Forex Scarcity: How We Help Manufacturers Get Dollars – Adebayo, Trade & Industry Minister
Otunba Richard Adeniyi Adebayo, Minister of Industry, Trade and Investment, giving his mid-term report, explains how his ministry supports manufacturers that wish to import industrial equipment that are not locally available, maintaining that all businesses can apply to the ministry for help and support is provided on a case-by-case basis.
Adebayo also asserts that notwithstanding challenges of COVID-19, Nigeria was still in 2020-2021 able to attract in billions of dollars foreign direct investment, second only to Egypt in Africa. Excerpts:
The President recently held a two-day ministerial retreat to evaluate the performance of the ministries. To the man on the street how can you say the ministry has impacted on his/her life?
Year 2020 was one of the most difficult years that the current generation has ever faced. The COVID – 19 pandemic negatively affected the entire world. In Nigeria, which we all know has the largest population in Africa, it was truly challenging to ensure that the most at-risk populations, who rely on daily work for subsistence, did not fall further into poverty.
The Ministry stepped forward to help when the pandemic was at its height by setting up an Emergency Operations Centre (EOC) that ensured the availability and free passage of essential items like food and medicine. We also assisted companies involved in the local manufacture of PPE’s, face masks, ventilators and sanitizers.
As part of the Nigeria Economic Sustainability Plan (NESP) we were charged with the enactment of the MSME Survival Fund Initiative, to help MSMEs respond to the shock caused by the pandemic. We have given payroll support to almost half a million MSMEs enabling them to pay staff and remain in business. We have also given MSME Grants to over 82,000 beneficiaries and 293,000 artisans and transporters. We have also successfully provided free CAC company registration and formalization support to over 240,000 MSMEs that just needed a small amount of encouragement to realize their entrepreneurial dreams.
In addition to being there in times of crisis our everyday operations have an impact that is strongly felt by both the business community and the general public. The trade policy work we do helps improve business processes, we intervene on behalf of businesses to ease investment and business operations and reduce trade barriers in a bid to increase job opportunities and reduce the costs of goods and services.
Things are not as easy as they were when oil was $107 a barrel and the dollar was N150/$1 but I think that instead of looking at the past we should concentrate on the future we can build now. A future in which oil no longer has such a stronghold on our economy and hard-working Nigerians can fulfil their potential. This is a future we are in the process of creating and I think the progress made is becoming more and more evident.
A major complaint from companies has been inability to access Foreign Exchange for legitimate operations, whether it be for importing machinery and raw materials or for repatriation of earnings. What are you doing to address this?
Access to forex has been a major challenge for business owners and I really do sympathise. As a short-term measure FMITI helps to obtain concessional forex allocations for high-priority business needs. We are working to be able to support manufacturers, who wish to import industrial equipment that are not locally available.
All businesses can apply to the ministry for help and then support is provided on a case-by-case basis. As a long-term solution to the forex scarcity, we are at the forefront of the diversification of Nigeria’s economy, and we are supporting the export community to supply into both African and wider international markets. Increased export volumes will generate forex and drive down high exchange rates. FMITI is working tirelessly to reduce Nigeria’s reliance on forex in general. Our industrialization agenda will go a long way to help increase exports and improve local sourcing.
Several analysts have posited that Nigeria is punching well below its weight when it comes to attracting Foreign Direct Investment, as compared to other African economies. What is your view on this?
Well, I wouldn’t exactly agree with this. In 2020 despite the challenges caused by COVID-19 Nigeria was still able to pull in billions of dollars in FDI. If we are comparing our progress to the rest of the continent, we attracted more FDI than South Africa and were second only to Egypt, so we are still a strong investment destination.
The Federal Government recently raised the sum of $4 billion through Eurobonds. One billion more than the initial offer. This is a big demonstration of investor confidence in Nigeria, it is one of the largest financial trades to come out of Africa and is an excellent outcome for the country. The tech-sector is evolving in leaps and bounds and doing a lot to attract FDI. Nigerian tech start-ups are getting strong international attention. In March this year I was proud to see Nigerian tech Flutterwave raise a landmark $170m with the support of U.S hedge-fund Tiger Global; and we are creating an enabling environment for other small businesses to achieve similar feats.
I am in no way however, saying that more should not be done though. Recent investments in Nigeria have been predominantly portfolio inflows and not direct investment which is more stable and can do more to boost the economy. My strategy supports Nigeria’s drive to attract targeted investment that will help drive measurable real-sector transformation.
We are in the process of launching an investment policy that positions us to compete for investment with similar countries around the globe. The Nigerian Investment Promotion Council (NIPC) , one of the Ministry’s agencies, is also working to review and renegotiate the bilateral investment treaties that Nigeria has with several foreign nations. NIPC attracts FDI into Nigeria through their many initiatives like their One Stop Shop and Compendium of Investment Incentives. Earlier this year they determined that almost 80% of the bilateral investment treaties need to be modernised in order to ensure Nigeria receives the type of investment we require, investment that moves us closer to our Sustainable Development Goals.
The news media has recently been awash with news about the challenges faced by exporters especially regarding the time and cost of exports. What are you doing about this?
