Small-scale manufacturers hardest hit by economic slump

Even though all businesses are hit by Nigeria’s economic slump, small- and medium-scale (SME) manufacturers are the most affected in the mix, according to some of their members.

Unlike other SMEs, small-scale manufacturers need machinery and raw materials to operate. In the current situation where foreign exchange is scarce and costly, many of them have had the biggest headache of finding the greenback needed to import these necessities.

In 2016 some of them had production interruptions a number of times owing to input shortages, leading to revenue and market losses, said Frank Jacobs, president, Manufacturers Association of Nigeria (MAN).

Some of them wishing to invest in backward integration in 2016 could not do so because they did not have the financial muscle to do so. Borrowing from banks was not easy at interest rates of 18 to 30 percent.

Large-scale manufacturers and multinationals could afford gas plants and even coal-fired plants, but SME players cannot. They use generators that consume diesel or fuel. Diesel price is over N200 per litre, while fuel price is N145, which is expensive for many of them who have to run generators for long hours.

Other categories of SMEs can afford to shut down generators at fits and starts, but manufacturers in this class cannot, otherwise they will suffer damage at their factories, says Ike Ibeabuchi, CEO of MD Services Limited.

Their revenue is small relative to multinationals and large enterprises, because they have limited funds for marketing and advertisement. Poor patronage of made-in-Nigeria products and multiple taxes affect them the more. They have limited market access and poor road network, which hinders them from reaching consumers. Between June 2015 and August 2016, 54 of manufacturers in this category had to shut down owing to these challenges, according to Jacobs,

“The small and medium companies (SMEs) are not being looked at, coupled with the fact that we have infrastructure deficit. If you come to my factory, you would probably climb so many motorcycles because the roads are very bad. We use a lot of power. As you and I know, the epileptic power supply is worsening. In addition, the general operating environment is very poor: multiple taxation, multiple regulatory agencies and so on,” said Ikpong O. Umoh, chairman of the Cosmetics and Toiletries Group of MAN and managing director of Stellarchem Nigeria Limited.

Umoh stressed the need for the government to pay a closer attention to manufacturers in this class by making more foreign exchange available for them and ensuring they import major inputs without paying tariff.

 

ODINAKA ANUDU