Oyelola: Stimulating Manufacturing Sector Most Suitable Way out of Recession

Mr. Tunde Oyelola is the Chairman of Manufacturers Association of Nigeria Export Promotion Group (MANEG) and seasoned industrialist. Oyelola, in this interview with Kunle Aderinokun, asserts that with the right policies Nigeria could navigate her way out of recession in 2017, exploring non-oil export and the ECOWAS Trade Liberalisation Scheme (ETLS)

Oyelola

As an experienced industrialist, how do you think Nigeria should navigate her way out of recession?
The right and most suitable way out of the economic recession currently ravaging the Nigerian economy is formulation and implementation of economic policies that will strengthen the manufacturing sector and attract foreign investors both as Foreign Direct Investors (FDI) and Foreign Portfolio Investors (FPI). I take this position because, the manufacturing sector is critical to every economy across the globe and Nigeria’s case is no different.

Policy decisions of successive governments have contributed to the challenges confronting the sector today. A good number of manufacturers have closed shop across the country while some especially the SMEs that are still in operation are retrenching workers, leading to increase in the number of the unemployed. Unfortunately, we have found ourselves in an economic situation where monetary policy and fiscal policy are not convergent.

Diversification seems to have become a constant word when Nigeria’s economy is discussed recently. What does the manufacturing sector expect from the government?
A spectacular lesson of globalisation is that local markets no matter how large are no longer a guaranteed platform to promote industrial productivity. That is why countries like China and India have incorporated export trade into their respective foreign policy as a way to strengthen their position in international trade.

Thus, the manufacturing sector which is strategic and instrumental to revamping the economy wants the government to revive the Export Expansion Grant (EEG) which actually is the only incentive that has served as a catalyst to boost on non-oil export in Nigeria. All over the world, even in developed countries where there are no infrastructural deficiencies like we have in Nigeria, government give incentives to their manufacturers. For instance, Australia, India, China, Singapore, Uganda and so on, are actively involved in boosting their non-oil export sector through various kinds of incentives. In year 2015 alone, the Chinese government paid a total of 656.5 billion yuan ($102.7 billion) in export tax rebates in the first six months, up 12.4 per cent from 2014.

The federal government introduced the EEG scheme to encourage non-oil exports as an alternative source of revenue to reduce our economy’s dependency on petroleum and related products. The scheme came into effect under the Export (Incentives and Miscellaneous Provisions) Act Cap 118 of 1986 (as amended by the Act No. 65 of 1992).

The policy, which is domiciled in Nigerian Export Promotion Council (NEPC) recorded huge success with the volume of non-oil exports rising from USD700 million in 2005 to USD2.9 billion in 2013 with export of key commodities to ECOWAS and the European Union. The sector witnessed a sharp decline from US$2.9billion in 2013 to US$1.1billion in 2015 which is about 59 per cent decrease. As at the end of the third quarter of 2016, the value of non–oil export had decreased to USD192,804,298. The trend in decline, which began in 2014 was due, largely to government’s interruptions in the implementation of the EEG and non-acceptance of the NDCC by the Nigeria Custom Service. From the foregoing statistics, it is obvious that there is positive correlation between the scheme and non-oil export growth in Nigeria.

As the chairman of the Manufacturers Association of Nigeria’s Export Promotion Group, how ready are your members to support the economy through exportation?
Very ready! If government shows readiness by adopting the right policies that enhance economic activities, they are ever ready to support through non-oil export.

What has the non-oil sector contributed to the Nigerian economy, say in the last five years?
The sector has made significant to contributions in terms of employment generation especially under EEG. Research has it that from 2005 to 2013 job creation rose from 105,220 in 2005 to 211,291 by 2010 as published by the Nigerian Export Promotion Council (NEPC). It began to experience a sharp decline from 2011 to 183,823 and 159,926 largely due to interruption of the EEG. Also, the non-oil sector’s contribution to Gross Domestic Product (GDP) has been significant. Non-oil export grew by 8.80 percent at the end of fourth quarter 2012 it however went down to 7.88 percent by end of fourth quarter 2013.

What do you attribute the decrease to?
Weak policy implementation on the part of government! The decrease in non-oil export can be attributed to, for instance the frequent disruptions of non-oil export driver in Nigeria which is the EEG. The scheme has been interrupted 10 times for different reasons and since January 2014 till date has been on hold.

