The Raw Materials Bill currently before the National Assembly, if passed, will do more harm than good to the Nigerian economy, the Centre for the Promotion of Private Enterprise (CPPE) said on Monday.
CPPE, which focuses on the promotion, protection and advancement of private enterprise in the Nigerian economy, said the Bill would result in significant adverse and unintended consequences for Nigerian exporters and manufacturers. It urged the National Assembly to discontinue deliberations on the Bill and encourage the Raw Material Research and Development Council (RMRDC) to focus on its core mandate of raw materials research to offer the most cost-effective raw materials option for manufacturers.
The Raw Materials Bill, put forward by the RMRDC, seeks to restrict manufacturers from importing essential raw materials and intends to impose barriers on exports.
But in a statement on Monday, Dr Muda Yusuf, who heads the economic think tank as Chief Executive Officer, said while the idea of promoting local value addition is good for the economy and potentially enhances the chances of better earnings from our exports, the policy has to ensure a balance between the interests of exporters of primary products and the processors.
“It is also imperative to undertake a robust study on domestic raw materials availability before legislating a ban on raw materials for manufacturers,” he said.
Yusuf said the current proposal in the Raw Materials Bill does not bode well for exporters in the country, who are mostly exporters primary products, noting that thousands of jobs in the primary products export supply chain would be put at risk.
“What is needed is a win-win proposition, not a zero-sum game,” he said.
Yusuf, a former Director-General of the Lagos Chamber of Commerce and Industry (LCCI), said Nigeria’s major non-oil exports are cocoa beans and cocoa butter, cashew nuts, gum arabic, ginger, sesame seeds, and shea butter, and crude oil remains a major component, as domestic refining capacity was nil until recently.
He said the proposition in the Bill raises a number of questions.
“What metrics would be used to determine the minimum 30% value addition? Who will determine and give approval for the export to proceed? What study has been done to determine the local processing capacity for each category of primary products currently being exported? What metrics would be used to determine raw materials that manufacturers would be allowed to import into the country? What is the effective time frame for implementation? Is it within the mandate of the RMRDC to be promoting the ban of exports or imports?” he asked.
Reiterating the CPPE’s position, Yusuf said the Raw Materials Bill “is a very simplistic proposition that has not taken into account the critical challenges of manufacturing, processing, and value addition in the Nigerian economy”.
“This contextual understanding is very critical to enrich the conversations around the Raw Materials Bill. Most agro processors have collapsed not so much because of the raw materials availability but because of the challenges of productivity and competitiveness,” Yusuf said.
“Production costs are prohibitive. The cost of energy, cost of funds, logistics cost, bureaucratic bottlenecks, exchange rate, multiple taxation, etc. These are bigger issues that need to be addressed to promote value addition. We should be causative in our approach to solving problems and focus less on the symptoms,” he said.
He stressed that the Bill, if passed, would create new corruption gateways in the bureaucracy as businesses would be burdened with another chain of approvals.
He also raised the issue of jurisdiction, saying that matters of export or import bans are outside the remit of the RMRDC and the Ministry of Science and Technology. Instead, they are fiscal policy issues within the purview of the Ministry of Finance, working in collaboration with the Ministry of National Planning and the Ministry of Industry, Trade, and Investment. He added that in the issue at hand, the Nigeria Export Promotion Council (NEPC) must be carried along so to determine the implications for the non-oil export sector, the manufacturing sector, and the economy as a whole, as well as for policy coordination and coherence.
“Import and export regulations are not often legislated. They are trade policy issues that are calibrated from time to time by the fiscal policy authorities in light of prevailing economic conditions. It is not a matter for the national assembly to legislate upon. Trade policies are also meant to be flexible, which is why they are not often a subject of legislation,” Yusuf said.
“We therefore submit that the National Assembly should discontinue deliberations on the bill and encourage the Raw Material Research and Development Council to focus on its core mandate of raw materials research to offer the most cost-effective raw materials option for manufacturers. The council’s involvement in trade policy matters is an aberration. Besides, the bill has a very weak value proposition. The CPPE advises the RMRDC to withdraw the bill,” he said.
