This is a time for economic diversification away from petroleum as our main export products and from oil and gas as the sole source of national revenue. The time calls for a robust national strategy that brings to the fore various revenue earners hitherto ignored or overlooked. This is also a time for clear introspection on how such a strategy brings inclusive growth, sustainable development and liberates Nigeria from chronic dependence on importation, a major factor responsible for the national economic haemorrhage.
I turn attention to the leather industry in Nigeria and how a healthy value chain could be properly established and sustained for national benefits. The factors holding back the unlocking of potential and the full exploitation of the wealth of the leather industry are well known. What is not known and not well understood so far is the broader national benefit inherent in the operationalisation of the treasure in its wider ramifications. The industry has therefore remained relegated for so long. Despite the remarkable progress made in leather tanning sector in recent years, the industry still remains unorganised, fragmented and dependent on chances for its survival.
As an emerging market, Nigeria has consistently missed great opportunities to occupy a niche in the global leather industry. While attention was focused on exportation of leather products, the procedures were fraught with structural defects and operational blunders, which facilitated frauds, malpractices and mindless short-changing of the country, creating a leeway for speculators and rent seekers. Rather than pay attention to articulating ways of becoming a notable player in the global supply chain, emphasis was laid on perverse incentives which did more damage to the leather market and enriched a handful of actors.
An example of such perverse incentives was the Export Expansion Grant (EEG), which lacked transparency, implemented without a level playing field, skewed in favour of big companies and squeezed small operators. In particular, EEG created avenues for foreigners with broader knowledge of international markets access to enjoy unequal advantage, buying raw leather from Nigeria and receiving incentives for exporting it into their own home countries while Nigerians in the same business groped in ignorance. Operationally, the government organs supervising the scheme took no real cognisance of the upstream segment of the leather value chain, namely the source of the raw leather.
A couple of years ago, Nigeria reportedly earned $680 million annually from the leather industry. Mr. Olusegun Aganga, who made the disclosure while he was the minister of industry, trade and investment, noted the efforts of the stakeholders and observed that “the sector remains relevant till today.” He added, however, that “they have developed the industry with little or no government support in the past.” According to Aganga, “the sector is the highest foreign exchange earner after oil. We used to say cocoa is the highest but they have overtaken cocoa.” Building on Aganga’s contemplation is very important as he revealed that federal government would develop six clusters for leather industry, which includes Kano, Kaduna, Aba and others.
Allusion to Aganga is very relevant here because of the many revealing comments he made on the leather industry. On job creation, for instance, he said then that the leather industry provided 700,000 direct and indirect jobs. On the export front, he alluded to the success story of Brazil, stating that Brazil exports leather to over 80 countries, tripling its revenue to over $2 billion. Sounding ambitious and determined then, he said “the Brazilians have done it, the Indians have done it. Nigeria can do it, and will do it.
Nigeria can find a comfortable niche among the countries competing for the $75 billion global leather industry. But this can only happen if policies refocus on the sector as it holds great potential for export earnings and employment. For a sustainable growth and development of the leather industry, sound, supportive and transparent (public and private sector) policies that are compliant with environmental and social responsibility requirements as well as international standards are very crucial. Nigeria, according to legends, is, perhaps the globally most important exporter of light leather, but that is yet to translate into commensurate revenue as quality and standards are still largely questionable.
In organising the leather industry in Nigeria, certain ground rules are needed to guide stakeholders. Continued haphazard operational styles will hamper progress in the direction of commercial leather business. Various value chain activities need streamlining to conform to certain social and economic norms and global best practices. Hunting of games for skins is increasingly becoming unpopular as it contributes to loss of biodiversity, erodes conservation of wildlife and does not lend itself easily to traceability and environmental accountability. These also narrow down the chances of global competitiveness when environmental indices are invoked. A national policy on developing the leather value chain should completely discourage the trade in game animal skins.
National advocacy is lacking in terms of discouragement of undesirable practices. A significant bulk of leather is consumed as food by Nigerians as ponmo – a delicacy from hides and skins – which was initially popularised in the south-west but seems now to be assuming a national acceptance. Inattention to the anomaly at the supply and demand interface of the hides and skin is a major reason for the spread and sustenance of ponmo business. Although tradition dies hard, innovation is one way of breaking any backward traditions. With the benefit of scientific knowledge of nutrition, consuming animal skin is not a worthwhile exercise – whether viewed from nutrition lens or from economic perspectives.
