FX scarcity pushes up local input sourcing to 60%
The foreign exchange scarcity in 2016 forced Nigerian manufacturers to further look inwardly, resulting in local input sourcing rising to 59.98 percent in the second half, from 46.3 percent percent recorded in the first half of the year, data from the Manufacturers Association of Nigeria (MAN) says.
“Local sourcing of raw-materials gained momentum in 2016 following the keying-in of manufacturers into the resource-based industrialisation and backward integrations agenda of the government,” says MAN while analysing the 2016 data.
“Local raw materials utilisation increased to 59.98 percent in the period under review, from 51.88 percent recorded in the corresponding half of 2015, thereby indicating 8.1 percentage point increase over the period. It also increased by 13.68 percentage point when compared with 46.3 percent recording in the preceding half. Local sourcing of raw materials averaged 53.14 percent in 2016 against 48.77 percent recorded in 2015, indicating 4.37 percentage point increase over the period,” MAN data show.
Figures show that local raw materials utilisation increased in textile, wearing apparel, carpet, leather and leather footwear to 68.67 percent in the second half, from 41.67percent recorded in the corresponding period of 2015, indicating 27.0 percentage point increase over the period.
When compared with the first half of 2016, the local input sourcing in the sub-sector rose by 19.37 percent.
In the group or sub-sector, local raw materials utilisation averaged 59.0 percent in 2016 as against 38.21 percent recorded in 2015, indicating 19.79 percentage point increase over the period.
Manufacturers are raising the local content of their raw materials to cut costs and avoid the repeat of 2016 when production was halted many times due to scarcity of dollars needed to import inputs, spare parts and packaging materials. Oil price crash, which started two years ago, dramatically cut dollar inflows into Africa’s biggest economy in 2016, pushing businesses to the brink.
But manufacturers are changing their style, investing heavily in backward integration and supporting local input suppliers with funds.
Nigerian Breweries, biggest brewer, has expanded sorghum sourcing from Psaltery International Limited with a view of meeting a 60 percent target.
FrieslandCampina WAMCO, producer of Peak Milk and Crown Milk, currently has five locations in Oyo State where it houses and supports local herdsmen who supply the firm raw milk from local cows.
PZ Wilmar, which is a subsidiary of PZ Cussons, has over 50,000 hectares of oil palm plantation in Cross River State.
The firm acquired the defunct Calaro Oil Palm Estate, formerly owned by Cross River government, as well as the 12,805-hectare Kwa Falls oil palm plantation, formerly owned by Obasanjo Farms. It also bought the 5,450-hectare Ibiae Oil Palm Estate and another 8,000 hectares estate in Biase.
“We have invested something close to the region of $300 million in backward integration projects in Cross River State. This year, our plantations are going to start fruiting,” Christos Giannopoulos, managing director/CEO, PZ Cussons Nigeria Plc, told BusinessDay in a chat.
Dangote Sugar is investing over $2 billion in six states in the country through its Savannah Sugar plc in Numan, Adamawa State, North-East Nigeria. It is already expanding plantations in backward integration projects in sugarcane and has pledged to extend this investment to Nasarawa State.
The Flour Mills of Nigeria, through its sugar subsidiary known as Golden Sugar Estate Limited, is investing $300 million in sugar production at Sunti, Niger State.
ODINAKA ANUDU