Sustaining ongoing investments in manufacturing sector
Nigerian manufacturers are ramping up investments in v a r i ous sub-sectors and economic watchers believe they should be encouraged.
Nigerian manufacturers invested N4.43 trillion between January 2013 and June 2018, despite borrowing at a double-digit interest rate of between 20 and 21 percent within the period, according to a survey done by the Manufacturers Association of Nigeria (MAN).
The investments were made mostly in agro processing, cement, metals, steel, plastics, vehicle assembly, and textile, among others.
The biggest beneficiaries of these investments are Ogun and Lagos, which comprises Ikeja and Apapa industrial zones.
The survey shows that in the first six months of 2018, manufacturing investment stood at N305.56 billion, which is 7.2 percent decline from N329.28 billion recorded in the corresponding half of 2017. But when viewed against the second half of 2017, the figure represents 72.9 percent rise from N176.69 billion obtained within the period.
Manufacturers have been bullish on the Nigerian economy despite tough business environment and high production costs.
In 2014 alone, new investors such as Shongai Technologies Limited, Ijako in Sango-otta, Apples and Pears Limited, Ceplas Farms Limited, Greenlife Bliss Healthcare Limited, and Sumo Steel Limited, berthed Ogun.
Even Procter &Gamble (P&G) set up a diaper plant in Agbara within that year, but shut down in 2018 owing to high production costs.
Fidson Healthcare, May & Baker, Pure Chemicals, Eagle Packaging, Nycil Limited, and Dufil made significant investments in the Nigerian economy within the period.
Less than six months after commissioning its 1.5million metric tonnes per annum (mtpa) Kalambaina Ce- ment Plant in Sokoto State, BUA has Cement completed its newest Obu plant in Edo State, which has a capacity to churn out three million mtpa of cement annually.
This brings the total capacity of BUA Obu cement operations to six million tonnes and move the entire group’s installed capacity to eight million mtpa.
“We have built a 32 megawatts multi-fuel captive power plant and a coal mill. To put this in perspective, this new plant will be generating more power than is currently generated by the entire Sokoto State,” Abdul Samad Rabiu, chairman and CEO of BUA Group, said in Sokoto in 2018.
Beloxxi, on February 9, 2018, launched the second and third phases of its biscuit lines in Agbara, Ogun State. Beloxxi Industries is one of the largest biscuit makers in Nigeria with a capacity to produce 40,000 metric tons (MT) per annum, amounting to 28 million cartons.
The biscuit firm in 2016 closed an $80 million deal with a consortium of 8 Miles (London), African Capital Alliance (Nigeria) and KFW DEG Bank (Germany). The investment is raising the company’s capacity from 40,000MT to 80,000MT while the staff strength is over 3,700.
Similarly, Nestlé also pumped N4.1 billion into its Milo Ready-to-drink (RTD) beverage plant in Agbara last year. The plant manufactures Nestlé Milo ReadyTo- Drink ( RTD) beverage in 180ml cartons and has a yearly production capacity above 8,000 tonnes.
“This new production plant is a true reflection of how Nestlé creates shared value for all, by providing good jobs, sourcing 80 per cent of our inputs with local farmers and investing in the development of rural communities,” said Mauricio Alarcon, managing director and CEO of Nestlé Nigeria.
More so, a new 30,000 metric tonnes per annum cocoa processing plant in Ikom, Cross River State, is over 60 percent completed and may be commissioned in December, according to Businessday checks.
In March 2018, Dangote Group inaugurated a multibillion naira rice processing mill in Hadin, Jigawa state.
The mill has the capacity to process 16 metric tons of paddy rice per hour as well as N14 billion worth of rice annually directly from the famers in Jigawa at market rate.
In the last four years, PZ Wilmar has pumped almost $150 million into oil palm plantations and palm oil mills, Santosh Pillai, managing director of PZ Wilmar, told Businessday.
“We are determined to continue with these investments and looking for opportunities to expand our plantations in the state,” he said.
Presco has so far invested N75 billion into the palm oil industry, Felix Nwabuko, managing director of Presco, said, adding that the company also plans a capital expenditure investment of N46 billion over a fiveyear period (2018-2022).
Nigeria’s monetary policy rate (MPR), which is a benchmark interest rate in the country, is 14 percent. Deposit money banks lend as high as 30 to 35 percent, according to Businessday checks. Manufacturers say they were charged 22.9 percent in the first half of 2018, representing 0.25 percentage point higher than 22.65 percent recorded in the same half of 2017.
The Nigerian economy emerged from recession in 2017, shutting down over 50 firms and crippling many firms, according to MAN. Inflation rate remains high at 11.28 percent.
For Babatunde Paul Ruwase, president of the Lagos Chamber of Commerce and Industry ( LCCI), Nigeria needs to have successful elections and policy consistency to sustain or raise these investments.
“We need to know that there is a strong nexus between political stability and economic progress. We should not create a situation where citizens and investors (domestic and foreign) lose confidence in the state institutions,” said in 2018, while analysing the impact of elections on investments.
On its part, MAN believes that sustaining these investments requires the implementation of the harmonised taxes and levies project which should be monitored strictly by the Joint Tax Board (JTB) to enforce compliance by states and local governments.
“There is a need to reclassify the manufacturing sector into strategic gas users from the current commercial gas users classification,” MAN says, adding that this would cut gas prices and eventually production costs.
“We must continue to entrench better exchange rate management. Forex allocation should tilt more to the industrial sector, including the SMES,” it says in its latest economic review.
“There is a need to fully recapitalise the Bank of Industry (BOI) and fully operationalise the Development Bank of Nigeria (DBN), while intensifying the implementation of the Moveable Collateral Registry and Credit Reporting system.”
MNA urges the Federal Government to monitor and enforce the Executive Orders 003 and 005 on patronage of made in Nigerian goods by Ministries, Department and Agencies (MDAS) of the government and local content.
“It is important to further construct a realistic margin of preference, which will be applied by MDAS in their procurement decisions. MAN had earlier suggested 30 percent,” the association states.
It stresses the need to encourage the state and local governments to embrace patronage of made-in -Nigerian products by toeing the footsteps of the Federal Government.
“We must create a sustainable platform through which Nigeria’s general public will be continuously educated on the need to jettison the current penchant for foreign goods and patronise locally manufactured products,” MAN advises.
It admonishes the implementation of Steve Oronsanye report on the reduction and re- alignment of government agencies and parastatals in order to streamline the number of taxes, levies, fees and administrative charges payable to them.
“We believe it is critical to expand the tax net to capture the non-tax-paying firms, particularly those operating in the informal sector and not to increase tax burden on the already tax compliant businesses.”
The body urges the government to continue to support the resourcebased industrialisation and backward integration in the country through appropriate incentives and funding support to investors.