Why Nigerians factories need to stay alive
Nigerians are feeling the pinch of the closure of 1980s and 1990s industries.
Since the exit of auto tyre makers, Michelin and Dunlop in 2007 and 2008 respectively, owing to poor business environment in Nigeria, tyre prices have been on the rise.
Apart from rising prices, importers now bring in substandard tyres that kill citizens. The death of the Nigerian minister of state for labour James Ocholi is still fresh in Nigerians’ memories. Ocholi, like many Nigerians, died in an accident because he used fake tyres imported by an unscrupulous businessman.
Consequently, the last 12 months have seen the prices of imported tyres rising by more than 50-70 percent owing to foreign exchange issues.
Similarly, the price of car batteries has risen by 100 percent on the back of dollar scarcity and collapse of manufacturing firms of 1980s and 1990s.
In the 1970s and 80s, Nigeria had brake pads and lining manufacturers such as Feredo and Exide in Ibadan; Mintex in Kano; Fenok in Onitsha; Apex in Lagos; Edison in Nnewi; Uko in Onitsha, and Ibeto in Nnewi. These firms collapsed in the 1990s, owing to policy inconsistencies, especially on import, say experts.
In 2015, the only surviving brake pads and lining maker Star Auto Industries collapsed as it was unable to compete with cheap Chinese products and could not pay back loan borrowed from the Bank of Industry.
“It is difficult to compete with Asia, with substandard, cheap brake pads. I am not happy that import duty on brake pads fell from 25 percent to 10 percent. This is the situation since 2004 and government has done nothing about it,” CEO of the firm Chidi Ukachukwu, told BusinessDay in early 2014.
Moreso, skyrocketing oil palm prices in Nigeria are a result of failure of palm plantations in the country.
Adapalm Plantation is a typical example of how a state held onto a facility that could easily have been privatised. This facility was set up by the then Michael Okpara administration of Eastern Region, but the company is today overgrown with weeds, with the state government failing to privatise it to achieve efficiency.
Okitipupa Oil Palm Company Plc (OOPC) in Ondo State, is also another case.
The consequence of the demise of several oil palm producing companies is the high market prices of the product, caused by middle-men in the value chain.
Importers of oil palm have no option than to raise prices on high dollar costs, but middlemen who procure palm oil from local farmers in Nigerian villages, hoard the commodity, create artificial scarcity and then raise prices. Their success is hinged upon the fact that there is over 700,000 metric tonnes gap in the industry, despite the presence of Okomu, PZ Wilmar and Presco.
Policy inconsistencies on importation, high energy prices and cost of funds, smuggling and poor patronage of locally produced goods are among the biggest disincentives to manufacturers. These factors forced a shut-down of 820 firms between 2000 and 2008, said Bashir Borodo, former president of MAN. Manufacturers need dollars to import inputs, but scarcity of green back dealt a big blow to many factories. Fifty manufacturing firms closed down 12 months preceding August 2016 due to their inability to access dollars to import raw materials, according to a survey carried out by NOI Polls and Centre for Economic Research last year.
“We need good policies now. Let’s address the issue of power. Let’s patronise locally made products. Let’s stop unbridled importation and fund local manufacturers. Let’s not sign any agreement that will kill local factories. Today we import 80 to 90 percent of our needs but produce little owing to our mentality,” said Ike Ibeabuchi, CEO ofg MD Services Limited.
ODINAKA ANUDU