Friday, May 31, 2013

How Democracy ruined Nigeria Manufacturing Sector

The Manufacturing sector in any economy is reputed to be the engine of growth and the ultimate pillar for sustainable growth and development. It is the steering wheel for the transformation of an underdeveloped economy to an advanced economy, our Industry correspondent AYODELE SAMUEL writes on its impact of 15 years unbroken democracy on the sector.

Before 1999, the manufacturing sector was blooming and growing, businesses environments were conducive and the sector contributed to national output. 

However as Nigerian roll out drums to celebrate 15 years of unbroken democracy, stakeholders in the Manufacturing sector and business operators are counting woes, to them democracy has not been a blessing to the nation's economy.

Despite its potentials as the engine of growth, an antidote of unemployment, a creator of wealth and the threshold for sustainable development, the manufacturing sector today has suffered severe decline in its contribution to national output. 

Their lamentation include that the Nigerian manufacturing sector is in a state of collapse as its capability to generate employment, create wealth, reduce poverty and contribute to gross domestic product, GDP, has been declining since 15 years ago, while elected democratic government keep paying lip service.

A performance of the sector in a report in 2009 from the Manufacturers Association of Nigeria (MAN), the performance of the sector fell from nearly 13 percent in the early 1980s to about 4.13 percent in 2008, the performance of the sector according to MAN was however eroded by the global economic crisis which rocked key macroeconomic variables all over the world which led to reduction in the capacity utilization of the sector.

Also unemployment rates 5 per cent for the period 1976-1998. However, the statistics has dramatically increased since the closure of manufacturing firms in the country.

In 2009 MAN said about 820 manufacturing companies in Nigeria closed down or temporarily suspended production between 2000 and 2008, while the Nigerian Association of Chambers of Commerce, Industry Mines and Agriculture NACCIMA last year said that no fewer than 800 companies shut up shop in the country between 2009 and 2011 due to harsh operating environment.

Akindele Alabi, a business expert in an interview with Peoples Daily said despite the global economic crisis, the manufacturing sector is suffering under the democratic rule.

" Before 1999, the government take manufacturing seriously, it was not politicize even though the Military head of states are not world best economist the economy was thriving doing business in Nigeria was easy, the business environment was far better than what we have today, 1999 till date, how many companies have folded up? How many of our graduates are roaming the street in endless search for jobs? Take a look at how democratic government open our borders at the detriment of local manufacturers, all these compounded the problem of the sector which had increasable grow in the last 15 years" 

Alabi argued that employment generation by the sector over the past 15 years has declined sharply, "Wealth creation has been on the decline also. Wealth can only be created when the prospective investors find the business environment conducive and profitable to do business. In Nigeria, since 1999 the operating environment is very harsh and un-conducive – from no power supply to insecurity of lives and property, as is currently seen in the northern part, in 2008 its was the Niger-Delta region of the country.

"The poverty level in Nigeria has been on the increase in recent times due to deteriorating quality of work life, especially in the area of reduction of job opportunities, high costs of living, poor infrastructure, and bad living conditions. Manufacturing contribution to GDP, which was 8.1 percent after independence, fell to 3.51 percent in 2011, what do we have today?"

Former MAN President Bashir Borodo while giving an extensive over view of the latest development in the sector, said since the return of democracy in 1999, "we have witnessed the emergence of political entrepreneurs and predators that have acquired political influence to direct and control economic policy. In the process they became predators, destroying the incipient industrial sector. They are not pro-industry and have succeeded in destroying major industrial sub-sectors, particularly the textiles, tyres, paper and vegetable oil. Their next target is the cement industry."

The emergence of political businessmen who amazed much influence after financing elections in the country, influence government policy towards the direction of enhancing unrestricted imports through waivers.

Also President, NACCIMA, Dr. Herbert Ajayi blamed the continued decline in the manufacturing sectors on political and economic factors, citing poor infrastructure and epileptic power supply as key impediments to the industries.

"The manufacturing industry as a whole operates on more than 70 per cent of energy it generates; using generators and operating these generators greatly increases the cost of manufacturing goods," 

Putting the country back on the path of recovery and growth will require urgently rebuilding deteriorated infrastructure and making more goods and services available to the citizenry at affordable prices. 

Alabi said "if the problems in the textile industry and the manufacturing sector as a whole are to be effectively tackled, the Nigerian government and Nigerians in general must take definite measures to revive the manufacturing sector through deliberate policies that would overhaul the country's infrastructure and give locally manufactured goods better patronage. There is, therefore, the urgent need to fix infrastructure, particularly power supply, to save manufacturers the huge cost they spend on generators.

The government also needs to review other policies, particularly the unfriendly (high) bank lending rate, that are stifling industrial growth if Nigeria is not only to stop the factory closures and the attendant problems but to be one of the leading economies in 2020. China, with its attempt to encourage economic growth and be comfortable in the long run, had to reduce interest rate.

Alabi added that if the nation's monetary and fiscal policies works in tandem to enhance the growth and development of local industries and businesses, even more foreign direct investment will come to the nation's economy.
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