How crisis forced re-think in Nigerian manufacturing sector

The 2016 foreign exchange crisis forced a re-think in Nigeria’s manufacturing firms.

A number of manufacturers, whose focus was on the local market, began to look outwards.

Large enterprises such as Nigerian Breweries, Guinness, Cadbury, Dangote, FrieslandCampina WAMCO and many others began to play more prominent roles in the West African market.

Many firms earned foreign exchange and set up overseas departments to beat the FX situation.

More so, rather than depend so much on imported raw materials, manufacturers had to look inwardly for their raw materials.  Brewers started substituting imported barley for locally available sorghum. Grains began to dry up in northern Nigeria as local food and drinks manufacturers resorted to the use of maize for production.

Local input preference, which was   47 percent in the second half of 2014, rose to 52 percent in the corresponding period of 2015, and to over 60 percent in the same period of 2016.

Also, manufacturers had to retool their factories and modify their machinery to suit the use of more local inputs in the face of prohibitive cost of raw materials importation.

 “What our members are doing is to retool and modify their machines to suit local inputs,” Frank Udemba Jacobs, president, Manufacturers Association of Nigeria, told BusinessDay in 2016.

“We are increasingly looking inwards, embracing resource-based and import-substitution industrialisation. While we keep exploring local inputs, we know this could need retooling and adjusting of machinery. We encourage those with the capacity to go into backward integration due to foreign exchange challenges,” Jacobs, who is the CEO of Jacobs Wines, said.

Several large corporations changed their machines, while a number of players in light industries used domestic fabricators to produce cheap equipment that could fit into domestic inputs, according to John Kachikwu, CEO of John Tudy Interbiz, a food processor and exporter to the United States.

“We changed machines because the foreign equipment we had could not blend with local raw materials we were getting,” said Kachikwu said.

A manufacturer of an Enugu State-based chemical firm said he was fabricating more of light machines locally, while using more of local inputs.

These prove that necessity is the mother of invention. In the face of FX stability, experts want manufacturers to consolidate on the gains made in the past two years, rather than overlooking the lessons learnt.

ODINAKA ANUDU