Despite mounting criticisms against the Federal Government’s import-restriction policy, resource-based industries are beginning to get positive results from the initiative as they now ramp up sales, capacity and generate unusually high number of jobs more than ever before the policy was introduced.
Resource-based industries are those that process more of locally available natural resources for use at factories.
Government, through the Central Bank of Nigeria (CBN), last year removed 41 items from accessing foreign exchange at the official rate of N199/$, with the aim of reducing pressure on the local currency and foreign reserves since government feels the items can be produced locally.
Although the policy is impacting negatively on most companies with the attendant closures and in some cases, retrenchment of staff, however, some manufacturers that are producing intermediate products from locally available agro commodities or solid minerals now have surging sales as they get high patronage from other companies that need them for the production of finished products.
“We have been able to increase our production capacity from 50 percent to 70 percent, thanks to the import-restriction policy,” Nassos Sidirofagis, deputy managing director, Tempo Paper Pulp & Packaging Limited, producer of packaging materials, said.
“The demand for our products has suddenly increased. We have also raised our export volumes to repatriate foreign exchange into the economy. With this policy, we can keep expanding,” Sidirofagis further said.
The oil price crash has led to over 60 percent fall in public revenue, prompting the Federal Government, through the CBN, to restrict importers of several items from accessing foreign exchange from local markets. This move was targeted at reducing undue pressure on the naira and foreign reserves, resulting from higher demand for forex with which to import goods and services into the country.
This policy has affected manufacturers who now struggle to import inputs as well as those bringing in finished products, as they now resort to sourcing foreign exchange at parallel and black markets, where forex is over 60 percent higher than what it is obtainable in the official market.
BusinessDay findings show that manufacturers now buy raw materials from peers rather than resort to imports, as doing this is cheaper. This tends to disprove the notion in some sections that locally made raw materials or products are inferior.
Some of the products that receive high patronage include packaging materials, processed foods, glass, and leather, among others.
Similarly, companies that are sourcing more of their raw materials locally now benefit from high sales, which have risen as much as 50 percent, while their market prices are 20 to 30 percent cheaper than what is brought into the country.
Oluwasesan Taiwo-Tijani, group operation manager, SREN Chemicals Limited, said several companies now buy SREN Chemicals for use at their factories, adding that this had raised the company’s sales and productive capacity by 30 percent.
Eric Umeofia, founder/CEO, Erisco Foods Limited, said Nigerians now buy more of his tomato pastes, disclosing that Erisco was increasing its staff strength from 1600 to 9000 and now, had 450,000 tons capacity in Lagos alone.
Ikechukwu Ibeabuchi, managing director, Klopp Water Cure, which sources almost 100 percent of its raw materials locally, told BusinessDay that he was having an unusual demand for his products in recent times.
Inconsistent policy has led export companies in Asia to flood the Nigerian market with goods, which are mostly sub-standard. Before the oil price crash, the country was a major destination for toothpicks, rice, footwear, textiles, furniture and other items that could easily be manufactured in the country.
The influx dealt a blow on several companies that could not compete with cheap products from Asia, prompting many to close shop. With N100 Billion Cotton, Textile and Garment Fund established since 2005, the textile sector is yet to see any remarkable difference, owing to unbridled smuggling and influx of fabrics into the country.
“We can see that the import restriction policy has its own advantage,” Joseph Babatunde, general manager, large enterprises at Bank of Industry, said at the Manufacturing Expo recently in Lagos.
“We see the problem in the textile sector where the players are asking for a 10 percent reduction in import so that they can sell. Textiles worth billions of naira are found at warehouses in Lagos and Kano, and the issue of counterfeiting is really making the manufacturers uncompetitive,” Babatunde said.
Nigeria has limestone, gypsum, iron, silica, quartz, clay and over 30 other minerals that can be developed for industrial use. The country is also blessed with arid land that enables food processing to thrive. But key issues such as infrastructure, faking, high cost of doing business and power have limited this potential. Politicians in power also change policies at will, particularly those instituted by leaders in other political parties.
“We need to ensure that policy inconsistency is dealt with as this cannot help manufacturing to grow,” Frank Jacobs, president, Manufacturers Association of Nigeria, said recently in Lagos.
ODINAKA ANUDU
