Keynote paper at The Industry Summit/Awards4.0

Ekuma Eze,

Fast Moving Consumer Goods (FMCG) as it is broadly categorized, comprises of three major segments: Household care, personal care and food and beverages.
FMCGs form the largest chunk of the manufacturing sector in Nigeria, which is the fourth largest sector of Nigeria’s economy, creating employment for over 3 million Nigerians. The FMCG industry in Nigeria is worth about US$20 billion.
In Q3, 2022 Nigeria’s Gross Domestic Product (GDP) grew by 2.25 per cent (year-on-year) in real terms, representing a 1.78 per cent decline compared to the 4.03 per cent growth recorded in Q3 2021, according to the National Bureau of Statistics (NBS). The manufacturing sector contributed 8.59 per cent to GDP, lower than 8.96 per cent in Q3 2021, as well as 8.65 per cent in Q2 2022.

The declining performance of the manufacturing sector according to the NBS data is indicative of the realities of the operating environment characterized by high lending rate, forex illiquidity, high energy cost and adverse effect of fiscal policy measures.
Similarly, Nigeria’s Foreign Direct Investment (FDI) has declined steadily over the last five years. FDI fell from $261.35m in Q2 2018 to $147.16m in Q2 2022 or a compound annual decline of -13.39% in the last half decade.
Some may tend to attribute the declining FDI as stated to COVID-19 issues between 2019-2020. This is not entirely true because countries like India and China saw a rapid rise in FDI in the two years despite outbreak of the pandemic. Since the mid-2000s, China and India have seen FDI soar as both countries beat the poverty trap.
The simple reason why China and India have continuously recorded rising FDI is their policy thrust that has placed emphasis on productivity and workforce quality. The two countries have set a national work ethos that has made their citizens among the most productive on the planet.
I believe Nigeria should take a few lessons from Asia:
Create an aggressive public policy environment that promotes private businesses
Adopt a private enterprise supporting tax structure (taxes must encourage enterprise. As production and domestic productivity rise, tax revenues increase).

I have tried to lay this foundation to underscore the importance of government policy in creating a favourable business environment for FMCGs. Public policy is the foundation for business creation, growth and overall economic prosperity. Public policy processes represent the fundamental processes of governance and development. I stress on development here because public policy should be about people’s needs and for their good. Therefore, the principles should be efficiency, effectiveness and responsiveness, consensus and adequate participation of the people in a transparent and accountable process. The intention of this paper in not to go into policy theories but to x-ray the topic from the prism of someone who has been around the policy corridor and has witnessed the direct impact of public policy.
Nigeria unfortunately has been largely plagued by policy inconsistencies, reversals and lack of coherence.
Between 1960-2000, real income per capita grew at only 0.43% per year. However, 2001-2006, real per capita GDP grew at an annual rate of 4.2%. The difference between the two periods is simply due to policy choices.
The improved performance between 2001-2006 was owing to comprehensive economic reform program via the National Economic Empowerment and Development Strategy (NEEDS). NEEDS encompassed important structural reforms designed to enhance the transparency and accountability of public sector policies and institutions. It focused on improving the macroeconomic environment, pursuing structural reforms, strengthening public expenditure management, and implementing institutional and governance reforms. This resulted in real GDP growth averaging 7.1 percent per year between 2003 and 2006, an inflation rate of 10 percent in 2006, foreign exchange reserves of US$45 billion in 2006, and total external debt of only US$5 billion in 2006. An oil price-based fiscal rule was introduced in which government expenditure was based on a prudent oil price benchmark. Any revenues that accumulated above the reference prices were
saved in a special excess crude account. Government budgeting was based on conservative oil prices of $25 per barrel in 2004, $30 per barrel in 2005, and $35 per barrel in 2006, despite higher realized prices of $38.3 and $54.2 in 2004 and 2005, respectively.

Adoption of this rule ensured that government expenditures are de-linked from oil revenue earnings, thereby limiting the transmission of external shocks into the domestic economy. There was a marked improvement in the government’s fiscal balance, with the previous deficit of 3.5 percent of GDP in 2003 turning to consolidated surpluses of about 10 percent of GDP in 2004 and 11 percent of GDP in 2005. Adoption of the fiscal rule also resulted in significant public savings for the government. Gross excess crude savings totaled about $6.35 billion at the end of 2004 and about $17.68 billion by the end of 2005.

