#Business

How environment affects production costs—Manufacturers

By Francis Akinnodi

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Nigerian manufacturers are hard hit by a harsh operating environment, which makes production costs high and competitiveness low.

Key players who spoke to The Hope said unless there is a well-defined approach to resolving key constraints to reduce cost of local production, the country would continue to rely on imports for the most basic things with its products unable to compete globally.

According to Chief Executive Officer of the Centre for the Promotion of Private Enterprise, Muda Yusuf, competitive manufacturing is about the quality of infrastructure a country possesses, which is currently in a poor state in Africa’s biggest economy.

“Competitive production is about the quality of infrastructure and if you look at the state of our infrastructure today, manufacturers cannot be competitive.”

He noted that power is a key infrastructure that is critical to production and competitiveness.

He said high dependence on imported raw materials by manufacturers is another factor that has made local production’s competitiveness low as it exposes them to foreign exchange shocks.

He said countries like Vietnam, China and other Asian industrial economies provide huge support and waivers to manufacturers, allowing them to access finance and making them immune to the FX crunch faced by their Nigerian competitors.

Former executive secretary of the Plantation Owners Forum of Nigeria, Fatai Afolabi said that the inability of manufacturers across various subsectors to compete has continued to hinder investments.

“We are not globally competitive and this is because of the harsh operating environment for manufacturers,” he said. “How can we compete when we are not efficient in production and still highly import-dependent for raw materials?”

He said driving industrialisation and diversifying the Nigerian economy away from oil will require paying more attention to making value-adding manufacturing export competitive.

According to him, importers are gaining more advantage than local manufacturers, as they sell cheaper than the former, whose production cost keeps rising on account of the high cost of doing business in the country.

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