ERGP Focus Labs: A Boost For Manufacturers:
Jonathan Eze examines the Economic Recovery and Growth Plan’s Focus Labs that was recently launched by the federal government
During the launch of the Economic Recovery and Growth Plan (ERGP) Focus Labs recently by President Muhammadu Buhari, it was indicated that the initiative would be targeting an initial $25 billion in investments from the private sector.
The initial labs targeted investments in the agriculture, transportation, manufacturing, processing, power and gas sectors.
Also, when Vice President Yemi Osinbajo visited the labs, he was particularly impressed by the level of commitment, enthusiasm and interest shown by participants in accepting to lock themselves up for six weeks, all in a bid to fast track the growth and development of the country.
He noted that even though regulatory processes were necessary to protect institutions and streamline activities, government appreciates the fact that it is necessary to limit bureaucratic bottlenecks so that they do not get in the way of progress; which was why government decided to embark on the labs to address any challenges that stand in the way of investments.
To underscore his observation during the gallery walk of the labs, the Vice President said the leader of the Malaysian consultants working with the ERGP Implementation Team on the labs hinted him that going by his experience in other parts of the world, the ERGP focus labs had already achieved about 80 per cent success in the three weeks so far.
At the inaugural level, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, said the country cannot continue to do things the old way and expect different results; hence the many initiatives embarked upon by the federal government to fast track the changes it is set to achieve.
On how the Focus Labs will work, Udoma said, “Potential and existing investors both foreign and Nigerian, who may be interested in investing in any of the three areas we are focusing on are to attend the closed-door sessions.
“The Focus Labs will involve stakeholders from the public and private sectors working together in a single environment to think out practical and workable solutions for delivering the kind of result Nigeria needs.”
Continuing, he said the central objective of the Labs would be to bring in private capital to finance projects across the country. “Our aim is to raise the level of productivity in Nigeria. We want more things to be grown in Nigeria. We want more things to be made in Nigeria. We want more opportunities created for Nigeria to be able to work. We are also inviting officials of state governments to participate. At the labs, we will also be able to identify new opportunities that investors may wish to exploit, or develop,” he added.
Around the world, the value of manufacturing has been on an upward trajectory as demand for goods rise with growing population.
On the average Nigeria’s population rises by five million annually and demands for goods continue to be met by importation. This is because the country’s immense potential in the manufacturing and processing sector is yet to be realised. Manufacturing remains the backbone to driving non-oil growth, a focal agenda for the current and previous administrations.
The abundant availability of raw materials, labour, land, market access, and strategic location in the Gulf of Guinea makes Nigeria an ideal manufacturing hub.
Despite being Africa’s most populous country, manufacturing contribution to the country’s Gross Domestic Product (GDP) is lower than Morocco, Kenya, Egypt, Mauritius and South Africa. Growth in the sector is crucial to achieving a diversified, sustainable and inclusive economy.
Other than agriculture, it is the sector that has the most capacity to create massive job as it currently employs only 12 per cent of the labour force.
Also, the processing sector is largely made up of mining, which suffers a similar fate as manufacturing.
Mining as a sub-sector has contributed less than six per cent to GDP over the past 10 years, despite proven deposits of over 40 minerals in commercial quantity.
Processing these minerals into finished goods for export will retain significant value for the economy and will feed raw materials into the manufacturing, agricultural and allied sectors. However, growth is hindered by poor infrastructure, unstable power, insecurity and unattractive government policies.
The influence of policy on the manufacturing and processing sectors is particularly acute.
The high cost of accessing finance and regulated pricing has created low policy perception for investors.
Manufacturing associations have thus decried a dearth in local and foreign investments, with most banks refusing to lend to them or charging exorbitant interest rates. This is not surprising, as investments into the sector remain extremely high risk with manufacturing recording a decline in productivity of about N30 billion in the first quarter of 2018.
The federal government through the Ministry of Budget and Planning conducted the ERGP Focus Labs to develop solutions to these challenges.
