Manufacturers in pain as smugglers, counterfeiters have a field day
Nigerian manufacturers are writhing in pains arising from the activities of smugglers and counterfeiters who exploit border and legal loopholes to ply their illicit trade in the country.
Africa’s largest economy is blessed with demography, estimated to be close to 175 million, but smugglers and counterfeiters find this attractive.
Smuggling occurs when a trader brings goods into the country or takes them outside of it without paying approved duties. Counterfeiting, on the other hand, is a deliberate manufacture of fake replicas of products with a view to leveraging on the superior value of the imitated goods. .
Smugglers often sell up to 50 to 100 percent cheaper than local manufacturers, as they do not pay duties or, in the case of counterfeiters, leverage on mileage achieved by imitated products. These activities have continued to de-market Nigerian manufacturers, making their products price un-competitive while creating identity crises among brands.
A draft copy of a research carried out by Micah Mendie, a research analyst and program officer at Foundation for Partnership Initiatives in the Niger Delta (PIND), sees manufacturers detailing the negative impact of the twin challenges.
While 23 percent of manufacturers interviewed said smuggling and counterfeiting have high impact on their profits, 33 percent said they have low impact.
All the manufacturing companies interviewed confirmed that they have lost a considerable amount of revenue from the activities of counterfeiters and smugglers. The report shows that a textile maker in Kano has lost about $80,000 in the last 12 years as a result of counterfeiting of its products and smuggling of prohibited knitting yarn that it produces.
The report captures the thought of a weaving apparel manufacturer in Lagos, who said he has lost 15 percent of the market and seen a 30 percent drop in production. The manufacturer complained that the Chinese have captured 85 percent market share with cheap, counterfeited products that flood the Nigerian market.
Another serious impact of the activities of these economic saboteurs is collapse of industries, according to the survey. The textile industry has basically collapsed, crumbling from over 200 in the 1980s to less than seven presently.
“One of the constraints of the Nigerian textile industry is the smuggling of foreign fabrics that have taken over our market. Only printed fabrics are under import prohibition list. But all others are still being smuggled in; many of them are counterfeited Nigerian products branded as made in Switzerland. So smuggling, faking and counterfeiting are the order of the day in Nigeria and nobody is checking. Therefore, we cannot compete because even though what is smuggled is fake and of low quality, they are cheaper,” said Jayeola Olarewaju, immediate past director-general of Nigeria Textile, Garment and Tailoring Employers Association.
Furthermore, the activities of smugglers and counterfeiters have also led to unemployment. According to manufacturers who responded to the survey, 10 and 22 percent said these activities have led to high and low level of employment respectively.
“All the respondents affected by counterfeiting or smuggling confirmed that they have had to lay off some staff because of the loss of their market share. A respondent in Kano has lost 20 to 25 percent of its workers in the last three years and, in 2015, 250 to 300 staff were retrenched,” said the report.
The report further identifies loss of market share as one key impact of smuggling and counterfeiting. A manufacturing firm in the food and beverage industry in Kano reported that it has lost 70 percent of its market share to these economic saboteurs. While 22 percent of manufacturers said the twin problems have strongly made them lose the market share, 31 percent said they have low impact.
Drop in production capacity has equally been identified as one key downside of counterfeiting and smuggling.
Moreover, the report reveals that smuggling deprives manufacturers of free competition while creating distortions in the market.
Africa’s largest economy has continued to shy away from strengthening the Intellectual Property Rights and Copyright Laws to help cut down on these practices and attract foreign investors.
“Foreign Direct Investment (FDI) is attracted into a country when an investor knows that there is return on investment and this can be achieved mostly with protection of Intellectual Property Rights (IPRs) and effective enforcement,” said Uche Nwokocha, a researcher, in an article entitled, ‘Nigerian Intellectual Property: Overview of Developments and Practice’.
“One area through which Nigeria can explore huge investment opportunities is in intellectual property rights development and protection. This will result in increased revenue. Conversely, non-protection of IPRs will force investors to take their businesses to other jurisdictions resulting in loss of jobs and government revenue through non-payment of taxes,” Nwokocha said.
Most analysts who spoke to Real Sector Watch attributed the problems to corruption among the Customs officers and other law enforcement agents.
“Sometimes it is just corruption. Many take money and then go to sleep. But again, smugglers are dangerous and can harm stubborn officers,” said a manufacturer who did not want his name in print.
“You will need to spend a lot of resources prosecuting a counterfeiter. But I think the Standards Organisation of Nigeria has rendered one or two commendable services in this area,” the manufacturer said.
The researcher interviewed a number of regulatory and enforcement officers who complaints ranging from lack of adequate vehicle for enforcement monitoring, absence of equipment or relevant technology to conduct specimen analysis, lack of robust database for good record-keeping, among others.
ODINAKA ANUDU