The Nigerian Economic Summit Group (NESG) has identified the country’s weak manufacturing sector as a significant contributor to the ongoing shortage of foreign exchange. Dr. Wilson Erumebor, a senior economist at NESG, made this observation in a recent paper published by Foresights Africa. The report, titled “Nigeria in 2023: Bridging the Productivity Gap and Building Economic Resilience,” highlights that the past seven years have been marked by considerable hardship, particularly following two economic recessions. Erumebor noted a shift in economic activity towards agriculture, accompanied by a slowdown in manufacturing, which he attributes to the neglect of the manufacturing sector.
Erumebor emphasized that Nigeria is not producing enough goods for both local consumption and export. The ramifications of a weak manufacturing base in a country with a large population are evident in the persistent foreign exchange shortages, the limited number of jobs available for new entrants into the workforce, and an import bill that current export earnings cannot sustain. The report also indicated that unemployment and underemployment rates reached an unprecedented high of 56.1 percent in 2020. Furthermore, Erumebor pointed out that 90 percent of workers are employed in sectors characterized by low productivity, such as agriculture and non-tradable services. This situation indicates a lack of available jobs that could generate income growth and help lift many Nigerians out of poverty.
Erumebor urged the incoming administration to collaborate with stakeholders to develop an agenda focused on economic and social inclusion. He stressed that the core of this agenda should be improving the lives of the average Nigerian. Additionally, it must include a practical strategy for structurally transforming the economy by reallocating labor and resources from low-productivity sectors to those with higher productivity. He also highlighted the necessity of designing and implementing national skills programs aimed at upskilling young Nigerians, ensuring that more individuals acquire digital skills and capabilities.
Manufacturing sits at the center of the productivity ladder, offering significantly higher productivity levels than agriculture and the capacity to employ a large number of the abundant labor force in Nigeria. With the country’s population projected to reach 428 million by 2050, alongside its mineral resources and the establishment of the African Continental Free Trade Area (AfCFTA), there is a compelling case for the growth of the manufacturing sector in Nigeria. Erumebor underscored the importance of the incoming government addressing the pressing infrastructure deficit and inadequate power supply, which hinder the competitiveness of manufacturing. He advocated for a clear strategy to develop an industrial policy that supports the scale, efficiency, and competitiveness of local firms within the manufacturing sector, as this is crucial for building economic resilience against vulnerabilities and future shocks. Such policies should be integrated with Nigeria’s AfCFTA strategy and facilitate the transition of small-scale firms, which are often key drivers of job creation in the country.
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