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About AACS!
AACS Fortnightly
(Mondays)
9th October 2023
From the Chairman’s Desk,
Ease of Doing Business
Data from the NBS shows that FDI in Nigeria declined by $18.6bn in a four-year period since 2019. This underscores the reason why the new administration has been on the front footing in generating FDI and getting other nations to invest in Nigeria. The flip side of this is ensuring we push the ease of doing business to spur local manufacturing and production, which Invariably ensures we import less by creating local substitutes and export more.
As much as the influx of FDI remains a top priority, a low hanging fruit will be to cleanse up the local environment and ease the efforts of the local manufacturers, SMEs and exporters to discourage the need to import through local alternatives and allow exports to generate the needed FX and a favourable balance of trade. There are few things to reduce the difficulty and challenges to local production and manufacturing, which include:
1. Regulations – We need to deal with the issue of overregulation, allowing regulation to assist businesses. Tax authorities, SON, NAFDAC, Customs, Police and Co. must be streamlined to be business friendly. The mode of operations of a lot of agencies are anti-business and need to be restructured
2. Power & infrastructure – The average cost of production and manufacturing in the country could range between 30% to 40% of the total costs. This is an expense head that’s a plug and play in a lot of countries where local production thrives. Basic infrastructure like farm to market roads and transportation of goods around the nation is still a big issue
3. Labour laws – We need to review our labour laws to ensure effectiveness and discipline. We still have instances where a worker agrees to eight hour work terms and gives less than half with a lot of inefficiencies and indiscipline crippling in and man hours wasted. In serious production climes, you can’t resume a 9-5 work schedule at 11am and close at 3pm
4. Credit – There has been a lot of discussion by the govt on this, but we need to have a credible credit policy that funds manufacturers and producers at single digits, while a strong credit bureau enforces repayment compliance
5. Security – We cannot overemphasize this and the extent it has affected local production. We must continue to intensify efforts to rid the nation of insecurity
Did lack of ease in doing business kill local operations of companies like Michelin, Exide, Nichemtex, UNTL, Peugeot, GlaxoSmithKline? Manufacturers have noted that it is cheaper most times to import products than produce locally. Nigeria exported goods valued at $46.9bn in 2022 for a population of over 200m, while South Africa with 60m people exported $135.7bn in the same period. It is clear that the weakness of our currency is directly linked to the poor local production and the consistent balance of trade issues.
Falil Ayo Abina