is illogical that Nigeria has an annual food import bill of $20 billion, according to Audu Ogbeh, the Minister of Agriculture and Rural Development. Figures from the Agricultural Research Council of Nigeria say that, annually, Nigeria imports rice worth N356 billion; wheat, N635 billion; sugar, N217 billion; and fish, N95 billion. Blessed with rich, arable land and favourable weather, these are foods that can be produced locally if the nation is serious about the campaign.

Apart from being a high-capacity employer of labour in the past, the textile industry has become a shadow of its once virile self. The Nigerian Textile Manufacturers Association says, “Nigeria currently spends over $4 billion annually importing textiles and ready-made clothing.” This is good money that could go a long way to reviving the domestic textile market.

That is not all. Data from the National Bureau of Statistics and the United Nations Conference on Trade and Development indicated that a total of about 400,000 vehicles (100,000 new and 300,000 used) valued at over N550 billion were imported in 2012. The situation comes out starkly when the N400 billion per annum spent on the importation of paper products is added to the mix. Although Nigeria owns four refineries, they have been rendered moribund by maladministration and corruption. The result: the NBS, in its latest release on the oil industry, says the nation imported petroleum products worth about N3 trillion between January 2015 and April 2016.

Similarly, Nigeria spent $3.3 billion on the importation of building materials in 2013. Olusegun Aganga, then the minister in charge of trade, lamented that the materials included roofing sheets, nails, gauze wire, roof tiles, marbles and head pans, projecting that if the trend persists, the figure would rise to $15 billion in the next few years. This is worrisome because these materials are produced from solid minerals, which are lying fallow in the country.

It is not surprising, therefore, when the NBS, in its second quarter report on the economy, said real GDP growth in manufacturing had contracted to minus 3.36 per cent. This could be why, at the NESG conference, Buhari restated his desire to see Nigeria as one that “will be able to produce the food we eat, make our own textiles (and), produce most of the things we use….” It is a good cause.

But this should not be just a slogan. To translate this desire into reality, the Buhari administration has to chart a fresh path, something which previous governments have failed to do. Yet, the fundamentals of the economy are so weak for this desire to be achieved. Manufacturing companies are closing down rapidly, eroding the capacity of the sector to produce goods and services needed domestically. The Manufacturers Association of Nigeria said in August that 272 firms had closed down in the past year, 50 of them manufacturing outfits. So, the government must not pay lip service to the campaign, but boost it with well-thought-out incentives.

A major factor limiting local production is the harsh operating environment that business operators face. The 2016 World Bank Ease of Doing Business index ranks Nigeria 169 out of 189 economies. This says it all. In the basket of measurement, the Nigerian economy ranks 182 in “Getting Electricity,” 181 in “Registering Property,” 139 in “Starting a Business,” and 143 in “Enforcing Contracts.” Seriously, the economy is not tailored to production, which is an inducement for importation.

But in an era of globalisation; it is crucial for our manufacturers to be incentivised to churn out quality products that can compete with imported goods in quality and prices. Without this, locally produced items will continue to lose out to foreign substitutes. And, this is where strong economies are different: they produce for domestic consumption and exports. According to the 2015 figures collated by the World Bank and the Paris-based Organisation for Economic Co-operation and Development, this trend can be observed in countries like the United States, which exported goods and services worth $2.23 trillion, Japan ($738 billion), South Korea ($632 billion), Holland ($622 billion) and Singapore ($516 billion).

This gloom can, however, be altered with sound microeconomic and macroeconomic policies. First, the government has to demonstrate its commitment by changing its own habits. The campaign must take root among public officials. Their lust for imported items is a threat to the crusade; therefore, they have to retrace their steps. Public procurement should likewise be restructured to accommodate local products as against foreign goods and services.

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