‘ Safeguards against dumping built- in to protect local industries’
The Minister of Industry, Trade and Investment, ADENIYI ADEBAYO in this interview, talks about efforts by the Federal Government to improve local production and export profile at a time when the continent hopes to leverage its free trade area agreement to
In November 2020, Nigeria ratified its membership to the African Continental Free Trade Agreement ( AFCFTA). While there are concerns about the country’s readiness for implementation, what economic gains and impact could this journey to continental trade bring to Nigeria and viceversa? What sectors and industries will benefit the most?
AFCFTAIS expected to complement Nigeria’s national development agenda and act as a catalyst for export diversification, by providing preferential access to the huge African market for Nigerian products and services, which currently sources over 85% of its imports from outside the continent.
AFCFTA is interesting because Africa demands finished goods and Nigeria aspires to industrialize and progress beyond export of primary commodities. It also provides immense opportunities for Nigerian companies to provide services to Africa especially in financial services, e- commerce, and the digital economy where we have already developed significant domestic capabilities.
As with all other developmental initiatives, AFCFTA is not without its challenges, both in terms of its implementation and its overall outcomes. In the long run, and to be able to take full advantage of the AFCFTA initiative, Africa will need to harmonize the monetary policies of State Parties amounting to a loss of monetary policy independence for member countries.
We are aware that goods made in other continents could be disguised as made- in- Africa to qualify for duty- free treatment. However, we have already built- in specific safeguards to mitigate this challenge.
Nigeria’s export base is still dominated by oil and gas exports. How can this trend be reversed?
I have spoken extensively on our efforts to increase local production and reduce importation. Let me now turn to our ongoing efforts at growing export capacity and building export infrastructure. Export growth is at the centre of our strategy for diversifying Nigeria’s sources of foreign exchange and reducing the vulnerability of the economy to external shocks. We have witnessed time and again, the devastating impact that events outside our control can have on our livelihoods due to our reliance on a primary source of foreign exchange.
The Ministry is currently implementing the Export Expansion Facility, which is one of the projects of the Nigerian Economic Sustainability Plan. This Program aims to protect export businesses from the effects of the COVID- 19 pandemic, safeguard jobs and de- risk the economy from shocks like COVID. Its primary goal is to increase Nigeria’s export capacity
in the near term and its export volumes in the medium term. It represents a huge financial commitment from the Government and demonstrates President Buhari’s commitment to export diversification.
The Program consists of fourteen projects, which focus on providing capital for expansion, building export capabilities, export market entry and development, establishing export infrastructure and ensuring inclusiveness in export activities. Local manufacturers continue to raise concerns about the challenges to industrialisation. How are you addressing these issues?
The Industrialisation Program requires unprecedented quantum of capital from the public and private sectors. We estimate that funding required for Government- backed programs such as provision of credit to MSMES, credit for investment by the private sector in Backward Integration Programs, financing consumer credit to boost demand and enable economies of scale in capital- intensive sectors and financing the development of special economic zones all require significant financing.
Creating wealth in the Agriculture Sector is the FG’S primary strategy for ensuring inclusive and sustainable growth and this is reflected in our focus on Backward Integration Programs. Large expanses of land are required for commercial agriculture that accompanies agro- processing. However, such large expanses of land are difficult to acquire, and investors are unable to take full possession of land acquired due to insecurity, continuous community agitation and unending and unpredictable cost of compensation which are extremely disruptive. The result is project delays and disruptions to the Backward Integration Programs.
These challenges impact the competitiveness of our economy and ability to attract and sustain direct investment.
The Federal Government is working with State Governments and the Central Bank on several interventions and programs to address these issues holistically.
MSMES appear to be highly impacted by the COVID- 19 pandemic. What initiatives has FMITI taken to stimulate MSMES during this period?
In the wake of the COVID- 19 Pandemic, the Federal government launched the MSME Survival Fund which is one of the programs of the Nigerian Economic Sustainability Plan ( NESP) aimed at protecting MSME businesses from the shocks of the Pandemic. The Fund comprises of the Payroll Support Scheme, which aims to support grant to support MSMES in meeting their payroll obligations and safeguard jobs by paying up to N50,000 to a maximum of 10 employees in each MSME for a three- month period; the Artisan and Transport Grant, which supports self- employed artisans with a one- off payment of N30,000 targeting 333,000 individuals.
Further, the General MSME Grant is expected to provide 100,000 MSMES with one- off grants of N50,000 each; and the Guaranteed Offtake Scheme will engage approximately 100,000 businesses across the country to produce items typically produced in their locality, targeting 300,000 beneficiaries. The Fund is estimated to save at least 1.3 million jobs across the country, while strengthening the growth potential of beneficiary businesses.
