Business

NESG: Prioritising real sector to boost FX inflow

A 2021 Macroeconomic Outlook report from the stable of the Nigerian Economic Summit Group (NESG) revealed that the time is ripe for government to prioritise the country’s manufacturing sector in order to boost forex inflow into the fragile economy. TAIWO HASSAN reports

No doubt, the profound challenge caused by foreign exchange scarcity on the Nigeria’s economy is becoming tougher everyday as virtually all the key sectors of the economy are facing difficulty in accessing it despite the Central Bank of Nigeria doing its best in the management of the country’s monetary policy. Indeed, the fundamental cause remains the emergence of COVID-19, which disrupted many global economies, supply and demand chain network, oil price and many others forcing low FX inflow. No doubt, Nigeria is among countries that have had their fair share of the pandemic, with the economy badly hit, making relevant sectors to move into recession.

COVID-19

Obviously, the country’s manufacturing sector is one of the most badly hit by COVID- 19 with dire consequences as many operators struggled to remain in businesses. In fact, the Manufacturers Association of Nigeria (MAN) has emphatically stated that manufacturers are yet to overcome the FX scarcity in the system.

New strategy adoption

Speaking with New Telegraph, President of MAN, Mansur Ahmed, explained that following the weak FX allocation to the real sector, manufacturers were now adopting a customised approach to manage the limited available forex considering that the shortage would not improve anytime soon. He stated that the situation had posed difficulty for real sector operators and manufacturers. The MAN boss emphasised that manufacturers were still finding it extremely difficult to source FX for importation of raw materials and machinery that are not locally available.

NESG report

However, NESG, in its 2021 Macroeconomic Outlook report, explained that the only way to get out of the wood relating to the country’s FX crisis was to aggressively develop the real sector. NESG, in it’s manufacturing report made available to the media, stated that Nigeria’s manufacturing sector was among the largest in Africa, with numerous opportunities. In the report, NESG explained that the sector had the potential to create jobs and lift millions of Nigerians out of poverty if government addresses the current challenges in the sector, bordering on poor quality of infrastructure, which remains the longest standing problem of the sector in Nigeria, contributing to the high cost of production, bad road networks and inadequate electricity supply. According to NESG in the report, all these make it difficult for businesses to maximise returns and limit operations costs in the sector. The report also maintained that prior to 2020, the sector faced several structural challenges, which have caused many manufacturing firms to shut down, limiting growth and investment inflows into the sector.

Manufacturing as key

NESG, in the report, described the manufacturing sector as one of the six sectors that have the potential to create jobs and reduce poverty in Nigeria. However, for the sector to achieve this, NESG argued that private investment would play a major role. The report pointed out that the closure of land borders in September 2019 reduced informal exports and indirectly affected several manufacturing outfits in Aba, Kano and Lagos. However, Nigeria has numerous favourable conditions for investment, especially in its manufacturing sector. Some of these conditions include large arable land, strategic location in Africa and large market and opportunities presented by AfCFTA. Already, there are several initiatives and interventions in the manufacturing sector, ranging from import restrictions to the establishment of 43 export processing zones, which are currently at different stages of development, according to the Nigerian Export Processing Zones Authority.

Composition

The manufacturing sector is made up of 13 sub-sectors, including oil refining; cement; food, beverage and tobacco; textile, apparel and footwear; wood and wood products; pulp, paper and paper products; chemical and pharmaceutical products; non-metallic products; plastic and rubber products; electrical and electronics; basic metal, iron and steel; motor vehicles & assembly and other manufacturing. The sector is dominated by informal players that are mostly micro, small, and medium enterprises.

Last line

With the NESG report, the onus is on the Federal Government and CBN that are managing the country’s fiscal and monetary policies to key into the report and generate more FX for the country via manufacturing.

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