Deal governance for manufacturing

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I commend and congratulate his Excellency the vice president and the leadership of the manufacturers Association of Nigeria for inviting this I mean for initiating this and I hope it will be a continuing flatform that will en enable us Co to coherently and sustain efforts to drive the reindustrialization of our economy which is necessary for us before I delve into my paper let me start with some key messages I least I would like you to note import dependence is equivalent to importing poty exporting jobs anything that you import you are importing poty into your nation and you're exulting jobs out no power no growth no Prosperity so unless you have a power you will not have growth you will not have Prosperity similarly no affordable financing no growth no Prosperity there is no industrialization without protection so ignoring all these facts is what gives rise to insecurity banditry kidnapping and object poverty in the land now let me dive into the details of my paper which I would like to present it is now an established fact that industrialization is an inescapable route to sustainable and inclusive economic growth and human development I I believe we will all know the critical role of manufacturing plays in the modern economy especially in especially it facts it impacts on other sectors through various linkages which is job creation economic diversification effects generation government revenues technology transfer and adaptation and Innovation manufacturing remains a key driver in a nation's quest for economic development and self-sufficiency it is also uh it is easy to determine the level of Economic Development growth and well-being of a Nation by observing its manufacturing sector it is evident that the strength of a country's manufacturing sector determines its capacity to compete in global trade which is about 70% in manufacturing Goods ing to the available statistics countries that have industrialized and have a robust manufacturing sector and able to export manufactured goods are generally able to grow their economies through global trade a review of the percentage of manufactured goods in the export trade of various countries indicates clearly the relationship between industrialization and the capacity of the manufacturing sector China is 93% South Korea is 93% European Union is 83% Malaysia 86% India is 73% USA is 70% Egypt for 2% South Africa 37% just to mention a few sadly Nigeria remains far behind was his manufacturing sector accounting for less than 5% of his merchandise export in 20122 and this is mainly coming from Ura and cement this is high level of in a high level of dependence on Commodities export which Nigeria shares with most African countries uh that is which Dr Akim adish described as African Paradox high level of poverty unemployment and low productivity despite the possession of enormous natural resources so let's go to now trajectory of Nigeria's manufacturing sector your Excellency sir ladies and gentlemen even a cury review of the trajectory of manufacturing sector since Independence will show clearly that a sector has not always performed uh fly post Independence and indeed until the late 1980s we had a thriving and consistently growing and increasingly diversified manufacturing industry our industrialization policy were well thought out and diligently implemented there was a determined effort to promote investment in manufacturing value addition in local agricultural products such as Coco rubber cotton granuts uh Etc across Nigeria we had a robust Industries in Cano kaduna Lagos and Asawa employing thousands of workers across cotton texiles value chain and if you remember texile unions at that time they employed almost 270,000 people next to the federal government of Nigeria so now uh if you look at it now uh we have this robust Industries all over and then the value chain from generes to speed sking weaving uh finishing all these processes is all done before in Nigeria this supported extensive cotton farming in areas like K zampara Cano and kaduna States we had various oil meals converting cotton oil seeds palm canels granuts and other into F vegetable oil two of the largest tires two of the largest tire manufacturers in Europe Michelin and D DLo establish large Tire factories one in pacot and the other one in Lagos respectively using natural rubber from the vast rubber plantations across rivers oun and Edo State even in the petroleum industry a policy of value addition to local raw materials was actively pursued during during this period in fact the main thrust of our Nigeria's third thirdd National development plan was in 1975 to 1980 that was the last development National plan that we had and you can see that this whole thrust was to eliminate fuel cues you can see since 19 49 years we've been fighting this there's no way you be fighting something for 49 years you will not succeed then you have to give up because I mean uh during G's Administration they did massively very well including you know trying to set up mobile refineries and Co but the idea was killed it did not succeed so now if you look at it the first crude oil refiner was established in Pak in 1965 followed by wari in 1978 and then kaduna in 1980 again a second refiner was commissioned in poot in 1989 since then no further capacity was added on the contrary all these three plants were allowed to steadily declin forcing the country to resort to embarrassing import dependency apart