Manufacturers expand operations on back of regional trade opportunities

Export-oriented firms in Nigeria are expanding capacity and diversifying operations to tap into two possible West African trade agreements whose implementations may begin this year.

These firms are raising capacity to have substantial market shares when these two regimes – the Common External Tariff (CET) and the Economic Partnership Agreement (EPA) – finally begin.

CET is a West African trade agreement aimed at liberalising trade among the 15 members of the Economic Community of West African States (ECOWAS). CET is targeted at achieving uniform tariffs, customs union and economic integration across the sub-region.

CET was earlier scheduled to begin this month but informed sources say it has not gone as planned, as Nigeria is yet to agree on some grey areas and trade bands.

EPA, on the other hand, is an economic agreement between the European Union (EU) and ECOWAS. The thrust of EPA is to open the EU market to West African products on a duty-free and quota-free basis. The West African market will also become partially open to the EU five years after EPA becomes operational. EPA, particularly, is heavily opposed by Nigeria’s Organised Private Sector (OPS) because locally manufactured goods cannot yet compete with European products.

But export-oriented manufacturers are adamant and are expanding operations to make best use of these two regimes whenever they happen.

Pharmaceuticals have been in the forefront of this expansion. May& Baker (M&B), producer of Paracetamol drug, has consolidated all of its manufacturing operations by transferring substantial product lines from Ikeja, Lagos, to its new pharmaceutical plant in Ota, Ogun State, with a capacity to produce 4.5 billion tablets and 37.5 million bottles of 60ml liquid preparations annually. This expansion has gained M&B the World Health Organisation’s (WHO) prequalification or certification necessary to compete in CET and EPA.

“We began an expansion and diversification programme in 2005, which gave rise to the creation of new businesses and subsidiaries. Hopefully, with these, the gate into the global pharmaceutical market will open for us,” said Nnamdi Okafor, managing director, M&B, in Lagos, before obtaining the WHO certification.

Swipha, Evans Medical and Chi Pharma are also expanding capacity and creating more jobs, having obtained the WHO certifications that will enable them lead the pack in West Africa when these trade agreements come in place.

Flour Mills of Nigeria (FMN) plc will also likely gain much more as the implementations of the agreements near, having already announced plans to invest $1 billion between three and five years to expand into the West African sub-region. FMN has further established an ultra-modern 70,000 metric tons (MT) integrated Eastern Feed Mills in Calabar, Cross River State, which is the largest in the sub-Saharan Africa, according to John G. Coumantaros, chairman of the flour miller.

Coleman Technical Industries has pumped N10 billion in the cable and wire industry as it has established a new factory in Sagamu, Ogun State, with a clear target of capturing the regional market.

During a recent facility tour of its new factory by Joseph Odumodu, director-general, Standards Organisation of Nigeria (SON), George Onafowokan, CEO, Coleman Technical Industries, told BusinessDay that the brand was already considering stamping its market footprints on other regional markets, having established itself as a dominant player in the Nigeria’s cable market.

Though Nigeria is yet to be self-sufficient in sugar production, there are indications that current investors are not only willing to satisfy local consumers but are also looking to explore some regional markets.

Investors are already pumping over $2.6 billion on plantation expansion and new machinery.

While Dangote Sugar Refinery is committing $2 billion investments in six states in the country, Golden Sugar Company is putting $300 million in Niger State to develop the sugar sub-sector.

Similarly, HoneyGold Group is investing $300 million on two sites in Adamawa State, with the target of producing 200,000 tons of sugar annually.

McNcihols Consolidated plc, Lucke Sugar and Dogan Sugar are investing in new cubing, Vitamin A fortification and packaging lines.

Other firms such as Confluence Sugar, Kogi; Crystal Sugar Mills, Jigawa, and Unicane Industries are also in expansion forefront.

“One thing we know is that this (CET) offers great opportunities for investors through the advantage of economies of scale,” an abridged earlier statement from Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry (LCCI), has shown.

Tunde Oyelola, chairman, Manufacturers Association of Nigeria Exort Group, said, “though there are issues we do not yet feel satisfied with in CET, the fact is that it offers opportunities for those willing to tap into a market of 360 million people in the West African region.

“The 360 million people in the region provide a very big market for Nigerian companies that are also putting things in place to tap into the large size. Nigeria is well-placed because between 60 and 70 percent of factories in the sub-region are here. But for EPA, we still have issues that we are not satisfied with for now.”