Foremost industrialist and President of the Dangote Group, Aliko Dangote, recently set an agenda for industrialising Nigeria in the next decade
“No country in the world has ever industrialised or attained ‘developed nation status’ without having a thriving manufacturing sector. Without a doubt, manufacturing is the heartbeat of industrialisation and the bedrock for inclusive economic growth and development. Consequently, any journey towards industrialisation must place strong emphasis on creating an enabling environment for manufacturing.”
This, in a nutshell, was the submission of the President and Chief Executive of the Dangote Group, Alhaji Aliko Dangote, when he mounted the rostrum recently to deliver the Second Adeola Odutola Lecture in commemoration of the 50th AGM of the Manufacturers Association of Nigeria (MAN) at the Oriental Hotel, Victoria Island Lagos.
Dangote, who presented a paper that was titled “Agenda Setting for Industrialising Nigeria in the Next Decade,” pontificated that the importance of manufacturing in ensuring the growth, stability and resilience of the economy cannot be over emphasised.
He said: “Without a vibrant manufacturing sector, Nigeria will be overly dependent on imports and fluactuations in oil revenues will continue to result in foreign exchange scarcity and economic shocks.”
He, therefore, said that “to drive industrialisation and sustained economic growth in Nigeria,” it would be important to enunciate deliberate policies that would ‘support manufacturing activities and address the perennial challenges of the sector.”
These challenges, according to him, included acute shortage of foreign exchange, dearth of long term funds, limited infrastructure, policy inconsistency, limited core industries, over regulation, insecurity and multiple and high tax rates for the industries.
Impediments to Sectors’ Growth
These binding constraints have combined to hinder the manufacturing sector from delivering its optimal performance. “In recent years, manufacturing sector’s contribution to GDP has hovered around 9.0 per cent, which is low and indicates that previous efforts at industrialising Nigeria through manufacturing have not yet yielded the desired result,” Dangote said.
He stated that when industrialisation is driven by broad based manufacturing of products for domestic consumption and export the internal and external position of the country will in the medium to long term become favourable.
The resultant effects would be that “economic growth will trend upward; tax revenues will increase; balance of payment will be positive; external reserves will grow and the value of the Naira will be stable.
“In addition, lending rate for investment should decline as the economy becomes more liquid; standard of living will improve; and Nigeria will be in a position to provide its citizens with some of the social safety nets that exist in advanced economies.”
He posited that even though the policy dispositions and implementation strategies of successive Nigerian governments on industrialisation had been to seek to create more employment opportunities, scale up the production of consumer goods for the country’s teeming population and generate wealth for the nation.
But in spite the fact that these dispositions and strategies formed the kernel of public sector policies and planning, the rate of industrialisation in Nigeria has been slow as evidenced by the low contribution of manufacturing to the GDP, poor capacity utilisation and constrained export of manufactured products within and outside the continent.
For instance, Nigeria’s 0.41 per cent share of the world output as reported by the World Bank in 2019/2020 was unimpressive considering the country’s size and resource endowment. This ranked poorly when compared with India’s 3.1 per cent; South Korea’s 3.0 per cent and China’s 28.7 per cent.
He attributed the poor showing of Nigeria’s manufacturing sector to the overtly challenging structural and institutional constraints, as well as funding. These factors, according to him, have over the years cumulatively contributed to its underwhelming performance.
He noted that the country’s dwindling industrial performance has significant socio-economic implications like rising rate of poverty and unemployment.
Dangote stated the following deductions on Nigeria’s latent potentials for industrialisation. One, that the numerical strength of the country’s population could indeed be translated into economic wealth. Two: sthat the teady growth of manufacturing output is possible when the operating environment is conducive. Three: that Nigeria would not easily transit from “developing” to “newly industrialised” country without a vibrant manufacturing sector. Four: that effective implementation of long term plans that are backed with policy consistency would promote enduring economic growth and development.
This, perhaps, accounted for the prominence given to the manufacturing sector, which is largely made up of manufacturing, mining and utilities, in each of Nigeria’s development planning. These national development plans have all expressed the aspiration to develop a robust industrial sector that would fully explore export market, boost export proceeds, promote the development of local technology, increase local raw material utilization, create employment and generate wealth for the nation.
