Naira slide may ground production in N300bn packaging industry

Manufacturing activities in Nigeria’s N300 billion packaging industry may be halted by the continued fall of the naira value against other currencies, especially the US dollar.

BusinessDay can report that Nigeria’s packaging industry, which imports 70 percent of its raw materials, relies heavily on foreign exchange market for its raw materials. The continued decline in naira value is rendering the industry inactive as import of raw materials falls.

A cross section of investors told BusinessDay that stocks of raw materials imported late last year were already getting exhausted and could be off in the next one or two months. This could result into total paralysis of the industry, wholesale lay-off of labour, and scarcity of essential goods due to non-availability of packaging materials such as packs, wraps and labels for producers.

Ravinder Kanwal, managing director, Shongai Technologies Limited, Sango-Ota, Ogun State, disclosed that the company might shut down soon if the stocks of raw materials were exhausted since the continued devaluation of naira had prevented the company from refilling raw materials imports, saying non-availability of foreign exchange was strangulating investors in the industry.
The managing director of Shongai Technologies Limited, which supplies packagings for major pharmaceutical, consumer goods, foods and beverages, home care, oil and gas companies such as PZ, Chi Limited, UAC Foods, Gongoni, Oando, NASCO, OLAM, Dangote, Chellarams, May&Baker, Dana among others, said that economy would suffer if urgent intervention were not made.

“In Nigeria’s packaging industry, we have to rely on imports of raw materials since sources of raw materials locally are very poor. Now, there are a lot of problems in getting raw materials due to non-availability of foreign exchange. The prices have gone up almost double of what we used to buy and we are becoming highly uncompetitive in the global market,” Kanwal said.

“We are globally uncompetitive because of high cost of inputs. At the moment, we are able to get some raw materials from some importers though the prices have gone very high, we are still able to manage. But, towards March this year, if the situation is not checked, we won’t have raw materials to produce. We will have to shut down because importers too will have been out of stocks.

“We used to buy 1kg for N300. Today 1kg of such material goes for N610. That is how bad the situation is. What Federal Government can do quickly is to make foreign exchange available. With availability of foreign exchange, we can import raw materials with ease and be globally competitive,” he further said.

When Kanwal was asked about ongoing expansion plan for multi billion dollar investment in Shongai Technologies Limited, he declared that the expansion process had been put on hold due to harsh economic situation in the country, especially packaging industry, adding that process would resume in about five years time when the economy is stable.

Another investor in the industry, Wale Adegbite, vice-chairman of Eagle Packaging, Printing Limited and chairman of Manufacturers’ Association of Nigeria, Ogun State chapter, stated that continued devaluation of naira ‘is a major crisis’ that affects manufacturing industry, especially packaging industry since larger percentage of raw materials used in the industry is imported.

He lamented that government does not pay much attention to any economic challenges that affect manufacturing sector as it does for service industry, which he said, creates less value in terms of employment, production of essential goods, stimulation of economy and control of market price, saying it was high time government intervened and saved manufacturing sector.
“We have got to the point that we may have to buy (foreign exchange) at parallel market. The situation is terrible. In our company (Eagle Packaging, Printing Limited) for instance, we have to produce below our capacity, we have reduced the working hours in our company and you know what that means, that is under-employment. It must be checked to prevent unemployment,” he said.

But, when the chairman of Manufacturers Association of Nigeria (MAN), Ogun State chapter, was asked about the efforts of MAN in such an economic circumstance to cushion the negative effects of continued devaluation of naiara and non-availability of foreign exchange, Adegbite said that consultations had been made from MAN to Federal Government but the responses were slow.

RAZAQ AYINLA