Statistics show that, in nearly four decades, the output of Nigeria’s manufacturing sector has remained the same. The World Bank estimated that, as of 2018, the country’s Manufacturing Value Added (MVA) was worth $31 billion. But checks by The ICIR revealed that this was also the figure in 1982.
On Friday, Vice President Yemi Osinbajo, represented by Special Adviser to the President on Ease of Doing Business, Jumoke Oduwole, expressed confidence that Nigeria stands to benefit a lot from the African Continental Free Trade Area (AfCFTA).
“At $35.45 billion, Nigeria’s manufacturing value-added is about seven times more than the current average for the top 20 African countries,” he said.
“There is no doubt that Nigeria would enjoy significant benefits from the agreement. AfCFTA will promote a vibrant and competitive industrial sector that is central to job creation and income growth.”
But while it is true Nigeria has the third highest MVA in Africa owing to her huge economic size, the trend from 1981 till date shows that very little success has been recorded over the years. This, therefore, casts doubt on the country’s ability to achieve Sustainable Development Goal 8—involving “higher levels of productivity of economies through diversification, technological upgrading and innovation, including through a focus on high value-added and labour-intensive sectors”.
The MVA is the manufacturing sector’s net output arrived at after summing all the outputs and subtracting the intermediate inputs. It is a measure of economic activity that captures “the difference between the value of goods and the cost of materials or supplies that are used in producing them”.
It is also a marker of the level of a country’s industrial development.
Manufacturing, according to the International Standard Industrial Classification, comprises “units engaged in the physical, or chemical transformation of materials, substances, or components into new products”. This includes production using hand such as in bakeries, assembling of component parts, waste recycling, and substantial alterations to goods.
What the figures say
According to the World Bank’s national accounts data, in 1981 Nigeria’s MVA was $33.3 billion. From there, it reduced rather sharply until it hit $5.1 billion in 1993. Gradually, it rose till it got to $27.5 billion in 2008. Then it dropped to $22.9 billion in 2009, from it skyrocketed to an all-time peak of $54.8 billion in 2014.
In 2015, it reduced to $46.6 billion and it’s continued on a downward curve since. The latest figure provided by the international organisation is for 2018: $30.9 billion—the same amount it was sometime in 1982.
The moments of a sharp decline in the manufacturing sector’s outputs appear to coincide with periods of sharp falls in global oil price, reflecting the country’s heavy dependence on crude oil since it became independent in 1960.
In June 2008, for instance, a barrel of oil sold for $140, but by January 2009 it had drastically dropped to $41.68. A similar pattern can be observed between July 2014 and January 2015, as well as in 1985. The Structural Adjustment Programme introduced in 1986 may also have played a part. It’s been argued to have led to “the collapse of manufacturing and agricultural industries, heightened unemployment and social insecurity”.
While a look at the MVA in terms of dollars shows that the country’s manufacturing sector is, in fact, slightly smaller in capacity than it was in 1981, interpreting it as a percentage of the Gross Domestic Product (GDP) tells a more unpleasant story.
In 1981, the MVA contributed up to 20.3 per cent of Nigeria’s GDP. But, thirty-seven years on, the sector’s contribution has now dropped to 7.8 per cent. In 2010, when it was at an all-time low of 6.55 per cent, it began to increase steadily until it got to 9.6 per cent in 2014. It has since returned to a downward spiral.
This figure is substantiated by the National Bureau of Statistics which confirmed a negative quarterly growth rate in the sector (minus 4.4 per cent) and stated that its contribution to the country’s real GDP in the second quarter of 2019 is 9.1 per cent
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