Light Manufacturing


GEM LIGHT MANUFACTURING SECTOR DEVELOPMENT APPROACH

Light manufacturing has the potential of creating dynamic economic growth, especially for low-income countries. GEM believes that Nigeria is not an exception. The key is to capture the opportunities arising from the relocation of light manufacturing from higher-income countries to lower income nations. Japan seized this opportunity using labor-intensive industries to drive its economy until rising labor costs eroded its comparative advantage in those sectors. That shift then allowed other low-income Asian economies – South Korea, Taiwan, Hong Kong, Singapore, and to some extent Malaysia and Thailand to follow in Japan’s footsteps. China, of course, is the region’s most recent opportunist. After more than three decades of breakneck economic growth, it has transformed itself from one of the poorest countries on earth to one of the world’s largest economy. Now China is beginning to lose its comparative advantage in labor-intensive industries, other developing countries, especially in Africa, are set to take its place.

Indeed, ever since the Industrial Revolution, the growth of light manufacturing has driven a dramatic rise in national income. The United Kingdom’s economic transformation started with textiles. In Belgium, France, Sweden, Denmark, Italy, and Switzerland, light manufacturing led the way. Similarly, in the United States, cities like Boston, Baltimore, and Philadelphia became centers for producing textiles, garments, and shoes.

Industry experts considers light manufacturing sector as an ideal entity to drive Nigeria’s development due to the labour intensive (export focus) nature of the industry. The sector is usually less capital intensive than heavy industry, and is more consumer oriented than business oriented. It presents a $10.29 billion opportunity in import substitution and a huge employment opportunity for Nigerian teaming population. With over 182million people of who over 40million are the growing middle class, Nigeria has great potentials for investments in both human and material resources.

The contribution of the manufacturing sector to the nation’s Gross Domestic Product rose to N6.616bn in the third quarter of 2015 surpassing the oil and gas industry by N1.93bn. Since the gradual fall in the price of crude oil in the international market from $114 in June 2014 to currently around $29 per barrel, the revenue generation ability of the oil industry has radically dwindled.

The overwhelming contributions of the manufacturing sector to create investment capital at a faster rate than any other sector of the economy brought forth the need to further invest efforts in order to fully utilize these advantages. The sector is highly desirable in achieving the much needed structural transformation and diversification agenda of the federal government Sustainable Developmental Goals (SDGs). In line with these, GEM support to light manufacturing will be focused on four key sectors of the economy identified as having high potentials for growth. These include:

  • Automobile
  • Leather and Leather goods
  • Renewable energy and
  • Palm Oil

Intervention in these sectors will include conducting extensive market analysis to identify areas of market failures, understand why the market is not responding to these failures and proffer activities that can catalyze into quick and definitive response. In addition to planned Technical Assistance arising from the expert recommendations, GEM will also provide policy and regulatory environment supports to assist in ease of doing business by investors. GEM will support public private sectors dialogue mechanisms at all levels of government and specific private sector investment outfits. Specifically, GEM will facilitate investments in identified areas, including:

  • Capacity building in modern production processes and techniques (best practices)
  • Developing business prowess of the value chain actors
  • Improvement of raw materials supplies
  • Supporting Business Linkages and marketing efforts

Interested firms can participate by either applying here as individual firm or through published Call for Proposals (CFP). The CFPs are usually designed (under two intervention grants window: Institutional and innovative) to address specific value chain problems. CFPs are usually published in at least two widely circulated national dallies in order capture and invite reputable public and private organizations with capacity to provide innovative and market driven solution(s). Firms responding to any published CFP are expected to download the required forms here www.bigportal.org.ng and complete the Business Plan Application Form and the Project Financial Modeling template. Completed forms should be submitted before the close date of the publication.

Shortlisted firms will be contacted along with a formal request inviting them for a panel presentation. Firms will present their business cases to a jury who will select viable projects for funding. There will also be site visitation to verify business location. During this visit, information provided as part of the application will be verified.