BusinessDay 07 Jan 2019
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Monday <strong>07</strong> <strong>Jan</strong>uary <strong>2019</strong> BUSINESS DAY 27<br />
C002D5556<br />
real sector watch<br />
No new grounds were explored<br />
in <strong>2019</strong> budget—MAN<br />
ODINAKA ANUDU<br />
The proposed <strong>2019</strong><br />
budget appears<br />
to be an extension<br />
of 2018, as<br />
no new grounds<br />
were explored, the Manufacturers<br />
Association of Nigeria<br />
(MAN) has said.<br />
The body said there is a<br />
need to properly align the<br />
assumptions of the budget<br />
with economic realities.<br />
It, however, said some of<br />
the provisions of the budget<br />
would be very important in<br />
supporting economic activities<br />
in the coming year, adding<br />
that huge emphasis on<br />
infrastructure development,<br />
especially power, road and<br />
rail, is encouraging.<br />
“As the budget stands,<br />
MAN opines that a lot of<br />
work still needs to be done<br />
while hoping that it will be<br />
passed with dispatch,” MAN<br />
said, in its analysis of the<br />
<strong>2019</strong> budget.<br />
“In broad terms, the<br />
manufacturing sector could<br />
be in for a tough operating<br />
environment in <strong>2019</strong>, seeing<br />
that the needed supporting<br />
policies and infrastructure<br />
have not been given sufficient<br />
priority. MAN is, however,<br />
hopeful that the capital<br />
expenditure component of<br />
the budget will be conscientiously<br />
implemented.”<br />
The body said the N80.29<br />
billion allocation to agriculture<br />
and rural development,<br />
Oluwatoyin Akomolafe, national president, Nigerian-American Chamber of Commerce (2nd L); Oba Otudeko, chairman, Honeywell<br />
Group (R); W. Stuart Symington, U.S. ambassador to Nigeria (L); Olusegun Osunkeye, former chairman, Nestle Nigeria Plc at the<br />
NACC 2018 Annual Dinner & Presidential Inauguration held in Lagos recently<br />
which is 32.5 percent lower<br />
than N118.98 billion allocation<br />
of 2018, should have<br />
been higher.<br />
“Agriculture development<br />
is very critical to the<br />
growth and development<br />
of any country. Agriculture<br />
is critical to industry rawmaterials<br />
supply and food<br />
security in the country. It is,<br />
therefore, important to pay<br />
significant attention to the<br />
agricultural development<br />
through better budget allocation<br />
while leveraging on<br />
backward integration.”<br />
MAN said without a<br />
better agriculture performance,<br />
it will be very difficult<br />
to achieve the economic<br />
growth and inflationary assumptions<br />
made in the <strong>2019</strong><br />
budget.<br />
It, however, commended<br />
the N15.66 billion allocation<br />
for the promotion and<br />
development of agriculture<br />
value chain across more<br />
than 30 different commodities<br />
and N2.69 billion for extension<br />
services, including<br />
other projects identified in<br />
the budget, as commendable.<br />
The body said the N80.22<br />
billion allocation for counterpart<br />
funding for railway<br />
projects (Lagos-Kano; Calabar-Lagos;<br />
Ajaokuta-Itakpe-<br />
Aladja; Port Harcourt-Maiduguri,<br />
among others) and<br />
the N27.12 billion allocation<br />
for rehabilitation of rail<br />
tracts and general maintenance/running<br />
of the rails<br />
system are critical.<br />
“Global evidence has<br />
shown that no country in<br />
the world had ever fully<br />
industrialised without a robust<br />
railway system. However,<br />
no mention is made<br />
of the need to dredge the<br />
various ports outside Lagos<br />
State to decongest Tin Can<br />
and Wharf ports and reduce<br />
the cost of moving goods<br />
from ports to the factories.”<br />
MAN said while recognising<br />
and deeply appreciating<br />
government’s efforts at<br />
carrying the private sector<br />
along on the issue of African<br />
Continental Free Trade<br />
Area (AfCTA), it is important<br />
to pay adequate and<br />
unwavering attention to the<br />
emerging issues on AfCFTA<br />
in <strong>2019</strong> and ensure that Nigeria’s<br />
economic interests,<br />
especially the private sector,<br />
are not only projected.<br />
“As a necessary part of<br />
the readiness assessment<br />
and the resulting action<br />
plan, government should<br />
put in place the necessary<br />
framework to protect and<br />
boost the capacity of the<br />
manufacturing sector to<br />
thrive in the continental<br />
free trade area.”<br />
While also acknowledging<br />
government’s recognition<br />
of the need to develop<br />
a digital economy and 4th<br />
Industrial Revolution in order<br />
to enhance productivity,<br />
MAN said safety nets were<br />
not captured in the budget<br />
and neither was a statement<br />
directed at it during the<br />
president’s budget speech.<br />
“Nigeria’s production<br />
base faces future risks due<br />
to its weak performance<br />
in developing productivity<br />
drivers such as innovation<br />
and human capital, and this<br />
calls for closer examination<br />
and immediate action,”<br />
