Sus­tain­ing on­go­ing in­vest­ments in man­u­fac­tur­ing sec­tor

Business Day (Nigeria) - - REAL SECTOR WATCH - ODINAKA ANUDU

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.

Newspapers in English

Newspapers from Nigeria

© PressReader. All rights reserved.