Government Admits ‘We Made A Mistake’


Nairametrics| Over the weekend, the Minister of Industry, Trade and Investment, Dr. Okechukwu Enelamah, admitted that some of the policies implemented by the Federal Government affected manufacturers in the country negatively.

“Some policies we passed affected manufacturers in terms of their raw materials and we are correcting those now. We want to discourage dumping and bad practices that happened in the past. But we need to do it in a way that does not hurt local manufacturing.” Guardian quotes him as saying.

A prominent example of this was the devaluation of the Naira. Coupled with the forex scarcity, it made 2016 a year to forget for the real sector, while giving foreign investors access to cheaper funds.

One result of this seems to be the gradual handing over of the sector into the hands of foreigners. With local producers claiming that over N50 billion was lost in profits last year, some firms were unable to sustain their operations and are now targets of takeover bids by foreign investors. This trend can inhibit the growth of local content.

For example, Swiss Pharmaceutical Company (Swipha), was practically sold over the weekend to French generic medicine manufacturer, Biogaran, who now controls over 95 per cent stake in the company. This acquisition may have been as a result of the inability of the Nigerian firm to sustain its operations due to the high cost of doing business and huge debt.

Similarly, Guardian reports that the parent company of Guinness Nigeria Plc, Diageo (a foreign company), is already planning to take up its rights by way of a debt/equity swap such that the outstanding foreign currency loan (N20.3 billion as at first half of 2017) from Diageo will be used as payment for its rights in Guinness.

While the Central Bank of Nigeria’s (CBN) recent boost of forex liquidity with over a billion dollars is a wonderful place to start the recovery journey, these examples show that the ghosts of 2016 may still be haunting the real sector. To banish these ghosts, increase local content and ownership, candid and frank efforts must be put in place by the FG to make sure that it doesn’t repeat the kind of policies that were inimical to the real sector last year.

 

Chacha Wabara

Chacha Wabara is a legal practitioner, blogger and fitness coach. She has over 5 years experience in blogging and freelance writing. She has written several articles and research work over the years as a freelance contributor. She joins Nairametrics as Our News and Analysis Lead.

What others say about : Government Admits ‘We Made A Mistake’..


Anonymous

Nice write up. I however believe that the currency devaluation of June 2016 wasn’t a mistake and I certainly do not think that was what Dr. Okechukwu Enelamah was referring to. Yes, devaluation had immediate impacts on the manufacturers considering that many of these companies have a high percentage of imported materials in their input mix. But there isn’t an easier way out to solving our forex scarcity challenge, and the continuous drawn down of our FX reserves to consistently defend the Naira and meet manufacturers demand isn’t the solution. In fact, it would hurt us further in future. Remember, FX earnings is hinged on oil price and production, the former which is already declining and the latter which is unstable and could decline if the people in Niger Delta aren’t getting what was promised.

I believe the wrong mistake made by the government or maybe the monetary side of the government was the failure to allow the currency float. If that had happened, yes things might have being hard for manufacturers and inflation might have been higher but our currency would have found its true value. With our currency being appropriately priced, FPI’s might have returned thereby increasing dollar supply. At the end of the day we are shying away from borrowing money from multilateral agencies because of the stringent conditions that come with it. If that’s the case, we must look to other means of obtaining dollars.

Anonymous

Nice write up. I however believe that the currency devaluation wasn’t a mistake and I certainly believe that wasn’t what Dr. Okechukwu Enelamah was referring to. Yes, devaluation had immediate impacts on the manufacturers considering that many of these companies have a high percentage of imported materials in their input mix. But there isn’t an easier way out to solving our forex scarcity challenge and the continuous drawn down of our FX reserves to consistently defend the Naira and meet manufacturers demand isn’t the solution. In fact, it would hurt us further in future. Remember, FX earnings is hinged on oil price and production, the former which is already declining and the latter which is unstable and could decline if the people in Niger Delta aren’t getting what was promised.

I believe the wrong mistake made by the government or maybe the monetary side of the government was the failure to allow the currency float. If that had happened, yes things might have being hard for manufacturers and inflation might have been higher but our currency would have found its true value. With our currency being appropriately priced, FPI’s might have returned thereby increasing dollar supply. At the end of the day we are shying away from borrowing money from multilateral agencies because of the stringent conditions that come with it. If that’s the case then we must look to other means of obtaining dollars.

Anodebenze

let wait and see,for so long the govt have operated a hands-off in the economy,now it looks 2017 they have started to participate actively in the economy.everybody loves their country,they protect their country and their interest with their means.i think this analysis is rubbish in this reaction,I TELL YOU. ? IT’S SIDEWAY.the main issue you raised in this reaction is only about forex scarcity,which can be resolved if the govt (1) participate actively in a mixed or partnership venture with the private(2) allows the private sector generates their forexi.e bsnk,broker,bdc,(3) protectS strategic industry and business from foreign ownership,which is going to happen sooner or later.
J.C Flowers a private American company bought a germans company,the gernans told j.c flower to sold up.now with the this british exit from Europe union,a merging of the London stock market and the german stock market fell apart due to uncertainity.the French uses various laws to block some americans company buying some French native owned companiesiN THE LATER 1967 TO EARLY 1970S.JAPAN PURSUED AN AGGRESSIVELY EXPORT STRATEGIC AIM GLOBALLY OF WHICH THE PRESIDENT OF FRANCE THEN CHARLES DE GULLES SAID JAPANESE EXECUTIVE TRAVELLING OVERSEAS ARE RADIO TRANSITORS SALESMEN

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