A number of manufacturing companies have shut down because they cannot have access to annealed cold rolled—their major raw material— from Western Metal Products Company Limited (WEMPCO) Group, the only company authorised to produce the input.
Right from the government of Goodluck Jonathan, Wempco has been the only company allowed to produce annealed cold-rolled steel and supply to other downstream firms which use it to make aluminium products and wheel barrows. But for a long time, the company has been unable to produce the steel and is even accused of importing the product.
The implication is that manufacturers using the input cannot import it because they are not allowed to, and cannot get it from Wempco which is currently battling survival.
Already, Grif, maker of aluminium drums, has exited Nigeria for this reason.
The cold-rolled steel is one of the items on the Central Bank of Nigeria’s list of 41 items banned from accessing foreign exchange since 2016.
Also, Federated Steel from China, maker of iron rods, has exited Nigeria and sold its assets to MNIL Limited.
Another iron rod maker, Universal Steel, has shut down.
BusinessDay gathered from reliable sources in the steel sector that Industrial And Farm Equipment Company, a maker of wheel barrow, has exited.
A big aluminium maker Wahum is on the verge of shut-down as it can’t produce because it is unable to get cold-rolled steel.
“This is not how to run an economy,” an affected steel sector player, said.
“It is counter-productive and helps nobody,” the steel sector player said.
Nigeria had 21 enamel makers in 1980s but only about five companies are barely existing. Other companies playing in industries under steel are also struggling for survival. First Aluminium is in dire straits as the company continues to be hobbled by cheap aluminium products.
Qualitec Industries, a major maker of roofing sheets, is nearing shut-down, having downsized workforce by over 50 percent in the last four years.
“We are really struggling. In the metals industry, the majority of the companies are dead,” Kufile said.
Nigeria exited recession in 2017, which claimed at least 50 manufacturers, mainly SMEs, according to the Manufacturers Association of Nigeria (MAN). Much of the problem was caused by poor access to dollars to import inputs.
Many companies in Nigeria cannot compete with cheap Chinese steel. There is also low patronage by construction players and government contractors.
Nigeria’s business environment is generally tough, ranking 146 out of 190 countries in the 2019 World Bank Doing Business Index. The country is full of opportunities, with demography of 201 million people, half of who are under 18 years.
But issues like multiple taxation, hurdles by government agencies and poor infrastructure hurt investors.
In July 2018, the dominant player in the diaper industry, Procter &Gamble, shut down its $300 million Agbara plant owing to issues relating to inability to meet expected targets due to multiple taxation and harsh treatment in the hands of Nigeria Customs Service, which regularly acts as a revenue earner rather than a business facilitator.
The Lagos-based Kimberly Clark, which produces Huggies, is exiting Nigeria.
“There are many substandard diapers flooding the Nigerian market. They pack them in white bails, sell them to Nigerian merchants at ridiculously low prices and bring them into this market. What we need is to stop this kind of products from coming into this market because they cause rashes and infections and they are not of good quality,” Paul Odunaiya, managing director, Wemy Industries, told BusinessDay in an interview.
Pharmaceutical companies are also in the shut-down party. Evans Medicals is shut down. Pharmaceuticals are struggling with importation of excepients and other inputs as Nigeria does not have a strong petrochemical industry that should produce them.
Energy constitutes 40 percent of manufacturers’ expenditure. Gas is dollarised, say manufacturers.
“We need a new energy policy. We need to review our energy policy,” Muda Yusuf, director-general of Lagos Chamber of Commerce, said recently in an interview.
In a recent CEO Confidence Index (MCCI) for Q1 2019 coducted by MAN, 92 percent of them said multiple taxes were the biggest issues, while 63 percent voted that banks were reluctant to lend to them.
However, analysts say apart from challenges in the economy, poor business practices also contribute to closure of firms.
ODINAKA ANUDU