from the focus on local value addition the earlier industrial policies also encourage and supported local entrepreneurs to go into manufacturing leading to emergence of our Trail Blazers uh in the like I mean in the sector such as the odas the ades the ad do the dantas the is RAV who were in very big in Texas the chin okes Rak Ooa that's elza if you can remember the Ona for cons which is lad group to do uh you know uh Coco processing and many others in the mid 70s following this end of the Civil War and encouraged by the massive inflow of oil revenues government also adopted a policy to uh what know which you call import substitution promoting Industries such as automobile assembly flly milling and many fil and finish pharmaceutical Industries but you know we actually have to be very serious Nigeria was way ahead of Morocco in terms of setting up automobile assembly today as we speak the highest revenue uh foreign exchange Revenue earner for Morocco is what is export of vehicles but our own were killed totally but they now earn $13 billion out of exort of vehicles more than the phosphates because phosphate to Morocco was like oil to us but that has been overtaken well many of these private investment and others were set up as a joint venture with the federal government of Nigeria such as the assembly plans this includes the these industries of the 1970s and 80s grew and thrived creating thousands of jobs for Nigerians and also enabling the development of the msme sectors further boosting job creation and growth the assembly plans for resistance encouraged and supported many local uh content MSE uh msme including battery Plastics and the rest of them as a result manufacturing sector sustained a steady growth in the 1970s and 19 and early 80s despite the impact of the Civil War and global economic crisis of the 1980s but all the but as all of us can testify our manufacturing sector has declined over the years and has largely failed to provide the job it was expected to create for our team in youth it has also increasingly lost the strong linkages it once had with our Agricultural and Mining sectors which if it had continued would have resulted in increasing food security and energy self-sufficiency we may all I mean we may all recall thriving manufacturing concerns across the country like St in Boi leand in ion andco which is Mercedes in Inu fat in Cano Volkswagen in Lagos p in kaduna uh oo Delta Jo rolling Mills ja paper mills Etc this and more and and and many others have actually since joined the graveyard of dead manufacturing concerns clearly therefore there's an urgent and imperative need for us to rethink our manufacturing so now we go to the next step which is rethinking manufacturing which is the main uh theme of the day there are no doubt many causes for the failure of our manufacturing sector to meet the expect ations of our people let me use my own personal experience to illustrate uh when textile businesses were booming we went and set up our own textile meals in Cano called Dango General textile mills and then we massively invested uh billions at that time uh that wasn't enough we went uh through and bought the foreign shareholder of Nigerian textile meals which was a textile meals set up for the western region by uh you know Chief AO and uh that was 1960 but at the end of the day there was no government protection we had to shut down both the two factories in fact we had to delay because the issue is that the biggest challenge we had was with the Nigerian textile meals because most of their workers they have worked there for 25 30 years so paying the pension and gratuity was difficult for us luckily for us somebody now came around that he wanted to buy our bank we had Liberty Merchant Bank so by the time we saw Liberty I was very happy I cash out 1.2 billion but after Cashing Out 1.2 billion the textile industry consumed 985 million to pay pension and gratuity just to get out of the business and that is how we now got out of the business we burn our fingers and that is why when even president obasanjo asked us to come back and invest in Texas I told him Mr President I will do whatever I want us do but Texas no thank you the second one now is to do with motor vehicles and I I said we have started before Alger uh Morocco Morocco today is the highest foreign exchange H but what happened one day out of the Buu we have invested everything was going well the Controller General of Customs then uh not the current one the current one is a good man uh hammed Ali just wrote a memo to president bhari that look he's losing Revenue so please it is better to allow all these vehicles to come rather than them to go to Republic of Ben instead of protecting people he now destroy that industry by now making sure that yes all of us majority of us were asked to go and invest $100 million in fact our own was just commissioned last month to do do CKD of 10,000 trucks but as far as I know it is a dead business we also Rush with some Governors from the north and we open up the P PJ 2 was also killed so we have to be careful in fact the only thing that can make people to go into industrialization is the protection of the industries Mr Vice President distinguished ladies and gentlemen you can see today in our own sector of cement uh all our tax holidays were withdrawn about 4 years ago but because government is serious there's protection in the business as we speak today we are building brand new 6 million metric tons at about 900 despite the lack of dollars was spending $900 