‘Lack of government commitment limiting backward integration’

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By Merit Ibe, [email protected] 

With the 2020 COVID-19 invasion of the Nigerian economy and the ongoing Ukraine-Russia war, its has become obvious the global economy has been recalibrated with supply chains becoming more complex.

This is coming as many countries have imposed restrictions on exports of essential goods in a bid to meet local demand and managing disruptions to global supply chain. This indeed does not bode well for import dependent  countries like Nigeria, as limited supply of raw materials  poses a hurdle to already constrained manufacturing capacity and shortage of essential items.

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The development has however presented an opportunity for the country to stimulate and promote its import substitution agenda.

But regrettably several years into the clamour for backward integration, stakeholders and manufacturers have  urged the Federal Government to implement policies that would discourage importation of manufactured good by incentivising local producers.

However, observers have argued that accelerating backward integration of the Buhari administration, some of the big challenges that must be tackled head on include insecurity,  poor infrastructure, power, refining capacity among others.

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Supporting companies to reduce the cost of doing business would be imperative for the government.

For farmers to produce for instance  it is needful that they are assured of security.

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Even as manufacturers have decried the prevalent scarcity of foreign exchange, exchange rate depreciation and high inflationary pressures, posing severe impediment to their businesses, they noted that backward integration needs to be intensified.

It was against this backdrop that some stakeholders have lamented government’s  policy summersault now taking a toll on investment.

For them, therefore  a steady and reliable policy is needed to encourage local investment.

They have therefore argued that for the government to  encourage investments in the country’s manufacturing industry, especially in sectors implementing the backward integration policy, there is need to implement policies that would discourage importation through the introduction of incentives for local producers.

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The Manufacturers Association of Nigeria (MAN) for instance stated that the average performance of local raw-materials utilisation among operators in the country is due principally to poor access to credit and adequate economic infrastructure needed for inward development of local inputs.

Chairman, MAN, Apapa branch, Frank Onyebu, lamented that the backward integration policy has not been largely successful in Nigeria because of little and in some cases, complete absence of government’s commitment.

“The issue here is that most of our infrastructure are dilapidated. A manufacturer, for instance, who depends on farm inputs for his production would need to go to the villages to source his raw materials on non-existent roads. With the absence of electricity in the villages he would need to either process the raw materials with generators or transport the raw inputs to his factory with the attendant high transportation cost.

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“The current security situation, which makes movement of goods very difficult, compounds the already bad situation. “Backward integration will thrive if the government creates the environment for it to thrive. Deliberate policies have to be made; infrastructures have to be upgraded; but above all, industrial clusters need to be created. These clusters have to be so designed in such a way to encourage backward integration. This is the way it is done in more developed economies.

For his part,  General Manager, Ornua Nigeria, Tunde Afolabi, said government should create an enabling environment for local production. Backward integration is a good policy, but it does not just work so easily. A lot of money has to be committed to the business. “For milk production, you need to secure the land, the cows, machines  and expertise to manage the business. With the value chain, there has to be a plant, where the milk can be preserved, so, we need constant supply of power. “The roads are not accessible, insecurity part seems to be the worst. Some who tried to invest into backward intigration, have lost so much.

“The first thing government should have done first was to call stakeholders together and take decisions together. Government should have given a timeline say between now and the next three years we want to start producing milk in Nigeria or between now and five years we want to have our own companies. As experts, we will now say what we can do and then agree on the strategies.

“What we require from governent  is  an enabling environment to do business.”

We need an enabling environment, the security issue is serious. We need constant power to preserve our products.

Our youths need to be educated on agriculture and technology needs to be adopted. Government needs to encourage the youths to go into farming through incentive. This will make the system competitive. Government also needs to encourage cooperative system of farming. This system has worked in India. They don’t import milk into India anymore, they produce  more than enough. This is because locally, everyone has a cow or two.

The rate of inflation is so high, spending is difficult. Doing business as a private entity in Nigeria is so difficult to survive in this terrain.

Govt has a good intention but it has not followed it up with a plan. Stakeholders need to be consulted to come up with their plans. In developed worlds, farmers are king, but here, they are not reckoned with.

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