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Frank Ike Onyebu is the Executive Director of Universal Luggage Industries Limited, a Lagos-based manufacturing company, and a former Chairman of the Apapa chapter of the Manufacturers Association of Nigeria (MAN). In this interview with TOBI AWODIPE, we discuss the many issues affecting the real sector, why the government must industrialize to save the economy, and how Nigeria can become a global manufacturing hub. I’ll tell you.
How do you evaluate the direction of the current government’s economic policy?
I think the government has made some very tough, perhaps tough decisions regarding the economy. Given the extent of the economic downturn, some decisions are necessary, albeit painful. However, a similarly harsh stance can be expected on the issue of governance costs. Unfortunately, we are witnessing an increase in decadence and debauchery, to the detriment of businesses. This is not good for this government or the image it is trying to create.
Is it fair to blame the current government entirely for the current level of poverty?
I think it’s quite unfair to blame the new administration for the current level of poverty in this country. Corruption caused by the failures of previous governments cannot be corrected overnight. Sure, it will take some time and a lot of dedication.
What are the challenges facing the Nigerian manufacturing industry?
One of the biggest challenges facing local manufacturers is that basic infrastructure is aging or, in some cases, completely absent. We are all familiar with the condition of roads across this country. The poor condition of roads makes it difficult for many manufacturers, distributors, and buyers to access factories, source raw materials, and sell their products. We all know that power supply is unstable. On average, most manufacturers get less than 40% of the energy they need from the power grid. Unfortunately, alternative energy sources are very expensive. No manufacturer can remain competitive at the current level of power supply to industry. Another big problem we face is multiple legal and illegal taxation. Various tiers of government come up with all kinds of taxes without considering the harsh impact these taxes have on the real sector. One can only imagine the consequences of these heavy tax burdens. This will only further worsen Nigeria’s already dire business environment.
Then there is the issue of foreign exchange. Most manufacturers require FX to purchase machinery, equipment, and raw materials, but cannot take advantage of FX because it is unavailable or very expensive. The foreign exchange market itself is in turmoil. Prices change several times a day. This makes it very difficult to plan and makes you wonder how you can run a successful business like this. There is also the issue of policy somersaults. It is difficult to plan when you cannot expect some degree of consistency in government policy. Nothing scares investors more than contradictory government policies. All this means that production costs are very high. Unfortunately, due to poor economic conditions, we are unable to increase the prices of our goods and products appropriately.
As a result, manufacturers are left with large inventories of finished goods that they either cannot sell or have difficulty selling. All of this affects your bottom line. It is therefore no wonder that many manufacturers go bankrupt and others relocate to countries with less uncertainty. Those left behind are hanging on by a thread, struggling to survive.
Do you think things would have been different if past administrations had taken the issue of economic diversification more seriously?
It certainly would have been different. Unfortunately, past governments have paid lip service to the issue of diversifying the economy away from the oil sector. I predict that after years of inaction, this government will realize it has no choice but to embrace economic diversification. We hope that the current government fully understands the role of manufacturing in this regard. I hope that the government will give this area the priority it needs. I hope that the government will be sympathetic to the fact that the real sector can lead the economy out of the woods, and that this sector could disappear if the right policies are not put in place quickly. I am.
What do you think about the unification of exchange rates and its importance for manufacturing?
Good policy that looks unpleasant now. It will ultimately benefit the economy in the long run. The multiple exchange rate system was full of corruption and only a few privileged individuals benefited. Even though we were supposed to be the biggest beneficiaries, most businesses, especially small businesses, never benefited. So I think it was only natural that it was scrapped. The challenges currently being faced are due to the inability of the Central Bank of Nigeria (CBN) to adequately fund the foreign exchange market. Anyone can see how the market is reacting to the liquidation of some of the outstanding exchange balances. If this is properly maintained, stability should be expected.
How would you advise the government on the best way to revive manufacturing and the economy as a whole?
Everyone is feeling the heat in Nigeria as economic realities are revealed day by day. The government has made some very tough and sometimes harsh decisions. I doubt if there is anyone living in this country right now who isn’t feeling the economic pinch. There is an urgent need to reduce governance costs. It is not enough to simply tell others to brace themselves for difficult times; governments need to lead by example. Again, governance costs need to be significantly reduced. Unless the government takes certain steps to curb many extravagances, the public will never fully understand what the government is saying.
There is no way people will willingly endure suffering while the government appoints thousands of non-essential officials while diverting billions of naira for welfare. The amount allocated for the renovation of certain government facilities is enough for the construction of highways, schools, and mega-hospitals, as well as for the revitalization of the physical sector. It makes no sense. I hope that all officials, from the Diet to the executive branch, recognize the unstable situation in which this country currently finds itself. What should be on their minds now is how to get this country out of the current mess. Everyone should be thinking about efforts to create jobs, as the current unemployment rate should warn that the country is almost on the brink.
Do you have any specific advice regarding the production sector?
I was coming there. I have to say that we have no choice but to speed up industrialization. We need to build hundreds of thousands of factories across the country. We need to build and finance micro, small, medium and large industries. I am in no way saying that the government should build these factories. No, what governments need to do is develop appropriate policies and provide an enabling environment. The country has the potential to become a major industrial power. we have the ability. We have human resources. we have the resources. What we lack is government support. As a result of this lack of government support and policy somersaults, we have lost so many opportunities.
There was a time recently when a number of Chinese, Indian and other Asian companies were seriously inquiring about investing in Nigeria. They won’t reach out anymore. why? It’s simple; our tough business environment has driven them elsewhere. It’s not enough to go to them and say come invest. They’re making private inquiries, but what do you think they’re going to find? What does the government need to do at this point? The government needs to create a favorable environment for manufacturing to thrive. be. Invest heavily in infrastructure and electricity, fight insecurity and corruption, and enact policies that make manufacturing more attractive than importing finished goods. These may seem far-fetched due to lack of resources, but we assure you that all of this is doable if you put your mind to it.
Governments do not need to invest resources directly. Much can be achieved through public-private partnership routes and transparency. I can assure you that if we do the right thing, Nigeria, with its large population, will become attractive to investors from all over the world. Nigeria has the potential to become a major industrial hub. Nigeria could be the next big thing. China did it, so we can do the same. Nigeria has the potential to become a second China, but we all need to actively work towards this goal. Hoping for it or asking for investment without doing our homework is a wasteful exercise that will get us nowhere.
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Source: guardian.ng