We also witnessed a fairly disciplined Monetary policy, with the central bank adhering to various monetary targets and reducing inflation. End-year inflation declined from 21.8 percent in 2003 to 10 percent in 2004 but increased slightly to 11.6 percent at the end of 2005. Finally, the adoption of the Wholesale Dutch Auction System facilitated the convergence of foreign exchange markets and the elimination of a previous black market premium
Fast forward to 2015-2022
Monetary policy: There have been laudable initiatives from the CBN such as the Direct Credit Provision to target sectors: Anchor Borrowers Program, which has improved access to finance for small holder farmers; Small and Medium Enterprises (SMEs), Power, Film or Intellectual Property, Aviation.
In order to reduce our reliance on the importation of items which could be produced in Nigeria, CBN restricted access to foreign exchange on 43 items.
CBN has continued to operate a managed float exchange rate regime in order to reduce the impact which continuous volatility in the exchange rate could have on our economy
Emefiele practices what is called Multiple Exchange Rates Regime. This is different from the prescription of the International Monetary Fund (IMF) and World Bank who recommend a single floating naira rate. IMF prefers a limited intervention in the foreign exchange market and for the market forces to determine the exchange rate of Nigeria based on the capacity of the nation to generate its own foreign exchange.
The major source of foreign exchange earnings is the sale of crude oil in the international market. With the volatility of the international oil market, the supply of foreign exchange to government is far below the demand.
The boundaries between the various segments are not rigid, hence opportunities for arbitrage exist in the foreign exchange market.

Naira Redesign Policy:
The central bank gave reasons for the naira redesign policy. According to Mr Emefiele, the policy would enable the CBN to take control of the naira in circulation, manage inflation, combat counterfeiting, and ransom payment. Trade and commerce have taken a beating. This is because consumer spending accounts for two-thirds of domestic output. Many FMCG are reporting significant Sales decrease in February and March by between -20%-60%. Many of these businesses are planning to restructure, which will worsen the unemployment problem.
Fiscal policy:
Key policy reforms include January to December budget cycle; introduction of Finance Act to bring the country’s tax legislation at par with global practices; exemption of small businesses from Companies Income Tax; increase in VAT rate from 5% to 7.5% and public financial management reforms.
On the other hand, we have witnessed domestic and external borrowing growing to N44trn by Q3, 2022, which translates to debt to GDP of 37.35%; debt service-to-revenue ratio rising to 92% in corresponding period.
Interestingly, the FMCG seems to be the target of domestic revenue mobilization efforts with introduction of and increase in taxes. Company income Tax rate in Nigeria is 30% for companies with gross turnover greater than NGN 100 million compared to an Africa average of 23.5% and a worldwide average of 23.4%. Tertiary Education Tax is now at 3% going by the Finance Bill 2022. There’s been consistent increase in excise tax for beer and tobacco companies while N10/l excise tax was introduced in June 2022. With this introduction, due to price elasticity of demand which is high among lower income consumers, who are major consumers of the products, the industry reported a revenue decline of -16% between June 1 December.
Comparing with other jurisdictions:
Rwanda in 2008 established Rwanda Development Board (RDB) out of a merger of 8 government institutions this has served as one-stop shop for all investors.
The board had been able to streamline customs procedures, simplifying tax regulations, invested heavily in infrastructure development, Investment Deals Negotiation, Export & Special Economic Zone. Development, Tourism and Conservation, and Private Sector Skills Development.
This has brought transformation to the Rwanda’s economy.
The economic reforms in India has brought liberalization of the economy: The country has made significant investments in education, (they have invested over $117 bn and is expected to reach $225 bn by FY25). This has helped create a large pool of skilled workers that have contributed to the growth of the tech sector.
These forces have worked together to make India a global tech powerhouse, their massive involvement in software development, artificial intelligence, and e-commerce, has position them as tech giant in the comity of nations.
China’s policy is an export-oriented growth strategy with focus on producing goods for export to foreign markets, (export subsidies, tax incentives, and the establishment of special economic zones)
Development of infrastructure which they have invested heavily in State support for key industries, and investment in research and development, Promotion of innovation and technology. Policies such as the “Made in China 2025” plan, which aims to promote the development of high-tech industries is an example.
 These and many more has supported China’s industrialization, which has helped to transform the country into a global economic powerhouse.
Critical Success factors for successful policy shift?
Commitment to a tangible and visible political and administrative will to deliver policy
Cooperation and collaborative behavior between stakeholders to a policy, characterized by goal alignment
“Nigeria’s economic pains are to a large extent self-inflicted often due to bad policies, suboptimal implementation or entrenched vested interests benefiting from the status quo”- Taiwo Oyedele PwC
The government must reposition public governance in Nigeria for global competitiveness, and sustainable development. We have seen the example of Rwanda.
We must increase investment in education and infrastructure to ensure that the country’s workforce is well-equipped to meet the demands of the global best practices. We have seen the example of India.
We must be deliberate and strategic in our approach to attract foreign direct investment (FDI) by improving national security, key infrastructures such as transportation systems and focus more on the ease of doing business.
The government must implement public policies that promote free trade and lower tariffs can make it easier and cheaper for manufacturers to import raw materials, which can lower production costs and result in lower prices for consumers.
ICRC: $100bn Required for Nigeria’s Infrastructure Development – Infrastructure Concession Regulatory Commission
Filling Nigeria’s Infrastructure Gap – Infrastructure Concession Regulatory Commission (,08%20billion%20in%202021.
Manufacturing outlook dips as forex crises worsen | The Nation Newspaper (
Leadership, Policy Making, and Economic Growth in African Countries: The Case of Nigeria by Milton A. Iyoha 2008.
Nigeria’s Economic Reforms Progress and Challenges by Ngozi Okonjo-Iweala, Philip Osafo-Kwaako 2007.