Industrial journey: Much talk, fewer actions

Nigeria’s industrial journey in recent times can best be summarised in few words: Much talk, fewer actions.  Before examining the recent industrial policies of Africa’s biggest economy, it is pertinent to look at the country’s post-colonial history.

After Independence in 1960, Nigeria basically survived on exports of primary agricultural products to Britain and Europe. Agriculture was the mainstay of the economy, contributing 63 percent to the gross domestic product (GDP) and between 70 and 80 percent of foreign exchange earnings of the post-colonial era.

Most of the companies in the then Nigeria , including John Holt, Peterson Zonhonis (PZ), Compagnie and the Union Trading Company (U.T.C), were engaged in trade and commerce especially in the importation and distribution of  foreign manufactured  goods, according to Udo Ekpo of the  Department of  Economics, Akwa Ibom State University, Obio.

The post-colonial administration started making frantic efforts to industrialise the country, introducing the import substitution strategy, with a view to establishing local industries that would manufacture  imported goods.

Government got directly involved in industrialisation by establishing the Ajaokuta Steel, rolling  mills  at  Warri,  Kaduna  and  Oshogbo,  aluminium  smelter  plant  at  Ikot  Abasi, crude oil refineries at Port Harcourt and Kaduna, petrochemical and fertilizer factories at Port Harcourt, paper  industry  at Oku  Iboku, cement  industries  at  Calabar  and  Nkalagu, machine  tools company,  sugar  plants and marble industries, according to Ekpo.

One major feature of this period, however, was indigenous efforts to explore locally available agricultural products to earn foreign exchange. Cocoa was the mainstay of the Nigerians in the West, groundnuts and cereals for those in the North and palm oil for those living in the East.

Nigeria had 45 percent market share in the global palm oil market in 1960. This has dropped to 1.5 percent as at 2016.

With the tool of import substitution, Nigeria had to impose protective tariffs, import  quotas  and  exchange  controls  to protect would-be local industries from imports.

However, import-substitution saw the rise of industries but these firms relied on foreign inputs and machinery because the industrial strategy adopted at this time did not factor in the role of technology.

The country subsequently needed foreign exchange and had to pay attention to crude oil export. With the collapse of the oil market in early 1980s, the country faced serious structural challenges. Raw materials and spare parts were rationed. According to the Central Bank of Nigeria (CBN) report in 2012, oil  revenue,  which  provided  about  90 percent  of  the  foreign exchange earnings, reduced from $25.4 billion in 1980 to less than $6 billion in 1986,

Due to the shortage of foreign exchange, the country adopted export promotion strategy in the mid-1980s to earn foreign exchange. The military regimes also pursued foreign investors to bring in external capital.

Though Nigeria paid special attention to crude oil at the expense of converting raw agricultural products into finished products, analysts say the Structural Adjustment Policy (SAP) did some damage to the country’s industrialisation dream through its liberalisation programmes.

By 1985, Nigeria had over 180 textile mills employing more than one million Nigerians.  Some of the mills were United Nigerian Textile Limited (UNTL), Aswani Textile, Afprint, Asaba Textile Mills, and Edo Textile Mills, among others, but there are fewer than three full-fledged healthy textile mills in Africa’s biggest economy and most populous country today.

But the era of Ibrahim Babangida (1985 to 1993)  saw a number of textile firms die owing to unbridled importation and lack of policy to protect domestic industries, say analysts. This, to them, is a result of poorly-thought liberalisation scheme orchestrated by Bretton Woods loan conditionalities.

Ginneries, defined as establishments where cotton is ginned, closed shop in reaction to the state of textile industry, where very few existing players have either resorted to skeletal textile production or diverted to customised manufacturing.

Ever since then, the situation has got worse. 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 collapsed in the 1990s.

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 a loan 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,” Chidi Ukachukwu , CEO of Star Auto Industries,told BusinessDay in early 2014.

