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Interest rate hike will hinder economic growth – Dangote faults CBN

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President of the Dangote Group, Aliko Dangote, has criticised the Central Bank of Nigeria’s (CBN) decision to raise interest rates to nearly 30 per cent.

The foremost entrepreneur also advocated for policies that safeguard domestic industries and cultivate them into indigenous champions capable of generating jobs and fostering prosperity in face of current global economic woes.

The Africa’s richest man told the gathering of manufacturers and investors in Abuja while delivering a speech on ‘Rethinking Manufacturing in Nigeria’ as the keynote speaker at the Nigeria Manufacturers’ Summit that Nigeria has what it takes to be prosperous.

Earlier in May, the Monetary Policy Committee of the Central Bank of Nigeria increased the benchmark interest rate by 150 basis points from 24.75 per cent to 26.25 per cent.

The Central Bank had defended its monetary policy, saying high interest rates are necessary to curb inflation.

Speaking at the manufacturers’ summit at the Presidential Villa Abuja, the Dangote Group president said businesses were struggling to cope with the high rates.

“Nobody can create jobs with an interest rate of 30 per cent. No growth will happen”, he said.

According to him, an import-dependent country is equivalent to poverty importation.

Dangote has urged for a fundamental rethinking of Nigeria’s approach to manufacturing and industrial policy.

Dangote emphasised the critical role of industrialisation in sustainable economic growth.

“Import dependence is equivalent to importing poverty and exporting jobs”, Dangote said, highlighting one of his key messages.

The business magnate pointed out the stark contrast between Nigeria’s manufacturing sector and those of other countries. “Sadly, Nigeria remains far behind with its manufacturing sector accounting for less than five per cent of its merchandise export in 2022”, he said, comparing this to countries like China and South Korea, where manufacturing accounts for 93 per cent of exports.

Dangote reflected on Nigeria’s industrial history, noting, “Post independence and indeed until the late 1980’s we had a thriving and consistently growing and increasingly diversifying manufacturing industry”.

He then contrasted this with the current state, saying, “But as all of us can testify, our manufacturing sector has declined over the years”.

The industrialist strongly advocated for government protection and support of industries. “I believe a primary role and responsibility of the government is not only to promote investment and encourage investors in Manufacturing, but also to ensure that those investments are nurtured and protected to grow and thrive”, he asserted.

Addressing common misconceptions, Dangote stated, “We are often told that protecting your industries makes your country uncompetitive! This is pure fiction. It is quite the reverse. I say you cannot be competitive until you protect and support your own industry”.

He used Nigeria’s cement industry as an example of successful government protection leading to competitiveness.

“Today we are among the 10 most competitive cement producers in the world and the biggest cement producer and cement exporter in Africa”, Dangote said.

Dangote called for urgent action: “We must look to leading countries in the West and the East who are actively protecting their domestic industries.

We must similarly enact policies to protect our domestic industries and nurture them into home grown champions that will create the jobs and prosperity we desperately need”.

Dangote noted that there are various factors contributing to the underperformance of the manufacturing sector, emphasising that the crucial issue requiring attention is government policy and its approach toward investments and investors.

He pointed out that industrial or manufacturing entities are not like trading entities, expressing that the fundamental role and responsibility of the government should be not only to promote investments and attract investors in manufacturing but also to ensure that these investments are nurtured and protected to facilitate growth and sustainability.

He emphasised that Government Protection of the industry, does not solely encompass short to medium-term Regulatory Mechanisms such as tax holidays and other incentives which have their place in industrial policy and should be applied when necessary to mitigate investment challenges.

Disputing assertions that protecting domestic industries leads to reduced competitiveness, Dangote argued to the contrary, citing examples such as China, Korea, India, and various other Asian nations.

He pointed out that these countries successfully developed into robust economies and posed a challenge to the established global economic order precisely because they protected their industries.

He also said that due to strategic government policies and support, Nigeria has since become Africa’s largest cement producer and exporter, ranking among the top 10 globally in competitiveness.

Dangote noted that in 2023, Dangote Cement alone contributed more tax revenue to the government than the entire banking sector.

According to him, in the past, Nigeria was not competitive in cement production. Up to 2007, Nigeria produced less than two million tons of cement per annum. Today we have about 60 million tons of production capacity and another nine million under construction.

“The foundation for this success story was laid by an administration which decided to extend full support and protection to Nigeria’s cement industry. Today we are among the 10 most competitive cement producers in the world and the biggest cement producer and cement exporter in Africa. In 2023, Dangote Cement alone paid more taxes into the coffers of the government than the entire banking industry”.

Dangote also refuted claims that protecting industries would lead to monopoly, stating that it is common knowledge that foreign investors only come when they see that local investors are also doing well.

Reiterating that Nigeria has all it takes to develop and sustain a globally competitive manufacturing sector, Dangote called for re-thinking of her industrialization policy, by learning from leading countries in the West and the East who are actively protecting their domestic industries.

The summit, organised to address challenges in Nigeria’s real sector, was attended by key stakeholders including the Vice President and leadership of the Manufacturer’s Association of Nigeria.

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