President of the Dangote Group and Africa’s richest man, Mr Aliko Dangote was called upon to deliver the keynote address at the 44th Annual General Meeting of the Manufacturers Association of Nigeria on Thursday.
In his speech he explained the role of government in developing the manufacturing sector through enhancing productivity and promoting productivity.
He also offered some tips to the government on how to attract long-term investments.
With the decline of oil prices and the amplified calls for economic diversification, Dangote warned that while efforts are being made to accelerate the development of the non-oil sector, oil and gas must not be abandoned or allowed to suffer neglect.
Below is the full address delivered by Aliko Dangote.
“DIVERSIFYING THE NIGERIAN ECONOMY: THE ROLE OF GOVERNMENT IN MANUFACTURING” AN ADDRESS DELIVERED BY ALHAJI ALIKO DANGOTE, PRESIDENT, DANGOTE GROUP OF COMPANIES AT THE 44TH ANNUAL GENERAL MEETING OF THE MANUFACTURERS ASSOCIATION OF NIGERIA (MAN) HELD ON 29TH SEPTEMBER, 2016 AT TRANSCOP HILTON HOTEL ABUJA.
I am delighted to be invited as the Guest Speaker at the 44th Annual General Meeting (AGM) of the Manufacturers Association of Nigeria (MAN). I am grateful to the Association for considering me worthy to present the keynote address on the theme of the AGM which is “Diversifying the Nigerian Economy: the Role of Government in Manufacturing”.
Economic diversification is arguably the single most topical issue in Nigeria today, and is basically aimed at increasing the range of products (and services) in the economy through domestic value addition. It also aims to enhance export opportunities for a variety of products and in so doing create multiple streams of foreign exchange inflows into the domestic economy.
The role of Government in manufacturing simply refers to those things that Government should do to expand the manufacturing sector, enhance its productivity and improve its competitiveness.
In Nigeria, government embraced industrialization after independence by putting in place several policies, one of which was Import Substitution. Import Substitution was aimed at reducing the importation of finished goods in favour of local production of such products, as a way of utilizing local raw materials and creating employment for Nigerians. The industrialization drive in Nigeria continued albeit with challenges and recorded appreciable gains until the early seventies when the country experienced an oil boom resulting in an upsurge in revenue from crude oil exports. This was indeed the genesis of the dependence of the Nigerian economy on crude oil and resulted in a rapid shift in focus from “industrialization to crude oil exports” and from “production to consumption”. It was therefore not surprising that Nigeria soon became a mono-product economy almost completely dependent on crude oil for government revenue and its foreign exchange earnings.
GLOBAL IMPACT OF MANUFACTURING
An industrialised nation is one that has transited from the extraction or cultivation of primary raw materials to the manufacturing of household and industrial goods. Evidence has shown that countries producing industrial goods are usually more economically prosperous than those that are solely dependent on the sale of primary raw materials.
This is attested to by the huge wealth gap between advanced industrial economies and developing economies, especially those in Sub-Saharan Africa. Industrialization is at the heart of any growth economy and is a proven process through which economic prosperity and inclusive growth are achieved. It not only increases a nations’ aggregate wealth but also the per capita income of its citizens.
Historically, manufacturing has been the driver of industrialization and structural change of any economy. Manufacturing is responsible for the high level of industrialization attained by advanced economies such as the United States, Germany and Japan. These industrialized nations of the world have high per capita income and good quality of life. The quality of life seen in these countries is made possible by the vibrancy of their manufacturing/industrial sector which is able to create direct and indirect employment for their people
Today, manufacturing has propelled emerging economies like China, Malaysia, Singapore and South Korea to achieve levels of prosperity that were hitherto only associated with more mature industrial nations like the United States, Germany, Japan and the United Kingdom.
The high levels of manufacturing output attained in high income economies is not fortuitous, rather it is a product of well-conceived policy actions deliberately targeted at the manufacturing sector and effectively implemented by successive Governments over a sustained period of time. Manufacturing in these economies is supported by Government in a multitude of ways such as concessional access to long term capital; cheap energy supply, export credits, government procurement etc. Without doubt, special attention needs to be accorded the manufacturing sector in Nigeria to enable it develop, grow and make the desired socio-economic impact especially in the area of poverty reduction through employment generation.
THE NIGERIAN MANUFACTURING SECTOR
In the sixties and seventies, Nigeria’s nascent manufacturing sector showed plenty of promise, making appreciable contributions to employment generation, wealth creation and economic growth. Although, the industrial sector experienced some teething problems, it encountered more severe challenges in the mid-eighties and nineties as the operating environment became increasingly hostile.