Interestingly, government has promised to revive the EEG early next year, and if they keep to it, the economy is going to witness a reverse trend of this current fall in non-oil export. By the third quarter, economic recession would become history in Nigeria. Third quarter because of the lag effect of the decision taken by government and the time implementation will begin.

How does regional trade play out in Nigeria?
In ECOWAS, Nigeria still play significant role in intra-regional trade among other member-states. The trade value of trade between Nigeria and other ECOWAS countries in 2013 increased by the following percentages over 2012. Trade with Ghana increased by 24 per cent, Cote d’Ivoire 23 per cent, Benin Republic 25 per cent, Burkina Faso 293 per cent, Guinea 124 per cent, Senegal per cent, and Liberia 26 per cent. As at the end of third quarter 2016, non-oil exports to ECOWAS countries stood at USD 55.6 million with Ghana as the major export destination, according to the report, filed by pre-shipment agents representing 26 per cent of the total value of non-oil exports within the third quarter. Even at that, MANEG is making frantic efforts to increase the volume of intra-regional Trade through the Trade House platform and plans are already underway awaiting support from government.

Tell us more about the ECOWAS Trade Liberalisation Scheme and what it means for ordinary people?
The ECOWAS Trade Liberalisation Scheme is a giant stride taken by ECOWAS to promote intra-regional trade among its members towards the creation of a common market.
The ECOWAS Revised Treaty include the abolition of customs duties levied on imports and exports and other non-tariff barriers among member states in order to establish a Free Trade Area in the Community. Like the other regional trade integrated area all over the world, ETLS is the foremost Trade Facilitation scheme put forward by ECOWAS in the Community. Accordingly, it was first implemented in 1979 with agricultural products, handicraft and crude products being allowed to benefit from the scheme until 1990 when it was expanded to include industrial products.

Since then, Nigerian companies that applied have been admitted into the scheme. Nigeria, being the largest economy in the ECOWAS sub-region benefits more from ETLS till date. This is because the ETLS makes made-in-Nigeria products competitive in the ECOWAS market amidst goods from Asian and Europe.

Under this scheme, company’s product registered into the ETLS in Nigeria can be exported to any ECOWAS member countries with zero duty. In the same vein, products registered into the ETLS by companies resident in any of the ECOWAS member countries can export to Nigeria with zero duty with same right of access to the market provided it is not among the products on the exempted list.

How do businesses obtain ETLS approval?
The practice is the same in all ECOWAS countries. The Enterprise completes the ETLS Applications Form electronically with details of production cost and raw materials utilised. The applications are submitted to the schedule Desk in the ministry in charge of ETLS in that country.

The National Approvals Committee in the country where the application is made meets to consider the applications from the Enterprise, like in Nigeria, it meets every quarter. Thereafter, it proceeds for factory inspection to confirm if the information claimed in the application forms is true or false. On return from factory inspection, the forms confirmed as true are sent to ECOWAS Commission for verification. When the commission has verified and certified the forms okay, they will send to the ministry for onward issuance of certificate.

How possible is it for businesses to play smart on the approval process?
No. It is not possible for any enterprise to out-smart NAC. Without NAC no application will get to ECOWAS Commission and without going through the laid-down procedures, it cannot fly.

What should Nigeria do to maximise the benefits of the ETLS?
Aggressive sensitisation exercise to enlighten the business public about the scheme and the need to register their products into the ETLS. Nigeria should collaborate with ECOWAS Commission as the largest economy in the sub-region to ensure full implementation of ETLS in other ECOWAS countries in order to ensure that the envisaged benefits of the scheme are fully converted to the advantage of the country.

Who are the leading beneficiaries of the ETLS by countries, and by sectors?
Nigeria remains the leading beneficiary of ETLS among the 15 ECOWAS member states since inception. This year alone about 114 companies have been registered under the scheme, pending applications will be considered by the NAC before the end of the year. Ghana is next behind Nigeria followed by Cote d’Ivoire, Senegal, Togo and they are basically manufactured products. The beauty of the ETLS is seen in situations where the same segment, like tobacco is benefiting from both export and import flows in Nigeria!