The focus labs were designed to identify projects that can drive economic growth and create jobs through mobilising private investments in three vital sectors of the economy.
The initiative took place over a six-week period between March and May 2018 and involved 180 organisations including ministries and government agencies.
Over 300 private sector companies participated, out of which 164 projects were ultimately selected. The results of the Labs were recently showcased at an open day with participation from public and private stakeholders.
The labs set a target of $9.25 billion for private sector investments into manufacturing and processing which would create over three hundred thousand jobs across the six geo-political zones by 2020. This will be backed by over $400 million in public investments, which the government has committed to.
This would be injected into investments in six entry point projects: food manufacturing, textiles, minerals, petrochemicals, general manufacturing and the construction of a new industrial park.
Reacting to the ERGP Focus Labs, the Head of Corporate and Government Relations at OLAM Nigeria, Mr. Ade Adefeko said, “These Focus Labs will indeed provide a valuable platform for the private sector to tap into the huge opportunities in these sectors on the one hand and on the other, it provides the government with a focused approach to accelerating quick wins in private sector investment to create jobs and truly stimulate broad-based economic development.
“As a nation in a hurry to industrialise, we need to create the necessary infrastructure to support manufacturing and other critical sectors as enunciated in the blue print.”
The Food processing industry in particular stands to benefit from these investments, as it is the largest sub-sector in manufacturing.
Foods like tomatoes, cassava, palm oil, nuts, and diary are cultivated abundantly in Nigeria, yet by-products like powdered milk, cooking and cosmetic oils, flour and sauces are imported in tonnes.
However, a local manufacturer, Chief Kingsley Okoh, lamented that local manufacturing was unable to meet the growing local demand and struggles to compete with the quality and prices of imported goods.
According to him, tackling domestic demand was the first target of the project developed with the long-term goal of exporting within the region and then around the world.
He added, “The textiles and leather industries are also in dire need of investments. The increasing population, made up of mostly young persons, creates a ready local market. While Nigeria produces plenty of leather and cotton, this is often exported and finished goods like clothes, shoes, bags, and furniture are imported.
“The situation is even more troubling because indigenous manufacturers are plagued by the inability to find consistent and high quality inputs. Thus raw cotton is exported, and clothes’ manufacturers import processed cotton to produce clothes.”
Petrochemical industries suffer similar fate. Nigeria imports a significant percentage of petrochemicals to meet burgeoning industrial demand while the natural resources required to make them are readily available.
Operators in the fertiliser sector often import inputs to create their blends due to inability to source them locally.
The Federal Ministry of Industry, Trade and Investment and the Ministry of Agriculture will jointly execute projects developed at the Labs to plug the gaps between raw material producers and manufacturers.
The production of high quality cassava flour (HQCF) was facilitated between local farmers and manufacturers. This supply of cassava will be used to produce glucose syrups, industrial alcohol, adhesives and baked goods.
The labs facilitated collaborations between manufacturers to ease sourcing of raw materials and granted the renewal of exploration licences. Projects were also able to access funding from the International Finance Corporation, an arm of the World Bank.
Towards strengthening collaborations between manufacturers and raw material producers, a reliable source told THISDAY that a petrochemical project conceived at the lab has been granted gas allocation by the Ministry of Petroleum Resources. A gas cylinder manufacturing factory was also linked with a 20 Mega Watt power plant which will form part of a newly established Industrial park.
The projects developed in the Lab will be implemented through a delivery unit of the Ministry headed by the Permanent Secretary of the relevant Ministries. This will be done in collaboration with the state governments where the projects are situated alongside the ERGP team. All projects will be supervised by the Steering committee chaired by Vice President Osinbajo.
This clearly showed that Nigeria’s growth is existentially tied to the growth of the private sector. Therefore, enhancing collaborations between various actors in the manufacturing value chain presents a giant opportunity for significant growth for the sector and the Nigerian economy.