FX Crisis and Renewed Campaign for Made-in-Nigeria Goods

As the current administration embarks on a multi-pronged approach to meet its FX obligations, shore its foreign exchange reserves, and address the gap between demand and supply at the various markets, economic affairs commentators argued that all these efforts would pale into insignificance until Nigerians, including government officials show real commitment to patronise locally produced goods and services, writes Festus Akanbi 

For a nation in dire need of foreign exchange required for economic development, it was not a surprise that the Minister of Budget and Economic Planning, Senator Atiku Bagudu, decided to use the platform created by the 29th economic summit of the Nigerian Economic Summit Group (NESG) in Abuja last week to canvass for the inflow of foreign investment, saying Nigeria is a haven for foreign investors to take advantage of.

Bagudu said despite the country’s challenges, the government remained resilient and was taking thriving economic activities to all parts of the country.

The marketing of the Nigerian investment climate by the minister notwithstanding, analysts who expressed concerns over the state of the economy said with an import bill of N5,726.25 billion in the second quarter of the year, the severity of the pressure of competitiveness brought to bear on local industries in a period of crashing purchasing power of the people, and rising operational costs, could be better imagined.

This captured the feelings of Nigerian manufacturers, and other economic watchers in their plea for the government to place a balance between revenue generation and industrial growth considering the threat to the competitiveness of local industries by imported goods.

Appetite for Imported Goods

Analysts explained that at the heart of the current challenges killing local manufacturing initiatives is the unbridled appetite for foreign goods and services at the expense of local production, and according to experts, Nigeria as a country has continued to pay dearly for this costly appetite.

This is because as Nigeria opens its door to the influx of foreign products, the country is being denied all the gains associated with a thriving manufacturing industry. These gains, according to Partner and Chief Economist of KMPG Nigeria, Dr. Yemi Kale, include employment opportunities, diversification and reduced dependency on oil, regional economic development, import substitution and export promotion.

Kale, in his presentation at the 29th Nigerian Economic Summit organised by the NESG, listed other accruable benefits of a thriving manufacturing sector including favourable trade balances, infrastructural and human capital development, transfer of technology and innovation, and government revenue generation. The title of his presentation was Manufacturing for Prosperity: A Roadmap for Industrial Growth in Nigeria.

It was therefore understandable that the Lagos State Governor, Babatunde Sanwo-Olu was full of praise for the Chinese car manufacturing company, CIG, last week when the company marked the completion of assembling the first 2000 vehicles in the Ogba area of Lagos. The assembling plant is the first to be built in Lagos by a Chinese company in partnership with the state government. 

The governor said the development would create more jobs in the state and Nigeria. 

He described the assemblage of 2000 vehicles in the plant as a remarkable milestone and a reflection of the promising synergy between international partnerships and local talent. The governor said the state is open to more investments that would create jobs, skills development, wealth creation, entrepreneurial opportunities, and reduce unemployment.

Low Production

There were reports that the growth of the manufacturing sector has been weak and sluggish since its recovery from the COVID-19 pandemic with an average annual growth of 3.4% in 2021 and 2.4% in 2022 and analysts think that the contribution of the manufacturing sector to Nigeria’s GDP still falls far short of globally competitive levels, averaging 10% annually in its contribution to GDP in almost two decades.

The manufacturing sector also under-performs in its contribution to exports as the sector accounted for only 6.4% of total exports recorded in 2021 compared to other countries where manufacturing accounts for over 70%. However, in the second quarter of 2023, Nigeria’s total trade stood at N12,741.96 billion, total exports stood at N7,015.71 billion and total imports amounted to N5,726.25 billion. 

Total exports increased by 8.15% when compared to the amount recorded in the first quarter of 2023 (N6,487.04 billion) but declined by 5.20% compared to the corresponding quarter in 2022 (N7,400.89 billion). Likewise, in the period under review, total imports increased by 2.99% compared to the value recorded in the first quarter of 2023 (N5,559.88 billion) but declined by 10.37% when compared to the value recorded in the corresponding quarter of 2022 (N6,388.51 billion).

Leading by Example

The drama playing out today is the failure of government officials to lead by example in the campaign to support local industry. This perhaps, was the main issue that provoked the recent condemnation of the National Assembly over the preference of imported official vehicles to the locally produced cars.

As the controversy rages, many Nigerians have taken to X (formerlyTwitter) to express their displeasure over the report that members of the National Assembly have chosen to buy foreign cars as utility vehicles, after rejecting an initial proposal to patronise local carmakers like Innoson or CIG, which opened its car assembling plant in Ogba area of Lagos last week.

The lawmakers were said to have resolved to purchase over 500 units of the Toyota Landcruiser 2020 model. According to the report, each of the SUVs is valued at N160 million, totalling N57.6 billion for the purchase of the vehicles.

Nigerians who vent their anger on social media platforms recalled how the government closed the borders because they wanted Nigerians to patronise made-in-Nigeria products.

Beyond the Reprieve for 43 Banned Items

Analysts argued that although the Central Bank of Nigeria (CBN), in its bid to ease the pressure on the FX market, unbanned 43 items previously restricted from accessing FX from the official window, the pressure cannot abate until Nigerians cut down on the consumption of imported materials.

Between 2015 and 2020, the CBN initially restricted 43 items from accessing FX from the I&E window, the country’s official market. By implication, importers of the commodities were forced to source for FX at the black market often at higher rates.

The list included rice, cement, margarine, palm kernel, vegetables, meat, poultry chicken, eggs, wheelbarrows, head pans, wire rods, wooden doors, and furniture. The list also included roofing sheets, enamelware, iron rods, plywood boards and panels, toothpicks, cloths, plastic and rubber products, soap and cosmetics, tomatoes/tomato pastes and fertiliser, among others.

Analysts, however, said there is no reason why some of these items should be imported given the fact they all have local variants which would not add to the current crisis in the fx market.

To position the manufacturing sector for the challenge ahead, experts said this is the time for the current administration to revive the manufacturing sector to boost the local economy.

One of such experts, Okechukwu Unegbu, said the priority for the government and its relevant agencies is to help the industries to start producing again.

“Production and manufacturing of essential goods will stop the dependence on imported goods, and go a long way in revamping the economy and strengthening the naira.

The federal government should address fundamental dislocations in the country, like boosting investment, reducing the unemployment rate and cutting down on inflation,” he said.

He maintained that the absence of a vibrant industrial and manufacturing sector in the country had exacerbated various economic challenges, like rising inflation and an unstable currency.

With adequate regulation, local manufacturing firms are certainly ready to meet the people’s needs once the business climate is clear and conducive enough for them to churn out quality products. This is a sure way of conserving foreign exchange and removing undue pressure on the government.