Why in­dus­tri­al­i­sa­tion must take front seat in po­lit­i­cal cam­paigns

Business Day (Nigeria) - - COMPANIES & MARKETS - ODINAKA ANUDU

Nige­rian pres­i­den­tial can­di­dates must con­sider in­dus­tri­al­i­sa­tion as one of the main is­sues of

cam­paign.

Eco­nomic watch­ers be­lieve that the con­tes­tants are yet to dis­cuss is­sues but have been fix­ated on mat­ters of lit­tle im­por­tance.

In­cum­bent Pres­i­dent Muham­madu Buhari of the All Pro­gres­sives Congress and op­po­si­tion can­di­date Atiku Abubakar of the Peo­ple’s Demo­cratic Party are two main con­tenders to seat of pres­i­dent.

The cam­paign is com­ing when Proc­ter &Gam­ble just shut its $300 mil­lion con­sumer goods plant in Ag­bara.

This was un­til July 2018 biggest US non-oil in­vest­ment in Nige­ria.

The can­di­dates are faced with the task of telling Nige­ri­ans what they in­tend to do with Ajaokuta Steel Com­plex , which has gulped $8 bil­lion pub­lic funds with­out pro­duc­ing one sheet of steel.

The Se­nate re­cently ap­proved $1 bil­lion for the be­he­moth, which is seen by an­a­lysts as a to­tal waste of money.

Since 1994, suc­ces­sive gov­ern­ments have claimed that the com­plex is 98 per­cent com­pleted, but the re­main­ing two per­cent has be­come a hard nut to crack for suc­ces­sive ad­min­is­tra­tions. Muham­madu Buhari’s gov­ern­ment bud­geted N3.9 bil­lion in 2016 and N4.27 bil­lion in 2017 for the re­sus­ci­ta­tion of the steel, de­spite an ear­lier busi­ness case in the last ad­min­is­tra­tion show­ing that the com­plex could only work if prop­erly pri­va­tised.

Busi­ness­day checks show that Ajaokuta Com­plex has the ca­pac­ity to pro­duce one mil­lion met­ric tonnes of steel, one mil­lion met­ric tonnes of coal , man­ganese and lime­stone, among oth­ers. Due to lack of op­er­a­tions at Ajaokuta Steel, Nige­ria to­day im­ports steel val­ued at $3.3 bil­lion ev­ery year.

Frank Udemba Ja­cobs, im­me­di­ate past pres­i­dent of the Man­u­fac­tur­ers As­so­ci­a­tion of Nige­ria (MAN), said over 50 per­cent of raw ma­te­ri­als used in the sec­tor would have been lo­cally avail­able had Ajaokuta been work­ing.

Sim­i­larly, the Alu­minium Smelter Com­pany, lo­cated in Akwa Ibom State, is not in op­er­a­tion due to a tus­sle be­tween Ban­corp Fi­nan­cial In­vest­ment Group Divino Cor­po­ra­tion ( BFIG), a con­sor­tium of U.s.-based Nige­rian in­vestors led by Reuben Jaja, and the United Com­pany RUSAL, a Rus­sian firm.

“We need that re­solved. Alu­minium Smelter Com­pany needs to be re-started so that we can get in­gots for lo­cal roof­ing sheets man­u­fac­tur­ers,” Oluyinka Ku­file, chair­man, Ba­sic Metal, Iron and Steel Group of the Man­u­fac­tur­ers As­so­ci­a­tion of Nige­ria (MAN), told Busi­ness­day ear­lier in an in­ter­view.

Nige­ria has three paper mills that are not work­ing at op­ti­mal ca­pac­ity. These in­clude: Nige­ria Paper Mill ( NPM) Lim­ited lo­cated in Jebba, Kwara State; Nige­rian Newsprint Man­u­fac­tur­ing Com­pany (Nnmc)lim­ited, Oku-iboku, Akwa Ibom State; and Nige­rian Na­tional Paper Man­u­fac­tur­ing Com­pany ( NNPMC) Lim­ited in Ogun State.

Stud­ies show that Nige­ria loses N180 bil­lion an­nu­ally from non­per­for­mance of these paper mills. Nige­ria spends N50 bil­lion on the im­port of pa­pers an­nu­ally, ac­cord­ing to a re­search done by Abim­bola Ogun­wusi and Pe­ter On­wualu, di­rec­tor and for­mer di­rec­tor-gen­eral of the Raw Ma­te­ri­als Re­search and De­vel­op­ment Coun­cil (RMRDC) News­pa­pers and pub­lish­ing firms are strug­gling to im­port pa­pers with lim­ited for­eign ex­change, lead­ing to very high cost of paper prod­ucts.

“The co-in­vestor that bought the Nige­ri­apa­per Mill (NPM) Lim- ited did not buy it to help Nige­ria,” said Sam­son Olo­lade Ogun­dele, ex-se­nior man­ager, Nige­ri­apa­per Mill Lim­ited, Jebba, Kwara State in La­gos, said at a stake­hold­ers’ fo­rum in La­gos in 2016.

