High cost of packaging, raw materials compounds exporters’ woes
Rising expenditure on packaging materials is taking a big toll on Nigerian exporters, who are already battling with a number of environmental issues that make them less competitive in the international market.
Exporters, especially manufacturers among them, have had production costs rise by over 20 percent on back of higher electricity charges and energy spend, weaker naira, rising cost of importing raw materials, as well as surging cost of funds.
Packaging costs have also risen by between 20 and 25 percent across industries, but it is proving difficult for exporters to shift the cost burden to international consumers who are ready to immediately switch to cheaper brands.
“There is a rise in the packaging costs for exporters by over 20 percent,” Tunde Oyelola, chairman, Manufacturers Association of Nigeria Export Group (MANEG), confirmed to BusinessDay.
“It is now difficult for Nigerian exporters to compete with Asians whose packaging costs are cheaper. You see, exporters are trying to increase the competitiveness of their products by packaging them properly to meet international standards, but with this rise, it is becoming more difficult,” Oyelola explained.
Oyelola said the current situation called for a packaging incentive or scheme for exporters.
Manufacturing exporters have been severely affected by challenges in the foreign exchange market, as they struggle to get forex with which to import raw materials from other markets.
Many manufacturing exporters have resorted to sourcing foreign currencies from various expensive means. This ramps us production costs and makes their products un-competitive in the international market.
“Given the fact that oil prices are falling, we all say there is the need to diversify the economy. But how can you diversify without manufacturing. How can you diversify the economy by doing things that will rather destroy the sector,” Frank S.U. Jacobs, president, Manufacturers Association of Nigeria (MAN), told Real Sector Watch recently.
However, some analysts say the current situation favours exporters who can truly raise their game.
Similarly, manufacturers and exporters have decried the impact of recent hike and disparity in electricity tariffs under the new Multi-Year Tariff Order (MYTO), saying that his has raised production costs and make exports more expensive.
According to manufacturers and exporters, production costs have hit the rooftops, while they face transport and logistics challenges in trying to export their products to other economies.
Dolapo Ogutuga, vice-president of the Western zone of the Manufacturers Association of Nigeria (MAN), said manufacturers and exporters needed interventions in their electricity situation to cushion the effects of the harsh economic situations and promote smooth operations.
Exporters also add that cost of funds, which hovers between 20 and 35 percent, is also a big disincentive to them. They say the situation makes it difficult for them to compete with traders from other continents that secure loans at single-digit rates.
“You cannot compare exporters who borrow from their economies with those of Nigeria who borrow at such a very high rate. Both are in the same market, so how can they compete?” asked John Isemede, immediate past director-general, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), in a recent chat with Real Sector Watch.
ODINAKA ANUDU