Ponmo has no nutritional value. Its continuous consumption has continued to generate concerns on its adverse effect on the tanning and leather industry in the country. The fact that there are no reliable statistics on ponmo consumed annually is a major cause for concern and a reason to find ways to end this culinary tradition. It has been surmised that a significant quantity of ponmo consumed in Nigeria is brought in from outside (either as smuggled or imported). An estimate of quantum of hides and skin consumed as ponmo can be assumed as running into billions of naira as it has been noted that the business of hides and skins in form of ponmo appears more lucrative than when used for leather.
The food safety and health implications of ponmo consumption are largely overlooked. Concerns over the health status of some of the animals killed are real and well-founded. Many sick animals and those undergoing treatments get slaughtered without any professional supervision. Their hides and skins are sold to unsuspecting consumers while the drugs or chemicals applied on the animals are yet to undergo full bio-degradation or detoxification. Curing animal skins with fire from hydrocarbons poses its own distinct health risks. In many abattoirs, animal skins meant for human consumption are burned with automobile tyres. This alone disqualifies the end-product from human consumption. But they are consumed anyway.
A report by the Nigerian Export Promotion Council (NEPC) report says the export of leather products like bags, shoes, was 63 million dollars in 2014. A private sector operator and a stakeholder in the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) pointed out that there is need to get the statistics of the consumption of the product, in comparison with the current volume of leather production and exports in the country. He made a case for the consideration of “the local market, because they are the highest stakeholders, as their survival depends on it.” He recommended the “need to simply discourage the consumption to a level, to earn some foreign exchange for the nation through more leather exports.’’
More importantly, a policy review to encourage the local marketing of locally made leather goods and promote the local production of good quality leather works like shoes, bags and belts is long overdue. It should be formulated and implemented in ways that will break the strain of cheaper imports from China and elsewhere. In implementing cluster models of leather industry value chains, the production and branding of “Made in Nigeria” leather goods should be given prominence. Economies of Japan, China and India grew on the back of copying and producing locally-manufactured versions of imported goods. With time, they perfected the qualities of such products.
The stigma attached to “Aba-made” shoes should be removed. Stakeholders could be assisted to produce products of international standards. With relentless research and development, capacity building, financial support, increased patronage and deliberate branding, Aba leather goods could go on to compete with Italian products among others. For its relevance, something similar to ‘silicon valley’ (with particular reference to leather industry) could be established and maintained within the Enugu-Aba-Port Harcourt corridor. A local content policy targeted at this niche market could earn Nigeria remarkable revenues over the next decade. Establishing a well-structured value chain between Aba cluster and primary sources of hides and skin could further integrate the cattle, sheep and goat production into a broader wealth creation programme for Nigeria.
A vibrant leather goods production centre can become a tourist attraction. With the turn of events, the stakeholders in the leather industry could reap economic gains derivable from the tourism dimensions, foreign exchange conservation, employment generation and national pride in relation to efficient utilisation of Nigerian leather. Some past policies have focused on issues that largely discouraged in-country investments in the development of the downstream aspects of the leather industry, focusing rather narrowly on the convenient options. Going forward, industry policies can change the economic landscape in favour of leather industry and turn Nigeria to a leading player in the global leather market.
The well-known hides of cows, horses and camels, and the skins of sheep and goats as tradable items have to assume greater relevance. Businesses can only be built around them if standards, quality, pricing and supply guarantee are in place. All these can be achieved together if livestock (especially cattle, sheep and goat) husbandry is done in a settled manner. Agriculture is at the roots of the leather value chain. Itinerant livestock production does not lend itself to quality control and acceptable standards, nor does it guarantee predictable supply. As cattle rearers transform from nomadism to ranching, it is much easier to ensure acceptable quality and quantum of raw materials which will in turn transform the leather industry in Nigeria and contribute immensely to economic diversification and increased revenue generation.
Olukayode Oyeleye
