The rate at which factories in Nigeria are shutting down and converted to worship centres and cinemas is becoming worrisome and requires urgent government intervention, the Chief Executive Officer of the Centre for the Promotion of Private Enterprises, Muda Yusuf has said.
The former Lagos Chamber of Commerce and Industry DG made the call at the round table of the National Association of Small and Medium Enterprises (NASME) held in Lagos.
Yusuf said, “There is a need to stem the tide of de-industrialization in the Nigerian economy. Following the collapse of many manufacturing firms (most of them are SMEs), many factory premises around the country have been taken over for activities order than manufacturing.
“Many factory premises have been converted to event centers, supermarkets, worship centers, warehouses for imported finished goods, restaurants, viewing centres, cinemas etc. Many of our industrial estates have become a shadow of what they used to be.”
Africa’s biggest economy has over 39.65 million MSMEs as of 2020 according to the Small and Medium Enterprises Agency of Nigeria (SMEDAN).
The industrial expert decried the liquidation rate among the MSMEs in the economy blaming the crisis on the numerous headwinds in the Nigerian business environment.
Yusuf identified some of the setbacks to be structural constraints particularly around “infrastructure, the naira exchange rate depreciation and the related liquidity crises in the foreign exchange market, the galloping inflation, weak purchasing power, regulatory compliance costs, high transaction costs at our ports, the multiplicity of taxes and levies, high cost of logistics, insecurity effects on the agricultural sector, influx of cheap Asian products into the Nigerian markets, the cost of fund, to mention a few.”
The President Tinubu-led government introduced several reforms like fuel subsidy removal and a managed foreign exchange float which has complicated the country’s surging inflation, now at 25.8 per cent as of August.
Yusuf described the policies as welcoming but he believes businesses are hit by the high cost of running their activities as a result of the policies.
The CPPE boss lamented that industrial estates located in Ilupeju, Ogba, Ikeja, Sango-Ota, Agbara and many other parts of the country both in the eastern and northern parts of the country have been abandoned.
In August, GlaxoSmithKline Consumer Nigeria Plc concluded arrangements to shut down its operations in Nigeria, raising fears that more multinationals may exit the country.
Yusuf said to save the remaining factories from closure, the Tinubu-led government should address the “Systemic issues of infrastructure. We should fix the foreign exchange liquidity and currency depreciation issues. MSMEs with annual turnover of N50m and below should be exempted from corporate tax and VAT.
“We should address concerns about unfair competition from imported finished goods. We should address regulatory and institutional problems affecting MSMES. Challenges of Access to credit, cost of credit and tenure of funds should be addressed. We should focus on labor-intensive industries to enhance job creation and promote economic inclusion.”