Princess Funlayo Okeowo, a member of Lagos Chamber of Commerce and Industry (LCCI) and Managing Director/Chief Executive Officer, FAE Limited, in this interview with TAIWO HASSAN, speaks on government’s reluctunce to provide a conducive business environment for investors
Has the country’s manufacturing sector performed very well in its contribution to the GDP growth? If no, what are the challenges facing the sector?
Indeed, to me, I will say yes our manufacturing sector has been performing well in this economy, except that they (manufacturers) need a conducive environment to thrive on. In any country’s economy, the manufacturing sector is the live wire and mainstay. But only that in Nigerian context, our manufacturing sector is bedeviled with lots of insurmountable challenges that are not allowing its contribution to the Nigeria’s GDP to show for it.
But our manufacturers are trying their best only that we are appealing to government to create conducive environment for us to operate and thrive. Nevertheless, there are top challenges confronting our manufacturing sector today in Nigeria. For instance, supply chain disruption.
For the foreseeable future, supply chain disruptions are among the biggest challenges impacting the manufacturing sector. Others are shortage of experienced engineers, worker safety, emerging technologies & cybersecurity, capacity constraints, nonexistent of power, inadequate funding, insecurity, poor infrastructures, irregular taxes and unstable government policy, and; credit not affordable.
As a member of LCCI, is insecurity really taking toll on businesses in Nigeria?
If yes, how do you think manufacturing firms will meet their revenue projections for this year? My submission as a key member of LCCI is yes, insecurity is affecting our businesses in all fronts in the country. It is not good for our GDP growth.
In addition, the issue is also preventing new investors from new businesses in Nigeria, even though, the old ones too are having concerns over the safety of their businesses at the same time. For instance, many business owners cannot deliver products nationwide because of insecurity and it is worsening Nigeria’s business environment currently.
On the second question, whether many firms would meet their revenue projections for this year, I would say No. They cannot possibly meet their financial projections due some reasons like goods delivery across the country is hampered by insecurity and companies’ sales projections may be short of target due to kidnapping of workers.
For instance, companies in the eastern and northern zones are primary targets of bandits and terrorist but the western zone is still safer and favored in that aspect as there are less cases of bandits hijacking goods or workers across state lines.
Yet this cases are smaller than others in the eastern and northern zones. Therefore, workers’ safety becomes crucial index of economics performance and where it occurs it thus leads to reduced economic activities of the area. As a result, most manufacturing companies in those affected areas may not meet their financial targets for the year.
However, it is not conclusive to say only this targeted areas are affected, those ones in the western zone could also be viewed under the different windows of parameters such as supply chain disruption. The port congestion and associated problems with clearing and delivery.
Scarce foreign exchange also affects most manufacturing sector as most companies may not be able to meet their targets. Therefore, it is right to conclude that the multiplier effect will surely affect the bottom line in this circumstance.
What is your assessment of the economy in terms of general performance?
Well, Nigeria’s economic performance in the last three quarters can be described as unsatisfactory in all ramifications. Indeed, since the beginning of this year, we have been having macro-economic challenges in the country till this moment we are now. No doubt, these challenges have caused setbacks to the economy and its performances in the last three quarters of the year.
However, on whether the macro-economic challenges have affected our GDP growth this year, I can say definitely yes, it has affected it negatively. The indices are there for everyone to see in our stunted GDP growth due to rising unemployment rate. You can see the multiplier effects of inflation on rising food prices and Nigerians now paying more for goods.
We also have the unavailable foreign exchange (forex). Little or no direct foreign investors fund. Insecurity. Corruption at the ports and highway. High foreign exchange rate of naira against the dollar, inconsistent monetary policy that affects inflow of dollars into the country. Overzealous appointments in numerous government agencies at ports, and highways.
Affordable credits with high interest rates. Poor infrastructures. Lack of government initiative in developing policy with incentives to make shipment by sea to neighbouring ECOWAS countries, attractive to shipping companies and traders.
Brain drain- many professionals in all walks of life particularly youth want to get out because of unfavourable environ- ment whereas, their contributions in the area of competence would have help improved performance of the economy if they remain in the country; (e.g. doctors, nurses, IT professionals etc). In other words, all these macroeconomic challenges have in one way or the other affected Nigeria’s GDP growth negatively this year.
Energy crisis has been one of the major constraints affecting the manufacturing sector with about 300 per cent increase. As a renowned manufacturer, can you say something about the multiplier effects of this astronomical increase on production?
Well, I can say the multiplier effects bring to fore many reasons the manufacturing sector is not performing well because the market is not ready to accept the multiple jumps in prices as result of loss of patronage, and reduced profitability, which leads to reduced workforce and unemployment.
In most cases, production and sales targets are reduced and are
not met due to low sales, high inventory maintenance, thus reducing the bottom line. In the aftermath, workers are disengaged and this leads to unemployment. In conclusion, I can definitely tell you that the rising energy crisis in the country is the reason for inflated cost of goods since it is causing disruption to production planning and bottom lines of many firms.
