The problem of sourcing raw materials locally
Refineries are shutting down and packing up due to cost of materials and others, this article is to look at the factors challenging sourcing of raw materials locally and how Nigeria can start to source raw materials locally.
Nigeria is a nation endowed with an array of natural resources, but still it depends majorly on the importation of raw materials for its manufacturing sector. According to the Lagos Chambers of Commerce and Industry, local manufacturers currently source only 46.71 percent of raw materials internally, as against 58.58 percent reported by end of 2013.For a country like ours where large deposits of natural minerals and resources like cocoa, rubber, iron ore, coal, and animal skins among many are found in abundance, local manufacturing industries should be impacted positively even more than neighboring countries that do not have as much as we do. The cause of this abnormality is not far-fetched as other viable job-generating sectors, like manufacturing, agriculture, have been neglected for a very long time because of the over-reliance on oil in Nigeria and this has brought about a huge level of unemployment and a decline in the supply or raw materials.
Other attributing factor is the lack of petrochemical industries and steel complexes that produce these raw materials. It’s clear evidence that the nation’s raw materials are either of poor quality or in short supply. Studies shows that one of the major causes of unavailability of raw material is that there is very low activity in the area of value addition to natural resources, meaning that there are no industries that have the capacity to add value to the natural resources to such an extent that it will be useful to intermediary industry for production of goods and services local industrialist still prefer to import raw materials because of quality concerns. Traders in raw materials most of the time prefer to sell to European and Asian countries where they make hard currencies in pounds and dollar instead of selling to local manufacturers. Findings show that most of these primary products needed by Nigerian manufacturers are exported to countries where they are used as raw materials, after which they are imported into the country as finished products.
Sourcing of raw material is very key to the economic growth of any nation as it creates market for farmers, boosts employment, reduces overall manufacturing cost thereby reducing cost of final goods and improve the country’s Gross domestic product and as a result the following should be implemented;
- Industrialists should be encouraged to set up industries for processing natural resources into raw materials and desired technology needed to properly convert raw materials into market driven products (raw material) should be made available at reasonable rates in other to drive and sustain the industrialization process.
- There has to be facility provided or promoted through or by the Ministry of Industry for production of local raw materials.
- Government should encourage the drive for local substitution for raw materials through some sort of incentives since government is mostly affected by the problem of import syndrome.
- Nigeria’s army of unemployed youths should be encouraged to take up gainful employment from a network of industries that will be engaged in converting raw materials from their primary forms to intermediate and final products needed by the industries.
- Favourable policies to induce local sourcing of industrial raw material should be made by the government
- Government should formulate strong Industrialization Strategy and Policies in the manufacturing sector, Industrial development strategy should be shifted towards the promotion of the use of locally available industrial raw materials. By introducing a system of high and escalating tariffs, import licensing and prohibitions, this can be used to insulate most of the domestic import-competing manufacturing activities from foreign competition.
- Government should give basic incentives to people in the manufacturing industry in other to promote manufacturing activities.
Government has established special incentives for encouraging domestic industries to engage in research and development activities for the improvement of their products and production processes, so as to produce value additive and quality raw materials for industries.