MAN added.<br />
“As articulated in a World<br />
Bank report on innovation<br />
policy, governments should<br />
instead be like a good gardener<br />
— one that prepares<br />
the ground by building up<br />
human resources, fertilises<br />
the soil by boosting R&D,<br />
waters the plants through<br />
providing financial support<br />
for innovation, and removes<br />
weeds and pests by removing<br />
obstacles to innovation,”<br />
MAN stated.<br />
Why manufacturing sector needs policy consistency<br />
ODINAKA ANUDU<br />
Nigeria’s manufacturing<br />
sector<br />
needs an urgent<br />
attention from<br />
whoever will become the<br />
next president. The reasons<br />
are obvious.<br />
First, former President<br />
Goodluck Jonathan introduced<br />
Automotive Policy in<br />
2013 with a target to produce<br />
50,000 cars annually at N1.5<br />
million each, while creating<br />
700,000 jobs.<br />
Five years down the line,<br />
prices of new cars have risen<br />
by over 200 percent as nairadollar<br />
exchange rate doubles<br />
by more than 100 percent<br />
since 2013.<br />
The federal government<br />
imposed 35 percent levy and<br />
another 35 percent duty on<br />
imported cars, hiking cost of<br />
imported cars.<br />
While the National Automotive<br />
Design and Development<br />
Council (NADDC),<br />
the body responsible for<br />
implementation of the auto<br />
policy, has issued 54 licenses<br />
to intending car assemblers,<br />
the policy seems to have<br />
raised car smuggling from<br />
Benin Republic into Nigeria.<br />
The combined capacity<br />
of the 54 assembly plants is<br />
410,000 vehicles, while annual<br />
car importation into the<br />
country is between 250,000<br />
and 300,000 vehicles.<br />
“We are driving a policy<br />
that is encouraging companies<br />
to continue assembling<br />
combustion engine<br />
cars when the Original<br />
equipment manufacturers<br />
(OEMs), who own these combustion<br />
engines themselves,<br />
have already announced<br />
they will phase them out.<br />
Are we sure we are not setting<br />
ourselves up to being a<br />
dumping ground?” Bambo<br />
Adebowale, chairman, Lagos<br />
Chamber of Commerce and<br />
Industry (LCCI) Automobile<br />
and Allied Products Sectoral<br />
Group, asked.<br />
Adebowale explained that<br />
even with Automotive Policy,<br />
car import has not slowed<br />
down, wondering how the<br />
car assemblers will be able to<br />
compete with up to 300,000<br />
cheap vehicles imported into<br />
the country.<br />
“If we want to develop a<br />
market for these 410,000 capacity<br />
plants and we import<br />
about 250,000 and 300,000<br />
used vehicles, how are they<br />
going to support vehicles being<br />
assembled, since the ones<br />
being assembled will be more<br />
expensive?” he asked.<br />
Also, the president is expected<br />
to proffer solutions<br />
to Ajaokuta Steel, which has<br />
gulped $8 billion public funds,<br />
according to government<br />
records. The Senate has approved<br />
$1 billion for the revivification<br />
of the plant but this<br />
remains a waste of resources,<br />
according to analysts.<br />
Since 1994, successive<br />
governments have claimed<br />
that the complex is 98 percent<br />
completed. Muhammadu<br />
Buhari’s government<br />
budgeted N3.9 billion in<br />
2016 and N4.27 billion in<br />
2017 for the resuscitation of<br />
the steel, despite an earlier<br />
business case in the last administration<br />
showing that<br />
the complex could only work<br />
if properly privatised.<br />
<strong>BusinessDay</strong> checks show<br />
that Ajaokuta Complex has<br />
the capacity to produce one<br />
million metric tonnes of steel,<br />
one million metric tonnes of<br />
coal , manganese and limestone,<br />
among others.<br />
Due to lack of operations<br />
at Ajaokuta Steel, Nigeria<br />
today imports steel valued at<br />
$3.3 billion every year.<br />
Frank Udemba Jacobs,<br />
immediate past president of<br />
the Manufacturers Association<br />
of Nigeria (MAN), said<br />
recently that over 50 percent<br />
of raw materials used in the<br />
sector would have been locally<br />
available had Ajaokuta<br />
been working.<br />
Up till now, the Aluminium<br />
Smelter Company, located in<br />
Akwa Ibom State, is not in<br />
operation due to the tussle<br />
between Bancorp Financial<br />
Investment Group Divino<br />
Corporation (BFIG), a consortium<br />
of U.S.-based Nigerian<br />
investors led by Reuben Jaja,<br />
and the United Company<br />
RUSAL, a Russian firm.<br />
Kayode Fayemi, former<br />
minister of solid minerals<br />
development, had stated<br />
that the government was<br />
resolving this crisis, but long<br />
after his departure, the plant<br />
is still under lock and key.<br />
“We need that resolved.<br />
Aluminium Smelter Company<br />
needs to be re-started<br />
so that we can get ingots for<br />
local roofing sheets manufacturers,”<br />
Oluyinka Kufile,<br />
chairman, Basic Metal, Iron<br />
and Steel Group of the Manufacturers<br />
Association of Nigeria<br />
(MAN), told Business-<br />
Day earlier in an interview.