In Nigeria, an enabling business environment takes shapeApril 16, 2021
Nigerian Minister of State for Industry, Trade and Investment H.E. Amb. Mariam Yalwaji Katagum talks to The Energy Year about how the ministry is promoting economic resilience and advancement, the importance of public-private engagement and how the challenges jeopardising free trade zone performance are being tackled.
What key areas is the Federal Ministry of Industry, Trade and Investment (FMITI) working on as levers of economic resilience and advancement?
In terms of the general macroeconomics, we are keyed into the larger principles of the Buhari administration, which are growing the economy, the fight against corruption and tackling insecurity. Aligned with these, FMITI aims to drive intensive economic growth via three key levers: backward integration, an enabling business environment and positioning Nigeria to properly benefit from the AfCFTA [African Continental Free Trade Area].
When it comes to backward integration, this refers to domesticating production of key items or products. This concept taps into the Nigerian industrial revolution plan, where we identify core sectors such as sugar, palm oil, cement, cotton, textiles and so on. With policy reviews, we are trying to encourage local production through backward integration. For example, there is a sugar levy all sugar producers have to contribute to. FMITI is using that money to expand sugar production by investing in modern means like irrigation. We are aiming to do the same with the palm oil, power and automotive sectors.
Within this backward integration and domestication, we are also focusing on the fast-tracking of economic zones across the country, these being: Ibom, Lekki, Funtua, Enyimba, Kano and Calabar. Lastly, we are also strengthening the chances of survival and growth of local industries, which implies the provision of credit, equipment, facilities and survival funds.
The second key component is to create an enabling business environment. Here, a Presidential Council, the Presidential Enabling Business Environment Council (PEBEC), analyses the impediments to business from an investor’s or operator’s perspective. Identifying the main obstacles is fundamental. These include difficulties with multiplicity of taxes, getting visas, rules and regulations, goods clearance, etc. From here, the council works with different stakeholders to see how these matters can be resolved.
Within the ease of doing business, we also focus on regulations. On this note, we have made advances with the CAMA [Companies and Allied Matters Act], approved in 2020. Yet, we still have some outstanding areas, such as with oil and gas free zones and the Nigeria Free Zones Authority, NEPZA, where we are trying to resolve some areas of overlap.
The last milestone is positioning Nigeria to take an active role in the AfCFTA. To this end, a National Action Committee on the AfCFTA has been set up, chaired by my colleague, the Hon. Minister of Industry, Trade and Investment. At the national level, we are bringing together all the agencies and stakeholders from the public and private sectors to sensitise them on what the AfCFTA entails. So, those are the three key areas we are working on.
What measures has FMITI introduced to enable a more favourable business environment?
A clear example of the hurdles we face is the multiplicity of agencies. An investor coming into Nigeria needs to go through several agencies and still the information required to invest safely in the country might not be there. One of our agencies, the NIPC [Nigerian Investment Promotion Commission], creates an enabling process as a one-stop centre compiling all the information you might need to invest in Nigeria on a single platform. They have recently published a book outlining what facilities are provided to investors and resource opportunities in each state, called the “Book of States.”
In terms of the regulation, when coming into Nigeria, we have eased the process of getting visas, which is essential to support foreign investment. Another area we have worked on is regarding issues with land acquisition. It could take several months or years to legally get a plot of land to set up a factory, for example. These things are being eased up. For instance, Kaduna State has set up an agency called KADIPA, where if you are looking for a plot of land, you can apply and get your permit within a very short timeline. As a result, Kaduna State has become one of the most attractive destinations for investors coming into the country.
Another area we have focused on is ports, where the Nigeria Customs Service is putting in place modern digital scanners, which are replacing the average physical inspection of containers. With these scanners, you can quickly inspect hundreds of containers daily. For port-based processes, we are getting all agencies to work collaboratively so port clearance is unanimous and automated. This, to a large extent, will reduce the time needed and will reattract investment.
