In 2016, Nigeria saw its biggest economic slump in 25 years, occasioned by a sharp drop in the price of crude oil, which is the country’s major foreign exchange earner.
The immediate impact of the crash in the crude oil market was that there was over 50 percent drop in foreign exchange (FX) inflows into Nigeria. This situation asphyxiated businesses, especially manufacturers using dollars to import inputs and machines.
The major structural challenge facing the Africa’s most populous country is lack of diversification of its export sector, as oil has constituted, averagely, 88 to 93 percent of FX earnings in the last 18 months, despite hullabaloo on diversification in the government circles.
Across the world, finished or semi-finished products provide a bulwark against oil shocks as it can provide an alternative FX inflows that will serve as a buffer.
This is why a ton of raw cashew nuts costs $1,500 while that of processed cashew is $8,000. China earned between $40 to $50 billion from steel export in 2015 and $9.1 billion from shoes. Vietnam earns $5.9 billion from finished shoe exports. But Nigeria has not earned beyond $3 billion each year from non-oil exports since 2013, according to data from the Nigerian Export Promotion Council (NEPC).
African Industries Group has stepped into this arena. The group has 12 subsidiaries in Nigeria, including six big steel plants such as African Steel Mills, Ikorodu Steel Mills, African Foundries, and Abuja Steel Mills.
It produces one million metric tonnes (MT) of steel per annum, including iron rods, angles, channels, pipes, and wire related products, representing 33 percent of the steel consumed in Nigeria. The group also produces over 50 percent of iron rods consumed in the country. African Industries has invested over $1.1 billion in the Nigerian economy and has shown interest in increasing and further diversifying its product portfolio.
But the biggest piece news, however, is that the company now exports finished steel products to Morocco, Ghana and other parts of Africa. This is the first time in the history of Nigeria that a manufacturer is exporting finished steel to other countries, which is a remarkable feat for a struggling economy reeling under FX uncertainty.
This will make positive impacts on the Nigerian economy, as the company, which already employs 8,000 Nigerians directly and thousands indirectly, will engage more people as global demand rises.
Similarly, African Industries, founded in 1971 by P.K. Gupta, will repatriate more foreign exchange into Nigeria at a point its manufacturing peers are scrambling for dollars to import inputs.
Alok Gupta, group managing director, African Industries Group, said at a business luncheon tagged ‘Taking Nigerian Steel to the Global Map’, held in Lagos, that the quality of steel products of African Industries was at par with steel from Ukraine, if not better, adding that the company had become internationally competitive in exporting products from Nigeria.
He, however, called for Export Expansion Grant to enable the company to sustain its exports. He added that freight cost from Ukraine to Ghana was $40 per metric tonne (MT) while that of Nigeria to Ghana is $65/MT, which was expensive.
Gupta urged shipping lines and the port authorities to play an important role in developing the export market for made-in-Nigeria products.
Uche Iwuamadi, executive director of the group, said the company’s operational capacity was below 70 percent, stating that there would likely be excess steel in the country when African Industries reached 100 percent capacity.
“We are saving the nation over $650 million yearly,” Iwuamadi said.
Frank Udemba Jacobs, president of the Manufacturers Association of Nigeria (MAN), said: “In spite of the harsh operating environment manufacturers and other businesses are going through, African Industries Group is able to continue with all those difficulties and produce to the extent of exporting to other countries, and earning foreign exchange for this country.”
Hameed Ali, comptroller-general of the Nigeria Customs Service, who was represented by Bashar Yusuf, customs area comptroller in charge of Tin-can Island Command, stressed the need to help manufacturers to improve their products.
“I urged the MAN President to look at how best we can improve on our freights,” Ali said, stating that he would do whatever was possible to support Nigerian export cargoes.
Oluyinka Kufile, chairman, Basic Metal, Iron and Steel Group of MAN and CEO of Qualitec Industries Limited, said given that the steel sector was the backbone of any economy, players needed to be protected and encouraged.
“Most of the billets you see are the efforts of Nigerians. They pick up scraps from which billets are produced. From billets, companies like African Industries are able to produce steel. No matter any major project you do, you need 70 to 75 percent of steel to do it. This is why we want to see more exports,” Kufile said.
Kayode Fayemi, minister of mining and steel development, who was represented by Ime Ekrikpo, said the ministry wanted to take the steel industry from the midstream to the upstream where players could mine locally available iron ore to produce steel.
Vicky Haastrup, vice chairman, ENL Consortium Ltd, called on the Nigerian government to support companies like African Industries, stating that the traffic situation in Apapa had become a national shame, crippling import and export.
ODINAKA ANUDU
