Experts say the rising crude oil price and the 2017 budget recently presented to the National Assembly by Nigeria’s President Muhammadu Buhari could force manufacturing rebound and ease the pains of stakeholders this year.
“Going by the budget presentation and new year message of Mr. President, the manufacturing sector, and trade may perform better this year, especially with the improvement we are seeing in the crude oil price,” Frank Udemba Jacobs, president of the Manufacturers Association of Nigeria (MAN), told Real Sector Watch in an e-mail response to questions.
The price of Brent Crude was $56.47 per barrel last Thursday, signifying about $20 rise from July of 2016. This signals that there could be more dollar inflows this year, as crude oil remains Nigeria’s major source of foreign exchange inflows.
Higher dollar inflows mean more dollars for manufacturers to import machinery, spare parts, as well as packaging and raw materials, analysts say.
Similarly, the 2017 budget made provisions for N85 billion for the revival of export processing zones and the Export Expansion Grant as well as the recapitalisation of development banks in Nigeria.
While the 2017 budget set aside N50 billion for the expansion and development of new export processing and special economic zones, it also voted N20 billion for the revival of the Export Expansion Grant (EEG) in the form of tax credits to companies.
Fifteen billion naira was likewise voted for the recapitalisation of the Bank of Industry and the Bank of Agriculture.
“The budget talked about developing SME, manufacturing and trade in so many ways. For instance, recapitalisation of Bank of Industry, resuscitation of the Export Expansion Grant (EEG), development of local inputs for manufacturers and the emphasis on infrastructure are some of the pronouncements made in the budget presentation that tend towards the development of SME, manufacturing and trade,” Jacobs said.
He cautioned, however, that the expected improvement would depend on the effective implementation of the proposals highlighted in the budget as well as the quantum of dollars allocated to the manufacturing sector.
Bassey Edem, national president of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), said the manufacturing sector and the entire economy could get out of recession if the capital infrastructure funds in the budget are spent on railways, roads and power.
Edem said a rise in oil price is good news for manufacturers, stating that if the right steps are taken the economy could start seeing the light from the last quarter of 2017.
Ifeanyi Okeleke, CEO of Kenfrancis Farms Limited, forecast that there would likely be less pressure on the foreign exchange market this year, with the oil price going north.
“Again, the 2017 budget has a lot of areas that show government commitment to the real sector. This is a strong statement that the government sees the potential in the real sector. If you check export analysis of the third quarter of 2016, you will see that agriculture, manufacturing and solid minerals played a key role,” Okeleke said.