CAMA has also been important in allowing investors to register a new company within 48 hours. On the financial side, the Central Bank of Nigeria and some development banks such as the Bank of Industry and the Bank of Agriculture are implementing schemes to encourage investors to come in and raise capital. Investors may bring in capital, but their Nigerian partners also need to access some form of credit.
Lastly, we are trying, as much as possible, to reduce the human element in every process. We have discovered that it is the human element that brings about the delays, the perception of corruption and so on. So, the less human contact there is, the better it is for the investor.
What levels of public-private engagement do we find in Nigeria’s economy and how important is this synergy for economic development?
The private sector plays a very important role in the Nigerian economy. For instance, the latest SMEDAN/NBS MSME Survey indicates Nigeria’s SMEs contribute nearly 50% of the country’s GDP and account for over 80% of employment in the country. FMITI has a very good collaboration with the organised private sector: the manufacturers association, the chambers of commerce and their local counterparts. For instance, at the beginning of Covid-19, the manufacturers association approached us because they were having problems moving raw materials and finished products – especially food and pharmaceuticals, due to the lockdown.
Accordingly, in partnership with the private sector, we set up an emergency operation centre, which devised a strategy whereby we received information from manufacturers, all of which was monitored on our e-platform. Trucks were given IDs which helped us to track them and understand the causes of delays, and then to take prompt action. As a result, throughout the troubling period of Covid-19, we did not have problems with the movement of food, medicine or other crucial goods.
Another clear example of our sound public-private collaboration is ECOWAS [the Economic Community of West African States]. When we were negotiating the tariff concessions in ECOWAS, private-sector players joined us in every meeting to make sure that these concessions were in line with the reality of the country. Moreover, we have a PPP unit in the ministry which tries to further incentivise and deepen public-private partnerships. For example, the Funtua, Kano and Calabar free trade zones are going to adopt PPP models as more effective and efficient, bringing together the best of both worlds.
How important is the phenomenon of economic and energy diversification in Nigeria?
Nigeria has just been in and out of a recession, and the main reason is the price of oil and the Covid-19 pandemic. As a country, we are largely reliant on it and the drop of global oil prices shakes every aspect of our economy. As a result, economic diversification is essential and to this end, we have been focusing on backward integration while diversifying our production bases. Through Executive Order No. 003, which relates to local content, the country is trying to carve out a strong local manufacturing base.
At the same time, we are about to announce the kick-off of the “Made in Nigeria” goods campaign. The government also set up a Nigerian Economic Sustainability Plan as a result of the dual shock. You see, most of the elements in the Economic Sustainability Plan are projects in the non-oil sector, as seen in the MSME Survival Fund, huge interventions focused on agriculture, solar power for homes, water and sanitation, rural roads and the digital economy, to mention a few.
We know that oil and gas will still have a critical role in years to come, but we are trying to move towards a greener economy. It is here that gas will be an important ingredient in Nigeria’s economic and energy transition. As an example, we have the construction of the AKK pipeline, which will power industries across the country via gas-to-power, spurring economic development. So, despite crude oil being a major part of our economic bedrock, we are now focusing on other sources of energy.
Does the AKK gas pipeline have the potential to revive the industrial sector?
It is very important because not only do we have more gas than oil, but until now gas has been largely underutilised to the point that we have even been flaring it. The AKK pipeline will be a game changer in terms of gas utilisation. It will start in Ajaokuta, which is where we have our steel complex, and go to Kaduna and up to Kano. It will completely change the industrial landscape of the country. In Kano, for example, new factories are being built and they will need feedstock to power them. The AKK pipeline is going to help us revitalise many of the factories, particularly in the area of textiles and other light manufacturing.
What measures and challenges must Nigeria consider to fully benefit from the AfCFTA?
Nigeria is the largest market in Africa. The continent has a huge demand for finished products due to, in part, its high population. This being said, if we get our next steps right, the AfCFTA is a huge opportunity for us to manufacture and sell within Africa. Consequently, we need to make sure we have the right environment for our manufacturing sector and MSMEs to thrive. We also need to get our quality issues right because quality is going to be very important. On this note, the Federal Executive Council recently approved a National Quality Policy that will support the quality of products produced in Nigeria.
