Manufacturers yearn for energy, tax, port reforms in Buhari’s second term

Manufacturers yearn for energy, tax, port reforms in Buhari’s second term

A major regret of President Muhammadu Buhari when he first came to power in 2015 was that Nigeria was importing virtually everything from toothpick to tomatoes.

He then promised to change the narrative and make the country one of Africa’s biggest manufacturers.

“We are determined to change Nigeria from a consumer nation to a producing nation,” Buhari said in 2017, two years into his tenure.

Four years after Buhari took office, and with his second tenure in the bags, the situation has not much changed.

Rice import between January and November 2018 was 3 million tonnes, which is 400,000 metric tonnes more than the quantity of the product imported in 2017, according to the United States Department of Agriculture World Markets and Trade Report. Milk import is still $1.3 billion annually, as $3.3 worth of steel and scraps still enter the country yearly.

The Manufacturers Association of Nigeria (MAN) says only a policy shift on multiplicity of taxes, credit, energy, infrastructure and incentives can make the sector competitive and curb imports as Buhari returns to power.

“We want better and improved business environment,” MAN said in one of its publications.
“The business environment is still perverse with over-regulation and multiple taxes and levies, which inhibit investments and economic activities, particularly in the manufacturing sector,” MAN said.

The 2019 World Bank Doing Business report puts Nigeria on the 146th position out of 190 countries, with a score of 52.89 points.

Experts told BusinessDay that the number of taxes paid by investors across the country has risen from 37 to 54 since 2015 as taxes remain un-harmonised.

Cost of production is rising rapidly, with firms shedding jobs or closing branches to stay afloat. Procter&Gamble shut down its $300 million Agbara plant in 2018, while Unilever sold its spread segment. Swiss Pharma has been bought by an investor after experiencing struggles, while Evans Medicals has gone under.

The combined administrative and distribution expenses of 24 largest manufacturers quoted on the floor of the bourse were up 7.59 percent to N196.61 billion in October 2018.

Forty percent of manufacturing expenditure goes to alternative energy. Manufacturers have spent N212.85 billion on alternative energy sources between the second half of 2016 and the first half of 2018, according to data from MAN. This is over 100 percent higher than what was incurred in the previous four halves. Manufacturers told BusinessDay that logistics costs have risen by 50 to 100 percent in the last two years, owing to poor state of roads and lack of good transport system.

“Nigeria has the potential to generate 12,522 megawatts (MW) of electric power from existing plants, but most days is only able to generate around 4,000 MW, which is insufficient,” the United States Agency for International Development (USAID) said in its Power Africa’s Fact Sheet for Nigeria.

Olufemi Akowe, executive director, Lexssz Plastics, which recycles pet bottles in Ogun State, said the firm has been running on diesel and coal, which impacts its production cost negatively.
“We want a policy that will make energy cheap for manufacturers,” Akowe said in Lagos on Monday.

MAN says it wants a review of some of the requirements for the uptake of the 2,000MW stranded electricity so that manufacturers can leverage on the initiative.

In the first half of 2018, average interest rate charged to Nigerian manufacturers stood at 22.9 percent, representing 0.25 percentage point higher than 22.65 percent recorded in the same half of 2017, according to MAN.

Manufacturers say they want recapitalisation of the Bank of Industry and the Bank of Agriculture to enable them to give out single-digit loans.

About 85 percent of the $1.4 billion worth of textiles that flood the country’s market is smuggled, mainly from neighbouring countries, according to Nigeria’s Textile Manufacturers Association (NTMA).

Aisha Abubakar, Buhari’s minister of state for industry, trade and investment, was in Lagos in 2016 on a courtesy visit to textile firms, particularly rug manufacturers. She was told that the biggest challenge facing the industry was smuggling. Three years after, smuggling is at its peak.

Smuggling has made the hitherto manufacturing hubs in Kano, Kaduna and Lagos now solitary camps with most of their factories used as event centres and warehouses to store smuggled textile materials.

“We cannot compete with the level of smuggling and counterfeiting going on now. We used to have about 127 textile firms in Nigeria but that has come down to two or three now,” said Grace Adereti, president, NTMA, at a Made-in-Nigeria stakeholders’ meeting in Lagos.

Manufacturers are struggling to bring in their raw materials as Apapa and Tin Can ports stagnate production process. Exporters too are unable to move their goods to other countries due to unnecessary delays.

“There is a need to extend reform action plans of the Presidential Enabling Business Environment Council (PEBEC) to Eastern ports, air and land ports,” Babatunde Paul Ruwase, president, Lagos Chamber of Commerce and Industry (LCCI), said at a recent press conference.

“The concessioning of Onitsha seaport should be finalised, while government should improve the security situation along and within the Warri port in order to ward off militants and touts. Stakeholders request that government should approve and publicise a bouquet of incentives to importers and exporters that patronise ports outside Lagos,” Ruwase said.

Source: BusinessDay

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