Dangote noted that the industrial objectives expressed in the national development plans were underpinned by basically two industrial strategies, namely import substitution and export promotion. The goal is to shore up the country’s foreign reserve, expand our domestic market for locally manufactured products, increase employment and local production of goods, reduce dependence on imports; expand exports; conserve foreign exchange by replacing imported items with locally produced alternatives.
However, when x-rayed in the mirror of key macroeconomic variables the impact of these development plans, policies and strategies on the industrial sector has revealed that there is plenty of room for improvement.
For instance, their set targets have largely not been attained as a result various factors that included the neglect of agriculture and manufacturing due to the oil boom; reliance on foreign technology for the country’s industrialisation without a robust local technology development strategy and policy inconsistency and poor policy implementation.
Others are dearth of local technical skills; low indigenous participation in manufacturing; dependence on external loans to finance projects and ill-conceived projects among others.
The corollary is that Nigeria has not attained its industrial development aspirations even though industrial development could hasten the pace of the country’s economic growth and ensure rapid transformation of the economy.
Drivers of Manufacturing Growth
Dangote also went on to touch on few factors that needed to be in place to accelerate the growth of the manufacturing sector in Nigeria. The first among them is the need to engender industry oriented government policy and macroeconomic policies such as exchange and interest rate that are pro-manufacturing industry. This could be achieved through an “industrial policy that is jointly designed and formulated by the monetary and fiscal authorities based on the outcome of interactions with the organised private sector and proper implementation of policies with sufficient maturation time as well as pro-industrial regulation and trade agreements.”
Secondly, is the provision of adequate infrastructure in the form of reliable energy for the industrial sector at reasonable tariff rates, good rail network that is functional and extensive and efficient seaports.
The third, according to him, is industry oriented research and development that would provide the best grades of local raw materials and creative technological solutions for Nigeria’s industrial sector.
Other factors included the development of the Small and Medium Enterprises (SMEs) sector to have strong industrial linkage, which would provide the value chain that feed the medium and large manufacturing business, and the necessity of human capacity development by nurturing a sound educational system that could churn out manpower with requisite skills for the manufacturing sector and revive and modernize technical and vocational education. Finally, is the need to leverage technology to improve efficiency through the digitisation and automation of the manufacturing process.
Dangote also observed that “the sector, however, recorded its highest growth over the periods between 1999 and 2007 when it recorded 8.04 per cent growth and also between 2010 and 2015 when it posted 12.34 per cent.
He said: “Incidentally, these periods coincided with the implementation of robust industrial policies such as NEEDS, backward integration and the NIRP that were driven by well-targeted sector specific incentives. The performance of the manufacturing in those periods showed how sustained pro-industry policies can catalyse growth in industrial output.”
Next 10 years Agenda
Dangote opined that so achieve industrialization goals, it is necessary for Nigeria to formulate plans and policies that will enhance and sustain industrial development, which involved the establishment of conducive environment that would encourage investment and ensures sufficient of resources to increase productivity and growth.
He said: “The creation of a pathway to steady and sustained industrial growth entails the deployment of industrialisation centric strategies and policies; promotion of the national manufacturing philosophy; securing the buy-in of government for successful implementation of the agenda; promotion of smart manufacturing; establishment of a robust framework aimed at improving the business environment; the extension of comprehensive and integrated support to priority sectors with strong linkages and growth potentials as espoused in the NDP 2021-2025 with particular emphasis on improved value addition and export of manufactured products.
“It also entails the development of strong partnership with the private sector within and outside the country.
“Nigeria needs to henceforth intensify efforts at promoting industrialization with specific focus on the attainment of the following targets in the next 10 years: 15 per cent manufacturing sector growth; 20 per cent manufacturing contribution to GDP, 15 per cent growth in export of manufactured products, 10 per cent increase in the share of the manufacturing to total export merchandise, stronger inter-industry linkage between SMEs and large corporations, improved manufacturing contributions to government tax revenue and 20 per cent increase in manufacturing employment.”
SOURCE: THISDAY