Of course, we anticipate challenges stemming from the AfCFTA. We might come across goods that are not originally from Africa being repackaged to make them look like they are made in Africa. To tackle these types of issues we have to be vigilant, inspecting the origin of goods and keeping our eyes on smuggling. Stringent conditions are thus required to regulate what will be one big, open African market. In addition, the importance of e-commerce, the rolling out of a digital economy and financial services will be add-ons for us under the AfCFTA, and more so now, as most people are turning to e-commerce. We must thus fully embrace it.
What are the major challenges jeopardising free trade zone performance and how are they being addressed?
Free trade zones have suffered an array of challenges that have hampered their performance over the years. Firstly, we witnessed the problems of inadequate and high-cost infrastructure, which directly affects efficiency and productivity. In addition, we also noticed that one of the major problems was the poor collaboration among the regulatory agencies. In every free trade zone, you need a certain degree of synergy between Customs, Immigration and other agencies that check the required processes and controls. Lastly in some places, lack of security is a major issue.
However, the government is determined to ensure the flourishing of six free economic trade zones in Ibom, Lekki, Funtua, Enyimba, Kano and Calabar. For example, in Kano the zone occupies a very large plot of land and some industries have started operations within the zone. However, the main problem is the lack of power. To this end, the Federal Executive Council approved a PPP arrangement with a company that is going to provide 24-hour power. The cost sharing will be 25% from the government while the private-sector investor will provide 75% in an 11-month delivery period. Once power gets to the Kano free trade zone, it will trigger organic growth. Other free trade zones, like in Lekki, are privately driven and are doing very well.
How are the administration and FMITI aiming to incentivise Nigerian exports?
Part of diversifying the economy also means valuing and growing our own in-country production. The Nigerian Export Promotion Council has an Export Expansion Grant, which is aligned with the nation’s economic sustainability plan. Here, NGN 50 billion [USD 130.6 million] has been dedicated to help with export expansion. The primary goal is to ensure that we build capacity for potential exporters to ship their goods. Capacity has to be built in terms of knowledge, processes and requirements, in order to enhance our export base. The right incentives and platforms have to be put in place to ultimately drive potential exporters along the proper path. Here, information is key.
Many businesses do not have the required know-how, being unaware of the process of packaging their goods, storing them before they get to the port and the time these goods stay in the container. Products end up spending many days in these containers and some might go bad. Some may require the right mix of protective chemicals, for example. At FMITI, we are trying to educate businesses on all these matters as a first step towards export promotion.
What are FMITI’s main goals for 2021 and what space does energy have within this plan?
As FMITI, we will continue to push for policies enabling the backward integration of several key sectors, and to increase our efforts to attract FDI. A lot of our bilateral agreements and trade agreements with other countries are now being reviewed so they better reflect a win-win situation.
At the same time, the energy sector will continue to be critical for Nigeria – and not just oil, but most importantly gas. It is here were we have to take into consideration the larger efforts the government is making to improve power generation and distribution across the country. Power could be seen as a synonym for economic development. What’s more, within the economic sustainability plan, we have a component that aims to install solar home systems for 25 million Nigerian households. This is an extremely important initiative not only due to the abundance of sunshine but also due to the fact that a lot of MSMEs operate from home or very close to home. Through this, we will be creating value and opportunities. There are also a lot of independent power generation sources, so we hope that eventually all these will be able to contribute to the larger power needs of the country.
Looking ahead, we have to strive towards a greener and cleaner energy future. Not only must we try to make sure that the environment is kept safe and healthy, but we also have to consider the volatility of crude oil, and its future projections. Definitely, renewable energy is an option we should further invest in. Nigeria has quite a number of hydroelectric dams and these are facilities we ought to put to optimum use. There is no doubt that oil is and will continue to be important for us, but as a nation we should look into transitioning into the future by putting more focus on the renewable energy sector.