Beneficiaries abusing Nigeria’s backward integration policy

Despite the successes recorded so far in the Federal Government-initiated Backward Integration Programme (BIP) some beneficiaries of the scheme are exploiting the many faults in policy, making quick gains and bleeding the nation’s economy.

According to BusinessDay findings, the Federal Government, under the three previous administrations, entered into various agreements with the beneficiaries, many of which have been flouted and abused.

Backward integration occurs when a company acquires or internally produces parts of its supply chain. The policy was initiated in the cement industry in 2002 as a way of harnessing Nigeria’s natural resources, creating more jobs and a ready market through the value chain, as well as boosting production, while whittling down importation.

There was an agreement between the government and local investors that the latter must make sizeable investments within a specified period of time in order to guarantee Nigeria’s self-sufficiency in their products.

However, some of the local companies are flouting this agreement by importing more of the products, rather than making the agreed investments. By so doing, these beneficiaries smile to the bank, while sabotaging a policy that could have led to more jobs and foreign exchange earnings through exportation of finished goods.

Also, some of the beneficiaries were given waivers with which to import raw materials. These waivers are however being used to bring in finished products, according to BusinessDay findings.

Similarly, some foreign investors in Nigeria, who have production plants in their countries are importing the products they are supposed to produce locally, from their countries, thereby exporting Nigeria’s jobs to their homes, while pretending to invest in the economy.

“The mixture of backward integration and importation is a problem,” Sani Dangote,  president of the Nigerian Agribusiness Group (NABG) and group vice president of Dangote Industries Limited, told BusinessDay.

“Why should a company invest billions on rice and its equipment and wait for three months before harvesting? If the same company can import rice at a cheaper rate, using just one assistance to import thousands of metric tonnes of rice and make more profit, which do you think the company would want to engage in?

“That is why these companies will continue to deceive the government by showing them a small piece of land where they are doing something with a promise that they will do more next year and get a quota to import rice,” Dangote said.

A clear example is the agreement among local rice producers, where the government gave them waivers to import some quantities of the product which they could not produce, to satisfy the local demand. 

According to Akinwumi Adesina, the immediate past agriculture minister, the beneficiaries exceeded the quota, which attracted a penalty of N28.39 billion.

The backward integration programme shot up local cement production from two million metric tonnes (MT) to almost 45 million MT, while attracting over $7 billion in private investment so far.

The integration programme is boosting local production of palm oil, but industry watchers still see many local players importing large quantities of palm oil.

“I think it’s about monitoring of a policy. You do not make a policy and leave it for the players to implement,” said Ike Ibeabuchi, managing director of a chemicals- making firm.

Apart from palm oil, there are also allegations of abuse of the BIP in sugar and a call by some tomato producers for patience in the implementation of the policy.

Industry players are divided in their opinions on how the Federal Government should carry on with the BIP. While some players, particularly those with investment war chests, say the government should not factor in importation in the scheme, others say without some level of importation, there could be scarcity of products occasioned by the inability of local manufacturers to satisfy domestic demand.

“If you are waiting to be 100 percent self-sufficient, you will shut the economy down. How can I produce more when you throw your borders open?,”  Eric Umeofia, founder/CEO, Erisco Foods Limited asked.

Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN) told BusinessDay that the association punishes any member who abuses government incentives.

ODINAKA ANUDU