Power, FX cut capacity in paint industry to 20%
Poor power supply across Nigeria and the foreign exchange crunch are hitting paint producers across the country, reducing their capacity utillisation from 35 to 20 percent, according to Paint Manufacturers Association of Nigeria.
The exchange rate of above N450/$ at the parallel market has more than doubled the prices of their inputs as over 80 percent of their raw materials are imported.
Even with the Central Bank of Nigeria (CBN) directive that 60 percent of foreign exchange be allocated to manufacturers, paints makers said they were currently buying dollar at N450/$ to N500/$.
Power supply across industrial zones has worsened, with manufacturers spending N59 billion on alternative power sources such as gas and diesel in 2015, as against N25 billion spent in 2014.
Natural gas used by many medium and large enterprises is currently scarce, prompting multinationals to mull establishing coal-fired plants, which costs up to $100 million to build.
“The issue of power has been a recurring decimal at every public function in the country for a long time now,”Rotimi Aluko, chairman, Paint Manufacturers Association of Nigeria, said at an annual general meeting held in Lagos.
“Having adequate and sustainable electricity will jumpstart the economy and make other aspects of the economy to function exponentially, thereby increasing employment while saving our foreign exchange earnings as we would be consuming more Nigerian products far beyond toothpicks, instead of the current unacceptable situation where everything is either totally or partially imported,”
Aluko said.
He said the group had been collaborating with the Raw Materials Research and Development Council (RMRDC) since the 1990s for import substitution, regretting, however, that the only result of the synergy was the development of some grades of calcium carbonate which were previously imported.
“Collaboration between the council and the association is ongoing and we hope that very soon kaolin and others will be added to the list of raw materials produced locally,” he stated.
Aluko further said adulteration, faking and merchandising of paints with high nuisance value were still big challenges to operators, stressing that the recent pegging of five-year jail term and a fine of N5 million on dealers of substandard goods by the Standards Organisation of Nigeria (SON) was a step in the right direction, appealing to the Federal Government to give appropriate legal backing to this.
“The problem of liquidity being experienced in the economy as a result of the current recession is stifling the businesses of manufacturers in general and our members in particular. In the paints industry, most of the companies are just there, thinking of what to do next, whether to sack workers or close down completely,” he explained.
“In the informal sector, information we received from field officers of our suppliers point to the fact that about 240 out of 300 of them have closed down, while 60 are crawling. The Federal Government should help the industrial sector to bounce back to business so that the economy can come alive again,” he added. He urged the government to ensure that the forthcoming $1.3 billion fund from the World Bank for small businesses would be given to genuine businesses, especially manufacturers, at low interest rates.
ODINAKA ANUDU