The confirmation that the manufacturing sector contracted for the sixth straight months in October, dampened hopes of Nigeria making a quick economic recovery. The Central Bank of Nigeria Purchasing Manager’s Index reported declines in eight key production sub-sectors, thereby further worsening the high unemployment challenge amid a failing official response. Stimulating manufacturing, alongside the primary sectors of the economy, holds the key to job creation, export diversification and investment. It deserves urgent action.
PMI, a monthly survey of supply chain managers across 14 industrial sectors, showed that only six sub-sectors reported expansion from the shutdown or near shutdown arising from covid-19 induced measures. Eight, including the vibrant food, beverages and tobacco segment, contracted. Only three sub-sectors recorded growth in employment level, two were stagnant while the remaining nine tallied job losses. With a 27.1 per cent unemployment level and a recently restive youth population, this is bad news.
To be sure, the global economy has taken a severe hit as the pandemic ravages both the strong and weak. Mono-product economies like Nigeria, already facing headwinds even before the meltdown, have been battered. Sluggish recovery from the recession of 2016/2017 gave way to a 6.1contaction in GDP in the second quarter of 2020.
The IMF sees a likely contraction in GDP by – 4.3% by year-end. The industrial sector, including mining, power, construction and manufacturing, declined by – 12.05% in Q2 compared to a 2.26% growth in Q1, the National Bureau of Statistics reported. Manufacturing contributes just 8.82% to GDP, while capacity utilization, from 70-75% in 1970-1980, now averages slightly above 40%.
In contrast, manufacturing contributes 15% to South Africa’s the result: the country imported N2.7 trillion worth of manufactured goods and exported only 254.2 billion worth of goods in April to June this year.
Manufacturing, the value-adding processing of raw materials, or parts into finished foods using tools, human labour, machinery and chemical procession, is a major creator of jobs. Experts say its value as the secondary sector of the economy is enhanced by its linkages with the primary productive sector – agriculture, mining on the one hand and the tertiary sector or service sector – transport, distribution, logistics, wholesale and retailing and ICT on the other. It is therefore a key stimulator of investment, capital formation, innovation, job creation, poverty reduction and exports. No country in the modern era has
transitioned from agro-dependency and poverty to high-income export-led status without a shift to industrialization.
Ironically, Nigeria was once on track. In the immediate post-independence era like most developing countries, it adopted the import-substitution industrialization strategy where local industries were to be built up, with subsidies, protective tariffs and credit. From a peak of 13.9 % in 1984, manufacturing’s share of GDP dropped to 4.0% in 2002, according to the CBN.
Multiple taxes, fees and charge by the three tiers of government and insecurity add greatly to costs. The terrible state of the ports, their access roads, red tape and corruption, as well as poor network of roads, railways and waterways inhibit growth in the sector.
In today’s globalised economy where supply chains and markets combine with technology to blur international borders, Nigeria should move fast to create a vibrant manufacturing sector.
The Punch, November 5, 2020
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