Rescuing Local Manufacturing with Improved Patronage of Local Products
Federal government agencies are determined to reverse the downward trend in the fortunes of local manufacturers with intentional promotion of patronage of Made-in-Nigeria products, writes Dike Onwuamaeze
Is President Bola Ahmed Tinubu planning something big for the Nigerian manufacturing sector? For key operators in the sector the answer to the above question is likely to be ‘no’ for obvious reasons. The operating environment that was orchestrated by the economic policies of President Tinubu is having telling consequences on the manufacturing sector. Under his watch, the exchange rate of the Naira to the Dollar deteriorated from N460 in May 2023 to N1,700 presently, the interest rate has also gone up from to 38 per cent currently while the inflation rate is above 30 per cent.
In addition, the energy prices for petrol and electricity tariff has also skyrocketed. The pump price of petrol has escalated from N200 in May 2023 to N1,115 per litre in Lagos and much higher in other parts of the country while electricity tariff for manufacturing industry under Band “A” category went up from N68 to N225 in April 2024 and was later reduced to N206.80 per kwhr.
Moreover, most of the palliatives in the form of credit and wavers his administration promised to the manufacturing sector have not been implemented. They remained what Nigerians cynically referred to as ‘microphone echo’.
Outcome of MAN Event
The National President of NECA, Dr. Ifeanyi Okoye, summed it up in a remark he last week at a Manufacturers Association of Nigeria’s (MAN) event. Okoye said: “Few months ago President Tinubu promised to remove import duties for manufacturers of pharmaceutical products, but I will tell you that till today no pharmaceutical manufacturer has enjoyed that privilege.
“The president has a very good intention, beautiful strategy to get things going for Nigerians, but because of lack of guided implementations that goodwill has not been implemented.”
Yet, the Chief Executive Officer, Africa Finance Corporation (AFC), Mr. Samaila Zubairu, said last week in his presentation at the “4th Adeola Adetola Annual Lecture” that was organised by MAN that “Nigeria’s manufacturing sector is at a turning point.” Zubairu pointed out that the country’s manufacturing sector is showing ample room for growth despite the besetting challenges that have hobbled its progress.
One of the firm believers that the Nigerian manufacturing sector is on the edge of its turning point is the Chairman of Nigerian Consumer Credit Corporation (CrediCorp), Mr. Aderemi Abdul-Bojela, who believed that the corporation would replicate the phenomenon that transformed America from an agrarian to industrial economy at the twilight of 19th century.
Abdul-Bojela said that when Henry Ford realised that an average American could not afford the unit price of a car, he very cleverly approached financial institutions like the Citi Bank, GT Morgan and Chase and others to finance the purchase of his unsold cars via consumer credit facilities. That was how automobile industry took off in America and also transited the American economy to technology driven economy.
He, therefore, asserted that consumer lending that is being packaged by the Tinubu’s administration would empower Nigerians to purchase goods that are produced by Nigerian local manufacturers to enable them to produce more.
He said: “At one point in time this country will require large scaled credit, particularly consumer credit and mortgages, to drive this economy.
“The current administration is targeting a trillion dollar economy in the next five years. A major component of that is credit, particularly consumer credit guarantee for ‘Made in Nigeria’ goods and services. That is where we are going.
“We will soon begin to use credit to bring back our industries. We will soon begin to use credit to connect the linkages between production and credit. We should be able to diversify this economy away from mono product of oil into other areas of business.”
Shedding light on how consumer credit would grow the industrial sector of Nigerian economy, the Managing Director/CEO of CrediCorp, Mr. Uzoma Nwagba, said that “our goal is, if possible, to get it as close as zero interest rate if one is buying locally.”
Similarly, another federal government agency, the Bureau of Public Procurement (BPP), is also bent on realising the federal government’s Executive Orders 003 and 005 that were designed to promote patronage of “Made in Nigeria” goods and services by the Ministries, Departments and Agencies (MDAs).
Speaking during the recent MAN’s “Made in Nigeria Exhibition and Fair” on “The Imperative of an Intentional Development of the Nigerian Manufacturing Sector in an Era of Economic Downturn,” the Acting Director General of BPP, Mr. Olusegun Omotola, pledged to use public procurement policies to improve the manufacturing sector.
Omotola said that Nigeria is faced with unprecedented economic challenges, which the manufacturing sector is not insulated from. According to him, the challenges facing manufacturers in Nigeria are multifaceted. However, in the face of these challenges, “we must not lose sight of the immense potential our manufacturing sector holds,” he said, adding that a robust manufacturing sector is essential for reducing “our dependence on imports, conserving foreign exchange, and positioning Nigeria as a competitive player in the global market.”
