Why local input sourcing in manufacturing sector is rising

Nigerian manufacturers sought more local alternatives in the first half of 2017, pushing up local input content to 60.72 percent from 46.3 percent recorded in the corresponding half of 2016, data from the Manufacturers Association of Nigeria (MAN) show.

The 60.72 percent local input content represents a 0.74 percentage point increase when compared with 59.98 percent in the preceding half ( second half of 2016).

According to MAN, the rising local raw materials sourcing could be attributed to the effect of the resource-based industrialisation and backward integration campaigns as well as availability of forex in the economy.

Speaking to Real Sector Watch, Ike Ibeabuchi, a chemical maker, said manufacturers were increasingly seeking alternatives to foreign inputs to cut cost of operations and reduce appetite for dollars.

“Many of us would be sourcing our raw materials from petrochemical industries here if they were available. With the experience of two years ago, it is clear that constantly searching for dollars is not the way to go.”

“Imagine if you seek maize here, rather than import barley as a brewer. Apart from reducing your operational costs, you will create a ready market for farmers and help them generate more jobs,” Ibeabuchi said.

But he pointed out that investing locally in backward integration often involved huge sums of money, which would be difficult for small and medium manufacturers to afford.

“This is why at this stage of our development, manufacturers still need to be assisted with cheap and longer term funds. There is also a need for tax holidays,” he suggested.

Dollar crunch hit Nigeria in 2016 and early 2017, but this forced its import-dependent manufacturers to begin to seek more local alternatives.

Brewers such as Nigerian Breweries (NB), Guinness and International Breweries substituted (and are substituting) barley for sorghum, while sourcing locally available industrial cassava from which they get starch and maltose syrup for use in the brewing process.

Nigerian Breweries sourced sorghum from Psaltery Nigeria Limited, which also supplied the commodity to other firms in food and beverage industry.

Last year, Patrick Olowokere, the company’s corporate communications, said that NB sourced 99 percent of its packaging materials, including bottles, cans, crates, cartons, crown corks, and labels, from local firms.

“Over 250,000 farmers spread across several agronomic zones in the North have been impacted by our sorghum value chain program as at 2013,” Olowokere said.

George Nassar, managing director of Procter & Gamble (P&G) Nigeria, America’s biggest non-oil investment in the country, said in a statement last year that the company sourced 100 per cent of its packaging materials for its products locally.

Peter Ndegwa, managing director, Guinness Nigeria Plc, said then that it was ramping up the use of maize and sorghum sourced from local farmers from 43 percent to 87 percent over the next two years.

ODINAKA ANUDU