Thursday, January 5, 2012

2011: Industrial sector still comatose as more firms close shop

From Ayodele Samuel, Lagos The 2011 is gradually ticking its way to history, but bruises it afflicts on corporate organizations, especially the manufacturing sector can’t be wished way. Worthy of note of course is the ever present unfavorable business climate which 2011 calendar year inherited from 2010. The dilapidating infrastructures, a harsh business environment; unstable power, absence of security and host of other obstacles continually beset 2011 without succor. The Federal government under President Goodluck Jonathan had raised hope of infusing fresh air that would jump-start the comatose manufacturing sector mid-year when he was sworn in for his fresh mandate having successfully, completed his joint ticket with late Umaru Shehu Musa Yar’adua. The re-christening of former Ministry of commerce and Industry as Trade and Investment Ministry man by former Minister of Finance, Olusegun Aganga raised positive expectation but it turned out the usual dashed hope with virtually no significant improvement recorded. The view of Chairman, Manufacturers Association of Nigeria MAN, Ikeja branch Isaac Agoye captures it all. He lamented that the 2011 like years before it, never give expected impetus to manufacturing sector. 2011, as MAN scribe further lamented leaves the sector in throes of bad shape as many struggling businesses got wiped out. “The capacity utilisation has nosedived from 70 per cent in the 1980s to 45 percent in 2010. The ever busy industrial estates have now become shadows of their past glories and what government at all levels keep saying indirectly is that they need more funds and the manufacturing sector must provide it without a commensurate provision of the required enabling environment,” Agoye added. Nigeria has lost what used to be industrial estates. In 2011, the remnants of what used to industries at once thriving Ikeja industrial estate in Lagos have closed shop and in their ashes, spring up churches, event centers and relaxation spots. They closed shops not because the plot housing them has vanished, but primarily due to unbearable hostile, very challenging business atmosphere. The key being absence of power and secondly lack of security. Though government managed to unveiled power sector road map to resuscitate and rejuvenate the sector, the reforms is yet to impact positively as PHCN staff have given conditions that must be met if power reforms must be carried out. However, a novel idea of Public Private Partnerships (PPP) was given considerable vent during the year. The government realising that it can’t do it all alone is partnering with private sector to execute some key projects in a form of partnership. The construction sector was virtually in comatose as its key ingredient component, cement witnessed price tumbling severally. Beginning January 2011, cement price had risen from 2,600 to N3, 000 with disastrous effect on the quality of blocks and prices of other building materials leading to unprecedented rise in accommodation cost. It took President Jonathan intervention to get a firm commitment from cement manufacturers to peg the price at N2, 000. Nigeria is virtually a dumping ground for import items without a corresponding export making Nigeria to maintain export deficit. A report obtained from the National Bureau of Statistics (NBS) showed imports in the second quarter of the year were also 175.5 percent higher than the N1.22 trillion recorded in the corresponding period in 2010. According to the Executive Director of the Nigerian Export Promotion Council (NEPC), Mr. David Adulugba, the agency disbursed a whopping N45 billion in the second quarter of 2011 under the Export Expansion Grant (EEG) scheme designed to induce performance of non oil exporters in the country. The initiative certainly paid off as many local manufacturers attested to the fact that they were part of the grant which definitely saw their business kicking off to another new level but not including the Leather and Allied Products Manufacturers Association of Nigeria (LAPAN) kicked against the total implementation of the Scheme. LAPAN President Alhaji Mustapha Nabegu, said the EEG scheme has weakened the capacity of the nation’s manufacturing sector to create jobs and drive economic growth. On the battle for standard, The Standards Organisation of Nigeria (SON) seems to be the most active government agency in the sector. It set up in mid-year, a consumer compliant desks in major markets across the country to check substandard products. The agency decided to take proactive steps to drastically reduce the influx of substandard products into the country, by destroying several containers loaded with substandard products worth millions naira. Another highlight of the agency that attracted divergent views include a claim by the agency to have spent about N20 million to destroy more than three million fake and sub-standard tyres nationwide. Experts say hope for active industrial sector may not totally be lost after all. The government, they say just have to rise to the occasion and be sincere in implementing experts’ recommendations. The government will have to genuinely tackle the poor electricity issue, it will have to create tax holiday and abolishing multiple taxes; it has to wake up to contain the security challenges that has make investment elusive and finally show sign of commitment to tackle corruption. The Nigerian textile industry was the second largest in Africa after Egypt’s in 1997, with over 250 vibrant factories operating above 50 per cent capacity utilization. Then, the local textile market had a share of about 20 per cent of Nigeria’s textile products with the balance of 80 per cent being imported. As at 1980, the textile industry in the country could boast of over 175 textile factories, but today only about 25 are still producing, as most of them have closed shop. For instance, Afprint, once a household name in Nigeria had since diverted to other businesses. The company is now selling cars and edible oil. Undoubtedly, the textile industry had its unfair share of the country’s penchant for foreign goods, smuggling, faking and counterfeiting. The recent spate of closure in the industry was driven largely by smuggling at the borders, failed government policies, high operating cost arising from prohibitive raw materials, energy cost and sheer lack of political commitment to industrialisation by Nigerian politicians. At its prime, textile factories in Kaduna and other cities were the second largest employer of labour after the government . But for over a decade now, the closure of these factories and the low capacity utilization of existing ones have become a very disturbing feature in the Northern states and the succeeding governments could not do much to redress. The workers that were laid off had since joined the unemployment market,while taxes in billions derived by governments from these factories had become a thing of the past. In his mission to industrialise the North, the late Sardauna of Sokoto and Premier of the defunct Northern Region, Sir Ahmadu Bello started by establishing textile factories to use the large quantity of cotton grown by farmers in the North. Thus, the Kano Textile factory in Gwammaja and the Kaduna Textile Mill (KTL) were established , transforming the two cities into textile marketing cities with other related factories such as weaving and spinning springing up.

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