backward
integration exercise in some of the nation’s productive sector has hit 53.1 per
cent following the restriction of some items from accessing foreign exchange at
the
official window of the Central Bank Nigeria (CBN) in 2016 as well as
subsequent forex intervention for local manufacturers in terms of raw materials
import.
According to
statistics from local operators, even though 2016 was a challenging year for
operations, it marked a growth in local substitution that may positively affect
reduction in the nation’s food import bill.
Already,
operators in the conglomerates sector have intensified alternative sourcing for
critical raw materials for milk, sorghum, tomato, apparels, leather and wood.
Local
producers claimed that local raw-materials utilisation increased across
sectoral groups like textile, wearing apparel, carpet, leather and leather
footwear; pulp, paper & paper products, printing, publishing &
packaging; chemical & pharmaceuticals; domestic & industrial plastics,
rubber & foam; electrical & electronics; and motor vehicle &
miscellaneous assembly groups; and to some extent basic metal, iron & steel
and fabricated metal group.
Import
substitution has remained one of Federal Government’s primary focus areas, with
agriculture serving as a potential catalyst.
In Q1 2017,
crop production remained the largest contributor to agriculture GDP, accounting
for 87 per cent of the total, while livestock farming accounted for just nine
per cent.
Based on CBN
data, importation of food products accounted for 8.9 per cent of forex
utilisation in Q1 2017 compared with 9.5 per cent recorded in the previous
quarter.
The latest
inflation report also points towards a reduction in imported food items as the
impact of the CBN’s stepped up forex interventions on parallel market rates has
been a contributing factor to the latest decline in imported food price
inflation, which slowed to 14.2per cent year-on-year in June from above 21.0
per cent throughout Q4 2016.
The
Manufacturers Association of Nigeria (MAN) described the intervention of the
Central Bank of Nigeria (CBN) by the way of preferential foreign exchange
allocation to the sector as the turning point in the second half of 2016 for
local producers as capacity utilisation rose above 50 per cent.
According to
MAN, the preferential forex allocation was able to support the various
investments already made locally for the development of raw materials and
resurged manufacturing production to a large extent.
Latest
report from MAN on activities in the industry in the second half of 2016 showed
that the intervention was responsible for the production momentum gained in the
economy during the period.
The
association however sought the sustenance of priority forex allocation for raw
materials, spare parts and machinery to the industrial sector so as to improve
production as well as the need for government to intensify efforts at further
diversifying the economy away from oil and expedite the resumption and
implementation of the Export Expansion Grant (EEG) to catalyze non-oil export
forex earnings.
However,
notwithstanding the leeway gained in the second half of the year, it is very
important for the government to continue to address the multifarious economic
challenges, especially the manufacturing sector.
“Government
needs to establish a manufacturing development bank in the country to cater for
the credit needs of the manufacturing sector
specially;
upscale access to the various development funds created by the CBN such as the
N220 billion Micro, Small and Medium Enterprises Development Fund (MSMEDF) and
the N300 billion Real Sector Support Facility (RSSF) through relaxing stringent
conditions that denies manufacturers access to these funding windows”, MAN
said.
On her part,
the Managing Director, Psaltry International Company Limited, Mrs. Yemisi
Iranloye, said her company’s processing plant has an installed capacity of 50
tonnes of processed starch daily to assist manufacturers with local
alternatives, adding that the company saved $4 million in import substitution
in 2016.
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