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Low capacity utilisation threatens industrial development — Employers

By Victor Ahiuma-Young
FOR employers in the food and beverage sector of the nation’s economy, the gradual and steady waning capacity utilisation and employment generation in the sector and indeed, the entire manufacturing sector in the country, is something that the government must urgently address frontally if the country’s dream of joining top 20 economies in 2020  would not end  a mirage.

Under the umbrella of Association of Food, Beverage and Tobacco Employers (AFBTE), at its 30th Annual General meeting (AGM) in Lagos,  the employers posited that evidence  on ground pointed to the  unfortunate conclusion that the federal government  is not perturbed that the nation’s manufacturing sector in other words, industrial development, is at the verge of collapse

L-R: Mr Aderemi Adegboyega, Executive Secretary, Association of Food, Beverage and Tobacco Employers (AFBTE) ; Chief .E. Ukpabi, President and Dr Paul Orhii, Director General, National Agency for Food and Drug Administration and Control, (NAFDAC) at the 30th AGM of  AFBTE  in Lagos. PHOTO: Kehinde Gbadamosi .
L-R: Mr Aderemi Adegboyega, Executive Secretary, Association of Food, Beverage and Tobacco Employers (AFBTE) ; Chief .E. Ukpabi, President and Dr Paul Orhii, Director General, National Agency for Food and Drug Administration and Control, (NAFDAC) at the 30th AGM of AFBTE in Lagos. PHOTO: Kehinde Gbadamosi .

Addressing members, AFBTE’s President and Executive Secretary, Chief E A Ukpabi and Mr. Aderemi Adegboyega respectively, lamented that policy inconsistencies, multiple/excessive taxation and deteriorating state of infrastructure the West African Common External Tariff (CET) policy, influx of substandard goods, high lending rate, high inflation and depreciating value of the Naira are the major obstacles  to the survival and growth of the sector in the country.

AFBTE declared that during the year under review, the manufacturing sector witnessed no significant improvement as the capacity utilization fluctuated between 35 and 40 percent and expressed sadness that there had been a gradual decline in the contribution of the manufacturing sector to the Gross Domestic Product (GDP) of the country during the year under review.

Giving   a detailsed  analysis of employment by the sector in the last four years, Mr. Adegboyega lamented that there had steady decline  of employment generation by the sector since 2004, where a total of 33,731 staff were engaged in the sector, stressing that but for the year under review, the number has reduced to 27, 238.

According to him: “In 2004, the Tobacco (Cigarettes and Allied Products) employed 1,170,  243 in 2005, 552 in 2006, 245 in 2007 and 245 in 208. Food (Millers, Biscuits, Confectioneries, Dairies, Sugar Refineries, Cocoa and Related Drinks) had 10,498 employees in 2004, 10,397 in 2005, 12, 571 in 2006, 11, 132 in 2007 and 11, 916 in 2008.  Beverage (Breweries, Bottlers and Distillers) in 2004 engaged 22,063 workers, in 2005 16,703, in 2006 13,088, in 2007 15, 688 and in 2008 15, 077.”

Mr.Adegboyega lamented that “the manufacturing sector of the Nigerian economy witnessed no significant improvement in 2008, as the capacity utilization fluctuated between 35 and 40 percent. It is perhaps no news that there has been a gradual decline in the contribution of the manufacturing sector to the Gross Domestic Product (GDP) of the country during the year under review.

The economic and environmental situation in the country is not right for production. One of the major problems being faced is power outage. Member-companies continued to spend huge amount of financial resources and time on power generation; which gulps about ten per cent of manufacturing costs, and even more in some cases. Government seems not to support manufacturing in the country. Government support for manufacturing is only in declarations.

The support is non-existent in action, understanding and policy formation. The low level of interest is due to the fact that revenue from Oil and Gas is available and easier, but as it becomes more  problematic,  our  government must start to develop tn manufacturing   sector.

A  government   that  has  not  provided   necessary infrastructure for manufacturing especially power cannot generate more  indirect taxes. Government and security agencies are not doing much about the spate of smuggling going on in the country. The inflation rate in the country and the fall in the value of the Nigerian currency are affecting the performances of member-companies. Most industries have either scaled down activities or are  packing up.”

“ Communication gap between government and manufacturers has been responsible for some of the problems confronting our industries. There have not been stakeholders’ interactive sessions with government. We need to know what government is doing or planning for the sector.

Regular meetings would enable the private sector acquaint government with some of the challenges that are facing manufacturing. We commend the federal government on the selective ban on a number of items that could be locally manufactured. The policy should be sustained while encouraging the local producers to meet up with the challenges.

Once we have a comparative production environment similar to other parts of the world, Nigerian manufacturers can compete. Government should consult early enough with manufacturers on policies, so that manufacturers would be able to plan.

Government policies usually come as surprises, especially policies on imports, exports, tariffs, taxation etc. Our Government should as a matter of fact sincerely address these problems not only on paper but also implement measures to boost industrial and economic growth. Our country is not in want of declarations, papers coming out of many talks, but only short in actions.

In addressing the power sector problems, we must do away with the central command structure in authority and administration of this sector. Smaller regional units of power generation is the way out. The Federal Government should financially empower regions/states to generate and distribute power.

The same goes for security and other unprofitable bureaucracies. Nigeria’s dream of becoming one of the world’s 20 strongest economies by 2020 can only be realized if industries are kept in business; that is why the few industries existing must be kept alive. Any government that is eager for development should focus on developing this sector, in order to generate employment alleviate poverty, create wealth and security for the entire citizenry.”

CET, others bane of manufacturing sector

Earlier in his opening address Chief Ukpabi, posited that running businesses in Nigeria have  continued to be more challenging especially in the midst of policy reversals and inconsistency, stressing that “the deteriorating state of infrastructure has remained a major challenge to industrial growth.

During the year, manufacturing sector had to grapple with increasingly epileptic power supply, exorbitant cost of diesel to power generating sets, shortage in supply and increase in the price of gas. And even now, there is a threat to regulate private power generation with tendency to “punish” and tax those who generate power for themselves as the state has failed in its obligation.

The manufacturing sector was further burdened by unfavourable aspect of Common External Tariff (CET) policy, which does not help local industries. Multiple taxation is one of the most potent threats to manufacturers in the country.

Governments at both federal and state levels have continued to legislate or demand different forms of taxes, levies and financial support, which had continued to increase the cost of production in Nigeria. When company vehicles go out on official duty, agents or officials of different tiers of government stop them and ask for one compliance document or the other.

The menace of sub-standard goods through smuggling is another critical factor that troubles the manufacturing sector. Smuggling of sub-standard products prevents the country from collecting appropriate revenue, and makes the prices of locally produced goods uncompetitive.”


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