Localisation & backward integration
Challenge to local manufacturers
The government is currently focusing on encouraging the local maufacture of finished and semi-finished goods in the country. This will be a major advantage for interested local investors as it provides them with a playing ground for building their business. Currently, local manufacturers face a number of challenges including:
- High Input Cost,
- Lack of petrochemical plant,
- High cost of production/distribution,
- Customs administration and port related issues,
- Common External Tariff (CET) and issue of competitiveness
- Security of life & property
- Weak legal framework
Although, there are various incentives in place to boost local manufacture the high transaction costs resulting from above make local manufacturing uncompetitive with the outside world.
The way forward:
Foreign direct investment (FDI)
FDI inflows into Nigeria have increased substantially in the past few years but they are mainly into the oil and sector and telecommunication services.
All hands should be on deck to encourage and sustain adequate inflow of foreign investments into the agricultural and manufacturing sectors.
Expansion of the local raw material base
The thoughts, the plans, the projections and efforts on backward integration should be focused on commercial quantity and international standard. This country has population as advantage over the other countries in the continent. There is also the abundance and myriads of mineral resources and large expanse of arable land. The main challenge then is effective and efficient utilization of these natural endowments in creating the right inputs for the manufacturing sector that will result in better competitiveness for the country.
Government needs to intensify efforts to revamp the Petrochemical Plant. This would increase the local content of manufacturers’ inputs. For example Detergent powders have Linear Alkyl Benzene as a major and perhaps the single costliest input material. Virtually all other industries rely on petrochemical products and by-products for a substantial portion of their input materials. Efforts to revamp the petrochemical plant and encourage fresh investment in this area would lead to sharp reduction in production cost.
Our initiative
Continued efforts to improve the agricultural sector will lead to more availability of raw materials to the manufacturing sector. Examples of this are in better production and processing of cassava starch (for which the Federal Government already has a program), re-vamping the palm plantations, encouraging the growing of more cash crops and getting more private sector involvement. An initiative that Unilever is currently taking in this area is the introduction of another cash crop (Allanblackia) that can produce edible oil for margarines and create a source of employment for hundreds of thousands of our women and youths.
Human capital development
A key area in increasing manufacturing capacity for the country is in the provision of good human capital that will efficiently run and manage this sector. There is currently a big issue with the quality of education at our tertiary institutions. Focus to bring significant improvement into this area requires urgent attention. A well educated work force will improve productivity, reduce cost and innovate new products that will excite the consumer. The industry is currently paying additional cost to re-train graduates of our higher institutions. In Unilever we send our high potential managers on International Exchange Programme to other Unilever businesses around the world to improve their technical and managerial skills which they can impact on the local work force back in Nigeria.
Just as in all other economies, developed and developing, the government should continue to partner with the organised private sector.