Supporting exporters is integral to Nigeria’s diversification agenda. I am the Vice Chairman of the Presidential Enabling Business Environment Council (PEBEC) –we have made consistent progress in improving the experience of companies trading across borders. Exporters now benefit from automated export processes and a reduction in the number of documents and processes required to export successfully. We have also ensured that Apapa Port now operates 24 hours a day 7 days a week, a move that has significantly reduced congestion and weekend demurrage costs have also reduced. I am, however, mindful that a lot more needs to be done to help improve our export environment. I have given the Nigerian Export Promotion Council (NEPC) a mandate to track and improve the cost and time of exporting certain benchmark commodities. There must be improvements in this area and I will ensure they are made.
NEPC does however, have a lot of support they currently offer to exporters. Our Export Development Fund provides exporters with financial assistance to cover a wide range of export activities from training, to advertising and marketing in foreign markets to supporting MSMEs with certificates and pre-shipment quarantine issues. NEPC also oversees the Export Expansion Grant (EEG) , a post-shipment incentive designed to encourage Nigerian exporters to expand export volume, value and improve global competitiveness of Nigerian products. This scheme has been fraught with challenges over the years but under this administration billions of naira in back payments going as far back as 2007 have been paid to exporters through the Debt Management Office. EEG has suffered from funding constraints but a lot of work has been done to ensure all outstanding promissory notes are issued.
My vision for export is one that takes us away from being a supplier of commodities and makes us a strategic supply chain partner for the world’s biggest off-taker nations. Nigeria can strategically position firms to partner with foreign retailers, buyers and end users. International entities should be able to both source from Nigeria and also contract production to centralized production centers. We should be able to build supply relationships with retail chains for not just raw produce but pre-packaged consumer products. My vision moves Nigeria from being a country that exports predominantly raw materials to one in which the manufacturing and export industries work hand in hand to reposition Nigeria as an essential trade partner to the rest of the world.
With the massive unemployment situation in the country, one would expect that the industrial sector would play a lead in addressing the challenge through creation of sustainable jobs. What should we expect from FMITI in solving this potential time-bomb?
I have reflected deeply on the unemployment problem in the country. We need to ensure unemployed Nigerians have access to both technical skills training and access to opportunities. I work hand in hand with the Industrial Training Fund (ITF), a parastatal under my ministry to ensure that as many Nigerians as possible are equipped with practical skills that will allow them to earn a living.
The National Industrial Skills Development Program, NISDP, under ITF, has equipped over 200,000 Nigerians nationwide with the skills they need for various trades. We are working hard to provide the unemployed with opportunities to either find paid employment or get started as either an entrepreneur or self-employed person. There are numerous other programmes under ITF and other agencies that offer a wide variety of training programmes that the unemployed can benefit from. Nigeria’s population is exploding, and everyday young people are coming of age and joining the job market. To tackle what you have termed a ‘time-bomb’ a complete paradigm shift is needed.
We are working to reposition Nigeria as a destination that Western countries can outsource their business processes to. Nigerians are intelligent hard-working people with skills that are highly sought after both here and internationally. The world is changing, and companies no longer require physically present workforces. We are positioning Nigeria as a hub for outsourced services like call centres, admin, tax and legal services offices etc. This is just one of our strategies to not only attract forex into the country but also give young Nigerians the opportunities that many may wish to travel abroad for, right here at home. We are constantly looking for innovative solutions like this to tackle this challenge.
Much was expected from the Special Economic Zones not only as a driver of industrialisation but also as a major source of non-oil foreign exchange. Their performance has however been underwhelming. Why this, and what is being done to reposition them?
The Special Economic Zones (SEZs) are long-term capital-intensive projects that require a great deal of development. Nonetheless, we realized that the SEZs are underperforming especially in comparison to our international peers. Consequently, the Ministry established a committee to review the performance of SEZs and the framework under which they operate. We also seek to address questions of ambiguity between supervising authorities, review the performance of current licensees and recommend the necessary reforms to unlock the SEZs true potential as an instrument of economic growth and diversification. The committee developed a report with key recommendations to transform our SEZs, which is currently awaiting approval from the Presidency. We expect these solutions to greatly improve the operations of SEZs and enable them to contribute significantly to employment generation, the promotion of exports and the attraction of Foreign Direct Investment.
In addition, FMITI and the Bureau of Public Enterprise (BPE) have appointed a transaction adviser to manage the process of concessioning the Calabar and Kano FTZs. And the process is ongoing.
Earlier in the year, you promised that we would soon have a revamped automotive industry policy. In view of AfFCTA and the imminent competition by well-established players like South Africa and Morocco as well as emerging players like Ghana, what is the outlook for Nigeria?
Automobile production in Nigeria dates back to the 1950s and there was a time when luxury motor vehicle companies like Daimler Benz and Leyland-Land Rover assembled here. Internationally we are seeing European car manufacturers move their production to Eastern Europe. Africa is a similar distance to mainland Europe and there is now more scope than ever for Nigeria to revive our local automotive industry. The automotive policy will be ready by early 2022. It will support a marked increase in production driven by vehicle financing and auto-component manufacturing and coupling.
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