He declared that the time for half-measures and piecemeal solutions have passed as the country needed a comprehensive, intentional approach to developing its manufacturing sector. This approach must be rooted in sound policies, strategic investments and unwavering commitment from both the public and private sectors.
According to him, Nigeria must double down on its efforts to promote local content and patronage of Made-in-Nigeria goods.
He said that the government at all levels must lead by example through effective enforcement and implementation of existing local content policies across all the MDAs. Omotola argued that by creating a guaranteed market for locally manufactured goods could stimulate production, drive innovation and lead to economic boom.
The Power of Public Procurement
Public procurement, which is the process by which government entities acquire goods, works and services, is a powerful tool that can shape Nigeria’s economy.
He said: “In Nigeria, where the government is a major spender, public procurement policies can significantly influence the direction of our industrial development.
“The impact of well-crafted procurement policies on local manufacturing cannot be overstated, and the BPP, in line with the Renewed Hope Agenda, is already taking measures to protect and support our manufacturing sector through its proposal for the amendment of the current Public Procurement Act (PPA) 2007.
“By prioritising locally manufactured goods, we can stimulate economic growth, create jobs, encourage innovation, reduce dependence on imports and strengthen Nigerian industrial base.”
Current Initiatives
Omotola stated that it is soothing to note that Nigeria has already taken significant steps in the right direction in 2017, when the federal government issued an Executive Orders 003 and 005 on Support for Local Content in Public Procurement.
These executive orders mandated that all MDAs of the federal government must grant preference to local manufacturers of goods and service providers in their procurement processes.
The orders required that at least 40 per cent of procurement expenditure on certain items by federal ministries must be for locally manufactured goods or services. It also requested mandatory disclosure of local content plans in bids submitted to government institutions while preference for foreign companies must show demonstrable plans for indigenous development, when local expertise is lacking.
He said: “These initiatives represent a strong foundation, but we must build upon them to fully realise the potential of public procurement in boosting local manufacturing.
“I am here to present a new Bureau of Public Procurement that is willing and ready to collaborate with key stakeholders such as the Federal Ministry of Industry, Trade and Investments, Standard Organisation of Nigeria (SON), Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA) and others in the manufacturing sector to develop intentional policies, roadmap and implementation framework that will deliver sustained inclusive economic growth, boost agriculture to achieve food security and accelerate diversification through industrialization and manufacturing in line with the President Bola Ahmed Tinubu Administration’s Renew Hope Agenda.”
Proposed Reform Enhancements
To further strengthen Nigeria’s public procurement policies and their impact on local manufacturing, Omotola proposed the expanding the preferential treatment of local manufacturers.
He said: “The current 40 per cent requirement for local content is a good start, we should aim higher. I propose gradually increasing this percentage over the next five years, with the ultimate goal of reaching 60-70 per cent for key sectors.”
He is also proposing implementation of stricter enforcement mechanisms so “that our policies are not just words on paper, but are effectively implemented.” This would require regular audits of procurement processes, penalties for non-compliance and rewards for agencies that exceed local content targets.
Omotola said: “Ladies and gentlemen, the potential of public procurement to transform our manufacturing sector and drive economic growth is immense.
“By implementing and enhancing these policies, we can create a virtuous cycle of local production, job creation, and economic development.
“Let us seize this opportunity to build a stronger, more self-reliant Nigeria. A Nigeria where our factories hum with activity, where our workers are employed in dignified jobs, and where our products proudly bear the label ‘Made in Nigeria.’
“The journey ahead may be challenging, but the rewards are great. With your support and collaboration, I am confident that we can harness the power of public procurement to unlock the full potential of Nigerian manufacturing sector.”
Moreover, the Director General of Nigeria Institute of Policy and Strategic Studies (NIPSS), Professor Ayo Omotayo, is also advocating for a favourable policy environment that would enable the Nigerian manufacturing sector to grow at 25 per cent year-on-year for five years.
Omotayo said that the NIPSS has carried out several studies and is convinced that if manufacturing actually fires itself up, it can contribute 6.0 per cent growth by itself and Nigeria can certainly get as much as12 per cent GDP growth year-on-year.
He also said that NIPSS is putting together a policy document on the manufacturing sector and is going to speak to policy makers.
He said: “I am assuring you that manufacturing is turning again for good.
“We are going to ensure that manufacturing provides all the jobs that our youths require. That is where most of the jobs are. The jobs are not with the service sector.
“Everyone that is a manufacturer is a very important component of Nigeria’s development. I am very sure that by the time we will get our manufacturing going, Nigeria will certainly get on its feet and run the race for a better economy.
“We will continue to work with MAN to achieve what we have said that you can achieve 25 per cent year-on-year growth.”
