Boosting manufacturing through local sourcing of raw materials

0

A sure way for manufacturing companies to survive the current economic difficulties is to stop importing raw materials and invest in the local market by sourcing raw materials locally.

Nigeria is known for its huge resources of raw materials and solid minerals, but only 51.7% as of December 2021 of raw materials come from the country.

Data from the Manufacturers Association of Nigeria (MAN) for the Biannual Review of the Economy from July to December 2021 revealed that the use of local raw materials in manufacturing fell to 51.7% during of the period considered, compared to 56.5% recorded during the corresponding period of 2020.; thus indicating a decline of 4.8 percentage points over the period.

However, it fell by 1.3 percentage points compared to the 53% recorded in the previous half. Local sourcing of raw materials averaged 52.4% in 2021 compared to 57.5% in 2020. Since the full opening of the economy following the COVID-19 pandemic lockdown, local raw materials and other manufacturing inputs are relatively scarce and expensive. This also negatively affected the production of the sector.

Over the years, the federal government through the Raw Materials Research and Development Council (RMRDC) has managed to turn around the country’s industrial sector by upgrading local raw materials. It is now clear that the way out of Nigeria’s overreliance on the oil sector is through diversification into other critical sectors. Incidentally, the country is rich in natural resources such as solid minerals and agriculture which can grow the manufacturing sector.

Additionally, the Manufacturers Association of Nigeria (MAN) has partnered with the RMRDC on how to look inward and source raw materials locally amid a worrying exchange rate crisis (forex ) and other macro-economic challenges in the country’s manufacturing sector.

Since the launch of the Backward Integration Policy (BIP) in 2002, manufacturers in various industries have been on the same page about the need to support the policy and leverage it to boost the ability to local production.

They believed that leveraging the BIP to source raw materials locally for production would help save scarce foreign exchange, boost capacity utilization in the sector and reduce hardship at ports while waiting longer. shipments of imported raw materials.

Industry stakeholders have also noted that local sourcing of raw materials for production will certainly boost capacity utilization in the country’s manufacturing sector and help reduce difficulties in ports, while waiting longer. shipments of imported raw materials.

MAN specifically pointed to the high cost of local and imported raw materials as the biggest constraint in manufacturers’ quest for better capacity utilization, competitiveness and of course, profitability.

As a result, this has forced manufacturers to renew their call for the resuscitation of BIP and government resource-based industrialization programs. This is with the aim of improving the performance of the manufacturing sector and, by extension, the economy in the future.

To further boost the performance of the sector, the manufacturers insisted that the intentional establishment of a permanent mechanism that will help address the challenges that are hurting the sector, starting with incentivizing investment in the development of raw materials at the local level through backward integration and resource-based industrialization, will make a difference.

MAN President, Engr. Mansur Ahmed, said that encouraging manufacturers to source their inputs locally by formulating a comprehensive industrialization policy that would prioritize backward integration programs and the creation of linkages for various value chains in the The manufacturing industry would reduce supply chain costs and support the federal government’s drive to diversify the economy.

Mansur also pointed out that improving manufacturing value chain linkages will make the manufacturing sector competitive, contribute more to the country’s Gross Domestic Product (GDP) and create much needed jobs in Nigeria.

He, however, stressed the need for the government to strategically involve private sector operators in the development and implementation of its backward integration policies to facilitate the creation of industry-friendly and sustainable policies. that would not erode the small gains made so far in the industrialization of the country. conduct.

The CEO of the Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said, “Nigeria’s manufacturing sector is too dependent on imports, which is a major shortcoming of the Nigerian manufacturing sector. The sector accounts for about 3% of Nigeria’s foreign exchange earnings and more than 30% of the country’s import bill. This demonstrates that the sector is not properly aligned with the vision of autonomy promoted by the current government.

“The local added value is still very low. The most sustainable segment of manufacturing is the food and beverage and cement industries, where local content is well over 60%. This explains the competitive strength of these segments.


Source link

Share.

Comments are closed.