million to build 6 million plant in itori in fact it has gone far and we hope by end of next year we'll be able to finish so it's not about incentives no it's about protection there's no country that does not protect their own industry but in Nigeria now somebody will come and say okay fine yes I have something to sell my car is uh assembly in Nigeria yes is 40 million somebody said that no no no give me the one as assemble in Romania I rather pay 45 why it doesn't make sense so it is better we learn how to have what you call a circular economy where all activities are within Bankers will get their own uh manufacturers will get their own people who are even selling food everybody will now get but the things will remain internally and create massive economic activities so your Excellency I trust this Summit will identify all the critical issues deliberate on the challenges and prosper how to reverse the trend for me the most critical issues to address is government policy and government attitude to Investments and investors in the sector I intend to focus on this in the next of my keynote address which is protecting and supporting Industries I I believe sorry I believe a role sorry I believe a primary role and responsibility of government is not only to promote investment and encourage investors in manufacturing but also to ensure that those Investments are nurtured and protected to grow and Thrive industrial manufacturing entities are not like trading entities in every economic regime including ining the most advanced Investments projects in manufacturing and Industrial sectors need time and a conducive environment for them to mature build capacity and scale to become competitive against those in older and more matur markets but since the mid 1990s non industrialized countries and their leaders have been discouraging I mean they've been discouraged from protecting and supporting such Investments and for to expose them for unfair competition from stronger older competitors in their own internal markets even before the new cromers are commissioned yet these same older bigger players are well supported in their home markets let me give a few examples Mr Vice President sir the US government I mean blocked the sell of us steel to npon Steel of Japan despite the good relationship between Japan and the US US Government both the uh Congress and the president they block the cell they don't have one single share but because they've taken it that no this is a National Asset youth owners cannot go and sell National Assets then the same time the US government that is the Congress and also the president at that time blocked the sell of six us ports management companies to Dubai Port world I'm sure all of you are aware of this then again the US government also put a restrictions of Chinese cres at Us Port again us import US US Government imposed last month 100% tariff on Chinese electric vehicles 50% tariff on semiconductors 50% tariff on medical products solar panels Etc why because they want to protect their own Industries which we don't do here the restrictions of Russian gas supply to Europe compelling Europe uh European countries to turn to coal despite very loud voices against fossil fuel you can see now when there was a problem between them and Russia instead of them to use Russia's gas even uh uh Britain they open all their old cold mines to Pro you know to produce coal for the safety of their own Industries the distribution again of$ 39 billion do in subsidies by the US government as an incentive for companies to produce microchips locally Asia achieved their significant level of industrialization by pursuing industrial policies where the government played an active role in nuring and supporting local companies they then subsequently leverage this success to attract foreign direct investment into free trade zones let me clearly uh let me clearly St that by government protection of Industry I do not mean short to medium term regul uh regulatory mechanism as such I mean such as Hol uh tax holidays and other incentives which have the which have their place in industrial policy should be applied when necessary to mitigate investment challenges I'm concerned with a long-term policy framework which ensures that investors can invest with understanding that the industry will uh will in the long run be regarded as a National Asset and not just investors assets so that when it is threatened either by external forces or by uh changes in environment beyond the control of the individual operators government will take appropriate action to protect investors and support them to survive the threat almost all countries did this in response to the covid threat those in the pharmaceutical industri May well remember how India protected and supported the pharmaceutical Industries if you remember one time we couldn't get covid vaccines because India stopped the export of their covid vaccin said that no their their citizens life first before anybody's life so if we adopt I mean if we had adopt such a policy and government attitude towards textile Industries Tire industry in the 80s and early '90s perhaps our economy today will still be benefiting from the job creation capacity of all these industries or if we had adopted the attitude of our refining industry Nigerians will not today be too anxious about D refinary I'm aware that uh the Bren Woods Institute have confused some of our Economist about the world protection to the extent that some of them think it is blasphemy a word that should not be