Nigerian consumers pay heavy price for collapse of 1980s industries

Nigerian consumers are now feeling the crunch of the collapse of 1970s and 1980s industries more severely, as prices of imported products soar increasingly above their heads, amid dollar scarcity.
Tyre makers, Michelin and Dunlop stopped producing in Nigeria in 2007 and 2008 respectively, on account of a poor business environment.
In the 1970s and 80s, Nigeria had brake pads and lining manufacturers such as Feredo and Exide in Ibadan; Mintex in Kano; Fenok in Onitsha; Apex in Lagos; Edison in Nnewi; Uko  in Onitsha, and Ibeto in Nnewi. These firms collapsed in the 1990s, owing to policy inconsistencies, especially on import, say experts.

Since auto tyre makers, Michelin and Dunlop shut down their Nigeria plants, Africa’s most populous country has not had any tyre producer and has resorted to importing the product.


Consequently, the last 12 months have seen the prices of imported tyres rising between 50 and70 percent, as importers who do not have access to dollars at the official market, get foreign exchange at almost N500/$ at the black market, as against N300+ /$ one year ago.

Dunlop Plc is still in Nigeria but as DN Tyre and Rubber Plc, importing tyres from Spain and South Africa, among other countries, BusinessDay found.
Due to high prices of new tyres, many importers are now bringing in expired and substandard products which are responsible for many of the accidents and deaths on Nigerian roads
Ede Dafinone, chief executive officer, Sapele Integrated Industries Limited, a key crumb rubber processor, does not see Michelin and Dunlop returning their plants to Nigeria, owing to Nigerians’ penchant for used tyres, as well as low rubber and tyre prices in the international market, shortage of lumps from trees (which will create input challenges), as well as harsh business environment.
Similarly, the price of car batteries has risen by 100 percent, on the back of dollar scarcity and collapse of manufacturing firms of  the1980s and 1990s.
In 2015, the only surviving brake pads and lining maker, Star Auto Industries, collapsed, as it was unable to compete with cheap Chinese products and could not pay back a loan from the Bank of Industry.
“It is difficult to compete with Asia, with substandard, cheap brake pads. I am not happy that import duty on brake pads fell from 25 percent to 10 percent. This is the situation since 2004 and government has done nothing about it,” Chidi Ukachukwu ,CEO of Star Auto Industries,told BusinessDay in early 2014.
Frank Udemba Jacobs, president of the Manufacturers Association of Nigeria (MAN), admitted that many manufacturers of brake pads shut down because they could not compete  with Asian imports.
In a similar vein, skyrocketing oil palm pricesare as a result of the obsession of government over the years, with crude oil money.
Adapalm Plantation is a typical example of how a state held onto a facility which could have been privatised. This facility was set up by the then Michael Okpara administration of the Eastern Region, but the company  is today overgrown with weeds, with the state government  failing to privatise it to achieve efficiency.
Experts attribute the demise of Okitipupa Oil Palm Company Plc (OOPC) in Ondo State, owned by the state government, to corruption and bad management.
The situation is not different with the Ore-Irele Oil Palm Company Limited and the Araromi-Ayesan Oil Palm Plc, both of which were partly state-owned, with over 13,000 hectares of land.
The consequence of the demise of several oil palm producing companies is the high market prices of the product, caused  by middle-men in the value chain.
Importers of oil palm have no option than to raise prices on high dollar costs, but BusinessDay gathered that the middlemen who procure palm oil from local farmers in Nigerian villages, hoard the commodity, create artificial scarcity and then raise prices. Their success is hinged upon the fact that there is an over 700,000 metric tonnes gap in the industry, despite the presence of Okomu, PZ Wilmar and Presco.
BusinessDay analysis of the Novus Agro Commodity Index shows that 25 litres of palm oil which was sold for N6, 500 in January 2016, now sells for N25,000 (a 284 percent price increase) at the major markets across the country.A bottle of palm oil, which sold for N220 in January last year, now sells for N720 (a 227 percent hike), while a five-litre keg of palm oil, which sold  for N1,300 last year, is now N5,000 (a 284 percent hike).
Henry Olatujoye, national president, National Palm Produce Association of Nigeria, told BusinessDay that the situation is gradually changing.
“About 50,000 hectares of plantation were added last year. This is what we need as a country, if truly we want to attain self – sufficiency in palm oil production,” said Olatujoye.
Policy inconsistencies on importation, high energy prices and cost of funds, smuggling and poor patronage of locally produced goods are among the biggest disincentives to manufacturers. These factors forced a shut-down of 820 firms between 2000 and 2008, said Bashir Borodo, former president of MAN.
Manufacturers need dollars to import inputs but scarcity of the dollar has dealt a big blow to many factories.  Fifty manufacturing firms closed down 12 months preceding August 2016 on account of their inability to access dollars to import raw materials, according to a survey carried out by NOI Polls and the Centre for Economic Research last year.
Also, there is a disconnect between town and gown, as the poorly funded Nigerian universities and research institutes have been unable to support industry meaningfully in research and development.
“There is a big challenge with technical education. If you leave your laboratories to graduates produced by our higher institutions, they could ruin your company, except maybe you subject them to a series of trainings,” said Ike Ibeabuchi, CEO of MD Services Limited, producer of chemicals.
“Again, why do we allow our best to leave the country? We export labour which are in short supply, and then turn around to import exactly the same at higher costs,”Ibeabuchi said.