Quality of local raw materials scares manufacturers

Many Nigerian manufacturers avoid using local raw materials because of their poor quality and insufficient quantity.

This is why manufacturers depend heavily on imported raw materials and have struggled to survive in the last 12 months, following the Central Bank of Nigeria’s (CBN) decision to impose restrictions on the foreign exchange market.

Experts say local raw materials fail to make the mark on account of low technology input in the country’s value chain, along with a huge shortage of skilled manpower and poor funding.  They add that there are also shortcomings in research & development, land tenure system, investments and a national strategy on the development of the solid minerals and agro inputs.

These lapses, they say, result in the loss of thousands of jobs that could have been created in the intermediate sector, as well as the loss huge sums of foreign exchange that would have been earned in the manufacturing export sector.

“In the pharmaceutical industry, there are two inputs we use, which are Active Pharmaceutical Ingredients (API) and excepients,” said Okey Akpa, chairman, Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN).

“Excepients are things you can derive from starch, Gum Arabic and so on. In this area, we have a problem of quality of locally available inputs.  In terms of API, the petrochemical industry must be available because they provide precursors. Since we do not have a petrochemical industry currently, the basic problem here remains that we have nothing at all,” Akpa said.

Keith Richards, chairman of the food and beverage company, Promasidor, wrote earlier in BusinessDay that no manufacturer would be willing to import inputs if the locally available raw materials were available in sufficient quantity and quality.

Patrick Oaikhinan, CEO, Epina Technologies Limited, attributed the challenge to lack of requisite skills, particularly in the sold minerals- manufacturing value chain.    

Nigeria’s local input preference, which stood at 59 percent in the second half of 2013, dropped to 48 percent by the end of 2014, according to data from the Manufacturers Association of Nigeria (MAN). Sources among manufacturers told BusinessDay that this would have dipped to as low as 45 percent currently.

Currently, many import-dependent manufacturers, especially multinationals, which used to purchase raw materials with hundreds of thousands of dollars from abroad, now do so with less than five thousand dollars.

“Many industries still have a stock of raw materials. By the time it gets exhausted, these firms will shut down, Frank Udemba Jacobs, president, MAN, said in a telephone interview at the weekend.

Dangote’s petrochemical plant, expected to be completed by 2018, is expected to reduce the plight of drug makers through the provision of the needed raw materials.

Central Bank governor, Godwin Emefiele, said this would help bring in foreign exchange to Nigeria to the tune of $6 billion a year.

The Federal Government in the last 14 years tried to develop the local raw materials industry in cement and sugar, through the Backward Integration Programme (BIP), resulting in massive investments in the two sectors.

The sugarcane to sugar industry is currently getting stronger, as many farmers have become part of the value chain, earning a living and having a ready market for sugar canes. The cement industry has also strengthened the limestone industry. But this is hardly enough, as there are still over 70 sectors that do not have this advantage.

“It is not possible to have 100 percent local sourcing in any part of the world,” said Tunde Oyelola, chairman, MAN Export Group.

“Sometimes the raw materials are so small in the country that you can’t build a factory and say you want to start producing them. In some products you have 70 percent local sourcing and 30 percent import. Take soap for instance, you have about 30 raw materials to produce it and you can’t get all of them here,” Oyelola said.

He added that there is the need to have a comprehensive plan to develop local raw materials to save forex and increase the number of people working in the value chain.

ODINAKA ANUDU