Inflation has continued to rise with no hope of abating soon. What are the side effects of this on the economy in general?
Do you think the government has key role to play to cushion the effects? The effects of high inflation rate can be high prices of products to consumers. High Inflation raises prices, lowering purchasing power. Inflation also lowers the values of pensions, savings, and treasury notes.
Assets such as real estate and collectibles, which usually keep up with inflation. However, the present government can play a major role in reducing inflation rate in Nigeria if they are determined. For instance, by making manufacturing attractive through enviable policy.
Mode of setting up business should be easy and attractive. Create a medium of exchange for trade between major industrial nations and Nigeria businesses to meet their raw materials needs. In addition, the government also has a crucial role to play to cushion the effect of inflation through proper management of fiscal and monetary policy in a way to bring the high inflation down. To reduce inflation, government can increase taxes (such as income tax and VAT) and cut spending.
However in Nigeria context, despite increased taxes and VAT, government spending is increasing with foreign loans and revenue is diminishing while loan repayment is exceeding available revenue. You can see that our foreign reserves is not growing with attendant high oil prices and with commensurate revenue.
So, government has to stimulate the economy by reducing spending and putting cap on foreign loans, encourage savings, reduce federal bloated workforce and reduce petrol subsidy, which is taking a bunch of gains in oil revenue to help economy grow. In addition, government should be more transparent because problem shared is problems solved. Mode of setting up business should be easy and attractive. Create a medium of exchange for trade between major industrial nations and Nigeria businesses to meet their raw material needs.
Of recent, the war between Russia and Ukraine has been ravaging the global economy with Nigeria also feeling the pains. Do you think our overdependence on importation is the main reason we are seeing the side effect of the war?
Yes, because we still import raw materials from overseas.
What are the solutions to boost local patronage of made in Nigeria goods?
Made in Nigeria policy should embrace the government commitment to 60 per cent of all purchases on goods from Nigeria market. Also, government has to commit to establish a functional paper mills and paper research institute through appropriate policy on paper mills.
Recently, the Nigerian Governors’ Forum (NGF) urged the Federal Government to increase Value Added Tax (VAT) to 15 per cent and also remove petrol subsidy in order to raise revenue and reduce expenditure?
Do Nigerians have the shock absorbers to take this? No, there is no shock to absorb in this, but government can introduce a “PAYBACK PROGRAM” that put about 20 per cent of the cost of new petrol prices back to consumer. With this, government is boosting the economy as most fund will go into local markets.
Do you think that Nigeria is wasting huge foreign exchange (forex) on paper importation?
Yes, we are wasting foreign exchange on paper importation into the country I can definitely say that.
Do you support government creating a functional paper mills, paper research institute and forestry division in the country as solutions to this?
Yes, because on the long run, it will be a good investment with future encouraging return on investment that will aid paper consumers in manufacturing sector in Nigeria and reduce unnecessary sourcing of foreign exchange at high costs. Our foreign reserves balances will surely improved.
You stated that the paper industry could equate oil revenue generation for Nigeria if revived and maximally exploited using backward integration policy. Can you share this with us?
Yes, but within about 10 years tax exemption moratorium for the investors. What government can do to boost interest in establishing paper mills in Nigeria is by setting up a regulatory agency to drive the initiative with appropriate governance model to give investors the confidence that the government is serious to the growth of paper industry.
Also, government should give a moratorium of at least 10 years tax exemption to help recoup their investment. State governments should also be invited to set up a paper mills in their domain with adequate protection as an investor and also a way of creating employment opportunities for the people.
With nearly 36 paper mills states investors at take off that may include private investors, these investments can turn Nigeria into a regional exporter of paper in ECOWAS in the near future and gain recognition globally as reputable paper mill country with modern technology to serve Europe and Far East countries. Besides, the research institute will provide educational research inputs into the mills as they grow.
The institute becomes a learning ground for the consortium of mills in Nigeria through partnership with notable Asian and Scandinavian countries. Last year, FAE Envelopes Limited unveiled its innovative (Radio Frequency Identification) RFID Blocking Card Holder meant to provide strong reliable data protection for ATM cards. Any breakthrough on this so far in security data protection?
There are two sectors this card main focus are; 80 per cent of Nigeria banks and 75 per cent of security companies patronise our products. From survey conducted recently on the acceptability, reliability, and meeting the needs of customers and the gains by banks in help to secure their ATM card from misuse and data protection, customers are happy with the introduction and usage. At least, about 75 per cent of respondents rated the RFID card the most protective medium for their cards in the industry.
However, replacement of ATM due to maltreatment that result in fading of cards is on the downside. There have been reduced complaints of ATM cards malfunction through improper access on the card. Fading of the impression is better than before.
So far we have fulfilled nearly 100 per cent order within agreed date and minimum order of 200,000 cards per quarter among the major banks. The financial results have been encouraging and within our projections. However the inflation is eating up other opportunity as prices continue to escalate. It is our hope that our customers will continue to patronise us for growth.