Manufacturing Sector and the National Development Plan

The federal government has projected to drive the country’s industrial sector with N868.56 billion under the new National Development Plan, but only time would tell how far the plan would revoltionise the country’s manufacturing sector, writes Dike Onwuamaeze

The federal government launched the 2021 to 2025 National Development Plan (NDP) on December 23, 2021.

The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said that the NDP was designed as the country’s Medium-Term Development Plan meant to succeed the Economic Recovery and Growth Plan (ERGP) that was implemented from 2017 to 2020.

The Volume One of the NDP document stated that “national development is the highest priority of the government,” adding that the “government will unlock all constraints to ensure that economic growth is enhanced, inclusive and sustainable over the plan period and beyond to generate employment and reduce poverty.”

It further stated that the NDP was formulated against the backdrop of several subsisting development challenges in the country and the need to tackle them within the framework of medium- and long-term plans. These challenges include low and fragile economic growth, insecurity, weak institutions, insufficient public service delivery, notable infrastructure deficits, climate change and weak social indicators. Hence, the Plan seeks to invest massively in infrastructure, ensure macroeconomic stability, enhance the investment environment, improve on social indicators and living conditions, implement climate change mitigation, adaptation and resilience strategies, amongst others.

Specifically, the Plan is aimed at generating 21 million full-time jobs and lift 35 million people out of poverty by 2025; thus setting the stage for achieving the government’s commitment of lifting 100 million Nigerians out of poverty in 10 years. The country can achieve these targets through high quality economic growth and a more inclusive economy, leveraging its young workforce, and enhancing implementation capacity at national and subnational levels. With effective implementation, Nigeria will progress significantly on the path of unlocking its potentials in all sectors of the economy for a sustainable, holistic and inclusive national development.”

In addition, the role of the government will go beyond the normal provision of the enabling environment to include the qualitative participation in vital sectors of the economy that will open opportunities for the private sector to be a major engine of growth.

Size of the Plan

In order to accomplish its objectives, the NDP provided for the implementation of major infrastructure and other development projects across the six geopolitical zones and the opening up of opportunities for the rural areas to ensure balanced development and increased competitiveness.

Specifically, the attainment of the objectives of the plan would require an investment commitment of about N348.1 trillion. It is estimated that the government capital expenditure during the period will be N49.7 trillion (14.3 percent) while the balance of N298.3 trillion (85.7 percent) is expected from the private sector.

Of the 14.3 percent government contribution, FGN capital expenditure will be N29.6 trillion (8.5 percent) while the sub-national governments’ capital expenditure is estimated to be about N20.1 trillion (5.8 percent). The successful implementation of this plan will therefore be heavily dependent on a strong partnership between the private and public sector.

The country is moving along the path of the reforms required to unlock local content development, subnational economic diversification, competitiveness, growth, and making moderate, incremental progress in poverty reduction and other human development indices in the medium-term.

Manufacturing Sector

The broad objective of the NDP in relation to the manufacturing sector is to improve the manufacturing climate, output and performance through improved infrastructure, stabilising the macro economy, and removing regulatory constraints. It said that as part of its efforts to improve the business environment for manufacturing, the government would simultaneously improve infrastructure, deepen and expand existing enabling business environment reforms, and align fiscal and monetary policy to strengthen the economy.

The NDP stated that four strategies are critical to realising its goals for the Nigeria’s manufacturing sector. They are increased infrastructure provision to alleviate bottlenecks in manufacturing. It said: “Infrastructure has widespread effects on manufacturing productivity and industrialisation. As a result, the government plans to expand Nigeria’s infrastructure stock, beginning with energy and transportation infrastructure. It is expected that industries will have a steady energy supply by the end of the plan period.”

In addition, the industrial locations would also be linked to multimodal transportation infrastructure covering rail, roads, air and sea ports.

The second strategy is the launching of interventions funds to finance manufacturing expansion. This strategy is intended to improve the availability and affordability of long term single-digit financial facilities for Nigerian manufacturers. This would lower manufacturing’s overall cost structure and potentially lower entry barriers, resulting in a surge in manufacturing activity across the country and increased economic output from the sector.

