Dis­tor­tions in economy fuel clo­sure rate of in­dus­tries in Kano

Business a.m. - - NIGERIA FRONTIER MARKETS - Ja­cob Ajakaiye, in Kano

THE ONGO­ING 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.

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