Harnessing Nigeria’s $1bn leather potential amid uncertainties

The global leather market size, currently valued at $394.12 billion is expected to hit $624.08 billion by 2028 at a compound annual growth rate (CAGR) of 5.9 per cent, according to a report by Grand View Research, a U.S based market research and consulting company. The market, reportedly driven by a rising demand for leather apparel, footwear, and accessories, along with growing brand awareness is highly popular among consumers for its unique qualities, durability and is reputed as one of the most widely traded commodities in the world with an extensive value chain that encompasses animal husbandry, tanneries, manufacture of finished leather products and leather products marketing. In his remarks during the launch and sensitisation workshop on the National Leather and Leather Products Policy Implementation Plan in Abuja, Yemi Osibanjo, Nigeria’s vice president noted that Nigeria is one of the highest producers of leather and finished leather products in Africa with an enormous potential for greater job opportunities and much higher export proceeds. Citing a 2019 study by the Nigerian Economic Summit Group (NESG) which projected that the Nigerian leather industry has the potential to increase its earnings by 70 per cent and generate over one billion dollars by 2025, Osibanjo raised optimism that if properly organised, the leather and leather products industry could become one of the major items in Nigeria’s export basket. He further disclosed that the leather and leather products industry currently employs over 750,000 workers with about 500,000 workers in the finished leather goods sector, while about 11 leather exporting companies have been active at the upstream end of the leather value chain. Osinbajo also said that the export of leather has grown steadily, reaching a peak of $117 million in 2018 and currently in the order of $272 million notwithstanding a decline in 2020 largely due to the Covid-19 pandemic. Challenges limiting potential of Nigeria’s leather industry: Despite the numerous potentials attributed to the Nigerian leather industry, it has been hindered by bottlenecks that have continually undermined required levels of productivity, restricting the country’s competitiveness and revenue in the world market. Abbas Zein, managing director, Z Tannery, a Kano based leather processing and production company noted that one of the major factors affecting Nigerian leather manufacturing are the stereotype of local customers believing it to be inferior and of less quality whereas the same leather is also used to make shoes all over the world. He attributed this factor to the industry lacking a strong and positive brand image among consumers/investors. Zein added that Nigeria’s tough investment climate, high cost of credit, and low finished goods standards for export has made it difficult for producers in the local industry to compete with foreign brands. Femi Olayebi, chief executive officer/creative director, FemiHandbags, a luxury line of leather handbags and accessories, Ibadan, said Nigeria has not fully tapped into the potential that the leather industry can bring into the economy and so much still needs to be done in terms of value addition to bring the leather industry into the top foreign exchange earner to the country. Olayebi asserted that the industry has been affected by weak tanning and leather preparation standards, giving rise to poor quality raw material which hinders tanneries’ performance to fully utilize manufacturing capacity for leather products. According to her, the government needs to focus on formulating a leather-industry strategy to be driven by stakeholders, improving the regulatory framework to reduce raw materials production costs and initiating the necessary value addition processes. This, she pointed, will enable leather designers to have access to processed leathers. She also suggested the need for public-private partnerships to support the creation of skills acquisition centres and establishment of more manufacturing hubs to boost leather production. Lawan Sule-Garo, chairman, Nigerian Tanners Council (NTC), indicated transportation of finished products as one of the challenges affecting the industry. According to him, transportation of leather products from the northern hinterlands to the South, particularly Lagos ports, poses a big challenge owing to bad roads and poor transport system. He noted that in most cases, leather products are transported by road on trucks and the poor roads make the movement slow and cumbersome. The NTC chairman further averred that Nigeria has one of the best quality leathers in the world and can compete with developed countries in the production of bags, belts, shoes and other products manufactured using leather as raw material. “We need people to come in and invest and we need improved power supply and infrastructural facilities which are indispensable variables that can aid, not only the leather but also the entire manufacturing sector in the country,” he stated. In his assessment of the Nigerian leather industry, Ugochukwu Aliogu, a public policy analyst pointed out that the Aba leather industry presents one of the country’s most viable clusters in terms of leather production and job creation. He noted that the leather clusters do not have access to basic requirements such as sustainable equity financing and investments from government and financial institutions, and also suffer from erratic power supply which is largely responsible for high cost of production as the producers are forced to utilise alternatives albeit at a higher cost, thereby increasing the price of leather products. Aliogu opined that for Nigeria’s leather products to compete globally, it needs to adopt innovative technologies and advanced leather tanneries, establish research and development hubs, while academic institutions need to be involved to help develop new mechanisms in production designs and develop new ways to make Nigeria’s leather products more competitive. Promoting Nigeria’s leather industry: The National Leather and Leather Products Policy Implementation Plan, according to a statement by the federal government, is aimed at addressing specific challenges and shortcomings of the leather industry, permanently resolve the issues for optimal productivity and exploit its full potential as a game-changer for Nigeria’s economy by raising its revenue capacity to over $1 billion by 2025. The plan also encompasses eight thematic areas which include intellectual property rights, governance, e-leather, environmental and social best practices, marketing, funding, critical infrastructure and research towards the development of technical capacity in leather works and technology. In furtherance, the Nigerian Institute of Leather Science and Technology (NILEST), the arrowhead of the plan, has established nine extension centres across the six geopolitical zones of Nigeria. These centres are reportedly operational with wellbuilt workshops, laboratories and exhibition showrooms to train and develop young entrepreneurs as well as provide innovative research and development in the processing of hides, skins, and polymers into Leather and Leather Products of a global standard for export. Given Nigeria’s endowment in the production of livestock, hides and skins in Africa, the Nigerian Economic Summit Group (NESG) emphasizes the need for the government to promote sustainable diversification of the economy through public-private coordination in the leather industry in order to boost competitiveness in terms of prices, quality and entry into domestic, regional and international markets. To actualise this, the group called for an urgent need to promote a holistic coordination between the government and the private sector in order to reduce cumbersome and bureaucratic procedures that constrain private investment and growth in the leather industry. This, it explained will relieve the government of any major cost associated with financing infrastructural development in the leather industry and provide incentives to willing investors in operationalizing and deepening the leather value chain. NESG also pointed out the need to establish a credit guarantee scheme to address working capital requirements and inadequate financing in the industry as well as utilisation of domestic technology as well as application of innovative/modern technology transfer to improve on the leather processing techniques across the value chain.