The third segment of the strategies to boost the industrial sector is the strengthening of value chain linkages to primary sectors, especially the linkages between the agro-allied and primary sectors to ensure raw material availability for manufacturing.

“This will be accomplished by implementing value chain development programmes and incentives to encourage local sourcing of raw materials in areas where Nigeria has a comparative advantage. There will be emphasis on fostering synergies among the Ministries of Industry, Trade and Investment and other relevant MDAs such as the Ministries of Agriculture and Rural Development and Ministries of Science and Technology, both at the federal and state levels, to implement initiatives that improve the productivity of value chains to provide critical input for manufacturing.”

The fourth strategy is the review of existing manufacturing policies, laws and regulations to ensure business friendliness and trade. The NDP said that “government will take a comprehensive approach to the policies, laws, and regulations required to create mutually reinforcing framework that promote competitiveness and a business-friendly environment. Policies, rules, and regulations will all work in tandem to achieve export orientation of manufacturing activities. Through the Industrial Policy and Competitiveness Council, the government will provide the private sector with a channel to share feedback on its policies.

The NDP also planned to “facilitate the development of industrial cities, industrial parks, and industrial clusters, while focusing on making hard infrastructure available within these industrial zones” and leverage technology and other digital innovations to aid Nigeria’s industrialisation process and competitiveness.

It also envisaged working with key partners, especially development finance institutions, to develop and expand the credit guarantee schemes available to players in the manufacturing sector, particularly the MSMEs.

It would also strengthen state-owned development finance institutions by injecting additional equity capital towards enabling them to support enterprises more effectively.

Investment and Resource Allocation

To meet the stated goals, the government assured that it would optimise financing for various initiatives aimed at eliminating binding constraints in the manufacturing sector. In addition, the government said that it would prioritise the promotion of investment in the industry.

Therefore, “within the planning period, an estimated public investment of about N868.56 billion is committed to complement private sector investment on this sector to achieve the objectives.

Along with the government’s contribution to relevant ministries’ capital expenditures, other government agencies involved in industrial development in the three-tiers of government will use their resources to prioritise initiatives aimed at fostering manufacturing growth and competitiveness. Government will demonstrate its commitment towards creating an enabling environment for private investment to thrive in the country. Furthermore, the implementation of the AfCFTA should attract significant private sector investment.”

In the years ahead, Nigeria will facilitate the rebirth of the manufacturing sector by improving the enabling environment, crowding in additional capital, and strengthening value chain linkages.

These initiatives are expected to accelerate the pace of the country’s industrialisation, improve economic growth and foster value-added export orientation of manufacturing activities. Synergies and consolidation of efforts from all government ministries, departments and agencies involved in the sector’s development is key to realizing the stated objectives. Successful implementation of initiatives and stated objectives will advance the performance of the manufacturing sector.

The Special Adviser to the President Muhammed Buhari on Finance and the Economy, Dr. Sarah Alade, who was a former acting governor of the Central Bank of Nigeria, said that the implementation of the NDP would be linked to the annual budget. She also harped on the need for the government to show the political will to implement the plan. “We do not want the train to leave us behind the fourth industrial revolution,” she said.

A former Professor of Economics, University of Benin, Dr. Mik Obadan, said that the broad objective of the NDP for the manufacturing sector is to improve the manufacturing climate, output and performance through improved infrastructure, stabilising the macro-economy, and removing regulatory constraints.

He said: “Manufacturing is a private sector activity. Opportunities abound in all areas of production, distribution and exchange of goods and services via MSMEs and large scale enterprises. Opportunities in infrastructure development through government’s PPP initiatives.

The implementation of the AfCFTA should attract significant private sector investment.”

But the Senior Partner, KPMG in Nigeria and Chairman, KPMG Africa, Mr. Kunle Elebute, has stated that the federal government should deepen economic reforms in order to attract the private sector investments that would drive the country’s development.