Tyre makers, Michelin and Dunlop, shut down their Nigeria plants in  2007 and 2008 respectively owing to poor power supply and inability to compete with second-hand tyres.

Okitipupa Oil Palm Company Plc (OOPC) in Ondo State, owned by the state government, collapsed due to corruption and bad management.

The situation is not different with the Ore-Irele Oil Palm Company Limited and the Araromi-Ayesan Oil Palm Plc, both of which were partly state-owned, with over 13,000 hectares of land. It equally collapsed owing to corruption and embezzlement.

The consequence of the demise of several oil palm producing companies is the high market prices of palm oil today, which is threatening breakfast tables of many Nigerians.

“If Nigeria were to maintain her market share of 45 percent (from 1960), gross foreign exchange inflow from the sector would be $17.5 billion today,” said a report titled ‘Palm Oil Industry in Nigeria’, collated by BudgIT Research, Indexmundi, the United States Department of Agriculture (USDA) and Vetiva Research.

Adapalm Plantation is a typical example of how a state held onto a facility which could have been privatised. This facility was set up by the then Michael Okpara administration of the Eastern Region, but the company, which is in Imo State,  is today overgrown with weeds, with the state government failing to privatise it to achieve efficiency.

Dunlop Plc is still in Nigeria but operates as DN Tyre and Rubber Plc, importing tyres from Spain and South Africa, among other countries, BusinessDay found.

Due to high prices of new tyres, many importers are now bringing in expired and substandard products which are responsible for many of the accidents and deaths on Nigerian roads.

The government of Olusegun Obasanjo established the N100 billion Cotton, Textile, and Garment (CTG) Revival Fund to assist textile manufacturers with loans of nine percent interest rate. This is currently managed by the Bank of Industry (BoI) and, according to the bank, over 60 percent has been disbursed.

The administration of Goodluck Jonathan introduced the National Revolution Plan (NIRP) with UNIDO and other international partners. This is currently being implemented by the present administration.

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.

The crash of the oil market hit Nigeria badly, which relies on minerals for its 90 percent of foreign exchange earnings.

This reduced dollar inflows and hit the import-dependent manufacturers badly.

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.

However, in 2017, the CBN has ramped up dollar supply to the FX market and created the export and the SME windows to support manufacturing.

At its recent annual general meeting held by MAN in Lagos, Frank Jacobs, president of MAN, enumerated some of the current policies influencing the manufacturing sector positively to include: adoption of the National Industrial Revolution Plan (NIRP) of the immediate past administration,  inauguration of the Nigeria Industrial Policy and Competitiveness Advisory Council, the establishment of the Presidential Enabling Business Environment Council (PEBEC) and the Micro, Small and Medium Enterprises (MSME) Clinic.

Others are lifting of ban on Export Expansion Grant (EEG), re-admission of 36 of the 95 items into the official foreign exchange market and the Special $20,000.00 quarterly FX allocation to SMEs for the importation of vital raw-materials and machinery.

However, the impact is yet to be clearly felt. Ajaokuta Steel Complex is still lying prostrate and there is yet no clear-cut import policy in the country.

Energy supply to industrial zones is still poor, leading manufacturers to set up MAN Power Development Company through which they will provide power for themselves.

Electricity supply from power distribution companies (DisCos) worsened across the country in 2016 as manufacturers spent N129.95 billion on alternative energy sources within the year as against N58.82 billion recorded in 2015.

The 2016 figure represents 121 percent jump from that of 2015, data exclusively obtained from the Manufacturers Association of Nigeria (MAN) show.

“Energy costs four cents per kilowatt in other African countries but 20 cents per kilowatt in Nigeria. So how can a struggling textile firm compete? We need government intervention to be able to compete,” Hamma Kwajaffa, director-general of Nigeria Textile, Garment and Tailoring Employers Association (NTGTEA), told BusinessDay in a telephone chat.

ODINAKA ANUDU