THE maritime industry is a goldmine. However, in Nigeria, it is a goldmine that has remained largely untapped because, to a large extent, an integral part of the industry – shipping development – has been dogged by challenges over a long time. No country can hope to participate and derive full economic benefits from the maritime sector without strong footing in shipping development. In fact, shipping development is a major determinant of a country’s strength in the maritime sector. This is what has made a country like South Korea one of the biggest players in the world’s maritime industry.
Shipping development is a tripod that rests on three legs. The first leg of the tripod is fleet expansion. This has to do with indigenous ownership of vessels. The question that should come to mind when considering fleet ownership in Nigeria is whether it has been on the increase, or has been declining over a certain period. When the current administration at the Nigerian Maritime Administration and Safety Agency ( NIMASA) came into office, it studied fleet ownership in Nigeria over the previous five years. It sought to know if fleet ownership in the country increased over the period, or there was actually a decrease.
The findings of the study showed that there had been a steady decline in fleet ownership over the period it covered. This could be attributed to factors that include the country’s economic situation, lack of incentives for fleet ownership and non- disbursement from the Cabotage Vessel Financing Fund ( CVFF).
Early last year, the Honourable Minister for Transportation, Mr. Chibuike Amaechi, inaugurated a committee to review the cabotage guidelines that were put in place as far back as 2003/ 2004, but were never implemented. As would probably be expected, most of the guidelines had become obsolete. The committee’s mandate was basically to review and submit the amended guidelines to the Honourable Minister for onward transmission to the National Assembly to commence the process that would lead to disbursement from the CVFF.
The committee had since completed its assignment. It is evident that progress on the guidelines has been slowed down by the Coronavirus pandemic that has affected many of the government’s plans, programmes and projects. As soon as the process is completed the primary lending institutions would begin to disburse the funds to beneficiaries. NIMASA has continued to work tirelessly towards this realization and I am optimistic they will bear fruit in 2021.
The second leg of shipping development is ship repairs. To jump start this activity, NIMASA bought a multi- million dollar modular floating dock over a year ago, but the initial challenge had been where to locate it. As a way out of the challenge, the agency entered into an agreement with the Nigerian Ports Authority ( NPA) for use of its continental shipping yard that was being used for its floating dock. The agreement involves NPA as owners of the facility, a partner to manage the floating dock and NIMASA as the owner of the dock. Nigerians can expect that with the support of the Federal Ministry of Transportation, the nation as a whole and the shipping community in particular can expect to soon begin reaping the dividends of this significant maritime investment.
The benefits of the floating dock to the Nigerian maritime sector and the national economy are legion. The project which will create a wonderful opportunity for the training of seafarers, will also lead to massive creation of jobs. Needless to say, the project is a huge revenue earner for the country. To
ensure that the envisioned benefits are derived from the project, NIMASA has an understanding with oil companies that own vessels to use the modular floating dock for dry docking.
The third leg of the shipping development tripod is ship building. We have conducted a study of ship builders in Nigeria. In the course of the study, we have tried to find out the number of ship builders we have in Nigeria, their capacity, etc. There are several shipyards, and some are operating at very low capacity. We asked questions. Are they operating at low capacity because of challenges that may be connected with unavailability of resources, like finance? Do they have access to spare parts for maintenance? These are the things that would enable a proper understanding of the true state of ship building in the country. We will know the right action to take with regard to ship building when we get the answers to these questions.
The point must be made that financing is central to shipping development in Nigeria, as indeed it is in other parts of the world. It is important that ship builders have access to finance. The government can come in with incentives to ship builders, by way of intervention, especially during this pandemic. We have seen such interventions in the aviation and agricultural sectors. I believe that government will extend the intervention to the maritime sector when the financing gap is properly dimensioned. NIMASA is also working hard at ensuring that ship builders have access to finance and other categories of fiscal incentives to strengthen the operational sustainability of the sector.
A major challenge prospective Nigerian ship owners face is customs duty on vessels. This is arguably the biggest obstacle to ownership of vessels in the country. Interestingly, however, NIMASA is striving hard to ensuring that this issue which has proved to be very thorny is ameliorated. Given the multiplier effect of ownership of vessels by Nigerians, it will not be a bad idea for government to give waivers to people who wish and are capable of buying ships.
With continuous decline in oil revenue, and against the backdrop of government’s efforts at diversifying the economy, maritime is one sector that has the potential to become the country’s cash cow. Again, a fully developed and vibrant shipping industry can reduce quite substantially the queue in the country’s labour market, because of the hundreds of thousands of jobs it can create. All that is required to kick start the drive to make the maritime sector realise its full potential is adequate funding of activities in the sector.