There are strong indications that the Nigerian economy is tottering, as evidenced by the significant depletion of the nation’s foreign exchange reserves, which many have attributed to the sharp decline in global oil prices. The diminishing financial inflow from oil has seen the nation’s forex reserves thin out. Nigeria’s foreign exchange reserves dropped from $31.459 billion in July 2015 to $27.870 billion in March 2016.
This development has ignited concerted calls for the regeneration and diversification of the nation’s economy through the revival of local industries. Recently, there was an outpouring of patriotic zeal on the need to patronize made-in-Nigeria goods in a bid to shore up the value of the naira. To this effect, the media has been awash with the hashtag BuyNaijaToGrowTheNaira, a slogan used for the campaign.
The campaigners seek to sensitise Nigerians to embrace locally produced goods while discouraging heavy reliance on imported products and the consequent depletion of scarce foreign exchange. It is hoped that by patronizing local businesses, foreign exchange will be reserved for only essential purchases.
Interestingly, the campaign has caught the attention of the Senate. The upper legislative house is presently working on the procurement bill, which seeks to bolster local production of goods and, in turn, grow consumption by mandating government agencies and offices to patronize Nigerian products.
As the Senate settles down for business, one area which it must critically examine is the impact of the ECOWAS Trade Liberalisation Scheme (ETLS) on the nation’s Forex reserves.
The ETLS is the main ECOWAS operational tool for promoting the West Africa region as a Free Trade Area. One of its objectives is the “establishment of a common market through the liberalisation of trade by the abolition, among member states, of customs duties levied on imports and exports, and the abolition among member states, of non-tariff barriers.” Often, manufacturers have hidden under the garb of the ETLS to import products that are, and can be, locally produced in the country, thereby further putting strains on Nigeria’s ailing forex reserves.
As lofty as the ECOWAS trade treaty may be for the economic integration of the sub-region, it must be said that local economic interest should not be sacrificed on the altar of regional interest. It will be inexpedient to give precedence to regional interest over local needs, considering the fact that the country does not have enough forex to meet all its local demands at this critical period.
A few months back, the media was awash with advertorials of the alleged entry, last year, of a leading tobacco manufacturer, into the Nigerian market where cigarettes are locally produced. The advertorials alleged that the entry of the global leader in tobacco production is in total disregard of the provisions in the Tobacco Control Act (TCA), which sets stringent conditions for all intending operators to do business in Nigeria’s tobacco industry.
This action constitutes a breach of a key provision of the TCA in Section 29, which stipulates that anyone importing cigarettes should register with or obtain a licence from the Ministry of Health written by the Health Minister and the Standards Organisation of Nigeria (SON), among other statutory bodies. Regrettably, this condition was, last year, circumvented by the company, which took advantage of the delay in the appointment of a minister of health, to obtain its licence from only SON to import five brands of cigarettes through its subsidiary in Nigeria.
It was alleged in the said advertorials that the subsidiary, which was registered as a company in December 11, 2014, was certified by SON in May 2015 to import five brands of cigarettes into the country. It secured approval from the Federal Ministry of Finance to import 122 million units of cigarettes and has since increased the quota. This transaction has been described by health experts and industry watchers as in breach of the TCA.
It has the potential of nullifying efforts at regulating the industry, reversing recent successes made in stemming illicit trade in tobacco and promoting youth access to cigarettes. Besides, it also questions the wisdom in licencing a foreign manufacturer of a product whose local production sufficiently meets local demand.
Another point worthy of note is that there are huge socio-economic benefits in the localization of production. A strong nexus exists between the tobacco industry and the agricultural sector, which has a high potential for employment creation.
Like tobacco, there are locally available products that have come under forex pressures and have been threatened by smuggling activities but with renewed drive for re-industrialisation of the country have started turning around their fortunes. An example that readily comes to mind is the local tomato pastes industry where local production has been given a boost. Only recently, leading local tomato paste manufacturer, Erisco Foods Ltd, opened a new factory.
If the federal government is really keen on diversifying the economy and growing the non-oil sector, in which agriculture is a critical part of, this is one area that it must pay close attention to. Also, efforts must be intensified by the appropriate authority to protect the local tobacco industry and other interventions aimed at localising production of goods.
It is only by so doing that the economy will be saved from tottering into a recession and further depletion of forex will be halted.
Nwadike writes from Lagos