The Manufacturers’ Association of Nigeria has urged the Federal Government to subsidise interest rate for the real sector.
The President, MAN, Dr. Frank Jacobs, made this appeal at a recent media briefing held at the MAN headquarters in Lagos.
Jacobs, who expressed appreciation to the government and the Central Bank of Nigeria on the recent decision to allocate 60 per cent foreign exchange to the manufacturing sector, also sought a downward review of the current interest rate, noting that it was not investment-friendly and did not support the economic diversification programme of the government.
According to him, one way government can reflate the economy is to subsidise interest rate for real sector operators so that manufacturing can receive a boost.
He said, “If government truly wants to reflate this economy, there are things that can be done. They can subsidise the interest rate for the real sector knowing what benefits can accrue to government from a healthy real sector.
“If the real sector is doing well, the operators will pay more taxes, create jobs and keep youths off the streets. The government needs to subsidise interest rate for companies that create jobs.”
The MAN president said the prevailing interest rate should be brought down to five per cent, adding that it was possible for that to happen despite the rate of inflation in the economy.
“Interest rate at five per cent is feasible. Let me draw an analogy of what is happening in Britain today; following the BREXIT; what they did to reflate the economy was to cut down their Monetary Policy Rate. Inflation rate in Britain today is seven per cent but the lending rate is one per cent. So the argument that the lending rate must be at par or bigger than the inflation rate, as far as I am concerned, does not hold water,” he stressed.
On the Export Stimulation Fund by the CBN which attracts interest rate of nine per cent, the MAN president remarked that the rate was too high.
“We believe that nine per cent is still high. After all, most of the intervention funds attract nine per cent interest rate. We believe that nine per cent is high considering the business environment we operate in,” he said.
He also called for recapitalisation of the key development finance institutions in the country to enable them to meet the funding needs of manufacturers. Specifically, he said government should put more funds into the Bank of Agriculture and Bank of Industry.
“The issue of recapitalisation of the BoA and BoI is very important. As a matter of fact, all intervention funds should have been channelled into the BoI which has proved itself to be very efficient and effective. If the bank has more money, it will do better.
Jacobs supported the call by the President for emergency powers noting that if these powers were given, the President would be able to take swift decisions on issues that had been constituting challenges to manufacturers.
He said, “If one considers all the things that the sector needs, one will see that these are things that if he has the power to do, he will do them and reflate the economy. For instance, he is asking for power to approve 50 per cent advance payment for any contract instead of the current 15 per cent.
“If they begin to pay 50 per cent upfront for contracts, we can get more achieved within a short space of time. All the challenges associated with contractors collecting the money from government will be eliminated.”
The MAN president said even though the industry was facing challenges and most manufacturers were shutting down, the sector was also welcoming new comers. “Although some are closing down, new companies are coming up. Recently we admitted 41 new companies into the association,” he stated.
