Lack of finance, sub-standard raw materials crippling Aba leather firms

More than 80,000 shoes, bag, belt and trunk box manufacturers in Aba, Abia State, the industrial hub of the South-Eastern Nigeria, are choked by poor access to finance and sub-standard raw materials, often imported from China.

They also reel under the heavy weight of cheap finished Asian products, poor infrastructure, absence of industrial clustering, as well as simple and unsophisticated machinery, stakeholders have said.

“We sincerely need finance to drive this industry,” said Nnabugwu Osondu, secretary, Abia State Shoe, Bag, Belt and Trunk Box Association, in a telephone interview with Real Sector Watch.

“We often approach banks for finance, but they give us difficult conditions that we cannot meet. It is difficult because many of us are in the small- and medium-scale category.

“But with adequate finance, each of the 80,000 members can employ at least 10 more people, meaning that we will take 800,000 Nigerians out of the streets and help drive the country’s diversification quest,” he said.

Findings have shown that many players in this industry often resort to the use of cheap and diluted chemicals imported from Asia, because they cannot afford the more expensive ones from Italy or Holland. This has been blamed on poor access to finance, as many of these players, mostly SMEs, have to source finance themselves.

This is also worsened by stiff credit conditions of Aba financial institutions, which often demand collaterals and interest rates ranging from 20 percent to 35 percent.

“Even in the case of animal skins, you find out that many in the industry are using the synthetic leather, often called the plastic leather, imported from China, because they may not be able to afford the more expensive leather from Northern Nigeria or Europe.

“But with adequate finance, we can get chemicals from any part of Europe and consequently produce shoes, bags, belts and trunk boxes that can both compete locally and internationally,” he said.

He said most importers bring in cheap and diluted chemicals because they know that many players cannot afford quality chemicals.

The United Nations Industrial Development Organisation (UNIDO) report has shown that India is one country that has a number of industrial clusters in locations such as Rayadurg, Nagari, East Godavari and Guntur, among others.

This has enabled congregating firms to enjoy economies of scale, reduce production costs and share resources, experts say.

Similarly, China set up industrial clusters and special economic zones (SEZs) after the country’s reforms. According to Douglas Zhihua Zeng, senior economist at the Financial and Private Sector Development Department of the Africa Region, World Bank, it is estimated that as of 2007, industrial clusters and SEZs accounted for about 22 percent of China’s Gross Domestic Product (GDP), about 46 percent of foreign direct investment (FDI), and about 60 percent of exports, generating an excess of 30 million jobs.

In Aba today, players in the leather industry are scattered in five places such as Powerline, Shoe Plaza, Imo Avenue, Bakassi and Old Site, thus precluding them from enjoying the benefits of industrial clustering.

“Clusters enable firms and countries to specialise and improve on their competitive advantage,” said the African Development Bank, on its article entitled, ‘Industrial Clusters: Drivers of Regional Integration in Africa.’

Checks have shown that Aba shoes, bags and belts are highly sought after by traders from Malabo (Equitorial Guinea), Cameroon, Togo, Mali, and other parts of Africa.

But the producers of these commodities lack modern machinery and tools necessary for manufacturing competitive products.

“But you will find that we need to export our finished products to Europe, Asia and America. But we cannot achieve this when many of us are still using bare hands in almost all aspects of the production process. We recently discovered fabricated machines, but they still cannot compare with foreign ones,” Osondu said.