The coronavirus pandemic has underlined the need for the federal government to support manufacturing and remove all obstacles that have stood in the way of the sector.
The Nigerian manufacturing sector contributes between eight and nine percent to the gross domestic product as against 14 percent in South Africa. Capacity utilisation is 54 percent, according to the Manufacturers Association of Nigeria (MAN)’s 2019 Economic Review, whereas South Africa’s hovers from 79 to 86 percent, according to research.
Many manufacturing companies in Nigeria have shut down in the last 30 years because of rudderless government policies and incoherent industrial plan. In recent times, firms like Procter &Gamble (Agbara), Grif, and many others have shut down owing to issues around poor competitiveness.
Grif, maker of aluminium drums, exited Nigeria because the company could not get annealed cold-rolled steel which was its key raw material. Government restricted the importation of the input, asking other players to get supplies from WEMPCO which no longer produces the input. Most of the barrow and aluminium makers have exited the Nigerian market. Federated Steel from China, maker of iron rods, has exited Nigeria and sold its assets to MNIL Limited.
P&G’s issues centre around harsh business environment such as high Customs duties, multiple taxation and high production costs.
“We are really struggling. In the metals industry, the majority of the companies are dead,” Oluyinka Kufile, chairman and chief executive, told BusinessDay in 2019, said.
Up till today, Nigeria’s minister of industry, trade and investment, and minister of steel development have not unveiled an industrial plan to tackle challenges faced by steel sector which is facing enormous competition from cheap Chinese steel.
“It is a huge investment that has been on for a very long time,” Kufile,who has invested over $100 million in the industry, said.
“And we are still doing more. When we started, it got to a point that we had to approach American Nexim Bank. They obliged us and gave us the facility. Today, it is a different story,” Kufile further said.
But Kufile is no longer that optimistic today.
“You can see that things are no longer that way they were when you first came,” he told this writer.
“We cannot compromise standards of roofing sheets we produce, but people bring in cheap products and are allowed to pay lower duties,” he said.
“No country develops its manufacturing sector that way,” he added.
Due to low import duties and inability to tackle smuggling, textile firms from Asaba Textile Mills to Kaduna Mills have all gone under. These companies could not compete with cheap Asian exports because production cost in Nigeria was high as a result of poor access to power, funds, infrastructure as well as multiple taxation.
The number of full-fledged textile mills in Africa’s most populous country has whittled down to just two, from over 180 in 1985. Industry players say the number of players is 24, but findings show that most of them are manufacturers of rugs, handkerchiefs, sweaters, towels and stockings.
Due to the neglect, the country muted an importation of face masks which are easily produced by fashion designers in Bangladesh.
Nigeria’s total non-oil export earnings from more than 25 commodities in 2018 were about $3 billion, according to the National Bureau of Statistics (NBS), but Bangladesh, once one of the poorest countries on earth, earned 11 times as that from exporting one product—textile.
Bangladesh, however, has 5,000 garment factories, employing about 20 million people, mostly women, pushing the extreme poverty index down to 12.9 percent, according to the World Bank, as against Nigeria’s nearly 50 percent.
Yale economist Ahmed Mushfiq believes that Bangladesh’s recent economic success is attributed to the flourishing garment manufacturing industry and the country’s robust NGO sector.
Experts attribute Bangladesh’s success to a convivial business environment that guarantees three to five years return on investments. This has forced 37 public and private universities to start producing ready-made garments for export. Another key factor is cheap labour with minimum monthly wage of a garment worker at $197, which makes it the last but one lowest wage among 21 textile-making countries in the world.
However, Nigeria has even more advantage than Bangladesh in terms of labour cost as its recent minimum wage hike (N30,000) amounts to only $83.3 per worker.
Stitch Dairy, a local publication, argues that the South Asian country has adopted technology and been able to enjoy duty-free advantage to export garments to the European Union, the US and Malaysia, but Nigeria has been a laggard in this area, having not taken maximum advantage of the African Growth and Opportunity Act (AGOA) to export duty-free to the US till 2025. It is also not fully maximising the Common External Tariff and other ECOWAS treaties.
“Nigeria needs an industrial plan now,” Ike Ibeabuchi, a manufacturer, said.
The pharmaceutical industry is handicapped and offers little hope in the face of Covid-19. This stems from long years of neglect. The industry has been hard hit by a number of factors. One is lack of funding, which has exposed the likes of Evans Medicals to humongous debts it could not repay. Apart from funding, the industry is also hard hit by high production cost, which makes its drugs more expensive than imported ones. Cost of production occupies 30 to 40 percent of their expenditure as the firms spend a lot on energy, water, research and development as well as raw materials. Most of the raw materials used by these drug makers are imported because Africa’s most biggest economy does not have a strong petrochemical industry that should produce resins and excipients.
Okey Akpa, chief executive officer of SKG Pharma and former chairman of the Pharmaceutical Manufacturers Group of the Manufacturers Association of Nigeria (PMG-MAN), said that increased import of medicines jeopardises Nigeria’s drug and national security. He stressed the need to have a petrochemical industry where drug firms can get inputs.
Importation of sanitizers has been difficult owing to closures around the world, pushing Nigerians to rely on local manufacturers. Innoson is said to have the capacity to produce ventilators but legislators have been ignoring his locally assembled vehicles for imported ones.
“Now is the time to pay a close attention to manufacturing. What is happening now in the world where some countries cannot export certain items shows that nobody cares for anybody,” Ibeabuchi, earlier quoted, said.
ODINAKA ANUDU