Relative stability in the macro-economy in the recent past, coupled with some encouraging government policies did offer temporary respite to manufacturers but this was short-lived as the operating environment in the last couple of years has resulted in a marked decline in the fortunes of the sector. Recently, figures show the manufacturing sector contracted by -2.9 percent in 2015 as against growth rates of 21.8 percent and 14.7 percent in 2013 and 2014 respectively. The aggregate manufacturing jobs created in 2014 and 2015 was 20,535 jobs as against 53,340 jobs created in the sector in 2013 alone. These figures merely confirm what we already knew which is that the manufacturing sector in Nigeria is currently under very serious strain.
NEED FOR DIVERSIFICATION OF THE ECONOMY
Since the massive decline in the price of crude oil over the past two years, oil exporting nations, Nigeria inclusive, have been grappling with severe deterioration in their fiscal positions. It has yet again become very evident, that Nigeria urgently needs to develop other income streams by diversifying its economy since it can no longer depend solely on crude oil exports to fund its economy. Fortunately, Nigeria has huge latent potential which can propel economic diversification. Our country has at least 44 known minerals scattered across the length and breath of the country as well as a huge expanse of arable land that supports the growth of most tropical crops. Indeed, even crops which we would typically associate with temperate regions of the world are known to grow in the highlands of Jos, Adamawa and Obudu.
As a nation, we need to stem the massive outflow of foreign exchange by weaning ourselves off our propensity to import what we can efficiently produce locally. Economic diversification through value addition for our domestic and export markets is the only way Nigeria will recover from its present economic predicament and achieve high levels of inclusive growth over a sustained period of time.
At this juncture it is worth emphasizing that diversifying the Nigerian economy does not mean we should neglect our oil & gas sector. On the contrary, the oil & gas sector needs to be deepened and expanded to enable us unlock the full benefits in the hydrocarbon value chain. Nigeria needs to produce sufficient refined petroleum products for its domestic economy as well as for exports. Natural Gas must be produced in adequate amounts not just to serve as an energy source but also as industrial feedstock for the production of a wide range of intermediate and finished products across several industries. The creation of these inter-industry linkages in key sectors of the economy will further strengthen the countries’ industrial base.
THE ROLE OF GOVERNMENT
Although the diversification of the economy has to be private sector led, government at both the national and sub-national levels have a huge role to play in attracting and facilitating long term investments. Some of the key steps needed to be taken by government include-:
i. The articulation of clear sector specific policies along with incentive packages that are commensurate with the risk inherent in each sector. Closely allied to this is the issue of consistent implementation of industrial policies. Policy inconsistency destabilizes industrial production plans and erodes investor confidence. For instance, the suspension of the Negotiable Duty Credit Certificate (NDCC) to exporters and non-payment of existing claims has discouraged non-oil exports and frustrated contracts entered into with overseas buyers.
ii. More support for small and medium scale manufacturers, since many Nigerian manufacturers are relatively small with limited capital to support their investments. Government has to develop industrial clusters with requisite infrastructure for this category of businesses. They should also have access to soft loans and research & development support.
iii. Boosting non-oil exports to bring in much needed foreign exchange, by ratifying and implementing the road-map recently developed the Nigerian Export Promotion Council.
iv. Harmonizing the role of various Government regulatory agencies so as to eliminate conflict of roles amongst them. For instance, the roles of NAFDAC and SON should be properly aligned.
v. Developing the infrastructure base of the economy by actively involving the private sector through Public-Private Partnerships (PPP), where viable. Particular attention should be given to transport infrastructure.
vi. Improving energy supply since no country can industrialize without sufficient and reliable energy to power her factories.
vii. Ensuring adequate patronage by Government and her agencies of “Made-in-Nigeria products” so as to galvanize investment in the manufacturing sector.
viii. Clarification by the CBN on how it intends to monitor and supervise banks to ensure that their recent directive on the allocation of 60% of their transacted forex to manufacturers is complied with.
ix. The development of appropriate curricula for technical education and skills acquisition.
x. Reduce or eliminate the incidences of smuggling, adulteration and counterfeiting activities in the country. Stronger penalties should be meted out to those found culpable of these offences.
xi. Domicile the price of natural gas in Naira, in line with the agreement signed with manufacturers so as to avoid unnecessary conflicts. Also the benchmarking of the price of gas to the international oil price should be discontinued.
xii. The Gas Master Plan should be implemented to ensure adequate allocation of gas for the domestic market.
xiii. Encourage the establishment of more Development Banks to cater for the credit needs of the industrial sector and reduce interest rate to single digit levels.
Your Excellency, distinguished Ladies and Gentlemen, the prospects of “lower-for-longer” crude oil prices makes it imperative that all stakeholders (Government , Financial Institutions, Regulators, Organized Private Sector etc) must work together to grow the real sector of our economy with a view to reducing our dependence on imports as well as growing our non-oil exports. Nigeria’s attainment of self-sufficiency in cement production is an indication of the capacity of the private sector when the right enabling environment is in place.
I thank you for your attention.
Alhaji Aliko Dangote, GCON
Source: Footprint to Africa