LAGOS, NOVEMBER 1, 2016 – Manufacturers in Nigeria have requested from the Federal Government a bailout of N1.5 trillion at single digit rate to resuscitate the ailing industrial sector. President, Manufacturers Association of Nigeria (MAN), Chief Frank Udemba Jacobs, and Chairman, Lagos Chamber of Commerce and Industry (LCCI) Small and Medium scale Group (SMESG), Jon Kachikwu, made the calls in separate interviews with New Telegraph in Lagos.
Kachikwu said it was time for the government to support the sector with bailout funds in order to save firms from further closure of factories/industries Jacob also noted that the current economic recession and harsh operating environment have made it impossible for firms to operate, adding that intervention funds for the industry would help to cushion the effect of the harsh economy on their operations.
The MAN president said: “I can categorically say that the manufacturing sector needs not less than N1.5 trillion as bailout funds for the sector to thrive and the economy to re-bounce. “I always like to refer to what is happening in the advanced countries like United States and China.
When President Barack Obama assumed office for second term and the economy was not okay; what did he do? He brought the idea of stimulation to manufacturing, automobile, production and SMEs industries, which propelled these companies to employ more workers into their sectors following the stimulant bailout fund from government.”
He noted that the Central Bank of Nigeria (CBN) has given various intervention funds for Micro Small and Medium scale Enterprises (MSMEs) operators at a single digit rate to assist them re-jig their businesses. He, however, rued that banks have been frustrating the success of the bailout funds given to the SMEs because of their high interest rate charges.
“Definitely, we’ve been saying that the manufacturing sector needs bailout fund from the government to survive. You know that the major part of the challenges confronting the manufacturing sector is source of funding. So, intervention funds have come and gone for MSMEs.
But majority of these intervention funds from CBN do come at high interest rates. For instance, nine per cent interest rate is too high and not so friendly for SMEs compared to other industrialised countries where interest rate runs from 3, 4 or 5 per cent.
We would like intervention funds where the interest rate will be 5 per cent or less for manufacturers. That is when it will really make sense,” Jacob said. The MAN president lamented that the economic recession had impaired the sector’s growth and development, particularly its contribution to the country’s Gross Domestic Product (GDP).
He, however, charged the government to provide conducive enabling environment for business to thrive for manufacturers in the sector. “It is unfortunate that the Nigerian economy has gone into recession despite attempts made to prevent it.
I do, however, believe that the industrial sector, especially the manufacturing sub-sector, should be strengthened by removing all obstacles restraining the growth and competitiveness of the sector such as the indiscriminate changes in the Monetary Policy Rate (MPR), which changed as many as four times between 2014 and July 2016, with its distorting effects on the economy; the exclusion of 41 items, some of which are essential raw materials, from the official forex market as well as failure to synchronise monetary and fiscal policy actions.
“This will enable the sector to be optimally productive and play its expected role of employment generation, capital mobilisation, wealth creation and technology acquisition.” For Kachikwu, the country’s manufacturing industry is ‘dying systematically’ because of decades of neglect by past governments. He explained that various sectors of the economy are in need of bailout funds, citing the aviation, education and maritime sectors.
The move by the manufacturers on the bailout funds is coming on the heels that the sector is currently in comatose situation and urgently needs government’s intervention. In addition, government has identified the sector, including agriculture and solid mineral, as critical sector of the economy in its diversification programme as a way of repositioning the country.
Meanwhile, Minister of Trade, Industry and Investment, Okey Enelamah, will lead a high-power Federal Government delegation to meet with Organised Private Sector (OPS) to find solution to the lingering Export Expansion Grant (EEG) scheme and Negotiable Duty Credit Certificate (NDCC) claims today in Lagos.
The meeting, which will be the second within one week, following last Thursday’s meeting, was specifically aimed at bringing succour to the country’s export sector, as the government concludes plan to review and address the EEG/NDCC issue.
The EEG scheme was introduced in 1999 by the Federal Government to encourage non-oil exports and reduce the effect of cost disadvantages faced by Nigerian exporters due to infrastructural gaps in the country. Already, the lingering EEG scheme has cost Nigeria about N100 billion in foreign exchange earnings since its suspension in 2014, following alleged petitions over abuse of the scheme by the country’s exporters.
The scheme, however, recorded $2 billion growth between 2006 and 2013 before it was suspended. Enelamah, in a chat with New Telegraph in Lagos, said that today’s meeting with the OPS is meant to align with the private sectors on the government’s readiness to enter into negotiation with them on the need to re-jig the country’s export sector to attract the much-needed foreign exchange into the economy.
MAN President also confirmed the meeting to New Telegraph. Jacobs said manufacturers/ exporters had done the needful by passing the necessary recommendations to the government on resolving the EEG scheme and NDCC claims impasses.