How poor policy hurts manufacturers

Recently, Grif, maker of aluminium drums, exited Nigeria because the company could not get annealed cold-rolled steel which was its key raw material.

The cold-rolled steel is one of the items on the Central Bank of Nigeria’s list of 41 items restricted from accessing foreign exchange since 2016. Yet, as of today, nobody manufactures annealed cold-rolled steel.

Right from the government of Goodluck Jonathan, Western Metal Products Company Limited (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 wheelbarrows. But for a long time, the company has been unable to produce the steel and is even accused of importing the product.

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Consequently, most of the barrow and aluminium makers are left stranded. 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. Sources close to the company attributed its closure to smuggling and unbridled import of iron rods, which are 20 to 30 per cent cheaper.

BusinessDay gathered from reliable sources in the steel sector that Industrial And Farm Equipment Company, a maker of a wheelbarrow, has exited.

Nigeria had 21 enamel makers in 1980s but only about five companies are barely existing. Like Grif, Wahum is about to shut down as it can’t produce because it is unable to get cold-rolled steel.

Generally, the steel sector and its ancillary sub-sectors are struggling. First Aluminium is also 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 per cent in the last four years.

When BusinessDay visited its factory at Ota, Ogun State, only a few workers were in its rolling mills and caster section.

“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.

The business environment is tough, as Nigeria ranks 146 out of 190 countries in the 2019 World Bank Doing Business Index. The country is full of opportunities, with the demography of 201 million people, half of who are under 18 years.

But issues like multiple taxations, hurdles by government agencies and poor infrastructure hurt investors. The sector does not have a funding scheme and cheap Chinese steel is hurting it so badly.

“Smuggling has become part of the system and we need the policy to check it. Poor policy or absence of a good one kills a sector like ours,” a key player in the steel sector said weekend.

In July 2018, the dominant player in the diaper industry, Procter &Gamble, shut down its $300 million Agbara plant owing to issues relating to the inability to meet expected targets due to multiple taxations and harsh treatment in the hands of Nigeria Customs Service, which regularly acts as a revenue earner rather than a business facilitator.

Analysts say apart from challenges in the economy, poor business practices by firms also contribute to the closure of firms.

ODINAKA ANUDU &GBEMI FAMINU