“I know it was val­ued at about N30 bil­lion in Nige­ria as at 1995, but this same mill was given to the in­vestor at N334 mil­lion in 2008. The aim of the gov­ern­ment in hand­ing over the mill was to cre­ate jobs and im­prove the econ­omy. The ma­jor­ity of Nige­ri­ans work­ing in Nige­ria Paper Mill –both ju­nior and se­nior—are all ca­sual,” Ogun­dele dis­closed, adding that the Fed­eral Gov­ern­ment must re-visit the pri­vati­sa­tion in spite of the fact that it is the only paper mill work­ing at the mo­ment.

As of to­day, many pri­vate com­pa­nies are ei­ther shut down or mired in in­tractable le­gal tus­sles. Vita Malt in Ag­bara, Ogun State, is shut down. Multi Trex, a 65,000 met­ric-tonne co­coa pro­cess­ing fac­tory, the largest in the coun­try, has been taken over by the As­set Man­age­ment Com­pany of Nige­ria (AMCON).

In 2015, the only sur­viv­ing brake pads and lin­ing maker, Star Auto In­dus­tries, col­lapsed as it was un­able to com­pete with cheap Chi­nese prod­ucts and could not pay back loan bor­rowed from the Bank of In­dus­try.

“It is dif­fi­cult to com­pete with Asia, with sub­stan­dard, cheap brake pads. I am not happy that im­port duty on brake pads fell from 25 per­cent to 10 per­cent. This is the sit­u­a­tion since 2004 and gov­ern­ment has done noth­ing about it,” CEO of the firm Chidi Ukachukwu, told Busi­ness­day in early 2014.

To­day, only three tex­tile firms out of over 120 in the 1980s are in op­er­a­tion.

In 1980s, the Nige­rian tex­tile mar­ket was the third largest in Africa, with over 160 vi­brant tex­tile mills and over 500,000 di­rect and in­di­rect jobs. In fact, by 1985, there were about 180 tex­tile mills in the coun­try, em­ploy­ing about one mil­lion Nige­ri­ans.

How­ever, the for­tunes of the sec­tor be­gan to dwin­dle in early 1990s. Pre­cisely in 1994, many tex­tile man­u­fac­tur­ers be­gan to feel the pinch of un­sta­ble po­lit­i­cal sit­u­a­tion, mas­sive smug­gling and high pro­duc­tion costs due to poor in­fra­struc­ture, taxes and levies, among oth­ers.

The sit­u­a­tion wors­ened in 1997, when ban on im­por­ta­tion of tex­tiles was lifted. There were so many out­cries by in­dus­try play­ers and well-mean­ing Nige­ri­ans as they warned of the con­se­quences of that pol­icy.

In­fe­rior im­ported prod­ucts flooded the mar­ket. Con­se­quently, many big play­ers in the in­dus­try could not sur­vive. Many di­vested to other in­ter­ests while oth­ers leased their premises to other com­pa­nies. For in­stance, Aswani Tex­tile leased its premises to Chel­larams, man­u­fac­turer of dairy prod­ucts. Af­print, on the other hand, went into oil man­u­fac­tur­ing and car busi­ness. En­pee In­dus­tries be­came a pack­ag­ing in­dus­try.

Within six years, over 50 com­pa­nies had closed down, while about 80,000 em­ploy­ees had lost their jobs. As of to­day, com­pa­nies such as Aba Tex­tiles, As­aba Tex­tile Mills, Arewa Tex­tiles, Five Star, Gaskiya, Haf­far In­dus­trial Com­pany Lim­ited, Specomills, Zam­fara Tex­tiles, Mil­let Nige­ria Lim­ited, among oth­ers, have all been for­got­ten when tex­tiles are dis­cussed.

“What we need is the en­abling en­vi­ron­ment. We can­not com­pete with the level of smug­gling and coun­ter­feit­ing go­ing on now. We used to have about 127 tex­tile firms in Nige­ria but that has come down to two or three now,” said Grace Adereti, pres­i­dent of the Nige­rian Tex­tile Man­u­fac­tur­ers As­so­ci­a­tion (NTMA) in La­gos at a Made-in-nige­ria stake­hold­ers’ meet­ing in La­gos.

“We had the re­vival loans but this didn’t work be­cause our biggest prob­lem has never been money,” Adereti said.

Sim­i­larly, pub­lic firms such as Fed­eral Su­per­phos­phate Fer­til­izer Com­pany and Na­tional Steel Raw Ma­te­ri­als Ex­plo­ration Agency are also mori­bund and need a blue­print.

Fifty-four man­u­fac­tur­ing firms closed down 12 months pre­ced­ing Au­gust 2016 due to their in­abil­ity to ac­cess dol­lars to im­port raw ma­te­ri­als, ac­cord­ing to a sur­vey car­ried out by NOI Polls and Cen­tre for Eco­nomic Re­search in late 2016.

Buhari

Atiku

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