Nigeria’s FX earnings must lean on globally competitive manufacturing – Businessday

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Nigeria has the capacity to wriggle out of recession but it must build a globally competitive manufacturing sector that can earn sufficient foreign exchange through export, said Dick Kramer, founder and chairman of African Capital Alliance. 

“FX earnings must be based on production that is internationally competitive and any exception (petroleum, other commodities, foreign aid, etc.) must be managed wisely to avoid the Dutch disease,” Kramer said at the 8th convocation ceremony of Redeemer’s University, Osun State, on Thursday. “Our challenge today is to strengthen our oil industry and use the FX revenues to build a strong diversified economy,” he said.

Africa’s most populous nation has had its GDP drop by half on the back of low FX inflows and lack of competitive manufacturing and export sector.

The GDP contracted by -2.06 percent in the second quarter of 2016 while inflation hit 17.1 percent, according to the National Bureau of Statistics.

The non-oil export sector value fell from $2.9 billion in 2014 to $1.1 billion in 2015.

The contribution of the manufacturing sector to nominal GDP in Q2 2015 was 8.95 percent in Q2 2016, lower than the contributions of  9.29 percent recorded in the corresponding period of 2015, and 9.33 percent in Q1 2016.

According to Kramer, Nigeria consumed its oil revenues without savings,  spending on consumption and not building a strong future economy.

He added that the country has failed to  build a strong private economy which is diversified and globally competitive. He said the current ‘severe recession’ is likely to last for several years, stressing that Nigeria needs a new economic plan – one that will diversify it away from dependence on oil and create an economy based on the industries where the country can have lasting and strong economic growth.

He said the most practical way to move Nigeria forward include implementation of the proposed ‘Emergency Power’ effectively so as to make up for lost time and gain momentum, as well as taking steps to forge an effective public/private partnership.
He suggested the development of a 3-5 year plan which has broad private sector support, while fostering long- term nationwide support for implementing Nigeria’s long term economic plan. “We need to craft support and implement a long term economic plan.

We need to launch a multi-year effort of all interested stakeholders to forge a national partnership. We need to evolve into political and economic processes which foster Nigeria’s success,” he noted.

The former chairman of Union Bank said now is the time to mobilise a healthy petroleum sector, both upstream and downstream, which provides most of the revenues to fund a viable and strong economy. “We must develop a viable private sector which pays taxes and fees sufficient to fund government structures which are effective but ‘right sized’. We need to build global quality infrastructure, education, healthcare, and other enablers which meet the needs of all sectors of the economy,” he said, adding that the country must institute foreign exchange, taxation and investment systems that encourage private investment, particularly to develop the non-oil sector and diversified industry.

He suggested the need for government’s role to evolve away from operating and controlling the economy to becoming an enabler which motivates and guides the private sector to build a strong responsible economy.

But to get to the desired target, there is a need to attract local and international investment capital through the creation of an enabling environment, he said, advising that the good environment should be extended to the  petroleum sector to ensure it provides much of the investment capital required. “There are nine key priorities which are fundamental to building a world class economy. They are defined national vision/strategy, attractive investment climate and incentive, privatisation of economic activities, and markets determined by supply and demand,” he said. “They also include incentives for industries where Nigeria has comparative advantage, world class infrastructure, education, healthcare; public/private partnership, strong regulation and rule of law, and international support,’’ he added.