Manufacturers urged to invest in research, backward integration

Stakeholders say for Nigeria’s manufacturers to survive the impact of the current monetary and economic challenges, they must be ready to invest in research and development (R&D), while also embracing the backward integration and import substitution.

“We should be prepared to invest in R&D,” Remi Bello, immediate past president, Lagos Chamber of Commerce and Industry (LCCI), at this year’s seminar of the industrial group of the chamber held recently in Ikeja, Lagos.

“We need to have the technology we need to produce. Value-addition to agricultural products is important if we want to survive. We should also continue to engage with the government on policy somersault,” Bello added.

Backward integration occurs when a firm buys or acquires a company that previously supplied its raw materials. This has occurred in the cement industry, where producers acquired suppliers of limestone, gypsum and other raw materials. Dangote Cement, Lafarge Africa, WAPCO, the United Cement Company of Nigeria (UNICEM), Ashaka Cement, Bua Cement and Cement Company of Northern Nigeria (CCNN) have all backwardly integrated.

Sugar makers have also integrated cane farmers in a relationship that has attracted over $2.6 billion in investment over the last 18 months.  The Dangote Sugar, Golden Sugar Company, McNichols, HoneyGold, Crystal Sugar Mills and Confluence Sugar, among others, have also backwardly integrated. There is also backward integration in sectors such as rice and palm oil.

Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN), told real sector players during this year’s annual general meeting of the association that there is the need to have a paradigm shift from packaging and assembly to conversion of natural raw materials into finished products.

According to Jacobs, the focus of Nigerian manufacturers and the government must now move towards backward integration and import substitution to realise sustainable industrial growth and development sooner than expected.

 

Odinaka Anudu