Distortions in economy fuel closure rate of industries in Kano
THE ONGOING DISTORTIONS in the Nigerian economy occasioned by instability in the management of forex, poor infrastructure, as well as increasing taxation, hav continued to fuel the closure of industrial plants in Nigeria’s north-west state of Kano.
A total of 232 manufacturing plants have closed down in the city of Kano from 1994 to date, attributable predominantly to the three factors identified, industry experts told business a.m.
According to latest data sourced from the Kano branch of the Manufacturers Association of Nigeria (MAN), the closed down plants are among over 338 existing in Sharada/Challawa and Bompai Industrial estates, the two estates where the bulk of industrial activity is concentrated in the city.
A total of 106 out of the 155 industries were known to have closed down in Sharada/Challawa, while a total of 126 out of 183 industries folded up in Bompai, within the period.
A sectoral distribution of the closed plants is indicative that most of the affected plants are in the textile, food and beverages, motor vehicle assembly, chemical/ pharmaceutical, pulp paper/paper product sectors.
Although information obtained from the Office of the National Bureau of Statistics (NBS) shows that the economy moved out of recession last year, with a real national output growth of 0.72 percent, as against marginal growth of -091 percent in the first quarter of 2017, and -1.49 percent within the same period in 2016.
According to NBS, manufacturing sector output growth increased by 0.64 percent in 2017 from -3.36 percent of the corresponding second quarters of the year 2016, indicating 4.0 percent increase over the period.
However, prevailing reality is indicative that the growth recorded in the sector is yet to be witnessed in Kano State, known to be the most active industrial hub in northern part of the country.
Confirming this development, at MAN `s annual general meeting, held recently in the state, Shehu Ya`u Sa`ad, chairman, Bompai branch of the association, said despite the on-going efforts by the federal and state governments to reinvent the industrial sector, nothing much is happening in the state.
“The year 2017 began with positive outlook following the slight recovery recorded in the fourth quarters of 2016. In the first three quarters of 2016 economic activities dipped significantly following distortions in the economy.
“You will agree with me that the events in the previous years have been disorderly and agonizing, which contributed immensely to the failure of business projections. However, I must say that in spite of these intimidating challenges militating against the manufacturing sector of the nation economy, our member companies have remained resolute,” Sa`ad noted.
In the same vein, Ali Madugu, immediate past vice–president, MAN in charge of the north, attributed the de-population of industries being experienced, primarily to the weak infrastructure, especially power, prevailing in the state.
“Despite the huge amount of money that the federal government has for decades committed to the power sector, with the aim of addressing the power crisis, the state is yet to witness any improvement,” he said
Madugu, who is also the managing director of Dala Tea Nigeria Limited, stated that smuggling, as well as, importation of sub-standard finished commodities, which some of the affected industries are capable of producing, is another factor that is contributing to this development.
“It is necessary to associate the current problems bedeviling the development of industries in Kano to lack of clear government industrial policy in the state.
“It is pertinent to mention that in the last ten years, several committees were instituted by government with the intention of addressing industrial problems, to mention a few are: sub-committee on resuscitation of industries in Kano State which was headed by Isyaku Umar Tofa. The report was submitted in October 2000.
“Other committees constituted, which has not led to any tangible result also includes: The technical committee on Revitalization of Industries in Kano State, submitted in June 2003, headed by Abdullahi Bashir, committee on Resuscitation of Industries and Economic activities in Kano state, submitted in May 2005, made by Kassim Musa Bichi, and the Business Incentive Committee submitted to the state government in April 2009 by Isyaku Umar Tofa”, he noted.
Madugu observed that despite these efforts the city, which used to be the hub of industrial activities in northern Nigeria has continued to witness closure of plants.
Also commenting on the issue, Mansur Idris, of Department of Economics, Bayero University, Kano, in a paper delivered at one of the MAN `s AGMs, said “the history of manufacturing in the country, and Kano, in particular, is a classic illustration of how a nation could neglect a vital sector through policy inconsistencies and through distractions attributable to the discovery of oil.
“The near-total neglect of agriculture has denied many manufacturers in the country the primary source of raw-materials. This absence of locally sourced inputs has led to low industrialization. Industrial capacity has remained in an unenviable position for much of the last two decades when Nigerian foreign exchange earnings declined as a result of the fall in the international price of oil and the mismanagement of the economy,” he further said.
Idris suggested that the situation can only change for better, when the federal and state governments address the following constraints: “limited access to credit facilities, high interest rate, unpredictable government policies, infrastructural inadequacies, low consumer purchasing power, high cost of equipment and working capital, multiple levies and taxes, inefficiencies in customs and port administration; and dumping of cheap products on nation`s market”
In the face of the prevailing reality, Kabiru Musa Adamu, chairman, Sharada/Challawa branch of MAN, is optimistic that Kano can still remain the industrial hub of northern Nigeria, if several of the issues raised are addressed.
“As the year draws to an end, we have noticed that business environment has continued to improve. The exchange rate has started stabilizing with the minimum difference between the official and the open market (BDC).
“Manufacturers are now getting forex from their banks to buy raw material. Employment rate is increasing. Inflation is becoming stable, as a result of improvement in economic indices, and the CBN forex policy is becoming helpful.
“If all these are maintained and we witness relative stability in monetary and fiscal policies, I think this will be good for manufacturing in the state” he added.