utter I mean should not be uttered in good company but how did China South Korea India and several other Asian countries emerge at as a strong Economist and Al and a threat to the existing World economic order because what they did they do not follow that advice they shut their doors they have their own internal policies they massively produce Goods they feed their own uh they feed their own uh uh uh citizens they feed their own Market the excess capacity is what now they are attacking us with so we are often told that protecting your industries make your country uncompetitive this is pure fiction that's not true it is [Applause] quite it is quite the reverse I say you cannot be competitive unless you protect and support your own industry in the past Nigeria was not competitive in cement production up to 200 7 Nigeria was producing less than 2 million tons of cement per anom today we have about 60 million tons of production in capacity and another 9 million under construction that is the industry not D the industry the foundation for this success story was laid by an Administration which decided to extend full support and protection to Nigeria cement industry and I know that minister aanga is here when he was minister at a point maybe a thousand trips but some people you know went to him to destroy the industry but luckily he did not hit their call so what is happening so today we are among the 10 most competitive in cement uh I mean cement producers in the world and the biggest cement produc cement producer and cement exporter in Africa that is our record in 2023 so don't cement alone just to tell you the benefits so sometimes some people talk about you know tax holiday people are always against tax holiday but tax holiday is 5 years and it will finish if you look at it our own tax DeMent tax alone paid more tax in 2023 than the entire major banking industry and as we speak today uh daily what we are paying we are paying to be precise 650 million n in V8 on a daily basis Saturday Sundays inclusive so it is also often suggested that that protecting your industries leads to Monopoly again this is false you create the environment for Monopoly when new investors are not willing or not allowed to invest in the industry but the field is open anybody can come and invest in asking for protection I am not asking government to prevent others from investing in sector or in Industry quite the opposite I'm recommending that government policy should support protect existing Industries so that others will know that their investments will also be protected is there any better incentives than that I don't think so so I humbly submit so I humbly submit that an industrial policy that assures investors of support and protection is the greatest incentive for all investors both local and foreign it is a common knowledge that foreign investors only come when they see that local investors are also doing well what attracts foreign investment is not government agencies or president or what going out there to seek for foreign investment no what attracts foreign investment is domestic investment no domestic investment no foreign investment will come [Applause] in furthermore I'm convinced that when government policy becomes more supportive and protective investors will be more willing to collaborate and partner with government in resolving the other challenges such as infrastructure deficit market instabilities and macroeconomic issues such as inflation and foreign exchange volatilities uh before I go to the conclusion I want to say one or two things Mr Vice President your Excellency I know that today we are battling with a very high interest rate this interest rate is now saying that we should fight uh inflation uh I'm not an economist I'm just a local businessman but your Excellency the other countries why do they jack up interest rates because during covid the G7 countries pumped money into their economies to the tune of 18.9 trillion so their economies were over you know I mean they were over you know uh uh they are evaporated with so many things so there are so much of money chasing few goods so if you have so much of money CH I mean chasing few goods it means that everything is going to go up but your Excellency during covid we did not and I repeat we did not reflect any economy at all we didn't do anything the only thing that we did was sharing pares I'm not talking about Nigeria now I'm talking about Africa in general there's no any African country that can maybe some few have actually given lower interest ratees but right now you actually see at 30% there's no way anybody can create jobs if interest rate is 30% there won't be any job creation because we are actually stippling growth so interest rate can remain 30 but then no growth will happen unless that interest rate goes down so so my conclusion actually is that let me therefore conclude by reiterating that Nigeria has all it takes to develop and sustain a globally competitive manufacturing sector but to do so we must rethink our industrial our industrialization policy we must look to Leading countries in the west and the East who actively Pro you know who are actively protecting their domestic Industries we must similarly enact policies to protect our domestic Industries and nature them into homegrown Champions that will create jobs and prosperity we desperately need the time to reink our industrial policy is now thank you excellen much thank you alaji aliko dang for that remarkable key notes it's always a delight listening to you